-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UJ/7iG0U1EPDoVyctHT5SMlTkpvdjj7ac36Coy9fY6DuwiV2Kcsd7ri+OnhmNs7T h44JyvaYXKGGqM7yAs5GAQ== 0000898430-96-003381.txt : 19960731 0000898430-96-003381.hdr.sgml : 19960731 ACCESSION NUMBER: 0000898430-96-003381 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19960730 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOCAL CORP CENTRAL INDEX KEY: 0000716039 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 953825062 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-09137 FILM NUMBER: 96600789 BUSINESS ADDRESS: STREET 1: 2141 ROSECRANS AVE STREET 2: SUITE 4000 CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3107267718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNOCAL CAPITAL TRUST CENTRAL INDEX KEY: 0001019370 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954589528 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-09137-01 FILM NUMBER: 96600790 BUSINESS ADDRESS: STREET 1: 2141 ROSECRANS AVE STREET 2: STE 4000 CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3107267600 MAIL ADDRESS: STREET 1: 2141 ROSECRANS AVE STREET 2: STE 4000 CITY: EL SEGUNDO STATE: CA ZIP: 90245 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1996 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- UNOCAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 2911 95-3825062 (State or other (Primary Standard Industrial (I.R.S. Employer jurisdiction of Classification Code Number) Identification Number) incorporation or organization) 2141 ROSECRANS AVENUE, SUITE 4000 EL SEGUNDO, CALIFORNIA 90245 (310) 726-7600 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) UNOCAL CAPITAL TRUST (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 6733 95-4589528 (State or other (Primary Standard Industrial (I.R.S. Employer jurisdiction of Classification Code Number) Identification Number) incorporation or organization) 2141 ROSECRANS AVENUE, SUITE 4000 EL SEGUNDO, CALIFORNIA 90245 (310) 726-7600 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- DENNIS P.R. CODON VICE PRESIDENT, CHIEF LEGAL OFFICER AND GENERAL COUNSEL UNOCAL CORPORATION 2141 ROSECRANS AVENUE, SUITE 4000 EL SEGUNDO, CALIFORNIA 90245 (310) 726-7600 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: R. GREGORY MORGAN BRUCE K. DALLAS MUNGER, TOLLES & OLSON DAVIS POLK & WARDWELL 355 SOUTH GRAND AVENUE 450 LEXINGTON AVENUE LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10017 (213) 683-9100 (212) 450-4000 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [_] --------------- CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (1) PRICE FEE - ------------------------------------------------------------------------------------------------------------------------------------ % Trust Convertible Preferred Securities of Unocal Capital Trust representing indirectly undivided beneficial interests in % Convertible Junior Subordinated Debentures of Unocal Corporation held by Unocal Capital Trust.................. -- -- $512,500,000(2) $176,725 Guarantee of % Trust Convertible Preferred Securities of Unocal Capital Trust by Unocal Corporation............ -- -- -- (3) Common Stock, par value $1.00 per share, of Unocal Corporation (together with Preferred Stock Purchase Rights)................ (4) -- -- (5)
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Consistent with Rule 475(o), this information is not included. (2) Represents the book value of the outstanding shares of $3.50 Convertible Preferred Stock of Unocal Corporation as of July 29, 1996, which was used to calculate the registration fee pursuant to Rule 457(f)(2). (3) No separate consideration will be received for the Guarantee. Pursuant to Rule 457(n), no filing fee is required. (4) Such presently indeterminable number of shares as may be issued upon conversion of the % Trust Convertible Preferred Securities and/or the % Convertible Junior Subordinated Debentures in accordance with the respective terms thereof. (5) Pursuant to Rule 457(i), no filing fee is required. --------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PROSPECTUS Subject to Completion, Issued July 30, 1996 Unocal Corporation Offer to Exchange % Trust Convertible Preferred Securities (liquidation amount $50 per security) of Unocal Capital Trust Guaranteed by Unocal Corporation to the Extent Set Forth Herein For $3.50 Convertible Preferred Stock of Unocal Corporation ---------- THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED. ---------- Unocal Corporation, a Delaware corporation (the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal" which, together with the Prospectus, constitute the "Exchange Offer"), to exchange % Trust Convertible Preferred Securities (the "Trust Convertible Preferred Securities") of Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), for up to all of the 10,250,000 outstanding shares of $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock") of the Company. The Company will directly or indirectly own all of the common securities of the Trust (the "Trust Common Securities" and, together with the Trust Convertible Preferred Securities, the "Trust Securities"). The Trust Securities will represent undivided beneficial interests in the assets of the Trust. The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price for a share of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date (as defined herein), plus accumulated and unpaid dividends thereon to but excluding the Expiration Date (as defined herein), or (2) the Market Value (as defined herein) of the number of shares of the common stock, par value $1.00 per share (the "Common Stock"), of the Company into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date, for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer. The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio of the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. The Company will pay amounts of less than $50 due to a Holder (as defined herein) of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. The "Exchange Amount Determination Date" will be the second business day before the Expiration Date. "Market Value" means the average of the daily closing prices for one share of the Common Stock as reported on the New York Stock Exchange Composite Transactions listing (the "Closing Price") for the five trading days immediately preceding the Exchange Amount Determination Date. The Trust Convertible Preferred Securities will be convertible at any time beginning 90 days following the first date of issuance of any Trust Convertible Preferred Securities and prior to the close of business on September 1, 2026, at the option of the holder thereof, into shares of Common Stock at an initial conversion ratio equal to that number of shares of Common Stock determined by dividing the liquidation amount of $50 per security by the product of times the Market Value of a share of Common Stock. On the Exchange Amount Determination Date, the Company will issue a press release announcing the exchange ratio for the Exchange Offer and the initial conversion ratio for the Trust Convertible Preferred Securities. Immediately prior to the exchange of Trust Convertible Preferred Securities for the shares of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer, the Company will deposit in the Trust as trust assets its % Convertible Junior Subordinated Debentures due 2026 (the "Convertible Debentures"), having an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities to be issued by the Trust. Upon the terms and subject to the conditions of the Exchange Offer, the Company will accept for exchange all shares of $3.50 Convertible Preferred Stock validly tendered and not withdrawn prior to 12:00 midnight, New York City time, on , 1996, or if extended by the Company, in its sole discretion, the latest date and time to which extended (the "Expiration Date"). The Exchange Offer will expire on the Expiration Date. Tenders of shares of $3.50 Convertible Preferred Stock may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by the Company, may be withdrawn at any time after 40 business days after the date of this Prospectus. The Company expressly reserves the right, in its sole discretion, to (i) terminate the Exchange Offer and not accept for exchange any shares of $3.50 Convertible Preferred Stock, upon failure of certain conditions or for any other reason, (ii) waive any condition to the Exchange Offer and accept all shares of $3.50 Convertible Preferred Stock previously tendered pursuant to the Exchange Offer, and (iii) extend, amend, or modify the terms of the Exchange Offer in any manner. See "The Exchange Offer--Expiration Date; Extensions; Amendments; Termination". (continued on next page) ---------- SEE "RISK FACTORS" STARTING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER. ---------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY 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. ---------- Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. have been retained to act as Dealer Managers to solicit exchanges of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities. See "The Exchange Offer--Dealer Managers". The Bank of New York has been retained to act as Exchange Agent in connection with the Exchange Offer. D.F. King & Co., Inc. has been retained to act as Information Agent to assist in connection with the Exchange Offer. ---------- THE DEALER MANAGERS FOR THE EXCHANGE OFFER: MORGAN STANLEY & CO. GOLDMAN, SACHS & CO. Incorporated , 1996 (continued from previous page) NONE OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), THE COMPANY, THE TRUSTEES (AS DEFINED HEREIN), OR THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING IN THE EXCHANGE OFFER. HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. IN ORDER TO PARTICIPATE IN THE EXCHANGE OFFER, HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK MUST SUBMIT A LETTER OF TRANSMITTAL AND COMPLY WITH THE OTHER PROCEDURES FOR TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN AND IN THE LETTER OF TRANSMITTAL PRIOR TO THE EXPIRATION DATE. SEE "THE EXCHANGE OFFER--PROCEDURES FOR TENDERING" AND "--LETTER OF TRANSMITTAL". For a description of the other terms of the Exchange Offer, see "The Exchange Offer--Terms of the Exchange Offer," "--Expiration Date; Extensions; Amendments; Termination," and "--Withdrawal of Tenders". Consummation of the Exchange Offer is conditioned on, among other things, receipt of at least 4,000,000 validly tendered shares of $3.50 Convertible Preferred Stock (which condition may be waived by the Company). See "The Exchange Offer--Expiration Date; Extensions; Amendments; Termination". The Company expressly reserves the right, in its sole discretion, subject to applicable law, to (i) terminate the Exchange Offer, and not accept for exchange any shares of $3.50 Convertible Preferred Stock and promptly return all shares of $3.50 Convertible Preferred Stock at any time for any reason, including (without limitation) if fewer than 4,000,000 of such shares are tendered or upon the failure of any of the conditions specified in "The Exchange Offer--Procedures for Tendering", (ii) waive any condition to the Exchange Offer and accept all shares of $3.50 Convertible Preferred Stock previously tendered pursuant to the Exchange Offer, (iii) extend the Expiration Date and retain all shares of $3.50 Convertible Preferred Stock tendered pursuant to such Exchange Offer until the Expiration Date, subject, however, to all withdrawal rights of Holders (see "The Exchange Offer-- Withdrawal of Tenders") or (iv) amend or modify the terms of the Exchange Offer in any manner, including (without limitation), the form of the consideration or the formula for calculating the amount of the consideration to be paid pursuant to the Exchange Offer. Any amendment applicable to the Exchange Offer will apply to all shares of $3.50 Convertible Preferred Stock tendered pursuant to the Exchange Offer. The minimum period during which the Exchange Offer must remain open following a material change in the terms of the Exchange Offer or a waiver by the Company of a material condition of the Exchange Offer, other than a change in the percentage of the $3.50 Convertible Preferred Stock being sought or in the consideration offered, will depend upon the facts and circumstances, including the relative materiality of the change or waiver. See "The Exchange Offer--Expiration Date; Extensions; Amendments; Termination". The Company will own directly or indirectly all of the Trust Common Securities. The Trust exists for the sole purposes of (a) issuing its Trust Securities in exchange for Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation amount of such Trust Securities and (b) engaging in such other activities as are necessary or incidental thereto. The Trust Convertible Preferred Securities and the Trust Common Securities will rank pari passu with each other and payment thereon shall be pro rata; provided that (i) if a Declaration Event of Default (as defined herein) occurs and is continuing, the rights of holders of Trust Common Securities to receive payment of periodic distributions and payments upon liquidation, redemption, or otherwise will be subordinated to the rights of holders of the Trust Convertible Preferred Securities and (ii) holders of Trust Common Securities have the exclusive right (subject to the terms of the Declaration (as defined herein)) to appoint, replace, or remove Trustees and to increase or decrease the number of Trustees. See "Unocal Capital Trust," "Description of the Trust Convertible Preferred Securities," and "Description of the Convertible Debentures". Cash distributions on the Trust Convertible Preferred Securities will accumulate from and including the Expiration Date at an annual rate of % of the liquidation amount of $50 per security (the "distribution rate"), and will be payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year, commencing on December 1, 1996 ("distributions"). Cash distributions not paid on the regular scheduled distribution date therefor will bear interest thereon at the distribution rate, compounded quarterly, to the extent ii permitted by applicable law. The term "distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. The distribution rate and the distribution and other payment dates for the Trust Convertible Preferred Securities will correspond to the interest rate and the interest and other payment dates on the Convertible Debentures deposited in the Trust as trust assets. As a result, if principal or interest is not paid on the Convertible Debentures, including as a result of the Company's election to extend the interest payment period on the Convertible Debentures as described below, the Trust will not make payments on the Trust Securities. The Convertible Debentures provide that, so long as the Company shall not be in default in the payment of interest on the Convertible Debentures, the Company shall have the right to defer payments of interest on the Convertible Debentures by extending the interest payment period from time to time. Such deferral right, if exercised, would result in a corresponding deferral of quarterly distributions on the Trust Convertible Preferred Securities (though such deferred distributions would bear interest thereon at the distribution rate, compounded quarterly, since interest would continue to accrue on the Convertible Debentures). Such deferral rights could result in multiple extension periods of varying lengths but are limited to an aggregate of 20 consecutive quarters (each, an "Extension Period"), and no such Extension Period may extend beyond the maturity of the Convertible Debentures. During any such Extension Period, the Company may not declare or pay dividends on, or redeem, purchase, acquire, or make any distribution or liquidation payment with respect to, any shares of its capital stock (with certain limited exceptions); see "Risk Factors--Option to Extend Interest Payment Period," and "Description of the Convertible Debentures--Interest," and "--Option to Extend Interest Payment Period". The obligations of the Company under the Convertible Debentures will be unsecured obligations of the Company and will be subordinate and junior in right of payment, to the extent set forth herein, to all Senior Indebtedness (as defined herein) of the Company, which includes all obligations and liabilities other than accounts payable or any other obligations of the Company to trade creditors, obligations expressly made pari passu or subordinate by their terms, and certain indebtedness between or among the Company and its affiliates, but senior to all capital stock of the Company now outstanding, including the $3.50 Convertible Preferred Stock, or hereafter issued by the Company and to any guarantee now or hereafter entered into by the Company in respect of capital stock of its affiliates, including the Guarantee. As of June 30, 1996, the Company (on an unconsolidated basis) had no Senior Indebtedness other than guarantees of debt and capital lease obligations of the Company's subsidiaries. At the same date, the Company's consolidated balance sheet reflected approximately $6.6 billion of total liabilities of the subsidiaries of the Company, including $3.2 billion of total debt and capital lease obligations of the Company's subsidiaries guaranteed by the Company. The Trust's funds available for distribution to the holders of the Trust Convertible Preferred Securities will be limited to payments received from the Company on the Convertible Debentures. The Convertible Debentures will be structurally subordinated to all obligations of the Company's subsidiaries. See "Description of the Trust Convertible Preferred Securities--Distributions". The payment of distributions, payments on the liquidation of the Trust, and payments on the redemption of the Trust Convertible Preferred Securities, out of moneys held by the Trust as set forth below, will be guaranteed by the Company on a subordinated basis as and to the extent described herein (the "Guarantee"). The Guarantee will be a full and unconditional guarantee from the time of exchange of the Trust Convertible Preferred Securities, but the Guarantee will cover distributions and other payments on the Trust Convertible Preferred Securities only if and to the extent that the Company has made a payment of interest or principal on the Convertible Debentures deposited in the Trust as trust assets. The Company's obligations under the Guarantee will be unsecured and will rank (i) subordinate and junior in right of payment to all Senior Indebtedness of the Company, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company (including the $3.50 Convertible Preferred Stock) and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company, and (iii) senior to the Common Stock. The Guarantee will be structurally subordinated to all obligations of the Company's subsidiaries. See "Description of the Guarantee". For a description of the redemption rights with respect to the Trust Convertible Preferred Securities, the possible dissolution of the Trust, and distribution of Convertible Debentures held by the Trust to holders of the iii Trust Securities and the liquidation amount on the Trust Convertible Preferred Securities, see "Risk Factors--Special Event Distribution or Redemption," "Description of the Trust Convertible Preferred Securities--Mandatory Redemption," "--Special Event Distribution or Redemption," "--Redemption Procedures for Redemption by the Trust," "--Liquidation Distribution Upon Dissolution," and "Description of the Convertible Debentures". There is no established public trading market for the $3.50 Convertible Preferred Stock. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, THE TRUSTEES, THE COMPANY, OR THE DEALER MANAGERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE CONTEMPLATED HEREBY SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST OR THE COMPANY SINCE THE RESPECTIVE DATES AS OF WHICH INFORMATION IS GIVEN HEREIN. THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK IN ANY JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. HOWEVER, THE TRUST AND THE COMPANY MAY, AT THEIR DISCRETION, TAKE SUCH ACTION AS THEY MAY DEEM NECESSARY FOR THE COMPANY TO MAKE THE EXCHANGE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE EXCHANGE OFFER TO HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK IN SUCH JURISDICTION. IN ANY JURISDICTION THE SECURITIES LAWS OR BLUE SKY LAWS OF WHICH REQUIRE THE EXCHANGE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE EXCHANGE OFFER IS BEING MADE ON BEHALF OF THE COMPANY BY THE DEALER MANAGERS OR ONE OR MORE REGISTERED BROKERS OR DEALERS WHICH ARE LICENSED UNDER THE LAWS OF SUCH JURISDICTION. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain matters discussed in this Prospectus and the documents incorporated herein by reference may constitute forward-looking statements and as such may involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements, and other information concerning the Company can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Common Stock is listed on the New York Stock Exchange, Inc. (the "NYSE"), the Chicago Stock Exchange, and the Pacific Stock Exchange. Reports, proxy statements, and other information concerning the Company can be inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005; the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605; and the Pacific Stock Exchange, 115 Sansome Street, 3rd Floor, San Francisco, California 94104. iv The Commission maintains a Web site at http://www.sec.gov that contains reports, proxy statements, and other information concerning the Company, which files electronically with the Commission. This Prospectus constitutes a part of a combined registration statement on Form S-4 (together with all amendments and exhibits, the "Registration Statement") filed by the Company and the Trust with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information included in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Statements contained herein concerning the provisions of any document do not purport to be complete and, in each instance, are qualified in all respects by reference to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is subject to and qualified in its entirety by such reference. Reference is made to such Registration Statement and to the exhibits relating thereto for further information with respect to the Company, the Trust, and the securities offered hereby. No separate financial statements of the Trust have been included herein. The Company does not consider that such financial statements would be material to holders of the Trust Convertible Preferred Securities because (i) all of the voting securities of the Trust will be owned, directly or indirectly, by the Company, a reporting company under the Exchange Act, (ii) the Trust has no independent operations but exists for the sole purpose of issuing securities representing undivided beneficial interests in the assets of the Trust in order to refinance outstanding shares of the $3.50 Convertible Preferred Stock, and (iii) the Company's obligations described herein, the guarantee by the Company of the Trust's obligations under the Trust Convertible Preferred Securities, and the Convertible Debentures to be held by the Trust and the related indenture, taken together, constitute a full and unconditional guarantee of payments due on the Trust Convertible Preferred Securities. See "Description of the Convertible Debentures" and "Description of the Guarantee". The Trust is not currently subject to the information reporting requirements of the Exchange Act. The Trust will become subject to such requirements upon the effectiveness of the Registration Statement, although it intends to seek and expects to receive exemption therefrom. v INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the Commission and are incorporated herein by reference (Commission File No. 1-8483): 1. The Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. 3. The Company's Current Reports on Form 8-K dated January 25, 1996, February 20, 1996, February 23, 1996, April 9, 1996, April 24, 1996, June 3, 1996, and July 25, 1996. All documents filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the securities offered hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified and superseded, to constitute a part of this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER OF SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS INCORPORATED HEREIN BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM THE STOCKHOLDER SERVICES DEPARTMENT, UNOCAL CORPORATION, 2929 E. IMPERIAL HIGHWAY, BREA, CALIFORNIA 92621-2390, OR (800) 252-2233. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NOT LATER THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE. vi TABLE OF CONTENTS
PAGE ---- Prospectus Summary................. 1 Risk Factors....................... 11 The Company........................ 16 Market Price of the Common Stock... 17 Dividends on the Common Stock...... 17 Capitalization..................... 18 Selected Consolidated Financial Information....................... 20 The Exchange Offer................. 21 Unocal Capital Trust............... 28 Description of the Trust Convertible Preferred Securities.. 30 Description of the Guarantee....... 48
PAGE ---- Description of the Convertible Debentures........................ 50 Effect of Obligations under the Convertible Debentures and the Guarantee......................... 59 Description of the Common Stock.... 60 Description of the $3.50 Convertible Preferred Stock....... 62 Book-Entry System--The Depository Trust Company..................... 69 Certain Federal Income Tax Considerations.................... 71 Legal Matters...................... 78 Experts............................ 78
vii PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by the detailed information contained elsewhere in this Prospectus or by documents incorporated by reference into this Prospectus. THE COMPANY The Company is a fully integrated energy resources company whose worldwide operations comprise many aspects of energy production. The Company conducts virtually all of its operations through its subsidiary, Union Oil Company of California ("Union Oil"), and Union Oil's subsidiaries. As of June 30, 1996, the Company had approximately $9.8 billion in assets. During 1995, the Company reorganized its business into the following segments in order to remain focused on its most critical business activities: . EXPLORATION AND PRODUCTION: This segment engages in the exploration for, and the production and marketing of, crude oil, condensate, natural gas, and natural gas liquids. The Company's major production and development operations are conducted in the United States (principally the Louisiana/Gulf Coast region and Alaska), Thailand, Indonesia, and Canada. The Company's worldwide 1995 oil and gas production averaged approximately 500,000 barrel-of-oil equivalents ("BOE") per day, excluding production from California properties which were sold in April 1996 but including approximately 35,000 BOE per day of host-country share under the Company's Indonesian production sharing contract. . REFINING, MARKETING AND TRANSPORTATION: The 76 Products Company, a division of Union Oil, encompasses the Company's West Coast petroleum refining operations, marketing, and transportation of refined petroleum products and manufacturing and marketing of petroleum coke. This business unit includes three refineries in California and more than 1,300 retail service stations in six Western states. The Company's 1995 refinery production was 234,000 barrels per day. . GEOTHERMAL AND POWER OPERATIONS: This segment engages in the exploration for, and the production and sale of, geothermal resources for the generation of electricity. The Company is the world's largest supplier of geothermal energy for power generation and is expanding to become a provider of electrical power in Southeast Asia's markets with projects in Indonesia and the Philippines. At year-end 1995, the Company had worldwide net proved geothermal reserves of 216 million BOE. . DIVERSIFIED BUSINESSES: The Company's diversified businesses include agricultural products (nitrogen-based fertilizers), carbon and minerals (lanthanides and molybdenum, petroleum coke, and specialty graphites), pipelines, and real estate development and sales. Diversified businesses also include a 50% interest in The UNO-VEN Company, a refining and marketing partnership with the Venezuelan state oil company, operating in the midwestern United States. THE TRUST The Trust is a statutory business trust that was formed under the Delaware Business Trust Act (the "Delaware Trust Act") on July 17, 1996. The Trust exists for the sole purpose of (a) issuing its Trust Securities in exchange for Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation amount of such Trust Securities and (b) engaging in such other activities as are necessary and incidental thereto. THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The purpose of the Exchange Offer is to refinance the $3.50 Convertible Preferred Stock with the Trust Convertible Preferred Securities. This refinancing will benefit the Company by (i) permitting the Company to deduct interest payable on the Convertible Debentures for United States federal income tax purposes, while dividends payable on the $3.50 Convertible Preferred Stock are not deductible, (ii) potentially lowering the Company's quarterly cash payment obligation, and (iii) reducing the number of shares of Common Stock issuable upon conversion. See "The Exchange Offer--Purpose of the Exchange Offer". THE EXCHANGE OFFER; SECURITIES OFFERED Upon the terms and subject to the conditions of the Exchange Offer, the Company hereby offers to exchange Trust Convertible Preferred Securities representing preferred undivided beneficial interests in the assets of the Trust for up to all outstanding shares of $3.50 Convertible Preferred Stock of the Company. The Convertible Debentures will be the sole assets of the Trust. The Trust Convertible Preferred Securities will be guaranteed by the Company to the extent set forth in the Guarantee and described herein. The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price for a share of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date, plus accumulated and unpaid dividends thereon to but excluding the Expiration Date, or (2) the Market Value of the number of shares of Common Stock into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer. The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio of the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. The Company will pay amounts of less than $50 due to a Holder of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. The Trust Convertible Preferred Securities will be convertible at any time beginning 90 days following the first date of issuance of any Trust Convertible Preferred Securities and prior to the close of business on September 1, 2026, at the option of the holder thereof, into shares of Common Stock at an initial conversion ratio equal to that number of shares of Common Stock determined by dividing the liquidation amount of $50 per security by the product of times the Market Value of a share of Common Stock. On the Exchange Amount Determination Date, the Company will issue a press release announcing the exchange ratio for the Exchange Offer and the initial conversion ratio for the Trust Convertible Preferred Securities. Immediately prior to the exchange of Trust Convertible Preferred Securities for the shares of $3.50 Convertible Preferred Stock validly tendered in the Exchange Offer, the Company will deposit in the Trust as trust assets its Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities to be issued by the Trust. EXPIRATION DATE; WITHDRAWALS Upon the terms and subject to the conditions of the Exchange Offer, the Company will accept for exchange all shares of $3.50 Convertible Preferred Stock validly tendered and not withdrawn prior to the Expiration Date, or if extended by the Company, in its sole discretion, the latest date and time to which extended. The Exchange 2 Offer will expire on the Expiration Date. Tenders of shares of $3.50 Convertible Preferred Stock pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by the Company, may be withdrawn at any time after 40 business days after the date of this Prospectus. See "The Exchange Offer--Withdrawal of Tenders" and "-- Expiration Date; Extensions; Amendments; Termination". EXTENSIONS, AMENDMENTS, AND TERMINATION The Company expressly reserves the right to (i) extend, amend, or modify the terms of the Exchange Offer in any manner and (ii) withdraw or terminate the Exchange Offer and not accept for exchange any shares of $3.50 Convertible Preferred Stock, at any time for any reason, including (without limitation) if fewer than 4,000,000 shares of $3.50 Convertible Preferred Stock are tendered (which condition may be waived by the Company). See "The Exchange Offer-- Expiration Date; Extensions; Amendments; Termination". PROCEDURES FOR TENDERING Each Holder of $3.50 Convertible Preferred Stock wishing to accept the Exchange Offer must (i) properly complete and sign the Letter of Transmittal or a facsimile thereof (all references in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) in accordance with the instructions contained herein and therein, together with any required signature guarantees, and deliver the same to The Bank of New York, as Exchange Agent, at either of its addresses set forth in "The Exchange Offer--Exchange Agent and Information Agent" and either (a) certificates for the shares of $3.50 Convertible Preferred Stock held by such Holder must be received by the Exchange Agent at either such addresses or (b) such shares of $3.50 Convertible Preferred Stock must be transferred pursuant to the procedures for book-entry transfer described herein and a confirmation of such book-entry transfer must be received by the Exchange Agent, in each case prior to the Expiration Date, or (ii) comply with the guaranteed delivery procedures described herein. See "The Exchange Offer--General" and "--Procedures for Tendering". SPECIAL PROCEDURES FOR BENEFICIAL OWNERS Any beneficial owner whose shares of $3.50 Convertible Preferred Stock are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing a Letter of Transmittal and delivering its shares of $3.50 Convertible Preferred Stock, either make appropriate arrangements to register the ownership of such shares in such owner's name or obtain a properly completed stock power from the registered Holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. See "The Exchange Offer--Procedures for Tendering--Signature Guarantees". GUARANTEED DELIVERY PROCEDURES If a Holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or shares of $3.50 Convertible Preferred Stock to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected in accordance with the guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for Tendering--Guaranteed Delivery". ACCEPTANCE OF SHARES AND DELIVERY OF TRUST CONVERTIBLE PREFERRED SECURITIES Upon the terms and subject to the conditions of the Exchange Offer, including the reservation by the Company of the right to withdraw or terminate the Exchange Offer and certain other rights, the Company will accept for exchange all shares of $3.50 Convertible Preferred Stock validly tendered and not withdrawn, and will deliver the Trust Convertible Preferred Securities to exchanging Holders of $3.50 Convertible Preferred Stock as promptly as practicable after the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer" and "--Expiration Date; Extensions; Amendments; Termination". 3 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities pursuant to the Exchange Offer will be a taxable event. Depending on each exchanging Holder's particular facts and circumstances, the exchange may be treated as (i) a transaction in which gain or loss will be recognized in an amount equal to the difference between the fair market value of the Trust Convertible Preferred Securities received in the exchange and the exchanging Holder's tax basis in the shares of $3.50 Convertible Preferred Stock surrendered or (ii) a distribution taxable as a dividend in an amount equal to the fair market value of the Trust Convertible Preferred Securities received by such exchanging Holder. See "Certain Federal Income Tax Considerations--Exchange of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities". In the event an Extension Period deferring interest on the Convertible Debentures occurs, all holders will be required to include accrued and unpaid interest on the Convertible Debentures through the date of disposition in income as ordinary income (i.e., original issue discount ("OID")), although the holders did not receive a cash distribution from the Trust related to such interest. The OID is then added to the holder's adjusted tax basis in his pro rata share of the underlying Convertible Debentures. A holder who disposes of his Trust Convertible Preferred Securities between record dates for payments of distributions at a selling price that is less than the holder's adjusted tax basis will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. The extent to which a holder would recognize a gain or loss on the Trust Convertible Preferred Securities will depend on the market for the Trust Convertible Preferred Securities at the time of disposition. See "Certain Federal Income Tax Considerations--Interest Income and Original Issue Discount". UNTENDERED SHARES Holders of $3.50 Convertible Preferred Stock who do not tender their shares of $3.50 Convertible Preferred Stock in the Exchange Offer or whose shares of $3.50 Convertible Preferred Stock are not accepted for exchange will continue to hold such $3.50 Convertible Preferred Stock and will be entitled to all the rights and preferences, and will be subject to all of the limitations, applicable thereto. See "The Exchange Offer--Trading of Trust Convertible Preferred Securities and $3.50 Convertible Preferred Stock". The Company may exercise its optional redemption rights on any shares of $3.50 Convertible Preferred Stock which are not tendered and exchanged in the Exchange Offer. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10, plus accumulated and unpaid dividends, if any, up to but excluding the date fixed for redemption. To the extent that shares of $3.50 Convertible Preferred Stock are tendered and exchanged in the Exchange Offer, a Holder's ability to sell untendered shares of $3.50 Convertible Preferred Stock could be adversely affected. See "Risk Factors--Reduced Trading Market for $3.50 Convertible Preferred Stock". EXCHANGE AGENT AND INFORMATION AGENT The Bank of New York has been appointed as Exchange Agent in connection with the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notices of Guaranteed Delivery should be directed to D.F. King & Co., Inc., which has been retained by the Company to act as Information Agent for the Exchange Offer. The addresses and telephone numbers of the Exchange Agent and Information Agent are set forth in "The Exchange Offer--Exchange Agent and Information Agent". DEALER MANAGERS Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. have been retained to act as Dealer Managers to solicit exchanges of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities. Questions with respect to the Exchange Offer may be directed to Morgan Stanley & Co. Incorporated at (800) 835-9668 (extension 2262) and to Goldman, Sachs & Co. at (800) 323-5678. 4 COMPARISON OF TRUST CONVERTIBLE PREFERRED SECURITIES AND $3.50 CONVERTIBLE PREFERRED STOCK The following is a brief summary of certain terms of the Trust Convertible Preferred Securities and the $3.50 Convertible Preferred Stock. For a more complete description of the Trust Convertible Preferred Securities, see "Description of the Trust Convertible Preferred Securities". For a more complete description of the Convertible Debentures which will be deposited in the Trust as trust assets and will represent the sole source for the payment of distributions and other payments on the Trust Convertible Preferred Securities, see "Description of the Convertible Debentures". For a more complete description of the $3.50 Convertible Preferred Stock, see "Description of the $3.50 Convertible Preferred Stock".
TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- Issuer.................. The Trust. Payment of distribu- The Company. tions and on liquidation or re- demption is guaranteed by the Company on a subordinated basis, to the extent described herein. Liquidation Amount...... $50.00 per Trust Convertible Pre- $50.00 per share, plus accumu- ferred Security, plus accumulated lated and unpaid dividends. and unpaid distributions. Distribution/Dividend Rate................... % per annum cash distribution $3.50 per share per annum (7% per payable quarterly in arrears on annum) cash dividend payable March 1, June 1, September 1, and quarterly in arrears on the 15th December 1 of each year, commenc- day of January, April, July, and ing December 1, 1996, but only October of each year, out of if, and to the extent that, in- funds legally available therefor, terest payments are made in re- when, as and if declared by the spect of the Convertible Deben- Board. Dividends are cumulative. tures held by the Trust. During Accumulated and unpaid dividends any Extension Period on the Con- do not bear interest. To date, vertible Debentures, distribution the Company has made each quar- payments on the Trust Convertible terly dividend payment with re- Preferred Securities will not be spect to the $3.50 Convertible made but will continue to accumu- Preferred Stock on the scheduled late, and will bear interest at dividend payment date. In the the distribution rate, compounded event that the equivalent of six quarterly, to the extent permit- quarterly dividends (whether con- ted by applicable law. If a de- secutive or not) are accumulated ferral of an interest payment oc- but not paid, the Holders of curs, the holders of the Trust $3.50 Convertible Preferred Stock Convertible Preferred Securities will have certain voting rights. would accrue income for United See "Voting Rights/Enforcement" States federal income tax purpos- below. If a deferral of a divi- es. Distributions accumulate from dend payment occurs, the Holders and including the Expiration of $3.50 Convertible Preferred Date. Stock would not be required to include such amount in income for United States federal income tax purposes until the dividend is actually declared and paid.
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TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- Conversion.............. Convertible at the option of the Convertible at the option of the holder at any time beginning 90 Holder into such number of whole days following the first date of shares of Common Stock as is issuance of any Trust Convertible equal to the aggregate liquida- Preferred Securities and prior to tion preference of shares of the close of business on Septem- $3.50 Convertible Preferred Stock ber 1, 2026 into such number of divided by the conversion price. whole shares as is equal to the As of the date of the Prospectus, liquidation amount of $50 per se- the conversion curity divided by the initial ratio is 1.626 shares (equivalent conversion price, which will be to a conversion price of $30.75). the product of times the Mar- The conversion price is subject ket Value of a share of Common to adjustments upon certain Stock. The conversion price is events, including the event of a subject to adjustments upon cer- Non-Stock Fundamental Change or a tain events, including the event Common Stock Fundamental Change, of a Non-Stock Fundamental each as defined herein with re- Change, a Common Stock Fundamen- spect to $3.50 Convertible Pre- tal Change, each as defined ferred Stock. See "Description of herein with respect to the Trust the $3.50 Convertible Preferred Convertible Preferred Securities, Stock--Conversion Rights". or a Spinoff (as defined herein). In the event of a Spinoff, the Although similar defined terms $3.50 Convertible Preferred Stock are used, these adjustments dif- will be subject to certain con- fer in many respects from the ad- version provision adjustments. justments required for the $3.50 Convertible Preferred Stock. See "Description of the Trust Con- vertible Preferred Securities-- Conversion Rights". In the event of a Spinoff (as de- fined herein), the Trust Convert- ible Preferred Securities may be, at the Company's option with cer- tain limitations, subject to cer- tain conversion provision adjust- ments or exchanged for one or more new convertible preferred securities which may be convert- ible into Spinoff Common Stock (as defined herein). See "De- scription of the Trust Convert- ible Preferred Securities--Cer- tain Other Conversion Provision Adjustments".
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TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- Maturity/Redemption..... Upon the repayment of the Con- The $3.50 Convertible Preferred vertible Debentures, whether at Stock is not subject to mandatory maturity, upon redemption, or redemption. The $3.50 Convertible otherwise, the proceeds thereof Preferred Stock is redeemable at must immediately be applied to the option of the Company on and redeem the Trust Convertible Pre- after July 15, 1996, in whole or ferred Securities through the in part, upon not less than 30 close of business on September 1, days notice nor more than 60 days 2026 and the Trust Common Securi- notice, during the twelve-month ties having an aggregate liquida- periods commencing on July 15 of tion amount equal to the aggre- the years indicated below at a gate principal amount of the Con- redemption price per share (ex- vertible Debentures so repaid. pressed as a percentage of the The Convertible Debentures will $50 liquidation preference there- be redeemable at the option of of), plus accumulated and unpaid the Company, in whole or in part, dividends thereon, up to but ex- upon not less than 30 days notice cluding the redemption date: nor more than 60 days notice on 104.2% in 1996, 103.5% in 1997, or after September 3, 2000 ini- 102.8% in 1998, 102.1% in 1999, tially at a redemption price 101.4% in 2000, 100.7% in 2001 equivalent to % per Convertible and 100.0% in 2002 and thereaf- Debenture to be redeemed and de- ter. Holders of $3.50 Convertible clining to par on September 1, Preferred Stock have no right to 2006, plus accrued and unpaid in- require the Company to redeem the terest thereon to the redemption $3.50 Convertible Preferred date, including interest accumu- Stock. See "Description of the lated as a result of the $3.50 Convertible Preferred Company's election to defer pay- Stock--Optional Redemption". ments of interest on the Convert- ible Debentures. The Company may not redeem any Convertible Deben- tures unless all accumulated and unpaid distributions have been paid on all Convertible Deben- tures for all quarterly interest payment periods terminating on or prior to the date of redemption. See "Description of the Trust Convertible Preferred Securi- ties--Mandatory Redemption" and "--Special Event Distribution or Redemption". Holders of Trust Convertible Preferred Securities have no right to require the Trust to redeem the Trust Con- vertible Preferred Securities. Subordination........... Subordinated to claims of credi- Subordinated to claims of credi- tors of the Trust, if any. The tors, including holders of the Trust is not permitted to incur Company's outstanding debt secu- any indebtedness for borrowed rities and the Convertible Deben- money. The Declaration provides tures, and structurally subordi- that the Company shall pay for nated to all existing and future all debts and obligations (other obligations of the Company's sub- than with respect to the Trust sidiaries, but senior to the Com- Securities) and all costs and ex- mon Stock. penses of the Trust, including As of June 30, 1996, the Company any income taxes, duties, and (on an unconsolidated basis) had other governmental charges, and no Senior all costs and expenses with re- Indebtedness other than guaran- spect thereto, to which the Trust tees of debt and capital lease may become subject, except for obligations of United States withholding taxes. the Company's subsidiaries. At the same
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TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- The Convertible Debentures will date, the Company's consolidated rank subordinate and junior to balance sheet reflected approxi- all Senior Indebtedness of the mately $6.6 billion of total lia- Company, which includes all obli- bilities of the subsidiaries of gations and liabilities other the Company, including $3.2 bil- than accounts payable or any lion of total debt and capital other obligations of the Company lease obligations of the to trade creditors, obligations Company's subsidiaries guaranteed expressly made pari passu or sub- by the Company. ordinate by their terms, and cer- tain indebtedness between or among the Company and its affili- ates, but senior to all capital stock, including the $3.50 Con- vertible Preferred Stock, now or hereafter issued by the Company, and to any guarantee now or here- after entered into by the Company in respect of capital stock of its affiliates, including the Guarantee. The Convertible Debentures (and the Company's obligations under the Guarantee) also will be structurally subordinated to all existing and future obligations of the Company's subsidiaries, except to the extent that the Company is a creditor of the sub- sidiaries and is recognized as such. In addition, the Guarantee will rank junior to the Convert- ible Debentures. As of June 30, 1996, the Company (on an unconsolidated basis) had no Senior Indebtedness other than guarantees of debt and capital lease obligations of the Company's subsidiaries. At the same date, the Company's consoli- dated balance sheet reflected ap- proximately $6.6 billion of total liabilities of the subsidiaries of the Company, including $3.2 billion of total debt and capital lease obligations of the Company's subsidiaries guaranteed by the Company.
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TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- Guarantee............... The Company will fully and uncon- None. ditionally guarantee, on a subor- dinated basis and to the extent set forth herein, the payment in full of (i) distributions on the Trust Convertible Preferred Secu- rities to the extent the Trust has funds available therefor, (ii) the amount payable upon re- demption of the Trust Convertible Preferred Securities to the ex- tent the Trust has funds avail- able therefor, and (iii) general- ly, the liquidation amount of the Trust Convertible Preferred Secu- rities to the extent the Trust has assets available for distri- bution to holders of Trust Con- vertible Preferred Securities. The Company's obligations under the Guarantee will be unsecured and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, (ii) pari passu with the most se- nior preferred or preference stock now or hereafter issued by the Company and with any guaran- tee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company, and (iii) senior to the Common Stock. Voting Rights/ Enforcement............ Generally, holders of the Trust The $3.50 Convertible Preferred Convertible Preferred Securities Stock is non-voting except that will not have any voting rights. (i) if the equivalent of six full However, if an Indenture Event of quarterly dividends (whether con- Default (as defined herein) oc- secutive or not) on the $3.50 curs and is continuing, the hold- Convertible Preferred Stock are ers of 25% of the aggregate liq- accumulated and unpaid, the num- uidation amount of the Trust Con- ber of directors of the Company vertible Preferred Securities may will be increased by two and the direct the Institutional Trustee Holders of $3.50 Convertible Pre- to declare the principal of and ferred Stock will have the right, interest on the Convertible De- voting as a class together with bentures immediately due and pay- holders of shares of any other able. If (i) the Institutional preferred stock having similar Trustee fails to enforce its voting rights, to elect such ad- rights under the Convertible De- ditional directors (such voting bentures or (ii) the Company de- rights will continue until such faults under the Guarantee, a time as the dividend arrearage on record holder of the Trust Con- the $3.50 Convertible Preferred vertible Preferred Securities may Stock and shares of stock ranking institute a legal proceeding di- on a parity with it have been rectly against the Company to en- paid in full), (ii) the affirma- force the Institutional Trustee's tive consent of the Holders of at rights without first instituting least 66 2/3% of the outstanding any legal proceeding against the shares of $3.50 Convertible Pre- Institutional Trustee. ferred Stock, voting as a class together with any other preferred stock ranking on a parity with the $3.50 Convertible Preferred Stock, will be required for the issuance of any class or series of preferred stock ranking senior to the $3.50 Convertible Pre- ferred Stock as to dividends or liquidation rights, and (iii) the affirmative consent of the Hold- ers of at least 66 2/3% of the outstanding shares of $3.50 Con- vertible Preferred Stock will be required for certain amendments to the Company's Certificate of Incorporation affecting adversely the rights of Holders of the $3.50 Convertible Preferred Stock.
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TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- Trading................. The Company has no current plans There is no established public to list the Trust Convertible trading market for the $3.50 Con- Preferred Securities on a securi- vertible Preferred Stock. The ties exchange. Although the shares of $3.50 Convertible Pre- Dealer Managers have indicated to ferred Stock, and the Common the Company and the Trust that Stock issuable upon conversion they intend to make a market in thereof, which are not (and have the Trust Convertible Preferred not been) held by an affiliate of Securities, they are not obli- the Company are no longer subject gated to do so and may discon- to transfer restrictions. tinue any such market making at any time without notice. See "The Exchange Offer--Trading of Trust Convertible Preferred Securities and $3.50 Convertible Preferred Stock". Dividends Received Deduction.............. Distributions on the Trust Con- Dividends on the $3.50 Convert- vertible Preferred Securities ible Preferred Stock are eligible will not be eligible for the div- for the dividends received deduc- idends received deduction for tion for corporate Holders. corporate holders.
ACCOUNTING TREATMENT The financial statements of the Trust will be reflected in the Company's consolidated financial statements with the Trust Convertible Preferred Securities shown as Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust holding solely the Convertible Debentures, and appropriate disclosure about the Trust Convertible Preferred Securities, the Guarantee, and the Convertible Debentures will be included in the notes to the Company's consolidated financial statements. For financial reporting purposes, the Company will record distributions payable on the Trust Convertible Preferred Securities as a reduction in earnings applicable to the Common Stock in the Company's consolidated statement of earnings. See "Capitalization". 10 RISK FACTORS Prospective exchanging Holders of $3.50 Convertible Preferred Stock should carefully consider, in addition to the other information set forth elsewhere in this Prospectus, the following: EXCHANGE OFFER AS TAXABLE EVENT The exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities pursuant to the Exchange Offer will be a taxable event. Depending on each exchanging Holder's particular facts and circumstances, the exchange may be treated as (i) a transaction in which gain or loss will be recognized in an amount equal to the difference between the fair market value of the Trust Convertible Preferred Securities received in the exchange and the exchanging Holder's tax basis in the shares of $3.50 Convertible Preferred Stock surrendered or (ii) a distribution taxable as a dividend in an amount equal to the fair market value of the Trust Convertible Preferred Securities received by such exchanging Holder. See "Certain Federal Income Tax Considerations". All Holders of $3.50 Convertible Preferred Stock are advised to consult their own tax advisors regarding the federal, state, local, and foreign tax consequences of an exchange of shares of $3.50 Convertible Preferred Stock. CORPORATE HOLDERS OF TRUST CONVERTIBLE PREFERRED SECURITIES NOT ENTITLED TO DIVIDENDS RECEIVED DEDUCTION While dividends with respect to the $3.50 Convertible Preferred Stock are eligible for the dividends received deduction for corporate Holders, each corporate holder of the Trust Convertible Preferred Securities will be considered the owner of an undivided interest in the Convertible Debentures and will be required to include distributions on the Trust Convertible Preferred Securities in gross income without a deduction for dividends received. RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE DEBENTURES The Company's obligations under the Guarantee will be unsecured and will rank subordinate and junior in right of payment to all other liabilities of the Company and pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company (including the $3.50 Convertible Preferred Stock). The obligations of the Company under the Convertible Debentures will be unsecured and will rank subordinate and junior in right of payment to all present and future Senior Indebtedness of the Company, which includes all obligations and liabilities other than accounts payable or any other obligations of the Company to trade creditors, obligations expressly made pari passu or subordinate by their terms, and certain indebtedness between or among the Company and its affiliates. Both the Guarantee and the Convertible Debentures will be structurally subordinated to all obligations of the Company's subsidiaries, including Union Oil, through which the Company conducts virtually all of its operations. No payment of principal of (including redemption), premium, if any, or interest on the Convertible Debentures may be made (i) if any Senior Indebtedness of the Company is not paid when due and any applicable grace period with respect to such default has ended and such default not having been cured or waived or ceasing to exist or (ii) if the maturity of any Senior Indebtedness has been accelerated because of a default. As of June 30, 1996, the Company (on an unconsolidated basis) had no Senior Indebtedness other than guarantees of debt and capital lease obligations of the Company's subsidiaries. At the same date, the Company's consolidated balance sheet reflected approximately $6.6 billion of total liabilities of the subsidiaries of the Company, including $3.2 billion of total debt and capital lease obligations of the Company's subsidiaries guaranteed by the Company. There are no terms in the Trust Convertible Preferred Securities, the Convertible Debentures, or the Guarantee that limit the Company's or its subsidiaries' ability to incur additional indebtedness, including indebtedness that ranks senior to the Convertible Debentures and the Guarantee. See "Description of the Guarantee--Status of the Guarantee" and "Description of the Convertible Debentures--Subordination". 11 RIGHTS UNDER THE GUARANTEE The Guarantee will be qualified as an indenture under the Trust Indenture Act. The Institutional Trustee will act as indenture trustee under the Guarantee for the purposes of compliance with the provisions of the Trust Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the Guarantee for the benefit of the holders of the Trust Convertible Preferred Securities. The Guarantee guarantees to the holders of the Trust Convertible Preferred Securities the payment of (i) any accumulated and unpaid distributions required to be paid on the Trust Convertible Preferred Securities, to the extent the Trust has funds available therefor, (ii) the Redemption Price (as defined herein), all accumulated and unpaid distributions with respect to Trust Convertible Preferred Securities called for redemption by the Trust, to the extent the Trust has funds available therefor and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Trust (other than in connection with the distribution of Convertible Debentures to the holders of Trust Convertible Preferred Securities or a redemption of all the Trust Convertible Preferred Securities), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid distributions on the Trust Convertible Preferred Securities to the date of the payment to the extent the Trust has funds available therefor or (b) the amount of assets of the Trust remaining available for distribution to holders of the Trust Convertible Preferred Securities in liquidation of the Trust. The holders of a majority in liquidation amount of the Trust Convertible Preferred Securities will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee. Notwithstanding the foregoing, any holder of Trust Convertible Preferred Securities may institute a legal proceeding directly against the Company to enforce such holder's right to receive payment under the Guarantee without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other person or entity. If the Company were to default on its obligation to pay amounts payable on the Convertible Debentures, the Trust would lack available funds for the payment of distributions or amounts payable on redemption of the Trust Convertible Preferred Securities or otherwise, and, in such event, holders of the Trust Convertible Preferred Securities would not be able to rely upon the Guarantee for payment of such amounts. See "Description of the Guarantee". However, a holder of the Trust Convertible Preferred Securities could instead rely on the enforcement (1) by the Institutional Trustee of its rights as registered holder of the Convertible Debentures against the Company pursuant to the terms of the Convertible Debentures or (2) by such holder of its right of direct action against the Company to enforce payments on Convertible Debentures. See "Description of the Convertible Debentures--Indenture Events of Default". The Declaration provides that each holder of Trust Convertible Preferred Securities, by acceptance thereof, agrees to the provisions of the Guarantee, including the subordination provisions thereof, and the Indenture. ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST CONVERTIBLE PREFERRED SECURITIES If (i) the Trust fails to pay distributions in full on the Trust Convertible Preferred Securities (other than pursuant to a deferral) or (ii) a Declaration Event of Default occurs and is continuing, then the holders of Trust Convertible Preferred Securities could rely upon, and under certain circumstances, could cause, the enforcement by the Institutional Trustee of its rights as a holder of the Convertible Debentures against the Company. In addition, the holders of a majority in liquidation amount of the Trust Convertible Preferred Securities will have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee or to direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee to exercise the remedies available to it as a holder of the Convertible Debentures. If the Institutional Trustee fails to enforce its rights under the Convertible Debentures, a holder of Trust Convertible Preferred Securities may institute a legal proceeding directly against the Company to enforce the Institutional Trustee's rights under the Convertible Debentures without first instituting any legal proceeding against the Institutional Trustee or any other person or entity. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then the registered holder of Trust Convertible Preferred Securities may directly institute a proceeding for enforcement of payment to such 12 holder of the principal of or interest on the Convertible Debentures having a principal amount equal to the aggregate liquidation amount of the Trust Convertible Preferred Securities of such holder (a "Direct Action") on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Trust Convertible Preferred Securities under the Declaration to the extent of any payment made by the Company to such holder of Trust Convertible Preferred Securities in such Direct Action. The holders of Trust Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Convertible Debentures. See "Description of the Trust Convertible Preferred Securities--Declaration Events of Default" and "Description of the Convertible Debentures--Indenture Events of Default". OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as the Company shall not be in default in the payment of interest on the Convertible Debentures, the Company will have the right at any time, and from time to time, under the Indenture (as such term is defined in "Description of the Convertible Debentures" herein) to defer payments of interest on the Convertible Debentures by extending the interest payment period at any time, for a period not exceeding 20 consecutive quarters. As a consequence of such an extension, quarterly distributions on the Trust Convertible Preferred Securities would be deferred (but despite such deferral would continue to accumulate with interest thereon at the rate specified by the Convertible Debentures, compounded quarterly) by the Trust during any such extended interest payment period. If the Company exercises this right to defer interest payments, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of capital stock in connection with any employee benefit plan or program, director plan or program, dividend reinvestment, stock repurchase, or other similar plans available to stockholders of the Company, or any option, warrant, right, or exercisable, exchangeable, or convertible security outstanding as of the Expiration Date, (ii) as a result of a reclassification of the Company's capital stock pursuant to the exchange or conversion provisions of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or the capital securities of a subsidiary (including a trust such as the Trust), or (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or security being converted or exchanged), and (b) the Company shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase, or redeem or make any guarantee payment (other than pursuant to the Guarantee) with respect to any debt securities issued by the Company that rank pari passu with or junior to the Convertible Debentures. Prior to the termination of any such Extension Period, the Company may further extend the interest payment period; provided that such Extension Period, together with all such previous and further extensions thereof, may not exceed 20 consecutive quarters or extend beyond the maturity of the Convertible Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. See "Description of the Trust Convertible Preferred Securities--Distributions" and "Description of the Convertible Debentures--Option to Extend Interest Payment Period". Should the Company exercise its right to defer payments of interest by extending the interest payment period, each holder of Trust Convertible Preferred Securities will accrue income (OID) in respect of the deferred and compounded interest allocable to its Trust Convertible Preferred Securities for United States federal income tax purposes, which will be allocated but not distributed, to holders of record of Trust Convertible Preferred Securities. As a result, each such holder of Trust Convertible Preferred Securities will recognize income for United States federal income tax purposes in advance of the receipt of cash and will not receive the cash from the Trust related to such income if such holder disposes of its Trust Convertible Preferred Securities prior to the record date for the date on which distributions of such amounts are made. The Company has no current intention of exercising its right to defer payments of interest by extending the interest payment period on the Convertible Debentures. However, should the Company determine to exercise such right in the future, the market price of the Trust Convertible Preferred Securities is likely to be affected. A holder that disposes of its Trust Convertible 13 Preferred Securities during an Extension Period, therefore, might not receive the same return on its investment as a holder that continues to hold its Trust Convertible Preferred Securities. In addition, as a result of the existence of the Company's right to defer interest payments, the market price of the Trust Convertible Preferred Securities (which represent an undivided beneficial interest in the Convertible Debentures) may be more volatile than other securities that do not grant the issuer such rights. See "Certain Federal Income Tax Considerations--Interest Income and Original Issue Discount". PROPOSED TAX LEGISLATION On March 19, 1996, as a part of President Clinton's Fiscal 1997 Budget Proposal, the Treasury Department proposed legislation (the "Proposed Legislation") that, among other things, would (i) treat as equity for United States federal income tax purposes certain debt instruments with a maximum term of more than 20 years and (ii) disallow interest deductions on certain convertible debt instruments or defer interest deductions on certain debt instruments issued with OID. The Proposed Legislation is proposed to be effective for debt instruments issued on or after December 7, 1995. On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr and House Ways and Means Committee Chairman William Archer issued a joint statement (the "Joint Statement") indicating their intent that the Proposed Legislation, if 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". Based upon the Joint Statement, it is expected that if the Proposed Legislation were enacted, such legislation would not apply to the Convertible Debentures since they would be issued prior to the date of any "appropriate Congressional action" or otherwise qualify for transitional relief. However, there can be no assurances that the effective date guidance contained in the Joint Statement will be incorporated in the Proposed Legislation, if enacted, or that other legislation enacted after the date hereof will not otherwise adversely affect the tax treatment of the Convertible Debentures. If legislation were enacted that adversely affects the tax treatment of the Convertible Debentures, there could be a distribution of the Convertible Debentures to holders of the Trust Convertible Preferred Securities or, in certain circumstances, the redemption of the Convertible Debentures by the Company and the distribution by the Trust of the resulting cash in redemption of the Trust Convertible Preferred Securities. See "Description of the Trust Convertible Preferred Securities--Special Event Distribution or Redemption". SPECIAL EVENT DISTRIBUTION OR REDEMPTION Upon the occurrence of a Special Event (as defined herein), the Trust could be dissolved (with the consent of the Company) except in the limited circumstance described below, with the result that the Convertible Debentures would be distributed to the holders of the Trust Securities in connection with the liquidation of the Trust. In certain circumstances, the Company would have the right to redeem the Convertible Debentures, in whole or in part, in lieu of a distribution of the Convertible Debentures by the Trust; in which event the Trust would redeem the Trust Securities on a pro rata basis to the same extent as the Convertible Debentures are redeemed by the Company. See "Description of the Trust Convertible Preferred Securities--Special Event Distribution or Redemption" and "Certain Federal Income Tax Considerations-- Receipt of Convertible Debentures or Cash Upon Liquidation of the Trust". There can be no assurance as to the market prices for the Trust Convertible Preferred Securities or the Convertible Debentures that may be distributed in exchange for Trust Convertible Preferred Securities if a dissolution or liquidation of the Trust were to occur. Accordingly, the Trust Convertible Preferred Securities that an investor may receive in the Exchange Offer or the Convertible Debentures that a holder of Trust Convertible Preferred Securities may receive on dissolution and liquidation of the Trust, may trade at a discount to the value of the $3.50 Convertible Preferred Stock on the Expiration Date of the Exchange Offer. Because holders of Trust Convertible Preferred Securities may receive Convertible Debentures upon the occurrence of a Special Event, prospective purchasers of Trust Convertible Preferred Securities are also making an investment decision with regard to the Convertible Debentures and should carefully review all the information regarding the Convertible 14 Debentures contained herein. See "Description of the Trust Convertible Preferred Securities--Special Event Distribution or Redemption" and "Description of the Convertible Debentures--General". EXCHANGE OF SECURITIES AND OTHER ADJUSTMENTS UPON A SPINOFF In the event of a Spinoff (as defined herein) of shares of capital stock of a subsidiary or other corporation controlled by the Company, the Trust Convertible Preferred Securities, at the Company's option with certain limitations, (i) may be subject to certain conversion provision adjustments, (ii) may be exchanged for a new trust convertible preferred security issued by a new trust created by the Spinoff Company (as defined herein) which is convertible into Spinoff Company Stock (as defined herein), (iii) may be subject to certain adjustments and a new trust convertible preferred security will be issued to holders of the Trust Convertible Preferred Securities or (iv) may be exchanged for a combination of such a new security and a new trust convertible preferred security issued by the Trust which is convertible into Common Stock. See "Description of the Trust Convertible Preferred Securities-- Conversion Rights--Certain Other Conversion Provision Adjustments". LIMITED VOTING RIGHTS Holders of Trust Convertible Preferred Securities will have limited voting rights and will not be entitled to vote to appoint, remove or replace, or to increase or decrease the number of, the Trustees, which voting rights are vested exclusively in the holder of the Trust Common Securities. See "Description of the Trust Convertible Preferred Securities--Voting Rights". TRADING PRICE The Trust Convertible Preferred Securities may trade at a price that does not fully reflect the value of accrued and unpaid interest with respect to the underlying Convertible Debentures. Should the Company exercise its right to defer payments of interest, a holder who disposes of his Trust Convertible Preferred Securities between record dates for payments of distributions thereon will be required to include accrued and unpaid interest on the Convertible Debentures through the date of disposition in income as ordinary income (i.e., OID), and to add such amount to his adjusted tax basis in his pro rata share of the underlying Convertible Debentures deemed disposed of. To the extent the selling price is less than the holder's adjusted tax basis, a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. See "Certain Federal Income Tax Considerations-- Interest Income and Original Issue Discount" and "--Sale or Redemptions of Trust Convertible Preferred Securities". LACK OF ESTABLISHED TRADING MARKET FOR TRUST CONVERTIBLE PREFERRED SECURITIES There has not previously been any public market for the Trust Convertible Preferred Securities, and the Company has no current plans to list the Trust Convertible Preferred Securities on a securities exchange. There can be no assurance that an active market for the Trust Convertible Preferred Securities will develop or, if developed, will be sustained in the future. Although the Dealer Managers have indicated to the Company and the Trust that they intend to make a market in the Trust Convertible Preferred Securities, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue any such market-making at any time without notice. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Trust Convertible Preferred Securities. REDUCED TRADING MARKET FOR $3.50 CONVERTIBLE PREFERRED STOCK There is no established public trading market for the $3.50 Convertible Preferred Stock. To the extent shares of $3.50 Convertible Preferred Stock are tendered and accepted in the Exchange Offer, the liquidity and trading market for shares of $3.50 Convertible Preferred Stock outstanding following the Exchange Offer, and the terms upon which such shares could be sold, could be adversely affected. In addition, if the Exchange Offer is substantially subscribed, there would be a significant risk that round lot holdings of shares of $3.50 Convertible Preferred Stock outstanding following the Exchange Offer would be limited. See "The Exchange Offer--Trading of Trust Convertible Preferred Securities and $3.50 Convertible Preferred Stock". 15 THE COMPANY The Company is a fully integrated energy resources company whose worldwide operations comprise many aspects of energy production. The Company conducts virtually all of its operations through Union Oil and Union Oil's subsidiaries. As of June 30, 1996, the Company had approximately $9.8 billion in assets. During 1995, the Company reorganized its business into the following segments in order to remain focused on its most critical business activities: . EXPLORATION AND PRODUCTION: This segment engages in the exploration for, and the production and marketing of, crude oil, condensate, natural gas, and natural gas liquids. The Company's major production and development operations are conducted in the United States (principally the Louisiana/Gulf Coast region and Alaska), Thailand, Indonesia, and Canada. The Company's worldwide 1995 oil and gas production averaged approximately 500,000 BOE per day, excluding production from California properties which were sold in April 1996 but including approximately 35,000 BOE per day of host-country share under the Company's Indonesian production sharing contract. . REFINING, MARKETING AND TRANSPORTATION: The 76 Products Company, a division of Union Oil, encompasses the Company's West Coast petroleum refining operations, marketing, and transportation of refined petroleum products and manufacturing and marketing of petroleum coke. This business unit includes three refineries in California and more than 1,300 retail service stations in six Western states. The Company's 1995 refinery production was 234,000 barrels per day. . GEOTHERMAL AND POWER OPERATIONS: This segment engages in the exploration for, and the production and sale of, geothermal resources for the generation of electricity. The Company is the world's largest supplier of geothermal energy for power generation and is expanding to become a provider of electrical power in Southeast Asia's markets with projects in Indonesia and the Philippines. At year-end 1995, the Company had worldwide net proved geothermal reserves of 216 million BOE. . DIVERSIFIED BUSINESSES: The Company's diversified businesses include agricultural products (nitrogen-based fertilizers), carbon and minerals (lanthanides and molybdenum, petroleum coke, and specialty graphites), pipelines, and real estate development and sales. Diversified businesses also include a 50% interest in the UNO-VEN Company, a refining and marketing partnership with the Venezuelan state oil company, operating in the midwestern United States. The Company was incorporated in Delaware on March 18, 1983, to operate as the parent of Union Oil, which was incorporated in California on October 17, 1890. The principal offices of the Company are located at 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245, and its telephone number at that address is (310) 726-7600. 16 MARKET PRICE OF THE COMMON STOCK The following table sets forth the high and low price of a share of the Common Stock reported on the New York Stock Exchange Composite Transactions listing during the indicated periods. The Common Stock is also listed on the Pacific, Chicago, Swiss (Basel, Geneva, and Zurich), and Singapore stock exchanges.
HIGH LOW ------ ------- 1994 First Quarter.................................................. $30 $24 7/8 Second Quarter................................................. 29 5/8 24 3/8 Third Quarter.................................................. 30 3/4 26 5/8 Fourth Quarter................................................. 29 7/8 25 5/8 1995 First Quarter.................................................. 29 1/8 25 1/4 Second Quarter................................................. 30 1/8 27 5/8 Third Quarter.................................................. 30 1/2 26 7/8 Fourth Quarter................................................. 29 7/8 24 3/4 1996 First Quarter.................................................. 34 27 3/4 Second Quarter................................................. 34 1/2 29 5/8 Third Quarter (through July 26, 1996).......................... 34 3/8 30 1/2
DIVIDENDS ON THE COMMON STOCK The following table sets forth the quarterly dividends declared on the Common Stock since January 1, 1994. Quarterly dividends declared are generally paid on or about the tenth day of February, May, August, and November. The most recent quarterly dividend was declared on June 3, 1996 and will be paid on August 9, 1996.
1996 1995 1994 ---- ---- ---- First Quarter................................................. $.20 $.20 $.20 Second Quarter................................................ .20 .20 .20 Third Quarter................................................. .20 .20 Fourth Quarter................................................ .20 .20
Declarations of cash dividends are at the discretion of the Board and dependent on the Company's results of operations, financial conditions, legal restrictions, and other factors deemed to be relevant by the Board. 17 CAPITALIZATION The following table sets forth the consolidated capitalization of the Company (i) at June 30, 1996, and (ii) as adjusted to give effect to the issuance of Trust Convertible Preferred Securities in the Exchange Offer on the assumption that all of the outstanding shares of the $3.50 Convertible Preferred Stock are validly tendered and accepted for exchange. To the extent that shares of the $3.50 Convertible Preferred Stock are not validly tendered or accepted in the Exchange Offer, the amount attributed to the Trust Convertible Preferred Securities would decrease and the amounts under the "As Adjusted" column attributed to the $3.50 Convertible Preferred Stock and to retained earnings would increase.
JUNE 30, 1996 ------------------------- ACTUAL AS ADJUSTED ---------- ------------- (DOLLARS IN MILLIONS) Debt: Current portion of long-term debt and capital lease obligations............................... $ 124 $ 124 Long-term debt and capital lease obligations..... 3,117 3,117 ---------- ---------- Total debt..................................... 3,241 3,241 Capitalization: Company-obligated mandatorily redeemable convertible preferred securities of a subsidiary trust holding solely the Convertible Debentures...................................... -- 540(1) Stockholders' Equity: Preferred stock, par value $.10 per share; Authorized--100,000,000 shares; Outstanding-- 10,250,000 shares of $3.50 Convertible Preferred Stock, stated at liquidation preference, under Actual; no shares outstanding under As Adjusted(2).............. 513 -- Common stock, $1.00 par value; Authorized-- 750,000,000 shares; Outstanding--248,309,196 shares(3)..................................... 248 248 Capital in excess of par value................. 344 344 Foreign currency translation adjustment........ (10) (10) Unearned portion of restricted stock........... (16) (16) Retained earnings.............................. 2,119 2,092(4) ---------- ---------- Total stockholders' equity................... 3,198 2,658 ---------- ---------- Total capitalization....................... $ 6,439 $ 6,439 ========== ========== Debt to capitalization............................. 50.3% 50.3% ========== ==========
- -------- (1) As described in this Prospectus, the sole assets of the Trust will be the Convertible Debentures in an aggregate principal amount equal to the aggregate liquidation amount of the Trust Convertible Preferred Securities issued in the Exchange Offer and the Trust Common Securities. The amount shown is attributable only to the Trust Convertible Preferred Securities and assumes the issuance thereof in an amount having an aggregate liquidation amount equal to the aggregate redemption price of all 10,250,000 outstanding shares of the $3.50 Convertible Preferred Stock ($534 million), plus the aggregate accumulated and unpaid dividends thereon for the period after July 15, 1996 (the most recent dividend payment date) to but excluding the Expiration Date stated on the cover of this Prospectus (approximately $6 million). To the extent that the Market Value for a share of the Common Stock exceeds $32.40 on the Exchange Amount Determination Date, the carrying amount of the Trust Convertible Preferred Securities will be greater. (2) Pursuant to its Rights Plan, the Company has designated 3,000,000 shares of preferred stock as Series A Junior Participating Cumulative Preferred Stock and reserved such shares for issuance upon the possible exercise, under the circumstances described in the Rights Plan, of preferred stock purchase rights associated with shares of Common Stock. See "Description of the Common Stock--Rights to Purchase Series A Preferred Stock". 18 (3) At June 30, 1996, there were reserved for issuance an aggregate of 37,121,298 shares of Common Stock (together with associated preferred stock purchase rights), of which 16,666,667 were issuable upon the conversion of shares of the $3.50 Convertible Preferred Stock, 5,184,058 were issuable pursuant to the Company's Dividend Reinvestment and the Common Stock Purchase Plan and the balance were issuable pursuant to various employee benefit plans of the Company and the Company's directors' restricted stock plan. The Company will reserve, upon consummation of the Exchange Offer, an additional number of shares of Common Stock initially issuable upon conversion of the Trust Convertible Preferred Securities. The shares of Common Stock reserved for issuance upon conversion of the $3.50 Convertible Preferred Stock will be reduced in proportion to the number of shares of $3.50 Convertible Preferred Stock accepted in the Exchange Offer and retired. (4) The excess of the carrying value of the Trust Convertible Preferred Securities over the carrying value of the $3.50 Convertible Preferred Stock will be charged to retained earnings. All or some portion of this amount may be treated similar to preferred dividends on the consolidated earnings statement. Such portion will be dependent on the extent that the value of the Trust Convertible Preferred Securities issued exceeds the greater of the carrying value of the shares of $3.50 Convertible Preferred Stock exchanged or the market value, as of the Exchange Amount Determination Date, of the shares of Common Stock into which the shares of $3.50 Convertible Preferred Stock exchanged were convertible. The issuance costs of the Trust Convertible Preferred Securities will be treated as deferred financing costs and will be amortized over a 30-year period (the term of the Convertible Debentures). 19 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following selected consolidated financial information of the Company and its subsidiaries at and for the years ended December 31, 1991 through 1995 is extracted or derived from, and should be read in conjunction with, the audited consolidated financial statements, and the notes thereto, of the Company, which statements have been audited by Coopers & Lybrand L.L.P., independent accountants. The selected consolidated financial information of the Company and its subsidiaries for the six months ended June 30, 1995 and 1996 is extracted or derived from, and should be read in conjunction with, the unaudited condensed consolidated financial statements, and the notes thereto, of the Company, which, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for the fair presentation of the financial information for such periods. The results for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year. The financial information reflects the adoption by the Company of certain accounting changes which are described in the notes to the aforementioned financial statements and the cumulative effect of which is reflected in the table below.
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, --------------- -------------------------------------- 1996 1995 1995 1994 1993 1992 1991 ------- ------- ------ ------ ------ ------- ------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS) REVENUES AND EARNINGS DATA Sales and operating revenues(1)........... $ 4,741 $ 4,064 $8,133 $7,797 $8,077 $ 9,887 $10,735 Other revenues(2)...... 221 132 292 168 267 174 160 Total revenues......... 4,962 4,196 8,425 7,965 8,344 10,061 10,895 Earnings before income taxes and cumulative effect of accounting changes............... 614 256 463 294 611 349 212 Income taxes........... 252 104 203 170 268 153 139 Earnings before cumulative effect of accounting changes.... 362 152 260 124 343 196 73 Cumulative effect of accounting changes.... -- -- -- (277) (130) 24 -- Net earnings (loss)(2)............. 362 152 260 (153) 213 220 73 Dividends on $3.50 Convertible Preferred Stock................. 18 18 36 36 36 17 -- Net earnings (loss) applicable to the Common Stock.......... 344 134 224 (189) 177 203 73 Earnings (loss) per share of the Common Stock: Before cumulative effect of accounting changes............... 1.39 .55 .91 .36 1.27 .75 .31 Cumulative effect of accounting changes.... -- -- -- (1.14) (.54) .10 -- Net earnings (loss) per share............ 1.39 .55 .91 (.78) .73 .85 .31 Depreciation, depletion, and amortization.......... 496 467 1,022 947 963 964 1,005 COMMON SHARE DATA Dividends declared..... 99 99 197 194 181 167 164 Per share.............. .40 .40 .80 .80 .75 .70 .70 BALANCE SHEET DATA (AT PERIOD END) Current assets......... 1,637 1,475 1,576 1,528 1,578 1,660 1,978 Current liabilities.... 1,466 1,070 1,316 1,257 1,196 1,436 1,524 Working capital........ 171 405 260 271 382 224 454 Total assets........... 9,779 9,569 9,891 9,337 9,706 9,892 10,345 Long-term debt and capital lease obligations........... 3,117 3,771 3,698 3,461 3,468 3,546 4,563 Stockholders' equity... 3,198 2,906 2,930 2,815 3,129 3,131 2,464 RATIOS Earnings to fixed charges(3)............ 4.5 2.3 2.2 1.7 2.5 1.7 1.4 Earnings to combined fixed charges and preferred stock dividends(3)(4)....... 3.8 2.0 1.9 1.5 2.2 1.6 1.4 Current assets to current liabilities... 1.1 1.4 1.2 1.2 1.3 1.2 1.3
- ------- (1) Includes consumer excise taxes of $486 million, $437 million, $898 million, $893 million, $816 million, $992 million and $1,050 million, respectively. (2) Special items are detailed and discussed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's unaudited quarterly reports on Form 10-Q and audited annual reports on Form 10-K from which the selected consolidated financial information of the Company was extracted or derived. (3) For purposes of this ratio, earnings consist of earnings before the cumulative effect of accounting changes, income taxes and fixed charges. Fixed charges consist of interest on indebtedness and capital lease obligations, amortization of debt discount, debt premium and issuance expense and that portion of operating lease rental expense which is representative of the interest factor (assumed to be one-third). (4)For purposes of this ratio, preferred stock dividends are adjusted to a pre-tax basis. 20 THE EXCHANGE OFFER GENERAL Participation in the Exchange Offer is voluntary and Holders should carefully consider whether to accept. None of the Board, the Company, the Trustees, or the Trust make any recommendation to Holders as to whether to tender or refrain from tendering in the Exchange Offer. Holders of $3.50 Convertible Preferred Stock are urged to consult their financial and tax advisors in making their own decisions on what action to take in light of their own particular circumstances. Unless the context requires otherwise, the term "Holder" with respect to the Exchange Offer means (i) any person in whose name any shares of $3.50 Convertible Preferred Stock are registered on the books of the Company, (ii) any other person who has obtained a properly completed stock power from the registered holder, or (iii) any person whose shares of $3.50 Convertible Preferred Stock are held of record by The Depository Trust Company ("DTC") who desires to deliver such shares by book-entry transfer at DTC. PURPOSE OF THE EXCHANGE OFFER The purpose of the Exchange Offer is to refinance the $3.50 Convertible Preferred Stock with the Trust Convertible Preferred Securities. This refinancing will benefit the Company by (i) permitting the Company to deduct interest payable on the Convertible Debentures for United States federal income tax purposes, while dividends payable on the $3.50 Convertible Preferred Stock are not deductible, (ii) potentially lowering the Company's quarterly cash payment obligation, and (iii) reducing the number of shares of Common Stock issuable upon conversion. The extent of these benefits, however, cannot be predicted because they depend upon the number of shares of $3.50 Convertible Preferred Stock exchanged pursuant to the Exchange Offer, upon the Company's federal income tax position in any year, and the period of time the Trust Convertible Preferred Securities remain outstanding. Neither the Trust's ability to defer distribution payments on the Trust Convertible Preferred Securities nor the more limited voting rights on the part of holders of the Trust Convertible Preferred Securities is a purpose of the Company in making the Exchange Offer. If any shares of $3.50 Convertible Preferred Stock remain outstanding after the consummation of the Exchange Offer, the Company may exercise its optional redemption rights on any such shares. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10, plus accumulated and unpaid dividends, if any, up to but excluding the date fixed for redemption. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions of the Exchange Offer, the Company will exchange Trust Convertible Preferred Securities representing preferred undivided beneficial interests in the assets of the Trust for up to all of the outstanding shares of $3.50 Convertible Preferred Stock of the Company. The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price for a share of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date, plus accumulated and unpaid dividends thereon to but excluding the Expiration Date, or (2) the Market Value of the number of shares of Common Stock into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date, for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer. The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio of the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. The Company will pay amounts of less than $50 due to a Holder of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. On the Exchange Amount Determination Date, the Company will issue a press release announcing the exchange ratio for the Exchange Offer. 21 Upon the terms and subject to the conditions of the Exchange Offer, the Company will accept for exchange all shares of $3.50 Convertible Preferred Stock validly tendered and not withdrawn as promptly as practicable after the Expiration Date unless the Exchange Offer has been withdrawn or terminated. The Company will not accept shares of $3.50 Convertible Preferred Stock for exchange prior to the Expiration Date. The Company expressly reserves the right, in its sole discretion, to delay acceptance for exchange of shares of $3.50 Convertible Preferred Stock tendered under the Exchange Offer or the exchange of Trust Convertible Preferred Securities for the shares of $3.50 Convertible Preferred Stock accepted for exchange (subject to Rules 13e-4 and 14e-1 under the Exchange Act, which require that the Company consummate the Exchange Offer or return the shares of $3.50 Convertible Preferred Stock deposited by or on behalf of the Holders thereof promptly after the termination or withdrawal of the Exchange Offer), or to withdraw or terminate the Exchange Offer and not accept any shares of $3.50 Convertible Preferred Stock at any time for any reason. In all cases, except to the extent waived by the Company, delivery of the Trust Convertible Preferred Securities in exchange for the shares of $3.50 Convertible Preferred Stock accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of such shares (or confirmation of book-entry transfer thereof), a properly completed and duly executed Letter of Transmittal, and any other documents required thereby. As of July 26, 1996, there were 10,250,000 shares of $3.50 Convertible Preferred Stock outstanding. This Prospectus, together with the Letter of Transmittal, is being sent to all registered Holders as of , 1996. The Company shall be deemed to have accepted validly tendered shares of $3.50 Convertible Preferred Stock (or defectively tendered shares of $3.50 Convertible Preferred Stock with respect to which the Company has waived such defect) when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Holders for the purpose of receiving the Trust Convertible Preferred Securities from the Company and remitting such Trust Convertible Preferred Securities to tendering Holders. Upon the terms and subject to the conditions of the Exchange Offer, delivery of Trust Convertible Preferred Securities in exchange for shares of $3.50 Convertible Preferred Stock will be made as promptly as practicable after the Expiration Date. If any tendered shares of $3.50 Convertible Preferred Stock are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein, or otherwise, unless otherwise requested by the Holder under "Special Delivery Instructions" in the Letter of Transmittal, such shares will be returned, without expense, to the tendering Holder thereof (or in the case of shares of $3.50 Convertible Preferred Stock tendered by book-entry transfer into the Exchange Agent's account at DTC, such shares will be credited to an account maintained at DTC designated by the participant therein who so delivered such shares), as promptly as practicable after the Expiration Date or the withdrawal or termination of the Exchange Offer. Holders of $3.50 Convertible Preferred Stock will not have any appraisal or dissenters' rights under the Delaware General Corporation Law in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. Holders who tender shares of $3.50 Convertible Preferred Stock in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of shares of $3.50 Convertible Preferred Stock pursuant to the Exchange Offer. See "--Fees and Expenses". EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION The Exchange Offer will expire on the Expiration Date. The Company reserves the right to extend the Exchange Offer in its sole discretion at any time and from time to time by giving oral or written notice to the Exchange Agent and by timely public announcement communicated, unless otherwise required by applicable law or regulation, by issuing a press release. During any extension of the Exchange Offer, all shares of $3.50 22 Convertible Preferred Stock previously tendered pursuant to the Exchange Offer and not withdrawn will remain subject to the Exchange Offer. The Company expressly reserves the right to (i) amend or modify the terms of the Exchange Offer in any manner, including (without limitation) the form of the consideration or the formula for calculating the amount of the consideration to be paid pursuant to the Exchange Offer and (ii) withdraw or terminate the Exchange Offer and not accept for exchange any shares of $3.50 Convertible Preferred Stock, at any time for any reason, including (without limitation) if fewer than 4,000,000 shares of $3.50 Convertible Preferred Stock are tendered (which condition may be waived by the Company). If the Company makes a material change in the terms of the Exchange Offer or if it waives a material condition of the Exchange Offer, the Company will extend the Exchange Offer. The minimum period for which the Exchange Offer will be extended following a material change or waiver, other than a change in the percentage of the $3.50 Convertible Preferred Stock being sought for exchange or in the consideration offered, will depend upon the facts and circumstances, including the relative materiality of the change or waiver. With respect to a change in the percentage of the $3.50 Convertible Preferred Stock being sought or in the consideration offered, the Exchange Offer will be extended for a minimum of ten business days following public announcement of such change. Any withdrawal or termination of the Exchange Offer will be followed as promptly as practicable by public announcement thereof. In the event the Trust withdraws or terminates the Exchange Offer, it will give immediate notice to the Exchange Agent, and all shares of $3.50 Convertible Preferred Stock theretofore tendered pursuant to the Exchange Offer will be returned promptly to the tendering Holders thereof. See "--Withdrawal of Tenders". ACCUMULATED DISTRIBUTIONS ON TRUST CONVERTIBLE PREFERRED SECURITIES AND DIVIDENDS ON $3.50 CONVERTIBLE PREFERRED STOCK The Trust Convertible Preferred Securities will accumulate distributions at an annual rate of % from and including the Expiration Date. Dividends accumulated on the $3.50 Convertible Preferred Stock after July 15, 1996 will not be paid in cash on shares of $3.50 Convertible Preferred Stock accepted for exchange in the Exchange Offer, but such accumulated and unpaid dividends will be accounted for in determining the number of shares of Trust Convertible Preferred Securities exchanged for each share of $3.50 Convertible Preferred Stock. PROCEDURES FOR TENDERING The tender of shares of $3.50 Convertible Preferred Stock by a Holder thereof pursuant to one of the procedures set forth below will constitute an agreement between such Holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. Each Holder of $3.50 Convertible Preferred Stock wishing to accept the Exchange Offer must (i) properly complete and sign the Letter of Transmittal or a facsimile thereof (all references in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) in accordance with the instructions contained herein and therein, together with any required signature guarantees, and deliver the same to the Exchange Agent, at either of its addresses set forth in "--Exchange Agent and Information Agent" and either (a) certificates for the shares of $3.50 Convertible Preferred Stock held by such Holder must be received by the Exchange Agent at either of such addresses or (b) such shares of $3.50 Convertible Preferred Stock must be transferred pursuant to the procedures for book-entry transfer described below and a confirmation of such book-entry transfer must be received by the Exchange Agent, in each case prior to the Expiration Date, or (ii) comply with the guaranteed delivery procedures described below. LETTERS OF TRANSMITTAL, $3.50 CONVERTIBLE PREFERRED STOCK, AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO THE COMPANY, THE TRUST, THE DEALER MANAGERS, OR THE INFORMATION AGENT. Signature Guarantees. If tendered shares of $3.50 Convertible Preferred Stock are registered in the name of the signer of the Letter of Transmittal and the Trust Convertible Preferred Securities to be issued in exchange 23 therefor are to be issued (and any untendered shares of $3.50 Convertible Preferred Stock are to be reissued) in the name of the registered Holder (which term, for the purposes described herein, shall include any participant in DTC whose name appears on a security listing as the owner of the $3.50 Convertible Preferred Stock), the signature of such signer need not be guaranteed. If the tendered shares of $3.50 Convertible Preferred Stock are registered in the name of someone other than the signer of the Letter of Transmittal, such tendered shares must be endorsed or accompanied by written instruments of transfer in form satisfactory to the Company and duly executed by the registered Holder, and the signature on the endorsement or instrument of transfer must be guaranteed by a financial institution (including most banks, savings and loan associations, and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program or The New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (any of the foregoing hereinafter referred to as an "Eligible Institution"). If the Trust Convertible Preferred Securities and/or $3.50 Convertible Preferred Stock not exchanged are to be delivered to an address other than that of the registered Holder appearing on the register for the $3.50 Convertible Preferred Stock, the signature in the Letter of Transmittal must be guaranteed by an Eligible Institution. Any beneficial owner whose shares of $3.50 Convertible Preferred Stock are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing a Letter of Transmittal and delivering its shares of $3.50 Convertible Preferred Stock, either make appropriate arrangements to register the ownership of such shares in such owner's name or obtain a properly completed stock power from the registered Holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. THE METHOD OF DELIVERY OF $3.50 CONVERTIBLE PREFERRED STOCK AND ALL OTHER DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED, PRIOR INSURANCE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. Book-Entry Transfer. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the $3.50 Convertible Preferred Stock at DTC for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in DTC's system may make book-entry delivery of $3.50 Convertible Preferred Stock by causing DTC to transfer such $3.50 Convertible Preferred Stock into the Exchange Agent's account with respect to the $3.50 Convertible Preferred Stock in accordance with DTC's Automated Tender Offer Program ("ATOP") procedures for such book- entry transfers. However, the exchange for shares of $3.50 Convertible Preferred Stock so tendered will only be made after timely confirmation (a "Book-Entry Confirmation") of such Book-Entry Transfer of shares of $3.50 Convertible Preferred Stock into the Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's Message (as such term is defined in the next sentence) and any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by DTC and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgement from a participant tendering shares of $3.50 Convertible Preferred Stock that is the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal, and that the Trust may enforce such agreement against such participant. See "Book- Entry System--The Depository Trust Company". Guaranteed Delivery. If a Holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or shares of $3.50 Convertible Preferred Stock to reach the Exchange Agent before the Expiration Date or the procedure for book- entry transfer cannot be completed on a timely basis, a tender may be effected if the Exchange Agent has received at its office, prior to the Expiration Date, a letter, a telegram, or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering Holder, the name(s) 24 in which the $3.50 Convertible Preferred Stock is registered and, if the $3.50 Convertible Preferred Stock is held in certificated form, the certificate number of the $3.50 Convertible Preferred Stock to be tendered, and stating that the tender is being made thereby and guaranteeing that within three trading days after the date of execution of such letter, telegram, or facsimile transmission by the Eligible Institution, the $3.50 Convertible Preferred Stock, in proper form for transfer together with a properly completed and duly executed Letter of Transmittal (and any other required documents), or a confirmation of book-entry transfer of such $3.50 Convertible Preferred Stock into the Exchange Agent's account at DTC, will be delivered by such Eligible Institution. Unless the shares of $3.50 Convertible Preferred Stock being tendered by the above-described method are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents) or a confirmation of book-entry transfer of such $3.50 Convertible Preferred Stock into the Exchange Agent's account at DTC in accordance with DTC's ATOP procedures is received, the Company may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are available from the Exchange Agent and the Information Agent. Miscellaneous. All questions as to the validity, form, eligibility (including time of receipt), and acceptance for exchange of any tender of shares of $3.50 Convertible Preferred Stock will be determined by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all tenders not in proper form or the acceptance for exchange of which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the absolute right to waive any defect or irregularity in the tender of any shares of $3.50 Convertible Preferred Stock, and the Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding. None of the Company, the Exchange Agent, the Dealer Managers, the Information Agent, or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Tenders of shares of $3.50 Convertible Preferred Stock involving any irregularities will not be deemed to have been made until such irregularities have been cured or waived. Shares of $3.50 Convertible Preferred Stock received by the Exchange Agent that are not validly tendered and as to which the irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holder (or in the case of shares of $3.50 Convertible Preferred Stock tendered by book-entry transfer into the Exchange Agent's account at DTC, such shares will be credited to an account maintained at DTC designated by the participant therein who so delivered such shares), unless otherwise requested by the Holder in the Letter of Transmittal, as promptly as practicable after the Expiration Date or the withdrawal or termination of the Exchange Offer. LETTER OF TRANSMITTAL The Letter of Transmittal contains, among other things, the following terms and conditions, which are part of the Exchange Offer. The party tendering shares of $3.50 Convertible Preferred Stock for exchange (the "Transferor") exchanges, assigns, and transfers such shares to the Company and irrevocably constitutes and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to cause such shares to be assigned, transferred, and exchanged. The Transferor represents and warrants that it has full power and authority to tender, exchange, assign, and transfer the shares of $3.50 Convertible Preferred Stock and to acquire Trust Convertible Preferred Securities issuable upon the exchange of such tendered shares, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered shares of $3.50 Convertible Preferred Stock, free and clear of all liens, restrictions, charges, and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute, and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange, assignment, and transfer of tendered shares of $3.50 Convertible Preferred Stock or transfer ownership of such shares on the account books maintained by DTC. All authority conferred by the Transferor will survive the death, bankruptcy, or incapacity of the Transferor, and every obligation of the Transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors, and administrators of such Transferor. 25 WITHDRAWAL OF TENDERS Tenders of shares of $3.50 Convertible Preferred Stock pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by the Company, may be withdrawn at any time after 40 business days after the date of this Prospectus. To be effective, a written notice of withdrawal delivered by mail, hand delivery, or facsimile transmission must be timely received by the Exchange Agent at the address set forth in the Letter of Transmittal. The method of notification is at the risk and election of the Holder. Any such notice of withdrawal must specify (i) the Holder named in the Letter of Transmittal as having tendered shares of $3.50 Convertible Preferred Stock to be withdrawn, (ii) if shares of $3.50 Convertible Preferred Stock are held in certificated form, the certificate numbers of such shares to be withdrawn, (iii) that such Holder is withdrawing his election to have such shares exchanged, and (iv) the name of the registered Holder of such shares, and must be signed by the Holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the shares of $3.50 Convertible Preferred Stock being withdrawn. The Exchange Agent will return the properly withdrawn shares of $3.50 Convertible Preferred Stock promptly following receipt of notice of withdrawal. If shares of $3.50 Convertible Preferred Stock have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn shares of $3.50 Convertible Preferred Stock and otherwise comply with DTC's procedures. All questions as to the validity of notice of withdrawal, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. Withdrawals of tenders of shares of $3.50 Convertible Preferred Stock may not be rescinded and any shares of $3.50 Convertible Preferred Stock withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer. Properly withdrawn shares of $3.50 Convertible Preferred Stock, however, may be retendered by following the procedures therefor described elsewhere herein at any time prior to the Expiration Date. See "-- Procedures for Tendering". 26 EXCHANGE AGENT AND INFORMATION AGENT The Bank of New York has been appointed as Exchange Agent for the Exchange Offer. Deliveries to the Exchange Agent should be as follows: THE EXCHANGE AGENT: THE BANK OF NEW YORK By Hand or Overnight Courier: The Bank of New York 101 Barclay Street (7 East) Reorganization Section Corporate Trust Services Window New York, New York 10286 Attention: George Johnson By Mail: The Bank of New York 101 Barclay Street (7 East) Reorganization Section New York, New York 10286 Attention: George Johnson By Facsimile Transmission (For Eligible Institutions Only): (212) 571-3080 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (212) 815-4997 D.F. King & Co., Inc. has been retained to act as Information Agent. Questions and requests for assistance regarding the Exchange Offer, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery may be directed to the Information Agent at 77 Water Street, New York, New York 10005, telephone (800) 848-3051 or (212) 269-5550 (collect). The Company will pay the Exchange Agent and Information Agent reasonable and customary fees for their services and will reimburse them for all their reasonable out-of-pocket expenses in connection therewith. DEALER MANAGERS Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co., as Dealer Managers, have agreed to solicit exchanges of shares of $3.50 Convertible Preferred Stock. The Company will pay the Dealer Managers a fee of 5/8% of the aggregate redemption price for the shares of $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date, plus accumulated and unpaid dividends thereon to but excluding the Expiration Date, validly tendered and accepted for exchange pursuant to the Exchange Offer. Additional solicitation may be made by telecopier, by telephone, or in person by officers and regular employees of the Company and its affiliates. No additional compensation will be paid to any such officers and employees who engage in soliciting tenders. Each of the Dealer Managers engage in transactions with, and from time to time have performed services for, the Company. 27 TRADING OF TRUST CONVERTIBLE PREFERRED SECURITIES AND $3.50 CONVERTIBLE PREFERRED STOCK There has not been any public market for the Trust Convertible Preferred Securities. There can be no assurance that an active market for the Trust Convertible Preferred Securities will develop or, if developed, be sustained in the future. Although the Dealer Managers have indicated to the Company and the Trust that they intend to make a market in the Trust Convertible Preferred Securities, they are not obligated to do so and may discontinue any such market-making at any time without notice. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Trust Convertible Preferred Securities. There is no established public trading market for the $3.50 Convertible Preferred Stock. The shares of $3.50 Convertible Preferred Stock, and the underlying shares of Common Stock issuable upon conversion thereof, have not been and will not be registered under the Securities Act. The shares of $3.50 Convertible Preferred Stock, and the underlying shares of Common Stock issuable upon conversion thereof, are freely tradeable unless held by affiliates of the Company. Holders of $3.50 Convertible Preferred Stock who do not tender their shares $3.50 Convertible Preferred Stock in the Exchange Offer or whose shares of $3.50 Convertible Preferred Stock are not accepted for exchange will continue to hold such shares and will be entitled to all the rights and preferences, and will be subject to all of the limitations applicable thereto. To the extent that shares of $3.50 Convertible Preferred Stock are tendered and accepted in the Exchange Offer, the liquidity and trading market for the $3.50 Convertible Preferred Stock outstanding following the Exchange Offer, and the terms upon which such $3.50 Convertible Preferred Stock could be sold, could be adversely affected. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE $3.50 CONVERTIBLE PREFERRED STOCK IN CONNECTION WITH THE EXCHANGE OFFER Except as described herein, there are no contracts, arrangements, understandings, or relationships in connection with the Exchange Offer between the Company or any of its directors or executive officers, the Trust or any of the Trustees, and any person with respect to any securities of the Company or the Trust, including the Trust Convertible Preferred Securities, the Convertible Debentures, the $3.50 Convertible Preferred Stock, and the Common Stock issuable upon conversion thereof. FEES AND EXPENSES; TRANSFER TAXES The expenses of soliciting tenders of shares of $3.50 Convertible Preferred Stock will be borne by the Company. For compensation to be paid to the Dealer Managers, see "--Dealer Managers". The total cash expenditures to be incurred by the Company in connection with the Exchange Offer, other than fees payable to the Dealer Managers, but including the expenses of the Dealer Managers and the Trust, printing, accounting, and legal fees, and the fees and expenses of the Exchange Agent, the Information Agent, the trustees under the Indenture, the Guarantee, and the Trust, are estimated to be approximately $1.1 million. Holders of shares of $3.50 Convertible Preferred Stock accepted in the Exchange Offer are responsible for paying any transfer taxes in connection with such exchange. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. UNOCAL CAPITAL TRUST The Trust is a statutory business trust formed under Delaware law pursuant to (i) a declaration of trust, dated as of July 17, 1996, executed by the Company, as sponsor, and the trustees of the Trust (the "Trustees") and (ii) the filing of a certificate of trust with the Secretary of State of Delaware on July 17, 1996. Such declaration will be amended and restated in its entirety (as so amended and restated, the "Declaration") substantially in the form filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Declaration will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Company will initially acquire all of the Trust Securities and will offer the Trust Convertible Preferred Securities 28 to the Holders of $3.50 Convertible Preferred Stock in the Exchange Offer. Immediately after consummation of the Exchange Offer, former Holders of $3.50 Convertible Preferred Stock will own all of the issued and outstanding Trust Convertible Preferred Securities and the Company will own all of the issued and outstanding Trust Common Securities. The Trust Common Securities will have an aggregate liquidation amount equal to no less than 1% of the total capital of the Trust. The Trust exists for the sole purposes and functions of (a) issuing its Trust Securities in exchange for Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities and (b) engaging in only those other activities as are necessary or incidental thereto. The Company will pay all fees and expenses related to the Trust and the offering of the Trust Securities. Pursuant to the Declaration, the number of Trustees will initially be five. Three of the Trustees (the "Regular Trustees") must be persons who are employees or officers of the Company. The fourth Trustee must be an entity permitted by the Commission to act as an institutional trustee under the Trust Indenture Act, unaffiliated with the Company and with a combined capital and surplus of at least $50 million, which will serve as indenture trustee under the Declaration for the purpose of compliance with the Trust Indenture Act (the "Institutional Trustee"). Initially, The Bank of New York, a banking corporation, will be the Institutional Trustee until it resigns or is removed by the Company. The fifth Trustee must be a resident of Delaware or an entity that maintains its principal place of business in the state of Delaware (the "Delaware Trustee"). Initially, The Bank of New York (Delaware), an affiliate of the Institutional Trustee, will be the Delaware Trustee until it resigns or is removed by the Company. The Company, as the holder of the Trust Common Securities, will have the right to appoint or remove any Trustee and to increase or decrease the number of Trustees (but not below two Trustees). The Institutional Trustee will hold title to the Convertible Debentures for the benefit of the holders of the Trust Securities and will have the power to exercise all rights, powers, and privileges as the holder of the Convertible Debentures under the Indenture. In addition, the Institutional Trustee will maintain exclusive control of a segregated non-interest bearing trust account (the "Institutional Trustee Account") into which it will deposit all payments of funds received in respect of the Convertible Debentures for the benefit of the holders of the Trust Securities. The Institutional Trustee will make payments of distributions and payments on liquidation, redemption, and otherwise to the holders of the Trust Securities out of funds from the Institutional Trustee Account. Trust and Trustee expenses are not paid from funds in the Institutional Trustee Account, but are paid by the Company pursuant to the Indenture. See "Description of the Convertible Debentures-- Miscellaneous". For the purpose of compliance with the Trust Indenture Act, The Bank of New York will also act as the Guarantee Trustee and as Debenture Trustee (as defined herein) under the Indenture (as defined herein). The Bank of New York is currently the trustee under two indentures under which debt securities in an aggregate principal amount of approximately $1.8 billion, maturing from August 1996 to March 2011, have been issued by Union Oil and guaranteed by the Company. The Bank of New York is a participating lender under two of the Company's bank credit agreements, pursuant to which it has committed to lend to Union Oil and other subsidiaries of the Company, subject to guarantees by the Company, an aggregate of approximately $80 million, none of which is outstanding as of the date of this Prospectus. The guarantees by the Company under the indentures and bank credit agreements described above are Senior Indebtedness (as defined herein). The Company and its subsidiaries may in the future enter into other relationships with The Bank of New York. The foregoing summary of the material terms and provisions of the Declaration is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the Registation Statement of which this Prospectus is a part, the Delaware Trust Act, and the Trust Indenture Act. The business address of the Trust is 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245, and its telephone number at that address is (310) 726-7600. 29 DESCRIPTION OF THE TRUST CONVERTIBLE PREFERRED SECURITIES The Trust Convertible Preferred Securities will be issued pursuant to the terms of the Declaration. The Declaration will be qualified as an indenture under the Trust Indenture Act. The Institutional Trustee, The Bank of New York, will act as indenture trustee for the Trust Convertible Preferred Securities under the Declaration for purposes of compliance with the Trust Indenture Act. The terms of the Trust Convertible Preferred Securities and the rights of the holders thereof, will include those stated in the Declaration, those made part of the Declaration by the Trust Indenture Act, and those set forth in the Delaware Trust Act. The following summary of the material terms and provisions of the Trust Convertible Preferred Securities and the rights of the holders thereof, is subject to, and qualified in its entirety by reference to, the Declaration, a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part, the Trust Indenture Act, and the Delaware Trust Act. GENERAL The Declaration authorizes the Regular Trustees to issue on behalf of the Trust the Trust Securities, which represent undivided beneficial interests in the assets of the Trust. All of the Trust Common Securities will be owned, directly or indirectly, by the Company. The Trust Common Securities will rank pari passu, and payments will be made thereon on a pro rata basis, with the Trust Convertible Preferred Securities, except that upon the occurrence and during the continuance of a Declaration Event of Default (as defined herein), the rights of the holders of the Trust Common Securities to receive payment of periodic distributions and payments upon liquidation, redemption, and otherwise will be subordinated to the rights of the holders of the Trust Convertible Preferred Securities. The Declaration does not permit the issuance by the Trust of any securities other than the Trust Securities or the incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the Institutional Trustee will hold the Convertible Debentures for the benefit of the holders of the Trust Securities. The payment of distributions out of money held by the Trust, and payments upon redemption of the Trust Convertible Preferred Securities or liquidation of the Trust, will be guaranteed by the Company to the extent described under "Description of the Guarantee". The Guarantee will be held by The Bank of New York, the Guarantee Trustee, for the benefit of the holders of the Trust Convertible Preferred Securities. The Guarantee will not cover payment of distributions when the Trust does not have sufficient available funds to pay such distributions. In such event, the remedy of a holder of Trust Convertible Preferred Securities would be to vote to direct the Institutional Trustee to enforce the Institutional Trustee's rights under the Convertible Debentures except in the limited circumstances in which the holder may take Direct Action (as defined herein). See "-- Declaration Events of Default" and "--Voting Rights". DISTRIBUTIONS Distributions on the Trust Convertible Preferred Securities will be fixed at a rate per annum of % of the liquidation amount of $50 per security. Distributions not paid on the regularly scheduled payment date therefor will bear interest thereon at the distribution rate, compounded quarterly, to the extent permitted by law. The term "distribution" as used herein includes any such interest payable unless otherwise stated. The amount of distributions payable for any full quarterly distribution period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of distributions payable for any period shorter than a full quarterly distribution period for which distributions are computed, will be computed on the basis of a 30-day month and, for periods of less than a month, the actual number of days elapsed divided by 30. Distributions on the Trust Convertible Preferred Securities will be cumulative, will accumulate from and including the Expiration Date, and will be payable quarterly in arrears on March 1, June 1, September 1, and December 1 of each year, commencing December 1, 1996, when, as and if funds are available for payment. Distributions will be made by the Institutional Trustee, except as otherwise described below. 30 So long as the Company is not in default in the payment of interest on the Convertible Debentures, the Company will have the right under the Indenture at any time, and from time to time, to defer payments of interest by extending the interest payment period on the Convertible Debentures, during which Extension Period no interest will be due and payable on the Convertible Debentures. As a consequence of such deferral, quarterly distributions on the Trust Convertible Preferred Securities will also be deferred, although such deferred distributions would accumulate with interest thereon, to the extent permitted by law, at the distribution rate, compounded quarterly, during any such Extension Period. Such right to extend the interest payment period for the Convertible Debentures will be limited to a period not exceeding 20 consecutive quarters and such period may not extend beyond the maturity of the Convertible Debentures. If the Company exercises this right, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of capital stock in connection with any employee benefit plan or program, director plan or program, dividend reinvestment, stock repurchase, or other similar plans available to stockholders of the Company, or any option, warrant, right, or exercisable, exchangeable, or convertible security outstanding as of the Expiration Date, (ii) as a result of a reclassification of the Company's capital stock pursuant to the exchange or conversion provisions of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or the capital securities of a subsidiary (including a trust such as the Trust), or (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or security being converted or exchanged), and (b) the Company shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase, or redeem or make any guarantee payment (other than pursuant to the Guarantee) with respect to any debt securities issued by the Company that rank pari passu with or junior to the Convertible Debentures. Prior to the termination of any such Extension Period, the Company may further extend the Extension Period; provided, that such Extension Period, together with all such previous and further extensions, may not exceed 20 consecutive quarters or extend beyond the maturity of the Convertible Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. See "Description of the Convertible Debentures--Interest" and "--Option to Extend Interest Payment Period". If distributions are deferred, the accumulated distributions (including accrued interest thereon) will be paid to holders of the Trust Convertible Preferred Securities as they appear on the books and records of the Trust on the first record date following the termination of the Extension Period. Distributions on the Trust Convertible Preferred Securities must be paid on the dates on which they are payable only to the extent that the Trust has funds available for the payment of such distributions. The Trust's funds available for distribution to the holders of the Trust Convertible Preferred Securities will be limited to payments received from the Company on the Convertible Debentures. See "Description of the Convertible Debentures". The payment of distributions out of moneys held by the Trust will be guaranteed by the Company to the extent set forth under "Description of the Guarantee". Distributions on the Trust Convertible Preferred Securities will be payable to the holders thereof as they appear on the books and records of the Trust on the relevant record dates, which, as long as the Trust Convertible Preferred Securities remain in book-entry only form, will be one Business Day (as defined below) prior to the relevant payment dates. Such distributions will be paid through the Institutional Trustee who will hold amounts received in respect of the Convertible Debentures for the benefit of the holders of the Trust Securities. Subject to any applicable laws and regulations and the provisions of the Declaration and the Indenture, distributions may, at the Company's option, be paid either (i) by check mailed to the address of the person entitled thereto as it appears in the register or (ii) by transfer to an account maintained by such person located in the United States; provided, however, that payments to DTC will be made by wire transfer of immediately available funds to the account of DTC or its nominee. See "Book-Entry System-- The Depository Trust Company". If the Trust Convertible Preferred Securities do not continue to remain in book-entry only form, the Regular Trustees shall have the right to select record dates, which shall conform to the rules of any securities exchange or other organization on which the Trust Convertible Preferred Securities are listed or quoted and shall be at least one 31 Business Day prior to the relevant payment dates. If any date on which distributions are payable on the Trust Convertible Preferred Securities is not a Business Day, then payment of the distributions payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date. A "Business Day" means any day other than a Saturday, Sunday, or any other day on which banking institutions in New York City or Los Angeles, California are permitted or required by any applicable law to close. CONVERSION RIGHTS General. The Trust Convertible Preferred Securities will be convertible at any time beginning 90 days following the first date of issuance of any Trust Convertible Preferred Securities and prior to the close of business on September 1, 2026 (or, in the case of Trust Convertible Preferred Securities called for redemption, prior to the close of business on the Business Day prior to the date of redemption (the "Redemption Date")), at the option of the holder thereof and in the manner described below, into shares of Common Stock at an initial conversion ratio equal to that number of shares of Common Stock determined by dividing the liquidation amount of $50 per security by the conversion price. The initial conversion price will be equal to the product of times the Market Value of a share of Common Stock and will be subject to adjustment as described under "--Conversion Provision Adjustments-General," "--Conversion Provision Adjustments-Merger, Consolidation or Sale of Assets of the Company," and "--Certain Other Conversion Provision Adjustments" below. Prior to the earliest of the Distribution Date (as defined herein), the date on which all Rights are redeemed, or January 29, 2000, whenever the Company issues shares of the Common Stock upon conversion of the Trust Convertible Preferred Securities, the Company will issue, together with each such share of the Common Stock, one Right (as defined herein) entitling the holder thereof, under certain circumstances, to purchase one one-hundredth of a share of the Series A Preferred Stock (as defined herein) pursuant to, and upon the terms of, the Rights Plan. See "Description of the Common Stock--Rights to Purchase Series A Preferred Stock". The terms of the Trust Convertible Preferred Securities provide that a holder of Trust Convertible Preferred Securities wishing to exercise its conversion right shall deliver an irrevocable conversion request (and, if such Trust Convertible Preferred Securities are certificated, the Trust Convertible Preferred Securities certificate(s), duly endorsed or assigned to the Trust in blank) to the Institutional Trustee, as conversion agent (the "Conversion Agent"), directing the Conversion Agent, on behalf of such holder, to exchange such Trust Convertible Preferred Securities for a portion of the Convertible Debentures and immediately convert such Convertible Debentures into Common Stock. Holders may obtain copies of the required form of the conversion notice from the Conversion Agent. So long as a book-entry system for the Trust Convertible Preferred Securities is in effect, however, procedures for converting the Trust Convertible Preferred Securities into shares of Common Stock will differ, as described under "Book-Entry System--The Depository Trust Company". Accumulated distributions will not be paid in cash on the Trust Convertible Preferred Securities that are converted nor will such accumulated distributions be converted into additional shares of Common Stock, but such accumulated distributions will be deemed to be paid in full and then returned by the holder to the Company as partial consideration for the Common Stock received on conversion. If any Trust Convertible Preferred Securities are converted into shares of Common Stock during the period from (but excluding) a record date to (and including) the next succeeding distribution payment date, then either (i) if such Trust Convertible Preferred Securities have been called for redemption on a redemption date which occurs during such period, or are to be redeemed in connection with a Special Event which occurs during such period, the Company shall not be required to pay a distribution on such distribution payment date in respect of such Trust Convertible Preferred Securities or (ii) if otherwise converted during such period, such Trust Convertible Preferred Securities shall be accompanied by funds equal to the distributions payable on such succeeding distribution payment date on the liquidation amount so converted. The Company may not redeem any Trust Convertible Preferred Securities unless all accumulated and unpaid distributions have been paid on all outstanding Trust Convertible Preferred 32 Securities for all quarterly distribution payment periods terminating on or prior to the last distribution payment date before the date of redemption. Since the Company is required to pay all accumulated and unpaid distributions, other than for the current quarter, prior to redeeming the Trust Convertible Preferred Securities, holders choosing to convert their Trust Convertible Preferred Securities in order to avoid such redemption will, at most, forego actual receipt of a cash distribution payment only for the current quarter. The Company will make no payment or allowance for distributions on the shares of Common Stock issued upon such conversion, except to the extent that such shares of Common Stock are held of record on the record date for any such distributions. No fractional shares of Common Stock will be issued as a result of conversion, but cash will be paid by the Company in lieu thereof based on the market price of the Common Stock on the date such Trust Convertible Preferred Securities are converted. Conversion Provision Adjustments--General. The conversion price for the Convertible Debentures (and thus the conversion price of the Trust Convertible Preferred Securities) will be subject to adjustment in certain events, including (a) the issuance of shares of Common Stock as a dividend or a distribution with respect to the Common Stock, (b) subdivisions, combinations, and reclassification of the Common Stock, (c) the issuance to all holders of the Common Stock of certain rights or warrants entitling them to subscribe for shares of Common Stock at less than the average of the closing prices of the Common Stock during the ten trading days immediately prior to such issuance, (d) the distribution to all holders of the Common Stock of capital stock (other than the Common Stock), evidences of indebtedness of the Company, assets or rights or warrants to subscribe for any of its securities (excluding certain distributions described elsewhere in this paragraph), (e) the distribution of cash to all holders of the Common Stock, excluding distributions in connection with the liquidation, dissolution, or winding-up of the Company, and excluding any quarterly cash dividend on the Common Stock to the extent that the aggregate cash dividend per share of the Common Stock in any quarter does not exceed the greater of (i) the amount per share of the next preceding quarterly dividend on the Common Stock to the extent that such preceding quarterly dividend did not require an adjustment of the conversion price pursuant to this clause (e) (as adjusted to reflect subdivisions or combinations of the Common Stock), and (ii) 3.75% of the average of the closing prices of the Common Stock during the ten trading days immediately prior to the declaration of such dividend, (f) payment in respect of a tender or exchange offer by the Company or a subsidiary thereof for the Common Stock (other than an odd-lot tender offer) at a price in excess of the closing price of the Common Stock as of the trading day next succeeding the last date tenders or exchanges thereunder may be made, and (g) payment in respect of a tender or exchange offer by a person other than the Company or a subsidiary thereof for the Common Stock at a price in excess of the closing price of the Common Stock as of the trading day next succeeding the last date tenders or exchanges thereunder may be made. The adjustment referred to in clause (g) above will only be made if the Board is not recommending rejection of the tender offer or exchange offer and if such offer is made for an amount that increases the offeror's ownership of the Common Stock to more than 25% of the total shares of Common Stock outstanding. The adjustment referred to in clause (g) above will not be made, however, if as of the close of the offer, the offering documents with respect to such offer disclose a plan or an intention to cause the Company to engage in a consolidation or merger or a sale of all or substantially all of the Company's assets. In the event that the Rights are separated from the Common Stock in accordance with the provisions of the Rights Plan such that the holders of Trust Convertible Preferred Securities would thereafter not be entitled to receive any such Rights in respect to the Common Stock issuable upon conversion of such Trust Convertible Preferred Securities, the conversion price of the Convertible Debentures (and thus the conversion price of the Trust Convertible Preferred Securities) will be adjusted as provided in clause (d) of the preceding paragraph (subject to readjustment in the event of the expiration, termination, or redemption of the Rights). In lieu of any such adjustment, the Company may amend the Rights Plan to provide that upon conversion of the Trust Convertible Preferred Securities the holders thereof will receive, in addition to the Common Stock issuable upon such conversion, the Rights which would have attached to such shares of Common Stock if the Rights had not become separated from the Common Stock pursuant to the provisions of the Rights Plan. See "Description of the Common Stock--Rights to Purchase Series A Preferred Stock". 33 The Company from time to time may reduce the conversion price of the Convertible Debentures (and thus the conversion price of the Trust Convertible Preferred Securities) by any amount selected by the Company for any period of at least 20 days, in which case the Company shall give at least 15 days' notice of such reduction. The Company may make such reductions in the conversion price, in addition to those set forth above, as the Board considers advisable to avoid or diminish any income tax to holders of the Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes. See "Certain Federal Income Tax Considerations--Conversion Adjustment". No adjustment of the conversion price will be made upon the issuance of any shares of Common Stock pursuant to (a) any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of optional amounts in shares of Common Stock under any such plan, (b) the issuance of shares of Common Stock, or options or rights to purchase such shares, pursuant to any present or future employee benefit plan or program, or director plan or program, or (c) pursuant to any option, warrant, right, or excercisable, exchangeable, or convertible security outstanding as of the Expiration Date. No adjustment in the conversion price will be required unless such adjustment would require a change of at least one percent (1%) in the conversion price then in effect; provided, however, that any adjustment that would not be required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment is required. If any action would require adjustment of the conversion price pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the holder of the Convertible Debentures (and therefore the Trust Convertible Preferred Securities). In the event that the provisions described herein specifying the methods by which the conversion price is adjusted, including those described in "-- Conversion Provision Adjustments--Merger, Consolidation or Sale of Assets of the Company" and "--Certain Other Conversion Provision Adjustments," would require a conversion price adjustment that is determined in good faith by the Board to be inconsistent with the purposes of the provisions hereof providing for conversion price adjustment (generally, to place the holders of the Convertible Debentures and the Trust Convertible Preferred Securities in a position equivalent to the position they were in prior to the event requiring an adjustment to the conversion price), the Board may make an adjustment (in lieu of that required pursuant to the above provisions) that it determines in good faith to be consistent with such purposes, which determination shall be described in a resolution of the Board, and that the Institutional Trustee determines to be not adverse to the holders of the Convertible Debentures and the Trust Convertible Preferred Securities. Conversion Provision Adjustments--Merger, Consolidation or Sale of Assets of the Company. If the Company is a party to (i) any recapitalization or reclassification of shares of Common Stock (other than a change in par value or a change resulting from a subdivision or combination), (ii) any consolidation or merger of the Company (other than a merger that does not result in a reclassification, conversion, exchange, or cancellation of the Common Stock), (iii) any sale or transfer of all or substantially all of the assets of the Company, (iv) any compulsory share exchange, or (v) any other transaction, in any such case pursuant to which the Common Stock is converted solely to the right to receive other securities, cash or other property, then lawful provision shall be made so that the holder of each Convertible Debenture (and thus, Trust Convertible Preferred Security) then outstanding will have the right thereafter to convert such Convertible Debenture only into: (x) in the case of any such transaction that does not constitute a Common Stock Fundamental Change (as defined below) and subject to funds being legally available for such purpose under applicable law at the time of such conversion, the kind and amount of the securities, cash and other property that would have been receivable upon such recapitalization, reclassification, consolidation, merger, sale, transfer, or share exchange by a holder of the number of shares of Common Stock issuable upon conversion of such Trust Convertible Preferred Security immediately prior to such recapitalization, reclassification, consolidation, merger, sale, transfer, or share exchange, after giving effect, in the case of any Non- Stock Fundamental Change (as defined below), to any adjustment in the conversion price in accordance with clause (i) of the following paragraph, and 34 (y) in the case of any transaction that constitutes a Common Stock Fundamental Change, common stock of the kind received by holders of the Common Stock as a result of such Common Stock Fundamental Change in an amount determined in accordance with clause (ii) of the following paragraph. The company formed by such consolidation, resulting from such merger or that acquires such assets or the Company's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments that, for events subsequent to the effective date of such provision in such certificate or articles of incorporation or other constituent documents, shall be as nearly equivalent as may be practicable to the relevant adjustments provided for in the preceding paragraphs and in this paragraph. Notwithstanding any other provision in the preceding paragraphs to the contrary, if any Fundamental Change (as defined below) occurs, then the conversion price in effect will be adjusted immediately after such Fundamental Change as follows: (i) in the case of a Non-Stock Fundamental Change, the conversion price of the Trust Convertible Preferred Securities immediately following such Non-Stock Fundamental Change shall be the lower of (A) the conversion price in effect immediately prior to such Non-Stock Fundamental Change (after giving effect to any other prior adjustments effected pursuant to the preceding paragraphs) and (B) the product of (1) the greater of the Applicable Price (as defined below) and the then applicable Reference Market Price (as defined below) and (2) a fraction, the numerator of which is the liquidation amount of such Trust Convertible Preferred Security and the denominator of which is (x) the amount of the redemption price for one Trust Convertible Preferred Security if the redemption date were the date of such Non-Stock Fundamental Change (or, for the period through September 1, 1997, the twelve-month periods commencing September 1, 1997 and September 1, 1998 and the period from September 1, 1999 to September 3, 2000, the product of , , and , respectively, times $50) plus (y) any then-accumulated and unpaid distributions on one Trust Convertible Preferred Security; and (ii) in the case of a Common Stock Fundamental Change, the conversion price of the Trust Convertible Preferred Securities immediately following such Common Stock Fundamental Change will be the conversion price in effect immediately prior to such Common Stock Fundamental Change, but after giving effect to any other prior adjustments effected pursuant to the preceding paragraphs, multiplied by a fraction, the numerator of which is the Purchaser Stock Price (as defined below) and the denominator of which is the Applicable Price, provided, however, that in the event of a Common Stock Fundamental Change in which (A) 100% of the value of the consideration received by a holder of the Common Stock is common stock of the successor, acquiror, or other third party (and cash, if any, paid with respect to any fractional interests in such common stock resulting from such Common Stock Fundamental Change) and (B) all of the Common Stock shall have been exchanged for, converted into or acquired for, common stock of the successor, acquiror, or other third party (and any cash with respect to fractional interests), the conversion price of the Trust Convertible Preferred Securities immediately following such Common Stock Fundamental Change shall be the conversion price in effect immediately prior to such Common Stock Fundamental Change divided by the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of the Common Stock as a result of such Common Stock Fundamental Change. Depending upon whether a Fundamental Change is a Non-Stock Fundamental Change or a Common Stock Fundamental Change, a holder may receive significantly different consideration upon conversion. In the event of a Non- Stock Fundamental Change, the holder will have the right to convert Trust Convertible Preferred Securities into the kind and amount of the shares of stock and other securities or property or assets (including cash), except as otherwise provided above, as is determined by the number of shares of Common Stock receivable upon conversion at the conversion price as adjusted in accordance with clause (i) of the preceding paragraph. However, in the event of a Common Stock Fundamental Change in which less than 100% of the value of the consideration received by a holder of the Common Stock is common stock of the successor, acquiror or other third party, a holder of a Trust Convertible Preferred Security who converts such security following the Common Stock Fundamental Change will receive consideration in the form of such common stock only, whereas 35 a holder who converted such security prior to the Common Stock Fundamental Change would have received consideration in the form of such common stock as well as any other securities or assets (which may include cash) issuable upon conversion of such Trust Convertible Preferred Security immediately prior to such Common Stock Fundamental Change. For purposes of the "Description of the Trust Convertible Preferred Securities," the following terms shall have the designated meanings: The term "Applicable Price" means (i) in the event of a Non-Stock Fundamental Change in which the holders of the Common Stock receive only cash, the amount of cash received by a holder of one share of the Common Stock and (ii) in the event of any other Fundamental Change, the average of the daily closing price for one share of the Common Stock during the 10 trading days immediately prior to the record date for the determination of the holders of the Common Stock entitled to receive cash, securities, property or other assets in connection with such Fundamental Change or, if there is no such record date, prior to the date upon which the holders of the Common Stock shall have the right to receive such cash, securities, property or other assets. The term "Common Stock Fundamental Change" means any Fundamental Change in which more than 50% of the value (as determined in good faith by the Board) of the consideration received by holders of the Common Stock consists of common stock that, for the 10 trading days immediately prior to such Fundamental Change, has been admitted for listing or admitted for listing subject to notice of issuance on a national securities exchange or quoted on The Nasdaq National Market; provided, however, that a Fundamental Change shall not be a Common Stock Fundamental Change unless either (i) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding Trust Convertible Preferred Securities continue to exist as outstanding Trust Convertible Preferred Securities, or (ii) not later than the occurrence of such Fundamental Change, the outstanding Trust Convertible Preferred Securities are converted into or exchanged for shares of convertible preferred stock or debentures of a corporation succeeding to the business of the Company, which convertible preferred stock has powers, preferences and relative, participating, optional or other rights, and qualifications, limitations, and restrictions substantially similar to those of the Trust Convertible Preferred Securities and which debentures have terms substantially similar to those of the Convertible Debentures. The term "Fundamental Change" means the occurrence of any transaction or event or series of transactions or events pursuant to which all or substantially all of the Common Stock is exchanged for, converted into, acquired for or constitutes solely the right to receive cash, securities, property, or other assets (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization, or otherwise); provided, however, in the case of any such series of transactions or events, for purposes of adjustment of the conversion price, a Fundamental Change shall be deemed to have occurred when substantially all of the Common Stock shall have been exchanged for, converted into or acquired for, or shall constitute solely the right to receive, such cash, securities, property or other assets, but the adjustment shall be based upon the consideration that the holders of the Common Stock received in the transaction or event as a result of which more than 50% of the Common Stock shall have been exchanged for, converted into or acquired for, or shall constitute solely the right to receive, such cash, securities, property or other assets. The term "Non-Stock Fundamental Change" means any Fundamental Change other than a Common Stock Fundamental Change. The term "Purchaser Stock Price" means, with respect to any Common Stock Fundamental Change, the average of the daily closing price for one share of the common stock received by holders of the Common Stock in such Common Stock Fundamental Change during the 10 trading days immediately prior to the date fixed for the determination of the holders of the Common Stock entitled to receive such common stock or, if there is no such date, prior to the date upon which the holders of the Common Stock shall have the right to receive such common stock. The term "Reference Market Price" shall initially mean 66 2/3% of the Market Value of the Common Stock and, in the event of any adjustment to the conversion price other than as a result of a Fundamental Change, the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the conversion 36 price after giving effect to any such adjustment shall always be the same as the ratio of the initial Reference Market Price to the initial conversion price. Certain Other Conversion Provision Adjustments. Notwithstanding any other provision in the preceding paragraphs to the contrary, in the event that the Company shall distribute, by dividend or otherwise (the date of which is hereinafter referred to as the "Spinoff Distribution Date") to all holders of the Common Stock shares of capital stock ("Spinoff Company Stock") of any subsidiary of the Company or any other corporation controlled by the Company and formed for the purpose of facilitating the transaction described in this paragraph (the "Spinoff Company") (such transaction, a "Spinoff"), then at the option of the Company (within the limits specified below), the Company will: (1) exchange all, but not less than all, of the Trust Convertible Preferred Securities for a new trust convertible preferred security ("Spinoff Company Trust Convertible Preferred Security") of the Spinoff Company Trust (as defined below) having the same liquidation amount, distribution rate, redemption provisions, and conversion provisions of the Trust Convertible Preferred Securities and other terms substantially similar to those of the Trust Convertible Preferred Securities except that (i) upon conversion the Spinoff Company Trust Convertible Preferred Securities will convert into Spinoff Company Stock, (ii) the conversion price immediately following such Spinoff will equal the product of (A) the conversion price in effect immediately prior to such Spinoff and (B) a fraction, the numerator of which is the Spinoff Fair Value (as defined below) and the denominator of which is the Average Stock Price (as defined below) (such fraction referred to as the "Spinoff Ratio") and (iii) the Reference Market Price with respect to the Spinoff Trust Convertible Preferred Securities shall equal the Reference Market Price with respect to the Trust Convertible Preferred Securities multiplied by the Spinoff Ratio; or (2) either (a) exchange all, but not less than all, of the Trust Convertible Preferred Securities for (i) a new trust convertible preferred security ("Spinoff Company Trust Convertible Preferred Security") of the Spinoff Company Trust (as defined below) having the same distribution rate, redemption provisions, and conversion provisions of the Trust Convertible Preferred Securities and other terms substantially similar to those of the Trust Convertible Preferred Securities except that (A) upon conversion the Spinoff Company Trust Convertible Preferred Securities will convert into Spinoff Company Stock, (B) the liquidation amount of each Spinoff Trust Convertible Preferred Security shall be equal to the product of (x) the liquidation amount of a Trust Convertible Preferred Security and (y) the Spinoff Ratio, (C) the conversion price immediately following such Spinoff will equal the product of (I) the conversion price in effect immediately prior to such Spinoff and (II) the Spinoff Ratio, and (D) the Reference Market Price with respect to the Spinoff Trust Convertible Preferred Securities shall equal the Reference Market Price with respect to the Trust Convertible Preferred Securities multiplied by the Spinoff Ratio; and (ii) a new trust convertible preferred security ("New Trust Convertible Preferred Security") of the Company having the same distribution rate, redemption provisions, and conversion provisions of the Trust Convertible Preferred Securities and other terms substantially similar to those of the Trust Convertible Preferred Securities except that (A) the liquidation amount of each New Trust Convertible Preferred Security shall be equal to the product of (x) the liquidation amount of a Trust Convertible Preferred Security and (y) one minus the Spinoff Ratio, (B) the conversion price immediately following such Spinoff will equal the product of (I) the conversion price in effect immediately prior to such Spinoff and (II) one minus the Spinoff Ratio, and (C) the Reference Market Price with respect to the New Trust Convertible Preferred Security shall equal the Reference Market Price with respect to the Trust Convertible Preferred Securities multiplied by one minus the Spinoff Ratio; or (b) in lieu of the exchange contemplated in (a) above, distribute a Spinoff Company Trust Convertible Preferred Security as provided for in (a)(i) and adjust the terms of the existing Trust Convertible Preferred Security as provided for in subsection (A), (B) and (C) of Section (a)(ii); or 37 (3) adjust the conversion price by multiplying the conversion price of the Trust Convertible Preferred Securities prior to the Spinoff by a fraction, the numerator of which is the Average Stock Price less the Spinoff Fair Value, and the denominator of which is such Average Stock Price; provided, that: (x) the Company will have the option described in clause (1) only if the Spinoff Company will own more than 40% of the consolidated net assets of the Company as of the day immediately prior to the Spinoff Distribution Date, as determined in good faith by the Board prior to the Spinoff Distribution Date; (y) the Company will have the options described in clauses (1) and (2) only if the effective date of the Spinoff is before September 1, 2023 and the Company and the Regular Trustees have received an opinion of an independent tax counsel experienced in such matters to the effect that the holders of the Trust Convertible Preferred Securities will not be subject, at the time of such transaction or subsequently, to more than a de minimus amount of taxes, duties or other governmental charges in connection with the transaction described therein; and (z) the Company will have the option described in clause (2) only if the Spinoff Company will own more than 20% of the consolidated net assets of the Company as of the day immediately prior to the Spinoff Distribution Date, as determined in good faith by the Board prior to the Spinoff Distribution Date. In order to effect the exchange described in clauses (1) or (2) above: (i)no less than 20 business days prior to the date on which an exchange of the Trust Convertible Preferred Securities or a distribution and adjustment as contemplated by 2(b) above has been completed (the "Spinoff Exchange Date"), the Company must provide notice to the registered holders of the Trust Convertible Preferred Securities of the Spinoff Exchange Date and the kind and amount of the securities into which such Trust Convertible Preferred Securities will be exchanged as a result of the Spinoff; (ii)the Company shall make provision, as part of the Spinoff, to establish the right of the holders of the Trust Convertible Preferred Securities to the securities to be issued in such exchange or a distribution and adjustment as contemplated by 2(b) above, including, but not limited to, causing the Spinoff Company to create a trust similar to the Trust (the "Spinoff Company Trust") for the purpose of issuing the Spinoff Company Trust Convertible Preferred Securities; (iii)following the Spinoff Exchange Date, the holders shall have the benefit of guarantees with terms substantially similar to that of the Guarantee, (a) from Spinoff Company as guarantor, with respect to the Spinoff Company Trust Convertible Preferred Securities, and (b) from the Company as guarantor, with respect to New Trust Convertible Preferred Securities; (iv)following the Spinoff Exchange Date, except in the case of 2(b) above, the rights of holders of Trust Convertible Preferred Securities (including, but not limited to, the right to accrue or accumulate dividends) shall cease, and the Trust Convertible Preferred Securities will no longer be deemed to be outstanding and will only represent the right to receive the securities to be issued to the holders of Trust Convertible Preferred Securities in exchange therefor pursuant to the Spinoff; and (v)following the Spinoff Exchange Date, the holders of record of the Trust Convertible Preferred Securities will be considered the holders of record of any Spinoff Company Trust Convertible Preferred Securities and New Trust Convertible Preferred Securities (or in the case of 2(b) above, the Trust Convertible Preferred Securities) for the purposes of the governing instruments with respect to such securities, including, but not limited to, any indenture, declaration or certificate of designations and the Declaration and the Indenture, including for the purposes of giving of notice or voting thereunder. Whether, after the Spinoff, the Spinoff Company Trust Convertible Preferred Securities or the New Trust Convertible Preferred Securities have terms substantially equivalent to the Trust Convertible Preferred Securities prior to the Spinoff will be determined in good faith by the Board (or its successor). "Average Stock Price" shall mean the average of the closing prices of the Common Stock during the 10 trading days immediately prior to the "ex" dividend or distribution date of the Common Stock, or absent such a date, the 10 trading days immediately prior to the Spinoff Distribution Date; provided, however, that if the Spinoff Fair Value is computed with respect to daily closing prices of Spinoff Company Stock following the Spinoff, the Average Stock Price for the Common Stock shall be calculated as the average of the sums of the 38 daily closing prices of the Common Stock and the Spinoff Company Stock over such same 10 day trading day period. "Spinoff Fair Value" shall mean the product of (a) the average daily closing price for one share of Spinoff Company Stock as reported on a "when issued" basis for the ten trading days immediately prior to the Spinoff Distribution Date or in the absence of "when issued" trading, for the ten trading days immediately following the Spinoff Distribution Date, multiplied by (b) the number of shares of Spinoff Company Stock distributed to a holder of one share of Common Stock in the Spinoff; provided, however, in the absence of an active trading market for the Spinoff Company Stock, the fair value of the shares of Spinoff Company Stock distributed to a holder of one share of Common Stock in the Spinoff shall be determined by the Board in good faith. In the event of a Spinoff, the provisions set forth in this section under "--Certain Other Conversion Provision Adjustments" above shall exclusively govern such transaction, and no other adjustment or change shall be made with respect to the conversion price or the securities to be received by a holder of Trust Convertible Preferred Securities upon conversion due solely to such Spinoff. The implementation of any of the provisions set forth above shall not require the approval of holders of Trust Securities. MANDATORY REDEMPTION Upon the repayment of the Convertible Debentures, whether at maturity or upon redemption, the proceeds from such repayment must immediately be applied to redeem Trust Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so repaid. The Convertible Debentures will mature on September 1, 2026, and may be redeemed, in whole or in part, at the option of the Company, at any time on or after September 3, 2000, or at any time in certain circumstances upon the occurrence of a Special Event (as defined below). Holders of Trust Securities must be given not less than 30 nor more than 60 days notice of any such redemption. The Company will issue a press release announcing any such redemption. See "-- Special Event Distribution or Redemption" and "Description of the Convertible Debentures--Redemption at the Option of the Company". In the event the Company redeems less than all of the Convertible Debentures and, therefore, less than all of the outstanding Trust Convertible Preferred Securities are to be redeemed, the Trust Convertible Preferred Securities will be redeemed pro rata, which means that so long as the Trust Convertible Preferred Securities are in book-entry form the redemption proceeds will be distributed in accordance with the procedures of the Depository (as defined herein). See "Book-Entry System--The Depository Trust Company". The Company may not redeem any Convertible Debentures (and therefore cause a mandatory redemption of Trust Convertible Preferred Securities) unless all accumulated and unpaid distributions have been paid on all outstanding Trust Convertible Preferred Securities for all quarterly distribution payment periods terminating on or prior to the last distribution payment date before the date of redemption. Any redemption of Trust Convertible Preferred Securities, other than upon the occurrence of a Special Event, will be made at the following prices (expressed as percentages of the principal amount of the Convertible Debentures) (each, a "Redemption Price") together with accrued and unpaid interest to, but excluding the redemption date, if redeemed during the 12- month period beginning September 1 (other than the first period, which will begin on September 3, 2000):
REDEMPTION YEAR PRICE ---- ---------- 2000.............................................................. % 2001.............................................................. % 2002.............................................................. % 2003.............................................................. % 2004.............................................................. % 2005.............................................................. % and 100% if redeemed on or after September 1, 2006.
SPECIAL EVENT DISTRIBUTION OR REDEMPTION "Tax Event" means that the Regular Trustees shall have received an opinion of an independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after the date of the Prospectus, as a result of (a) any amendment to, clarification of, or change (including any announced prospective change) in the laws, or any regulations thereunder, of the United States or any political subdivision or taxing 39 authority thereof or therein, (b) any judicial decision, official administrative pronouncement, ruling, regulatory procedure, notice, or announcement, including any notice or announcement of intent to adopt such procedures or regulations (an "Administrative Action"), or (c) any amendment to, clarification of, or change in the official position or the interpretation of such Administrative Action or judicial decision that differs from the theretofore generally accepted position, in each case, by any legislative body, court, governmental authority, or regulatory body, irrespective of the manner in which such amendment, clarification or change is made known, which amendment, clarification, or change is effective or such pronouncement or decision is announced, in each case, on or after, the date of this Prospectus, there is the creation by such change in tax law of more than an insubstantial risk that (i) the Trust is or will be subject to United States federal income tax with respect to income accrued or received on the Convertible Debentures, (ii) the Trust is, or will be subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest paid in cash by the Company to the Trust on the Convertible Debentures (other than interest attributable to the Trust Common Securities) is not, or will not be, deductible, in whole or in part, by the Company for United States federal income tax purposes. Notwithstanding the foregoing, a Tax Event shall not include any change in tax law that requires the Company for United States federal income tax purposes to defer taking a deduction for any OID that accrues with respect to the Convertible Debentures until the interest payment related to such OID is paid by the Company in cash; provided that such change in tax law does not create more than an insubstantial risk that the Company will be prevented from taking a deduction for OID accruing with respect to the Convertible Debentures at a date that is no later than the date the interest payment related to such OID is actually paid by the Company in cash. "Investment Company Event" means that the Regular Trustees shall have received an opinion of an independent counsel experienced in such matters (a "Change in 1940 Act Opinion") to the effect that, as a result of the occurrence of a change in law or regulation or a written change in interpretation or application of law or regulation by any legislative body, court, governmental agency, or regulatory authority on or after the date of this Prospectus, there is more than an insubstantial risk that the Trust is or will be considered an "investment company" which is required to be registered under the Investment Company Act of 1940, as amended (the "1940 Act"). If, at any time, a Tax Event or an Investment Company Event (each, a "Special Event") shall occur and be continuing, the Trust may with the consent of the Company, except in the limited circumstances described below, be dissolved with the result that Convertible Debentures with an aggregate principal amount equal to the aggregate liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accumulated and unpaid distributions on, the Trust Securities, would be distributed to the holders of the Trust Securities in liquidation of such holders' interests in the Trust on a pro rata basis within 90 days following the occurrence of the Special Event; provided that such dissolution and distribution shall be conditioned on (i) the Regular Trustees' receipt of an opinion of an independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service ("IRS"), to the effect that the holders of the Trust Securities will not recognize any gain or loss for United States federal income tax purposes as a result of such dissolution and distribution of Convertible Debentures, (ii) the Company or the Trust being unable to avoid such Tax Event within such 90-day period by taking some ministerial action or pursuing some other reasonable measure that will have no adverse effect on the Trust, the Company or the holders of the Trust Securities and (iii) the Company's prior written consent to such dissolution and distribution. If the Company declines to consent to the dissolution and distribution, the Company may incur an obligation to pay Additional Interest. See "Description of the Convertible Debentures--Additional Interest". Furthermore, if (i) after receipt of a Dissolution Tax Opinion by the Regular Trustees the Company has received an opinion (a "Redemption Tax Opinion") of an independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more that an insubstantial risk that the Company would be precluded from deducting the interest on the Convertible Debentures for United States federal income tax purposes, even after the Convertible Debentures were distributed to the holders of Trust Securities in liquidation of such holders' interests in the Trust as described above, or (ii) after receipt of a Dissolution Tax Opinion or a Change in 1940 Act Opinion by the Regular Trustees, such Regular Trustees shall have been informed by independent tax counsel experienced in such matters that it cannot deliver a No Recognition Opinion to the Trust, 40 the Company shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Convertible Debentures, in whole or in part, at 100% of the principal amount thereof, plus accrued and unpaid interest thereon, for cash within 90 days following the occurrence of such Special Event. Following such redemption, Trust Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Convertible Debentures so redeemed shall be redeemed by the Trust at the liquidation amount thereof plus accrued and unpaid distributions thereon to, but excluding the redemption date on a pro rata basis; provided, however, that if at the time there is available to the Company or the Trust the opportunity to eliminate, within such 90-day period, such Special Event if it is a Tax Event by taking some ministerial action, such as filing a form or making an election or pursuing some other similar reasonable measure that has no adverse effect on the Trust, the Company or the holders of the Trust Securities, the Company or the Trust will pursue such measure in lieu of redemption. After the date for any distribution of Convertible Debentures upon dissolution of the Trust, (i) the Trust Convertible Preferred Securities will no longer be deemed to be outstanding, (ii) the Depository (as defined herein) or its nominee, as the record holder of the Trust Convertible Preferred Securities, will receive a registered global certificate or certificates representing the Convertible Debentures to be delivered upon such distribution, and (iii) any certificate representing Trust Convertible Preferred Securities not held by the Depository or its nominee will be deemed to represent Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest (including Compound Interest) equal to accumulated and unpaid distributions on such Trust Convertible Preferred Securities until such certificates are presented to the Company or its agent for transfer or reissuance. REDEMPTION PROCEDURES FOR REDEMPTION BY THE TRUST The Trust may not redeem any of the outstanding Trust Convertible Preferred Securities unless all accumulated and unpaid distributions have been paid on all outstanding Trust Convertible Preferred Securities for all quarterly distribution periods terminating on or prior to the last distribution payment date before the date of redemption. If the Trust gives a notice of redemption in respect of Trust Convertible Preferred Securities, then, by 12:00 noon, New York City time, on the redemption date, provided that the Company has paid to the Institutional Trustee funds sufficient to pay the applicable Redemption Price, the Institutional Trustee will irrevocably deposit with the Depositary funds sufficient to pay the applicable Redemption Price, plus accumulated and unpaid distributions thereon, and will give the Depository irrevocable instructions and authority to pay the Redemption Price to the holders of the Trust Convertible Preferred Securities. See "Book-Entry System--The Depository Trust Company". If notice of redemption shall have been given and funds deposited as required, then, immediately prior to the close of business on the date of such deposit, distributions will cease to accrue and all rights of holders of such Trust Convertible Preferred Securities so called for redemption will cease, except the right of the holders of such Trust Convertible Preferred Securities to receive the Redemption Price, plus accumulated and unpaid distributions thereon, but without further accrued interest on such Redemption Price. The distributions payable upon redemption (unless the date of redemption is a distribution payment date) will be payable to the person to whom the Redemption Price is payable. In the event that any date fixed for redemption of Trust Convertible Preferred Securities is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (without any interest or other payments 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 Trust Convertible Preferred Securities is improperly withheld or refused and not paid either by the Institutional Trustee, or, if paid to the Trust, by the Company pursuant to the Guarantee, distributions on such Trust Convertible Preferred Securities will continue to accumulate at the distribution rate from the original redemption date to the actual date of payment, in which case the actual payment date will be considered the date fixed for redemption for purposes of calculating the Redemption Price. In the event that fewer than all of the outstanding Trust Securities are to be redeemed, the Trust Securities will be redeemed pro rata. So long as the Trust Convertible Securities are in book-entry form, the distribution of 41 proceeds will be made in accordance with the procedures applied by the Depository. See "Book-Entry System--The Depository Trust Company". Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Company or any of its subsidiaries may at any time, and from time to time, purchase outstanding Trust Convertible Preferred Securities by tender, in the open market or otherwise. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary, dissolution, winding-up or termination of the Trust (each a "Liquidation"), the then holders of the Trust Convertible Preferred Securities will be entitled to receive out of the assets of the Trust, after satisfaction of liabilities to creditors, distributions in an amount equal to the aggregate of the liquidation amount per Trust Convertible Preferred Security, plus accumulated and unpaid distributions thereon to the date of payment (the "Liquidation Distribution"), unless, in connection with such Liquidation, Convertible Debentures in an aggregate principal amount equal to the aggregate liquidation amount of, with an interest rate identical to the distribution rate of, and accrued and unpaid interest equal to accumulated and unpaid distributions on, the Trust Convertible Preferred Securities have been distributed on a pro rata basis to the holders of the Trust Securities. If, upon any such Liquidation, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution for all Trust Securities, then the amounts payable directly by the Trust on the Trust Securities shall be paid on a pro rata basis. The holders of the Trust Common Securities will be entitled to receive distributions upon any such dissolution pro rata with the holders of the Trust Convertible Preferred Securities, except that if a Declaration Event of Default has occurred and is continuing, the Trust Convertible Preferred Securities shall have a preference over the Trust Common Securities with regard to such distributions. Pursuant to the Declaration, the Trust shall terminate (i) on July 17, 2031, the expiration of the term of the Trust, (ii) upon the bankruptcy of the Company as the holder of the Trust Common Securities, (iii) upon the filing of a certificate of dissolution or its equivalent with respect to the Company as the holder of the Trust Common Securities, the filing of a certificate of cancellation with respect to the Trust after obtaining the consent of the holders of at least a majority in liquidation amount of the Trust Securities voting together as a single class to file such certificate of cancellation, or the revocation of the charter of the Company as the holder of the Trust Common Securities and the expiration of 90 days after the date of revocation without a reinstatement thereof, (iv) upon the distribution of Convertible Debentures upon the occurrence of a Special Event, (v) upon the entry of a decree of a judicial dissolution of the holder of the Trust Common Securities or the Trust, (vi) upon the redemption of all the Trust Securities, or (vii) upon the distribution of the Common Stock to all holders of Trust Convertible Preferred Securities upon conversion of all outstanding Trust Convertible Preferred Securities. DECLARATION EVENTS OF DEFAULT An event of default under the Indenture (an "Indenture Event of Default") constitutes an event of default under the Declaration with respect to the Trust Securities (a "Declaration Event of Default"). See "Description of Convertible Debentures--Indenture Events of Default". Upon the occurrence and continuance of a Declaration Event of Default, the Institutional Trustee as the sole holder of the Convertible Debentures will have the right under the Indenture to declare the principal amount of the Convertible Debentures to be immediately due and payable. The Company and the Trust are each required to file annually with the Institutional Trustee an officer's certificate as to its compliance with all conditions and covenants under the Declaration. If the Institutional Trustee fails to enforce its rights under the Convertible Debentures, any holder of Trust Convertible Preferred Securities may institute a legal proceeding against the Company to enforce the Institutional 42 Trustee's rights under the Convertible Debentures. Notwithstanding the foregoing, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), then the registered holder of Trust Convertible Preferred Securities may institute a Direct Action for payment on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Trust Convertible Preferred Securities under the Declaration to the extent of any payment made by the Company to such holder of Trust Convertible Preferred Securities in such Direct Action. The holders of Trust Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Convertible Debentures. Pursuant to the Declaration, the holder of the Trust Common Securities will be deemed to have waived any Declaration Event of Default with respect to the Trust Common Securities until all Declaration Events of Default with respect to the Trust Convertible Preferred Securities have been cured, waived or otherwise eliminated. Until such Declaration Events of Default with respect to the Trust Convertible Preferred Securities have been so cured, waived, or otherwise eliminated, the Institutional Trustee will be deemed to acting solely on behalf of the holders of the Trust Convertible Preferred Securities and only the holders of the Trust Convertible Preferred Securities will have the right to direct the Institutional Trustee with respect to certain matters under the Declaration, and therefore the Indenture. VOTING RIGHTS Except as described herein, under the Delaware Trust Act, the Trust Indenture Act and under "Description of the Guarantee--Modification of the Guarantee; Assignment", and as otherwise required by law and the Declaration, the holders of the Trust Convertible Preferred Securities will have no voting rights. Subject to the requirement of the Institutional Trustee obtaining a tax opinion as set forth in the last sentence of the next paragraph, the holders of a majority in aggregate liquidation amount of the Trust Convertible Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or direct the exercise of any trust or power conferred upon the Institutional Trustee under the Declaration, including the right to direct the Institutional Trustee, as holder of the Convertible Debentures, to (i) exercise the remedies available under the Indenture with respect to the Convertible Debentures, (ii) waive any past Indenture Event of Default that is waivable under the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Convertible Debentures shall be due and payable; provided, however, that if an Indenture Event of Default has occurred and is continuing then, the holders of 25% of the aggregate liquidation amount of the Trust Convertible Preferred Securities may direct the Institutional Trustee to declare the principal of and interest on the Convertible Debentures immediately due and payable; provided, further, that, where a consent or action under the Indenture would require the consent or act of holders of more than a majority in principal amount of the Convertible Debentures (a "Super Majority"), only the holders of at least such Super Majority in aggregate liquidation amount of the Trust Convertible Preferred Securities may direct the Institutional Trustee to give such consent or take such action. The Institutional Trustee shall notify all holders of the Trust Convertible Preferred Securities of any notice of default received from the Debenture Trustee with respect to the Convertible Debentures. Such notice shall state that such Indenture Event of Default also constitutes a Declaration Event of Default. Except with respect to the directing the time, method and place of conducting a proceeding for a remedy, the Institutional Trustee shall not take any of the actions described in clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the Trust will not be classified as other than a grantor trust for United States federal income tax purposes. In the event the consent of the Institutional Trustee, as the holder of the Convertible Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the 43 Convertible Debentures, the Institutional Trustee shall request the direction of the holders of the Trust Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in liquidation amount of the Trust Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of a Super Majority, the Institutional Trustee may only give such consent at the direction of the holders of at least the same Super Majority percentage in liquidation amount of the Trust Securities as is required under the Indenture of aggregate principal amount of the Convertible Debentures outstanding. The Institutional Trustee shall not take any such action in accordance with the direction of the holders of the Trust Securities unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income take the Trust will not be classified as other than a grantor trust on account of such action. A waiver of an Indenture Event of Default will constitute a waiver of the corresponding Declaration Event of Default. Any approval or direction of holders of Trust Convertible Preferred Securities may be given at a separate meeting of holders of Trust Convertible Preferred Securities convened for such purpose, at a meeting of all of the holders of Trust Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which holders of Trust Convertible Preferred Securities are entitled to vote, or of any matter upon which action by written consent of such holders is to be taken, to be mailed to each holder of record of Trust Convertible Preferred Securities. Each such notice will include a statement setting forth the following information: (i) the date of such meeting or the date by which such action is to be taken; (ii) a description of any resolution proposed for adoption at such meeting on which such holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. No vote or consent of the holders of Trust Convertible Preferred Securities will be required for the Trust to redeem and cancel Trust Convertible Preferred Securities, distribute Convertible Debentures, or make adjustments to the conversion price or to the kind and amount of the securities, cash and other property into which the Convertible Debentures are convertible, each in accordance with the Declaration. Notwithstanding that holders of Trust Convertible Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Trust Convertible Preferred Securities that are owned at such time by the Company or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Company, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Trust Convertible Preferred Securities were not outstanding. The procedures by which holders of Trust Convertible Preferred Securities may exercise their voting rights are described below. See "--Book-Entry Only Issuances" and "Book-Entry System--The Depository Trust Company". Holders of the Trust Convertible Preferred Securities will have no rights to appoint or remove the Trustees, who may be appointed, removed or replaced solely by the Company as the indirect or direct holder of all of the Trust Common Securities. MODIFICATION OF THE DECLARATION The Declaration may be modified and amended if approved by the Regular Trustees (and in certain circumstances the Institutional Trustee), provided that, if any proposed amendment provides for, or the Regular Trustees otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding- up or termination of the Trust, then the holders of the Trust Securities voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority in liquidation amount of the Trust Securities affected thereby; provided that if any amendment or proposal referred to in clause (i) above would adversely affect only the Trust Convertible Preferred Securities or only the Trust Common Securities, then only the affected class will 44 be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of a majority in liquidation amount of such class of Trust Securities. Notwithstanding the foregoing, no amendment or modification may be made to the Declaration if such amendment or modification would (i) cause the Trust to be classified for purposes of United States federal income taxation as other than a grantor trust, (ii) reduce or otherwise adversely affect the powers of the Institutional Trustee in contravention of the Trust Indenture Act or (iii) cause the Trust to be deemed an "investment company" which is required to be registered under the 1940 Act. PROPOSED TAX LEGISLATION On March 19, 1996, as a part of President Clinton's Fiscal 1997 Budget Proposal, the Treasury Department proposed legislation (the "Proposed Legislation") that, among other things, would (i) treat as equity for United States federal income tax purposes certain debt instruments with a maximum term of more than 20 years and (ii) disallow interest deductions on certain convertible debt instruments or defer interest deductions on certain debt instruments issued with OID. The Proposed Legislation is proposed to be effective for debt instruments issued on or after December 7, 1995. On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways and Means Committee Chairman William Archer issued a joint statement (the "Joint Statement") indicating their intent that the Proposed Legislation, if 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". Based upon the Joint Statement, it is expected that if the Proposed Legislation were enacted, such legislation would not apply to the Convertible Debentures since they would be issued prior to the date of any "appropriate Congressional action" or otherwise qualify for transitional relief. However, there can be no assurance that the effective date guidance contained in the Joint Statement will be incorporated in the Proposed Legislation, if enacted, or that other legislation enacted after the date hereof will not otherwise adversely affect the tax treatment of the Convertible Debentures. If legislation were enacted that adversely affects the tax treatment of the Convertible Debentures, there could be a distribution of the Convertible Debentures to holders of the Trust Convertible Preferred Securities or, in certain circumstances, the redemption of the Convertible Debentures by the Company and the distribution by the Trust of the resulting cash in redemption of the Trust Convertible Preferred Securities. See "Description of the Trust Convertible Preferred Securities--Special Event Distribution or Redemption". If the Proposed Legislation or any similar legislation changed the tax treatment of the Convertible Debentures and the Trust Convertible Preferred Securities, the United States federal income tax consequences of the purchase, ownership and disposition of the Trust Convertible Preferred Securities would differ from those described herein. If legislation were enacted that would constitute a Tax Event, there would be a distribution of the Convertible Debentures to holders of the Trust Convertible Preferred Securities or, in certain circumstances, at the Company's option, redemption of the Convertible Debentures by the Company. There can be no assurances as to whether or in what form the Proposed Legislation may be enacted into law or whether other legislation will be enacted that otherwise adversely affects the tax treatment of the Convertible Debentures and the Trust Convertible Preferred Securities. MERGERS, CONSOLIDATIONS OR AMALGAMATIONS The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, any corporation or other body, except as described below. The Trust may, with the consent of the Regular Trustees and without the consent of the holders of the Trust Securities, the Delaware Trustee or the Institutional Trustee, consolidate, amalgamate, merge with or into, or be replaced by a trust organized as such under the laws of any state, provided that (i) such successor entity either (x) expressly assumes all of the obligations of the Trust under the Trust Securities or (y) substitutes for the Trust Convertible Preferred Securities other securities having substantially the same terms as the Trust Securities (the "Successor Securities"), so long as the Successor Securities rank the same as the Trust 45 Convertible Preferred Securities rank with respect to distributions and payments upon liquidation, redemption, and otherwise, (ii) the Company expressly acknowledges a trustee of such successor entity possessing the same powers and duties as the Institutional Trustee as the holder of the Convertible Debentures, (iii) such merger, consolidation, amalgamation or replacement does not cause the Trust Convertible Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (iv) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the Trust Convertible Preferred Securities as a result of such merger, consolidation, amalgamation or replacement), (v) such successor entity has a purpose identical to that of the Trust, (vi) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of an independent counsel to the Trust experienced in such matters to the effect that, (A) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), and (B) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (vii) the Company guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and the Trust Common Securities Guarantee (as defined below). Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in liquidation amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it, if such consolidation, amalgamation, merger or replacement would cause the Trust or the successor entity to be classified as other than a grantor trust for United States federal income tax purposes. BOOK-ENTRY ONLY ISSUANCES DTC will act as securities depositary for the Trust Convertible Preferred Securities. The Trust Convertible Preferred Securities will be issued only as fully registered securities registered in the name of Cede & Co., DTC's nominee ("Cede"). One or more fully registered global Trust Convertible Preferred Securities certificates, representing the total aggregate number of Trust Convertible Preferred Securities, will be issued and will be deposited with DTC. Although voting with respect to the Trust Convertible Preferred Securities is limited, in those cases where a vote is required, neither DTC nor Cede will itself consent or vote with respect to Trust Convertible Preferred Securities. Under its usual procedures, DTC would solicit votes on behalf of the Trust through an Omnibus Proxy. Except as provided herein, a Beneficial Owner in a global Trust Convertible Preferred Security certificate will not be entitled to receive physical delivery of Trust Convertible Preferred Securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under the Trust Convertible Preferred Securities. A more detailed description of the DTC book-entry system is set forth in "Book-Entry System--The Depository Trust Company" below. INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE The Institutional Trustee, prior to the occurrence of a default with respect to the Trust Securities and after the curing of any defaults that may have occurred, undertakes to perform only such duties as are specifically set forth in the Declaration and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provisions, the Institutional Trustee is under no obligation to exercise any of the powers vested in it by the Declaration at the request of any holder of Trust Convertible Preferred Securities, unless offered reasonable indemnity by such holder against the costs, expenses and liabilities which might be incurred hereby. The holders of Trust Convertible Preferred Securities will not be required to offer such indemnity in the event such holders, by exercising their voting rights, direct the Institutional Trustee to take any action it is empowered to take under the Declaration following a Declaration Event of Default. The Institutional Trustee also serves as trustee under the Guarantee and the Indenture. 46 See "Unocal Capital Trust" regarding the Bank of New York's service as the trustee under two indentures under which debt securities have been issued by Union Oil and guaranteed by the Company. CONVERSION AGENT AND PAYING AGENT The Institutional Trustee is appointed under the terms of the Trust Securities to act as Conversion Agent. In addition, in the event that the Trust Convertible Preferred Securities do not remain in book-entry only form, the following provisions would apply: The Institutional Trustee will act as paying agent and may designate an additional or substitute paying agent at any time. Registration of transfers of Trust Convertible Preferred Securities will be effected without charge by or on behalf of the Trust, but upon payment (with the giving of such indemnity as the Trust or the Company may require) in respect of any tax or other government charges that may be imposed in relation to it. The Trust will not be required to register or cause to be registered the transfer of Trust Convertible Preferred Securities after such Trust Convertible Preferred Securities have been called for redemption. GOVERNING LAW The Declaration and the Trust Convertible Preferred Securities will be governed by, and construed in accordance with, the internal laws of the State of Delaware. MISCELLANEOUS The Regular Trustees are authorized and directed to take any action so that the Trust will not be required to register as an "investment company" under the 1940 Act or characterized as other than a grantor trust for United States federal income tax purposes, and to cooperate with the Company so that the Convertible Debentures will be treated as indebtedness of the Company for United States federal income tax purposes. In this connection, the Regular Trustees are authorized to take any action, not inconsistent with the Declaration and applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable to achieve such end, as long as such action does not adversely affect the interests of the holders of the Trust Convertible Preferred Securities. Holders of the Trust Convertible Preferred Securities have no preemptive rights. 47 DESCRIPTION OF THE GUARANTEE Set forth below is a summary of information concerning the Guarantee which will be executed and delivered by the Company for the benefit of the holders of Trust Convertible Preferred Securities. The Guarantee will be qualified as an indenture under the Trust Indenture Act. The Bank of New York will act as the independent trustee under the Guarantee (the "Guarantee Trustee") for purposes of 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. The summary is subject in all respects to the provisions of, and is qualified in its entirety by reference to, the form of Guarantee, which is filed as an exhibit to the Registration Statement of which this Prospectus forms a part, and the Trust Indenture Act. The Guarantee will be held by the Guarantee Trustee for the benefit of the holders of the Trust Convertible Preferred Securities. GENERAL Pursuant to the Guarantee, the Company will agree, to the extent set forth therein, to pay in full to the holders of the Trust Convertible Preferred Securities the Guarantee Payments (as defined herein) (except to the extent paid by the Trust), as and when due, regardless of any defense, right of setoff, or counterclaim which the Trust may have or assert. The following payments with respect to Trust Convertible Preferred Securities issued by the Trust to the extent not paid by the Trust (the "Guarantee Payments"), will be subject to the Guarantee thereon (without duplication): (i) any accumulated and unpaid distributions which are required to be paid on such Trust Convertible Preferred Securities to the extent the Trust shall have funds available therefor; (ii) the Redemption Price and all accumulated and unpaid distributions to the date of redemption to the extent the Trust has funds available therefor with respect to any Trust Convertible Preferred Securities called for redemption by the Trust, and (iii) upon a voluntary or involuntary dissolution, winding-up, or termination of the Trust (other than in connection with the conversion of all of the Trust Securities into Common Stock or the distribution of the Convertible Debentures to the holders of Trust Convertible Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accumulated and unpaid distributions on such Trust Convertible Preferred Securities to the date of payment, to the extent the Trust has funds available therefor and (b) the amount of assets of the Trust remaining available for distribution to holders of such Trust Convertible Preferred Securities in liquidation of the Trust. The Company's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Company to the holders of Trust Convertible Preferred Securities or by causing the Trust to pay such amounts to such holders. The Guarantee will not apply to any payment of distributions on the Trust Convertible Preferred Securities except to the extent the Trust shall have funds available therefor. If the Company does not make interest payments on the Convertible Debentures purchased by the Trust, the Trust will not pay distributions on the Trust Convertible Preferred Securities issued by the Trust and will not have funds available therefor. See "Description of the Convertible Debentures--Certain Covenants of the Company". The Guarantee, when taken together with the Company's obligations under the Convertible Debentures, the Indenture, and the Declaration, including its obligations to pay costs, expenses, debts, and liabilities of the Trust (other than with respect to the Trust Securities), will provide a full and unconditional guarantee on a subordinated basis by the Company of payments due on the Trust Convertible Preferred Securities. The Company has also agreed separately to fully and unconditionally guarantee the obligations of the Trust with respect to the Trust Common Securities (the "Trust Common Securities Guarantee") to the same extent as the Guarantee, except that upon an Indenture Event of Default, rights of holders of Trust Common Securities to receive payment of periodic distributions and payments on liquidation, redemption, or otherwise will be subordinated to the rights of the holders of Trust Convertible Preferred Securities. CERTAIN COVENANTS OF THE COMPANY In the Guarantee, the Company will covenant that, so long as any Trust Convertible Preferred Securities remain outstanding, if there shall have occurred any event that would constitute an event of default under the Guarantee or the Declaration, then (a) the Company shall not declare or pay any dividend on, make any 48 distributions with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of capital stock in connection with any employee benefit plan or program, director plan or program, dividend reinvestment, stock repurchase, or other similar plans available to stockholders of the Company, or any option, warrant, right, or exercisable, exchangeable, or convertible security outstanding as of the Expiration Date, (ii) as a result of a reclassification of the Company's capital stock pursuant to the exchange or conversion provisions of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or the capital securities of a subsidiary (including a trust such as the Trust), or (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or security being converted or exchanged), and (b) the Company shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase, or redeem or make any guarantee payment (other than pursuant to the Guarantee) with respect to any debt securities issued by the Company that rank pari passu with or junior to the Convertible Debentures. MODIFICATION OF THE GUARANTEE; ASSIGNMENT Except with respect to any changes that do not adversely affect the rights of holders of Trust Convertible Preferred Securities (in which case no consent of holders of Trust Convertible Preferred Securities will be required), the Guarantee may be amended only with the prior approval of the holders of at least a majority in liquidation amount of the outstanding Trust Convertible Preferred Securities. All guarantees and agreements contained in a Guarantee shall bind the successors, assigns, receivers, trustees, and representatives of the Company and shall inure to the benefit of the holders of the Trust Convertible Preferred Securities then outstanding. TERMINATION The Guarantee will terminate upon (a) full payment of the Redemption Price of all Trust Convertible Preferred Securities, (b) conversion of all the Trust Convertible Preferred Securities to Common Stock or distribution of the Convertible Debentures held by the Trust to the holders of the Trust Convertible Preferred Securities or (c) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. 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 Trust Convertible Preferred Securities must restore payment of any sums paid under Trust Convertible Preferred Securities or the Guarantee. The subordination provisions of the Convertible Debentures provide that in the event payment is made on the Convertible Debentures or the Guarantee in contravention of such provisions, such payments shall be paid over the holders of Senior Indebtedness. EVENTS OF DEFAULT An event of default under the Guarantee will occur upon the failure of the Company to perform any of its payment or other obligations thereunder. The holders of a majority in liquidation amount of the Trust Convertible 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 exercising any trust or power conferred upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce such Guarantee, any holder of Trust Convertible Preferred Securities may institute a legal proceeding directly against the Company to enforce the Guarantee Trustee's rights under the Guarantee, without first instituting a legal proceeding against the Trust, the Guarantee Trustee, or any other person or entity. Notwithstanding the foregoing, if the Company has failed to make a payment required under the Guarantee, a holder of the Trust Convertible Preferred Securities may directly institute a proceeding against the Company for enforcement of the Guarantee for such payment. The Company waives any right or remedy to require that any action be brought first against the Trust or any other person or entity before proceeding directly against the Company. 49 STATUS OF THE GUARANTEE The Guarantee will constitute an unsecured obligation of the Company and will rank (i) subordinate and junior in right of payment to all other liabilities of the Company, (ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Company and with any guarantee now or hereafter entered into by the Company in respect of any preferred or preference stock of any affiliate of the Company (including the $3.50 Convertible Preferred Stock); and (iii) senior to the Common Stock. The terms of the Trust Convertible Preferred Securities provide that each holder of Trust Convertible Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms of the Guarantee relating thereto. The Guarantee creates a guarantee of payment and not of collection (that is, the holder of Trust Convertible Preferred Securities may institute a legal proceeding directly against the Company to enforce its rights under the Guarantee without instituting a legal proceeding against the Trust, the Guarantee Trustee, or any other person or entity). INFORMATION CONCERNING THE GUARANTEE TRUSTEE The Guarantee Trustee, before the occurrence of any event of default with respect to the Guarantee and after curing all events of default with respect to the Guarantee that may have occurred, shall undertake to perform only such duties as are specifically set forth in the Guarantee. After an event of default with respect to the Guarantee has occurred, the Guarantee Trustee shall exercise the rights and powers vested in it by the Guarantee, and shall use the same degree of care and skill in its exercise thereof as a prudent individual would exercise or use under the circumstances in the conduct of his or her own affairs. Subject to such provisions, the Guarantee Trustee is under no obligation to exercise any of the powers vested in it by the Guarantee at the request of any holder of Trust Convertible Preferred Securities, unless such holder shall have provided to the Guarantee Trustee such security and indemnity, reasonably satisfactory to the Guarantee, against the costs, expenses, and liabilities that might be incurred thereby. DESCRIPTION OF THE CONVERTIBLE DEBENTURES Set forth below is a description of the specific terms of the Convertible Debentures. The following description is subject to, and is qualified in its entirety by reference to, the Supplemental Indenture, dated as of , 1996 (the "Supplemental Indenture") and the Indenture dated as of , 1996 (the "Base Indenture" and, together with the Supplemental Indenture, the "Indenture"), each between the Company and The Bank of New York, as Trustee (the "Debenture Trustee"), a form of which is filed as an Exhibit to the Registration Statement of which this Prospectus is a part. Certain capitalized terms used herein are defined in the Indenture. Under certain circumstances involving the dissolution of the Trust following the occurrence of a Special Event, Convertible Debentures may be distributed to the holders of the Trust Securities in liquidation of the Trust. See "Description of the Trust Convertible Preferred Securities--Special Event Distribution or Redemption". If the Convertible Debentures are distributed to the holders of the Trust Convertible Preferred Securities, the Company will use its reasonable efforts to have the Convertible Debentures listed or quoted on such national securities exchange or similar organization on which the Trust Convertible Preferred Securities are then listed or quoted, if any. GENERAL The Convertible Debentures will be issued as unsecured debt under the Indenture. The Convertible Debentures will be limited in aggregate principal amount to approximately (i) the greater of (A) the aggregate 50 redemption price as of the Exchange Amount Determination Date for all outstanding shares of $3.50 Convertible Preferred Stock, plus aggregate accumulated and unpaid dividends thereon to but excluding the Expiration Date, or (B) the Market Value of shares of Common Stock of the Company as of the Exchange Amount Determination Date into which all outstanding shares of the $3.50 Convertible Preferred Stock are convertible, plus (ii) the capital contributed by the Company in exchange for the Trust Common Securities. The Convertible Debentures are not subject to a sinking fund provision. The Convertible Debentures are convertible into the Common Stock at the option of the holders of the Convertible Debentures at any time beginning 90 days following the first date that any Trust Convertible Preferred Securities are issued and prior to the close of business on September 1, 2026 (or, in the case of Convertible Debentures called for redemption, the close of business on the Business Day immediately preceding the Redemption Date) at the initial conversion ratio equal to that number of shares of Common Stock determined by dividing the principal amount of $50 by the product of times the Market Value of a share of Common Stock, subject to the conversion price adjustments described under "Description of the Trust Convertible Preferred Securities-- Conversion Rights". The entire principal amount of the Convertible Debentures will mature and become due and payable, together with any accrued and unpaid interest thereon including Compound Interest (as defined herein) and Additional Interest (as defined herein), if any, on September 1, 2026. If Convertible Debentures are distributed to holders of Trust Convertible Preferred Securities in liquidation of such holders' interests in the Trust, such Convertible Debentures will initially be issued as a Global Security (as defined herein). As described herein, under certain limited circumstances, Convertible Debentures may be issued in certificated form in exchange for a Global Security. See "Book-Entry and Settlement" below. In the event that Convertible Debentures are issued in certificated form, such Convertible Debentures will be in denominations of $50 and integral multiples thereof and may be transferred or exchanged at the offices described below. Payments on Convertible Debentures issued as a Global Security will be made to DTC, a successor depositary or, in the event that no depositary is used, to a Paying Agent for the Convertible Debentures. In the event Convertible Debentures are issued in certificated form, principal and interest will be payable, the transfer of the Convertible Debentures will be registrable and Convertible Debentures will be exchangeable for Convertible Debentures of other denominations of a like aggregate principal amount at the corporate trust office of the Institutional Trustee in New York, New York; provided that payment of interest may be made at the option of the Company by check mailed to the address of the holder entitled thereto or by wire transfer to an account appropriately designated by the holder entitled thereto. Notwithstanding the foregoing, so long as the holder of any Convertible Debentures is the Institutional Trustee, the payment of principal and interest on the Convertible Debentures held by the Institutional Trustee will be made at such place and to such account as may be designated by the Institutional Trustee. SUBORDINATION The Convertible Debentures are subordinated and junior in right of payment to all Senior Indebtedness of the Company to the extent set forth in the Indenture. No payment of principal (including redemption payments), premium, if any, or interest on the Convertible Debentures may be made (i) if any Senior Indebtedness of the Company is not paid when due and any applicable grace period with respect to such default has ended and such default has not been cured or waived or ceased to exist, or (ii) if the maturity of any Senior Indebtedness of the Company has been accelerated because of a default and such acceleration has not been rescinded. Upon any payment by the Company or distribution of assets of the Company to creditors upon any dissolution, winding-up, liquidation, or reorganization, whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, all principal, premium, if any, and interest due or to become due on all Senior Indebtedness of the Company must be paid in full before the holders of Convertible Debentures are entitled to receive or retain any payment. Upon satisfaction of all claims of all Senior Indebtedness then outstanding, the rights of the holders of the Convertible Debentures will be subrogated to the rights of the holders of Senior Indebtedness of the Company to receive payments of distributions applicable to Senior Indebtedness until all amounts owing on the 51 Convertible Debentures are paid in full. For purposes of the subordination provisions, the payment, issuance and delivery of cash, property or securities (other than stock and certain subordinated securities of the Company) upon conversion of a Convertible Debenture will be deemed to constitute payment on account of the principal of such Convertible Debenture. By reason of such subordination, in the event of liquidation or insolvency, creditors of the Company may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of the Convertible Debentures. In the event of the acceleration of the maturity of any Convertible Debentures, the holders of Senior Indebtedness outstanding at the time of such acceleration will first be entitled to receive payment in full of all amounts due thereon before the holders of the Convertible Debentures will be entitled to receive any payment upon the principal of (and premium, if any) or interest on, the Convertible Debentures. The term "Senior Indebtedness" means, with respect to the Company, all current and future obligations and liabilities of the Company (whether absolute, accrued, fixed, contingent, liquidated, unliquidated, or otherwise), except for (1) accounts payable or any other obligations of the Company to trade creditors created or assumed by the Company in the ordinary course of business, (2) any obligation that is expressly by its terms subordinated to or pari passu with the Convertible Debentures, and (3) any obligation or liability of the Company to any person of which at least a majority of the voting interest under ordinary circumstances is at such time, directly or indirectly, owned by the Company. Such Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to the benefits of the subordination provisions irrespective of any amendment, modification, or waiver of any term of such Senior Indebtedness. The Indenture does not limit the aggregate amount of Senior Indebtedness that may be issued or incurred by the Company and does not limit obligations at Union Oil or other subsidiaries which are structurally senior to the Convertible Debentures. CERTAIN COVENANTS OF THE COMPANY If the Company shall have exercised its right to defer payment of interest on the Convertible Debentures by extending the interest payment period as provided in the Indenture and such period, or any extension thereof, shall be continuing, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of capital stock in connection with any employee benefit plan or program, director plan or program, dividend reinvestment, stock repurchase, or other similar plans available to stockholders of the Company, or any option, warrant, right, or exercisable, exchangeable, or convertible security outstanding as of the Expiration Date, (ii) as a result of a reclassification of the Company's capital stock pursuant to the exchange or conversion provisions of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or the capital securities of a subsidiary (including a trust such as the Trust), or (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or security being converted or exchanged), and (b) the Company shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase, or redeem or make any guarantee payment (other than pursuant to the Guarantee) with respect to any debt securities issued by the Company that rank pari passu with or junior to the Convertible Debentures. Except as otherwise provided in the Indenture, for so long as the Convertible Debentures are issued to the Trust or the Institutional Trustee and the Trust Securities remain outstanding, the Company will covenant (i) to directly or indirectly maintain 100% ownership of the Trust Common Securities; provided, however, that any 52 permitted successor of the Company under the Indenture may succeed to the Company's ownership of such Trust Common Securities, (ii) to use its reasonable efforts to cause the Trust (a) to remain a statutory business trust, except in connection with the distribution of the Convertible Debentures, the redemption of all Trust Securities, or certain mergers, consolidations, amalgamations, or other transactions each as permitted by the Indenture or the Declaration, and (b) to continue to be classified as a grantor trust for United States federal income tax purposes and (iii) to use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Convertible Debentures. REDEMPTION AT THE OPTION OF THE COMPANY Except as described below with respect to accrued and unpaid interest, the Company will have the right to redeem the Convertible Debentures, in whole or in part, from time to time, on or after September 3, 2000, upon not less than 30 nor more than 60 days notice, at the following Redemption Prices (expressed as percentages of the principal amount of the Convertible Debentures) together with accrued and unpaid interest thereon, including Compound Interest (as defined herein) to, but excluding, the redemption date, if redeemed during the 12-month period beginning September 1 (other than the first period, which will begin on September 3, 2000):
REDEMPTION YEAR PRICE ---- ---------- 2000.............................................................. % 2001.............................................................. % 2002.............................................................. % 2003.............................................................. % 2004.............................................................. % 2005.............................................................. % and 100% if redeemed on or after September 1, 2006.
Notwithstanding the foregoing, the Company may not redeem any Convertible Debentures unless all accrued and unpaid interest has been paid on all outstanding Convertible Debentures for all quarterly interest payment periods terminating on or prior to the last interest payment date before the date of redemption. If Convertible Debentures are redeemed on any March 1, June 1, September 1, or December 1, accrued and unpaid interest shall be payable to holders of record on the record date for such interest payment. The Company shall also have the right to redeem the Convertible Debentures at any time in certain circumstances upon the occurrence of a Special Event as described under "Description of the Trust Convertible Preferred Securities-- Special Event Distribution or Redemption" at 100% of the principal amount thereof, plus accrued and unpaid interest thereon (including Compound Interest), to, but excluding, the redemption date. So long as the Trust Convertible Preferred Securities are outstanding, the Declaration requires that the proceeds from the redemption of any of the Convertible Debentures will be used to redeem Trust Convertible Preferred Securities. INTEREST Each Convertible Debenture shall bear interest at the rate of % per annum from the date of original issuance or, for Convertible Debentures issued in the Exchange Offer, from and including the Expiration Date. Interest is payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year (each an "Interest Payment Date"), commencing on December 1, 1996, to the person in whose name such Convertible Debenture is registered, subject to certain exceptions, at the close of business on the business day next preceding such Interest Payment Date. In the event the Convertible Debentures shall not continue to remain in book-entry only form, the Company shall have the right to select record dates, which shall be more than one business day prior to the Interest Payment Date. 53 The amount of interest payable for any full quarterly interest period will be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any period shorter than a full quarterly interest period for which interest is computed, will be computed on the basis of 30-day months and, for periods of less than a month, the actual number of days elapsed divided by 30. In the event that any date on which interest is payable on the Convertible Debentures is not a business day, then payment of the interest payable on such date will be made on the next succeeding day that is a business day (and without any interest or other payment in respect of any such delay), except that, if such business day is in the next succeeding calendar year, then such payment shall be made on the immediately preceding business day, in each case with the same force and effect as if made on such date. OPTION TO EXTEND INTEREST PAYMENT PERIOD So long as the Company is not in default in the payment of interest on the Convertible Debentures, the Company will have the right, at any time, and from time to time, during the term of the Convertible Debentures, to defer payments of interest by extending the interest payment period for a period not exceeding 20 consecutive quarters, during which Extension Period no interest will be due and payable. At the end of the Extension Period, the Company shall pay all interest then accrued and unpaid (including any Additional Interest, as herein defined), together with interest thereon compounded quarterly at the rate specified for the Convertible Debentures to the extent permitted by applicable law ("Compound Interest"); provided that during any such Extension Period, (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of capital stock in connection with any employee benefit plan or program, director plan or program, dividend reinvestment, stock repurchase, or other similar plans available to stockholders of the Company, or any option, warrant, right, or exercisable, exchangeable, or convertible security outstanding as of the Expiration Date, (ii) as a result of a reclassification of the Company's capital stock pursuant to the exchange or conversion provisions of the Company's capital stock or the exchange or conversion of one class or series of the Company's capital stock for another class or series of the Company's capital stock or the capital securities of a subsidiary (including a trust such as the Trust), or (iii) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or security being converted or exchanged), and (b) the Company shall not make any payment of interest, principal or premium, if any, on, or repay, repurchase, or redeem or make any guarantee payment (other than pursuant to the Guarantee) with respect to any debt securities issued by the Company that rank pari passu with or junior to the Convertible Debentures. Prior to the termination of any such Extension Period, the Company may further extend the Extension Period; provided, that, such Extension Period, together with all such previous and further extensions, may not exceed 20 consecutive quarters or extend beyond the maturity of the Convertible Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, the Company may commence a new Extension Period, subject to the above requirements. No interest during an Extension Period, except at the end thereof, shall be due and payable. The Company has no present intention of exercising its right to defer payments of interest by extending the interest payment period on the Convertible Debentures. If the Institutional Trustee shall be the sole holder of the Convertible Debentures, the Company shall give the Regular Trustees and the Institutional Trustee notice of its selection of such Extension Period one Business Day prior to the earlier of (i) the date distributions on the Trust Convertible Preferred Securities are payable or (ii) the date the Regular Trustees are required to give notice to any national stock exchange or other organization on which the Trust Convertible Preferred Stock are listed or quoted, if any, or to holders of the Trust Convertible Preferred Securities of the record date or the date such distribution is payable. The Regular Trustees shall give notice to the Company's selection of such Extension Period to the holders of the Trust Convertible Preferred Securities. If the Institutional Trustee shall not be the sole holder of the Convertible Debentures, the Company shall give the holders of the Convertible Debentures notice of its selection of such Extension Period ten Business Days prior to the earlier of (i) the Interest Payment Date or (ii) the date upon which the Company is required to give notice to any national stock exchange or other organization on which the Trust Convertible Preferred Stock are listed or quoted, if any, or to holders of the Convertible Debentures of the record or payment date of such related interest payment. 54 PROPOSED TAX LEGISLATION See the discussion above under the heading "Description of the Trust Convertible Preferred Securities--Proposed Tax Legislation". CONVERSION OF THE CONVERTIBLE DEBENTURES The Convertible Debentures will be convertible into the Common Stock at the option of the holders of the Convertible Debentures at any time beginning 90 days following the first date that any Trust Convertible Preferred Securities are issued and prior to the close of business on September 1, 2026 (or, in the case of Convertible Debentures called for redemption, the close of business on the Business Day immediately preceding the Redemption Date) at the initial conversion ratio equal to that number of shares of Common Stock determined by dividing the stated principal amount of one Convertible Debenture by the product of times the Market Value of a share of Common Stock, subject to the conversion price adjustments described under "Description of the Trust Convertible Preferred Securities--Conversion Rights". The Trust has agreed not to convert Convertible Debentures held by it except pursuant to a notice of conversion delivered to the Conversion Agent by a holder of Trust Convertible Preferred Securities. Upon surrender of a Trust Convertible Preferred Security to the Conversion Agent for conversion, the Trust will distribute Convertible Debentures to the Conversion Agent on behalf of the holder of the Trust Convertible Preferred Securities so converted, whereupon the Conversion Agent will convert such Convertible Debentures to the Common Stock on behalf of such holder. The Company's delivery to the holders of the Convertible Debentures (through the Conversion Agent) of the fixed number of shares of Common Stock into which the Convertible Debentures are convertible (together with the cash payment, if any, in lieu of fractional shares) will be deemed to satisfy the Company's obligation to pay the principal amount of the Convertible Debentures so converted, and the accrued and unpaid interest thereon attributable to the period from the last date to which interest has been paid or duly provided for. If any Convertible Debentures are converted into Common Stock during the period from (but excluding) a record date to the next succeeding interest payment date, then either (i) if such Convertible Debentures have been called for redemption on a redemption date which occurs during such period, or are to be redeemed in connection with a Special Event which occurs during such period, the Company shall not be required to pay accrued interest in cash on such interest payment date in respect of such Convertible Debentures nor will such accrued interest be converted into additional shares of Common Stock, but such accrued interest will be deemed to be paid in full and then returned by the holder to the Company as partial consideration for the Common Stock received on conversion or (ii) if otherwise converted during such period, such Convertible Debentures shall be accompanied by funds equal to the interest payable on such succeeding interest payment date on the principal amount so converted. The Company may not redeem any Convertible Debentures unless all accrued and unpaid interest has been paid on all outstanding Convertible Debentures for all quarterly interest payment periods terminating on or prior to the last interest payment date before the date of redemption. Since the Company is required to pay all accrued and unpaid interest, other than for the current quarter (which interest is then paid to holders of Trust Convertible Preferred Securities as accumulated and unpaid distributions), prior to redeeming the Convertible Debentures (and thus, resulting in the redemption of the Trust Convertible Preferred Securities), holders of Trust Convertible Preferred Securities choosing to convert such Trust Convertible Preferred Securities in order to avoid such redemption will, at most, forego actual receipt of a cash distribution payment only for the current quarter. Interest may, at the Company's option, be paid either (i) by check mailed to the address of the person entitled thereto as it appears in the register or (ii) by transfer to an account maintained by such person located in the United States; provided, however, that payments to DTC will be made by wire transfer of immediately available funds to the account of DTC or its nominee. ADDITIONAL INTEREST If at any time the Trust shall be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the Company will pay as additional interest ("Additional Interest") such additional amounts as shall be required so that the net amounts received and retained by the Trust after paying any such taxes, duties, 55 assessments or other governmental charges will be not less than the amounts the Trust would have received had no such taxes, duties, assessments or other governmental charges been imposed. CONSOLIDATION, MERGER AND SALE OF ASSETS Except as otherwise provided in the Indenture, the Company may not merge or consolidate or sell or convey all or substantially all of its assets unless the successor corporation (if other than the Company) is a domestic corporation and assumes the Company's obligations on the Convertible Debentures and under the Indenture. See "Description of the Trust Convertible Preferred Securities--Conversion Rights". The Indenture does not contain provisions that afford the Convertible Debentures protection in the event of a highly leveraged transaction involving the Company. INDENTURE EVENTS OF DEFAULT Any one of the following events will constitute an Indenture Event of Default with respect to the Convertible Debentures: (a) default in the payment of any interest on the Convertible Debentures when due and payable, if continued for 30 days after written notice has been given as provided on the Indenture, whether or not such payment is prohibited by the subordination provisions of the Indenture and the Convertible Debentures, provided, however, that a valid extension of the interest payment period does not constitute a default in the payment of interest; (b) default in the payment of principal of (or premium, if any, on) the Convertible Debentures when due and payable whether or not such payment is prohibited by the subordination provisions of the Indenture and the Convertible Debentures, provided, however, that a valid extension of the maturity of such Convertible Debentures does not constitute a default in the payment of principal or premium; (c) failure to perform any other covenant of the Company in the Indenture or the Convertible Debentures (other than a covenant included in the Indenture solely for the benefit of any series of debt securities other than the Convertible Debentures), if continued for 90 days after written notice has been given as provided in the Indenture; (d) failure of the Company to deliver the Common Stock upon a valid conversion election by the holder or holders of the Convertible Debentures to convert such Convertible Debentures into shares of Common Stock; (e) certain events in bankruptcy, insolvency or reorganization involving the Company; or (f) the voluntary or involuntary dissolution, winding-up, or termination of the Trust, except in connection with (i) the distribution of Convertible Debentures to the holders of Trust Securities in liquidation of the Trust or in their interest in the Trust, (ii) the redemption of the Trust Convertible Preferred Securities, and (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration. If any Indenture Event of Default shall occur and be continuing, the Institutional Trustee, as the holder of the Convertible Debentures, will have the right to declare the principal of the Convertible Debentures (including any Compound Interest and Additional Interest, if any) and any other amounts payable under the Indenture to be forthwith due and payable and to enforce its other rights as a creditor with respect to the Convertible Debentures. See "Description of the Convertible Debentures--Indenture Events of Default" for a description of the Indenture Events of Default. An Indenture Event of Default also constitutes a Declaration Event of Default. The holders of Trust Convertible Preferred Securities in certain circumstances have the right to direct the Institutional Trustee to exercise its rights as the holder of the Convertible Debentures. See "Description of the Trust Convertible Preferred Securities--Declaration Events of Default" and "--Voting Rights". Notwithstanding the foregoing, if an Indenture Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest or principal on the Convertible Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), the Company acknowledges that then a holder of Trust Convertible Preferred Securities may institute a Direct Action for payment on or after the respective due date specified in the Convertible Debentures. Notwithstanding any payments made to such holder of Trust Convertible Preferred Securities by the Company in connection with a Direct Action, the Company shall remain obligated to pay the principal of or interest on the Convertible Debentures held by the Trust or the Institutional Trustee of the Trust, and the Company shall be subrogated to the rights of the holder of such Trust Convertible Preferred Securities with respect to payments on the Trust Convertible Preferred 56 Securities to the extent of any payments made by the Company to such holder in any Direct Action. The holders of Trust Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holders of the Convertible Debentures. DEFEASANCE The obligations of the Company with respect to the payment of the principal of, and interest on, the Convertible Debentures will terminate if the Company irrevocably deposits or causes to be deposited with the Debenture Trustee, under the terms of an escrow trust agreement in form and substance satisfactory to the Debenture Trustee, as a trust fund specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Convertible Debentures, (i) money, (ii) U.S. government obligations, which through the payment of interest and principal in respect thereof in accordance with their terms will provide money at such time or times as payments are due and payable on the Convertible Debentures, or (iii) a combination of (i) and (ii), sufficient to pay and discharge the Convertible Debentures (and all other sums payable with respect to the Convertible Debentures). The discharge of the Convertible Debentures is subject to certain other conditions, including (without limitation) (a) no Indenture Event of Default or event (including such deposit) which with notice or lapse of time would become an Indenture Event of Default shall have occurred and be continuing on the date of such deposit, and (b) such deposit and the related intended consequence will not result in any default or event of default under any material indenture, agreement, or other instrument binding upon the Company or its subsidiaries or any of their properties. The conversion rights under the Indenture will survive until the Convertible Debentures are no longer outstanding. MODIFICATION, WAIVER, MEETINGS, AND VOTING Modification of Indentures. The Indenture will provide that the Company and the Debenture Trustee may, without the consent of any holders of Convertible Debentures, enter into supplemental indentures for the purposes, among other things, of adding to the Company's covenants, adding additional Indenture Events of Default, establishing the form or terms of Convertible Debentures or curing ambiguities or inconsistencies in such Indenture, or making other changes to the Indenture or form or terms of the Convertible Debentures, provided such action does not have a material adverse effect on the interests of the holders of the Convertible Debentures. In addition, modifications and amendments of the Indenture may be made by the Company and the Debenture Trustee with the consent of the holders of not less than a majority in aggregate principal amount of the Convertible Debentures then outstanding affect by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of each holder of Convertible Debentures outstanding that is affected thereby, (a) change the stated maturity of the principal of, or any installment of principal of or rate of interest on the Convertible Debentures, (b) reduce the principal amount of or interest on any Convertible Debentures, (c) change any obligation to pay additional amounts, (d) change the place of payment or the currency or currency unit in which the Convertible Debentures or interest thereon is payable, (e) impair the right to institute suit for the enforcement of any payment on or with respect to the Convertible Debentures, (f) reduce the percentage in principal amount of the Convertible Debentures then outstanding required for modification or amendment of the Indenture or for any waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults, (g) change any obligation of the Company to maintain an office or agency in the places and for the purposes required by the Indenture, (h) make any change that would materially adversely affect the right to convert the Convertible Indentures, or (i) modify any of the above positions. Waiver of Default. The holders of a majority in aggregate principal amount of the Convertible Debentures then outstanding may, on behalf of the holders of all Convertible Debentures, waive compliance by the Company with certain restrictive provisions of the Indenture. The holders of a majority in aggregate principal amount of the Convertible Debentures then outstanding may, on behalf of the holders of all Convertible Debentures, waive any past default under the Indenture with respect to the Convertible Debentures except a default (a) in the payment of principal of or any interest on the Convertible Debentures and (b) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of each holder of the Convertible Debentures then outstanding. 57 Meetings and Voting. A meeting may be called at any time by the Debenture Trustee, and upon request, by the Company (pursuant to a resolution of the Board) or the holders of at least 25% in principal amount of the Convertible Debentures then outstanding. Except as described above under "Modifications of Indentures" and "Waiver of Default," a resolution presented at a meeting or reconvened meeting at which a quorum of the holders of Convertible Debentures then outstanding is present may be adopted by the affirmative vote of the lesser of (i) the holders of a majority in principal amount of the Convertible Debentures then outstanding, or (ii) the holders of 66 2/3% in principal amount of the Convertible Debentures then outstanding represented and voting at the meeting; provided, however, that if any consent, waiver, or other action which the Indenture expressly provides may be made, given, or taken by the holders of a specified percentage, which is less than a majority of the principal amount of the Convertible Debentures then outstanding, such action may be adopted at a meeting or reconvened meeting at which a quorum is present by the affirmative vote of the lesser of (a) the holders of such specified percentage in principal amount of the Convertible Debentures then outstanding or (b) a majority in principal amount of Convertible Debentures then outstanding of such series represented and voting at the meeting. Any resolution passed or decision taken at any meeting of holders of Convertible Debentures duly held in accordance with the Indenture will be binding on all holders of Convertible Debentures whether or not present or represented at the meeting. Except with respect to certain reconvened meetings, the quorum at a meeting of the holders of a Convertible Debenture will be persons holding or representing a majority in principal amount of the Convertible Debentures then outstanding. BOOK-ENTRY AND SETTLEMENT If distributed to holders of Trust Convertible Preferred Securities in connection with the involuntary or voluntary dissolution, winding-up, or liquidation of the Trust as a result of the occurrence of a Special Event, the Convertible Debentures will be issued in the form of one or more global certificates registered in the name of the depository or its nominee. For further detail, see "Book-Entry System--The Depository Trust Company" below. THE DEPOSITORY If the Convertible Debentures are distributed to holders of Trust Convertible Preferred Securities in liquidation of such holders' interests in the Trust, DTC will act as securities depository for the Convertible Debentures. For a description of DTC and the specific terms of the depository arrangements, see "Description of the Trust Convertible Preferred Securities-- Book-Entry Only Issuances". None of the Company, the Trust, the Institutional Trustee, any paying agent and 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 beneficial ownership interests in a Global Security for such Convertible Debentures or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DISCONTINUANCE OF THE DEPOSITORY'S SERVICES A Global Security shall be exchangeable for Convertible Debentures registered in the names of persons other than the Depository or its nominee only if (i) the Depository notifies the Company that it is unwilling or unable to continue as a depository for such Global Security and no successor depository shall have been appointed, (ii) the Depository, at any time, ceases to be a clearing agency registered under the Exchange Act at which time the Depository is required to be so registered to act as such depository and no successor depository shall have been appointed, (iii) the Company, in its sole discretion, determines that such Global Security shall be so exchangeable or (iv) there shall have occurred an Indenture Event of Default with respect to such Convertible Debentures. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Convertible Debentures registered in such names as the Depository shall direct. It is expected that such instructions will be based upon directions received by the Depository from its Participants with respect to ownership of beneficial interests in such Global Security. 58 GOVERNING LAW The Indenture and the Convertible Debentures will be governed by, and construed in accordance with, the internal laws of the State of New York. MISCELLANEOUS The Indenture will provide that the Company will pay all fees and expenses related to (i) the offering of the Trust Securities and the Convertible Debentures, (ii) the organization, maintenance and dissolution of the Trust, (iii) the retention of the Trustees and (iv) the enforcement by the Institutional Trustee of the rights of the holders of the Trust Convertible Preferred Securities. The payment of such fees and expenses will be fully and unconditionally guaranteed by the Company. The Company will have the right at all times to assign any of its respective rights or obligations under the Indenture to a direct or indirect wholly owned subsidiary of the Company; provided that, in the event of any such assignment, the Company will remain liable for all of their respective obligations. Subject to the foregoing, the Indenture will be binding upon and inure to the benefit of the parties thereto and their respective successors and assigns. The Indenture provides that it may not otherwise be assigned by the parties thereto. EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE DEBENTURES AND THE GUARANTEE As set forth in the Declaration, the sole purposes of the Trust are (a) issuing its Trust Securities in exchange for Convertible Debentures having an aggregate principal amount equal to the aggregate liquidation amount of such Trust Securities and (b) engaging in such other activities as are necessary or incidental thereto. As long as payments of interest and other payments are made when due on the Convertible Debentures, such payments will be sufficient to cover distributions and payments due on the Trust Securities because of the following factors: (i) the aggregate principal amount of Convertible Debentures will be equal to the sum of the aggregate liquidation amount of the Trust Securities; (ii) the interest rate and the interest and other payment dates on the Convertible Debentures will match the distribution rate and distribution and other payment dates for the Trust Convertible Preferred Securities; (iii) the Company shall pay all, and the Trust shall not be obligated to pay, directly or indirectly, costs, expenses, debt, and obligations of the Trust (other than with respect to the Trust Securities); and (iv) the Declaration further provides that the Trustees shall not take or cause or permit the Trust to, among other things, engage in any activity that is not consistent with the purposes of the Trust. Payments of distributions (to the extent funds therefor are available) and other payments due on the Trust Convertible Preferred Securities (to the extent funds therefor are available) are guaranteed by the Company as and to the extent set forth under "Description of the Guarantee". If the Company does not make interest payments on the Convertible Debentures held by the Trust, the Trust will not have sufficient funds to pay distributions on the Trust Convertible Preferred Securities. The Guarantee is a full guarantee on a subordinated basis with respect to the Trust Convertible Preferred Securities issued by the Trust from the time of its issuance but does not apply to any payment of distributions unless and until the Trust has sufficient funds for the payment of such distributions. The Guarantee covers the payment of distributions and other payments on the Trust Convertible Preferred Securities only if and to the extent that the Company has made a payment of interest or principal on the Convertible Debentures held by the Trust as its sole asset. The Guarantee, when taken together with the Company's obligations under the Convertible Debentures, the Indenture and the Declaration, including its obligations to pay costs, expenses, debts and liabilities of the Trust (other than with respect to the Trust Securities), provides a full and unconditional guarantee of amounts on the Trust Convertible Preferred Securities. If the Company fails to make interest or other payments on the Convertible Debentures when due (taking account of any Extension Period), the Declaration provides a mechanism whereby a holder of the Trust 59 Convertible Preferred Securities, using the procedures described in "Description of the Trust Convertible Preferred Securities--Book-Entry Only Issuances," and "--Voting Rights," and "Book Entry System--The Depository Trust Company" may direct the Institutional Trustee to enforce its rights under the Convertible Debentures. Notwithstanding the foregoing, in such circumstances a holder of Trust Convertible Preferred Securities may institute a Direct Action for payment on or after the respective due date specified in the Convertible Debentures. In connection with such Direct Action, the Company will be subrogated to the rights of such holder of Trust Convertible Preferred Securities in such Direct Action. The Company, under the Guarantee, acknowledges that the Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the Trust Convertible Preferred Securities. If the Company fails to make payments under the Guarantee, the Guarantee provides a mechanism whereby the holders of the Trust Convertible Preferred Securities may direct the Guarantee Trustee to enforce its rights thereunder. Any holder of Trust Convertible Preferred Securities may institute a legal proceeding directly against the Company to enforce such holder's right to receive payment under the Guarantee without first instituting a legal proceeding against the Trust, the Guarantee Trustee, or any other person or entity. DESCRIPTION OF THE COMMON STOCK The Board is authorized to issue a maximum of 750,000,000 shares of Common Stock under the Company's Certificate of Incorporation, as amended (the "Certificate of Incorporation"). As of June 30, 1996, 248,309,196 shares of Common Stock were outstanding, 16,666,667 million shares were reserved for issuance upon the conversion of the $3.50 Convertible Preferred Stock and 20,454,631 million shares were reserved for issuance in connection with the Company's employee benefit plans, its directors' restricted stock plan and its dividend reinvestment and common stock purchase plan. The following summary of the rights of holders of the Common Stock does not purport to be complete and is subject in all respects to the applicable provisions of the Delaware General Corporation Law, the Certificate of Incorporation, and the Company's bylaws (the "Bylaws"). CERTAIN RIGHTS OF HOLDERS OF THE COMMON STOCK Dividend Rights: Subject to the prior rights of the holders of any class of the Company's preferred stock, if any, holders of the Common Stock are entitled to receive such dividends as are declared by the Board out of funds legally available therefor. Voting Rights: Subject to the rights of the holders of any class of the Company's preferred stock, if any, all voting rights are vested in the holders of shares of Common Stock, each share being entitled to one vote on all matters presented for a vote (except for those matters for which a separate class vote is required under Delaware law). The holders of one-third of the shares entitled to vote constitute a quorum at any meeting of stockholders. Holders of shares of Common Stock do not have cumulative voting rights, which means that holders of more than 50% of the shares voting for the election of directors can elect 100% of the directors standing for election, if they choose to do so, and the holders of the remaining shares voting for the election of directors will not be able to elect any person or persons to the Board. The Board is divided into three classes, and directors normally serve three-year staggered terms. One of the classes is presented for election at each annual meeting, so that the entire Board is never presented for election in any one year. Liquidation Rights: Subject to the rights of the holders of any class of the Company's preferred stock, if any, in the event of liquidation of the Company, holders of the Common Stock will share pro rata in all assets distributable to stockholders in respect of shares held by them. Preemptive Rights: Holders of the Common Stock are not entitled to any preemptive rights to subscribe for any securities that may be issued by the Company. 60 ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon"), Encino, California, is the transfer agent and registrar for the Common Stock. The Common Stock may also be presented for transfer at the office of ChaseMellon, New York, New York. RIGHTS TO PURCHASE SERIES A PREFERRED STOCK In January 1990, the Board adopted a stockholder rights plan (the "Rights Plan") and declared a dividend of one right (a "Right" and collectively, the "Rights") for, and to be attached to, each outstanding share of the Common Stock. The resolutions creating the Rights Plan provide that as long as the Rights are attached to shares of Common Stock, as provided in the "Rights Agreement" referred to below, one additional Right will be issued and delivered with each share of the Common Stock that becomes outstanding after February 12, 1990. Each Right entitles the holder thereof to purchase one one- hundredth (1/100th) of a share of preferred stock designated as the Series A Junior Participating Cumulative Preferred Stock ("Series A Preferred Stock"). The Rights will expire on January 29, 2000, unless redeemed earlier, and will not be exercisable or transferable separately from the shares of Common Stock until the close of business on the earlier of (i) the tenth day following a public announcement that a person or group of affiliated or associated persons (a "15% Stockholder") has acquired, or obtained the right to acquire, beneficial ownership of 15% or more of the outstanding Common Stock or (ii) the date of the commencement or the announcement of an intention to make a tender or exchange offer that would cause any person or group to become a 15% Stockholder (the "Distribution Date"). The Rights Plan is expected to have the effect of rendering certain changes of control of the Company more difficult. Pursuant to the Rights Plan, 3,000,000 shares of Series A Preferred Stock have been designated and reserved for issuance upon exercise of the Rights. An additional number of shares of Series A Preferred Stock equal to one one- hundredth of the number of shares of Common Stock will be reserved for issuance in connection with an issuance of preferred stock or the Common Stock of the Company, whether issued directly, upon exercise of equity warrants, or upon conversion of any convertible preferred stock or debt securities (including the Convertible Debentures) of the Company. A description of the Rights and the Series A Preferred Stock is set forth in the Rights Agreement, dated January 29, 1990 and as amended, between the Company and The Chase Manhattan Bank, as successor rights agent, which is included as exhibit to the Registration Statement of which this Prospectus is a part. CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS The Certificate of Incorporation and Bylaws contain certain provisions that may have the effect of rendering a change of control of the Company more difficult. The Board is divided into three classes, and normally serve three- year staggered terms. Special meetings of the Company's stockholders generally may be called only by the Board, and any action required or permitted to be taken by the stockholders must be taken at an annual or special meeting and may not be effected by written consent. The vote of 75% of the outstanding stock of the Company entitled to vote is required for the stockholders to adopt, amend or repeal bylaws. Such a 75% vote is also required for approval of a merger or consolidation of the Company, and certain other transactions, with another corporation that owns beneficially, with its affiliates, more than 10% of the total voting power of all outstanding shares of the Company's voting stock (a "Related Corporation"), unless such a transaction was approved by 75% of the directors of the Company prior to the Related Corporation becoming such. The Certificate of Incorporation also requires such a 75% vote to repeal or amend any of the foregoing provisions. The Bylaws require 30 days' advance notice of, and specified information with respect to, nominations by stockholders of persons for election as directors and other business to be brought before an annual meeting by a stockholder. As set forth below under "Description of the $3.50 Convertible Preferred Stock," the Board has the authority, without further stockholder action, to provide for the issuance of preferred stock of the Company and to fix the terms thereof. Provisions which could render a change of control of the Company more difficult, such 61 as extraordinary voting, dividend, redemption or conversion rights, could be included in the terms of preferred stock. The Board has adopted a policy that it will not authorize the issuance of voting preferred stock for the sole or principal purpose of deterring an unsolicited takeover bid for the Company. However, this policy does not prevent or restrain the Board from taking any action necessary in the discharge of its fiduciary duties or from authorizing preferred stock in connection with a transaction approved by stockholders, employee or executive plans, a rights offering or the Rights Plan, or to existing stockholders in connection with a recapitalization or reclassification. DESCRIPTION OF THE $3.50 CONVERTIBLE PREFERRED STOCK GENERAL Under the Certificate of Incorporation, the Board is authorized without further stockholder action to provide for the issuance of up to 100,000,000 shares of preferred stock, $.10 par value, in one or more series, with such voting powers or without voting powers, and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions, as shall be set forth in resolutions providing for the issue therefor adopted by the Board. As of the date of this Prospectus, the Company has issued, pursuant to a certificate of designations (the "Certificate of Designations"), 10,250,000 shares of preferred stock, all of which are shares of $3.50 Convertible Preferred Stock. The transfer agent, registrar, dividend disbursing agent, and redemption agent for the $3.50 Convertible Preferred Stock is ChaseMellon. The registrar for the $3.50 Convertible Preferred Stock will send notices to stockholders of any special meetings at which Holders thereof will have the right to elect directors of the Company. See "--Voting Rights". DIVIDENDS Holders of $3.50 Convertible Preferred Stock are entitled to receive, when, as and if declared by the Board, out of funds legally available for payment, cash dividends at an annual rate of $3.50 per share, payable in arrears on January 15, April 15, July 15, and October 15 of each year. Each such dividend is payable to Holders of record as they appear on the Company's stock register on such record dates, not more than 60 days nor less than 10 days preceding the payment dates thereof, as fixed by the Board. Dividends payable for each full dividend period equal $0.875 per share of $3.50 Convertible Preferred Stock. Dividends payable for any period less than a full dividend period are computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends on each share of $3.50 Convertible Preferred Stock cumulate to (but excluding) the earlier of the redemption date for such share or the date of final distribution upon liquidation, dissolution, or winding up of the Company. Holders of $3.50 Convertible Preferred Stock are not entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends. No interest, or sum of money in lieu of interest, is payable in respect of any dividend payment or payments which may be in arrears. If there are outstanding shares of any other class or series of preferred stock of the Company ranking junior to (including the Series A Preferred Stock described under "Description of the Common Stock--Rights to Purchase Series A Preferred Stock") or on a parity with the $3.50 Convertible Preferred Stock as to dividends, no full dividends may be declared or paid or set apart for payment on any such other series for any period unless full cumulative dividends have been or contemporaneously are declared and paid (or declared and a sum sufficient for the payment thereof is set apart for such payment) on the $3.50 Convertible Preferred Stock for all dividend payment periods terminating on or prior to the date of the payment of such full cumulative dividends. When dividends are not paid in full on the $3.50 Convertible Preferred Stock and on any other series of preferred stock of the Company ranking on a parity as to dividends with the $3.50 Convertible Preferred Stock, all dividends declared upon all outstanding shares of $3.50 Convertible Preferred Stock and shares of such other series of preferred stock will be declared pro rata so that the amounts of dividends declared per share on the $3.50 Convertible Preferred Stock and such other preferred stock will in all cases bear to each other the same 62 ratio that accumulated and unpaid dividends per share on the shares of $3.50 Convertible Preferred Stock and such other preferred stock bear to each other. Unless full cumulative dividends on all outstanding shares of $3.50 Convertible Preferred Stock have been paid or declared and set apart for payment for all past dividend payment periods, no dividend (other than a dividend in the Common Stock or in any other stock of the Company ranking junior to the $3.50 Convertible Preferred Stock as to dividends and upon liquidation and other than as provided in the preceding paragraph) may be declared or paid or set apart for payment or other distribution declared or made upon the Common Stock or upon any other stock of the Company ranking junior to or on a parity with the $3.50 Convertible Preferred Stock as to dividends or upon liquidation, nor may any of the Common Stock or any other stock of the Company ranking junior to or on a parity with the $3.50 Convertible Preferred Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company (except by conversion into or exchange for stock of the Company ranking junior to the $3.50 Convertible Preferred Stock as to dividends and upon liquidation). These restrictions do not prevent the Company from making contributions to its employee benefit plans or from redeeming Rights pursuant to its Rights Plan. Holders of shares of $3.50 Convertible Preferred Stock called for redemption on a redemption date between a dividend record date and the corresponding dividend payment date are not entitled to receive the dividend payable on such dividend payment date. LIQUIDATION RIGHTS In the event of any voluntary or involuntary dissolution, liquidation, or winding up of the Company, the Holders of $3.50 Convertible Preferred Stock will be entitled to receive and to be paid out of the Company's assets available for distribution to its stockholders, before any payment or distribution is made to holders of the Common Stock or any other class of stock of the Company ranking junior to the $3.50 Convertible Preferred Stock upon liquidation (including the Series A Preferred Stock), a liquidation preference in the amount of $50 per share of the $3.50 Convertible Preferred Stock plus accumulated and unpaid dividends. If, upon any voluntary or involuntary dissolution, liquidation, or winding up of the Company, the amounts payable with respect to the liquidation preference of the $3.50 Convertible Preferred Stock and any other shares of stock of the Company ranking as to any such distribution on a parity with the $3.50 Convertible Preferred Stock are not paid in full, the Holders of $3.50 Convertible Preferred Stock and of such other shares will share ratably in any such distribution of assets of the Company in proportion to the full distributable amounts to which they are entitled as measured by liquidation preferences. After payment of the full amount of the liquidating distribution to which they are entitled, the Holders of $3.50 Convertible Preferred Stock will have no right or claim to any of the remaining assets of the Company. Neither the sale of all or substantially all of the property or business of the Company (other than in connection with the winding up of its business), nor the merger or consolidation of the Company into or with any other corporation will be considered a dissolution, liquidation, or winding up of the Company. The right of the Company, and hence the right of Holders of $3.50 Convertible Preferred Stock and other stockholders and creditors of the Company, to participate in any distribution of assets of any subsidiary (including Union Oil) upon its liquidation or reorganization or otherwise is necessarily subject to the prior claims of creditors of the subsidiary, except to the extent that claims of the Company itself as a creditor of the subsidiary are recognized. 63 OPTIONAL REDEMPTION The $3.50 Convertible Preferred Stock is not subject to any mandatory redemption, sinking fund, or other similar provisions. Since July 15, 1996, the $3.50 Convertible Preferred Stock has been redeemable in whole or in part, at the Company's option, upon not less than 30 days' notice nor more than 60 days' notice, during the twelve-month periods commencing on July 15 of the years indicated below at the following redemption prices per share (expressed as a percentage of the $50 liquidation preference thereof), plus accumulated and unpaid dividends, if any, up to but excluding the date fixed for redemption:
REDEMPTION YEAR PRICE ---- ---------- 1996.............................................................. 104.2% 1997.............................................................. 103.5% 1998.............................................................. 102.8% 1999.............................................................. 102.1% 2000.............................................................. 101.4% 2001.............................................................. 100.7% 2002 and thereafter............................................... 100.0%
In the event that fewer than all the outstanding shares of $3.50 Convertible Preferred Stock are to be redeemed, the shares to be redeemed will be determined by lot or pro rata or by any other method as may be determined by the Board to be equitable. From and after the applicable redemption date (unless default shall be made by the Company in providing money for the payment of the redemption price), dividends on the shares of $3.50 Convertible Preferred Stock to be redeemed on such redemption date shall cease to accrue, said shares shall no longer be deemed to be outstanding, the Holders thereof shall cease to be stockholders of the Company, and all rights with respect to said shares (except the right to receive the redemption price without interest) will terminate. Holders of shares of $3.50 Convertible Preferred Stock called for redemption on a redemption date between a dividend record date and the corresponding dividend payment date are not entitled to receive the dividend payable on such dividend payment date. If any dividends on the $3.50 Convertible Preferred Stock are in arrears, no shares of the Preferred Stock will be redeemed unless all outstanding shares of $3.50 Convertible Preferred Stock are simultaneously redeemed. Holders of $3.50 Convertible Preferred Stock have no right to require redemption of the $3.50 Convertible Preferred Stock. VOTING RIGHTS Holders of $3.50 Convertible Preferred Stock have no voting rights except as set forth below or as otherwise from time to time required by law. If the equivalent of six quarterly dividends payable on the $3.50 Convertible Preferred Stock or any other series of preferred stock of the Company are in default, the number of directors of the Company will be increased by two and the Holders of all outstanding shares of $3.50 Convertible Preferred Stock and all other outstanding shares of preferred stock having similar voting rights, voting as a single class without regard to series and with no cumulative voting, to the exclusion of the holders of the Common Stock, will be entitled to elect those two additional directors, who shall serve until all dividends in default have been paid or declared and set apart for payment. Unless the vote or consent of the Holders of a greater number of shares is then required by law, the affirmative vote or consent of the Holders of at least 66 2/3% of the outstanding shares of $3.50 Convertible 64 Preferred Stock, voting as a class, will be required for any amendment, alteration or repeal of the Certificate of Incorporation (including any certificate amendatory thereof or supplemental thereto providing for the capital stock of the Company, including any Certificate of Designation or similar document relating to the $3.50 Convertible Preferred Stock) which would adversely affect the preferences, rights, powers or privileges of the $3.50 Convertible Preferred Stock. Unless the vote or consent of the Holders of a greater number of shares is then required by law, the affirmative vote or consent of the Holders of at least 66 2/3% of the outstanding shares of $3.50 Convertible Preferred Stock and any other series of preferred stock of the Company ranking on a parity with the $3.50 Convertible Preferred Stock either as to dividends or upon liquidation, voting as a single class without regard to series, will be required to create, authorize or issue, or reclassify any authorized stock of the Company into, or create, authorize, or issue any obligation or security convertible into or evidencing a right to purchase, any shares of any class of stock of the Company ranking prior to the $3.50 Convertible Preferred Stock as to dividends or upon liquidation. The Certificate of Incorporation may be amended to increase the number of authorized shares of preferred stock without the vote of the Holders of the outstanding shares of $3.50 Convertible Preferred Stock. CONVERSION RIGHTS The $3.50 Convertible Preferred Stock is convertible at the option of the holder thereof into such number of shares of Common Stock as is equal to the aggregate liquidation preference amount of shares of $3.50 Convertible Preferred Stock surrendered for conversion divided by the conversion price (except that a share of $3.50 Convertible Preferred Stock called for redemption will be convertible up to and including but not after the close of business on the day fixed for redemption, unless the Company defaults in making payment of the amount payable upon redemption). As of the date of this Prospectus, the conversion price is $30.75. No fractional shares of Common Stock or securities representing fractional shares of Common Stock will be issued upon conversion. Any fractional interest in a share of the Common Stock resulting from conversion will be paid in cash based on the market price of the Common Stock (determined as set forth in the Certificate of Designations). The conversion price is subject to adjustment (under formulas set forth in the Certificate of Designation) in certain events, including: the issuance of the Common Stock as a dividend or distribution on its capital stock; subdivisions and combinations of the shares of Common Stock; the issuance to all holders of the Common Stock of certain rights or warrants entitling them to subscribe for or purchase the Common Stock at less than the current market price (as defined in the Certificate of Designation); and the distribution to all holders of the Common Stock of evidences of indebtedness of the Company, capital stock, or assets (excluding the Common Stock, cash dividends, distributions in connection with liquidation, dissolution, or winding up of the Company, and those rights or warrants referred to above), unless the Company reserves such distribution for the Holders of $3.50 Convertible Preferred Stock upon conversion. If the Company shall be a party to a recapitalization, reclassification, consolidation, merger, sale or transfer of all or substantially all of its assets or share exchange (including any (i) recapitalization or reclassification of shares of Common Stock (other than a change in par value or as a result of a subdivision or combination of the Common Stock), (ii) consolidation or merger of the Company with or into another person, other than a merger that does not result in a reclassification, conversion, exchange or cancellation of the Common Stock, (iii) any sale or transfer of all or substantially all of the assets of the Company, or (iv) any compulsory share exchange, pursuant to which the Common Stock is converted to the right to receive other securities, cash or other property), then lawful provision shall be made so that the holder of each share of $3.50 Convertible Preferred Stock then outstanding shall have the right thereafter to convert such share only into (x) in the case of a Non-Stock Fundamental Change (as defined below) and subject to funds being legally available for such purpose under applicable law at the time of such conversion, the kind and amount of the securities, cash and other property receivable upon such transaction by a holder of the number of shares of Common Stock issuable upon conversion of such share of $3.50 Convertible Preferred Stock immediately prior to such transaction after giving effect to 65 any adjustment in the conversion price in accordance with clause (i) of the following paragraph, and (y) in the case of a Common Stock Fundamental Change (as defined below), common stock of the kind received by holders of the Common Stock as a result of such Common Stock Fundamental Change in an amount determined in accordance with clause (ii) of the following paragraph. The company formed by such consolidation, resulting from such merger, or acquiring such assets or the Company's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as practical to the relevant adjustments provided for in specified portions of the Certificate of Designations. Notwithstanding any other provision in the preceding paragraphs, if any Fundamental Change (as defined below) occurs, the conversion price in effect will be adjusted immediately after that Fundamental Change as follows: (i) in the case of a Non-Stock Fundamental Change, the conversion price of the shares of $3.50 Convertible Preferred Stock will be the lower of (A) the conversion price in effect immediately prior to such Non-Stock Fundamental Change and (B) the product of (1) the greater of the Applicable Price (as defined below) and the Reference Market Price (as defined below) and (2) a fraction, the numerator of which is $50 and the denominator of which is the amount at which one share of $3.50 Convertible Preferred Stock would be redeemed by the Company if the redemption date were the date of the Non-Stock Fundamental Change (the denominator being the sum of (y) the product of the percentage (expressed as a decimal) set forth in the table under the caption "Optional Redemption" and $50, and (z) any accumulated and unpaid dividends on the $3.50 Convertible Preferred Stock); and (ii) in the case of a Common Stock Fundamental Change, the conversion price of the shares of $3.50 Convertible Preferred Stock immediately following the Common Stock Fundamental Change will be the conversion price in effect immediately prior to the Common Stock Fundamental Change multiplied by a fraction, the numerator of which is the Purchaser Stock Price (as defined below) and the denominator of which is the Applicable Price; provided, however, that in the event of a Common Stock Fundamental Change in which (A) 100% of the value of the consideration received by a holder of the Common Stock is common stock of the successor, acquiror, or other third party (and cash, if any, paid with respect to any fractional interests in that common stock resulting from the Common Stock Fundamental Change) and (B) all of the Common Stock of the Company shall have been exchanged for, converted into, or acquired for, common stock of the successor, acquiror or other third party, the conversion price of the shares of $3.50 Convertible Preferred Stock immediately following the Common Stock Fundamental Change shall be the conversion price in effect immediately prior to the Common Stock Fundamental Change multiplied by a fraction, the numerator of which is one (1) and the denominator of which is the number of shares of common stock of the successor, acquiror, or other third party received by a holder of one share of the Common Stock as a result of the Common Stock Fundamental Change. Depending upon whether the Fundamental Change is a Non-Stock Fundamental Change or Common Stock Fundamental Change, a holder may receive significantly different consideration upon conversion. In the event of a Non-Stock Fundamental Change, the holder has the right to convert shares of $3.50 Convertible Preferred Stock into the kind and amount of the shares of stock and other securities or property or assets (including cash), except as otherwise provided above, as is determined by the number of shares of Common Stock receivable upon conversion at the conversion price as adjusted in accordance with clause (i) of the preceding paragraph. However, in the event of a Common Stock Fundamental Change in which less than 100% of the value of the consideration received by a holder of the Common Stock is common stock of the successor, acquiror or other third party, a holder of a share of $3.50 Convertible Preferred Stock who converts such share following the Common Stock Fundamental Change will receive consideration in the form of such common stock only, whereas a holder who converted such share prior to the Common Stock Fundamental Change received consideration in the form of such common stock as well as any other securities or assets (which may include cash) issuable upon conversion of such share of $3.50 Convertible Preferred Stock immediately prior to such Common Stock Fundamental Change. 66 For purposes of the "Description of the $3.50 Convertible Preferred Stock", the following terms shall have the designated meanings: The term "Applicable Price" means (i) in the event of a Non-Stock Fundamental Change in which the holders of the Common Stock receive only cash, the amount of cash received by a holder of one share of the Common Stock and (ii) in the event of any other Non-Stock Fundamental Change or any Common Stock Fundamental Change, the average of the Closing Prices (determined as provided in the Certificate of Designation) for one share of the Common Stock during the ten trading days immediately prior to the record date for the determination of the holders of the Common Stock entitled to receive cash, securities, property or other assets in connection with such Non-Stock Fundamental Change or Common Stock Fundamental Change or, if there is no such record date, prior to the date on which the holders of the Common Stock will have the right to receive such cash, securities, property or other assets. The term "Common Stock Fundamental Change" means any Fundamental Change in which more than 50% of the value (as determined in good faith by the Board) of the consideration received by holders of the Common Stock consists of common stock that, for the ten trading days immediately prior to such Fundamental Change, has been admitted for listing on a national securities exchange or quoted on the Nasdaq National Market System; provided, however, that a Fundamental Change will not be a Common Stock Fundamental Change unless either (i) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding shares of $3.50 Convertible Preferred Stock continue to exist as outstanding shares of $3.50 Convertible Preferred Stock, or (ii) not later than the occurrence of such Fundamental Change, the outstanding shares of $3.50 Convertible Preferred Stock are converted into or exchanged for shares of convertible preferred stock of a corporation succeeding to the business of the Company, which convertible preferred stock has powers, preferences and relative, participating, optional or other rights, and qualifications, limitations and restrictions substantially similar to those of the $3.50 Convertible Preferred Stock. The term "Fundamental Change" means the occurrence of any transaction or event in connection with a plan pursuant to which all or substantially all of the Common Stock of the Company is exchanged for, converted into, acquired for or constitutes solely the right to receive cash, securities, property or other assets (whether by means of an exchange offer, liquidation, tender offer, consolidation, merger, combination, reclassification, recapitalization or otherwise); provided, however, in the case of a plan involving more than one such transaction or event, for purposes of adjustment of the conversion price, a Fundamental Change will be deemed to have occurred when substantially all of the Common Stock has been exchanged for, converted into, or acquired for, or constitutes solely the right to receive cash, securities, property or other assets, but the adjustment shall be based upon the consideration that the holders of the Common Stock received in the transaction or event as a result of which more than 50% of the Common Stock is exchanged for, converted into, or acquired for, or constitutes solely the right to receive cash, securities, property or other assets; and provided, further, that the term does not include (i) any transaction or event in which the Company and/or any of its subsidiaries are the issuers of all the cash, securities, property or other assets exchanged, acquired or otherwise issued in the transaction or event, or (ii) any transaction or event in which the holders of the Common Stock receive securities of an issuer other than the Company if, immediately following the transaction or event, those holders hold a majority of the securities having the power to vote normally in the election of directors of the other issuer outstanding immediately following the transaction or other event. The term "Non-Stock Fundamental Change" means any Fundamental Change other than a Common Stock Fundamental Change. The term "Purchaser Stock Price" means, with respect to any Common Stock Fundamental Change, the average of the reported last sale prices for one share of the common stock received by holders of the Common Stock in that Common Stock Fundamental Change during the ten trading days immediately prior to the record date for the determination of the holders of the Common Stock entitled to receive that common stock or, if there is no such record date, prior to the date upon which the holders of the Common Stock shall have the right to receive the common stock. 67 The term "Reference Market Price" means $17.00 as of the date of this Prospectus and, in the event of any adjustment to the conversion price as described in the third paragraph of this subsection, the Reference Market Price will also be adjusted so that the ratio of the Reference Market Price to the conversion price after giving effect to any adjustment will always be the same as the ratio of $17.00 (the initial Reference Market Price) to $30.75 (the initial conversion price for the Preferred Stock); which is 1 to 1.8088. No adjustment in the conversion price will be required unless the adjustment would require a change of at least 1% in the conversion price then in effect; provided, however, that any adjustment that would otherwise be required to be made shall be carried forward and taken into account in any subsequent adjustment. The Company reserves the right to make any reduction in the conversion price in addition to those required in the foregoing provisions as the Company considers to be advisable to avoid or diminish income taxes to the Company's stockholders resulting from certain stock-related distributions. Except as stated above, the conversion price will not be adjusted for the issuance of the Common Stock or any securities convertible into or exchangeable for the Common Stock or carrying the right to purchase any of the foregoing. The Holders of shares of $3.50 Convertible Preferred Stock at the close of business on a dividend record date are entitled to receive the dividend payable on those shares (except that Holders of shares called for redemption on a redemption date between the record date and the dividend payment date will not be entitled to receive such dividend) on the corresponding dividend payment date notwithstanding the subsequent conversion thereof. However, shares of $3.50 Convertible Preferred Stock surrendered for conversion during the period between the close of business on any dividend record date and the opening of business on the corresponding dividend payment date (except shares called for redemption on a redemption date during that period) must be accompanied by payment of an amount equal to the dividend payable on the shares on that dividend payment date. A holder of shares of $3.50 Convertible Preferred Stock on a dividend record date who (or whose transferee) tenders any shares for conversion on or after a dividend payment date will receive the dividend payable by the Company on $3.50 Convertible Preferred Stock on that date, and the converting holder need not include payment in the amount of such dividend upon surrender of shares of $3.50 Convertible Preferred Stock for conversion. Except as provided above, the Company will not make any payment or adjustment on conversion in respect of dividends, whether or not in arrears, on shares surrendered for conversion or on account of dividends on the shares of Common Stock issued upon conversion. BOOK-ENTRY; DELIVERY AND FORM Except as described in the next paragraph, the shares of $3.50 Convertible Preferred Stock are on deposit with, or on behalf of, DTC and are registered in the name of Cede in the form of a global $3.50 Convertible Preferred Stock certificate, and investors hold their interests therein directly through DTC, or indirectly through organizations which are participants in DTC. A more detailed description of the DTC book-entry system is set forth in "Book-Entry System--The Depository Trust Company" below. Shares of $3.50 Convertible Preferred Stock (i) held by certain foreign purchasers or accredited institutional investors who are not qualified institutional buyers (the "Non-Global Purchasers") or (ii) if DTC is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, issued by the Company in definitive form in exchange for the global certificate are "Certificated $3.50 Convertible Preferred Shares". There are restrictions on the transfer of Certificated $3.50 Convertible Preferred Shares. The redemption price of Certificated $3.50 Convertible Preferred Shares will be payable upon redemption by wire transfer of immediately available funds upon presentation and surrender of such Certificated $3.50 Convertible Preferred Shares at the Company's principal office or at the office or agency of the Company maintained for such purpose in the Borough of Manhattan, the City of New York. Dividends on the Certificated $3.50 Convertible Preferred Shares will be payable on each dividend payment date by check mailed to the persons in whose names such shares are registered on the record date preceding such dividend payment date; provided that any such person will be entitled to receive such dividend payment by wire transfer of immediately 68 available funds if appropriate wire transfer instructions have been received by ChaseMellon, the transfer agent, not later than the record date preceding such dividend payment date and the amount of such payment is equal to or greater than the minimum amount required for a wire transfer under ChaseMellon's rules for operations at the time of payment. BOOK-ENTRY SYSTEM--THE DEPOSITORY TRUST COMPANY DTC acts as securities depositary (the "Depository") for the $3.50 Convertible Preferred Stock, will act as the Depository for the Trust Convertible Preferred Securities and, if such are distributed to the holders of Trust Convertible Preferred Securities as described herein, is expected to act as the Depository for the Convertible Debentures. For purposes of the description of the book-entry system below, the Trust Convertible Preferred Securities, the $3.50 Convertible Preferred Stock and the Convertible Debentures are referred to as the "Convertible Securities". DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds securities that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations (the "Direct Participants"). DTC is owned by a number of its Direct Participants and by the NYSE, the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers and dealers, banks, and trust companies that clear transactions through or maintain a direct or indirect custodial relationship with a Direct Participant either directly or indirectly ("Indirect Participants"). The rules applicable to DTC and its Participants are on file with the SEC. The ownership interest of each actual owner of a Convertible Security ("Beneficial Owner") within the DTC system is recorded on the Direct and Indirect Participants' records and is credited to the Direct Participant on DTC's records. Beneficial Owners do not receive written confirmation from DTC of their transactions, but Beneficial Owners are expected to receive written confirmations providing details of the transactions, as well as periodic statements of their holdings, from the Direct or Indirect Participants through which the Beneficial Owners exchanged or hold Convertible Securities. Transfers of ownership interests in the Convertible Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in a Convertible Security, except in the event that use of the book-entry system for such Convertible Security is discontinued. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. Such laws may impair the ability to transfer beneficial interests in the Convertible Securities represented by a global certificate. To facilitate subsequent transfers, all the Convertible Securities deposited by Participants with DTC are registered in the name of Cede. The deposit of Convertible Securities with DTC and their registration in the name of Cede effect no change in beneficial ownership. DTC has no knowledge of the identity of the Beneficial Owners of the Convertible Securities, as its records reflect only the identity of the Direct Participants to whose accounts such Convertible Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed 69 by arrangements among them, subject to any statutory or regulatory requirements that may be in effect from time to time. Redemptions are coordinated through DTC. Redemption notices shall be sent to Cede. If less than all of the Convertible Securities held by DTC are being redeemed, DTC will reduce the amount of the interest of each Direct Participant in such Convertible Securities in accordance with its procedures. Conversions are coordinated through DTC. Conversions notices shall be sent to Cede by a Direct Participant for the benefit of Beneficial Owners. DTC will reduce the amount of interest of a Direct Participant in the Convertible Securities as result of any such conversion in accordance with its procedures. Additionally, although voting with respect to the Convertible Securities is limited, in those cases where a vote is required, neither DTC nor Cede will itself consent or vote with respect to such securities. Under its usual procedures, DTC would mail an Omnibus Proxy to the issuer of the Convertible Security for which a vote is being solicited as soon as possible after the record date. The Omnibus Proxy assigns Cede consenting or voting rights to those Direct Participants to whose accounts the voting Convertible Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). The Company and the Trust believe that the arrangements among DTC, Direct and Indirect Participants, and Beneficial Owners will enable the Beneficial Owners to exercise rights equivalent in substance to the rights that can be directly exercised by a holder of a Convertible Security. Distribution payments on the Convertible Securities are made to DTC. DTC's practice is to credit Direct Participants' accounts on the relevant payment date in accordance with their respective holdings shown of DTC's record unless DTC has reason to believe that it will not receive payments on such payment date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the account of customers in bearer form or registered in "street name," and such payments will be the responsibility of such Participant and not of DTC, the Trust, or the Company, subject to any statutory or regulatory requirements to the contrary that may be in effect from time to time. Payment of distributions to DTC is the responsibility of the issuer of the Convertible Security, disbursement of such payments to the Beneficial Owners is the responsibility of Direct and Indirect Participants. DTC has advised the Company that it will take any action permitted to be taken by a holder of the Convertible Securities (including, without limitation, the presentation of a stock certificate for conversion) only at the direction of one or more Participants to whose account with DTC interests in shares presented by a global certificate are credited and only in respect of such number of the shares of the Convertible Securities represented by a global certificate as to which such Participants have given such direction. Except as provided herein, a Beneficial Owner in a global Convertible Security certificate will not be entitled to receive physical delivery of such securities. Accordingly, each Beneficial Owner must rely on the procedures of DTC to exercise any rights under such securities. Because DTC can only act on behalf of Participants, who in turn act on behalf of Indirect Participants, the ability of a person having a beneficial interest in shares represented by a global certificate to pledge such interest to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate of such interest. DTC may discontinue providing its services as Depository with respect to the Convertible Securities at any time by giving reasonable notice to the issuer. Under such circumstances, in the event that a successor securities depositary is not obtained, certificates for the Convertible Securities for which DTC has discontinued its services are required to be printed and delivered. Additionally, the issuer of the Convertible Security may decide to discontinue use of the system of book-entry transfers through DTC (or any successor depositary) with respect to its Convertible Securities. In that event, certificates for such Convertible Securities will be printed and delivered. 70 The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Company and the Trust believe to be reliable, but neither the Company nor the Trust takes responsibility for the accuracy thereof. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS GENERAL In the opinion of Miller & Chevalier, Chartered, special tax counsel to the Company and the Trust, the following are the material United States federal income tax consequences of the acquisition by exchange, ownership, and disposition of the Trust Convertible Preferred Securities. Unless otherwise stated, this summary deals only with Trust Convertible Preferred Securities held as capital assets by Holders who exchange shares of $3.50 Convertible Preferred Stock. It does not deal with special classes of holders such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, tax-exempt investors, foreign governments, or with persons that hold the Trust Convertible Preferred Securities or the $3.50 Convertible Preferred Stock as a position in a "straddle," as part of a "synthetic security" or "hedge," as part of a "conversion transaction" or other integrated investment, or as other than a capital asset. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. Dollar or the tax consequences to stockholders, partners, or beneficiaries of a holder of Trust Convertible Preferred Securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or any foreign government that may be applicable to the Trust Convertible Preferred Securities or to a Holder's decision to exchange shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder, and administrative and judicial interpretations thereof, as of the date hereof, all of which are subject to change, possibly on a retroactive basis. ALL HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF AN EXCHANGE OF SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED SECURITIES AND THE OWNERSHIP, CONVERSION AND DISPOSITION OF TRUST CONVERTIBLE PREFERRED SECURITIES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. CLASSIFICATION OF THE CONVERTIBLE DEBENTURES In connection with the issuance of the Convertible Debentures, Miller & Chevalier, Chartered will render its opinion that, although the matter is not free from doubt, the Convertible Debentures will be classified for United States federal income tax purposes as indebtedness of the Company under current law. By accepting a Trust Convertible Preferred Security, each holder covenants to treat the Convertible Debentures as indebtedness and the Trust Convertible Preferred Securities as evidence of an indirect beneficial ownership in the Convertible Debentures. No assurance can be given, however, that the classification of the Convertible Debentures as indebtedness will not be challenged by the IRS. The remainder of this discussion assumes that the Convertible Debentures will be classified for United States federal income tax purposes as indebtedness of the Company. CLASSIFICATION OF THE TRUST In connection with the issuance of the Trust Convertible Preferred Securities, Miller & Chevalier, Chartered will render its opinion that the Trust will be classified for United States federal income tax purposes as a grantor trust and not as an association taxable as a corporation. Accordingly, for United States federal income tax purposes, each holder of Trust Convertible Preferred Securities will be considered the owner of an undivided interest in the Convertible Debentures, and pursuant to the agreement to treat the Convertible Debentures as indebtedness, each holder will be required to include in its gross income interest received or accrued with respect to its allocable share of the Convertible Debentures. 71 INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT Corporate holders of the Trust Convertible Preferred Securities will not be entitled to a dividends-received deduction with respect to any income recognized with respect to the Trust Convertible Preferred Securities. Under current law, the Company's option to defer payments of interest by extending interest payment periods for up to 20 quarters would cause the Convertible Debentures to be issued with OID. OID must be included in income by all holders as it accrues economically on a daily basis, without regard to when it is paid in cash or whether a particular holder generally uses the cash method of accounting. On June 14, 1996, however, the U.S. Treasury Department issued new income tax regulations providing that "remote" contingencies are ignored in determining whether a debt instrument is issued with OID. These new regulations apply to all debt instruments that, like the Convertible Debentures, are to be issued on or after August 13, 1996. 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 more than 80 years. Thus, in the opinion of special tax counsel, the Convertible Debentures that will be issued on or after August 13, 1996, will not include OID under the new regulations, and holders of the Trust Convertible Preferred Securities should accrue interest under their own methods of accounting (e.g., cash or accrual) instead of under the daily economic accrual rules for OID instruments. Under the new regulations, however, if the Company exercises its right to defer payments of interest, the Convertible Debentures will become OID instruments, and all holders of the Trust Convertible Preferred Securities will be required to accrue interest on a daily basis during the extended interest period even though the Company will not pay the interest in cash until the end of the extended interest period, and even if some holders generally use the cash method of accounting. A holder who disposes of the Trust Convertible Preferred Securities during an extended interest period may suffer a loss because the market value of the Trust Convertible Preferred Securities will likely fall if the Company exercises its option to defer payments of interest on the Convertible Debentures. Furthermore, the market value of the Trust Convertible 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 Trust Convertible 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). If the Convertible Debentures become OID instruments (i.e., if the Company ever exercises its right to defer payments of interest), the Convertible 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 Convertible 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 Convertible Debentures, and actual cash payments of interest on the Convertible Debentures would not be reported separately as taxable income. The new regulations have not yet been addressed in any rulings or other interpretations by the IRS, and it is possible that the IRS could take a position contrary to special tax counsel's interpretation. EXCHANGE OF $3.50 CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED SECURITIES The exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities will be a taxable event. If, with respect to a particular holder, the exchange satisfies one of the tests of section 302 of the Code described below, it will be treated as a transaction in which capital gain or loss is recognized, rather than as a dividend. The tests under section 302 of the Code are applied on a stockholder-by-stockholder basis. Therefore, whether an exchange will be treated as a transaction in which capital gain or loss is recognized or as a dividend with respect to a particular Holder will depend on that Holder's particular facts and circumstances. If the exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities is 72 treated as a transaction in which capital gain or loss is recognized with respect to a particular holder, the capital gain or loss will be based on the difference between the fair market value of the Trust Convertible Preferred Securities received in the exchange and the Holder's adjusted tax basis in the shares of $3.50 Convertible Preferred Stock surrendered therefor. Any capital gain or loss will be long-term capital gain or loss if the shares of $3.50 Convertible Preferred Stock surrendered in the exchange was held by the holder for more than one year. The exchanging Holder's tax basis in the Trust Convertible Preferred Securities received in the exchange will equal the fair market value of the Trust Convertible Preferred Securities at the time of the exchange and the holding period for the Trust Convertible Preferred Securities will begin on the day after the day on which the Trust Convertible Preferred Securities are acquired by the holder. Pursuant to section 302 of the Code, an exchange will be treated as a transaction in which gain or loss is recognized if, after giving effect to the constructive ownership rules of section 318 of the Code, the exchange (i) represents a "complete termination" of the exchanging Holder's stock interest in the Company, (ii) is "substantially disproportionate" with respect to the exchanging Holder or (iii) is "not essentially equivalent to a dividend" with respect to the exchanging Holder, all within the meaning of section 302(b) of the Code. Under the constructive ownership rules of section 318 of the Code, a holder of Trust Convertible Preferred Securities will be treated as owning the Common Stock into which such Trust Convertible Preferred Securities are convertible. Accordingly, an exchange pursuant to the Exchange Offer could not, standing alone, satisfy the "complete termination" or the "substantially disproportionate" tests. An exchange will be "not essentially equivalent to a dividend" as to a particular holder if it results in a "meaningful reduction" in such holder's interest in the Company (after application of the constructive ownership rules of section 318 of the Code). In general, there are no fixed rules for determining whether a "meaningful reduction" has occurred. However, based upon published rulings of the IRS, the exchange will be treated as a transaction in which gain or loss is recognized if the holder's stock ownership (treating the Trust Convertible Preferred Securities as converted) is minimal, the holder exercises no control over the affairs of the Company, and the holder's percentage equity interest in the Company is reduced in the redemption to any extent. As of the date of this Prospectus, the current market price of the Common Stock is $ . If the Market Value of a share of Common Stock is at least $ , the conversion price of the Trust Convertible Preferred Securities will be higher than that of the equivalent amount of $3.50 Convertible Preferred Stock to be surrendered, and an exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities would, standing alone, result in some reduction in an exchanging Holder's constructive stock interest in the Company. However, if the Market Value of a share of Common Stock is lower than $ , such exchange would not, standing alone, result in any reduction in the exchanging Holder's constructive stock interest in the Company. No assurance can be given that these tests will be satisfied, and, if such tests are not satisfied, the exchange will be treated as a dividend. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO ITS ABILITY IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES TO SATISFY ANY OF THE FOREGOING TESTS, POSSIBLY BY DISPOSING OF A PORTION OF ITS STOCK INTEREST IN THE COMPANY CONTEMPORANEOUSLY, AND AS PART OF AN INTEGRATED PLAN, WITH THE EXCHANGE OF SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED SECURITIES. If an exchange is treated as a dividend with respect to a particular exchanging Holder under section 302 of the Code, such holder (i) will not recognize any loss on the exchange, (ii) will recognize dividend income (rather than capital gain) in an amount equal to the fair market value of the Trust Convertible Preferred Securities (and any cash in lieu of fractional Trust Convertible Preferred Securities) received without regard to the holder's basis in the shares of $3.50 Convertible Preferred Stock surrendered in the exchange, to the extent of its proportionate share of the Company's current or accumulated earnings and profits. The holding period for the Trust Convertible Preferred Securities will begin on the day after the day on which the Trust Convertible Preferred Securities are acquired by the exchanging Holder. CORPORATE HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS CONCERNING THE AVAILABILITY OF THE CORPORATE DIVIDENDS-RECEIVED DEDUCTION AND THE POSSIBLE APPLICATION OF THE EXTRAORDINARY DIVIDEND RULES OF CODE SECTION 1059 TO AN EXCHANGE BY A CORPORATE HOLDER FOR WHOM THE DISTRIBUTION IS TAXABLE AS A DIVIDEND. 73 RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST Under certain circumstances, as described under the caption "Description of the Trust Convertible Preferred Securities--Special Event Distribution or Redemption". The Convertible Debentures may be distributed to holders in exchange for the Trust Convertible Preferred Securities and in liquidation of the Trust. This distribution cannot occur without an opinion of an independent tax counsel to the effect that the distribution will not result in recognition of gain or loss to each holder. If the exchange is a non-taxable event, each holder would receive an aggregate tax basis in the Convertible Debentures equal to the holder's aggregate tax basis in the Trust Convertible Preferred Securities. A holder's holding period in the Convertible Debentures received in liquidation of the Trust would include the period during which the Trust Convertible Preferred Securities were held by the holder. However, the tax- free treatment of the distribution may be adversely affected as a result of a change in law. For example, if a Tax Event results in the Trust being treated as an association taxable as a corporation, then a holder would recognize gain or loss upon receipt of the Convertible Debentures as if it had sold the exchanged Trust Convertible Preferred Securities for cash. See "--Sale or Redemption of Trust Convertible Preferred Securities". Under certain circumstances described herein (see "Description of the Trust Convertible Preferred Securities"), the Convertible Debentures may be redeemed for cash and the proceeds of the redemption distributed to holders in redemption of the Trust Convertible Preferred Securities. Under current law, such a redemption would, for United States federal income tax purposes, constitute a taxable disposition of the redeemed Trust Convertible Preferred Securities and a holder would recognize gain or loss as if it sold the redeemed Trust Convertible Preferred Securities for cash. See "--Sale or Redemption of Trust Convertible Preferred Securities". SALE OR REDEMPTION OF TRUST CONVERTIBLE PREFERRED SECURITIES A holder that sells or redeems Trust Convertible Preferred Securities will recognize gain or loss equal to the difference between its adjusted tax basis in the Trust Convertible Preferred Securities and the amount realized on such sale or redemption. Assuming that the Company does not defer payment of interest on the Convertible Debentures, a holder's adjusted tax basis in the Trust Convertible Preferred Securities will be the fair market value of those securities on the date of the exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities. Subject to the discussion below regarding accrued and unpaid interest, such gain or loss generally will be a capital gain or loss and generally will be a long-term capital gain or loss if the Trust Convertible Preferred Securities have been held for more than one year. The Trust Convertible Preferred Securities may trade at a price that does not fully reflect the value of the accrued and unpaid interest with respect to the underlying Convertible Debentures. Should the Company exercise its right to defer payments on interest, a holder who disposes of its Trust Convertible Preferred Securities between record dates for payments of distributions thereon will be required to include accrued and unpaid interest on the Convertible Debentures through the date of disposition in income as ordinary income, and to add such amount to its adjusted tax basis in its allocable share of the underlying Convertible Debentures deemed disposed. To the extent the selling price is less than the holder's adjusted tax basis, a holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. CONVERSION OF TRUST CONVERTIBLE PREFERRED SECURITIES INTO THE COMMON STOCK A holder of Trust Convertible Preferred Securities will not recognize income, gain or loss upon the conversion, through the Conversion Agent, of Convertible Debentures into the Common Stock except to the extent of ordinary income recognized with respect to accrued and unpaid interest on the Convertible Debentures at that time. A holder of Trust Convertible Preferred Securities will also recognize gain upon the receipt of cash in lieu of a fractional share of the Common Stock equal to the amount of the cash received less such holder's tax basis in such fractional share. Such a holder's tax basis in the Common Stock received upon conversion should generally be equal to such holder's tax basis in the Trust Convertible Preferred Securities delivered to the Conversion Agent for exchange, plus the amount of interest income recognized on the exchange, minus the basis 74 allocated to any fractional share for which cash is received and such holder's holding period in the Common Stock received upon conversion will begin on the day after the day the holder acquired the Trust Convertible Preferred Securities delivered to the Conversion Agent for exchange (except that the holding period of the Common Stock deemed issued for accrued interest will begin on the day following the date of conversion). CONVERSION ADJUSTMENT Treasury Regulations promulgated under section 305 of the Code would treat holders of Trust Convertible Preferred Securities as having received a constructive distribution from the Company in the event the conversion price of the Convertible Debentures were adjusted if (i) as a result of such adjustment, the proportionate interest of such holder in the assets or earnings and profits of the Company were increased and (ii) the adjustment was not made pursuant to a bona fide, reasonable anti-dilution formula. An adjustment to the conversion price would not be considered made pursuant to such formula if the adjustment was made to compensate for certain taxable distributions with respect to the Common Stock. Thus, under certain circumstances, a reduction in the conversion price for the holders may result in deemed dividend income to holders to the extent of the current or accumulated earnings and profits of the Company. Holders of the Convertible Debentures would be required to include their allocable share of such deemed dividend in gross income but will not receive any cash related thereto. PROPOSED TAX LEGISLATION See the discussion above under the heading "Risk Factors--Proposed Tax Legislation". INFORMATION REPORTING TO HOLDERS Income on the Trust Convertible Preferred Securities will generally be reported to holders on Forms 1099, which should be mailed to holders of the Trust Convertible Preferred Securities by January 31 following each calendar year. The Trust will be obligated to report annually to Cede, as holder of record of the Trust Convertible Preferred Securities, the interest received or accrued related to the Convertible Debentures for the year. The Trust currently intends to report such information on Form 1099 prior to January 31 following each calendar year even though the Trust is not legally required to report to record holders until April 15 following each calendar year. Under current law, holders of Trust Convertible Preferred Securities who hold as nominees for beneficial holders will not have any obligation to report information regarding the beneficial holders to the Trust. The Trust, moreover, will not have any obligation to report to beneficial holders who are not also record holders. Thus, beneficial holders of the Trust Convertible Preferred Securities who hold their Trust Convertible Preferred Securities through nominees will receive Forms 1099 reflecting the income on their Trust Convertible Preferred Securities from such nominee holders rather than the Trust. BACKUP WITHHOLDING Payments made on, and proceeds from the sale of the Trust Convertible Preferred Securities or the Convertible Debentures distributed to holders of the Trust Convertible Preferred Securities may be subject to a "backup" withholding tax of 31% unless the holder complies with certain identification requirements. Any withheld amounts will be allowed as a refund or credit against the holder's United States federal income tax provided the required information is provided to the Service. NON-UNITED STATES PERSONS For purposes of this discussion, "non-United States person" means any person who, for United States federal income tax purposes, is neither (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States or of any State or of any of its territories or possessions, or (iii) a domestic trust or estate. 75 On April 15, 1996, the U.S. Treasury Department issued proposed regulations that could affect the procedures to be followed by a non-United States person in establishing non-United States person status. These proposed regulations would generally be effective for payments made after December 31, 1997. Non- United States persons should consult their tax advisors regarding the effect, if any, of the proposed regulations on their acquisition, ownership and disposition of the Trust Convertible Preferred Securities. ALL HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK THAT ARE NON-UNITED STATES PERSONS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THEIR EXCHANGE OF SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED SECURITIES AND THE OWNERSHIP, CONVERSION, AND DISPOSITION OF TRUST CONVERTIBLE PREFERRED SECURITIES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. EXCHANGE OF $3.50 CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED SECURITIES Subject to the discussion of backup withholding below, if a holder that is a non-United States person proves, in a manner and under arrangements satisfactory to the Company or other withholding agent, that the exchange of shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities qualifies as a transaction in which gain or loss is recognized rather than as a dividend (see "Certain Federal Income Tax Considerations-- Exchange of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities," above), the Company or other withholding agent will not withhold federal income tax on the issuance of the Trust Convertible Preferred Securities to that holder and that holder generally will not be subject to United States federal income tax in respect of gain recognized on the exchange unless (i) the gain is effectively connected with a trade or business conducted by the non-United States person within the United States (in which case the branch profits tax may also apply if the holder is a foreign corporation), (ii) in the case of a non-United States person that is an individual, the holder is present in the United States for a period or periods aggregating 183 days or more in the taxable year of the exchange and certain other conditions are satisfied or (iii) the Company is or has been a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code within the shorter of the holder's holding period or the five-year period ending on the date of the exchange and certain other conditions are satisfied, and no treaty exception is applicable. The Company believes it is a "United States real property holding corporation". Accordingly, gain realized on the disposition (or exchange) of shares of $3.50 Convertible Preferred Stock by a non-United States person that is deemed to own more than five percent of the $3.50 Convertible Preferred Stock at any time during the shorter of the five-year period preceding such disposition or such holder's holding period may be subject to United States federal income tax. Where a non-United States person is deemed to own less than five percent of the $3.50 Convertible Preferred Stock at all times during the shorter of the five-year period preceding disposition or such holder's holding period, the non-United States person will not be subject to United States federal income taxation provided that the $3.50 Convertible Preferred Stock continues, prior to the disposition of such stock, to be "regularly traded on an established securities market" (within the meaning of section 897(c)(3) of the Code and the temporary regulations issued thereunder). If a holder that is a non-United States person exchanges shares of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities and does not prove, in a manner satisfactory to the Company or other withholding agent, that such exchange qualifies as a transaction in which gain or loss is recognized, the Company will treat the issuance of Trust Convertible Preferred Securities to the non-United States person as a dividend distribution. The Company will withhold United States federal income tax from the gross proceeds to that holder in an amount equal to 30% of the proceeds (including Trust Convertible Preferred Securities that the holder would otherwise have received) unless the holder is eligible for a reduced tax treaty rate with respect to dividend income (in which case tax will be withheld at the reduced rate) or unless the holder establishes that it is exempt from tax (such as by providing the appropriate form certifying its status as a foreign government). Except as may otherwise be provided in an applicable income tax treaty, a holder that is a non-United States person will be taxed at ordinary federal income tax rates on a net income basis if such dividend is effectively connected with 76 the conduct of a trade or business of such holder within the United States (in which case the branch profits tax may also apply if the holder is a foreign corporation) and will not be subject to the withholding tax described in the preceding sentence. A holder that is a non-United States person may be eligible to obtain from the IRS a refund of tax withheld if such holder meets one of three tests of section 302 described above under "--Exchange of $3.50 Convertible Preferred Stock for Trust Convertible Preferred Securities" or is otherwise able to establish that no tax (or a reduced amount of tax) was due. PAYMENTS ON TRUST CONVERTIBLE PREFERRED SECURITIES Subject to a discussion of backup withholding below, payments of principal and interest (including OID, if any) on a Trust Convertible Preferred Security by the Company or its agent (in its capacity as such) to a beneficial owner that is a non-United States person will not be subject to United States federal withholding tax provided that (a) such person does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote, (b) such person is not a controlled foreign corporation that is related to the Company actually or constructively through stock ownership, (c) such person is not a bank that acquired its Trust Convertible Preferred Security in consideration of an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business and (d) either (i) the beneficial owner certifies under penalties of perjury on a Form W-8 delivered to the Company or its agent, that it is not a United States person and provides its name and address or (ii) a qualifying securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business and that holds the Trust Convertible Preferred Security certifies to the Company or its agent under penalties of perjury that such statement has been received from the beneficial owner in a suitable form by it or by a qualifying intermediary and furnishes the payor with a copy thereof. If the beneficial owner of a Trust Convertible Preferred Security who is a non-United States person is engaged in a trade or business within the United States and interest (including OID, if any) on the Trust Convertible Preferred Security is effectively connected with the conduct of such trade or business, such beneficial owner may be subject to United States federal income tax on such interest (including OID, if any) at ordinary federal income tax rates on a net basis (in which case the branch profits tax may also apply if the holder is a foreign corporation). If the Convertible Debentures are not classified for United States federal income tax purposes as indebtedness of the Company, payments by the Trust or any of its paying agents to any holder of a Trust Convertible Preferred Security who is a non-United States person could be subject to United States withholding tax at a 30% rate (or a lower rate prescribed by an applicable treaty). Prospective investors that are non-United States persons should consult their tax advisors concerning the possible application of these rules. SALE, EXCHANGE OR CONVERSION OF TRUST CONVERTIBLE PREFERRED SECURITIES Subject to the discussion of backup withholding below, any capital gain realized upon the sale or exchange of a Trust Convertible Preferred Security (including upon retirement of a Trust Convertible Preferred Security or to the extent cash is received in lieu of a fractional share of Common Stock upon conversion) by a beneficial owner who is a non-United States person ordinarily will not be subject to United States federal income tax unless (i) such gain is effectively connected with a trade or business conducted by such non-United States person within the United States (in which case the branch profits tax may also apply if the holder is a foreign corporation), (ii) in the case of a non-United States person that is an individual, such holder is present in the United States for a period or periods aggregating 183 days or more in the taxable year of the exchange and certain other conditions are satisfied or (iii) the Company is or has been a "United States real property holding corporation" within the meaning of section 897(c)(2) of the Code within the shorter of the holder's holding period or the five-year period ending on the date of the exchange and certain other conditions are satisfied, and no treaty exception is applicable. If the Company is treated as a "United States real property holding corporation," gain realized on the disposition (or exchange) of the Trust Convertible Preferred Securities by a non-United States person that is 77 deemed to own more than five percent of the Trust Convertible Preferred Security disposed at any time during the shorter of the five-year period preceding such disposition or such holder's holding period may be subject to United States federal income tax. Where a non-United States person is deemed to own less than five percent of the Trust Convertible Preferred Securities at all times during the shorter of the five-year period preceding disposition or such holder's holding period, the non-United States person will not be subject to United States federal income taxation provided that the Trust Convertible Preferred Securities continue to be "regularly traded on an established securities market" (within the meaning of section 897(c)(3) of the Code and the temporary regulations issued thereunder). The conversion of Trust Convertible Preferred Securities into Common Stock will not result in a realization of gain or loss or be subject to United States withholding tax. BACKUP WITHHOLDING AND INFORMATION REPORTING Information reporting on IRS Form 1099 and backup withholding at a rate of 31% will not apply to payments of principal and interest (including OID, if any) or a paying agent to a non-United States holder on a Trust Convertible Preferred Security if the certification described in clause (d) under "-- Payments on Trust Convertible Preferred Securities" above is received, provided that the payor does not have actual knowledge that the holder is a United States person. However, interest (including OID, if any) on a Trust Convertible Preferred Security owned by a holder that is non-United States person may be required to be reported annually on IRS Form 1042S. Payments of the proceeds from the sale by a holder that is a non-United States person of a Trust Convertible Preferred Security 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 a Trust Convertible Preferred Security to or through the United States office of a broker is subject to information reporting and backup withholding unless the holder certifies as to its non-United States person status or otherwise establishes an exemption from information reporting and backup withholding. LEGAL MATTERS Certain matters relating to the validity of the Trust Convertible Preferred Securities offered hereby will be passed upon for the Company by Morris Nichols Arhst & Tunnell, Wilmington, Delaware, and certain matters relating to the validity of the Convertible Debentures, the Guarantee, and the Common Stock will be passed upon for the Company by Munger, Tolles & Olson, Los Angeles, California. Certain tax matters will be passed upon for the Company by Miller & Chevalier, Chartered, Washington, D.C. Certain legal matters will be passed upon for the Dealer Managers by Davis Polk & Wardwell, New York, New York. EXPERTS The consolidated financial statements and financial statement schedule of the Company and its subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, included in the Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated by reference in this Prospectus, have been incorporated herein in reliance on the report of Coopers & Lybrand L.L.P., independent accountants, which report is incorporated by reference herein, and on the authority of that firm as experts in accounting and auditing. Such report includes an explanatory paragraph with respect to changes in methods of accounting for the impairment of long-lived assets and long-lived assets to be disposed of in 1995; for recognizing the reduction in value of producing oil and gas properties in 1994; and for postretirement benefits other than pensions and for postemployment benefits in 1993. 78 The Exchange Agent: THE BANK OF NEW YORK By Hand or Overnight Courier: By Mail (Registered or Certified Mail Recommended) The Bank of New York 101 Barclay Street (7 East) Reorganization Section The Bank of New York Corporate Trust Services Window 101 Barclay Street (7 East) New York, New York 10286 Reorganization Section Attention: George Johnson Attention: George Johnson By Facsimile Transmission (For Eligible Institutions Only): (212) 571-3080 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (212) 815-4997 The Information Agent: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 (800) 848-3051 (Toll-Free) (212) 269-5550 (Call Collect) Any questions or requests for assistance or additional copies of this Prospectus and the Letter of Transmittal may be directed to the Information Agent at its telephone number and location set forth above. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Exchange Offer. The Dealer Managers for the Exchange Offer: MORGAN STANLEY & CO. GOLDMAN, SACHS & CO. Incorporated 85 Broad Street 1585 Broadway New York, New York 10004 New York, New York 10036 (800) 323-5678 (Toll-Free) (800)835-9668 (extension 2262) (Toll-Free) 79 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law ("DGCL") authorizes Unocal Corporation, a Delaware corporation (the "Company") to indemnify directors and officers in certain circumstances against liabilities, including expenses, incurred while acting in such capacities; provided, generally, that any such indemnified director or officer acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The Bylaws of the Company provide for the indemnification of directors and officers to the maximum extent permitted by the DGCL. In addition, the Company has provided in its Certificate of Incorporation that it shall eliminate the personal liability of its directors to the fullest extent permitted by the DGCL, and the Company has entered into indemnification agreements with each director providing for additional indemnification. The Company has policies of directors' and officers' liability insurance which insure directors and officers against the cost of defense, settlement, or payment of a judgment under certain circumstances. The Declaration of Trust, as amended and restated (the "Declaration"), of Unocal Capital Trust (the "Trust"), the Trust provides that the Company will indemnify, to the full extent provided by law, (i) a trustee, (ii) any affiliate of a trustee, (iii) any officers, directors, shareholders, members, partners, employees, representatives, or agents of a trustee, and (iv) any officer, employee, or agent of the Trust or its affiliates for losses, liabilities, and expenses incurred in connection with his actions as trustee of the Trust if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Trust (except that, with respect to actions in the right of the Trust, no such indemnification shall be made in respect of a matter as to which such person shall have been adjudged to be liable to the Trust, unless the court in which such matter was brought determines that such person is fairly and reasonably entitled to indemnity), and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The Company also agreed to indemnify (a) the institutional trustee, (b) Delaware trustee, (c) any affiliate of the institutional trustee or the Delaware trustee, and (d) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees, or agents of the institutional trustee or Delaware trustee for any losses, liabilities, and expenses incurred without negligence or bad faith on its part in connection with the exercise or performance of any of its powers or duties under the Declaration. Section 11 of the form of Dealer Manager Agreement filed as Exhibit 1.1 to this registration statement provides for indemnification of each of the Company and the Trust, their directors, trustees, and officers who sign this registration statement, and each person, if any, who controls the Company or the Trust within the meaning of either Section 15 of the Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by the dealer managers with respect to information relating to the dealer managers furnished to the Company or the Trust in writing by the dealer managers expressly for use in this registration statement and certain other materials prepared in connection with the exchange offer contemplated hereby. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits
NUMBER EXHIBIT ------ ------- 1.1 Form of Dealer Manager Agreement. 3.1 Certificate of Trust of the Trust. 4.1 Certificate of Incorporation of the Company, as amended through July 23, 1992 and currently in effect (incorporated by reference to Exhibit 3.1 to Amendment No. 2 on Form 10-K/A to the Company's Annual Report on Form 10-K for the year ended December 31, 1993, File No. 1-8483).
II-1
NUMBER EXHIBIT ------ ------- 4.2 Bylaws of the Company, as amended through June 3, 1996 and currently in effect. 4.3 Form of Standard Multiple-Series Indenture Provisions ("Indenture") of the Company.* 4.4 Form of First Supplemental Indenture, between the Company and The Bank of New York, as trustee, including form of % Convertible Junior Subordinated Debenture.* 4.5 Declaration of Trust of the Trust. 4.6 Form of Amended and Restated Declaration of Trust of the Trust, including form of % Trust Convertible Preferred Security ("Trust Convertible Preferred Security").* 4.7 Form of Preferred Securities Guarantee Agreement (the "Guarantee"). 4.8 Form of Common Stock certificate of the Company. 4.9 Rights Agreement, dated as of January 29, 1990 (the "Rights Agreement"), between the Company and The Chase Manhattan Bank, as successor rights agent. 5.1 Opinion of Munger, Tolles & Olson.* 5.2 Opinion of Morris Nichols Arhst & Tunnell.* 8.1 Opinion of Miller & Chevalier, Chartered.* 12.1 Statement re computation of ratio of earnings to fixed charges for the Company (incorporated by reference to Exhibit 12.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-8483, and Exhibit 12.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996, File No. 1-8483). 12.2 Statement re computation of ratio of earnings to combined fixed charges and preferred stock dividends for the Company (incorporated by reference to Exhibit 12.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1995, File No. 1-8483, and Exhibit 12.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1996, File No. 1-8483). 23.1 Consent of Coopers & Lybrand L.L.P. 23.2 Consent of Munger, Tolles & Olson (contained in its opinion filed as Exhibit 5.1 to this Registration Statement).* 23.3 Consent of Morris Nichols Arhst & Tunnell (contained in its opinion filed as Exhibit 5.2 to this Registration Statement).* 23.4 Consent of Miller & Chevalier, Chartered (contained in its opinion filed as Exhibit 8.1 to this Registration Statement).* 24.1 Power of Attorney (the Company) (included on the signature page to this Registration Statement). 24.2 Power of Attorney (the Trust) (included on the signature page to this Registration Statement). 25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as trustee under the Indenture. 25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as trustee under the Declaration of Trust of the Trust. 25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as amended, of The Bank of New York, as trustee under the Guarantee by the Company for the benefit of the holders of the Trust Convertible Preferred Securities. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Registered Holders and Depository Trust Company Participants. 99.4 Form of Letter to Clients. 99.5 Form of Newspaper Announcement.
- -------- * To be filed by amendment. II-2 ITEM 22. UNDERTAKINGS. (a) The Company hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first-class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement throughout the date responding to the request. (b) The undersigned registrants each hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (c) The Company hereby undertakes that, for purposes of determining any liability under the Securities Act, each of the Company's annual reports pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of any employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described under Item 20 above, or otherwise, the registrants have each been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by them is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (e) The undersigned registrants each hereby undertake to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of El Segundo, State of California on July 29, 1996. Unocal Corporation /s/ Neal E. Schmale By: _________________________________ Neal E. Schmale Chief Financial Officer Each person whose signature appears below hereby constitutes and appoints each of Neal E. Schmale, Charles S. McDowell, and Darrell D. Chessum his or her true and lawful attorney-in-fact and agent with full powers of substitution and resubstitution, for the undersigned and in the name of the undersigned, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement on Form S-4, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ R. C. Beach Chairman of the Board July 29, 1996 - ------------------------------------- of Directors and Roger C. Beach Chief Executive Officer /s/ Neal E. Schmale Chief Financial July 29, 1996 - ------------------------------------- Officer and Director Neal E. Schmale /s/ Charles S. McDowell Vice President and Comptroller (Principal Accounting Officer) July 29, 1996 - ------------------------------------- Charles S. McDowell Director July , 1996 - ------------------------------------- John W. Amerman II-4 Signature Title Date /s/ MacDonald Becket Director July 29, 1996 - ------------------------------------- MacDonald G. Becket /s/ John W. Creighton, Jr. Director July 29, 1996 - ------------------------------------- John W. Creighton, Jr. /s/ Malcolm R. Currie Director July 29, 1996 - ------------------------------------- Malcolm R. Currie /s/ Frank C. Herringer Director July 29, 1996 - ------------------------------------- Frank C. Herringer /s/ John F. Imle, Jr. Director July 29, 1996 - ------------------------------------- John F. Imle, Jr. /s/ Donald P. Jacobs Director July 29, 1996 - ------------------------------------- Donald P. Jacobs /s/ Charles R. Weaver Director July 29, 1996 - ------------------------------------- Charles R. Weaver /s/ J. Steven Whisler Director July 29, 1996 - ------------------------------------- J. Steven Whisler /s/ Marina v.N. Whitman Director July 29, 1996 - ------------------------------------- Marina v.N. Whitman II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of El Segundo, State of California on July 29, 1996. Unocal Capital Trust /s/ D. D. Chessum By: _________________________________ Darrell D. Chessum Trustee Each person whose signature appears below hereby constitutes and appoints each of Darrell D. Chessum, Daniel A. Franchi, and Richard L. Walton his true and lawful attorney-in-fact and agent with full powers of substitution and resubstitution, for the undersigned and in the name of the undersigned, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement on Form S-4, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ D. D. Chessum Trustee July 29, 1996 - ------------------------------------- Darrell D. Chessum /s/ Daniel A. Franchi Trustee July 29, 1996 - ------------------------------------- Daniel A. Franchi /s/ R. L. Walton Trustee July 29, 1996 - ------------------------------------- Richard L. Walton The Bank of New York Trustee July , 1996 By: _________________________________ Title: ______________________________ The Bank of New York (Delaware) Trustee July , 1996 By: _________________________________ Title: ______________________________ II-6 EX-1.1 2 FORM OF DEALER MANAGER AGREEMENT EXHIBIT 1.1 FORM OF DEALER MANAGER AGREEMENT July ______, 1996 Morgan Stanley & Company Incorporated 1585 Broadway New York, New York 10036 Goldman, Sachs & Co. One New York Plaza New York, New York 10004 Ladies and Gentlemen: 1. General Unocal Corporation, a Delaware corporation (the "Company") ------- proposes to exchange _____% Trust Convertible Preferred Securities (the "Trust Preferred Securities") of Unocal Capital Trust (the "Trust"), a statutory business trust organized under the Business Trust Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. Sec 3801 et seq.) for that number of shares of $3.50 Convertible Preferred Stock (par value $.10 per share) (the "Preferred Shares") of the Company determined as set forth in the Prospectus (as hereinafter defined). The Trust Preferred Securities will be guaranteed (the "Guarantee") by the Company to the extent described in the Prospectus (as hereinafter defined). The exchange offer, as it may be amended and supplemented, described above is herein referred to as the "Exchange Offer." In connection with the Exchange Offer, the Company will deposit in the Trust as trust assets its _____% Convertible Junior Subordinated Debentures due 2026 (the "Debentures") and the Trust will transfer to the Company the Trust Preferred Securities and its common securities (the "Common Securities") as set forth in the Prospectus. 2. Engagement as Dealer Manager. By this Dealer Manager Agreement (the ---------------------------- "Agreement"), each of the Company and the Trust hereby engages and appoints each of you as the exclusive Dealer Managers for the Exchange Offer and authorizes each of you to act as such in connection with the Exchange Offer. As Dealer Managers each of you agrees, in accordance with your customary practice,to perform in connection with the Exchange Offer those services as are customarily performed by investment banking concerns in connection with similar offers, including, without limitation, soliciting from individuals and institutions the tender of Preferred Shares pursuant to and in accordance with the terms and conditions of the Exchange Offer. You shall act as independent contractors in connection with the Exchange Offer with duties solely to the Company and the Trust and nothing herein contained shall constitute you as an agent of the Company or the Trust in connection with the solicitation of such Preferred Shares pursuant to and in accordance with the terms and conditions of the Exchange Offer; provided, --------- however, that the Company hereby authorizes the Dealer Managers, and/or one ------- or more registered brokers or dealers chosen by the Dealer Managers, to act as the Company's agent in making the Exchange Offer to residents of any jurisdiction in which such agent designation may be necessary to comply with applicable law. Nothing in this Agreement shall constitute the Dealer Managers, either individually or collectively, partners or joint venturers with the Company, the Trust or any of their subsidiaries. On the basis of the representations and warranties and agreements of the Company and the Trust contained herein and subject to and in accordance with the terms and conditions hereof and of the Exchange Offer, the Dealer Managers agree to act in such capacity. 3. Registration Statement, Prospectus and Offering Materials. (a) The --------------------------------------------------------- Company and the Trust have prepared and filed with the Securities and Exchange Commission (the "Commission"), under the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder (collectively, the "Securities Act"), a registration statement on Form S-4 covering the registration of the Trust Preferred Securities, the Guarantee, the Debentures, and shares of the Common Stock, $1.00 par value per share, of the Company issuable upon conversion of the Trust Preferred Securities and the Debentures. Such registration statement, including the exhibits thereto and any documents incorporated by reference therein, as amended at the time it becomes effective or as thereafter amended or supplemented from time to time, is herein called the "Registration Statement." The final prospectus included in the Registration Statement (including any documents incorporated in the prospectus by reference) is herein called the "Prospectus," except that if the final prospectus furnished to the Dealer Managers for use in connection with the Exchange Offer differs from the prospectus set forth in the Registration Statement (whether or not such prospectus is required to be filed pursuant to Rule 424(b)), the term "Prospectus" shall refer to the final prospectus furnished to the Dealer Managers for such use. The terms "supplement" and "amendment" or "supplemented" and "amend" as used herein with respect to the Prospectus shall include all documents deemed to 2 be incorporated by reference in the Prospectus that are filed subsequent to the date of the Prospectus and prior to the termination of the Exchange Offer by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (b) The Company and the Trust have prepared and filed, or agree that prior to or on the date of commencement of the Exchange Offer (the "Commencement Date") they will file, with the Commission under the Exchange Act and the rules and regulations promulgated thereunder a Statement on Schedule 13E-4 with respect to the Exchange Offer (including the exhibits thereto and any documents incorporated by reference therein, the "Schedule 13E-4"). (c) The Registration Statement, Prospectus and the related letters from the Dealer Managers to securities brokers, dealers, commercial banks, trust companies and other nominees, letters to beneficial owners of Preferred Shares, letters of transmittal (the "Letters of Transmittal"), notice of guaranteed delivery (the "Notice of Guaranteed Delivery") and any newspaper announcements, press releases and other offering materials and information the Company may use or prepare, approve or authorize for use in connection with the Exchange Offer, including the Schedule 13E-4 as amended or supplemented from time to time, are herein collectively referred to as the "Exchange Offer Materials." 4. Use of Exchange Offer Material. (a) The Exchange Offer Materials ------------------------------ have been or will be prepared and approved by, and are the sole responsibility of, the Company and the Trust. The Company shall, to the extent permitted by law, use its best efforts to disseminate the Exchange Offer Materials to each registered holder of any Preferred Shares, as soon as practicable after the Commencement Date, pursuant to Rule 13e-4 under the Exchange Act and comply in all material respects with its obligations thereunder. Thereafter, to the extent practicable until three days prior to the Expiration Date of the Exchange Offer, the Company shall use its best efforts to cause copies of such Exchange Offer Materials and a return envelope to be mailed to each person who becomes a holder of record of any Preferred Shares. The Company and the Trust acknowledge and agree that you may use the Exchange Offer Materials as specified herein without assuming any responsibility for independent verification on your part and the Company and the Trust represent and warrant to you that you may rely on the accuracy and completeness of any information delivered to you by or on behalf of the Company or the Trust without assuming any responsibility for independent verification of such information or without performing or receiving any appraisal or evaluation of the assets or liabilities of the Company or the Trust. 3 (b) The Company and the Trust agree to provide you as many copies as you may reasonably request of the Exchange Offer Materials. The Company and the Trust agree that within a reasonable time prior to using or filing with any federal, state or other governmental agency or instrumentality of the United States of any Exchange Offer Materials, it will submit copies of such materials to you and will give reasonable consideration to your and your counsel's comments, if any, thereon. The Company and the Trust agree prior to the termination of the Exchange Offer, before amending or supplementing the Registration Statement or the Prospectus, to furnish copies of drafts to, and consult with, the Dealer Managers and their counsel within a reasonable time in advance of filing with the Commission of any amendment or supplement to the Registration Statement, the Prospectus or the other Exchange Offer Materials. Neither the Company nor the Trust shall file any such amendment or supplement to which the Dealer Managers shall reasonably object; provided, however that the foregoing ----------------- requirement shall not apply to any of the Company's filings with the Commission required to be filed pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act, copies of which filings the Company will cause to be delivered to each of the Dealer Managers promptly after being transmitted for filing with the Commission. (c) The Company has furnished or shall use its best efforts to furnish to you, or cause the transfer agents or registrars for the Preferred Shares to furnish to you, as soon as practicable after the date hereof (to the extent not previously furnished), cards or lists in reasonable quantities or copies thereof showing the names of persons who were the holders of record or, to the extent available, the beneficial owners of the Preferred Shares as of a recent date, together with their addresses and the number of Preferred Shares held by them. Additionally, the Company and the Trust shall update, or cause the transfer agents or registrars referred to above to update, such information from time to time during the term of this Agreement as may be reasonably requested by you. Except as otherwise provided herein, you agree to use such information only in connection with the Exchange Offer. (d) The Company and the Trust authorize the Dealer Managers to use the Exchange Offer Materials in connection with the Exchange Offer and for such period of time as any such materials are required by law to be delivered in connection therewith. The Dealer Managers shall not have any obligation to cause any Exchange Offer Materials to be transmitted generally to the holders of Preferred Shares. (e) Each of the Company and the Trust authorizes the Dealer Managers to communicate with any information agent (the "Information Agent") or exchange agent (the "Exchange Agent") appointed by the Company or the Trust to act in 4 such capacity in connection with the Exchange Offer. The Company and the Trust will arrange for the Exchange Agent to advise you daily, as necessary, as to such matters relating to the Exchange Offer as you may reasonably request. (f) The Company and the Trust agree that any reference to the Dealer Managers in any Exchange Offer Materials or in any newspaper announcement or press release or other document or communication is subject to the Dealer Managers' prior consent, which consent shall not be unreasonably withheld. 5. Withdrawal. In the event that either the Company or the Trust (i) ---------- uses or permits the use of, or files with the Commission, any amendment or supplement to the Registration Statement and any such document has not been previously submitted to you for your comment if prior submission is required in accordance with the provisions of Section 4(b) hereof; or (ii) shall have breached, in any material respect, any of its representations, warranties, agreements or covenants herein, then you shall be entitled upon written notice to the Company and the Trust to withdraw as Dealer Managers in connection with the Exchange Offer without any liability or penalty to you or any other indemnified person (as defined in Section 11 below) and without loss of any right to indemnification or contribution provided in Section 11 or to the payment of (x) all fees payable pursuant to Section 6 with respect to the Preferred Shares tendered prior to the date of withdrawal and (y) all reasonable expenses payable hereunder which have accrued through the date of such withdrawal. 6. Fees. The Company and the Trust have agreed to pay certain fees ---- of the Dealer Managers in connection with the Exchange Offer as set forth in a separate letter agreement dated [ ] among the Company, the Trust and the Dealer Managers (the "Engagement Letter"). 7. Expenses and Reimbursement of Expenses. The Company and the Trust, -------------------------------------- jointly and severally, agree to pay the reasonable costs and expenses incident to the performance of the obligations hereunder, including, without limitation, all costs and expenses (i) incurred by dealers and brokers (including yourself), commercial banks, trust companies and nominees for their customary mailing and handling expenses incurred in forwarding the Exchange Offer Materials to their customers, (ii) incident to the preparation, issuance, execution and delivery of the Trust Preferred Securities, (iii) incident to the preparation, printing and filing under the Securities Act of the Registration Statement, the Prospectus (including, without limitation, in each case all exhibits, amendments and supplements thereto), (iv) incurred in connection with the registration or qualification of the Trust Preferred Securities under the laws of such jurisdictions as the Dealer Managers may designate (including, without limitation, reasonable 5 fees of counsel for the Dealer Managers and its reasonable disbursements), (v) in connection with the printing (including word processing and duplication costs) and delivery of all Exchange Offer Materials (including, without limitation, any preliminary and supplemental blue sky memoranda) including, without limitation, mailing and shipping; (vi) all advertising expenses related to the Exchange Offer and the fees and expenses of the Exchange Agent and the Information Agent; (vii) the fees and disbursements of Munger, Tolles & Olson, counsel to the Company and Trust, Coopers & Lybrand, L.L.P., auditors to the Company and (viii) the fees and expenses of the trustee of the Trust (the "Trustee"). In addition, the Company and the Trust, jointly and severally, agree to reimburse the reasonable out-of- pocket expenses of the Dealer Managers in connection with the Exchange Offer (including, without limitation, the reasonable legal fees and expenses of counsel to the Dealer Managers in connection with the Exchange Offer). 8. Representations, Warranties and Certain Agreements of the Company ----------------------------------------------------------------- and the Trust. Each of the Company and the Trust jointly and severally ------------- represents and warrants to you, and agrees with you, that as of the Commencement Date and at all times on or prior to date when the Exchange Offer is consummated (the "Closing Date"): (a) the Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission; (b) (i) the Exchange Offer Materials, including the Registration Statement and Prospectus, comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the Exchange Act and the applicable rules and regulations of the Commission thereunder; (ii) the Registration Statement, when it became effective, did not contain and as amended or supplemented, if applicable, will not contain, any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) none of the Prospectus or other Exchange Offer Materials contains, and, as amended or supplemented, if applicable, will contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the representations and warranties set forth in this paragraph 8(b) do not apply (A) to statements or omissions in the Exchange Offer Materials, the Registration Statement or the Prospectus based upon information relating to the Dealer Managers furnished to the Company in writing by the Dealer Managers expressly for use therein or (B) to that part of the Registration 6 Statement that constitutes the Statements of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), of the Trustee under the Indenture (as defined below), as institutional trustee under the Declaration (as defined below), and as trustee under the Guarantee; (c) the Company has the corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Declaration, the Indenture and the Guarantee; and the Trust has the business trust power and authority to execute, deliver and perform its obligations under this Agreement; (d) this Agreement has been duly and validly authorized, executed and delivered by the Company and is a valid and binding obligation of the Company; (e) this Agreement has been duly and validly authorized, executed and delivered by the Trust and is a valid and binding obligation of the Trust; (f) the Exchange Offer does not conflict with any provision of existing indebtedness of the Company; (g) the Prospectus as amended or supplemented in relation to the Exchange Offer shall have been filed with the Commission pursuant to Rule 424(b), if required, within the applicable time period prescribed for such filing by the rules and regulations under the Act; (h) on or prior to the Commencement Date, the Exchange Agent Agreement shall be in full force and effect; (i) The Trust Preferred Securities to be issued pursuant to the Exchange Offer will be duly authorized by the Trust's Amended and Restated Declaration of Trust (the "Declaration") upon execution and delivery of the Declaration in the form filed with the Registration Statement, and, when issued and delivered in accordance with the terms of this Agreement in exchange for Preferred Shares pursuant to the Exchange Offer, will be validly issued and (subject to the terms of the Declaration) fully paid and nonassessable undivided beneficial interests in the assets of the Trust, not subject to any preemptive or similar rights, and will conform in all material respects to all statements relating thereto contained in the Prospectus. Holders of Trust Preferred Securities will be entitled, subject to the terms of the Declaration, to the same limitation of personal liability extended to stockholders of private corporations for profit. (j) The Declaration and the Guarantee have been duly authorized by the Company and, as of the Closing Date, will have been duly executed and delivered 7 by the Company. Assuming due authorization, execution and delivery of the Declaration by the Trustees, the Declaration will, as of the Closing Date, be a valid and binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). The Guarantee, as of the Closing Date, will be a valid and binding obligation of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws affecting enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (k) The Indenture between the Company and the Indenture Trustee (including the related supplemental indenture governing the Debentures to be deposited in the Trust, the "Indenture"), has been duly qualified under the Trust Indenture Act and by the Indenture Trustee and, assuming due authorization, execution and delivery of the Indenture by the Indenture Trustee, when executed and delivered by the Company, will constitute a valid and binding agreement of the Company, enforceable in accordance with its terms, except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws affecting enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (l) The Debentures to be deposited in the Trust as trust assets in connection with the Exchange Offer have been duly authorized, and, assuming due authorization, execution and delivery of the Indenture by the Indenture Trustee, when executed and delivered by the Company to the Indenture Trustee, and when executed and authenticated in accordance with the provisions of the Indenture and delivered to the Trust pursuant to the terms of the Exchange Offer, will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company enforceable in accordance with their terms, except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws affecting enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 8 (m) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or to be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (n) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act, is and will be treated as a "grantor trust" for Federal income tax purposes under existing law, has the business trust power and authority to conduct its business as presently conducted and as described in the Prospectus, and is not required to be authorized to do business in any other jurisdiction. (o) Union Oil Company of California has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of California, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or to be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (p) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (q) The execution and delivery by the Company and the Trust of, and the performance by the Company and the Trust of their obligations under, this Agreement, the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Declaration, the Indenture and the Guarantee, the issuance and delivery by the Trust of the Trust Preferred Securities and the consummation of the Exchange Offer and the fulfillment of the terms herein contemplated will not contravene, violate, conflict with, result in the breach of, or constitute a default under (i) any provision of applicable law or regulation; (ii) the certificate of incorporation or by-laws of the Company; (iii) the Declaration or any agreement or other instrument binding upon the Trust or the Company or any of its subsidiaries; or (iv) any judgment, determination, order or decree of any governmental body, agency or court having jurisdiction over the Trust or the Company or any of its subsidiaries other than, in the case of clauses 9 (i), (iii) and (iv), any such contravention, violation, conflict, breach, or default that individually or in the aggregate would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, and no consent, approval, authorization or order of, or the qualification with, any governmental body or agency is required for the performance by the Company and the Trust of their obligations under this Agreement, the issuance and delivery of the Trust Preferred Securities and the consummation of the Exchange Offer, except such as may be required by the Securities Act, the Exchange Act or the Trust Indenture Act and as may be required by the securities or Blue Sky laws of the various states or the securities laws of non-U.S. jurisdictions in connection with the Exchange Offer. (r) There has not occurred any material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (s) There are no legal or governmental proceedings pending or threatened to which the Trust or the Company or any of its subsidiaries is a party or to which any of the properties of the Trust or the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described, other than such proceedings that individually or in the aggregate would not have a material adverse effect on the Company and its subsidiaries taken as a whole, or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that are not described or filed as required. (t) The Company and the Trust are not, and after giving effect to the consummation of the Exchange Offer, will not be an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended. (u) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Trust Preferred Securities registered pursuant to the Registration Statement. 10 (v) Except as described in the Prospectus and except for (i) other noncompliance with Environmental laws (as defined below), (ii) failure to receive required permits, licenses or other approvals or (iii) failure to comply with the terms and conditions of permits, licenses or approvals, which, in the case of clauses (i) through (iii), are not likely, based on management's evaluation of known and anticipated claims, singly or in the aggregate, to have a material adverse effect on the Company and its subsidiaries, taken as a whole, the Company and its subsidiaries are (x) in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (y) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (z) are in compliance with all terms and conditions of any such permit, license or approval. (w) In the ordinary course of its business, the Company periodically reviews the effect of Environmental Laws on the business, operations and properties of the Company and its subsidiaries, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, capital or operating expenditures required for clean- up, costs of closure of properties or compliance with Environmental Laws or permits, licenses or approvals, costs of related constraints on operating activities). The Company also periodically reviews potential liabilities under Environmental Laws to third parties. On the basis of such reviews, the Company has reasonably concluded that such associated costs and liabilities are disclosed, in accordance with the requirements of the Exchange Act and the Securities Act, in all material respects. (x) Each of the Company and the Trust has complied with all provisions of Section 517.075 Florida Statutes (Chapter 92-198, Laws of Florida) relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba. 9. Conditions to Dealer Manager's Obligations. The obligations of the ------------------------------------------ Dealer Managers hereunder are subject, as of the Commencement Date and at all times on or prior to the Closing Date, to the accuracy of the representations and warranties on the part of the Company and the Trust herein, to the accuracy of the statements of officers of the Company and of the Trust made pursuant to the provisions hereof, to the performance by the Company and the Trust of their respective obligations hereunder and to the following additional conditions: (a) subsequent to the execution and delivery of this Agreement and prior to the Closing Date, 11 (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating or preliminary rating accorded the Trust Preferred Securities or of any other securities of or guaranteed by the Company or any of its subsidiaries by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, of the Trust or the Company and its subsidiaries taken as a whole, from that described in the Prospectus that, in the Dealer Managers' judgement, is material and adverse and that makes it, in the Dealer Managers' judgement, impracticable to market the Trust Preferred Securities on the terms and in the manner contemplated in the Registration Statement; (b) on the Commencement Date and the Closing Date, you shall have received a certificate, dated such date and signed by an authorized officer of the Company and an authorized officer of the Trust acceptable to you, to the effect set forth in clause (a) above, and to the effect that the representations and warranties of the Company and the Trust, as the case may be, contained in this Agreement shall be true and correct as of the Closing Date and that the Company and the Trust, as the case may be, shall have performed all of their respective obligations to be performed hereunder on or prior to the Closing Date. The officers signing and delivering such certificate on behalf of the Company and the Trust may rely upon the best of their knowledge as to proceedings threatened; (c) each of the Company and the Trust shall have furnished to you on each of the Commencement Date and the Closing Date, such additional certificates or other documents as are typically delivered in connection with a transaction of this type and which you may reasonably request; (d) on the Closing Date and, except as to clauses (iii), (iv) and (v), on the Commencement Date, the Dealer Managers shall have received a signed opinion of Munger, Tolles & Olson, counsel for the Company and the Trust, dated as of such date, to the effect that: 12 (i) this Agreement has been duly authorized, executed and delivered by the Company; (ii) the Exchange Agent Agreement has been duly authorized, executed and delivered by the Company; (iii) the Indenture has been duly qualified under the Trust Indenture Act, has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery of the Indenture by the Indenture Trustee, constitutes a valid and binding agreement of the Company enforceable in accordance with its terms except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (iv) the Debentures when executed and authenticated in accordance with the provisions of the Indenture, assuming due authorization, execution and delivery of the Indenture by the Indenture Trustee, and delivered pursuant to the terms of the Exchange Offer will be entitled to the benefits of the Indenture and will be valid and binding obligations of the Company enforceable in accordance with their terms except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (v) the Guarantee has been duly authorized, executed and delivered and is a valid and binding agreement of the Company, enforceable in accordance with its terms except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors' rights generally and 13 (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity); (vi) the statements made in the Prospectus under the captions, "Description of the Trust Convertible Preferred Securities," "Description of the $3.50 Convertible Preferred Stock," "Description of the Convertible Debentures," "Description of the Guarantee," and "Description of the Common Stock" insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and are accurate in all material respects; (vii) neither the Company nor the Trust is, or after giving effect to the consummation the Exchange Offer, will be, and neither the Company nor the Trust is directly or indirectly "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended; (viii) such counsel (1) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules and other financial and statistical data included or incorporated therein as to which such counsel need not express an opinion and except for that part of the Registration Statement that constitutes the Forms T-1) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (2) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Registration Statement and the Prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (3) has no reason to believe that (except for financial statements and schedules, and other financial and statistical data as to which such counsel need 14 not express any belief) the Prospectus at the date of such opinion contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely as to matters of fact on certificates of officers of the Company and of public officials, may rely upon the opinion delivered pursuant to paragraph (h) of this Section 9 as to the laws of the State of New York and may state that such counsel expresses no opinion as to the laws of any jurisdiction other than the State of California, the federal law of the United States and the Delaware General Corporation Law. With respect to paragraph (viii) above, such counsel may state that it has not independently verified the accuracy, completeness or fairness of the statements made or included or incorporated by reference therein and takes no responsibility therefor and that such opinion is based upon such counsel's examination of the Registration Statement, the Prospectus as amended or supplemented and any documents incorporated by reference thereto, its participation in the preparation of the Registration Statement and Prospectus and its participation in conferences with certain officers and employees of the Company and its subsidiaries and any others referred to in such opinion. (e) On the Commencement Date and the Closing Date (except with respect to paragraph (iv) which will be given on the Closing Date), the Dealer Managers shall have received a signed opinion of Morris, Nichols, Arsht & Tunnell, Delaware counsel for the Company and the Trust, dated as of such date, to the effect that: (i) the Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Act, is and has the business trust power and authority to conduct its business as described in the Prospectus; (ii) assuming due authorization, execution and delivery of the Declaration by the Company and the Trustees, the Declaration is a valid and binding agreement of the Company and the Trustees, enforceable in accordance with its terms except as the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other 15 similar laws relating to or affecting the enforcement of creditors' rights generally, (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity) and (iii) considerations of public policy or the effect of applicable law relating to fiduciary duties; (iii) assuming due authorization, execution and delivery of the Declaration by the Company and the Trustees, the execution and delivery of this Agreement by the Trust, and the performance by the Trust of its obligations hereunder, will have been duly authorized by all requisite business trust action on the part of the Trust; (iv) the Trust Preferred Securities and the Common Securities have been duly authorized by the Declaration and are duly and validly issued and, subject to the terms of the Declaration, fully paid and nonassessable beneficial interests in the assets of the Trust. The holders of Preferred Securities and the Common Securities will be, subject to the terms of the Declaration, entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; and (v) under the Declaration and the Delaware Act, the issuance of the Trust Preferred Securities and the Common Securities is not subject to preemptive rights. (f) On the Commencement Date and the Closing Date, the Dealer Managers shall have received a signed opinion of the General Counsel of the Company, dated as of such date, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Delaware, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or the ownership or leasing of its property requires such qualification, except to the extent that the failure to be so qualified or be in good 16 standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) Union Oil Company of California has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of California has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) this Agreement has been duly authorized, executed and delivered by the Company; (iv) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (v) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, the Declaration, the Indenture, the Debentures and the Guarantee, and the consummation of the Exchange Offer and the fulfillment of the terms herein contemplated (including the issuance of the Trust Preferred Securities and the Common Securities by the Trust) will not contravene any provision of applicable law or the certificate of incorporation or by-laws of the Company or any of its subsidiaries (including the Trust) or any material agreement or other instrument binding upon the Company or any of its subsidiaries (including the Trust) or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary (including the Trust), and no consent, approval or authorization or order of, or qualification with, any governmental body or agency is required for the performance by either the Trust or the Company of its obligations under this Agreement, the Declaration, the 17 Indenture, the Debentures and the Guarantee, and the consummation of the Exchange Offer, except such as may be required by the Securities Act, the Exchange Act or the Trust Indenture Act or the securities or Blue Sky laws of the various states or the securities laws of non-U.S. jurisdictions in connection with the Exchange Offer; (vi) after due inquiry, to the best of such counsel's knowledge, such counsel does not know of any legal or governmental proceeding pending or threatened to which the Company or any of its subsidiaries (including the Trust) is a party or to which any of the properties of the Company or any of its subsidiaries (including the Trust) is subject that is required to be described in the Registration Statement or the Prospectus and is not so described, other than such proceedings that individually or in the aggregate would not have a material adverse effect on the Company and its subsidiaries taken as a whole, or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; (vii) such counsel is of the opinion that the Company is (i) in compliance with any and all applicable Environmental Laws, (ii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except as otherwise described in or contemplated in the Prospectus and except for such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals which such counsel believes, based on his evaluation of known and anticipated claims, are not likely, singly or in the aggregate, to have a material adverse effect on the Company and its subsidiaries taken as a whole; and (viii) such counsel (1) is of the opinion that the Registration Statement and Prospectus (except for financial 18 statements and schedules and other financial and statistical data included or incorporated therein as to which such counsel need not express an opinion and except for that part of the Registration Statement that constitutes the Forms T-1) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (2) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (3) has no reason to believe that (except for financial statements and schedules, and other financial and statistical data as to which such counsel need not express any belief), the Prospectus at the date of such opinion contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, not misleading; (ix) the statements made in "Item 3-Legal Proceedings" of the Company's most recent annual report on Form 10-K, in "Item 1-Legal Proceedings" of any quarterly report on Form 10-Q and in "Item 5-Other Events" of any current report on Form 8-K included or incorporated by reference in the Prospectus, insofar as such statements constitute a summary of legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and are accurate in all material respects. In rendering such opinion, such counsel may rely as to certain matters of fact on certificates of officers of the Company and of public officials, may rely upon the opinion delivered pursuant to paragraph (h) of this Section 9 as to the laws of the State of New York and may state that such counsel expresses no opinion as to the laws of any jurisdiction other than the State of California, the federal law of the United States and the Delaware General Corporation Law. 19 With respect to paragraph (viii) above, counsel for the Company may state that such counsel's opinion and belief are based upon the participation of the office of such counsel in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and documents incorporated therein by reference and review and discussion of the contents thereof, but are without independent check or verification, except as specified. (g) The Dealer Managers shall have received the opinion of Miller & Chevalier Chartered, tax counsel for the Company and the Trust, dated as of the Commencement Date and the Closing Date to the effect that the Trust will be treated as a "grantor trust" for Federal income tax purposes under existing law and covering the Statements made in the Prospectus under "Certain Federal Income Tax Considerations." (h) The Dealer Managers shall have received the opinion of Davis Polk & Wardwell, counsel for the Dealer Managers, dated as of the Commencement Date and the Closing Date, covering the incorporation and legal existence of the Company, the issuance and delivery of the Trust Preferred Securities, this Agreement, the Registration Statement, the Prospectus and such other related matters as the Dealer Managers may require. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, and the Federal law of the United States and the corporate law of the State of Delaware, upon the opinions of counsel satisfactory to the Dealer Managers. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and certificates of public officials. (i) The Company and the Trust will also furnish to you from time to time (including on the Closing Date), up to the last acceptance of Preferred Shares pursuant to the Exchange Offer, any further opinion of counsel, satisfactory to your counsel, as you may reasonably request. (j) You shall have received, on the Commencement Date and the Closing Date, letters, dated the Commencement Date and the Closing Date, as the case may be, reasonably satisfactory to you of Coopers & Lybrand, L.L.P., containing statements and information of the type ordinarily included in accountants' "comfort letters" with respect to the consolidated financial statements of the Company and Trust and certain financial information contained in the Registration Statement and the Prospectus. 20 The Company and the Trust will furnish you with such executed or conformed copies of such opinions, certificates, letters and documents as you may reasonably request. 10. Covenants of the Company and the Trust. Each of the Company and -------------------------------------- the Trust covenants with the Dealer Managers: (a) To use its reasonable efforts to cause the Registration Statement, including any post-effective amendment thereto, to become effective promptly and will notify the Dealer Managers immediately and, if requested by the Dealer Managers, will confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall have become effective, or any supplement to the Prospectus or any amended Prospectus or any amended or additional Exchange Offer Materials shall have been filed, (ii) of the receipt of any comments from the Commission relating to the Exchange Offer, (iii) of any request by the Commission to amend the Registration Statement or amend or supplement the Prospectus or the other Exchange Offer Materials or for additional information relating to the Exchange Offer and (iv) of (A) the issuance by the Commission of any stop order suspending the use of any Exchange Offer Materials or any qualification of the Trust Preferred Securities for offering or sale in connection with the Exchange Offer in any jurisdiction, (B) the institution or threatening of any proceedings for any of such purposes or (C) the occurrence of any event which could cause the Company or the Trust to withdraw, rescind, terminate or modify the Exchange Offer or would permit the Company or the Trust to exercise any right not to accept Preferred Shares tendered pursuant to the Exchange Offer. Each of the Company and the Trust will use its reasonable efforts to prevent the issuance of any such stop order, the issuance of any order preventing or suspending such use and the suspension of any such qualification and, if any such order is issued or qualification suspended, to obtain the lifting of such order or suspension at the earliest practicable time; (b) To comply in all material respects with the Securities Act, the Exchange Act and the Trust Indenture Act in connection with the Exchange Offer Materials, the Exchange Offer and the transactions contemplated hereby and thereby, as applicable. If at any time when the Prospectus is required by the Securities Act or Exchange Act to be delivered in connection with the Exchange Offer, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Dealer Managers or counsel for the Company or the Trust, to amend the Registration Statement or amend or supplement the Prospectus or any other Exchange Offer Materials in order that the Prospectus or such other Exchange Offer Materials will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements in the Prospectus or such other Exchange Offer Materials, in 21 the light of the circumstances under which they were made, not misleading or if, in the opinion of either such counsel, it shall be necessary to amend the Registration Statement or amend or supplement the Prospectus or any other Exchange Offer Materials to comply with the requirements of the Securities Act or Exchange Act, the Company and the Trust will promptly prepare, file with the Commission, subject to Section 4(b) hereof, and furnish, at its own expense, to the Dealer Managers and to the dealers (whose names and address will be furnished to the Company and the Trust by the Dealer Managers) to which Preferred Shares may have been exchanged, such amendment or supplement as may be necessary to correct such untrue statement or omission or to make the Registration Statement or the Prospectus or such other Exchange Offer Materials comply with such requirements; (c) To endeavor, in cooperation with the Dealer Managers, to qualify the Trust Preferred Securities for offering and sale in connection with the Exchange Offer under the applicable securities or Blue Sky laws of such jurisdictions as the Dealer Mangers may reasonably request and to maintain such qualifications in effect for such time as may be required for the consummation of the Exchange Offer. In each jurisdiction in which the Trust Preferred Securities have been so qualified, the Trust will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement; (d) To make generally available to its security holders and to the Dealer Managers as soon as practicable an earnings statement covering a twelve-month period beginning not later than the first day of the Trust's fiscal quarter next following the effective date of the Registration Statement that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder; and (e) To use its best efforts to advise or cause the Exchange Agent to advise the Dealer Managers at 5:00 P.M., New York City time, or promptly thereafter, daily (or more frequently if requested), by telephone or facsimile transmission, with respect to Preferred Shares tendered as follows: (i) the aggregate number of Preferred Shares validly tendered and represented by certificates physically held by the Exchange Agent or confirmations of receipt of book-entry transfer of Preferred Shares pursuant to the procedures set forth in the Exchange Offer on such day; (ii) the aggregate number of Preferred Shares represented by Notices of Guaranteed Delivery on such day; (iii) any Preferred Shares properly withdrawn on such day; and (v) the cumulative totals of the number of Preferred Shares in categories (i) through (iii), inclusive, above. 22 11. Indemnification and Contribution; Settlement of Litigation; ----------------------------------------------------------- Release. Each of the Company and the Trust jointly and severally agrees to: ------- (a) Indemnify and hold harmless the Dealer Managers, the partners, the directors and officers of the Dealer Managers and each person, if any, who controls the Dealer Managers ("Indemnified Persons") within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (i) from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Dealer Managers or any such controlling person in connection with defending or investigating any such action or claim) (A) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any related preliminary prospectus, the Prospectus, the Schedule 13E-4 or any Exchange Offer Materials (as amended or supplemented if the Company or the Trust shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon and in conformity with information relating to the Dealer Managers furnished to the Company and the Trust in writing by the Dealer Managers expressly for use therein); or (B) which arises out of or is based upon a withdrawal, rescission or modification of or a failure to make or consummate the Exchange Offer; and (ii) against any other loss, claim, damage or liability which is related to, otherwise arises out of or is based upon or asserted against you in connection with your acting as a Dealer Manager in connection with the Exchange Offer, rendering financial advisory services to the Company or the Trust in connection with the Exchange Offer or which arises in connection with any other matter referred to in this Agreement, except to the extent any such losses, damages, liabilities or claims referred to in this clause (ii) result from the Dealer Managers' gross negligence or bad faith in performing the services that are the subject of this Agreement. The Company or the Trust also agree that neither you nor any of your affiliates, nor any of your partners, officers, directors, agents, employees or controlling persons (if any), as the case may be, of you or any such affiliates, shall have any liability to the Company or the Trust or any person asserting claims on behalf of or in right of the Company or the Trust for or in connection with any matter referred to in this Agreement except to the extent that any loss, damage, liability or claim incurred by the Company or the Trust results from the Dealer Managers' gross negligence or bad faith in performing the services that are the subject of this Agreement. (b) Indemnify and hold harmless the Dealer Managers, the directors and officers of the Dealer Managers and each person, if any, who controls the Dealer 23 Managers within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any other losses, claims, damages or liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Dealer Managers or any such controlling person in connection with defending or investigating any such action or claim) which otherwise arise in connection with the Exchange Offer, except to the extent any such loss, damage, claim or liability referred to in this Section 11(b) which is finally judicially determined to have resulted from the bad faith, gross negligence or wilful misconduct of any Indemnified Person. The Company and the Trust also agree that no person indemnified under this Section 11(b) shall have any liability (whether direct or indirect, in contract or tort or otherwise) to them for or in connection with the Exchange Offer except for any such liability for losses, claims, damages or liabilities incurred by the Company and the Trust that are finally judicially determined to have resulted from the bad faith, gross negligence or wilful misconduct of such indemnified person. (c) The Dealer Managers agree, severally and not jointly, to indemnify and hold harmless each of the Company and the Trust, their directors, trustees and officers who sign the Registration Statement or the Schedule 13E-4, and each person, if any, who controls the Company or the Trust within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Trust and the Company to the Dealer Managers contained in Section 11(a)(A) above, but only with reference to information relating to the Dealer Managers furnished to the Company or the Trust in writing by the Dealer Managers expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus, the Schedule 13E-4, any other Exchange Offer Material or any amendment or supplement thereto. (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to paragraphs (a), (b) or (c) of this Section 11, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (A) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (B) the named parties to any such proceeding (including any impleaded parties) include both the 24 indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Dealer Managers and such partners, directors, officers and control persons of the Dealer Managers, such firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In the case of any such separate firm for the Company or the Trust, and such directors, officers, trustees and control persons of the Company or the Trust, such firm shall be designated in writing by the Company. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (e) If the indemnification provided for above is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (A) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Trust, on one hand, and the Dealer Managers, on the other hand, from the Exchange Offer or (B) if the allocation provided by clause (A) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (A) above but also the relative fault of the Company and the Trust, on the one hand, and of the Dealer Managers, on the other hand, in connection with the statements or omissions or any other matter that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Trust, on the one hand, and the Dealer Managers, on the other hand, in connection with the Exchange Offer shall be deemed to be in the same respective proportions as the 25 maximum aggregate principal amount of the Trust Preferred Securities issuable pursuant to the Exchange Offer bears to the total Dealer Managers' fee under the Engagement Letter attributable to the Exchange Offer payable to the Dealer Managers pursuant to the Engagement Letter. The relative fault of the Company and the Trust, on the one hand, and the Dealer Managers, on the other hand, (A) in the case of any untrue statement of a material fact or omission or alleged omission to state a material fact, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Trust, on the one hand, or by the Dealer Managers, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission and (B) in the case of any other action or omission, shall be determined by reference to, among other things, whether such action or omission was taken or omitted to be taken by the Company or the Trust or their affiliates or by the Dealer Managers, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action or omission. (f) The Company, the Trust and the Dealer Manager agree that it would not be just and equitable if contribution pursuant to Section 11(e) above were determined by pro rata allocation or by any other method of allocation --- ---- that does not take account of the equitable considerations referred to in Section 11(e) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in Section 11(e) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Agreement, the Dealer Managers shall not be required to contribute any amount in excess of the fee paid to the Dealer Managers in connection with the Exchange Offer as provided in the Engagement Letter. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (g) The remedies provided for in this Agreement are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (h) The indemnity and contribution provisions contained in this Agreement and the representations and warranties of the Company and the Trust contained in this Agreement shall remain operative and in full force and effect regardless of (A) any termination of this Agreement, (B) any investigation made 26 by or on behalf of the Dealer Managers or its officers, directors, partners or any person controlling the Dealer Managers, or by or on behalf of the Company or the Trust, any of their respective officers, directors, trustees or any person controlling the Company or any Trust or (C) consummation of the Exchange Offer. (i) With respect to the Exchange Offer (and for no other purpose), this Section 11 shall supersede the indemnity agreement attached to the Engagement Letter and with respect to the Exchange Offer (and for no other purpose) such indemnity agreement shall be of no further effect. 12. Termination. (a) This Agreement shall terminate upon the earliest ----------- to occur of (i) thirty days after the Expiration Date, (ii) any of the conditions specified in Section 9 has not been fulfilled as of any date such condition is required to be fulfilled pursuant to Section 9 (and the Dealer Managers shall have notified the Company and the Trust thereof) or (iii) the date on which the Company and the Trust terminate or withdraw the Exchange Offer for any reason (the earliest to occur of clauses (i), (ii) and (iii) being referred to as the "Termination Date"). (b) Notwithstanding termination of this Agreement pursuant to subsection (a) above, the obligations of the parties pursuant to Sections 6, 7 and 11 shall survive any termination of this Agreement. 13. Severability. If any term or other provision of this Agreement is ------------ invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic and legal substance of the agreements contained herein is not affected in any manner adverse to any party. 14. Counterparts. This Agreement may be executed by the different ------------ parties hereto in one or more separate counterparts, each of which when executed shall be deemed an original, but all of which together shall constitute one and the same agreement. 15. Binding Effect. This Agreement shall be binding upon and inure -------------- solely to the benefit of each party hereto and the Indemnified Persons, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy. 16. Governing Law. This Agreement shall be governed by and construed ------------- in accordance with the laws of the State of New York. 27 17. Consent to Jurisdiction. (a) Each of the Company and the Trust ----------------------- (i) agrees that any legal suit, action or proceeding brought by the Dealer Managers arising out of or relating to this Agreement, the Indenture, the Trust Preferred Securities, the Exchange Offer Materials or the transactions contemplated hereby or thereby may be instituted in any federal or state court in New York City, (ii) irrevocably waives, to the fullest extent it may effectively do so, any objection (x) which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any federal or state court in New York City or (y) that any such suit, action or proceeding has been brought in an inconvenient forum, and (iii) irrevocably submits to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding. (b) Each of the Company and the Trust irrevocably designates and appoints [ ] as its authorized agent upon which process may be served in any legal suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby which may be instituted in any federal or state court in New York City, and agrees that service of process upon such agent, and written notice of said service to the Company or the Trust, as the case may be, by the person serving the same, shall be deemed in every respect effective service of process upon the Company or the Trust, as the case may be, in any such suit or proceeding. Each of the Company and the Trust further agrees to take any and all actions as may be necessary to maintain such designation and appointment of such agent in full force and effect. (c) Each of the Company and the Trust agree that a final judgment in any such legal suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. 18. Entire Agreement. This Agreement, together with the Engagement ---------------- Letter (including all attachments) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. 19. Amendment. This Agreement may not be amended except in a writing --------- signed by each party to be bound thereby. 20. Notices. All notices and other communications required or ------- permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person, by cable, fax, telegram or telex or by 28 registered or certified mail (postage prepaid, return receipt requested) to the parties hereto as follows (or, as to each party, at such other address as shall be designated by such party in a written notice complying as to delivery with the terms of this paragraph): (a) If to you: Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Fax No: (212) 761-0367 Attention: Equity Syndicate With a copy to: Legal Department Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Fax No.: (212) 450-4800 Attention: Bruce Dallas, Esq. and: Goldman, Sachs & Co. 333 South Grand Avenue Suite 1900 Los Angeles, California Fax No.: (213) 617-5763 Attention: [ ] 29 (b) If to the Company or the Trust, Unocal Corporation 2141 Rosecrans Avenue Suite 4000 El Segundo, California 90245 Fax No.: (310) 726-7875 Attention: General Counsel With a copy to: Munger, Tolles & Olson 355 South Grand Avenue 35th Floor Los Angeles, California 90071-1560 Fax No.: (213) 687-3702 Attention: R. Gregory Morgan, Esq. 21. Subheadings. The descriptive headings contained in this ----------- Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 30 Please indicate your willingness to act as Dealer Managers on the terms set forth herein and your acceptance of the foregoing provisions by signing in the space provided below for that purpose and returning to us a copy of this letter, whereupon this letter and your acceptance shall constitute a binding agreement among us. Very truly yours, UNOCAL CORPORATION By:________________________ Name: Title: UNOCAL CAPITAL TRUST By:________________________ Name: Title: Accepted and agreed as of the date first above written: MORGAN STANLEY & CO. INCORPORATED By: __________________________ Name: Title: GOLDMAN, SACHS & CO. _______________________________ Goldman, Sachs & Co. EX-3.1 3 CERTIFICATE OF TRUST OF UNOCAL CAPITAL TRUST EXHIBIT 3.1 CERTIFICATE OF TRUST OF UNOCAL CAPITAL TRUST This Certificate of Trust of Unocal Capital Trust (the "Trust"), dated July 17, 1996, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (S) --- - 3801 et seq.). -- --- 1. NAME. The name of the business trust being formed hereby is ---- Unocal Capital Trust. 2. DELAWARE TRUST. The name and business address of the trustee of -------------- the Trust with a principal place of business in the State of Delaware is the Bank of New York (Delaware), a Delaware banking corporation, White Clay Center, Route 273, Newark, Delaware 19711. 3. EFFECTIVE DATE. This Certificate of Trust shall be effective as -------------- of its filing. IN WITNESS WHEREOF, the undersigned, being all of the trustees of the Trust, have executed this Certificate of Trust as of the date first above written. /s/ Darrell D. Chessum --------------------------------------- Darrell D. Chessum, as Trustee /s/ Daniel A. Franchi --------------------------------------- Daniel A. Franchi, as Trustee /s/ Richard L. Walton --------------------------------------- Richard L. Walton, as Trustee THE BANK OF NEW YORK, as Trustee By: /s/ Helen M. Cotiaux ----------------------------------- Name: Helen M. Cotiaux -------------------------------- Title: Vice President ------------------------------- THE BANK OF NEW YORK (DELAWARE) as Trustee By: /s/ Joseph G. Ernst ----------------------------------- Name: Joseph G. Ernst --------------------------------- Title: Assistant Vice President ------------------------------- EX-4.2 4 BYLAWS OF THE COMPANY, AS AMENDED JUNE 3, 1996 EXHIBIT 4.2 BYLAWS OF UNOCAL CORPORATION ARTICLE I FISCAL YEAR Section 1. The fiscal year of Unocal Corporation (hereinafter called the "Corporation") shall end on the thirty-first day of December of each year. ARTICLE II OFFICES Section 1. PRINCIPAL OFFICE. The principal office for the transaction of business of the Corporation is hereby fixed and located at 2141 Rosecrans Avenue, Suite 4000, in the City of El Segundo, County of Los Angeles, State of California. The Board of Directors (hereinafter sometimes called the "Board") is hereby granted full power and authority to change said principal office from one location to another. ARTICLE III STOCKHOLDERS Section 1. ANNUAL MEETINGS. The annual meetings of the stockholders shall be held at 10:00 o'clock A.M. on the fourth Monday in May of each year if not a legal holiday, for the purpose of electing directors, consideration of reports of the affairs of the Corporation, and for the transaction of any other business which is within the powers of the stockholders and properly brought before the meeting. If the fourth Monday in May is a legal holiday, the annual meeting of the stockholders shall be held at 10:00 o'clock A.M. on the preceding or subsequent Monday as fixed by resolution of the Board. Section 2. NOTICE OF MEETINGS. Written notice of each annual or special meeting of stockholders shall be given to each stockholder entitled to vote thereat not less than ten nor more than sixty days before the meeting. Section 3. PLACE OF MEETINGS. All meetings of stockholders, whether annual or special, shall be held at the principal office of the Corporation or at such other place, within or without the State of Delaware, as the Board may from time to time designate pursuant to authority hereinafter granted it. In the absence of any such designation stockholders' meetings shall be held at the principal office of the Corporation. Section 4. VOTING RIGHTS. Stockholders entitled to vote at stockholder meetings shall be entitled to one vote for each full share. A fraction of a share or a fractional interest in a share shall not be entitled to any voting rights whatsoever. Section 5. CONDUCT OF MEETINGS. The decisions of the Chairman of the Board or officer presiding at all stockholders' meetings shall govern in all matters relating to the conduct of the meeting. Section 6. VOTING. Directors shall be divided into three classes with each director serving a three-year term. At each annual meeting, all directors of one class shall be elected in accordance with the provisions of ARTICLE SEVENTH of the Corporation's Certificate of Incorporation by the holders of shares entitled to vote in the election. A nomination shall be accepted, and votes cast for a proposed nominee shall be counted by the inspectors of election, only if the Secretary of the Corporation has received at least 30 days prior to the meeting a statement over the signature of the proposed nominee that such person consents to being a nominee and, if elected, intends to serve as a director. Such statement shall also contain the Unocal stock ownership of the proposed nominee, occupations and business history for the previous five years, other directorships, names of business entities in which the proposed nominee owns a 10 percent or more equity interest, listing of any criminal convictions, including federal or state securities violations, and all other information required by the federal proxy rules in effect at the time the proposed nominee submits said statement. Section 7. NOTICE OF STOCKHOLDER BUSINESS. At any meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before the meeting by a stockholder, the Secretary must have received written notice at least thirty (30) days prior to the meeting. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and the number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth herein. Section 8. QUORUM. The holders of one-third (1/3) of all of the outstanding shares of the stock of the Corporation entitled to vote at a meeting of stockholders, present in person or by proxy, 2 shall constitute a quorum for the transaction of any business at such meeting. ARTICLE IV BOARD OF DIRECTORS Section 1. POWERS. Subject to the limitations of the Certificate of Incorporation of the Corporation and of the Delaware General Corporation Law as to action which shall be authorized or approved by the stockholders, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by, the Board of Directors. Section 2. NUMBER. The exact number of directors of the Corporation, within the limits specified in ARTICLE SEVENTH of the Corporation's Certificate of Incorporation, shall be twelve until changed in the manner provided by law. Section 3. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The Board shall appoint a Chairman, who shall preside at all meetings of the Board of Directors and shall have such other powers and duties as may from time to time be assigned by the Board of Directors or prescribed by the Bylaws. The Board may also appoint a Vice Chairman, who shall preside at all meetings of the Board of Directors in the absence of the Chairman and shall have such other powers and duties as may from time to time be assigned by the Board of Directors or prescribed by the Bylaws. Section 4. ANNUAL MEETINGS. Immediately following each annual meeting of stockholders, the Board shall hold its annual meeting for the purpose of organization, election of officers and the transaction of any other business. Section 5. REGULAR MEETINGS. Regular meetings of the Board shall be held at the times and on the dates fixed by resolution of the Board. Section 6. SPECIAL MEETINGS. Special meetings of the Board for any purpose or purposes whatsoever may be called by the Chairman of the Board or the Chief Executive Officer or, in the absence or inability of either of them, by the President, the Chief Financial Officer, or by at least two of the directors at the time in office. Section 7. NOTICE OF MEETINGS. Notice of annual meetings and of regular meetings of the Board is hereby dispensed with. Notice of special meetings must be given at least two days in advance if given by mail, or at least twenty-four hours in advance if delivered personally or given by telephone or telegram. 3 Section 8. PLACE OF MEETINGS. All meetings of the Board, whether annual, regular or special meetings, shall be held at any place within or without the State of Delaware which has been designated from time to time by resolution of the Board or in the notice of the meeting. In the absence of such designation all directors' meetings shall be held at the principal office of the Corporation. Section 9. QUORUM. A majority of the exact number of directors specified in Section 2 of ARTICLE IV of the Bylaws shall constitute a quorum of the Board of Directors for the transaction of business; provided, however, that vacancies on the Board may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, each such director to hold office until a successor is elected at an annual or special meeting of the stockholders. Section 10. COMPENSATION OF DIRECTORS. Directors and members of committees appointed by the Board shall receive such compensation, if any, for their services, and such reimbursement for their expenses, as may be fixed or determined by resolution of the Board. The Board may, however, in any such resolution provide that directors who are also employees of the Corporation or any of its subsidiaries shall not receive additional compensation for services as a director or member of a committee appointed by the Board. Section 11. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation or of a partnership, joint venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, or agent or in any other capacity while serving as a director, officer, employee, or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability, and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or 4 suffered by such person in connection therewith; and, such indemnification shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of his or her heirs, executors, and administrators; provided, however, that, except as provided in paragraph (b) hereof, with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, to the extent authorized from time to time by its board of directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for expenses incurred in a proceeding in advance of its final disposition in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of providing such defense shall be on the Corporation. Neither the failure of the Corporation (including its board of directors, its independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is 5 proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its board of directors, its independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. (d) INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee, or agent of the Corporation or another corporation, partnership, joint venture, trust, or other enterprise against any such expense, liability, or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. Section 12. AUTHORITY TO DESIGNATE PLACE OF STOCKHOLDERS' MEETINGS. The Board is hereby granted full power and authority to designate from time to time any place within or without the State of Delaware for the holding of any stockholders' meeting. Section 13. COMMITTEES. The Board may, by resolution, appoint one or more committees, in addition to an Executive Committee and a Management Committee, to consist of two or more of the directors of the Corporation, and prescribe their duties and powers. A majority of the members of any such committee may determine its action and fix the time and place of its meetings unless the Board shall otherwise provide. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Section 14. ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken by the Board or any committee thereof may be taken without a meeting, if all members of the Board or such committee, as the case may be, shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Section 15. CONFERENCE CALLS. Members of the Board or any committee thereof may participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. 6 ARTICLE V EXECUTIVE COMMITTEE Section 1. NUMBER AND COMPOSITION. The Board of Directors shall appoint from its membership, annually, an Executive Committee of three or more directors. Included on the Executive Committee shall be the Chief Executive Officer of the Corporation. Each member of the Executive Committee shall hold membership at the pleasure of the Board, which shall have the exclusive power to fill vacancies thereon as they may occur. The Chairman of the Executive Committee shall be the Chief Executive Officer of the Corporation. Section 2. POWERS. The Executive Committee, during the intervals between meetings of the Board, shall have and there is hereby granted to it all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, except that the Executive Committee shall not be permitted to fill vacancies on the Board or on any committee, approve any action for which stockholder approval is also required by the Delaware General Corporation Law, amend or repeal any resolution of the Board which by its express terms is not so amendable or repealable, or appoint other committees of the Board or the members thereof and shall not have any powers restricted by Section 141(c) of the Delaware General Corporation Law unless the Board shall have specifically delegated authority to the Executive Committee to take action with respect to a matter listed in such Section as permitted to be so delegated. Section 3. PROCEDURE. Two members of the Executive Committee shall constitute a quorum of the Executive Committee for the transaction of business. The Executive Committee, by vote of a majority of its members, shall fix its own times and places of meetings and shall prescribe its own rules of procedure; no change in which shall be made save by a majority vote of its members. Section 4. RECORDS AND REPORTS. The Executive Committee shall keep regular minutes of all business transacted at its meetings, and all action of the Executive Committee shall be reported to the Board at its next ensuing meeting. Section 5. COMPENSATION. Members of the Executive Committee may receive such compensation, if any, for their services, and such reimbursement for their expenses, as may be fixed or determined by the Board. ARTICLE VI MANAGEMENT COMMITTEE Section 1. NUMBER AND COMPOSITION. The Board of Directors shall appoint from its membership, annually, a Management Committee composed of the directors who are salaried officers of the 7 Corporation. The Chairman of the Management Committee shall be the Chief Executive Officer of the Corporation. Section 2. POWERS. The Management Committee, during the intervals between meetings of the Board, shall have and there is hereby granted to it all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, subject to approval limits established by resolution of the Board of Directors as deemed appropriate from time to time, but the Management Committee shall not be permitted to fill vacancies on the Board or on any committee, appoint officers, approve any action for which stockholder approval is also required by the Delaware General Corporation Law, amend or repeal any resolution of the Board or of the Executive Committee, which by its express terms is not so amendable or repealable, or appoint other committees of the Board or the members thereof and shall not have any powers restricted by Section 141(c) of the Delaware General Corporation Law unless the Board shall have specifically delegated authority to the Management Committee to take action with respect to a matter listed in such Section as permitted to be so delegated. Section 3. PROCEDURE. Two members of the Management Committee shall constitute a quorum of the Management Committee for the transaction of business. The Management Committee, by vote of a majority of its members, shall fix its own times and places of meetings, and shall prescribe its own rules of procedure; no change in which shall be made save by a majority vote of its members. Section 4. RECORDS. The Management Committee shall keep regular minutes of all business transacted at its meetings. ARTICLE VII OFFICERS Section 1. OFFICERS. The officers of the Corporation shall be a Chief Executive Officer, a President, a Chief Financial Officer, a Vice President, a Secretary, a Comptroller, a Treasurer, and a Chief Legal Officer. The Corporation may also have, at the discretion of the Board, one or more additional Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and one or more Assistant Comptrollers, and the Board may appoint such other officers as it may deem necessary or advisable, who shall have such authority and perform such duties as from time to time may be prescribed by the Board, the Chairman of the Board, or the Chief Executive Officer. Any two or more offices may be held by the same person. Section 2. ELECTION AND REMOVAL. The officers of the Corporation shall be chosen annually by the Board at its annual meeting and each shall hold office until the corresponding annual meeting of the Board in the next year and until a successor shall be elected and qualified unless such officer shall theretofore 8 resign or shall be removed or otherwise disqualified to serve. The Board may remove any officer either with or without cause or under such other terms or conditions as it may prescribe. Vacancies may be filled by the Board as they may occur. Section 3. POWERS AND DUTIES. (a) CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be the officer, reporting directly to the Board, responsible for overall management of the Corporation and shall have general supervision, direction and control over the business and affairs of the Corporation and its officers. The Chief Executive Officer shall be a member of the Executive Committee and of the Management Committee and in general shall perform all duties incident to the office of Chief Executive Officer and shall have such powers and duties as may from time to time be assigned by the Board of Directors or prescribed by the Bylaws. (b) PRESIDENT. The President in general shall perform all duties incident to the office of President, and shall have such powers and duties as may from time to time be assigned by the Board of Directors, the Chief Executive Officer or prescribed by the Bylaws. (c) CHIEF FINANCIAL OFFICER AND VICE PRESIDENTS. The Chief Financial Officer and each Vice President shall have such authority and shall perform such duties as shall from time to time be assigned by the Board, the Chief Executive Officer or prescribed by the Bylaws. (d) SECRETARY. The Secretary shall keep, or cause to be kept, a book of minutes, at the principal office and/or such other place or places as the Board may order, of all meetings of directors and stockholders, with the time and place of holding, whether regular or special, and if special how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The Secretary shall keep or cause to be kept at the principal office, or at the office of the Corporation's transfer agent, a stock register, which may be an electronic database, showing the names of the stockholders of record and their addresses, the number and classes of shares held by each, the numbers and dates of the certificates issued for those shares, and the numbers and dates of cancellation of every certificate surrendered for cancellation. The Secretary shall give or cause to be given notice of all meetings of the stockholders and the Board required to be given by the Bylaws or by law. The Secretary shall have charge of and be custodian of the seal of the Corporation and the minute books and 9 documents relating to the existence and governance of the Corporation. The Secretary shall have such other powers and perform such other duties as may from time to time be prescribed by the Board, the Chairman of the Board, the Chief Executive Officer or the Bylaws, and shall in general, subject to control of the Board, the Chairman of the Board and the Chief Executive Officer, perform all the duties usually incident to the office of secretary of a corporation. (e) ASSISTANT SECRETARIES. Each Assistant Secretary shall assist the Secretary and, in the absence or disability of the Secretary, may perform the duties of the Secretary unless and until the contrary is expressed by the Board, and may perform such other duties as may be prescribed by the Board or the Secretary. (f) TREASURER. The Treasurer shall have custody of and be responsible for all the monies and funds of the Corporation. The Treasurer shall deposit or cause to be deposited all Corporation monies, funds and other valuables in the name and to the credit of the Corporation in such bank or banks as shall be judged proper or as shall be directed by the Board, the Chief Executive Officer, or the Chief Financial Officer, and shall disburse the funds of the Corporation which have been duly approved for disbursement. The Treasurer shall enter or cause to be entered regularly in the books of the Corporation full and accurate accounts of all monies received and paid out on account of the Corporation. The Treasurer shall have such other powers and perform such other duties as may from time to time be prescribed by the Board, the Chief Executive Officer, the Chief Financial Officer or the Bylaws, and shall in general, subject to control of the Board, the Chief Executive Officer, and the Chief Financial Officer, perform all the duties usually incident to the office of treasurer of a corporation. (g) ASSISTANT TREASURERS. Each Assistant Treasurer shall assist the Treasurer and, in the absence or disability of the Treasurer, may perform the duties of the Treasurer unless and until the contrary is expressed by the Board, and shall perform such other duties as may be prescribed by the Board or the Treasurer. (h) COMPTROLLER. The Comptroller shall be the principal officer in charge of the general accounting books, accounting records and forms of the Corporation and shall see that all monies and obligations due the Corporation and all properties and assets are properly accounted for. The Comptroller shall prepare the Corporation's balance sheets, income accounts and other financial statements and reports, and render to the Board, the Chief Executive Officer, and the Chief Financial Officer, such periodic 10 reports covering the results of operations of the Corporation as may be required by them or any of them. The Comptroller shall have such other powers and perform such other duties as may from time to time be prescribed by the Board, the Chief Executive Officer, the Chief Financial Officer or the Bylaws and shall in general, subject to control of the Board, the Chief Executive Officer, and the Chief Financial Officer, perform all the duties usually incident to the office of comptroller of a corporation. (i) ASSISTANT COMPTROLLERS. Each Assistant Comptroller shall assist the Comptroller and, in the absence or disability of the Comptroller, may perform the duties of the Comptroller unless and until the contrary is expressed by the Board, and shall perform such other duties as may be prescribed by the Board or the Comptroller. (j) CHIEF LEGAL OFFICER. The Chief Legal Officer shall be in charge of the Corporation's legal affairs. The Chief Legal Officer shall advise the Board, the Chairman of the Board and/or the officers of the Corporation on such legal matters and prepare such reports as may be required by them or any of them. ARTICLE VIII MISCELLANEOUS Section 1. EXECUTION OF DOCUMENTS. Unless otherwise authorized or prescribed by the Board of Directors, all contracts, leases, deeds, deeds of trust, mortgages, bonds, indentures, endorsements, assignments, powers of attorney, and other documents and instruments of whatsoever kind shall be executed for and on behalf of the Corporation by the Chief Executive Officer, the President, the Chief Financial Officer, a Vice President, the Treasurer, the Comptroller, or by any such officer and shall be attested by the Secretary or an Assistant Secretary, who shall have authority to affix the corporate seal to the same. The Board also may authorize, and delegate to any one or more of the Chief Executive Officer, the President and the Chief Financial Officer the power to so authorize, any other officer or officers, employee or employees, or agent or agents, to execute any contract, document or instrument of whatever kind for and on behalf of the Corporation and such authority may be general or be confined to specific instances. Section 2. UNDERTAKINGS AND COMMITMENTS. No undertaking, commitment, contract, instrument or document shall be binding upon the Corporation unless previously authorized or subsequently ratified by the Board or executed by an officer or officers, an employee or employees or an agent or agents of the Corporation acting under powers conferred by the Board or by these Bylaws. 11 Section 3. CHECKS, DRAFTS, ETC. All checks, notes and other obligations for collection, deposit or transfer, and all checks and drafts for disbursement from Corporation funds, and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be endorsed or signed by such officer or officers, employee or employees or agent or agents as shall be thereunto authorized from time to time by the Board of Directors, which may delegate the power to so authorize to any one or more of the Chief Executive Officer, the President and the Chief Financial Officer. Section 4. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Shares standing in the name of the Corporation may be voted or represented and all rights incident thereto may be exercised on behalf of the Corporation by the Chief Executive Officer, the President, the Chief Financial Officer, a Vice President, the Secretary, the Treasurer or the Comptroller, or by such other officers upon whom the Board of Directors may from time to time confer like powers. ARTICLE IX AMENDMENTS TO BYLAWS Section 1. POWER OF STOCKHOLDERS. New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote of seventy-five percent of the outstanding stock of the Corporation entitled to vote thereon. Section 2. POWER OF DIRECTORS. Subject to the right of stockholders as provided in Section 1 of this ARTICLE IX to adopt, amend or repeal Bylaws, Bylaws may be adopted, amended or repealed by the Board of Directors as provided or permitted by law; however, any Bylaw amendment adopted by the Board of Directors increasing or reducing the authorized number of directors or amending this section shall require a resolution adopted by the affirmative vote of not less than seventy-five percent of the directors. ARTICLE X EMERGENCY Section 1. "Emergency" as used in this Article means disorder, disturbance or damage caused by war, enemy attack, other warlike acts or by catastrophe, disaster or other similar emergency condition, which prevents the conduct and management of the affairs and business of the Corporation by the Board of Directors and officers in the manner provided for in other Articles of these Bylaws. The powers and duties conferred and imposed by this Article, and any resolutions adopted pursuant hereto, shall be effective only during an emergency. This Article may be implemented from time to time by resolutions adopted by the Board of Directors before or during an emergency, or during an emergency by the emergency Board of Directors constituted and then acting 12 pursuant hereto. An emergency, once commenced, shall be deemed to continue until terminated by resolutions adopted for that purpose by the Board of Directors. Section 2. If, during an emergency, a majority of the Board of Directors cannot be found or is unable to act, one-third of the exact number of the Board of Directors shall constitute a quorum thereof. Section 3. During any emergency, the officers and employees of the Corporation shall continue, so far as possible, to conduct the Corporation's affairs and business under the guidance of the Board of Directors acting pursuant to this Article and in accordance with known orders of governmental authorities. Section 4. If, during any emergency, a quorum of the Board of Directors, as provided in Section 3 of this Article, cannot be found or is unable to act, any three available members of the Executive Committee, including the Chief Executive Officer, shall be and constitute the Board of Directors, with two thereof constituting a quorum, and as such shall have and exercise the fullest power of the Board of Directors for the conduct and management of the affairs and business of the Corporation, permitted by law, without the limitations set forth in Section 2 of ARTICLE V of these Bylaws, provided that such emergency Board of Directors as so constituted shall comply to the extent practicable under the circumstances with the provisions of ARTICLE III of these Bylaws relating to annual and special meetings of stockholders. If three members of the Executive Committee, including the Chief Executive Officer, are not able to serve, any three available directors shall be and constitute such emergency Board of Directors, with two thereof constituting a quorum, for the exercise of the powers conferred and performance of the duties imposed by this Section 4. Section 5. If, during any emergency, neither a quorum of the Board of Directors, as provided in Section 3 of this Article, nor a quorum of the emergency Board of Directors, as provided for in Section 4 of this Article is available to serve, then the powers conferred and duties imposed by Section 4 shall vest in and devolve upon any three of (in the following order of priority) available directors, including any one or more of the Chief Executive Officer, the President and the Chief Financial Officer, and as many Vice Presidents (or, in case of their inability, any other officers), in order of seniority, as may be necessary from time to time to constitute a total of three emergency directors. The Chief Executive Officer and any other one emergency director shall constitute a quorum of such emergency Board of Directors for exercise of the powers conferred and performance of the duties imposed hereunder, but if the Chief Executive Officer is not available, any two of such emergency directors shall constitute a quorum. 13 EX-4.5 5 DECLARATION OF TRUST OF THE TRUST EXHIBIT 4.5 DECLARATION OF TRUST DECLARATION OF TRUST, dated as of July 17, 1996, between Unocal Corporation, a Delaware corporation, as Sponsor, The Bank of New York, a New York banking corporation, The Bank of New York (Delaware), a Delaware banking corporation, Darrell D. Chessum, Daniel A. Franchi, and Richard L. Walton as Trustees. The Sponsor and the Trustees hereby agree as follows: 1. The trust created hereby (the "Trust") shall be known as "Unocal Capital Trust", in which name the Trustees, or the Sponsor to the extent provided herein, may conduct the business of the Trust, make and execute contracts, and sue and be sued. 2. The Sponsor hereby assigns, transfers, conveys and sets over to the Trustees the sum of $10. The Trustees hereby acknowledge receipt of such amount in trust from the Sponsor, which amount shall constitute the initial trust estate. The Trustees hereby declare that they will hold the trust estate in trust for the Sponsor. It is the intention of the parties hereto that the Trust created hereby constitute a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (S) 3801 et seq. (the "Business Trust Act"), and ---- -- -- ---- that this document constitute the governing instrument of the Trust. The Trustees are hereby authorized and directed to execute and file a certificate of trust with the Delaware Secretary of State in the form attached hereto. 3. The Sponsor and the Trustees will enter into an amended and restated Declaration of Trust, satisfactory to each such party and substantially in the form to be included as Exhibit 4.2 to the Registration Statement referred to below, to provide for the contemplated operation of the Trust created hereby and the issuance of the Trust Convertible Preferred Securities and Trust Common Securities referred to therein. Prior to the execution and delivery of such amended and restated Declaration of Trust, the Trustees shall not have any duty or obligation hereunder or with respect to the trust estate, except as otherwise required by applicable law or as may be necessary to obtain prior to such execution and delivery any licenses, consents or approvals required by applicable law or otherwise. 4. The Sponsor and the Trustees hereby authorize and direct the Sponsor, in each case on behalf of the Trust as the sponsor of the Trust, (i) to prepare for filing with the Securities and Exchange Commission (the "Commission") (a) a Registration Statement on Form S-4 and any pre-effective or post-effective amendments to such Registration Statement (the "Registration Statement"), relating to the registration under the Securities Act of 1933, as amended, of the Trust Convertible Preferred Securities of the Trust, and (b) a Registration Statement on Form 8-A or other form issued or permitted by the Commission, including all pre-effective and post-effective amendments thereto (the "1934 Act Registration Statement"), relating to the registration of the Trust Convertible Preferred Securities under the Securities Exchange Act of 1934, as amended; (ii) to execute and file with the New York Stock Exchange, the American Stock Exchange or such other national securities exchange or the Nasdaq National Market as the Sponsor shall determine, a listing or other similar application and all other 1 applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Trust Convertible Preferred Securities to be listed or approved for quotation on the New York Stock Exchange, the American Stock Exchange or such other national securities exchange or the Nasdaq National Market; (iii) to execute and file such applications, reports, surety bonds, irrevocable consents, appointments of attorneys for service of process and other papers, documents and agreements as shall be necessary or desirable to register the Trust Convertible Preferred Securities under the securities or "Blue Sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable and (iv) to negotiate and execute a Dealer Manager Agreement among the Trust, the Sponsor, Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co., and the other parties thereto, relating to the Exchange Offer (as defined in the Registration Statement), substantially in the form to be included as Exhibit 1.1 to the Registration Statement. It is hereby acknowledged and agreed that in connection with any document referred to in clauses (i)-(iii) above, (A) any Regular Trustee (or his attorneys-in-fact and agents or the Sponsor as permitted herein) is authorized on behalf of the Trust to execute such document on behalf of the Trust, provided that the Registration Statement shall be signed by all of the Regular Trustees, and (B) The Bank of New York and The Bank of New York (Delaware), in their capacities as Trustees of the Trust shall not be required to join in any such filing or execute on behalf of the Trust any such document unless required by the rules and regulations of the Commission, the New York Stock Exchange (or other national securities exchange or the Nasdaq National Market) or state securities or "Blue Sky" laws, and in such case only to the extent so required. In connection with all of the foregoing, each Regular Trustee, solely in his capacity as Trustee of the Trust, hereby constitutes and appoints Neal E. Schmale, Charles S. McDowell, and Darrell E. Chessum, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for such Regular Trustee or in such Regular Trustee's name, place and stead, in any and all capacities, to sign the Registration Statement and any and all amendments (including post-effective amendments) thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, granting unto said attorneys-in-fact and agents, or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as such Regular Trustee might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall do or cause to be done by virtue hereof. 5. This Declaration of Trust may be executed in counterparts. 6. The number of Trustees initially shall be five (5) and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor which may increase or decrease the number of Trustees; provided that to the extent required by the Business Trust Act, one Trustee shall either be a natural person who is a resident of the State of Delaware or, if not a natural person, an entity which has its principal place of business in the State of Delaware. Subject to the foregoing, the Sponsor is entitled to appoint or remove without cause any Trustee at any time. The Trustees may resign upon thirty days prior notice to the Sponsor. 2 IN WITNESS WHEREOF, the parties hereto have caused this Declaration of Trust to be duly executed as of the day and year first above written. UNOCAL CORPORATION, as Sponsor By: /s/ Darrell D. Chessum ----------------------------------- Name: Darrell D. Chessum ------------------------------- Title: Treasurer ------------------------------ /s/ Darrell D. Chessum --------------------------------------- Darrell D. Chessum, as Trustee /s/ Daniel A. Franchi --------------------------------------- Daniel A. Franchi, as Trustee Richard L. Walton --------------------------------------- Richard L. Walton, as Trustee THE BANK OF NEW YORK, as Trustee By: /s/ Helen M. Cotiaux ----------------------------------- Name: Helen Cotiaux ------------------------------- Title: Vice President ------------------------------- THE BANK OF NEW YORK (DELAWARE) as Trustee By: /s/ Joseph G. Ernst ----------------------------------- Name: Joseph G. Ernst ------------------------------- Title: Assistant Vice President ------------------------------- EX-4.7 6 FORM OF PREFERRED SECURITIES GUARANTEE AGREEMENT EXHIBIT 4.7 FORM OF PREFERRED SECURITIES GUARANTEE AGREEMENT Unocal Capital Trust Dated as of July [ ], 1996 TABLE OF CONTENTS ------------
Page ---- ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation..................................... 2 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application................................... 4 SECTION 2.2 Lists of Holders................................................... 5 SECTION 2.3 Reports by the Preferred Guarantee Trustee......................... 5 SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee.................... 5 SECTION 2.5 Evidence of Compliance with Conditions Precedent................... 6 SECTION 2.6 Events of Default; Waiver.......................................... 6 SECTION 2.7 Event of Default; Notice........................................... 6 SECTION 2.8 Conflicting Interests.............................................. 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee............... 7 SECTION 3.2 Certain Rights of Preferred Guarantee Trustee...................... 9 SECTION 3.3 Not Responsible for Recitals or Issuance of Preferred Securities Guarantee............................................... 11 ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1 Preferred Guarantee Trustee: Eligibility........................... 11 SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee Trustee.................................................. 12 ARTICLE V PREFERRED SECURITIES GUARANTEE SECTION 5.1 Preferred Securities Guarantee..................................... 13 SECTION 5.2 Waiver of Notice and Demand........................................ 13 SECTION 5.3 Obligations Not Affected........................................... 13 SECTION 5.4 Rights of Holders.................................................. 14
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Page ---- SECTION 5.5 Guarantee of Payment............................................... 14 SECTION 5.6 Subrogation........................................................ 15 SECTION 5.7 Independent Obligations............................................ 15 ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions......................................... 15 SECTION 6.2 Subordination...................................................... 16 ARTICLE VII TERMINATION SECTION 7.1 Termination........................................................ 16 ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation........................................................ 16 SECTION 8.2 Indemnification.................................................... 17 ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns............................................. 17 SECTION 9.2 Amendments......................................................... 17 SECTION 9.3 Notices............................................................ 18 SECTION 9.4 Benefit............................................................ 19 SECTION 9.5 Governing Law...................................................... 19
ii PREFERRED SECURITIES GUARANTEE AGREEMENT This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee") dated as of July [ ], 1996, is executed and delivered by Unocal Corporation, a Delaware corporation (the "Guarantor"), and The Bank of New York, as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Unocal Capital Trust, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the "Declaration") dated as of ________, 1996, among the trustees of the Issuer named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing to the Guarantor on the date hereof up to [ ] preferred securities, having an aggregate liquidation amount of up to $[ ] designated the [ ]% Trust Convertible Preferred Securities (the "Preferred Securities"). WHEREAS, the Guarantor is offering, upon the terms and subject to the conditions set forth in the Prospectus dated ______, 1996 (the "Prospectus"), of the Guarantor and the Issuer, and the related Letter of Transmittal (which, together with the Prospectus, constitute the "Exchange Offer"), to exchange the Preferred Securities for up to all of the 10,250,000 outstanding shares of its $3.50 Convertible Preferred Stock, par value $.10 per share (the "$3.50 Convertible Preferred Stock"). WHEREAS, as incentive for the Holders to exchange their shares of $3.50 Convertible Preferred Stock for the Preferred Securities in the Exchange Offer, the Guarantor desires fully and unconditionally to agree, to the extent set forth in this Preferred Securities Guarantee, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. WHEREAS, as of the date hereof, the Guarantor is also executing and delivering a guarantee agreement (the "Common Securities Guarantee") with substantially identical terms to this Preferred Securities Guarantee for the benefit of the holders of the Common Securities, except that if an Event of Default (as defined in the Indenture), has occurred and is continuing, the rights of holders of the Common Securities to receive Guarantee Payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments under this Preferred Securities Guarantee. NOW, THEREFORE, in consideration of the exchange by each holder of $3.50 Convertible Preferred Stock in the Exchange Offer, the Guarantor executes and delivers this Preferred Securities Guarantee for the benefit of the Holders. ARTICLE I DEFINITIONS AND INTERPRETATION SECTION 1.1 Definitions and Interpretation ------------------------------ In this Preferred Securities Guarantee, unless the context otherwise requires: (a) Capitalized terms used in this Preferred Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) terms defined in the Declaration as of the date of execution of this Preferred Securities Guarantee have the same meaning when used in this Preferred Securities Guarantee unless otherwise defined in this Preferred Securities Guarantee; (c) a term defined anywhere in this Preferred Securities Guarantee has the same meaning throughout; (d) all references to "the Preferred Securities Guarantee" or "this Preferred Securities Guarantee" are to this Preferred Securities Guarantee as modified, supplemented or amended from time to time; (e) all references in this Preferred Securities Guarantee to Articles and Sections are to Articles and Sections of this Preferred Securities Guarantee, unless otherwise specified; (f) a term defined in the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") has the same meaning when used in this Preferred Securities Guarantee, unless otherwise defined in this Preferred Securities Guarantee or unless the context otherwise requires; and (g) a reference to the singular includes the plural and vice versa. "Authorized Officer" of a Person means any Person that is ------------------ authorized to bind such Person, provided, however, that the Authorized Officer -------- ------- signing a certificate furnished pursuant to Section 314(a)(4) of the Trust Indenture Act shall be the principal executive, financial or accounting officer of such Person. 2 "Corporate Trust Office" means the office of the Preferred ---------------------- Guarantee Trustee at which the corporate trust business of the Preferred Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 101 Barclay Street (21 West), New York, New York 10286. "Covered Person" means any Holder or beneficial owner of Preferred -------------- Securities. "Event of Default" means a default by the Guarantor on any of its ---------------- payment or other obligations under this Preferred Securities Guarantee. "Guarantee Payments" means the following payments or ------------------ distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by the Issuer: (i) any accumulated and unpaid Distributions that are required to be paid on such Preferred Securities to the extent the Issuer shall have funds available therefor, (ii) the redemption price (the "Redemption Price"), and all accumulated and unpaid Distributions to the date of redemption, to the extent the Issuer has funds available therefor, with respect to any Preferred Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of the Issuer (other than in connection with the conversion of all of the Trust Securities into the Guarantor's common stock or the distribution of Debentures to the Holders in exchange for Preferred Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer shall have funds available therefor and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). If an Event of Default (as defined in the Indenture) has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee are subordinated to the rights of Holders of Preferred Securities to receive Guarantee Payments. "Holder" shall mean any holder, as registered on the books and ------ records of the Issuer, of any Preferred Securities; provided, however, that, in -------- ------- determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or any Affiliate of the Guarantor. "Indemnified Person" means the Preferred Guarantee Trustee, any ------------------ Affiliate of the Preferred Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Preferred Guarantee Trustee. 3 "Indenture" means Standard Multiple-Series Indenture dated as of --------- _________, 1996, of the Guarantor, as supplemented by the First Supplemental Indenture dated as of ___________, 1996, between the Guarantor (the "Debenture Issuer") and The Bank of New York, as trustee, relating to the Debentures. "Majority in liquidation amount of the Preferred Securities" ---------------------------------------------------------- means, except as provided in the terms of the Preferred Securities, or except as provided by the Trust Indenture Act, a vote by Holder(s), voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation or other wise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Preferred Securities. "Preferred Guarantee Trustee" means The Bank of New York, until a --------------------------- Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Preferred Securities Guarantee and thereafter means each such Successor Preferred Guarantee Trustee. "Responsible Officer" means, with respect to the Preferred ------------------- Guarantee Trustee, any officer within the Corporate Trust Office of the Preferred Guarantee Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer within the Corporate Trust Office of the Preferred Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Successor Preferred Guarantee Trustee" means a successor ------------------------------------- Preferred Guarantee Trustee possessing the qualifications to act as Preferred Guarantee Trustee under Section 4.1. "Trust Securities" means, collectively, the Common Securities and ---------------- the Preferred Securities. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act; Application -------------------------------- (a) This Preferred Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Preferred Securities Guarantee and shall, to the extent applicable, be governed by such provisions; and 4 (b) if and to the extent that any provision of this Preferred Securities Guarantee limits, qualifies or conflicts with the duties imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. SECTION 2.2 Lists of Holders ---------------- (a) The Guarantor shall provide the Preferred Guarantee Trustee with a list, in such form as the Preferred Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") (i) within 1 Business Day after each record date for payment of Distributions as long as the Preferred Securities remain in book-entry only form, otherwise within 14 days after each record date for payment of Distributions, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 14 days before such List of Holders is given to the Preferred Guarantee Trustee, provided, that the -------- Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The Preferred Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Preferred Guarantee Trustee shall comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Preferred Guarantee Trustee ------------------------------------------ Within 60 days after May 15 of each year, the Preferred Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee ----------------------------------------------- The Guarantor shall provide to the Preferred Guarantee Trustee such documents, reports and information as are required by Section 314 (if any) and the compliance certificate required by Section 314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Preferred Guarantee Trustee is for informational purposes only and the Preferred Guarantee Trustee's receipt of such shall not constitute constructive notice of any information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Preferred Guarantee Trustee is entitled to rely exclusively on Officers' Certificates). 5 SECTION 2.5 Evidence of Compliance with Conditions Precedent ------------------------------------------------ The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Preferred Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver ------------------------- The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders of all of the Preferred Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Preferred Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. SECTION 2.7 Event of Default; Notice ------------------------ (a) The Preferred Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, the Preferred -------- Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Preferred Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Preferred Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Preferred Guarantee Trustee shall have received written notice thereof, or a Responsible Officer of the Preferred Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge thereof. SECTION 2.8 Conflicting Interests --------------------- The Declaration shall be deemed to be specifically described in this Preferred Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 6 ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee ---------------------------------------------------- (a) This Preferred Securities Guarantee shall be held by the Preferred Guarantee Trustee for the benefit of the Holders, and the Preferred Guarantee Trustee shall not transfer this Preferred Securities Guarantee to any Person except a Holder exercising his or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee Trustee upon acceptance by such Successor Preferred Guarantee Trustee of its appointment to act as Successor Preferred Guarantee Trustee. The right, title and interest of the Preferred Guarantee Trustee shall automatically vest in any Successor Preferred Guarantee Trustee, and such vesting and succession of title shall be effective whether or not conveyance documents have been executed and delivered pursuant to the appointment of such Successor Preferred Guarantee Trustee. (b) If an Event of Default actually known to a Responsible Officer of the Preferred Guarantee Trustee has occurred and is continuing, the Preferred Guarantee Trustee shall enforce this Preferred Securities Guarantee for the benefit of the Holders. (c) The Preferred Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such of the rights and powers vested in it by this Preferred Securities Guarantee, and shall use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. (d) No provision of this Preferred Securities Guarantee shall be construed to relieve the Preferred Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Preferred Guarantee Trustee shall be determined solely by the express provisions of this Preferred Securities 7 Guarantee, and the Preferred Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Preferred Securities Guarantee, and no implied covenants or obligations shall be read into this Preferred Securities Guarantee against the Preferred Guarantee Trustee; and (B) in the absence of bad faith on the part of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Preferred Guarantee Trustee and conforming to the requirements of this Preferred Securities Guarantee; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Preferred Securities Guarantee; (ii) the Preferred Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Preferred Guarantee Trustee, unless it shall be proved that the Preferred Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Preferred Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Guarantee Trustee, or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee; and (iv) no provision of this Preferred Securities Guarantee shall require the Preferred Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Preferred Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Preferred Securities Guarantee or indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against such risk or liability is not reasonably assured to it. 8 SECTION 3.2 Certain Rights of Preferred Guarantee Trustee --------------------------------------------- (a) Subject to the provisions of Section 3.1: (i) The Preferred Guarantee Trustee may conclusively rely, and shall 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 by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Preferred Securities Guarantee shall be sufficiently evidenced by an Officers' Certificate. (iii) Whenever, in the administration of this Preferred Securities Guarantee, the Preferred Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Preferred Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an Officers' Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. (iv) The Preferred Guarantee Trustee shall have no duty to see to any recording, filing or registration of any instrument (or any rerecording, refiling or re-registration thereof). (v) The Preferred Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its employees. The Preferred Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Preferred Securities Guarantee from any court of competent jurisdiction. (vi) The Preferred Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Preferred Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Preferred Guarantee Trustee such security and indemnity, reasonably satisfactory to the Preferred Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Preferred Guarantee Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such 9 request or direction, including such reasonable advances as may be requested by the Preferred Guarantee Trustee; provided that, nothing -------- contained in this Section 3.2(a)(vi) shall be taken to relieve the Preferred Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Preferred Securities Guarantee. (vii) The Preferred Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Preferred Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (viii) The Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (ix) Any action taken by the Preferred Guarantee Trustee or its agents hereunder shall bind the Holders and the signature of the Preferred Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Preferred Guarantee Trustee to so act or as to its compliance with any of the terms and provisions of this Preferred Securities Guarantee, both of which shall be conclusively evidenced by the Preferred Guarantee Trustee's or its agent's taking such action. (x) Whenever in the administration of this Preferred Securities Guarantee the Preferred Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Preferred Guarantee Trustee (i) may request instructions from the Holders of a Majority in liquidation amount of the Preferred Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in conclusively relying on or acting in accordance with such instructions. (xi) The Preferred Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Preferred Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 10 (xii) The Preferred Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Preferred Securities Guarantee. (b) No provision of this Preferred Securities Guarantee shall be deemed to impose any duty or obligation on the Preferred Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Preferred Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Guarantee Trustee shall be construed to be a duty. SECTION 3.3 Not Responsible for Recitals or Issuance of Preferred Securities ---------------------------------------------------------------- Guarantee --------- The recitals contained in this Preferred Securities Guarantee shall be taken as the statements of the Guarantor, and the Preferred Guarantee Trustee does not assume any responsibility for their correctness. The Preferred Guarantee Trustee makes no representation as to the validity or sufficiency of this Preferred Securities Guarantee. ARTICLE IV PREFERRED GUARANTEE TRUSTEE SECTION 4.1 Preferred Guarantee Trustee: Eligibility ---------------------------------------- (a) There shall at all times be a Preferred Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange Commission to act as an institutional trustee under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least 50 million U.S. dollars ($50,000,000), and subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for 11 the purposes of this Section 4.1(a)(ii), the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Preferred Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). (c) If the Preferred Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. SECTION 4.2 Appointment, Removal and Resignation of Preferred Guarantee ----------------------------------------------------------- Trustee ------- (a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Preferred Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor. (c) The Preferred Guarantee Trustee appointed to office shall hold office until a Successor Preferred Guarantee Trustee shall have been appointed or until its removal or resignation. The Preferred Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Preferred Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Preferred Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Preferred Guarantee Trustee and delivered to the Guarantor and the resigning Preferred Guarantee Trustee. (d) If no Successor Preferred Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of resignation or removal, the Preferred Guarantee Trustee resigning or being removed may petition any court of competent jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Preferred Guarantee Trustee. (e) No Preferred Guarantee Trustee shall be liable for the acts or omissions to act of any Successor Preferred Guarantee Trustee. 12 (f) Upon termination of this Preferred Securities Guarantee or removal or resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all amounts owed to the Preferred Guarantee Trustee by the Guarantor to the date of such termination, removal or resignation. ARTICLE V PREFERRED SECURITIES GUARANTEE SECTION 5.1 Preferred Securities Guarantee ------------------------------ The Guarantor fully and unconditionally agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set- off or counterclaim that the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. SECTION 5.2 Waiver of Notice and Demand --------------------------- The Guarantor hereby waives notice of acceptance of this Preferred Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 5.3 Obligations Not Affected ------------------------ The obligations, covenants, agreements and duties of the Guarantor under this Preferred Securities Guarantee shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities (other than an extension of time for payment of Distributions, Redemption Price, Liquidation 13 Distribution or other sum payable that results from the extension of any interest payment period on the Debentures); (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be full and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. SECTION 5.4 Rights of Holders ----------------- (a) The Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting of any proceeding for any remedy available to the Preferred Guarantee Trustee in respect of this Preferred Securities Guarantee or exercising any trust or power conferred upon the Preferred Guarantee Trustee under this Preferred Securities Guarantee. (b) If the Preferred Guarantee Trustee fails to enforce such Preferred Securities Guarantee, any Holder of Preferred Securities may institute a legal proceeding directly against the Guarantor to enforce the Preferred Guarantee Trustee's rights under this Preferred Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Preferred Guarantee Trustee or any other person or entity. The Guarantor waives any right or remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. 14 SECTION 5.5 Guarantee of Payment -------------------- This Preferred Securities Guarantee creates a guarantee of payment and not of collection. SECTION 5.6 Subrogation ----------- The Guarantor shall be subrogated to all (if any) rights of the Holders of Preferred Securities against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Preferred Securities Guarantee; provided, however, that the Guarantor shall not (except to the extent required - -------- ------- by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Preferred Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Preferred Securities Guarantee. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. SECTION 5.7 Independent Obligations ----------------------- The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Preferred Securities Guarantee notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION SECTION 6.1 Limitation of Transactions -------------------------- So long as any Preferred Securities remain outstanding, if there shall have occurred an Event of Default or an event of default under the Declaration, then (a) the Guarantor shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of capital stock in connection with any employee benefit plan or program, director benefit plan or program, dividend reinvestment, stock repurchase, or other similar plans available to stockholders of the Guarantor, or any option, warrant, right, or exercisable, exchangeable, or convertible security outstanding as of the expiration date of the Exchange Offier, (ii) as a result of a reclassification of the Guarantor's capital 15 stock or the exchange or conversion of one class or series of the Guarantor's capital stock for another class or series of the Guarantor's capital stock or the capital securities of a subsidiary (including a trust such as the Issuer), or (iii) the purchase of fractional interests in shares of the Guarantor's capital stock pursuant to the conversion or exchange provisions of such capital stock of the Guarantor or the security being converted or exchanged) or make any guarantee payments with respect to the foregoing, (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Guarantor which rank pari passu with or junior to the Debentures and (c) the ---- ----- Guarantor shall not make any guarantee payments with respect to the foregoing (other than pursuant to this Preferred Securities Guarantee). SECTION 6.2 Subordination ------------- This Preferred Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities of the Guarantor, (ii) pari passu with the most ---- ----- senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor's common stock. ARTICLE VII TERMINATION SECTION 7.1 Termination ----------- This Preferred Securities Guarantee shall terminate upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) the distribution of the Guarantor's common stock to all of the Holders in respect of the conversion of all the Preferred Securities into the Guarantor's common stock or upon the distribution of the Debentures held by the Issuer to the Holders of all of the Preferred Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this Preferred Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under the Preferred Securities or under this Preferred Securities Guarantee. ARTICLE VIII INDEMNIFICATION SECTION 8.1 Exculpation ----------- 16 (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage, liability, expense or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith in accordance with this Preferred Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Preferred Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's negligence or willful misconduct with respect to such acts or omissions. (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders might properly be paid. SECTION 8.2 Indemnification --------------- The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 8.2 shall survive the termination of this Preferred Securities Guarantee. When the Preferred Guarantee Trustee incurs expenses or renders services in connection with an Event of Default with respect to the Preferred Securities specified in Section 6.01(e) or 6.01(f) of the Standard Multiple- Series Indenture of the Guarantor, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for services are intended to constitute expenses of administration under any applicable federal or state bankruptcy. insolvency or other similar law. ARTICLE IX MISCELLANEOUS SECTION 9.1 Successors and Assigns ---------------------- 17 All guarantees and agreements contained in this Preferred Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. SECTION 9.2 Amendments ---------- Except with respect to any changes that do not adversely affect the rights of Holders (in which case no consent of Holders will be required), this Preferred Securities Guarantee may be amended only with the prior approval of the Holders of at least a Majority in liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accumulated and unpaid Distributions to the date upon which the voting percentages are determined) of the Preferred Securities. The provisions of Section 12.2 of the Declaration with respect to meetings of Holders apply to the giving of such approval. SECTION 9.3 Notices ------- All notices provided for in this Preferred Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall be delivered by hand, telecopied or mailed by first class mail, as follows: (a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee Trustee's mailing address set forth below (or such other address as the Preferred Guarantee Trustee may give notice of to the Holders of the Preferred Securities): The Bank of New York 101 Barclay Street (21 West) New York, New York 10286 Attn: Corporate Trust Trustee Administration (b) If given to the Guarantor, at the Guarantor's mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Preferred Securities): Unocal Corporation 2141 Rosecrans Avenue Suite 4000 El Segundo, California 90245 Attn: Corporate Secretary 18 (c) If given to any Holder of Preferred Securities, at the address set forth on the books and records of the Issuer. All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. 19 SECTION 9.4 Benefit ------- This Preferred Securities Guarantee is solely for the benefit of the Holders of the Preferred Securities and, subject to Section 3.1(a), is not separately transferable from the Preferred Securities. SECTION 9.5 Governing Law ------------- THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. 20 THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year first above written. UNOCAL CORPORATION, as Guarantor By:___________________________________ Name: Title: THE BANK OF NEW YORK, as Preferred Guarantee Trustee By:___________________________________ Name: Title: 21 EX-4.8 7 FORM OF COMMON STOCK CERTIFICATE EXHIBIT 4.8 FORM OF COMMON STOCK CERTIFICATE COMMON COMMON PAR VALUE OF $1.00 PAR VALUE OF $1.00 [PICTURE APPEARS HERE] INCORPORATED UNDER THIS CERTIFICATE IS TRANSFERABLE IN THE THE LAWS OF THE STATE OF DELAWARE CITY OF NEW YORK OR IN LOS ANGELES OR IN SAN FRANCISCO SEE REVERSE FOR CUSIP 915289 10 2 CERTAIN DEFINITIONS AND TERMS UNOCAL CORPORATION This Certifies that - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- is the record holder of FULLY PAID AND NON-ASSESSABLE COMMON SHARES OF Unocal Corporation transferable on the books of the Corporation in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate is not valid unless countersigned by a Transfer Agent and registered by a Registrar. Witness the seal of the Corporation and the signatures of its duly authorized officers. DATED COUNTERSIGNED AND REGISTERED: /s/ Dennis Codon CHEMICAL TRUST COMPANY OF CALIFORNIA Vice President TRANSFER AGENT AND REGISTRAR BY_____________________ /s/ B. Dewez AUTHORIZED SIGNATURE ASSISTANT CORPORATE SECRETARY UNOCAL CORPORATION A copy of the statement of rights, preferences, privileges and restrictions granted to or imposed upon the respective classes of shares of the Corporation and upon the holders thereof as established by its Articles of Incorporation will be furnished to the stockholders of the Corporation upon request and without charge at the principal office of the Corporation in Los Angeles, California. This certificate also represents Rights that entitle the holder hereof to certain rights as set forth in a Rights Agreement dated as of January 29, 1990 by and between the Corporation and Chemical Trust Company of California, as Rights Agent (the "Rights Agreement"), the terms and conditions of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Corporation. Under certain circumstances specified in the Rights Agreement, such Rights will be represented by separate certificates and will no longer be represented by this certificate. Under certain circumstances specified in the Rights Agreement, Rights beneficially owned by certain persons may become null and void. The Corporation will mail to the record holder of this certificate a copy of the Rights Agreement without charge promptly following receipt of a written request therefor. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM--as tenants in common UNIF GIFT MIN ACT-- Custodian TEN ENT--as tenants by the entireties ------------------------------------- JT TEN --as joint tenants with right of (Cust) (Minor) survivorship and not as tenants under Uniform Gifts to Minors in common Act ---------------------------- (State) UNIF TRF MIN ACT-- Custodian (until age ) ------------------------------------- (Cust) under Uniform Transfers --------------- (Minor) to Minors Act ------------------------ (State)
Additional abbreviations may also be used though not in the above list. For Value Received, hereby sell, assign and transfer unto ---------- PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE - -------------------------------------- + + + + - -------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- shares - -------------------------------------------------------------------------- of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint Attorney - ------------------------------------------------------------------------ to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises. Dated ---------------------- X ------------------------------------------------------- X ------------------------------------------------------- NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAMES(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. Signature(s) Guaranteed: - --------------------------------------------------------------- THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-4.9 8 RIGHTS AGREEMENT DATED JANUARY 29, 1990 EXHIBIT 4.9 RIGHTS AGREEMENT dated as of January 29, 1990 by and between UNOCAL CORPORATION and MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA as Rights Agent TABLE OF CONTENTS ----------------- Section Page - ------- ---- 1 Certain Definitions.................................... 1 2 Appointment of Rights Agent............................ 7 3 Issuance of Right Certificates......................... 7 4 Form of Right Certificates............................. 8 5 Countersignature and Registration...................... 9 6 Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates..................................... 10 7 Exercise of Rights..................................... 10 8 Cancellation and Destruction of Right Certificates..... 13 9 Reservation and Availability of Capital Stock.......... 13 10 Securities Record Date................................. 14 11 Adjustment of Exercise Price, Number of Shares Issuable Upon Exercise of Rights or Number of Rights... 14 12 Certificate of Adjusted Exercise Price or Number of Shares Issuable Upon Exercise of Rights................ 22 13 Consolidation, Merger, or Sale or Transfer of Assets or Earning Power....................................... 23 14 Fractional Rights and Fractional Shares................ 25 15 Rights of Action....................................... 26 16 Agreement of Right Holders............................. 26 17 Right Holder and Right Certificate Holder Not Deemed a Stockholder................................... 27 18 Concerning the Rights Agent............................ 27 (i) TABLE OF CONTENTS ----------------- (continued) Section Page - ------- ---- 19 Merger of Consolidation or Change of Name of Rights Agent...................... 28 20 Duties of Rights Agent....................... 29 21 Change of Rights Agent....................... 31 22 Issuance of New Right Certificates........... 32 23 Redemption of Rights......................... 32 24 Exchange..................................... 33 25 Notice of Certain Events..................... 34 26 Notices...................................... 35 27 Supplements and Amendments................... 36 28 Certain Covenants............................ 36 29 Successors................................... 37 30 Benefits of this Agreement................... 37 31 Severability................................. 37 32 Governing Law................................ 37 33 Determination and Actions Taken By the Board of Directors....................... 37 34 Counterparts................................. 38 35 Descriptive Headings......................... 38 (ii) TABLE OF EXHIBITS ----------------- Exhibit A -- Form of Certificate of Designations Exhibit B -- Form of Right Certificate Exhibit C -- Form of Summary of the Rights (iii) TABLE OF DEFINED TERMS ---------------------- Term Defined Page Section - ------------ ---- ------- Adjustment Shares 16 11(a)(ii) Affiliate 1 1(a) Agreement 1 Introduction Associate 1 1(a) Beneficially Own 1 1(b) Beneficial Owner 1 1(b) Business Day 3 1(c) Close of Business 3 1(d) Closing Price 3 1(e) Common Share 4 1(f) Common Share Equivalent 18 11(c) Company (Unocal Corporation) 1 Introduction Company (following a Section 13(a) Event) 23 13(a)(iii) Current Market Price 4 1(g) Distribution Date 7 3(a) Exchange Act 4 1(i) Exchange Ratio 33 24 Exercise Price 11 7(c) Expiration Date 4 1(k) NASDAQ 3 1(e) Person 4 1(l) Preferred Share 5 1(m) (iv) TABLE OF DEFINED TERMS ---------------------- (continued) Term Defined Page Section - ------------ ---- ------- Preferred Share Equivalent 17 11(b) Record Date 1 Recital Redemption Date 5 1(o) Redemption Price 32 23(a) Right 1 Recital Rights Agent 1 Introduction Section 13(a) Event 23 13(a) Securities Act 5 1(r) Subsidiary 5 1(s) Surviving Person 23 13(a) Trading Day 5 1(t) Triggering Event 5 1(u) Unavailable Adjustment Shares 16 11(a)(iii) Voting Share 5 1(v) 15% Ownership Date 6 1(w) 15% Stockholder 6 1(x) (v) RIGHTS AGREEMENT This Rights Agreement ("Agreement") is made and entered into as of the 29th day of January, 1990 by and between Unocal Corporation, a Delaware corporation (the "Company"), and Manufacturers Hanover Trust Company of California (the "Rights Agent"). WHEREAS, the Board of Directors of the Company has authorized and declared a dividend of one preferred stock purchase right (a "Right") for each Common Share (as hereinafter defined) of the Company, which dividend is payable on February 12, 1990 (the "Record Date") to the holders of record of Common Shares as of the Close of Business (as hereinafter defined) on such date; WHEREAS, the Board of Directors of the Company has further authorized and directed the issuance of one Right for each Common Share that shall be issued by the Company at any time after the Record Date and prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date (as such terms are hereinafter defined); and WHEREAS, in connection with the matters referred to herein, the Company desires to appoint the Rights Agent to act on behalf of the Company, and the Rights Agent is willing so to act; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements set forth herein, and for the benefit of the holders of Rights, the parties hereto hereby agree as follows: Section 1. Certain Definitions. For purposes of this Agreement, the ------------------- following terms have the meanings indicated: (a) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act, as in effect on the date hereof. (b) A Person shall be deemed the "Beneficial Owner" of and shall be deemed to "Beneficially Own": (i) any securities that such Person or any of such Person's Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Rule 13d-3 promulgated under the Exchange Act, in each case as in effect on the date hereof; (ii) any securities that such Person or any of such Person's Affiliates or Associates has the right to acquire (whether such right is exercisable immediately, or only after the passage of time, compliance with regulatory requirements, the fulfillment of a condition, or otherwise) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise, provided that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own, securities tendered pursuant to a tender offer or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange; (iii) any securities that such Person or any such Person's Affiliates or Associates has the right to vote, alone or in concert with others, pursuant to any agreement, arrangement or understanding, provided that a Person shall not be deemed the Beneficial Owner of, or to Beneficially Own, any security if the agreement, arrangement or understanding to vote such security (A) arises solely from a revocable proxy given to such Person or any of such Person's Affiliates or Associates in response to a public proxy solicitation made pursuant to and in accordance with the applicable rules and regulations of the Exchange Act, and (B) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report); (iv) any securities that are Beneficially Owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (other than voting pursuant to a revocable proxy as described in the proviso to Section 1(b)(iii) hereof) or disposing of any securities of the Company; and (v) on any day on or after the Distribution Date, all Rights that prior to such date were represented by certificates for Common Shares that such Person Beneficially Owns on such day. Notwithstanding anything to the contrary in this Section 1(b): (i) a Person engaged in business as an underwriter of securities shall not be deemed to be the Beneficial Owner of, or to Beneficially Own, any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition; and (ii) no Person shall be deemed to be the Beneficial Owner of, or to Beneficially Own, any security 2 Beneficially Owned by another Person solely by reason of any agreement, arrangement or understanding with such other Person for: (A) soliciting the Company's stockholders for the election of director nominees or any other stockholder resolution, the formation of and membership on any committee for the purpose of promoting or opposing any stockholder resolution or for electing a slate of nominees to the Company's board of directors, service on such a slate of nominees, or agreement to a slate of director nominees, provided that such other Person retains the right at any time to withdraw as a nominee or member of any such committee, and to withhold or revoke any vote or proxy for or against any such stockholder resolution or for such slate of nominees; (B) entry into revocable voting agreements or the granting or solicitation of revocable proxies with respect to the foregoing; or (C) the sharing of expenses and the indemnification against expenses and liabilities by any such other Person with respect to expenses incurred or conduct occurring during the time such other Person is a nominee or a member of any such committee. (c) "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the States of New York or California are authorized or obligated by law or executive order to close. (d) "Close of Business" on any given date shall mean 5:00 o'clock p.m., Los Angeles time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 o'clock p.m., Los Angeles time, on the next succeeding Business Day. (e) "Closing Price" of a stock or other security on any day shall be the last sale price, regular way, per share of such stock or unit of such other security on such day or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if such stock or other security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such stock or other security is listed or admitted to trading or, if such stock or other security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then in use or, if on any such date such stock or other security is not 3 quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker that makes a market in such stock or other security and that is selected by the Board of Directors of the Company. (f) "Common Share" shall mean one share of the Common Stock, par value $1.00 per share, of the Company, unless used with reference to a Person other than the Company, in which case it shall mean one share of the class of common stock or such Person having the greatest voting power per share or, if such Person is a Subsidiary of another Person, one Common Share of the Person that ultimately controls such Person. (g) "Current Market Price" per share of a stock or unit of any other security on any date shall mean the average of the daily Closing Prices of such stock or other security for the 30 consecutive Trading Days through and including the Trading Day immediately preceding the date in question; provided, however, that if any event shall have caused the Closing Price on any Trading Day during such 30-day period not to be fully comparable with the Closing Price on the date in question (or, if no Closing Price is available on the date in question, on the Trading Day immediately preceding the date in question), then each such noncomparable Closing Price so used shall be appropriately adjusted by the Board of Directors in order to make the Closing Price on each Trading Day during the period used for the determination of the Current Market Price fully comparable with the Closing Price on such date in question (or, if applicable, the immediately preceding Trading Day); and provided further, however, that if such stock or other security is not publicly held or so listed or traded, "Current Market Price" per share of such stock or unit of such other security shall mean the fair value per share of such stock or unit of such other security as determined in good faith by the Board of Directors of the Company based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine appropriate, which determination shall be described in a statement filed by the Company with the Rights Agent. (h) "Distribution Date" shall have the meaning ascribed to it in Section 3 hereof. (i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (j) "Exercise Price" shall have the meaning ascribed to it in Section 7(c) hereof. (k) "Expiration Date" shall mean January 29, 2000. 4 (l) "Person" shall mean any individual, firm, partnership, corporation, association, group (as such term is used in Rule 13d-5 promulgated under the Exchange Act as in effect or the date hereof) or other entity, any two or more of the foregoing acting in concert or pursuant to an agreement, arrangement or understanding for the purpose of acquiring, holding voting or disposing of capital stock of the Company, and shall include any successor (by merger or otherwise) of any such entity. (m) "Preferred Share" shall mean one share of the Series A Junior Participating Cumulative Preferred Stock, par value $0.10 per share, of the Company, which shall have the rights and preferences set forth in the form of Certificate of Designations attached hereto as Exhibit A. (n) "Record Date" shall have the meaning ascribed to it in the recitals hereto. (o) "Redemption Date" shall mean the date of the action of a majority of the Board of Directors directing the Company to redeem the Rights pursuant to Section 23(a) hereof. (p) "Redemption Price" shall have the meaning ascribed to it in Section 23(a) hereof. (q) "Section 13(a) Event" shall have the meaning ascribed to it in Section 13(a) hereof. (r) "Securities Act" shall mean the Securities Act of 1933, as amended. (s) "Subsidiary" of any Person shall mean any corporation or other Person of which equity securities or equity interests representing a majority of the voting power are owned, directly or indirectly, or which is effectively controlled, by such Person. (t) "Trading Day" shall mean, as to any stock or other security, a day on which the principal national securities exchange on which such stock or other security is listed or admitted to trading is open for the transaction of business or, if such stock or other security is not listed or admitted to trading on any national securities exchange, a Business Day. (u) "Triggering Event" shall mean the first to occur of (i) midnight at the end of the tenth Business Day following a 15% Ownership Date, or (ii) the date of a Section 13(a) Event. 5 (v) "Voting Share" shall mean (i) a common share of a Person and (ii) any other share of capital stock of a Person entitled to vote generally in the election of Directors or entitled to vote together with the common shares in respect of any merger, consolidation, sale of all or substantially all of a Person's assets, liquidation, dissolution or winding up. References in this Agreement to a percentage or portion of the outstanding Voting Shares shall be deemed a reference to the percentage or portion of the total votes entitled to be cast by the holders of the outstanding Voting Shares. (w) "15% Ownership Date" shall mean the first date of public announcement (which, for purposes of this definition, shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or a 15% Stockholder containing the facts by virture of which a Person has become a 15% Stockholder. (x) "15% Stockholder" shall mean any Person that, together with all Affiliates and Associates of such Person, hereafter acquires Beneficial Ownership of Voting Shares of the Company and thereupon or thereafter Beneficially Owns 15% or more of the Voting Shares of the Company then outstanding; provided, however, that the term "15% Stockholder" shall not include: (i) the Company, any wholly-owned Subsidiary of the Company, any employee benefit plan of the Company or any Person holding Voting Shares for or pursuant to the terms of any such employee benefit plan; or (ii) any Person if such Person would not otherwise be a 15% Stockholder but for a reduction in the number of outstanding Voting Shares resulting from a stock repurchase program or other similar plan of the Company or from a self tender offer of the Company, which plan or tender offer commenced on or after the date hereof, provided, however, that the term "15% Stockholder" shall include such Person from and after the first date upon which (A) such Person, since the date of the commencement of such plan or tender offer, shall have acquired Beneficial Ownership of, in the aggregate, a number of Voting Shares of the Company equal to 1% or more of the Voting Shares of the Company then outstanding and (B)such Person, together with all Affiliates and Associates of such Person, shall Beneficially Own 15% or more of the Voting Shares of the Company then outstanding. In calculating the percentage of the outstanding Voting Shares that are Beneficially Owned by a Person for purposes of this subsection (y), Voting Shares that are Beneficially Owned by such Person shall be deemed outstanding, and Voting Shares that are not Beneficially Owned by such Person and that are subject to issuance upon the exercise or conversion of outstanding conversion rights, exchange rights, rights (other than Rights), warrants or options shall not be deemed outstanding. Any determination 6 made by the Directors as to whether any Person is or is not a 15% Stockholder shall be conclusive and binding upon all holders of Rights. Section 2. Appointment of Rights Agent. The Company hereby appoints the --------------------------- Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem necessary or desirable. Section 3. Issuance of Right Certificates. ------------------------------ (a) "Distribution Date" shall mean the date, after the date hereof, that is midnight at the end of the tenth Business Day following the first to occur of (i) the date of the commencement of, or the first public announcement of the intent of any Person (other than the Company, any wholly-owned Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person holding Common Shares for or pursuant to the terms of any such employee benefit plan) to commence, a tender offer or exchange offer, the consummation of which would cause any Person to become a 15% Stockholder, or (ii) the first 15% Ownership Date. (b) Until the Distribution Date (i) the Rights shall be represented by certificates for Common Shares (all of which certificates for Common Shares shall be deemed to be Right Certificates) and not by separate Right Certificates, (ii) the record holder of the Common Shares represented by each of such Certificates shall be the record holder of the Rights represented thereby and (iii) the Rights shall be transferable only in connection with the transfer of Common Shares. Until the earliest of the Distribution Date, the Redemption Date or the Expiration Date, the surrender for transfer of such certificates for Common Shares shall also constitute the surrender for transfer of the Rights represented thereby. (c) As soon as practicable after the Distribution Date, and after notification by the Company, the Rights Agent shall send by first-class, postage-prepaid mail to each record holder of Common Shares, as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company, a Right Certificate substantially in the form of Exhibit B hereto representing one Right for each Common Share so held. Notwithstanding the foregoing, the Rights Agent shall not send any Right Certificate to any Person known to the Rights Agent or Company to be a 15% Stockholder or any of its Affiliates or Associates or to any Person if the Rights held by such Person are Beneficially Owned by a 15% Stockholder or any of its Affiliates or Associates. From 7 and after the Distribution Date, the Rights shall be represented solely by such Right Certificates and may only be transferred by the transfer of such Right Certificates, and the holders of such Right Certificates, as listed in the records of the Company or any transfer agent or registrar for such Rights, shall be the record holders of such Rights. Any determination made by a majority of the Board of Directors as to whether any Common Shares are or were Beneficially Owned at any time by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder shall be conclusive and binding upon all holders of Rights. (d) As soon as practicable after the Record Date, the Company shall send a copy of a Summary of the Rights in substantially the form attached hereto as Exhibit C by first-class, postage-prepaid mail to each record holder of Common Shares as of the Close of Business on the Record Date at the address of such holder shown on the records of the Company. (e) Certificates for Common Shares issued at any time after the Record Date and prior to the earliest of the Distribution Date, the Redemption Date or the Expiration Date, shall have impressed on, printed on, written on or otherwise affixed to them the following legend: This certificate also represents Rights that entitle the holder hereof to certain rights as set forth in a Rights Agreement dated as of January 29, 1990 by and between the Corporation and Manufacturers Hanover Trust Company of California, as Rights Agent (the "Rights Agreement"), the terms and conditions of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of the Corporation. Under certain circumstances specified in the Rights Agreement, such Rights will be represented by separate certificates and will no longer be represented by this Certificate. Under certain circumstances specified in the Rights Agreement, Rights beneficially owned by certain persons may become null and void. The Corporation will mail to the record holder of this certificate a copy of the Rights Agreement without charge promptly following receipt of a written request therefor. Section 4. Form of Right Certificates. The Right Certificates and the form of assignment, including certificate, and the form of election to purchase, including certificate, printed on the reverse thereof, when, as and if issued, shall be substantially the same as Exhibit B hereto, and may have 8 such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange upon which the Rights or the securities of the Company issuable upon exercise of the Rights may from time to time be listed, or to conform to usage. Subject to Section 22 hereof, Right Certificates, whenever issued, that are issued in respect of Common Shares that were issued and outstanding as of the Close of Business on the Distribution Date, shall be dated as of the Distribution Date. Section 5. Countersignature and Registration. --------------------------------- (a) The Right Certificates shall be executed on behalf of the Company by any one of its Chairman of the Board, its Vice Chairman of the Board, its President, any Vice President, its Chief Operating Officer, or its Chief Financial Officer either manually or by facsimile signature, and may have affixed thereto the Company's seal or a facsimile thereof attested by its Secretary or any Assistant Secretary, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates may nevertheless be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Right Certificates had not ceased to be such officer of the Company. Any Right Certificate may be signed on behalf of the Company by any person who at the actual date of such execution shall be a proper officer of the Company to sign such Right Certificate, even though such person was not such an officer at the date of the execution of this Agreement. (b) Following the Distribution Date, the Rights Agent shall keep or cause to be kept at its principal offices books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of Right Certificates, the number of Rights represented on its face by each Right Certificate and the date of each Right Certificate. 9 Section 6. Transfer, Split Up, Combination and Exchange of Right ----------------------------------------------------- Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. - --------------------------------------------------------------------- (a) Subject to the provisions of Sections 6(c), 7(d) and 14 hereof, at any time after the Close of Business on the Distribution Date, and so long as the Rights represented thereby remain outstanding, any one or more Right Certificates may be transferred, split up, combined or exchanged for one or more Right Certificates representing the same aggregate number of Rights as the Right Certificates surrendered. Any registered holder desiring to transfer, split up, combine or exchange one or more Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificates to be transferred, split up, combined or exchanged at the office of the Rights Agent with the form of assignment, including certificate, on the reverse side thereof completed and duly executed, with signature guaranteed. Thereupon, the Rights Agent shall countersign and deliver to the person entitled thereto one or more Right Certificates, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates. (b) Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them and, at the Company's request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of such Right Certificate if mutilated, the Company shall issue and deliver to the Rights Agent for delivery to the record holder of such Right Certificate a new Right Certificate of like tenor in lieu of such lost, stolen, destroyed or mutilated Right Certificate. (c) Notwithstanding anything to the contrary in this Section 6, the Rights Agent shall not countersign and deliver a Right Certificate to any Person if such Right Certificate represents, or would represent when held by such Person, Rights that had become or would become null and void pursuant to Section 7(d) hereof. Section 7. Exercise of Rights. ------------------ (a) Until the Distribution Date, no Right may be exercised. 10 (b) Subject to Section 7(d) and (g) hereof and the other provisions of this Agreement, at any time after the Close of Business on the Distribution Date and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, the registered holder of any Right Certificate may exercise the Rights represented thereby in whole or in part upon surrender of such Right Certificate, with the form of election to purchase, including certificate, on the reverse side thereof completed and duly executed, with signature guaranteed, to the Rights Agent at the office of the Rights Agent at 300 South Grand Avenue, Los Angeles, CA 90071, together with payment of the Exercise Price for each Right exercised. Upon the exercise of an exercisable Right prior to the first Triggering Event and payment of the Exercise Price in accordance with the provisions of this Agreement, the holder of such Right shall be entitled to receive, subject to adjustment as provided herein, one one-hundredth of a Preferred Share. (c) The Exercise Price for the exercise of each Right shall initially be seventy-five dollars ($75.00) and shall be payable in lawful money of the United States of America in accordance with Section 7(f) hereof. The Exercise Price and the number of Preferred Shares (or, following the occurrence of a Section 13(a) Event, Voting Shares and/or other securities) to be acquired upon exercise of a Right shall be subject to adjustment from time to time as provided in Sections 7(e), 11 and 13 hereof and the other provisions of this Agreement. (d) Notwithstanding anything in this Agreement to the contrary, from and after the 15% Ownership Date, any Rights that are or were Beneficially Owned by a 15% Stockholder or any Affiliate or Associate of a 15% Stockholder at any time on or after the Distribution Date shall be null and void, and any holder of such Rights (whether or not such holder is a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder) shall thereafter have no right to exercise such Rights. (e) Prior to the Distribution Date, if a majority of the Board of Directors shall have determined that such action adequately protects the interests of the holders of Rights, the Company may, in its discretion, substitute for all or any portion of the Preferred Shares that are otherwise issuable (after the Close of Business on the Distribution Date) upon the exercise of each Right and payment of the Exercise Price, (i) cash, (ii) other equity securities of the Company (iii) debt securities of the Company, (iv) other assets or (v) any combination of the foregoing, in each case having an aggregate value equal to the aggregate value of the Preferred Shares for which substitution is made. Subject to Section 7(d) hereof, in the event that the Company takes any action pursuant 11 to this Section 7(e), such action shall apply uniformly to all outstanding Rights. (f) Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase, including certificate, completed and duly executed, with signature guaranteed, accompanied by payment of the Exercise Price for each Right to be exercised and an amount equal to any applicable transfer tax required to be paid by the holder of such Right Certificate in accordance with Section 9 hereof by certified check or cashier's check payable to the order of the Company, the Rights Agent shall thereupon promptly (i) requisition from the transfer agent of the Preferred Shares, certificates for the number of Preferred Shares to be purchased, and the Company hereby irrevocably authorizes such transfer agent to comply with all such requests, and/or, as provided in Section 14 hereof, requisition from the depositary agent described therein depositary receipts representing such number of one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with such depositary agent) and the Company hereby directs such depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional Preferred Shares in accordance with Section 14 hereof, (iii) after receipt of such certificates, depositary receipts or cash, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, after receipt thereof, deliver such cash to or upon the order of the registered holder of such Right Certificate. (g) Notwithstanding the foregoing provisions of this Section 7, the exercisability of the Rights shall be suspended for such period as shall reasonably be necessary for the Company to register under the Securities Act and any applicable securities law of any jurisdiction the Preferred Shares to be issued pursuant to the exercise of the Rights; provided, however, that nothing contained in this Section 7 shall relieve the Company of its obligations under Section 9(c) hereof. (h) In case the registered holder of any Right Certificate shall exercise less than all of the Rights represented thereby, a new Right Certificate representing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to such holder's duly authorized assigns, subject to the provisions of Section 14 hereof. 12 Section 8. Cancellation and Destruction of Right Certificates. All -------------------------------------------------- Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all canceled Right Certificates to the Company or shall, at the written request of the Company, destroy such canceled Right Certificates, and in such case shall deliver a certificate of destruction thereof to the Company. Section 9. Reservation and Availability of Capital Stock. --------------------------------------------- (a) Subject to Section 7(e) hereof, the Company shall cause to be reserved and kept available out of its authorized and unissued equity securities (or out of its authorized and issued equity securities held in its treasury), the number of such equity securities that will from time to time be sufficient to permit the exercise in full of all outstanding Rights. (b) In the event that any securities issuable upon exercise of the Rights are listed on any national securities exchange, the Company shall use its best efforts, from and after such time as the Rights become exercisable, to cause all such securities issued or reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise. (c) If necessary to permit the issuance of securities upon exercise of the Rights, the Company shall use its best efforts, from and after the Distribution Date, to register such securities under the Securities Act and any applicable securities laws and to keep such registration effective until the earlier of the Redemption Date or the Expiration Date. (d) The Company shall take all such action as may be necessary to ensure that all securities delivered upon exercise of the Rights shall, at the time of delivery of the certificates for such securities (subject to payment of the Exercise Price), be duly and validly authorized and issued and be fully paid and nonassessable securities. 13 (e) The Company shall pay when due and payable any and all federal and state transfer taxes and charges that may be payable in respect of the issuance or delivery of the Right Certificates or of any securities upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax that may be payable in respect of any transfer or delivery of a Right Certificate to a Person other than, or the issuance or delivery of a certificate for securities in respect of a name other than that of, the registered holder of the Right Certificate representing Rights surrendered for exercise, or to issue or deliver any certificate for securities upon the exercise of any Right until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due. (f) With respect to securities other than the Preferred Shares issuable pursuant to Section 11(a)(iii) hereof, the foregoing covenants shall be applicable only upon and following the occurrence of substitution pursuant to Section 11(a)(iii). Section 10. Securities Record Date. Each person in whose name any ---------------------- certificate for securities of the Company is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the securities represented thereby on, and such certificate shall be dated, the date upon which the Right Certificate representing such Rights was duly surrendered and payment of the Exercise Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the securities transfer books of the Company are closed, such person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the securities transfer books of the Company are open. Section 11. Adjustment of Exercise Price, Number of Shares Issuable Upon ------------------------------------------------------------ Exercise of Rights or Number of Rights. The Exercise Price, the number and kind - -------------------------------------- of securities that may be purchased upon exercise of a Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11. (a)(i) (A) In the event that the Company shall at any time after the Close of Business on the Record Date and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date (1) declare or pay any dividend on the Common Shares payable in Common Shares, Preferred Shares or other Voting Shares, (2) subdivide the 14 outstanding Common Shares, (3) combine the outstanding Common Shares into a smaller number of Common Shares, or (4) issue Common Shares, Preferred Shares or other Voting Shares in a reclassification of the Common Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then and in each such event, the number and kind of Preferred Shares or other securities issuable upon the exercise of a Right on such date shall be appropriately and proportionately adjusted, to the extent practicable, so that the value of the Preferred Shares or other such securities purchasable upon exercise of a Right is not diminished or increased. (B) In the event that the Company shall at any time after the Close of Business on the Record Date and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date (1) declare or pay any dividend on the Preferred Shares payable in Common Shares, Preferred Shares or other Voting Shares, (2) subdivide the outstanding Preferred Shares, (3) combine the outstanding Preferred Shares into a smaller number of Preferred Shares, or (4) issue Preferred Shares or other Voting Shares in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then and in each such event, the number and kind of Preferred Shares or other securities issuable upon the exercise of a Right on such date shall be proportionately adjusted so that the holder of any Right exercised on or after such date shall be entitled to receive, upon the exercise thereof and payment of the Exercise Price, the aggregate number and kind of Preferred Shares or other securities or other property, as the case may be, that, if such Right had been exercised immediately prior to such date and at a time when such right was exercisable and the transfer books of the Company were open, such holder would have owned upon such exercise and would have been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof. (ii) In the event neither the Redemption Date nor the Expiration Date shall have occurred, after the tenth Business Day following each and every 15% Ownership 15 Date, proper provision shall be made so that except as provided in Section 7(d) hereof, each holder of a Right shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement and payment of the then current Exercise Price, such number of one-hundredths of a Preferred Share of the Company as shall equal the result obtained by multiplying the then current Exercise Price by the then number of one one-hundredths of a Preferred Share for which a Right was exercisable or would have been exercisable if the distribution Date had occurred on the Business Day immediately preceding the date of such tenth Business Day following the 15% Ownership Date, and dividing that product by 50% of the Current Market Price (determined pursuant to Section 11(e) hereof) of one one-hundredth of a Preferred Share on the date of occurrence of the relevant event (such number of shares being hereinafter referred to as the "Adjustment Shares"). Successive adjustments shall be made pursuant to this paragraph each time such an event occurs. (iii) In the event that the aggregate number of Preferred Shares that are authorized by the Company's Certificate of Incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights shall at any time be less than the aggregate number of Adjustment Shares issuable upon the exercise in full of the Rights in accordance with Section 11(a)(ii) hereof (the excess of such number of Adjustment Shares over and above such number of Preferred Shares being hereinafter referred to as the "Unavailable Adjustment Shares"), the Company shall substitute for the pro rata portion of the Unavailable Adjustment Shares that would otherwise be issuable thereafter upon the exercise of each Right and payment of the Exercise Price, (A) cash, (B) other equity securities of the Company, (C) debt securities of the Company, (D) other assets or (E) any combination of the foregoing, in each case having an aggregate value equal to the aggregate value of the Unavailable Adjustment Shares for which substitution is made. Subject to Section 7(d) hereof, in the event that the Company takes any action pursuant to this Section 11(a)(iii), such action shall apply uniformly to all outstanding Rights. (b) In the event that the Company shall, at any time after the Close of Business on the Record Date and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, fix a record date prior to the earlier of the Redemption Date or the Expiration Date for the issuance of rights, options or warrants to all holders of Preferred Shares 16 or Common Shares entitling them initially to subscribe for or purchase Preferred Shares (or shares other than Common Shares having the same rights, privileges and preferences as the Preferred Shares ("Preferred Share Equivalents")) or securities convertible into Preferred Shares or Preferred Share Equivalents, at a price per Preferred Share or Preferred Share Equivalent (or having a conversion price per share, if a security convertible into Preferred Shares or Preferred Share Equivalents) less than the Current Market Price per Preferred Share on such record date, then the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be equal to the sum of the aggregate number of Common Shares and one-hundredths of Preferred Shares outstanding on such record date plus the number of one-hundredths of Preferred Shares that the aggregate offering price of the total number of Preferred Shares and/or Preferred Share Equivalents to be so offered (and/or the aggregate initial conversion price of the convertible securities to be so offered) would purchase at such Current Market Price, and the denominator of which shall be equal to the aggregate number of Common Shares and one-hundredths of Preferred Shares outstanding on such record date plus the number of additional one-hundredths of Preferred Shares and/or Preferred Share Equivalents to be offered for subscription or purchase (or into which the convertible securities to be so offered are initially convertible); provided, however, that if such rights, options or warrants are not exercisable immediately upon issuance but become exercisable only upon the occurrence of a specified event or the passage of a specified period of time, then the adjustment to the Exercise Price shall be made and become effective only upon the occurrence of such event or such passage of time, and such adjustment shall be made as if the record date for the issuance of such rights, options or warrants had been the Business Day immediately preceding the date upon which such rights, options or warrants became exercisable. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment to the Exercise Price shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price that would then be in effect if such record date had not been fixed. (c) In the event that the Company shall, at any time after the Close of Business on the Record Date and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, fix a record date prior to the earlier of the Redemption Date or the Expiration Date for the issuance of rights, options or warrants to all holders of Common Shares or Preferred Shares entitling them initially to subscribe for or 17 purchase Common Shares (or shares other than Preferred Shares having the same rights, privileges and preferences as the Common Shares ("Common Share Equivalents")) or securities convertible into Common Shares or Common Share Equivalents, at a price per Common Share or Common Share Equivalent (or having a conversion price per share, if a security convertible into Common Shares or Common Share Equivalents) less than the Current Market Price per Common Share on such record date, then the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction, the numerator of which shall be equal to the sum of the aggregate number of Common Shares and one-hundredths of Preferred Shares outstanding on such record date plus the number of Common Shares that the aggregate offering price of the total number of Common Shares and/or Common Share Equivalents to be so offered (and/or the aggregate initial conversion price of the convertible securities to be so offered) would purchase at such Current Market Price, and the denominator of which shall be equal to the aggregate number of Common Shares and one-hundredths of Preferred Shares outstanding on such record date plus the number of additional Common Shares and/or Common Share Equivalents to be offered for subscription or purchase (or into which the convertible securities to be so offered are initially convertible); provided, however, that if such rights, options or warrants are not exercisable immediately upon issuance but become exercisable only upon the occurrence of a specified event or the passage of a specified period of time, then the adjustment to the Exercise Price shall be made and become effective only upon the occurrence of such event or such passage of time, and such adjustment shall be made as if the record date for the issuance of such rights, options or warrants had been the Business Day immediately preceding the date upon which such rights, options or warrants became exercisable. Common Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment to the Exercise Price shall be made successively whenever such a record date is fixed, and in the event that such rights or warrants are not so issued, the Exercise Price shall be adjusted to be the Exercise Price that would then be in effect if such record date had not been fixed. (d) In the event that the Company shall, at any time after the Close of Business on the Record Date and prior to the Close of Business on the earlier of the Redemption Date or the Expiration Date, fix a record date for the making of a distribution to all holders of Common Shares or Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the surviving corporation) of securities or assets (other than a distribution of securities for which an adjustment is required under Section 11(a)(i) or (b) hereof or a regular quarterly cash 18 dividend), the Exercise Price to be in effect after such record date shall be determined by multiplying the Exercise Price in effect immediately prior to such record date by (i) in the case of a distribution only to holders of Common Shares, a fraction, the numerator of which shall be equal to the excess of the Current Market Price per Common Share on such record date over and above the fair market value of the portion of the securities or assets to be so distributed with respect to one Common Share, and the denominator of which shall be equal to such Current Market Price per Common Share; (ii) in the case of an equal distribution per share to holders of each Common Share and each one one-hundredth of a Preferred Share, a fraction, the numerator of which shall be equal to the excess of the Current Market Price per Preferred Share on such record date over and above the fair market value of the portion of the securities or assets to be so distributed with respect to one Preferred Share, and the denominator of which shall be equal to such Current Market Price per Preferred Share; or (iii) in the case of a distribution only to holders of Preferred Shares, or in the case of a distribution to holders of Preferred Shares and Common Shares in which holders of Preferred Shares receive a greater distribution per one one-hundredth of a Preferred Share than holders of Common Shares receive per Common Share, a fraction, the numerator of which shall be the excess of the Current Market Price per Common Share on such record date over quotient obtained by dividing the fair market value of the total distribution by the aggregate number of Common Shares and one-hundredths of Preferred Shares outstanding on such record date, and the denominator of which shall be equal to such Current Market Price per Common Share. Such adjustments shall be made successively whenever such a record date is fixed, and in the event that such a distribution is not so made, the Exercise Price shall be adjusted to be the Exercise Price that would then be in effect if such record date had not been fixed. (e) For the purpose of any computation under this Section 11, if the Preferred Shares are not publicly held or so listed and traded, the "Current Market Price" per Preferred Share shall be conclusively deemed to be the Current Market Price per Common Share multiplied by 100. (f) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price; provided, however, that any adjustments that by reason of this Section 11(f) are not required to be made shall be cumulated and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a Common Share or other share or ten-millionth of a Preferred Share, as the case may be. 19 (g) If, as a result of an adjustment made pursuant to Section 11(a) hereof, the holder of any Right thereafter exercised shall become entitled to receive any securities of the Company other than Preferred Shares, the number of such other securities so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to Preferred Shares contained in this Section 11, and the other provisions of this Agreement with respect to Preferred Shares shall apply on like terms to any such other securities. (h) All Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder shall represent the right to purchase, at the adjusted Exercise Price, the number of one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein. (i) Unless the Company shall have exercised its election as provided in Section 11(j) below, upon each adjustment of the Exercise Price as a result of the calculations made in Sections 11(b), (c) and (d) hereof, each Right outstanding immediately prior to the making of such adjustment shall thereafter represent the right to purchase, at the adjusted Exercise Price, that number of one-hundredths of a Preferred Share (calculated to the nearest one hundred-thousandth of a Preferred Share) obtained by multiplying (i) the number of one-hundredths of a Preferred Share purchasable upon the exercise of one Right immediately prior to such adjustment of the Exercise Price by (ii) the Exercise Price in effect immediately prior to such adjustment, and dividing the product so obtained by the Exercise Price in effect immediately after such adjustment. (j) The Company may elect, on or after the date of any adjustment of the Exercise Price, to adjust the number of Rights instead of making any adjustment in the number of Preferred Shares purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Exercise Price in effect immediately prior to the adjustment of the Exercise Price by the Exercise Price in effect immediately after such adjustment of the Exercise Price. The Company shall make a 20 public announcement of its election to adjust the number of Rights pursuant to this Section 11(j), indicating the record date for the adjustment and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Exercise Price is adjusted or any day thereafter, but, if separate Right Certificates have been issued, it shall be at least 10 days after the date of such public announcement. If separate Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(j), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates representing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment or, at the option of the Company, cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of such adjustment, and upon surrender thereof if required by the Company, new Right Certificates representing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates to be so distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Exercise Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement. (k) Irrespective of any adjustment or change in the Exercise Price or the number of one-hundredths of a Preferred Share issuable upon the exercise of one Right, the Right Certificates theretofore and thereafter issued may continue to express the Exercise Price per one one-hundredth of a Preferred Share and the number of Preferred Shares issuable upon the exercise of one Right that were expressed in the initial Right Certificates issued hereunder. (l) Before taking any action that would cause an adjustment reducing the Exercise Price below one one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action that may, in the advice or opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable one one-hundredths of a Preferred Share at such adjusted Exercise Price. (m) In any case in which this Section 11 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer, until the occurrence of such event, the issuance to the holder of any Right exercised after such 21 record date of the number of one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one-hundredths of a Preferred Share and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument representing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. (n) Anything in this Section 11 to the contrary notwithstanding, the Company shall be entitled (but shall not be obligated) to make such further adjustments in the number of one-hundredths of a Preferred Share that may be purchased upon exercise of one Right, and such further adjustments in the Exercise Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that it in its sole discretion shall determine to be advisable in order that any (i) consolidation or subdivision of the Common Shares or Preferred Shares, (ii) issuance wholly for cash of any Common Shares or Preferred Shares at less than the Current Market Price thereof, (iii) issuance wholly for cash of Common Shares or Preferred Shares or securities that by their terms are convertible into or exchangeable for Common Shares or Preferred Shares, (iv) dividends on Preferred Shares or Common Shares payable in Preferred Shares or Common Shares or (v) issuance of rights, options or warrants referred to Section 11(b) and (c) hereof, hereafter made by the Company to holders of its Common Shares or Preferred Shares shall not be taxable to such stockholders. Section 12. Certificate of Adjusted Exercise Price or Number of Shares ---------------------------------------------------------- Issuable Upon Exercise of Rights. Whenever an adjustment is made as provided in - -------------------------------- Section 11 hereof, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief statement of the facts giving rise to such adjustment, (b) file with the Rights Agent and with each transfer agent for the securities issuable upon exercise of the Rights a copy of such certificate and (c) mail a brief summary thereof to each holder of Rights in accordance with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or to give such notice shall not affect the validity or the force and effect of such adjustment. Any adjustment to be made pursuant to Sections 11 or 13 hereof shall be effective as of the date of the event giving rise to such adjustment. 22 Section 13. Consolidation, Merger, or Sale or Transfer of Assets or ------------------------------------------------------- Earning Power. - ------------- (a) In the event (a "Section 13(a) Event") that, at any time on or after the 15% Ownership Date and prior to the earlier of the Redemption Date or the Expiration Date, (x) the Company shall, directly or indirectly, consolidate with or merge with and into any other Person and the Company shall not be the continuing or surviving corporation in such consolidation or merger, (y) any Person shall, directly or indirectly, consolidate with or merge with and into the Company and the Company shall be the continuing or surviving corporation in such merger and, in connection with such merger, all or part of the Common Shares shall be changed into or exchanged for stock or other securities of any Person or cash or any other property, or (z) the Company and/or any one or more of its Subsidiaries shall, directly or indirectly, sell or otherwise transfer, in one or more transactions (other than transactions in the ordinary course of business), assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons other than the Company or one or more of its wholly-owned Subsidiaries (such Persons, together with the Persons described in clauses (x) and (y) above shall be collectively referred to in this Section 13 as the "Surviving Person"), then, and in each such case, proper provision shall be made so that: (i) except as provided in Section 7(d) hereof, each holder of a Right shall thereafter have the right to receive, upon the exercise thereof in accordance with the terms of this Agreement and payment of the then current Exercise Price, that number of validly authorized and issued, fully paid and nonassessable Voting Shares of the Surviving Person as shall be determined by multiplying the then current Exercise Price by the number of one-hundredths of a Preferred Share for which one Right was or would have been exercisable if the Distribution Date had occurred on the Business Day immediately preceding the date of such Section 13(a) Event, and the denominator of which is 50% of the Current Market Price per Share of the Voting Shares of the Surviving Person on the date of consummation of such Section 13(a) Event; (ii) the Surviving Person shall thereafter be liable for and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term, "Company," shall thereafter be deemed to refer to the Surviving Person; and 23 (iv) the Surviving Person shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Voting Shares in accordance with Section 9 hereof) in connection with such consummation as may be necessary to ensure that the provisions hereof shall thereafter be applicable to its Voting Shares thereafter deliverable upon the exercise of Rights. (b) Notwithstanding the foregoing, if the Section 13(a) Event is the sale or transfer in one or more transactions of assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole), but less than 100% thereof, then each Person acquiring all or a portion thereof shall assume the obligations of the Company as to a fraction of each of the Rights equal to the fraction of the assets of the Company and its Subsidiaries (taken as a whole) acquired by such Person, and the obligations of the Company as to the remaining fraction of each of the Rights shall continue to be the obligations of the Company. (c) The Company shall not consummate a Section 13(a) Event unless prior thereto the Company and the Surviving Person shall have executed and delivered to the Rights Agent a supplemental agreement confirming that such Surviving Person shall, upon consummation of such Section 13(a) Event, assume this Agreement in accordance with Section 13 hereof, that all rights of first refusal or preemptive rights in respect of the issuance of shares of the Voting Shares of such Surviving Person upon exercise of outstanding Rights have been waived and that such Section 13(a) Event shall not result in a default by such Surviving Person under this Agreement, and further providing that, as soon as practicable after the date of consummation of such Section 13(a) Event, such Surviving Person shall: (i) prepare and file a registration statement under the Securities Act with respect to the Rights and the securities purchasable upon exercise of the Rights on an appropriate form, use its best efforts to cause such registration statement to become effective as soon as practicable after such filing, use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the Expiration Date, and similarly comply with all applicable state securities laws; (ii) use its best efforts to list (or continue the listing of) the Rights and the Voting Shares of the Surviving Person purchasable upon exercise of the Rights on a national securities exchange, or use its best efforts to 24 cause the Rights and such Voting Shares to meet the eligibility requirements for quotation on NASDAQ; and (iii) deliver to holders of the Rights historical financial statements for such Surviving Person that comply in all respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act. (d) In the event that at any time after the occurrence of the tenth Business Day following a 15% Ownership Date some or all of the Rights shall not have been exercised pursuant to Section 11 hereof prior to the date of a Section 13(a) Event, such Rights shall thereafter be exercisable only in the manner described in Section 13(a) hereof (without taking into account any prior adjustment required by Section 11(a)). In the event that a 15% Ownership Date occurs on or after the date of a Section 13(a) Event, Rights shall not be exercisable pursuant to Section 11 hereof but shall instead be exercisable pursuant to, and only pursuant to, this Section 13. (e) The provisions of this Section 13 shall apply to each successive merger, consolidation, sale or other transfer constituting a Section 13(a) Event. Section 14. Fractional Rights and Fractional Shares. --------------------------------------- (a) The Company shall not be required to issue fractions of Rights or to distribute Right Certificates that represent fractional Rights. If the Company shall determine not to issue such fractional Rights, the Company shall pay to the registered holders of the Right Certificates with respect to which such fractional Rights would otherwise be issuable, at the time such Rights are exercised as provided herein, an amount in cash equal to the same fraction of the Current Market Value of a whole Right. For the purposes of this Section 14(a), the Current Market Value of a whole Right shall be the Closing Price per Right for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. (b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share) upon exercise of Rights, or to distribute certificates that represent fractional Preferred Shares (other than fractions that are integral multiples of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be represented by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that 25 the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of Preferred Shares. If the Company shall determine not to issue fractional Preferred Shares (or depositary receipts in lieu of Preferred Shares), the Company shall pay to the registered holders of Right Certificates with respect to which such fractional Preferred Shares would otherwise be issuable, at the time such Rights are exercised as provided herein, an amount in cash equal to the same fraction of the Current Market Value of a whole Preferred Share, as the case may be, or purposes of this Section 14(b), the Current Market Value of a whole Preferred Share shall be the Closing Price per share for the Trading Day immediately prior to the date of such exercise. (c) The holder of a Right, by the acceptance of such Right, expressly waives such holder's right to receive any fractional Rights or any fractional Preferred Shares upon exercise of such Right, except as permitted by this Section 14. Section 15. Rights of Action. All rights of action in respect of this ---------------- Agreement, except the rights of action given to the Rights Agent under Section 18 hereof, are vested in the respective registered holders of the Right Certificates and certificates for Common Shares representing Rights, and any registered holder of any Right Certificate and of such certificate for Common Shares, without the consent of the Rights Agent or of the holder of any other Right Certificate or any other certificate for Common Shares may, in such holder's own behalf and for such holder's own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, such holder's right to exercise the Rights represented by such Right Certificate or by such certificate for Common Shares in the manner provided in such Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance, and injunctive relief against actual or threatened violations, of the obligations of any Person under this Agreement. Section 16. Agreement of Right Holders. Every holder of a Right, by -------------------------- accepting the same, consents and agrees with the Company and the Rights Agent and every other holder of a Right that: (a) prior to the Distribution Date, the Rights shall be represented by certificates for Common Shares registered in the name of the holders of such Common Shares (which certificates for Common Shares shall also constitute Right 26 Certificates), and each such Right shall be transferable only in connection with the transfer of such Common Shares; (b) after the Distribution Date, the Right Certificates shall only be transferable on the registry books of the Rights Agent if surrendered at the principal office of the Rights Agent, duly endorsed or accompanied by a proper instrument of transfer; and (c) the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate is registered as the absolute owner thereof and of the Rights represented thereby (notwithstanding any notations of ownership or writing on the Right Certificate by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be affected by any notice to the contrary. Section 17. Right Holder and Right Certificate Holder Not Deemed a ------------------------------------------------------ Stockholder. No holder, as such, of any Right or Right Certificate shall - ----------- be entitled to vote, receive dividends or be deemed for any purpose the holder of the securities of the Company that may at any time be issuable upon the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right or Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, to give or withhold consent to any corporate action, to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or subscription rights, or otherwise, in each case until such Right or the Rights represented by such Right Certificate shall have been exercised in accordance with the provisions hereof. Section 18. Concerning the Rights Agent. --------------------------- (a) The Company agrees to pay to the Rights Agent as compensation for all services rendered by it hereunder reasonable and customary fees and expenses. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss, liability, or expense, incurred without negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability. (b) The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration 27 of this Agreement in reliance upon any Right Certificate or certificate for the Preferred Shares or Common Shares or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper person or persons, or otherwise upon the advice of its counsel as set forth in Section 20 hereof. Section 19. Merger or Consolidation or Change of Name of Rights Agent. --------------------------------------------------------- (a) Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. If, at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificates so countersigned; and if at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificates shall have the full force provided in such Right Certificates, and in this Agreement. (b) If at any time the name of the Rights Agent shall be changed, and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and if at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in such Right Certificates and in this Agreement. 28 Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties ---------------------- and obligations imposed by this Agreement upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance of the Rights, shall be bound: (a) The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such advice or opinion. (b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chairman of the Board, the Vice Chairman of the Board, the President, any Vice President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full authorization to the Rights Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (c) The Rights Agent shall be liable hereunder to the Company and any other Person only for its own negligence, bad faith or willful misconduct. (d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement, or in the Right Certificates (except its countersignature thereof), or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only. (e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including the Rights becoming null and void pursuant to Section 7(d) or any adjustment in the terms of the Rights (including the manner, method or amount 29 thereof) provided for in Sections 7, 11, 13 and 23 hereof, or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights represented by Right Certificates after actual notice that such change or adjustment is required); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or Common Shares or other securities to be issued pursuant to this Agreement or any Right Certificate, or as to whether any Preferred Shares or Common Shares or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable. (f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement. (g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chairman of the Board, the Vice Chairman, the President, any Vice President, the Chief Operating Officer, the Chief Financial Officer, the Secretary, any Assistant Secretary or the Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. (h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity. (i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, provided that reasonable care was exercised in the selection and continued employment thereof. 30 Section 21. Change of Rights Agent. The Rights Agent or any successor ---------------------- Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and Preferred Shares by registered or certified mail, and to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting as such, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit such holder's Right Certificate for inspection by the Company), then the Company shall become the Rights Agent and the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation organized and doing business under the laws of the United States or of the States of New York or California (or of any other state of the United States so long as such corporation is authorized to do business as a banking institution in the States of New York or California), in good standing, having a principal office in New York or California, that is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and that has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose of this Agreement and so that the successor Rights Agent may appropriately act as Rights Agent hereunder. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of 31 the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Section 22. Issuance of New Right Certificates. Notwithstanding any of ---------------------------------- the provisions of this Agreement or of the Right Certificates to the contrary, the Company may, at its option, issue new Right Certificates in such form as may be approved by the Board of Directors in order to reflect any adjustment or change in the Exercise Price and the number or kind or class of shares or other securities or property purchasable upon exercise of the Rights in accordance with the provisions of this Agreement. Section 23. Redemption of Rights. -------------------- (a) Until the earliest of the first Triggering Event or the Expiration Date, a majority of the Board of Directors may, at their option, direct the Company to redeem all, but not less than all, of the then outstanding Rights at a redemption price of $.01 per Right, as such redemption price shall be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (the "Redemption Price"), and the Company shall so redeem the Rights. (b) Immediately upon the action of a majority of the Board of Directors directing the Company to redeem the Rights pursuant to subsection (a) of this Section 23, or at such time and date thereafter as they may specify, and without any further action and without any notice, the right to exercise Rights shall terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Within 10 Business Days after the action of a majority of the Board of Directors directing the Company to redeem the Rights pursuant to subsection (a) of this Section 23, the Company shall give notice of such redemption to the holders of Rights by mailing such notice to all holders of Rights at their last addresses as they appear upon the registry books of the Rights Agent or, if prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice that is mailed in the manner herein provided shall be deemed given, whether or not the holder receives such notice, but neither the failure to give any such notice nor any defect therein shall affect the legality or validity of such redemption. Each such notice of redemption shall state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may, directly or indirectly, redeem, acquire or purchase for value any Rights in any manner other than that specifically set forth in this Section 23, and other than in connection with the purchase of Common Shares prior to the Distribution Date. 32 Section 24. Exchange. -------- (a) The Board of Directors of the Company may, at its option, at any time after the first 15% Ownership Date, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(d) hereof) for Preferred Shares at an exchange ratio of one-half the number of Preferred Shares (calculated in one one-hundredths of a Preferred Share) which each holder of a Right would have a right to receive upon exercise of a Right after the tenth Business Day following such 15% Ownership Date, per Right (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Shares for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of a majority of the Common Shares then outstanding. (b) Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to subsection (a) of this Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights shall be to receive that number of Preferred Shares equal to the number of such Rights held by such holder multiplied by the Exchange Ratio and divided by 100. The Company shall promptly give notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the Common Shares for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the -------- number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(d) hereof) held by each holder of Rights. (c) In any exchange pursuant to this Section 24, the Company, at its option, may substitute other equity securities of the Company or Preferred Share Equivalents for the one-hundredth of a Preferred Share units exchangeable for Rights, as appropriately adjusted. 33 (d) In the event that there shall not be sufficient Preferred Shares or Preferred Share Equivalents authorized by the Company's certificate of incorporation and not outstanding or subscribed for, or reserved or otherwise committed for issuance for purposes other than upon exercise of Rights, to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional Preferred Shares or Preferred Share Equivalents for issuance upon exchange of the Rights. (e) The Company shall not be required to issue fractions of Preferred Shares or to distribute certificates which evidence fractional Preferred Shares (other than integral multiples of one one-hundredth of a Preferred Share). In lieu of such fractional Preferred Shares, the Company shall pay to the registered holders of the Right Certificates with regard to which such frational Preferred Shares would otherwise be issuable an amount in cash equal to the same fraction of the current per share market value of a whole Preferred Share. For the purposes of this paragraph (e), the current per share market value of a whole Preferred Share shall be the Closing Price of a Preferred Share for the Trading Day immediately prior to the date of the exchange pursuant to this Section 24. Section 25. Notice of Certain Events. ------------------------ (a) In the event that the Company shall propose (i) to declare or pay any dividend payable on or make any distribution with respect to its Common Shares or Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer to the holders of its Common Shares or Preferred Shares options, rights or warrants to subscribe for or to purchase any additional shares thereof or shares of stock of any class or any other securities, rights or options, (iii) to effect any reclassification of its Common Shares or Preferred Shares (other than a reclassification involving only the subdivision of outstanding shares), (iv) to effect any consolidation or merger with or into, or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to, any other Person or Persons, or (v) to effect the liquidation, dissolution or winding up of the Company, then and in each such case, the Company shall give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of such proposed action, that shall specify the record date for the purpose of such dividend or distribution, or the date upon which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of record of the 34 Common Shares or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least 20 days prior to the record date for determining holders of the Common Shares or Preferred Shares for purposes of such action, and in the case of any such other action, at least 20 days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares or Preferred Shares, whichever date shall be the earlier. The failure to give the notice required by this Section 25 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action. (b) Upon the occurrence of each Triggering Event, the Company shall as soon as practicable thereafter give to each holder of a Right Certificate, in accordance with Section 26 hereof, a notice of the occurrence of such event, specifying the event and the consequences of the event to holders of Rights under Sections 11 and 13 hereof. Section 26. Notices. Notices or demands authorized by this Agreement to be ------- given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows: Unocal Corporation 1201 West 5th Street Los Angeles, CA 90071 Attention: Robert O. Hedley, Secretary Subject to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) to the principal office of the Rights Agent as follows: Manufacturers Hanover Trust Company of California 50 California Street San Francisco, CA 94111 Attention: Sara Battin, Vice-President Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company. 35 Section 27. Supplements and Amendments. -------------------------- (a) Until the earliest of (i) a Triggering Event, or (ii) the Redemption Date, a majority of the Board of Directors may, without the approval of any holders of Rights, direct the Company and the Rights Agent to supplement or amend any provision of this Agreement in any manner, including, but not limited to, postponing the Distribution Date, whether or not such supplement or amendment is adverse to any holders of Rights, and the Company and the Rights Agent shall so supplement or amend such provision. After the first Triggering Event, a majority of the Board of Directors may, without the approval of any holders of Rights, direct the Company and the Rights Agent to supplement or amend any provision of this Agreement in any manner so long as the interests of the holders of Rights (other than a 15% Stockholder, its Affiliates or Associates) shall not be materially and adversely affected thereby, and the Company and the Rights Agent shall so supplement or amend such provision. (b) After the first Triggering Event and prior to the earlier of the Redemption Date or the Expiration Date, the Company shall not effect any amendment to the Certificate of Designations for the Preferred Shares that would materially and adversely affect the rights, privileges or preferences of the Preferred Shares without the prior approval of the holders of two-thirds or more of the then outstanding Rights. Section 28. Certain Covenants. ----------------- Subject to Section 27 and the other provisions of this Agreement: (a) no adjustment to the Exercise Price, the number of Preferred Shares or other securities (or fractions of a share of any of them), as the case may be, for which a Right is exercisable or the number of Rights outstanding shall be made or be effective if such adjustment would have the effect of reducing or limiting the benefits that the holders of Rights would have had absent such adjustment, including, without limitation, the benefits under Sections 7, 11 and 13 hereof, unless the terms of this Agreement are amended so as to preserve such benefits; and (b) from and after the first Triggering Event and prior to the earlier of the Redemption Date or the Expiration Date, the Company shall not (i) issue or sell, or permit any Subsidiary to issue or sell, to a 15% Stockholder or a Surviving Person, or any Affiliate or Associate of a 15% Stockholder or a Surviving Person, or any Person holding Voting Shares of the Company that are Beneficially Owned by a 36 15% Stockholder or a Surviving Person, (A) any rights, options, warrants or convertible securities on terms similar to, or that materially adversely affect the value of, the Rights or (B) Preferred Shares, Common Shares or shares of any other class of capital stock, if such sale is intended to or would materially adversely affect the value of the Rights, or (ii) take any action that is intended to or would materially adversely affect the value of the Rights. Section 29. Successors. All the covenants and provisions of this Agreement ---------- by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder. Section 30. Benefits of this Agreement. Nothing in this Agreement shall be -------------------------- construed to give to any Person other than the Company, the Rights Agent, the registered holders of the Right Certificates (other than those representing Rights that have become null and void) and the certificates for Common Shares representing Rights (other than those Rights that have become null and void) any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent, such registered holders of Right Certificates and such certificates for Common Shares representing Rights. Section 31. Severability. If any term, provision, covenant or restriction ------------ of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 32. Governing Law. This Agreement and each Right Certificate ------------- issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts made and performed entirely within such state. Section 33. Determination and Actions Taken by the Board of Directors. The --------------------------------------------------------- Board of Directors of the Company shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to such Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including without limitation the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including a determination to redeem or not redeem 37 the Rights or to amend the Agreement). All such actions, calculations, interpretations and determinations (including, for purposes of clause (B) below, all omissions with respect the foregoing) which are done or made by the Board in good faith, shall (A) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (B) not subject the Board to any liability to the holders of the Rights. Section 34. Counterparts. This Agreement may be executed in any number of ------------ counterparts and each such counterpart shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument. Section 35. Descriptive Headings. Descriptive headings of the several -------------------- sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. Attest: UNOCAL CORPORATION By /s/ R.E. Jenkins By /s/ Gary W. Sproule --------------------------- ------------------------- R.E. Jenkins Gary W. Sproule, Vice President Its: Assistant Secretary ----------------------- Attest: MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA By /s/ C.L. Lyons By /s/ Sara Battin --------------------------- ------------------------- Sara Battin, Vice President Its: Assistant Secretary and General Manager ----------------------- 38 Exhibit A --------- FORM OF CERTIFICATE OF DESIGNATIONS OF SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK $.10 Par Value of UNOCAL CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, [Name], [Title], and [Name], [Title], of Unocal Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the Corporation, the Board of Directors on January 29, 1990 adopted the following resolution creating a series of two million five hundred thousand (2,500,000) shares of Preferred Stock, par value $.10 per share, designated as Series A Junior Participating Cumulative Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Certificate of Incorporation, a series of Preferred Stock of the Corporation be, and it hereby is, created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof, are as follows: Section 1. Designation and Amount. The shares of such series shall be ---------------------- designated as Series A Junior Participating Cumulative Preferred Stock, par value $.10 per share (the "Series A Preferred Stock"), and the number of shares constituting such series shall be two million five hundred thousand (2,500,000). Section 2. Dividends and Distributions. --------------------------- (a) The holders of shares of Series A Preferred Stock, in preference to the holders of shares of Common Stock, $1.00 per share, of the Corporation (the "Common Stock") and of any other junior stock of the Corporation that may be outstanding, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the tenth day of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (i) $0.25 per share ($1.00 per annum), or (ii) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock, or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event that the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then and in each such event, the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event, and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (a) of this Section 2 immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided, however, that in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.25 per share ($1.00 per annum) on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. 2 (c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which cases such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall cumulate but shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred ------------- Stock shall have the following voting rights: (a) Each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes (and each one one-hundredth of a share of Series A Preferred Stock shall entitle the holder thereof to one vote) on all matters submitted to a vote of the stockholders of the Corporation. In the event that the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then and in each such event, the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event, and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided in the Certificate of Incorporation of the Corporation or herein or by law, the holders of shares of Series A Preferred Stock and the holders 3 of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (c) In addition, the holders of shares of Series A Preferred Stock shall have the following special voting rights: In the event that at any time dividends on Series A Preferred Stock, whenever accrued and whether or not consecutive, shall not have been paid or declared and a sum sufficient for the payment thereof set aside, in an amount equivalent to six quarterly dividends on all shares of Series A Preferred Stock at the time outstanding, then and in each such event, the holders of shares of Series A Preferred Stock and each other series of preferred stock now or hereafter issued that shall be accorded such class voting right by the Board of Directors and that shall have the right to elect three directors as the result of a prior or subsequent default in payment of dividends on such series (each such other series being hereinafter called "Other Series of Preferred Stock"), voting separately as a class without regard to series, shall be entitled to elect three directors at the next annual meeting of stockholders of the Corporation, in addition to the directors to be elected by the holders of all shares of the Corporation entitled to vote for the election of directors, and the holders of all shares (including the Series A Preferred Stock) otherwise entitled to vote for directors, voting separately as a class, shall be entitled to elect the remaining members of the Board of Directors, provided that the Series A Preferred Stock and each Other Series of Preferred Stock, voting as a class, shall not have the right to elect more than three directors. Such special voting right of the holders of shares of Series A Preferred Stock may be exercised until all dividends in default on the Series A Preferred Stock shall have been paid in full or declared and funds sufficient therefor set aside, and when so paid or provided for, such special voting right of the holders of shares of Series A Preferred Stock shall cease, but subject always to the same provisions for the vesting of such special voting rights in the event of any such future dividend default or defaults. At any time after such special voting rights shall have so vested in the holders of shares of Series A Preferred Stock, the Secretary of the Corporation may, and upon the written request of the holders of record of 10% or more in number of the shares of Series A Preferred Stock and each Other Series of Preferred Stock then outstanding addressed to the Secretary at the principal executive office of the Corporation shall, call a special meeting of the holders of shares of Preferred Stock so entitled to vote, for the 4 election of the directors to be elected by them as herein provided, to be held within 60 days after such call and at the place and upon the notice provided by law and in the Bylaws for the holding of meetings of stockholders; provided, however, that the Secretary shall not be required to call such special meeting in the case of any such request received less than 90 days before the date fixed for any annual meeting of stockholders, and if in such case such special meeting is not called or held, the holders of shares of Preferred Stock so entitled to vote shall be entitled to exercise the special voting rights provided in this paragraph at such annual meeting. If any such special meeting required to be called as above provided shall not be called by the Secretary within 30 days after receipt of any such request, then the holders of record of 10% or more in number of the shares of Series A Preferred Stock and each Other Series of Preferred Stock then outstanding may designate in writing one of their number to call such meeting, and the person so designated may, at the expense of the Corporation, call such meeting to be held at the place and upon the notice given by such person, and for that purpose shall have access to the stock books of the Corporation. No such special meeting and no adjournment thereof shall be held on a date later than 60 days before the annual meeting of stockholders. If, at any meeting so called or at any annual meeting held while the holders of shares of Series A Preferred Stock have the special voting rights provided for in this paragraph, the holders of not less than 40% of the shares of Series A Preferred Stock and each Other Series of Preferred Stock then outstanding are present in person or by proxy, which percentage shall be sufficient to constitute a quorum for the election of additional directors as herein provided, the then authorized number of directors of the Corporation shall be increased by three, as of the time of such special meeting or the time of the first such annual meeting held while such holders have special voting rights and such quorum is present, and the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock, voting as a class, shall be entitled to elect the additional directors so provided for. If the directors of the Corporation are then divided into classes under provisions of the Certificate of Incorporation of the Corporation or the Bylaws, the three additional directors shall be members of those respective classes of directors in which a vacancy is created as a result of such increase in the authorized number of directors. If the foregoing expansion of the size of the Board of Directors shall not be valid under applicable law, then the holders of shares of Series A Preferred Stock and of each Other Series of Preferred Stock, voting as a class, shall be entitled, at the meeting 5 of stockholders at which they would otherwise have voted, to elect directors to fill any then existing vacancies on the Board of Directors, and shall additionally be entitled, at such meeting and each subsequent meeting of stockholders at which directors are elected, to elect all of the directors then being elected until by such class vote three members of the Board of Directors have been so elected. Upon the election at such meeting by the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock, voting as a class, of the directors they are entitled so to elect, the persons so elected, together with such persons as may be directors or as may have been elected as directors by the holders of all shares (including Series A Preferred Stock) otherwise entitled to vote for directors, shall constitute the duly elected directors of the Corporation. The additional directors so elected by holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock, voting as a class, shall serve until the next annual meeting or until their respective successors shall be elected and qualified, or if any such director is a member of a class of directors under provisions dividing the directors into classes, each such director shall serve until the annual meeting at which the term of office of such director's class shall expire or until such director's successor shall be elected and shall qualify, and at each subsequent meeting of stockholders at which the directorship of any director elected by the vote of holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock under the special voting rights set forth in this paragraph is up for election, said special class voting rights shall apply in the reelection of such director or in the election of such director's successor; provided, however, that whenever the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock shall be divested of the special rights to elect three directors as above provided, the terms of office of all persons elected as directors by the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock, voting as a class, or elected to fill any vacancies resulting from the death, resignation, or removal of directors so elected by the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock, shall forthwith terminate (and, if applicable, the number of directors shall be reduced accordingly). If, at any time after a special meeting of stockholders or an annual meeting of stockholders at which the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock, voting as a class, have elected directors as provided above, and while the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock shall be entitled so to elect three directors, the 6 number of directors who have been elected by the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock (or who by reason of one or more resignations, deaths or removals have succeeded any directors so elected) shall by reason of resignation, death or removal be less than three but at least one, the vacancy in the directors so elected by the holders of shares of the Series A Preferred Stock and each Other Series of Preferred Stock may be filled by the remaining director elected by such holders, and in the event that such election shall not occur within 30 days after such vacancy arises, or in the event that there shall not be incumbent at least one director so elected by such holders, the Secretary of the Corporation may, and upon the written request of the holders of record of 10% or more in number of the shares of Series A Preferred Stock and each Other Series of Preferred Stock then outstanding addressed to the Secretary at the principal office of the Corporation shall, call a special meeting of the holders of shares of Series A Preferred Stock and each Other Series of Preferred Stock so entitled to vote, for an election to fill such vacancy or vacancies, to be held within 60 days after such call and at the place and upon the notice provided by law and in the Bylaws for the holding of meetings of stockholders; provided, however, that the Secretary shall not be required to call such special meeting in the case of any such request received less than 90 days before the date fixed for any annual meeting of stockholders, and if in such case such special meeting is not called, the holders of shares of Preferred Stock so entitled to vote shall be entitled to fill such vacancy or vacancies at such annual meeting. If any such special meeting required to be called as above provided shall not be called by the Secretary within 30 days after receipt of any such request, than the holders of record of 10% or more in number of the shares of Series A Preferred Stock and each Other Series of Preferred Stock then outstanding may designate in writing one of their number to call such meeting, and the person so designated may, at the expense of the Corporation, call such meeting to be held at the place and upon the notice above provided, and for that purpose shall have access to the stock books of the Corporation; no such special meeting and no adjournment thereof shall be held on a date later than 60 days before the annual meeting of stockholders. (d) Nothing herein shall prevent the directors or stockholders from taking any action to increase the number of authorized shares of Series A Preferred Stock, or increasing the number of authorized shares of Preferred Stock of the same class as the Series A Preferred Stock or the number of authorized shares of Common Stock, or changing the par value of the Common Stock or Preferred Stock, or issuing options, 7 warrants or rights to any class of stock of the Corporation as authorized by the Certificate of Incorporation of the Corporation, as it may hereafter be amended. (e) Except as set forth herein, holders of shares of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote as set forth in the Certificate of Incorporation of the Corporation or herein or by law) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (a) Whenever any dividends or other distributions payable on the Series A Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not and shall cause its subsidiaries not to, directly or indirectly: (i) declare or pay dividends on, or make any other distributions with respect to, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on, or make any other distributions with respect to, any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on shares of the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the 8 Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock ----------------- purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock, without designation as to series, and may be reissued as part of any series of preferred stock created by resolution or resolutions of the Board of Directors (including Series A Preferred Stock), subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, -------------------------------------- dissolution or winding up of the Corporation, no distribution shall be made to: (a) the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received the greater of (i) $1.00 per share ($.01 per one one-hundredth of a share), plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, or (ii) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock; or (b) the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. 9 In the event that the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then and in each such event, the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (a) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event, and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In the event that the Corporation --------------------------- shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, or otherwise changed, then and in each such event, the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event that the Corporation shall at any time declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then and in each such event, the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event, and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Preferred Stock shall not ------------- be redeemable. Notwithstanding the foregoing, the Corporation may acquire shares of Series A Preferred Stock in any other manner permitted by law, the Certificate of Incorporation of the Corporation or herein. Section 9. Rank. Unless otherwise provided in the Certificate of ---- Incorporation of the Corporation or a Certificate of Designations relating to a subsequent series of preferred stock of the Corporation, the Series A Preferred 10 Stock shall rank junior to all other series of the Corporation's preferred stock as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up, and senior to the Common Stock of the Corporation. Section 10. Amendment. The Certificate of Incorporation of the Corporation --------- shall not be amended in any manner that would materially and adversely alter or change the powers, preferences or special rights of the Series A Preferred Stock without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single series. Section 11. Fractional Shares. Series A Preferred Stock may be issued in ----------------- fractions of a share (in one one-hundredths (1/100) of a share and integral multiples thereof) that shall entitle the holder thereof, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and have the benefit of all other rights of holders of shares of Series A Preferred Stock. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this ______ day of February, 1990. ---------------------------- [Name] [Title] Attest: - ------------------------- [Name] [Title] 11 Exhibit B --------- FORM OF RIGHT CERTIFICATE Certificate No. R-____ ____ Rights NOT EXERCISABLE AFTER JANUARY 29, 2000 OR EARLIER IF REDEEMED. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY CERTAIN PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. Right Certificate UNOCAL CORPORATION This certifies that ___________________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms and conditions of a Rights Agreement (the "Rights Agreement") dated as of January 29, 1990 by and between Unocal Corporation, a Delaware corporation (the "Company"), and Manufacturers Hanover Trust Company of California (the "Rights Agent"), to purchase from the Company at any time prior to 5:00 o'clock p.m., Los Angeles time, on the earlier of the Redemption Date (as such term is defined in the Rights Agreement) or January 29, 2000, at the office or agency of the Rights Agent at 300 South Grand Avenue, Los Angeles, California 90071, or at the office of its successor as Rights Agent, one one-hundredth of a fully paid and nonassessable share of Series A Junior Participating Cumulative Preferred Stock, par value $.10 per share, of the Company (a "Preferred Share") or, in certain circumstances, other securities or other property, at a purchase price of seventy-five dollars ($75.00) per one-hundredth of a Preferred Share (the "Exercise Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase, including Certificate, on the reverse side hereof completed and duly executed, with signature guaranteed. The number of Rights represented by this Right Certificate and the Exercise Price set forth above are the number of Rights and the Exercise Price as of January [29], 1990, based upon the Preferred Shares as constituted on such date. As provided in the Rights Agreement, the Exercise Price and the number of Preferred Shares or other securities or other property that may be purchased upon the exercise of the Rights. represented by this Right Certificate are subject to modification and adjustment upon the occurrence of certain events. The Rights Agreement contains a full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, the Company and the holders of Right Certificates. This Right Certificate is subject to all the terms and conditions of the Rights Agreement, which terms and conditions are hereby incorporated herein by reference and made a part hereof. Copies of the Rights Agreement are on file at the principal executive offices of the Company and the above-mentioned offices of the Rights Agent. This Right Certificate, with or without other Right Certificates, upon presentation and surrender at the above-mentioned offices of the Rights Agent, with the Form of Assignment, including Certificate, on the reverse side hereof completed and duly executed, with signature guaranteed, may be exchanged for another Right Certificate or Right Certificates of like tenor and date representing Rights entitling the holder thereof to purchase a like aggregate number of Preferred Shares or, in certain circumstances, other securities or other property, as the Rights represented by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive, upon the surrender hereof with the Form of Election to Purchase, including Certificate, on the reverse side hereof completed and duly executed, with signature guaranteed, another Right Certificate or Right Certificates for the number of whole Rights not exercised. Subject to the provisions of the Rights Agreement, the Rights represented by this Right Certificate may be redeemed by the Company, at its option, at a redemption price of $.01 per Right. No fractional securities shall be issued upon the exercise of any Right or Rights represented hereby (other than fractions of Preferred Shares that are integral multiples of one one-hundredth of a Preferred Share, that may, at the option of the Company, be represented by depositary receipts), but in lieu thereof, a cash payment shall be made, as provided in the Rights Agreement. No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or other securities of the Company that may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the 2 election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, until the Right or Rights represented by this Right Certificate shall have been exercised as provided in the Rights Agreement. This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of ___________. Attest: UNOCAL CORPORATION By By --------------------------- ------------------------------ Name: Name: Title: Title: Countersigned: MANUFACTURERS HANOVER TRUST COMPANY OF CALIFORNIA By --------------------------- Name: Title: 3 Form of Reverse Side of Right Certificate FORM OF ASSIGNMENT ------------------ (To be executed by the registered holder if such holder desires to transfer any or all of the Rights represented by this Right Certificate) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Name, address and social security or other identifying number of transferee) _________________________________ (____________)of the Rights represented by this Right Certificate, together with all right, title and interest in and to said Rights, and hereby irrevocably constitutes and appoints ________________ attorney to transfer said Rights on the books of Unocal Corporation with full power of substitution. Dated: ___________________, 19__ ____________________________ (Signature) Signature Guaranteed: Certificate ----------- (to be completed, if true) The undersigned hereby certifies that the Rights represented by this Right Certificate are not Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement). Dated: ___________________, 19__ ____________________________ (Signature) Signature Guaranteed: 4 Form of Reverse Side of Right Certificate (continued) NOTICE The signatures to the foregoing Assignment and the foregoing Certificate, if applicable, must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. In the event that the foregoing Certificate is not duly executed, with signature guaranteed, the Company may deem the Rights represented by this Right Certificate to be Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement), and not issue any Right Certificate or Right Certificates in exchange for this Right Certificate. 5 Form of Reverse Side of Right Certificate (continued) FORM OF ELECTION TO PURCHASE (To be executed by the registered holder if such holder desires to exercise any or all of the Rights represented by this Right Certificate) To Unocal Corporation: The undersigned hereby irrevocably elects to exercise ______________________________ (__________) of the Rights represented by this Right Certificate to purchase the following: (Check one of the following boxes) __ / / the Preferred Shares or other securities or property issuable upon the __ exercise of said number of Rights pursuant to Section 7(c) of the Rights Agreement. __ / / the shares of the Preferred Stock, par value $.10 per share of the Company, __ or other securities or property issuable upon the exercise of said number of Rights pursuant to Section 11(a)(ii) of the Rights Agreement. __ / / the securities issuable upon the exercise of said number of Rights pursuant __ to Section 13(a) of the Rights Agreement. The undersigned hereby requests that any such property and a certificate for any such securities be issued in the name of and delivered to: ________________________________________________________________________________ ________________________________________________________________________________ (Name, address and social security or other identifying number of issuee) The undersigned hereby further requests that if said number of Rights shall not be all the Rights represented by his Right Certificate, a new Right Certificate for the remaining balance of such Rights be issued in the name of and delivered to: ________________________________________________________________________________ ________________________________________________________________________________ (Name, address and social security or other identifying number of issuee) Dated: ___________, 19___ __________________________________ (Signature) Signature Guaranteed: 6 Form of Reverse Side of Right Certificate (continued) Certificate ----------- (to be completed, if true) The undersigned hereby certifies that the Rights represented by this Right Certificate are not Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement). Dated: ____________________, 19__ ________________________________ (Signature) Signature Guaranteed: NOTICE The signatures to the foregoing Assignment and the foregoing Certificate, if applicable, must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. In the event that the foregoing Certificate is not duly executed, with signature guaranteed, the Company may deem the Rights represented by this Right Certificate to be Beneficially Owned by a 15% Stockholder or an Affiliate or Associate of a 15% Stockholder (as such capitalized terms are defined in the Rights Agreement), and not issue any property or certificate for securities upon the exercise of this Right Certificate or issue any new Right Certificate for any remaining balance of unexercised Rights represented by this Right Certificate. 7 Exhibit C --------- SUMMARY OF THE RIGHTS The following is a brief description of the preferred stock purchase rights (the "Rights") issuable upon the adoption of the proposed rights plan by Unocal Corporation (the "Company"). It is intended to provide a general description only and is subject to the detailed terms and conditions of a Rights Agreement (the "Rights Agreement") dated as of January 29, 1990 by and between the Company and Manufacturers Hanover Trust Company of California, as Rights Agent (the "Rights Agent"). 1. Common Share Certificates Representing Rights --------------------------------------------- Until the Distribution Date (as defined in Section 2 below), (a) the Rights are not exercisable, (b) they remain attached to and traded only together with the Common Shares and (c) Common Share certificates will represent the Rights related thereto. Common Share certificates issued after the Record Date and prior to the Distribution Date shall contain a notation incorporating the Rights Agreement by reference. 2. Distribution Date ----------------- The "Distribution Date" is the earliest of the tenth business day following (a) the date of the first public announcement that any person (other than the Company or certain related entities) has become the beneficial owner of 15% or more of the outstanding Common Shares (such person is a "15% Stockholder" and the date of such public announcement is the "15% Ownership Date") or (b) the date of the commencement of, or the announcement of an intention to make, a tender offer or exchange offer, the consummation of which would cause any person to become a 15% Stockholder. In calculating the percentage of outstanding Common Shares that are beneficially owned by any person, that person is deemed to own any Common Shares issuable upon the exercise, exchange or conversion of any options, warrants or other securities beneficially owned by such person; provided, however, that such Common Shares are not deemed outstanding for the purpose of calculating the percentage of Common Shares that are beneficially owned by any other person. Upon the close of business on the Distribution Date, the Rights separate from the Common Shares, Right certificates are issued and the Rights become exercisable to purchase Preferred Shares as described in Section 5 below. 3. Issuance of Right Certificates ------------------------------ As soon as practicable following the Distribution Date, separate certificates representing only Rights will be mailed to the holders of record of Common Shares as of the close of business on the Distribution Date, and the separate Right certificates alone will represent the Rights from and after the Distribution Date. 4. Expiration of Rights -------------------- The Rights will expire on January 29, 2000, unless earlier redeemed. 5. Exercise of Rights ------------------ Rights may be exercised, at the option of the holders, pursuant to paragraphs (a), (b) or (c) below. No Right may be exercised more than once or pursuant to more than one of such paragraphs. From and after the first event of the type described in paragraphs (b) or (c) below, each Right that is beneficially owned by a 15% Stockholder is void. (a) Unless the Rights have previously expired or been redeemed, from and after the close of business on the Distribution Date, each Right (other than a Right that has become void) will be exercisable to purchase one one-hundredth of a share of Series A Junior Participating Cumulative Preferred Stock, par value $.10 per share, of the Company (the "Preferred Shares"), at an exercise price of $75.00 (the "Exercise Price"). The Preferred Shares are nonredeemable and, unless otherwise provided in connection with the creation of a subsequent series of preferred stock, are subordinate to any other series of the Company's preferred stock, whether issued before or after the issuance of the Preferred Shares. The Preferred Shares may not be issued except upon exercise of Rights. The holder of a Preferred Share is entitled to receive when, as and if declared, the greater of (a) cash and non-cash dividends in an amount equal to 100 times the dividends declared on each Common Share or (b) a preferential annual dividend of $1.00 per Preferred Share ($.01 per one one-hundredth of a Preferred Share). In the event of liquidation, the holders of Preferred Shares are entitled to receive a liquidation payment in an amount equal to the greater of (x) $100 per Preferred Share ($1.00 per one one-hundredth of a Preferred Share), plus all accrued and unpaid dividends and distributions on the Preferred Shares, or (y) an amount equal to 100 times the aggregate amount to be distributed per Common 2 Share. Each Preferred Share has 100 votes, voting together with the Common Shares. In the event of any merger, consolidation or other transaction in which Common Shares are exchanged, the holder of a Preferred Share will be entitled to receive 100 times the amount received per Common Share. The rights of the Preferred Shares as to dividends, voting and liquidation preferences are protected by anti-dilution provisions. It is anticipated that the value of one one-hundredth of a Preferred Share should approximate the value of one Common Share. (b) Unless the Rights have previously expired or been redeemed, from and after the close of business on the tenth business day following the 15% Ownership Date, each Right (other than a Right that has become void) will be exercisable to purchase, at the Exercise Price (initially $75.00), Preferred Shares with a market value equal to two times the Exercise Price. If the Board of Directors so elects, the Company will substitute for all or any portion of the Preferred Shares that would otherwise be issuable upon the exercise of the Rights, cash, assets or other securities having the same aggregate value as such Preferred Shares. (c) Unless the Rights have previously expired or been redeemed, if, on or after the 15% Ownership Date, (a) the Company is acquired in a merger or other business combination in which the Company is not the surviving corporation or in which the outstanding Common Shares are changed into or exchanged for stock or assets of another person or (b) 50% or more of the Company's consolidated assets or earning power are sold (other than in transactions in the ordinary course of business), then each Right (other than a Right that has become void) will thereafter be exercisable to purchase, at the Exercise Price (initially $75.00), shares of stock of the surviving corporation or purchaser, respectively, with an aggregate market value equal to two times the Exercise Price. 6. Adjustments to Prevent Dilution ------------------------------- The Exercise Price, the number of outstanding Rights and the number of Preferred Shares issuable upon exercise of the Rights are subject to adjustment from time to time as set forth in the Rights Agreement in order to prevent dilution. 7. Exchange Provision ------------------ Unless the Rights have previously expired or been redeemed, at any time after the 15% Ownership Date, the Board of Directors may elect to exchange the Rights (other than a Right owned by the 15% Stockholder which has become void), in whole or in part, for shares of Preferred Stock at an exchange 3 ratio of one-half of the number of shares of Preferred Stock which a holder of a Right would then be entitled to receive upon exercise of a Right, per Right. 8. Cash Paid Instead of Issuing Fractional Securities -------------------------------------------------- With certain exceptions, no adjustment in the Exercise Price will be required until cumulative adjustments require an adjustment of at least 1%. No fractional securities will be issued upon exercise of a Right (other than fractions of Preferred Shares that are integral multiples of one one-hundredth of a Preferred Share and that may, at the election of the Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment in cash shall be made based on the market price of such securities on the last trading date prior to the date of exercise. 9. Redemption ---------- At any time prior to the first event of the type described in Section 5(b) or (c) above, a majority of the Board of Directors may, at their option, direct the Company to redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"). Immediately upon the action of a majority of the Board of Directors directing the Company to redeem the Rights (the date of such action is the "Redemption Date"), the right to exercise Rights shall terminate and the only right of the holders of Rights thereafter shall be to receive the Redemption Price. 10. No Stockholder Rights Prior to Exercise --------------------------------------- Until a Right is exercised, the holder thereof, as such, has no rights as a stockholder of the Company (other than rights resulting from the holder's ownership of Common Shares), including, without limitation, the right to vote or to receive dividends. 11. Amendment of Rights Agreement ----------------------------- At any time prior to the earlier of (a) the first event of the type described in Section 5(b) or (c) above, or (b) the Redemption Date, a majority of the Board of Directors may, without the approval of any holders of Rights, direct the Company and the Rights Agent to amend the Rights Agreement in any manner, whether or not such amendment is adverse to the holders of Rights. At any time after the earlier of the first event of the type described in Section 5(b) or (c) above and prior to the Redemption Date, a majority of the Board of Directors may, without the approval of any holders of Rights, direct the Company and the Rights Agent to amend the Rights 4 Agreement in any manner so long as such amendment does not materially and adversely affect the interests of the holders of Rights. 5 EX-23.1 9 CONSENT OF COOPERS & LYBRAND L.L.P. EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Registration Statement on Form S-4 of Unocal Corporation and Unocal Capital Trust of our report dated February 14, 1996, except for Note 25, as to which the date is February 16, 1996, on our audits of the consolidated financial statements and financial statement schedule of Unocal Corporation and its subsidiaries as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995, which report is included in Unocal Corporation's Annual Report on Form 10-K for the year ended December 31, 1995. Our report includes an explanatory paragraph with respect to the changes in methods of accounting for the impairment of long-lived assets and long-lived assets to be disposed of in 1995; for recognizing the reduction in value of producing oil and gas properties in 1994; and for postretirement benefits other than pensions and for postemployment benefits in 1993. We also consent to the reference to our firm under the caption "Experts". Coopers & Lybrand L.L.P. Los Angeles, California July 26, 1996 EX-25.1 10 FORM T-1 AS TRUSTEE UNDER THE INDENTURE EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [__] THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) UNOCAL CORPORATION (Exact name of obligor as specified in its charter) Delaware 95-3825062 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 (Address of principal executive offices) (Zip code) ______________________ __% Convertible Junior Subordinated Debentures (Title of the indenture securities) ================================================================================ 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affilia- tion. None. (See Note on page 3.) 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 1996. THE BANK OF NEW YORK By: /s/ PAUL J. SCHMALZEL Name: Paul J. Schmalzel Title: Assistant Treasurer -4- EXHIBIT 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ................. $ 2,461,550 Interest-bearing balances .......... 835,563 Securities: Held-to-maturity securities ........ 802,064 Available-for-sale securities ...... 2,051,263 Federal funds sold in domestic offices of the bank: Federal funds sold ................... 3,885,475 Loans and lease financing receivables: Loans and leases, net of unearned income .........................27,820,159 LESS: Allowance for loan and lease losses ................... 509,817 LESS: Allocated transfer risk reserve......................... 1,000 Loans and leases, net of unearned income, allowance, and reserve... 27,309,342 Assets held in trading accounts ...... 837,118 Premises and fixed assets (including capitalized leases) ................. 614,567 Other real estate owned .............. 51,631 Investments in unconsolidated subsidiaries and associated companies ........................... 225,158 Customers' liability to this bank on acceptances outstanding ............. 800,375 Intangible assets .................... 436,668 Other assets ......................... 1,247,908 ----------- Total assets ......................... $41,558,682 =========== LIABILITIES Deposits: In domestic offices ................ $18,851,327 Noninterest-bearing ............. 7,102,645 Interest-bearing ................11,748,682 In foreign offices, Edge and Agreement subsidiaries, and IBFs .. 10,965,604 Noninterest-bearing .............. 37,855 Interest-bearing .................. 10,927,749 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ............. 1,224,886 Securities sold under agreements to repurchase ...................... 29,728 Demand notes issued to the U.S. Treasury ............................. 118,870 Trading liabilities ................... 673,944 Other borrowed money: With original maturity of one year or less ............................. 2,713,248 With original maturity of more than one year ............................ 20,780 Bank's liability on acceptances executed and outstanding ............. 803,292 Subordinated notes and debentures ..... 1,022,860 Other liabilities ..................... 1,590,564 ---------- Total liabilities ..................... 38,015,103 ========== EQUITY CAPITAL Common stock ......................... 942,284 Surplus .............................. 525,666 Undivided profits and capital reserves ............................ 2,078,197 Net unrealized holding gains (losses) on available-for-sale securities .......................... 3,197 Cumulative foreign currency translation adjustments ............. (5,765) Total equity capital ................. 3,543,579 ----------- Total liabilities and equity capital ............................. $41,558,682 ============ I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot Thomas A. Renyi Directors Alan R. Griffith EX-25.2 11 FORM T-1 AS TRUSTEE UNDER THE DECLARATION EXHIBIT 25.2 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [__] THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) UNOCAL CAPITAL TRUST (Exact name of obligor as specified in its charter) Delaware 95-4589528 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 (Address of principal executive offices) (Zip code) ______________________ __% Trust Convertible Preferred Securities (Title of the indenture securities) =============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affilia- tion. None. (See Note on page 3.) 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 1996. THE BANK OF NEW YORK By: /s/ PAUL J. SCHMALZEL Name: Paul J. Schmalzel Title: Assistant Treasurer -4- EXHIBIT 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ................. $ 2,461,550 Interest-bearing balances .......... 835,563 Securities: Held-to-maturity securities ........ 802,064 Available-for-sale securities ...... 2,051,263 Federal funds sold in domestic offices of the bank: Federal funds sold ................... 3,885,475 Loans and lease financing receivables: Loans and leases, net of unearned income .........................27,820,159 LESS: Allowance for loan and lease losses ................... 509,817 LESS: Allocated transfer risk reserve......................... 1,000 Loans and leases, net of unearned income, allowance, and reserve... 27,309,342 Assets held in trading accounts ...... 837,118 Premises and fixed assets (including capitalized leases) ................. 614,567 Other real estate owned .............. 51,631 Investments in unconsolidated subsidiaries and associated companies ........................... 225,158 Customers' liability to this bank on acceptances outstanding ............. 800,375 Intangible assets .................... 436,668 Other assets ......................... 1,247,908 ----------- Total assets ......................... $41,558,682 =========== LIABILITIES Deposits: In domestic offices ................ $18,851,327 Noninterest-bearing ............. 7,102,645 Interest-bearing ................11,748,682 In foreign offices, Edge and Agreement subsidiaries, and IBFs .. 10,965,604 Noninterest-bearing .............. 37,855 Interest-bearing ................. 10,927,749 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ............. 1,224,886 Securities sold under agreements to repurchase ...................... 29,728 Demand notes issued to the U.S. Treasury ............................. 118,870 Trading liabilities ................... 673,944 Other borrowed money: With original maturity of one year or less ............................. 2,713,248 With original maturity of more than one year ............................ 20,780 Bank's liability on acceptances executed and outstanding ............. 803,292 Subordinated notes and debentures ..... 1,022,860 Other liabilities ..................... 1,590,564 ----------- Total liabilities ..................... 38,015,103 =========== EQUITY CAPITAL Common stock ......................... 942,284 Surplus .............................. 525,666 Undivided profits and capital reserves ............................ 2,078,197 Net unrealized holding gains (losses) on available-for-sale securities .......................... 3,197 Cumulative foreign currency translation adjustments ............. (5,765) Total equity capital ................. 3,543,579 ----------- Total liabilities and equity capital ............................. $41,558,682 =========== I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot Thomas A. Renyi Directors Alan R. Griffith EX-25.3 12 FORM T-1 AS TRUSTEE UNDER THE GUARANTEE EXHIBIT 25.3 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [__] THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) UNOCAL CORPORATION (Exact name of obligor as specified in its charter) Delaware 95-3825062 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 (Address of principal executive offices) (Zip code) ______________________ Guarantee of __% Trust Convertible Preferred Securities of Unocal Capital Trust (Title of the indenture securities) =============================================================================== 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affilia- tion. None. (See Note on page 3.) 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33- 44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24 day of July, 1996. THE BANK OF NEW YORK By: /s/ PAUL J. SCHMALZEL Name: Paul J. Schmalzel Title: Assistant Trassurer -4- EXHIBIT 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1996, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ................. $ 2,461,550 Interest-bearing balances .......... 835,563 Securities: Held-to-maturity securities ........ 802,064 Available-for-sale securities ...... 2,051,263 Federal funds sold in domestic offices of the bank: Federal funds sold ................... 3,885,475 Loans and lease financing receivables: Loans and leases, net of unearned income ......................... 27,820,159 LESS: Allowance for loan and lease losses ................... 509,817 LESS: Allocated transfer risk reserve......................... 1,000 Loans and leases, net of unearned income, allowance, and reserve... 27,309,342 Assets held in trading accounts ...... 837,118 Premises and fixed assets (including capitalized leases) ................. 614,567 Other real estate owned .............. 51,631 Investments in unconsolidated subsidiaries and associated companies ........................... 225,158 Customers' liability to this bank on acceptances outstanding ............. 800,375 Intangible assets .................... 436,668 Other assets ......................... 1,247,908 ----------- Total assets ......................... $41,558,682 =========== LIABILITIES Deposits: In domestic offices ................ $18,851,327 Noninterest-bearing ............. 7,102,645 Interest-bearing ................11,748,682 In foreign offices, Edge and Agreement subsidiaries, and IBFs .. 10,965,604 Noninterest-bearing .............. 37,855 Interest-bearing ....................10,927,749 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ............. 1,224,886 Securities sold under agreements to repurchase ...................... 29,728 Demand notes issued to the U.S. Treasury ............................. 118,870 Trading liabilities ................... 673,944 Other borrowed money: With original maturity of one year or less ............................. 2,713,248 With original maturity of more than one year ............................ 20,780 Bank's liability on acceptances executed and outstanding ............. 803,292 Subordinated notes and debentures ..... 1,022,860 Other liabilities ..................... 1,590,564 ----------- Total liabilities ..................... 38,015,103 =========== EQUITY CAPITAL Common stock ......................... 942,284 Surplus .............................. 525,666 Undivided profits and capital reserves ............................ 2,078,197 Net unrealized holding gains (losses) on available-for-sale securities .......................... 3,197 Cumulative foreign currency translation adjustments ............. (5,765) Total equity capital ................. 3,543,579 Total liabilities and equity ----------- capital ............................. $41,558,682 =========== I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot Thomas A. Renyi Directors Alan R. Griffith EX-99.1 13 FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL TO TENDER $3.50 CONVERTIBLE PREFERRED STOCK OF UNOCAL CORPORATION IN EXCHANGE FOR % TRUST CONVERTIBLE PREFERRED SECURITIES OF UNOCAL CAPITAL TRUST THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON , 1996 (THE "EXPIRATION DATE") UNLESS EXTENDED BY UNOCAL CORPORATION EXCHANGE AGENT: THE BANK OF NEW YORK Facsimile Number: (For Eligible Institutions Only) (212) 571-3080 By Hand or Overnight Courier: By Mail: (Registered or Certified Mail The Bank of New York Recommended) 101 Barclay Street (7 East) Reorganization Section The Bank of New York Corporate Trust Services Window 101 Barclay Street (7 East) New York, New York 10286 Reorganization Section Attention: George Johnson New York, New York 10286 Attention: George Johnson Confirm Receipt of Notice of Guaranteed Delivery by Telephone (212) 815-4997 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. The undersigned acknowledges receipt of the Prospectus, dated , 1996 (the "Prospectus"), of Unocal Corporation, a Delaware corporation ("Unocal"), and Unocal Capital Trust, a Delaware statutory business trust (the "Trust") which, together with this Letter of Transmittal (the "Letter of Transmittal"), describes Unocal's offer (the "Exchange Offer") to exchange % Trust Convertible Preferred Securities of the Trust, representing preferred undivided beneficial interests in the assets of the Trust (the "Trust Convertible Preferred Securities"), for up to all of the 10,250,000 outstanding shares of its $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock"). The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price for a share of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date (as defined herein), plus accumulated and unpaid dividends thereon to but excluding the Expiration Date, or (2) the Market Value (as defined herein) of the number of shares of the common stock, par value $1.00 per share (the "Common Stock"), of Unocal into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date, for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer. The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio on the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. Unocal will pay amounts of less than $50 due to a holder of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. The "Exchange Amount Determination Date" will be the second business day before the Expiration Date. "Market Value" means the average of the daily closing price for one share of the Common Stock as reported on the New York Stock Exchange Composite Transaction listing for the five trading days immediately preceding the Exchange Amount Determination Date. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ANY ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. List below the shares of $3.50 Convertible Preferred Stock to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Numbers of Shares should be listed on a separate signed schedule affixed hereto. DESCRIPTION OF SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK TENDERED HEREWITH - -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) NUMBER OF SHARES (PLEASE CERTIFICATE REPRESENTED NUMBER OF SHARES FILL IN) NUMBER(S)* BY CERTIFICATE(S) TENDERED** - ---------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- TOTAL
- ------------------------------------------------------------------------------- * Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full number of shares of $3.50 Convertible Preferred Stock represented by the tendered certificates. See instruction 2. This Letter of Transmittal is to be used if certificates for shares of $3.50 Convertible Preferred Stock are to be forwarded herewith. If delivery of shares of $3.50 Convertible Preferred Stock is to be made through book-entry transfer into the Exchange Agent's account at the Depository Trust Company ("DTC"), this Letter of Transmittal need not be delivered; provided, however, that tenders of shares of $3.50 Convertible Preferred Stock must be effected in accordance with DTC's Automated Tender Offer Program ("ATOP") procedures and the procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering--Book-Entry Transfer". Unless the context requires otherwise, the term "Holder" for purposes of this Letter of Transmittal means any person in whose name shares of $3.50 Convertible Preferred Stock are registered or any other person who has obtained a properly completed stock power from the registered holder or any person whose shares of $3.50 Convertible Preferred Stock are held of record by DTC who desires to deliver such shares by book-entry transfer at DTC. Holders whose shares of $3.50 Convertible Preferred Stock are not immediately available or who cannot deliver their shares of $3.50 Convertible Preferred Stock and all other documents required hereby to the Exchange Agent prior to the Expiration Date may tender their shares of $3.50 Convertible Preferred Stock according to the guaranteed delivery procedure set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering--Guaranteed Delivery". [_] CHECK HERE IF TENDERED SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution ---------------------------------------------- The Depository Trust Company: ---------------------------------------------- Account Number Transaction Code Number --------------- --------------------- [_] CHECK HERE IF TENDERED SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) -------------------------------------------- Name of Eligible Institution that Guaranteed Delivery ---------------------- If delivery is by Book-Entry Transfer: Account Number ----------------------------------------------------------- PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to Unocal the above-described shares of $3.50 Convertible Preferred Stock. Subject to, and effective upon, the acceptance for exchange of the shares of $3.50 Convertible Preferred Stock tendered herewith, the undersigned hereby exchanges, assigns, and transfers to, or upon the order of, Unocal, all right, title, and interest in and to such shares. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that said Exchange Agent acts as the agent of the undersigned in connection with the Exchange Offer) to cause the shares of $3.50 Convertible Preferred Stock to be assigned, transferred, and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign, and transfer the shares of $3.50 Convertible Preferred Stock and to acquire the Trust Convertible Preferred Securities issuable upon the exchange of such tendered shares, and that, when the same are accepted for exchange, Unocal will acquire good and unencumbered title to the tendered shares of $3.50 Convertible Preferred Stock, free and clear of all liens, restrictions, charges, and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute, and deliver any additional documents deemed by the Exchange Agent or Unocal to be necessary or desirable to complete the exchange, assignment, and transfer of tendered shares of $3.50 Convertible Preferred Stock or transfer ownership of such shares on the account books maintained by DTC. All authority herein conferred or agreed to be conferred shall survive the death, bankruptcy, or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors, and assigns of the undersigned. The Exchange Offer is conditioned on the receipt for exchange of at least 4,000,000 shares of $3.50 Convertible Preferred Securities and certain other conditions described in the Prospectus, which conditions may be waived by Unocal. In addition, Unocal expressly reserves the right, in its sole discretion, to extend, amend, or modify the terms and conditions of the Exchange Offer in any manner, or to withdraw or terminate the Exchange Offer at any time for any reason. The undersigned recognizes that as a result of the foregoing, Unocal may not be required to exchange any of the shares of $3.50 Convertible Preferred Stock tendered hereby and, in such event, the shares of $3.50 Convertible Preferred Stock not exchanged will be returned to the undersigned at the address shown below the signature of the undersigned. Tendered shares of $3.50 Convertible Preferred Stock may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by Unocal, may be withdrawn at any time after 40 business days after the date of the Prospectus. Certificates for all Trust Convertible Preferred Securities delivered in exchange for tendered shares of $3.50 Convertible Preferred Stock delivered herewith but not exchanged, registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. TENDERED HOLDER(S) SIGN HERE (Complete accompanying substitute Form W-9) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (Signature(s) of Holder(s)) Dated: ---------------- , 1996 (Must be signed by registered Holder(s) exactly as name(s) appear(s) on certificate(s) for shares of $3.50 Convertible Preferred Stock or by any person(s) authorized to become registered Holder(s) by endorsements and documents transmitted herewith or, if the shares of $3.50 Convertible Preferred Stock are held of record by DTC, the person in whose name such shares are registered on the books of DTC. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, please set forth the full title of such person.) See instruction 3. Name(s): --------------------------------------------------------------------- ----------------------------------------------------------------------------- (Please Print) Capacity (full title): ------------------------------------------------------- Address: --------------------------------------------------------------------- ----------------------------------------------------------------------------- ----------------------------------------------------------------------------- (Including Zip Code) Area Code and Telephone No. -------------------------------------------------- Taxpayer Identification No. -------------------------------------------------- GUARANTEE OF SIGNATURE(S) (If Required--See Instruction 3) Authorized Signature: -------------------------------------------------------- Name: ------------------------------------------------------------------------ Title: ----------------------------------------------------------------------- Address: --------------------------------------------------------------------- Name of Firm: ---------------------------------------------------------------- Area Code and Telephone Number: ---------------------------------------------- Dated: ---------------- , 1996 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. Delivery of this Letter of Transmittal and Certificates. Certificates for all physically delivered shares of $3.50 Convertible Preferred Stock as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, or confirmation of any book-entry transfer to the Exchange Agent's account at DTC of shares of $3.50 Convertible Preferred Stock tendered by book-entry transfer, must be received by the Exchange Agent at either of its addresses set forth herein prior to the Expiration Date. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK, AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, BE USED. Holders whose shares of $3.50 Convertible Preferred Stock are not immediately available or who cannot deliver their shares of $3.50 Convertible Preferred Stock and all other required documents to the Exchange Agent prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis may tender their shares of $3.50 Convertible Preferred Stock pursuant to the guaranteed delivery procedure set forth in the Prospectus under "The Exchange Offer--Procedures for Tendering--Guaranteed Delivery". Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined in the Prospectus); (ii) on or prior to the Expiration Date, the Exchange Agent must have received from such Eligible Institution a letter, telex, telegram, or facsimile transmission setting forth the name and address of the tendering Holder, the names in which such shares are registered, and, if possible, the certificate numbers of the shares of $3.50 Convertible Preferred Stock to be tendered; and (iii) all tendered shares of $3.50 Convertible Preferred Stock as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, or a confirmation of any book-entry transfer of such shares into the Exchange Agent's account at DTC, must be received by the Exchange Agent within three New York Stock Exchange, Inc. trading days after the date of execution of such letter, telex, telegram, or facsimile transmission, all as provided in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering-- Guaranteed Delivery". No alternative, conditional, irregular, or contingent tenders will be accepted. All tendering Holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the shares of $3.50 Convertible Preferred Stock for exchange. 2. Partial Tenders; Withdrawals. If less than the entire number of shares of $3.50 Convertible Preferred Stock evidenced by a submitted certificate is tendered, the tendering Holder must fill in the number of shares tendered in the box entitled "Number of Shares Tendered". A newly issued certificate for shares of $3.50 Convertible Preferred Stock submitted but not tendered will be sent to such Holder as soon as practicable after the Expiration Date. All shares of $3.50 Convertible Preferred Stock evidenced by certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Tenders of shares of $3.50 Convertible Preferred Stock pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by Unocal, may be withdrawn at any time after 40 business days after the date of the Prospectus. To be effective, a written, telegraphic, telex, or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered shares of $3.50 Convertible Preferred Stock to be withdrawn, the certificate numbers of the shares of $3.50 Convertible Preferred Stock to be withdrawn, the number of shares of $3.50 Convertible Preferred Stock delivered for exchange, a statement that such a Holder is withdrawing its election to have such shares exchanged, and the name of the registered Holder of such shares and must be signed by the Holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to Unocal that the person withdrawing the tender has succeeded to the beneficial ownership of the shares of $3.50 Convertible Preferred Stock being withdrawn. The Exchange Agent will return properly withdrawn shares of $3.50 Convertible Preferred Stock promptly following receipt of notice of withdrawal. If shares of $3.50 Convertible Preferred Stock have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn shares of $3.50 Convertible Preferred Stock or otherwise comply with DTC's procedures. All questions as to the validity of notice of withdrawal, including time of receipt, will be determined by Unocal, and such determination will be final and binding on all parties. Withdrawals of tenders of shares of $3.50 Convertible Preferred Stock may not be rescinded and any shares of $3.50 Convertible Preferred Stock withdrawn will thereafter be deemed not validly tendered for purposes of the Exchange Offer. Properly withdrawn shares of $3.50 Convertible Preferred Stock, however, may be retendered by following the procedures therefor at any time prior to the Expiration Date. 3. Signature on this Letter of Transmittal; Written Instruments and Endorsements; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered Holder(s) of the shares of $3.50 Convertible Preferred Stock tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration, enlargement, or any change whatsoever. If any of the shares of $3.50 Convertible Preferred Stock tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the shares of $3.50 Convertible Preferred Stock tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign, and submit as many separate copies of this Letter of Transmittal as there are different registrations of shares of $3.50 Convertible Preferred Stock. When this Letter of Transmittal is signed by the registered Holder(s) of shares of $3.50 Convertible Preferred Stock listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered Holder(s) of the shares of $3.50 Convertible Preferred Stock listed, such shares must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to Unocal and duly executed by the registered Holder(s), in either case signed exactly as the name or names of the registered Holder(s) appear(s) on the shares of $3.50 Convertible Preferred Stock. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such person should so indicate when signing, and, unless waived by Unocal, proper evidence satisfactory to Unocal of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal need not be guaranteed by an Eligible Institution, provided the shares of $3.50 Convertible Preferred Stock are tendered (i) by a registered Holder of such shares, or (ii) for the account of an Eligible Institution. 4. Transfer Taxes. Unocal shall pay all transfer taxes, if any, applicable to the transfer and exchange of shares of $3.50 Convertible Preferred Stock to it or its order pursuant to the Exchange Offer. If, however, certificates representing Trust Convertible Preferred Securities or shares of $3.50 Convertible Preferred Stock not tendered or accepted for exchange, are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of such shares tendered hereby, or if a transfer tax is imposed for any reason other than the exchange of shares of $3.50 Convertible Preferred Stock to Unocal or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exception therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder. Except as provided in this Instruction 4, it will not be necessary for transfer tax stamps to be affixed to the shares of $3.50 Convertible Preferred Stock listed in this Letter of Transmittal. 5. Extensions, Amendments and Termination. Unocal expressly reserves the right to extend, waive, amend, or modify the terms or conditions of the Exchange Offer or withdraw or terminate the Exchange Offer at any time and for any reason. 6. Mutilated, Lost, Stolen, or Destroyed Certificates. Any Holder whose certificates for shares of $3.50 Convertible Preferred Stock have been mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the address indicated below for further instructions. 7. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the addresses and telephone number set forth above. In addition, all questions relating to the Exchange Offer as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to D.F. King & Co., Inc., telephone (800) 848-3051. 8. Irregularities. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or shares of $3.50 Convertible Preferred Stock will be resolved by Unocal, whose determination will be final and binding. Unocal reserves the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of Unocal's counsel, be unlawful. Unocal also reserves the right to waive any irregularities or conditions of tender as to the particular shares of $3.50 Convertible Preferred Stock covered by any Letter of Transmittal or tendered pursuant to such letter. None of Unocal, the Exchange Agent, or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Unocal's interpretation of the terms and conditions of the Exchange Offer shall be final and binding. 9. Substitute Form W-9. Except as described below under "Important Tax Information," federal income tax laws require each tendering holder to provide Unocal with a correct taxpayer identification number ("TIN") on the Substitute Form W-9 which is provided below, and to indicate whether or not the holder is not subject to backup withholding by crossing out Part 2 of the Substitute Form W-9 if the holder is currently subject to backup withholding. Failure to provide the information on such form or to cross out Part 2 of such form if applicable may subject the tendering holder to 31% federal income tax withholding on payments made to the holder. The box in Part 3 of such form may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and the holder is not provided with a TIN within sixty (60) days, Unocal will withhold 31% on all such payments thereafter until a TIN is provided to it. 10. Definitions. Capitalized terms used in this Letter of Transmittal and not otherwise defined have the meanings given in the Prospectus. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK AND ALL OTHER REQUIRED DOCUMENTS) OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a holder whose tendered shares of $3.50 Convertible Preferred Stock are accepted for exchange is required to provide Unocal with such holder's correct taxpayer identification number ("TIN") on a Substitute Form W-9. If a holder is an individual, the TIN is the holder's social security number. If Unocal is not provided with the correct TIN, the holder may be subject to a penalty imposed by the Internal Revenue Service ("IRS"). In addition, payments that are made to such holder with respect to Trust Convertible Preferred Securities acquired pursuant to the Exchange Offer may be subject to backup withholding. If backup withholding applies, Unocal is required to withhold 31% of all payments with respect to the Trust Convertible Preferred Securities made to a holder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. To prevent backup withholding on payments that are made to a holder with respect to Trust Convertible Preferred Securities, the holder is required to notify Unocal of his or its correct TIN by completing the Substitute Form W-9 below, certifying that the TIN provided on such form is correct (or that such holder is awaiting a TIN) and whether or not (i) the holder has not been notified by the IRS that the holder is subject to backup withholding as a result of a failure to report all interest or dividends or (ii) the IRS has notified the holder that the holder is no longer subject to backup withholding. Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding requirements. A corporation must, however, complete the Substitute Form W-9, including providing its TIN (unless it is a foreign corporation that does not have a TIN) and indicating that it is exempt from backup withholding, in order to establish its exemption from backup withholding. A foreign corporation or individual, or other foreign person, must submit a statement, signed under penalties of perjury, attesting to such person's status as a non-United States person. Such statements can be obtained from the Exchange Agent. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. - ------------------------------------------------------------------------------- PAYER'S NAME: UNOCAL CORPORATION ------------------------------------------------------------------------------- Part I--PLEASE PROVIDE YOUR SUBSTITUTE TIN IN THE BOX AT RIGHT AND -------------------- Form W-9 CERTIFY BY SIGNING AND Social security DATING BELOW number OR --------------------- Employer identification number - ------------------------------------------------------------------------------- Department of Part II--I am not subject to backup withholding the Treasury because (i) I am exempt from backup withholding, Internal Revenue (ii) I have not been notified by the Internal Service Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. (You must cross out this Part 2 if you are currently subject to backup withholding because of underreporting of interest or dividends on your tax return.) - ------------------------------------------------------------------------------- Payer's Request for CERTIFICATION--UNDER PENALTIES OF PERJURY, I Taxpayer CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM Identification Number IS TRUE, CORRECT, AND COMPLETE. (TIN) ----------------------------------------------------- Part III Signature: ______________ Date: ______ Awaiting Name (Please Print): TIN [_] --------------------------- - ------------------------------------------------------------------------------ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. - ------------------------------------------------------------------------------- CERTIFICATE OF TAXPAYER AWAITING TIN I certify under penalties of perjury that a taxpayer identification num- ber has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to an appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I under- stand that if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. _______________________________________ __________________________ Signature Date --------------------------------------- Name (Please Print) ------------------------------------------------------------------------------ EX-99.2 14 FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF $3.50 CONVERTIBLE PREFERRED STOCK OF UNOCAL CORPORATION IN EXCHANGE FOR % TRUST CONVERTIBLE PREFERRED SECURITIES OF UNOCAL CAPITAL TRUST Registered holders of shares of $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock") of Unocal Corporation, a Delaware corporation ("Unocal"), who wish to tender any such shares in exchange for % Trust Convertible Preferred Securities (the "Trust Convertible Preferred Securities") of Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), representing preferred undivided beneficial interests in the assets of the Trust, on the terms and subject to the conditions set forth in the Prospectus of Unocal and the Trust, dated , 1996 (the "Prospectus"), and the related Letter of Transmittal, and whose shares of $3.50 Convertible Preferred Stock are not immediately available or who cannot deliver their shares of $3.50 Convertible Preferred Stock and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to The Bank of New York (the "Exchange Agent") prior to the Expiration Date (as defined in the Prospectus), may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission (receipt confirmed by telephone and an original delivered by guaranteed overnight delivery) or mailed to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering" in the Prospectus. The Exchange Agent for the Exchange Offer: THE BANK OF NEW YORK Facsimile Number: (For Eligible Institutions Only) (212) 571-3080 By Hand or Overnight Courier: By Mail: (Registered or Certified Mail Recommended) The Bank of New York The Bank of New York 101 Barclay Street (7 East) 101 Barclay Street (7 East) Reorganization Section Reorganization Section Corporate Trust Services Window New York, New York 10286 New York, New York 10286 Attention: George Johnson Attention: George Johnson Confirm Receipt of Notice of Guaranteed Delivery by Telephone (212) 815-4997 Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than as set forth above will not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution, such signature guarantee must appear in the applicable space provided in the Letter of Transmittal for the guarantee of signatures. Ladies and Gentlemen: The undersigned hereby tenders the number of shares of $3.50 Convertible Preferred Stock indicated below, upon the terms and subject to the conditions contained in the Prospectus, dated , 1996, of Unocal and the Trust, receipt of which is hereby acknowledged. DESCRIPTION OF SECURITIES TENDERED Name and address of Certificate Number(s) Number of Shares of registered holder as of $3.50 Convertible $3.50 Convertible it appears on the Preferred Stock Preferred Stock Certificate(s) of Tendered Tendered $3.50 Convertible Preferred Stock (Please Print) - ----------------------- ----------------------- ----------------------- - ----------------------- ----------------------- ----------------------- - ----------------------- ----------------------- ----------------------- - ----------------------- ----------------------- ----------------------- THE FOLLOWING GUARANTEE MUST BE COMPLETED GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch, agency, or correspondent in the United States, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth above, the certificates representing the shares of the $3.50 Convertible Preferred Stock, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal within three New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery. Name of Firm: ----------------------- ----------------------------------------- (Authorized Signature) Address: Title: ---------------------------- ----------------------------------- Name: - ------------------------------------ ------------------------------------ (Zip Code) (Please type or print) Area Code and Telephone Number: Date: ------------------- ------------------------------------ NOTE: DO NOT SEND CERTIFICATES OF $3.50 CONVERTIBLE PREFERRED STOCK WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES OF $3.50 CONVERTIBLE PREFERRED STOCK SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.3 15 FORM OF LETTER TO REGISTERED HOLDERS EXHIBIT 99.3 TENDER FOR $3.50 CONVERTIBLE PREFERRED STOCK OF UNOCAL CORPORATION IN EXCHANGE FOR % TRUST CONVERTIBLE PREFERRED SECURITIES OF UNOCAL CAPITAL TRUST To Registered Holders and Depository Trust Company Participants: We are enclosing herewith the material listed below relating to the Exchange Offer (as defined herein) by Unocal Corporation, a Delaware corporation ("Unocal"), to exchange % Trust Convertible Preferred Securities of Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), representing preferred undivided beneficial interests in the assets of the Trust (the "Trust Convertible Preferred Securities"), for up to all of the 10,250,000 shares of its outstanding $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock"). The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price for a share of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date (as defined herein), plus accumulated and unpaid dividends thereon to but excluding the Expiration Date (as defined herein), or (2) the Market Value (as defined herein) of the number of shares of the common stock, par value $1.00 per share (the "Common Stock"), of Unocal into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date, for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer, and upon the terms and subject to the conditions set forth in the Prospectus, dated , 1996 (the "Prospectus"), of Unocal and the Trust, and the related Letter of Transmittal (which, together with the Prospectus, constitutes the "Exchange Offer"). The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio on the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. Unocal will pay amounts of less than $50 due to a holder of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. The "Exchange Amount Determination Date" will be the second business day before the Expiration Date. "Market Value" means the average of the daily closing price for one share of the Common Stock as reported on the New York Stock Exchange Composite Transaction listing for the five trading days immediately preceding the Exchange Amount Determination Date. Enclosed herewith are copies of the following documents: 1.Prospectus, dated , 1996; 2.Letter of Transmittal (together with accompanying Substitute Form W-9 Guidelines); 3.Notice of Guaranteed Delivery; and 4. Letter which may be sent to your clients for whose account you hold shares of the $3.50 Convertible Preferred Stock in your name or in the name of your nominee, with space provided for obtaining such client's instruction with regard to the Exchange Offer. We urge you to contact your clients promptly. Please note that the Exchange Offer will expire at 12:00 midnight, New York City time, on , 1996, unless extended (the "Expiration Date"). The Exchange Offer is conditioned on the receipt for exchange of at least 4,000,000 shares of the $3.50 Convertible Preferred Stock and certain other conditions described in the Prospectus, which conditions may be waived by Unocal. D. F. King & Co., Inc. has been appointed Information Agent for the Exchange Offer. All questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus or the Letter of Transmittal, may be directed to D. F. King & Co., Inc., New York, New York, telephone (800) 669-5550. Unocal will not pay any fee or commission to any broker or dealer or to any other persons (other than the Dealer Managers and the Exchange Agent) in connection with the solicitation of tenders of shares of $3.50 Convertible Preferred Stock pursuant to the Exchange Offer. Unocal will pay or cause to be paid any transfer taxes payable on the transfer of shares of $3.50 Convertible Preferred Stock to it, except as otherwise provided in Instruction 4 of the enclosed Letter of Transmittal. Very truly yours, UNOCAL CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU AS THE AGENT OF UNOCAL CORPORATION OR THE BANK OF NEW YORK OR AUTHORIZE YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. EX-99.4 16 FORM OF LETTER TO CLIENTS EXHIBIT 99.4 TENDER FOR $3.50 CONVERTIBLE PREFERRED STOCK OF UNOCAL CORPORATION IN EXCHANGE FOR % TRUST CONVERTIBLE PREFERRED SECURITIES OF UNOCAL CAPITAL STOCK To Our Clients: We are enclosing herewith a Prospectus, dated , 1996 (the "Prospectus"), of Unocal Corporation, a Delaware corporation ("Unocal"), and Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), and a related Letter of Transmittal (which, together with the Prospectus, constitutes the "Exchange Offer") relating to the offer by Unocal to exchange % Trust Convertible Preferred Securities of the Trust, representing preferred undivided beneficial interests in the assets of the Trust (the "Trust Convertible Preferred Securities"), for up to all of the 10,250,000 outstanding shares of its $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock"). The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price for a share of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date (as defined herein), plus accumulated and unpaid dividends thereon to but excluding the Expiration Date (as defined herein), or (2) the Market Value (as defined herein) of the number of shares of the common stock, par value $1.00 per share (the "Common Stock"), of Unocal into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date, for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer. The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio on the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. Unocal will pay amounts of less than $50 due to a holder of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. The "Exchange Amount Determination Date" will be the second business day before the Expiration Date. "Market Value" means the average of the daily closing price for one share of the Common Stock as reported on the New York Stock Exchange Composite Transaction listing for the five trading days immediately preceding the Exchange Amount Determination Date. Please note that the Exchange Offer will expire at 12:00 midnight, New York City time, on , 1996, unless extended (the "Expiration Date"). The Exchange Offer is conditioned on the receipt for exchange of at least 4,000,000 shares of the $3.50 Convertible Preferred Stock and certain other conditions described in the Prospectus, which conditions may be waived by Unocal. We are the holder of record of shares of $3.50 Convertible Preferred Stock held by us for your account. A tender of such shares can be made only by us as the record holder and pursuant to your instructions. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER THE SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to tender any or all of the shares $3.50 Convertible Preferred Stock held by us for your account pursuant to the terms and conditions of the Exchange Offer. Please so instruct us by completing, executing, detaching, and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your shares of $3.50 Convertible Preferred Stock, please forward to us your instructions in ample time to permit us to submit a tender on your behalf prior to the Expiration Date. Unless otherwise indicated on the instruction form, you will be deemed to have tendered the full number of shares of $3.50 Convertible Preferred Stock held by us for your account. Very truly yours, INSTRUCTIONS WITH RESPECT TO THE TENDER FOR $3.50 CONVERTIBLE PREFERRED STOCK OF UNOCAL CORPORATION IN EXCHANGE FOR % TRUST CONVERTIBLE PREFERRED SECURITIES OF UNOCAL CAPITAL TRUST The undersigned acknowledges receipt of your letter enclosing the Prospectus, dated , 1996, of Unocal and the Trust and a related Letter of Transmittal relating to the Exchange Offer. This will instruct you to tender the number of shares of $3.50 Convertible Preferred Stock indicated below held by you for the account of the undersigned, pursuant to the terms and subject to the conditions of the Exchange Offer, and confirm that you may make the representations contained in the Letter of Transmittal on behalf of the undersigned. DESCRIPTION OF SECURITIES TO BE TENDERED AGGREGATE NUMBER OF SHARES OF $3.50 CONVERTIBLE PREFERRED STOCK HELD BY NUMBER OF SHARES YOU FOR THE ACCOUNT OF $3.50 CONVERTIBLE OF THE UNDERSIGNED PREFERRED STOCK TENDERED -------------------- ------------------------ ------------------------------------- Signature(s) ------------------------------------- Please print name ------------------------------------- Date - -------- * Unless otherwise indicated, the undersigned will be deemed to have tendered the full number of shares of $3.50 Convertible Preferred Stock held for the account of the undersigned. EX-99.5 17 FORM OF NEWSPAPER ANNOUNCEMENT EXHIBIT 99.5 This is neither an offer to exchange or to sell nor a solicitation of an offer to exchange or buy any of the $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock") of Unocal Corporation. The Exchange Offer (as defined herein) is made only by the Prospectus (as defined herein) and the related Letter of Transmittal, and the Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of $3.50 Convertible Preferred Stock in any jurisdiction in which the making or acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. In any jurisdiction where the securities or blue sky laws require the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer is being made on behalf of Unocal Corporation by Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. or one or more other brokers or dealers which are licensed under the laws of such jurisdiction. NOTICE OF EXCHANGE OFFER TO HOLDERS OF UNOCAL CORPORATION $3.50 CONVERTIBLE PREFERRED STOCK Unocal Corporation, a Delaware corporation ("Unocal"), is offering, upon the terms and subject to the conditions set forth in the Prospectus, dated ___________, 1996 (the "Prospectus"), of Unocal and Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), and the related Letter of Transmittal (the "Letter of Transmittal" which, together with the Prospectus, constitute the "Exchange Offer"), to exchange __% Trust Convertible Preferred Securities of the Trust, representing preferred undivided beneficial interests in the assets of the Trust (the "Trust Convertible Preferred Securities"), for up to all of the 10,250,000 outstanding shares of its $3.50 Convertible Preferred Stock. Unocal will directly or indirectly own all of the common securities of the Trust (together with the Trust Convertible Preferred Securities, the "Trust Securities"). THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON ______ __, 1996, UNLESS EXTENDED. NONE OF THE BOARD OF DIRECTORS OF UNOCAL, UNOCAL, THE TRUSTEES, OR THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING IN THE EXCHANGE OFFER. HOLDERS OF $3.50 CONVERTIBLE PREFERRED STOCK ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISORS IN MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. The Exchange Offer will be effected on the basis of (A) that amount of Trust Convertible Preferred Securities having an aggregate liquidation amount equal to the greater of (1) the redemption price of the $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date (as defined herein), plus accumulated and unpaid dividends on the $3.50 Convertible Preferred Stock to but excluding the Expiration Date, or (2) the Market Value (as defined herein) of the number of shares of the common stock, par value $1.00 per share (the "Common Stock"), of Unocal into which a share of the $3.50 Convertible Preferred Stock is convertible as of the Exchange Amount Determination Date, for (B) each share of $3.50 Convertible Preferred Stock validly tendered and accepted for exchange in the Exchange Offer. The Trust Convertible Preferred Securities have a liquidation amount of $50 per security. The current redemption price for a share of the $3.50 Convertible Preferred Stock is $52.10. The current conversion ratio on the $3.50 Convertible Preferred Stock is 1.626 shares of Common Stock for each share of $3.50 Convertible Preferred Stock. Unocal will pay amounts of less than $50 due to a holder of $3.50 Convertible Preferred Stock for such exchange in cash in lieu of issuing a fractional Trust Convertible Preferred Security. The "Exchange Amount Determination Date" will be the second business day before the Expiration Date. "Market Value" means the average of the daily closing price for one share of the Common Stock as reported on the New York Stock Exchange Composite Transaction listing for the five trading days immediately preceding the Exchange Amount Determination Date. The Trust Convertible Preferred Securities will be convertible at any time beginning 90 days following the first date of issuance of any Trust Convertible Preferred Securities through the close of business on ___________, 2026, at the option of the holder thereof, into shares of Common Stock at an initial conversion rate equal to that number of shares of Common Stock determined by dividing the liquidation amount of $50 per security by the product of _____ times the Market Value. On the Exchange Amount Determination Date, the Company will issue a press release announcing the exchange ratio for the Exchange Offer and the initial conversion ratio for the Trust Convertible Preferred Securities. Immediately prior to the consummation of the Exchange Offer, Unocal will deposit in the Trust as trust assets its __% Convertible Junior Subordinated Debentures due 2026 (the "Convertible Debentures"), having an aggregate principal amount equal to the aggregate stated liquidation amount of the Trust Securities to be issued by the Trust. The Convertible Debentures will be the sole assets of the Trust. Upon the terms and subject to the conditions of the Exchange Offer, Unocal will accept for exchange shares of $3.50 Convertible Preferred Stock validly tendered and not withdrawn prior to 12:00 midnight, New York City time, on _________ __, 1996, or if extended by Unocal, in its sole discretion, the latest date and time to which extended (the "Expiration Date"). The Exchange Offer will expire on the Expiration Date. Tenders of $3.50 Convertible Preferred Stock may be withdrawn at any time prior to the Expiration Date and, unless accepted for exchange by Unocal, may be withdrawn at any time after 40 business days after the date of this Prospectus. Consummation of the Exchange Offer is conditioned on, among other things, receipt of at least 4,000,000 validly tendered shares of $3.50 Convertible Preferred Stock (which condition may be waived by Unocal). Unocal expressly reserves the right, in its sole discretion, subject to applicable law, to (i) terminate the Exchange Offer, and not accept for exchange any shares of $3.50 Convertible Preferred Stock and promptly return all $3.50 Convertible Preferred Stock at any time for any reason, including (without limitation) if fewer than 4,000,000 of such shares are tendered or upon the failure of any of the conditions specified in "The Exchange Offer--Procedures for Tendering" in the Prospectus, (ii) waive any condition to the Exchange Offer and accept all $3.50 Convertible Preferred Stock previously tendered pursuant to the Exchange Offer, (iii) extend the Expiration Date and retain all $3.50 Convertible Preferred Stock tendered pursuant to such Exchange Offer until the Expiration Date, subject, however, to all withdrawal rights of Holders (see "The Exchange Offer--Withdrawal of Tenders" in the Prospectus), or (iv) amend or modify the terms of the Exchange Offer in any manner, including (without limitation), the form or the formula for calculating the amount of the consideration to be paid pursuant to the Exchange Offer. Any amendment applicable to the Exchange Offer will apply to all shares of $3.50 Convertible Preferred Stock tendered pursuant to the Exchange Offer. The minimum period during which the Exchange Offer must remain open following a material change in the terms of the Exchange Offer or a waiver by the Company of a material condition of the Exchange Offer, other than a change in the percentage of the $3.50 Convertible Preferred Stock being sought or in the consideration offered, will depend upon the facts and circumstances, including the relative materiality of the change or waiver. See "The Exchange Offer--Expiration Date; Extensions; Amendments; Termination" in the Prospectus. The purpose of the Exchange Offer is to refinance the $3.50 Convertible Preferred Stock with the Trust Convertible Preferred Securities. The Prospectus and Letter of Transmittal contain important information which should be read before any action is taken by holders of $3.50 Convertible Preferred Stock. Tenders may be made only by a properly completed and executed Letter of Transmittal and in conformance with the terms thereof and of the Prospectus. Unocal will pay to Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co., as dealer managers, a fee of 5/8% of the aggregate redemption price for the shares of $3.50 Convertible Preferred Stock as of the Exchange Amount Determination Date, plus accumulated and unpaid dividends thereon to but excluding the Expiration Date, validly tendered and accepted for exchange pursuant to the Exchange Offer. The information required to be disclosed by paragraph (d)(1) of Rule 13e-4 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Prospectus and is incorporated herein by reference. The Prospectus and the related Letter of Transmittal are being sent to all registered holders of the $3.50 Convertible Preferred Stock as of ____________, 1996. Any questions or requests for assistance or copies of the Prospectus and the Letter of Transmittal may be directed to the Information Agent at its telephone number and location set forth below. Any copies requested will be forwarded promptly at Unocal's expense. You may also contact your broker, dealer, commercial bank, or trust company or other nominee for assistance concerning the Exchange Offer. THE INFORMATION AGENT: D.F. KING & CO., INC. 77 Water Street New York, New York 10005 (800) 848-3051 (Toll-Free) (212) 269-5550 (Call Collect) THE EXCHANGE AGENT: THE BANK OF NEW YORK By Hand or Overnight Courier: By Mail (Registered or Certified Mail Recommended) The Bank of New York The Bank of New York 101 Barclay Street (7 East) 101 Barclay Street (7 East) Reorganization Section Reorganization Section Corporate Trust Services Window New York, New York 10286 New York, New York 10286 Attention: George Johnson Attention: George Johnson By Facsimile Transmission (For Eligible Institutions Only): (212) 571-3080 Confirm Receipt of Notice of Guaranteed Delivery by Telephone: (212) 815-4997 THE DEALER MANAGERS FOR THE EXCHANGE OFFER: MORGAN STANLEY & CO. INCORPORATED GOLDMAN, SACHS & CO. 1585 Broadway 85 Broad Street New York, New York 10036 New York, New York 10004 (800) ___-____ (Toll-Free) (800) 323-5678 (Toll-Free) ______________, 1996 -----END PRIVACY-ENHANCED MESSAGE-----