-----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, Ck3PGSt5n1bkrngdsKcb7Jwe1+rPvCLg4c1aOPAi4rUnMzUJHp81/1gTInx9uVhY WHkFrQigEh5mTDNYXUNavQ== 0000898430-96-003496.txt : 19960808 0000898430-96-003496.hdr.sgml : 19960808 ACCESSION NUMBER: 0000898430-96-003496 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19960807 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-09137 FILM NUMBER: 96604719 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/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-09137-01 FILM NUMBER: 96604720 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/A 1 FORM S-4 PRE-EFFECTIVE AMENDMENT #1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1996 REGISTRATION NOS. 333-09137 333-09137-01 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- PRE-EFFECTIVE AMENDMENT NO. 1 TO 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 JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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 JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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: [_] 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. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Unocal Corporation Offer to Exchange 6 1/4% 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 SEPTEMBER 5, 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 6 1/4% 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 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 1.24 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 6 1/4% 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 September 5, 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. (continued on next page) --------------- SEE "RISK FACTORS" STARTING ON PAGE 17 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 August 7, 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 6 1/4% (the "distribution rate") of the liquidation amount of the securities, 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 2 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 3 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 OF TENDERS THEREIN 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. TABLE OF CONTENTS
PAGE PAGE ---- ---- Available Information.............. 5 Description of the Guarantee....... 54 Incorporation of Certain Documents Description of the Convertible by Reference...................... 6 Debentures........................ 56 Prospectus Summary................. 7 Effect of Obligations under the Risk Factors....................... 17 Convertible Debentures and the The Company........................ 22 Guarantee......................... 65 Market Price of the Common Stock... 23 Description of the Common Stock.... 66 Dividends on the Common Stock...... 23 Description of the $3.50 Capitalization..................... 24 Convertible Preferred Stock....... 68 Selected Consolidated Financial Book-Entry System--The Depository Information....................... 26 Trust Company..................... 75 The Exchange Offer................. 27 Certain Federal Income Tax Unocal Capital Trust............... 34 Considerations.................... 77 Description of the Trust Legal Matters...................... 84 Convertible Preferred Securities.. 36 Experts............................ 84
4 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. 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. 5 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. 6 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. 7 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 1.24 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 8 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". 9 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. 10 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. Distribution on Liquidation ........... $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................... 6 1/4% per annum cash distribu- $3.50 per share per annum (7% per tion payable quarterly in arrears annum) cash dividend payable on March 1, June 1, September 1, quarterly in arrears on the 15th and December 1 of each year, com- day of January, April, July, and mencing December 1, 1996, but October of each year, out of only if, and to the extent that, funds legally available therefor, interest 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 per security the conversion divided by the initial conversion ratio is 1.626 shares (equivalent price, which will be the product to a conversion price of $30.75). of 1.24 times the Market Value of The conversion price is subject a share of Common Stock. The con- to adjustments upon certain version price is subject to ad- events, including the event of a justments upon certain events, Non-Stock Fundamental Change or a including the event of a Non- Common Stock Fundamental Change, Stock Fundamental Change, a Com- each as defined herein with re- mon Stock Fundamental Change, spect to $3.50 Convertible Pre- each as defined herein with re- ferred Stock. See "Description of spect to the Trust Convertible the $3.50 Convertible Preferred Preferred Securities, or a Spin- Stock--Conversion Rights". off (as defined herein). Although similar defined terms are used, In the event of a Spinoff, the these adjustments differ in many $3.50 Convertible Preferred Stock respects from the adjustments re- will be subject to certain con- quired for the $3.50 Convertible version provision adjustments. Preferred Stock. See "Description of the Trust Convertible Pre- ferred 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 and other adjustments or exchanged for one or more new trust con- vertible preferred securities which may be convertible into Spinoff Common Stock (as defined herein). See "Description of the Trust Convertible Preferred Secu- rities--Certain Other Adjust- ments".
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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 103.75% per Con- and 100.0% in 2002 and thereaf- vertible Debenture to be redeemed ter. Holders of $3.50 Convertible and declining to par on September Preferred Stock have no right to 1, 2006, plus accrued and unpaid require the Company to redeem the interest thereon to the redemp- $3.50 Convertible Preferred tion date, including interest ac- Stock. See "Description of the cumulated 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
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TRUST CONVERTIBLE $3.50 CONVERTIBLE PREFERRED SECURITIES PREFERRED STOCK --------------------------------- --------------------------------- 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. 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". 16 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". 17 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 and 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 18 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 19 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 20 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 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". 21 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. 22 MARKET PRICE OF THE COMMON STOCK The following table sets forth the high and low sales prices 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 August 6, 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. 23 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...................................... -- 539 (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................. 345 345 Foreign currency translation adjustment........ (10) (10) Unearned portion of restricted stock........... (16) (16) Retained earnings.............................. 2,119 2,093 (4) ---------- ---------- Total stockholders' equity................... 3,199 2,660 ---------- ---------- Total capitalization....................... $ 6,440 $ 6,440 ========== ========== 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 $5 million). To the extent that the Market Value for a share of the Common Stock exceeds $32.33 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". 24 (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 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). 25 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... 3,199 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. 26 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. 27 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 August 6, 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 such date. 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 28 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 6 1/4% 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 29 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) 30 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. 31 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". 32 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. 33 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 $1.3 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 34 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 August 6, 1996. 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. 35 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 6 1/4% of the liquidation amount of the securities. Distributions not paid on the regularly scheduled payment date therefor will accumulate 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 per 30-day month. 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. 36 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 during 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 interest accrued and unpaid on the Convertible Debentures, 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. The Company has no present intention of exercising its rights to defer payments by extending the interest payment period on the Convertible Debentures. 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 37 organization on which the Trust Convertible Preferred Securities are listed or quoted and shall be at least one 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 1.24 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 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 request 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 that 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 Securities for all quarterly distribution payment periods terminating on or prior to the last distribution payment 38 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. Any determinations by the Board pursuant to these general conversion provision adjustments shall be determined in good faith by the Board, whose determination shall be conclusive and described in a Board resolution. 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". 39 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 or other provisions are adjusted, including those described in "--Conversion Provision Adjustments--Merger, Consolidation or Sale of Assets of the Company" and "--Certain Other Adjustments," would require an 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 or other provisions), the Board may make an adjustment (in lieu of that required pursuant to the above provisions) that it determines in good faith to place the holders of the Convertible Debentures and the Trust Convertible Preferred Securities in a position at least equivalent to the position they were in prior to such event, which determination shall be described in a resolution of the Board. 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 into 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 transaction that is a Non-Stock Fundamental Change (as defined below), to any adjustment in the conversion price in accordance with clause (i) of the following paragraph, and 40 (y) in the case of any such 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, or resulting from such merger, or that acquired such assets or the Company's shares, or is the issuer of the securities into which the Common Stock was converted into the right to receive such securities, 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 August 31, 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 106.250%, 105.625%, 105.000% and 104.375%, respectively, times the liquidation amount of such Trust Convertible Preferred Security) 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 41 Common Stock Fundamental Change will receive consideration in the form of such common stock only, whereas 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 closing price, of the Common Stock for the 10 trading days immediately prior to (A) 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 (B), if there is no such record date, 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, or approved for quotation subject to notice of issuance on The Nasdaq National Market System; 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 prices for one share of the common stock received by holders of the Common Stock in such Common Stock Fundamental Change for the 10 trading days immediately prior to (A) the record date for the determination of the holders of the Common Stock entitled to receive such common stock or (B), if there is no such record date, 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 or a 42 Spinoff (as defined herein), the Reference Market Price shall also be adjusted so that the ratio of the Reference Market Price to the conversion price after giving effect to any such adjustment of the conversion price shall always be the same as the ratio of the initial Reference Market Price to the initial conversion price. Certain Other 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 exchange 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 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 exchange 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 exchange 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 (2)(a)(ii); or 43 (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 thereafter, to more than a de minimis 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 including reasonable detail concerning relevant adjustments to interest rate, redemption provisions and conversion provisions, 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 distributions) 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; (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; and (vi) each holder of Trust Convertible Preferred Securities, by such holder's acceptance thereof, agrees to such exchange and to the effects of such exchange as set forth herein. 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). 44 "Average Stock Price" shall mean the average of the closing prices of the Common Stock for 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 Distribution Date, the Average Stock Price shall be calculated as the average of the sums of the daily closing prices of the Common Stock and the Spinoff Company Stock for the same 10 trading days immediately following the Spinoff Distribution Date. "Spinoff Fair Value" shall mean the product of (a) the average of the closing prices 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 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". 45 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) of the following years:
REDEMPTION YEAR PRICE ---- ---------- 2000.............................................................. 103.750% 2001.............................................................. 103.125% 2002.............................................................. 102.500% 2003.............................................................. 101.875% 2004.............................................................. 101.250% 2005.............................................................. 100.625% 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 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 interest 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 payable 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; provided, however, that such an opinion shall not be deemed to be a "Dissolution Tax Opinion" if the change in tax law 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, 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 46 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 Special Event within such 90-day period by taking some ministerial action (such as filing a form or making an election or pursuing some other similar reasonable measure) that will have no adverse effect on the Trust, the Company or the holders of the Trust Securities or does not subject any of them to more than de minimis regulatory requirements 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, for substantive reasons, deliver a No Recognition Opinion to the Trust, 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 accumulated 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 the opportunity to eliminate, which elimination shall be complete within such 90-day period, such Special Event by taking some ministerial action that has no adverse effect on the Trust, the Company or the holders of the Trust Securities, or does not subject any of them to more than de minimis regulatory requirements, 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 beneficial interests in 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. 47 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, plus accumulated and unpaid distributions thereon, 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 plus accumulated and unpaid distributions 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, plus accumulated and unpaid distributions thereon, 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, plus accumulated and unpaid distributions thereon, 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 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 48 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 16, 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 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. 49 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 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 50 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 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 51 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 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) the Company uses its reasonable efforts to cause the Trust Convertible Preferred Securities (including any Successor Securities) to be listed or quoted on any national securities exchange or with another organization on which the Trust Convertible Preferred Securities are then listed or quoted, (iv) 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, (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect (other than with respect to any dilution of the holders' interest in the new entity), (vi) such successor entity has a purpose identical to that of the Trust, (vii) prior to such merger, consolidation, amalgamation or replacement, the Company has received an opinion of 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 legal 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), (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 (C) following such merger, consolidation, amalgamation or replacement, the Trust or such successor entity will continue to be classified as a grantor trust for United States federal income tax purposes, and (viii) the Company guarantees the obligations of such successor entity under the Successor Securities at least to the extent provided by the Guarantee and the 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 52 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. 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. 53 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 54 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. 55 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 (the "Supplemental Indenture") and the Multiple Series Indenture (the "Base Indenture" and, together with the Supplemental Indenture, the "Indenture"), each to be entered into by and 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 56 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 1.24 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 57 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. In addition, 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 58 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 on September 1 (other than the first period, which will begin on September 3, 2000) of the following years:
REDEMPTION YEAR PRICE ---- ---------- 2000.............................................................. 103.750% 2001.............................................................. 103.125% 2002.............................................................. 102.500% 2003.............................................................. 101.875% 2004.............................................................. 101.250% 2005.............................................................. 100.625% 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. The Company also has the right to redeem the Convertible Debentures in order to effect an exchange of securities in the event of a Spinoff. See "Description of the Trust Convertible Preferred Securities--Conversion Rights--Certain Other Adjustments". INTEREST Each Convertible Debenture shall bear interest at the rate of 6 1/4% 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 Trust Convertible Preferred Securities shall not continue to remain in book-entry only form and the Convertible Debentures are not in the form of a global security, the Company shall have the right to select record dates, which shall be at least one business day before an Interest Payment Date. 59 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 per 30-day month. 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 only holder of the Convertible Debentures, the Company shall give the Regular Trustees, the Institutional Trustee and the Debenture Trustee notice of its election 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 only holder of the Convertible Debentures, the Company shall give the holders of the Convertible Debentures notice of its election 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. 60 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 1.24 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, 61 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 in 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 62 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. 63 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. 64 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 issuance and exchange 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 65 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 shares were reserved for issuance upon the conversion of the $3.50 Convertible Preferred Stock and 20,454,631 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. 66 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 67 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 August 6, 1996, 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 68 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. 69 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 70 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 71 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. 72 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. 73 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 74 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 75 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. 76 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. 77 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 78 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. On August 6, the closing market price of the Common Stock was $33 5/8. If the Market Value of a share of Common Stock is at least $26.08, the number of shares of Common Stock to be issued upon conversion of all of the Trust Convertible Preferred Securities would be less than the number of shares of Common Stock that would be issued upon conversion of all of the $3.50 Convertible Preferred Securities (assuming that the Expiration Date is not extended beyond September 5, 1996); therefore 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 $26.08, 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. 79 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 80 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. 81 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 82 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 83 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. 84 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 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 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) 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. II-1 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). 4.2 Bylaws of the Company, as amended through June 3, 1996 and currently in effect.* 4.3 Form of Multiple Series Indenture ("Base Indenture"), between the Company and The Bank of New York, as trustee. 4.4 Form of First Supplemental Indenture to the Base Indenture (the "Indenture"), between the Company and The Bank of New York, as trustee, including form of 6 1/4% 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 6 1/4% 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).* 24.2 Power of Attorney (the Trust).* 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.*
II-2
NUMBER EXHIBIT ------ ------- 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.*
- -------- * Previously filed. 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; and (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 amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of El Segundo, State of California on August 6, 1996. Unocal Corporation By: /s/ Neal E. Schmale ------------------------------- Neal E. Schmale Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date * Chairman of the Board August 6, 1996 - ------------------------------------- of Directors and Roger C. Beach Chief Executive Officer /s/ Neal E. Schmale Chief Financial August 6, 1996 - ------------------------------------- Officer and Director Neal E. Schmale * Vice President and August 6, 1996 - ------------------------------------- Comptroller Charles S. McDowell (Principal Accounting Officer) Director August , 1996 - ------------------------------------- John W. Amerman II-4 Signature Title Date * Director August 6, 1996 - ------------------------------------- MacDonald G. Becket * Director August 6, 1996 - ------------------------------------- John W. Creighton, Jr. * Director August 6, 1996 - ------------------------------------- Malcolm R. Currie * Director August 6, 1996 - ------------------------------------- Frank C. Herringer * Director August 6, 1996 - ------------------------------------- John F. Imle, Jr. * Director August 6, 1996 - ------------------------------------- Donald P. Jacobs * Director August 6, 1996 - ------------------------------------- Charles R. Weaver * Director August 6, 1996 - ------------------------------------- J. Steven Whisler * Director August 6, 1996 - ------------------------------------- Marina v.N. Whitman *By: /s/ Neal E. Schmale -------------------------------- Neal E. Schmale Attorney-in-Fact II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of El Segundo, State of California on August 6, 1996. Unocal Capital Trust /s/ R. L. Walton By: _________________________________ Richard L. Walton Trustee Pursuant to the requirements of the Securities Act of 1933, this amendment to the registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date * Trustee August 6, 1996 - ------------------------------------- Darrell D. Chessum * Trustee August 6, 1996 - ------------------------------------- Daniel A. Franchi /s/ Richard L. Walton Trustee August 6, 1996 - ------------------------------------- Richard L. Walton The Bank of New York Trustee August , 1996 By: _________________________________ Title: ______________________________ The Bank of New York (Delaware) Trustee August , 1996 By: _________________________________ Title: ______________________________ *By: /s/ R. L. Walton -------------------------------- Richard L. Walton Attorney-in-Fact II-6 EXHIBIT INDEX
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). 4.2 Bylaws of the Company, as amended through June 3, 1996 and currently in effect.* 4.3 Form of Multiple Series Indenture ("Base Indenture"), between the Company and The Bank of New York, as trustee. 4.4 Form of First Supplemental Indenture to the Base Indenture (the "Indenture"), between the Company and The Bank of New York, as trustee, including form of 6 1/4% 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 6 1/4% 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).* 24.2 Power of Attorney (the Trust).* 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.*
NUMBER EXHIBIT ------ ------- 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.*
- -------- * Previously filed. EX-4.3 2 FORM OF MULTIPLE SERIES INDENTURE ___________________________________________________________ UNOCAL CORPORATION as Issuer and THE BANK OF NEW YORK as Trustee ________________________________ MULTIPLE SERIES INDENTURE ________________________________ Dated as of , 1996 ___________________________________________________________ TABLE OF CONTENTS ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1 Section 1.01 Definitions..................................................... 1 Section 1.02 Form of Documents Delivered to Trustee.......................... 8 Section 1.03 Notices, etc., to Trustee, Company.............................. 9 Section 1.04 Notice to Holders; Waiver....................................... 9 Section 1.05 Legal Holidays.................................................. 10 Section 1.06 Moneys of Different Currencies To Be Segregated................. 10 Section 1.07 Payment To Be in Proper Currency................................ 10 Section 1.08 Language of Notices, etc........................................ 11 ARTICLE 2 THE SECURITIES 11 Section 2.01 Amount Unlimited; Issuable in Series............................ 11 Section 2.02 Denominations................................................... 14 Section 2.03 Execution, Authentication, Delivery and Dating.................. 15 Section 2.04 Temporary Securities............................................ 17 Section 2.05 Registration; Registration of Transfer and Exchange............. 19 Section 2.06 Mutilated, Destroyed, Lost and Stolen Securities................ 22 Section 2.07 Persons Deemed Owners........................................... 23 Section 2.08 Cancellation.................................................... 24 Section 2.09 Payment of Interest; Interest Rights Preserved.................. 24 Section 2.10 Computation of Interest......................................... 25 Section 2.11 Currency and Manner of Payments in Respect of Securities........ 25 Section 2.12 Compliance with Certain Laws and Regulations.................... 30 Section 2.13 Security Forms Generally........................................ 30 Section 2.14 Form of Trustee's certificate of Authentication................. 31 Section 2.15 Securities in Global Form....................................... 31 ARTICLE 3 REDEMPTION OF SECURITIES AND SINKING FUNDS 32 Section 3.01 Applicability of Article........................................ 32 Section 3.02 Mandatory and Original Sinking Fund Payments.................... 33 Section 3.03 Election to Redeem: Notice to Trustee.......................... 33 Section 3.04 Selection by Trustee of Securities to be Redeemed............... 33 Section 3.05 Notice of Redemption............................................ 34 Section 3.06 Deposit of Redemption Price..................................... 34 Section 3.07 Securities Payable on Redemption Date........................... 35 Section 3.08 Securities Redeemed in Part..................................... 35 Section 3.09 Satisfaction of Sinking Fund Payments with Securities........... 36 Section 3.10 Redemption of Securities for Sinking Fund....................... 36 Section 3.11 Redemption of Securities During Event of Default................ 36 ARTICLE 4 PARTICULAR COVENANTS OF THE COMPANY 37 Section 4.01 Payment of Principal, Premium and Interest...................... 37 Section 4.02 Maintenance of Office or Agency................................. 37 Section 4.03 Prohibition of Extension of Claims for Interest................. 38 Section 4.04 Appointment to Fill Vacancy of Trustee.......................... 39
i Section 4.05 Paying Agents: Money for Securities Payments Held in Trust...... 39 Section 4.06 Compliance Certificate.......................................... 40 Section 4.07 Additional Amounts.............................................. 40 ARTICLE 5 SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE 41 Section 5.01 Company To Furnish Trustee Names and Addresses of Holders....... 41 Section 5.02 Preservation of Information: Communications to Holders.......... 42 Section 5.03 Reports by Company.............................................. 43 Section 5.04 Reports by Trustee.............................................. 43 ARTICLE 6 REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS IN EVENT OF DEFAULT 45 Section 6.01 Event of Default; Acceleration, Etc............................. 45 Section 6.02 Collection of Indebtedness and Suits for Enforcement by Trustee. 47 Section 6.03 Application of Money Collected.................................. 49 Section 6.04 Limitation on Suits: Unconditional Rights of Holders........... 49 Section 6.05 Remedies Cumulative, Restoration of Rights and Remedies......... 50 Section 6.06 Control by Holders: Waiver of Past Default..................... 51 Section 6.07 Notice of Defaults.............................................. 51 Section 6.08 Undertaking for Costs........................................... 52 Section 6.09 Special Record Date for Consents................................ 52 ARTICLE 7 CONCERNING THE TRUSTEE 52 Section 7.01 Certain Duties and Responsibilities............................. 52 Section 7.02 Certain Rights of Trustee....................................... 53 Section 7.03 Not Responsible for Recitals or Issuance of Securities.......... 54 Section 7.04 May Hold Securities............................................. 54 Section 7.05 Money Held in Trust............................................. 55 Section 7.06 Compensation and Reimbursement.................................. 55 Section 7.07 Right to Rely on Officers' Certificate.......................... 55 Section 7.08 Disqualification: Conflicting Interests........................ 55 Section 7.09 Corporate Trustee Required; Eligibility......................... 61 Section 7.10 Resignation and Removal: Assignment of Successor................ 62 Section 7.11 Acceptance of Appointment by Successor.......................... 64 Section 7.12 Merger, Conversion, Consolidation, Etc.......................... 65 Section 7.13 Preferential Collection of Claims Against Company............... 65 Section 7.14 Appointment of Authenticating Agent............................. 69 Section 7.15 Judgment Currency............................................... 71 Section 7.16 Corporate Trust Office.......................................... 71 ARTICLE 8 CONCERNING THE SECURITYHOLDERS 71 Section 8.01 Acts of Holders................................................. 71 Section 8.02 Authenticity of Instruments..................................... 72 Section 8.03 Authenticity of Bearer Securities............................... 72 Section 8.04 Determination of Principal Amounts of Original Issue Discount Securities and Securities in Foreign Currencies................. 73 Section 8.05 Company Solicitation of Holder.................................. 73
ii ARTICLE 9 SECURITYHOLDERS' MEETING 74 Section 9.01 Purposes for Which Meetings May be Called....................... 74 Section 9.02 Call, Notice and Place of Meeting............................... 74 Section 9.03 Call of Meetings by Company or Holders.......................... 74 Section 9.04 Persons Entitled to Vote........................................ 75 Section 9.05 Determination of Voting Rights: Conduct and Adjournment of Meetings........................................................ 75 Section 9.06 Counting Votes and Recording Action of Meetings................. 75 Section 9.07 No Delay in Exercise of Rights.................................. 76 Section 9.08 Quorum: Action................................................. 76 Section 9.09 Disregard of Securities Owned by Company or Controlling Person.......................................................... 77 ARTICLE 10 SUPPLEMENTAL INDENTURES 77 Section 10.01 Supplemental Indentures Without Consent of Holders.............. 77 Section 10.02 Supplemental Indentures With Consent of Holders................. 79 Section 10.03 Effect of Supplemental Indentures............................... 81 Section 10.04 Reference in Securities to Supplemental Indentures.............. 81 ARTICLE 11 CONSOLIDATION, MERGER, SALE OR CONVEYANCE 81 Section 11.01 Company May Consolidate, Etc., Only on Certain Terms............ 81 Section 11.02 Rights and Duties of Successor Corporation...................... 82 ARTICLE 12 SATISFACTION AND DISCHARGE OF INDENTURE: UNCLAIMED MONEYS 83 Section 12.01 Satisfaction and Discharge of Indenture......................... 83 Section 12.02 Application of Trust Money...................................... 84 Section 12.03 Satisfaction, Discharge and Defeasance of Securities of Any Series.......................................................... 84 Section 12.04 Definitions..................................................... 86 Section 12.05 Repayment of Money Held by Trustee.............................. 87 ARTICLE 13 IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS 87 Section 13.01 No Recourse: Exemption from Personal Liability................. 87 ARTICLE 14 MISCELLANEOUS PROVISIONS 88 Section 14.01 Successors and Assigns.......................................... 88 Section 14.02 Validity of Acts by Successor Corporations...................... 88 Section 14.03 Surrender of Powers............................................. 88 Section 14.04 Notices......................................................... 88 Section 14.05 Governing Law................................................... 88 Section 14.06 Compliance Certificates and Opinions............................ 89 Section 14.07 Effect of Headings and Table of Contents........................ 89 Section 14.08 Conflict with Trust Indenture Act............................... 89 Section 14.09 Benefits of Trust Indenture..................................... 89 Section 14.10 No Security Interest............................................ 89 Section 14.11 Execution in Counterparts....................................... 89 Section 14.12 Separability.................................................... 90
iii ARTICLE 15 SUBORDINATION 90 Section 15.01 Applicability of Article........................................ 90 Section 15.02 Conversion Privilege............................................ 90 Section 15.03 Conversion Procedure............................................ 91 Section 15.04 Fractional Shares............................................... 92 Section 15.05 Taxes on Conversion............................................. 92 Section 15.06 Company to Provide Securities Issuable Upon Conversion.......... 92 Section 15.07 Adjustments 93 Section 15.08 Valuation....................................................... 93 Section 15.09 Reorganization of Company....................................... 93 Section 15.10 Trustee's Disclaimer............................................ 94 Section 15.11 Reliance on Judicial Order or Certificate of Liquidating Agent.. 95 Section 15.12 Trustee Not Fiduciary for Holders of Senior Indebtedness........ 95 Section 15.13 Rights of Trustee as Holder of Senior Indebtedness, Preservation of Trustee's Rights............................................. 95 Section 15.14 Article Applicable to Paying Agents............................. 95 Section 15.15 Certain Conversions Deemed Payment.............................. 95 ARTICLE 16 CONVERSION 96 Section 16.01 Applicability of Article........................................ 96 Section 16.02 Conversion Privilege............................................ 96 Section 16.03 Conversion Procedure............................................ 96 Section 16.04 Fractional Shares............................................... 96 Section 16.05 Taxes on Conversion............................................. 96 Section 16.06 Company to Provide Securities Issuable Upon Conversion.......... 97 Section 16.07 Adjustments..................................................... 97 Section 16.08 Valuation....................................................... 97 Section 16.09 Reorganization of Company....................................... 97 Section 16.10 Trustee's Disclaimer............................................ 97
iv EXHIBIT A Forms of Certification EXHIBIT A.1 Form of Certificate to be Given by Person Entitled to Receive Bearer Security EXHIBIT A.2 Form of Certificate to be Given by Euro-Clear, CEDEL S.A. and any other Entity Performing Similar Functions in connection with the Exchange of Portion of a Temporary Global Security EXHIBIT A.3 Form of Certificate to be Given by Euro-Clear, CEDEL S.A. and any other Entity Performing Sinfflar Functions to obtain Interest prior to an Exchange Date EXHIBIT A.4 Form of Certificate to be Given by Beneficial Owners to obtain Interest prior to an Exchange Date EXHIBIT A.5 Form of Confirmation to be sent to Purchasers of Bearer Securities v THIS MULTIPLE SERIES INDENTURE, dated as of ________________________, 1996 (the "Indenture"), is between Unocal Corporation, a Delaware corporation (the "Company"), and The Bank of New York, as trustee (the "Trustee"). ARTICLE 1. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION --------------------------------- Section 1.01 Definitions. The terms defined in this Section 1.01 ----------- (except as otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All other terms used in this Indenture which are defined in the Trust Indenture Act of 1939 or which are by reference therein defined in the Securities Act of 1933 (except as herein otherwise expressly provided or unless the context otherwise requires) shall have the meanings assigned to such terms in said Trust Indenture Act and in said Securities Act as they were in force at the date of the execution of this Indenture. All accounting terms used herein and not expressly defined shall have the meaning given to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation. The terms "hereof", "herein" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Unless the context otherwise requires, the terms defined in this Article include the plural as well as the singular and the use of the word "or" in this Indenture is not exclusive. Certain terms, used principally within an Article of this Indenture, may be defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 8.01. "Affiliate" of any specified Person shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purpose of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" shall mean the agent of the Trustee, if any, which at the time shall be appointed and acting pursuant to Section 7.14 of this Indenture. "Authorized Newspaper" means a newspaper of general circulation in the place of publication, printed in the official language of the country of publication and customarily published on each Business Day, whether or not published on Saturdays, Sundays or holidays. Whenever successive weekly publications in an Authorized Newspaper are authorized or required 1 hereunder, they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or different Authorized Newspapers. "Bearer Security" means any Security which is not registered in the Security Register as to principal (including without limitation any Security in temporary or permanent global bearer form). "Board of Directors" shall mean the Board of Directors, the Executive Committee of the Board of Directors, the Management Committee of the Board of Directors, or any other committee of the Board of Directors with authority to act in the matter of the Company. "Board Resolution" shall mean a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day," when used with respect to any Place of Payment or place of publication, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment, place of conversion of currency, if applicable, or place of publication are authorized or obligated by or pursuant to law, regulation or executive order to close or as specified for a series of Securities pursuant to Section 2.01 or as specified for any Security in such Security. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Depository" has the meaning specified in Section 2.04. "Company" shall mean Unocal Corporation, a Delaware corporation, and, subject to the provisions of Article Twelve, shall also include its successors and assigns. "Company Order" and "Company Request" mean, when used with reference to the Company, a written order or request signed in the name of the Company by its Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, any Vice President (whether or not designated by a number or word or words added before or after the title Vice President), or Treasurer or an Assistant Treasurer, or by its Secretary or an Assistant Secretary, or its Comptroller or an Assistant Comptroller, as the case may be, and delivered to the Trustee. "Component Currency" has the meaning specified in Section 2.11(i). "Conversion Agent" means any Person authorized by the Company to facilitate the conversion of any Security which by its terms is convertible into any other security of the Company. "Corporate Trust Office" or "Principal Office of the Trustee" shall mean the office of the Trustee at which at any particular time its corporate trust business shall be principally 2 administered, which office at the date hereof is set forth in Section 7.16 of this Indenture, except that with respect to the presentation of Securities (or Coupons, if any, representing an installment series of interest) for payment or ------ for registration of transfer and exchange, such term shall mean the office or the agency of the Trustee in said city at which at any particular time its corporate agency business shall be conducted. "Corporation" includes corporations, associations, companies and business trusts. "Coupon" or "coupon" means any interest coupon appertaining to a Bearer Security or Partially Registered Security. "Currency Conversion Date" has the meaning specified in Section 2.11(e). "Currency Conversion Rate" has the meaning specified in Section 7.15. "Defaulted Interest" shall have the meaning specified in Section 2.09. "Dollar" means the coin or currency of the United States as at the time of payment is legal tender for the payment of public and private debts. "Dollar Equivalent of the Currency Unit" has the meaning specified in Section 2.11(h). "Dollar Equivalent of the Foreign Currency" has the meaning specified in Section 2.11(g). "ECU" means the European Currency Unit as defined and revised from time to time by the Council of the European Communities. "Euro-clear" means the operator of the Euro-clear System. "European Communities" means the European Economic Community, the European Coal and Steel Community and the European Atomic Energy Community. "Event of Default" shall mean any event specified in Section 6.01, continued for the period of time, if any, and after the giving of notice, if any, therein designated. "Exchange Date" has the meaning specified in Section 2.04. "Exchange Rate Agent" means an entity appointed by the Company pursuant to Section 2.11(i) from time to time. "Exchange Rate Officer's Certificate" means a tested telex or a certificate setting forth (i) the applicable Official Currency Unit Exchange Rate and (ii) the Dollar or Foreign Currency or currency unit amounts of principal, premium, if any, and interest, if any, respectively (on an aggregate basis and on the basis of a Security having a principal amount of 1,000 in the relevant currency unit), payable on the basis of such Official Currency Unit Exchange Rate, sent (in the case of a tested telex) or executed (in the case of a certificate) by the Treasurer or any 3 Assistant Treasurer of the Company and delivered to the Trustee; such tested telex or certificate need not comply with Section 14.06. "Foreign Currency" means a currency issued by the government of any country other than the United States. "Fully Registered Security" means any Security registered in the Security Register as to principal and interest, if any. "Holder," "holder of Securities" and "Securityholder" or other similar term shall mean, with respect to a Registered Security, the Person in whose name at the time a particular Registered Security is registered in the Security Register and, with respect to a Bearer Security and/or a Coupon, the bearer thereof. "Indebtedness" shall mean and include, without duplication, all items of indebtedness or liability (except stockholders' equity) which in accordance with generally accepted accounting principles would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which indebtedness is to be determined; indebtedness secured by any mortgage, pledge or lien existing on property owned subject to such mortgage, pledge or lien, whether or not the indebtedness secured thereby shall have been assumed; and guarantees, endorsements (other than the endorsement of negotiable instruments for deposit or collection in the ordinary course of business) and other contingent obligations (whether direct or indirect) in respect of, or to purchase or otherwise acquire, indebtedness of others except guarantees, endorsements or contingent obligations in connection with the sale or discount of accounts receivable, trade acceptances and other paper arising in the ordinary course of business or conditional sales contracts, chattel mortgages, leases, trust receipts or repurchase or other obligations arising out of the sale and/or delivery of equipment in the ordinary course of business. "Indenture" means this instrument as originally executed or as from time to time supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated hereunder. "Interest," when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Market Exchange Rate" has the meaning specified in Section 2.11(i). "Maturity" when used with respect to any Security means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Mortgage" shall mean and include any mortgage, pledge, lien, security interest, conditional sale or other title retention agreement or other similar encumbrance. 4 "Officers' Certificate" shall mean a certificate, in the case of the Company, signed in the name of the Company by its Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, any Vice President (whether or not designated by a number or word or words added before or after the title Vice President), or Treasurer or an Assistant Treasurer, and by its Secretary or an Assistant Secretary, or its Comptroller or an Assistant Comptroller, as the case may be, and delivered to the Trustee. "Official Currency Unit Exchange Rate" means with respect to any payment to be made hereunder, the exchange rate between the relevant currency unit and the currency or currency unit of payment calculated by the Exchange Rate Agent for the Securities of the relevant series (in the case of ECU, reported by the Commission of the European Communities and currently based on the rates in effect at 2:30 p.m., Brussels time, on the exchange markets of the Component Currencies of ECU), on the Business Day (in the city in which such Exchange Rate Agent has its principal office) immediately preceding delivery of any Exchange Rate Officer's Certificate. "Opinion of Counsel" shall mean an opinion in writing signed by legal counsel, who may be an employee of, or of counsel to, the Company, and who is acceptable to the Trustee. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 6.01. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (a) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; and (b) Securities for which payment or redemption money in the necessary amount and in the required "currency" or currency unit has been theretofore deposited with the Trustee or any paying agent (other than the Company) in trust for the holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (c) Securities in exchange for or in lieu of which other Securities have been authenticated and delivered or which have been paid pursuant to this Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by Persons in whose hands any of such Securities is a valid, binding and legal obligation of the Company; provided, however, that in determining whether the Holders of the requisite - -------- principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether a quorum is present at a meeting of Holders of Outstanding Securities or the number of votes entitled to be cast by each Holder of a Security in respect of such Security at any such meeting (i) the principal amount of an Original Issue Discount 5 Security that shall be deemed to be Outstanding for such purposes shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon a declaration of acceleration of the Maturity thereof pursuant to Section 6.01, (ii) the principal amount of a Security denominated in a Foreign Currency or currency unit shall be the Dollar equivalent (as determined by the Company in good faith) as of the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the Dollar equivalent (as determined by the Company in good faith) of the amount determined as provided in (i) above) of such Security, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Partially Registered Security" means any Security registered in the Security Register as to principal only. "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) or interest, if any, on any Securities on behalf of the Company. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and interest on the Securities of that series are payable as specified in accordance with Section 2.01. "Predecessor Security" or "Predecessor" followed by the title or designation of a particular Security means every previous Security (or Coupon, as the case may be) evidencing all or a portion of the same debt as that evidenced by such particular Security (or Coupon, as the case may be) and, for the purposes of this definition, any Security (or Coupon, as the case may be), authenticated and delivered under Section 2.06 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security (or Coupon, as the case may be), shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security (or Coupon, as the case may be). "Redemption Date" when used with respect to any Security to be redeemed in the currency or currency unit in which such Security is payable, means the date fixed for such redemption pursuant to this Indenture. "Redemption Price" when used with respect to any Security to be redeemed means the price in the currency or currency unit in which such Security is payable, at which it is to be redeemed pursuant to this Indenture. 6 "Registered Security" means any Fully Registered Security or any Partially Registered Security (including without limitation any Security in temporary or permanent global registered form) which is registered on the Security Register. "Regular Record Date" for the interest payable on any Interest Payment Date on the Fully Registered Securities of any series means the date specified for that purpose as contemplated by Section 2.01, which date shall be, unless otherwise specified pursuant to Section 2.01, the fifteenth day preceding such Interest Payment Date, whether or not such day shall be a Business Day. "Required Currency" has the meaning specified in Section 1.7. "Responsible Officer" when used with respect to the Trustee, shall mean the chairman of the board of directors, the presidents any vice president or assistant vice president, the secretary, the treasurer, or any officer or employee of the Trustee customarily performing corporate trust functions or to whom any corporate trust matter is referred because of his knowledge of and familiarity with the particular subject. "Securities" shall mean the unsecured debentures, notes, bonds or other evidences of indebtedness to be issued in one or more series as in this Indenture provided, and more particularly means any Securities authenticated and delivered under this Indenture. "Security Register" and "Security Registrar" shall have the respective meanings specified in Section 2.05. "Senior Indebtedness" shall mean, 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 Securities of any series, 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. In addition, 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 hereof. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 2.09. "Specified Amount" has the meaning specified in Section 2.11(i). "Stated Maturity" when used with respect to any Security (or Coupon, if any, representing an installment of interest) or any installment of principal thereof or interest thereon, means the date specified in such Security (or Coupon) as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" shall mean, at any given time, any corporation, association or other business entity of which either stock having by the terms thereof ordinary voting power to elect 7 a majority of the directors of such corporation, whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency, or other ownership interest representing more than 50% ownership of an entity, is at the time, directly or indirectly, owned or controlled by the Company, or by one or more Subsidiaries of the Company, or by the Company and one or more Subsidiaries. "Trustee" shall mean the Person named as the "Trustee" in the first paragraph of this Instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each person who is then a Trustee hereunder; provided, however, that if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series, shall mean only the Trustee with respect to Securities of that series. "Trust Indenture Act of 1939" shall mean (except as herein otherwise provided) the Trust Indenture Act of 1939 as it was in force at the date of execution of this Indenture. "U.S. Depository" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more permanent global Securities, the Person designated as U.S. Depository by the Company pursuant to Section 2.01 until a successor U.S. Depository shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "U.S. Depository" shall mean or include each Person who is then a U.S. Depository hereunder, and if at any time there is more than one such Person, "U.S. Depository" as used with respect to the Securities of any such series shall mean the U.S. Depository with respect to the Securities of that series. "United States Alien" means any Person who, for United States Federal income tax purposes, is a foreign corporation, a nonresident alien individual, a nonresident alien fiduciary of a foreign estate or trust or a foreign partnership one or more of the members of which is, for United States Federal income tax purposes, a foreign corporation, a nonresident alien individual or a nonresident alien fiduciary of a foreign estate or trust. "United States" means the United States of America (including the states and the District of Columbia) and its possessions at the relevant date. As of the date of these Standard Provisions, the possessions of the United States include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island, and the Northern Mariana Island. "Valuation Date" has the meaning specified in Section 2.11(e). "Warrant Agent" shall mean the agent of the Company authorized to deliver Securities issuable upon due exercise of warrants. Section 1.02 Form of Documents Delivered to Trustee. In any case -------------------------------------- where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. 8 Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 1.03 Notices, etc., to Trustee, Company. Any request, ---------------------------------- demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office and unless otherwise herein expressly provided, any such document shall be deemed to be sufficiently made, given, furnished or filed upon its receipt by a Responsible Officer of the Trustee or (b) the Company by the Trustee or by any Holder shall be made, given, furnished or filed in writing to or with the Company, as the case may be, addressed to it at the office specified in Section 14.04 of this instrument or at any other address previously furnished in writing to the Trustee by the Company, as the case may be, Attention: Secretary. Section 1.04 Notice to Holders; Waiver. Where this Indenture ------------------------- provides for notice to Holders of any event: (a) if any of the Securities affected by such event are Registered Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, within the time prescribed for the giving of such notice, and (b) if any of the Securities affected by such event are Bearer Securities, such notice shall be sufficiently given (unless otherwise herein expressly provided or unless otherwise specified in such Securities) if (1) published once in an Authorized Newspaper in The City of New York, London and such other city or cities as may be specified for the Securities of a series pursuant to Section 2.01 and 9 (2) mailed in the manner prescribed in (i) above to such Persons who have filed their names and addresses with the Trustee within the two-year period preceding such notice and to all Persons whose names are furnished to the Trustee pursuant to Section 5.01. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice to Holders of Registered Securities by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders of Registered Securities is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Registered Securities shall affect the sufficiency of such notice with respect to other Holders of Registered Securities or the sufficiency of any notice to Holders of Bearer Securities given as provided herein. In case by reason of the suspension of publication of any Authorized Newspaper or Authorized Newspapers or by reason of any other cause it shall be impracticable to publish any notice to Holders of Bearer Securities as provided above, then such notification to Holders of Bearer Securities as shall be given with the approval of the Trustee shall constitute sufficient notice to such Holders for every purpose hereunder. Neither the failure to give notice by publication to Holders of Bearer Securities as provided above, nor any defect in any notice so published, shall affect the sufficiency of any notice to Holders of Registered Securities given as provided herein. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Securities shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 1.05 Legal Holidays. Except as otherwise specified as -------------- contemplated by Section 2.01, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then (notwithstanding any other provision of this Indenture or of the Securities or Coupons, if any) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, to the next succeeding Business Day at such Place of Payment. Section 1.06 Moneys of Different Currencies To Be Segregated. The ----------------------------------------------- Trustee shall segregate moneys, funds and accounts held by the Trustee hereunder in one currency (or unit thereof) from any moneys, funds or accounts in any other currencies (or units thereof), notwithstanding any provision herein which would otherwise permit the Trustee to commingle such amounts. Section 1.07 Payment To Be in Proper Currency. In the case of any -------------------------------- Securities denominated in any particular currency or currency unit (the "Required Currency"), except as 10 otherwise provided herein, therein or in or pursuant to the related Board Resolution or supplemental indenture, the obligation of the Company to make any payment of principal, premium or interest thereon shall not be discharged or satisfied by any tender by the Company, or recovery by the Trustee, in any currency or currency unit other than the Required Currency, except to the extent that such tender or recovery shall result in the Trustee timely holding the full amount of the Required Currency then due and payable. If any such tender or recovery is made in other than the Required Currency, the Trustee may take such actions as it considers appropriate to exchange such other currency or currency unit for the Required Currency. The costs and risks of any such exchange, including without limitation the risks of delay and exchange rate fluctuation, shall be borne by the Company, the Company shall remain fully liable for any shortfall or delinquency in the full amount of the Required Currency then due and payable and in no circumstances shall the Trustee be liable therefor. The Company hereby waives any defense of payment based upon any such tender or recovery which is not in the Required Currency, or which, when exchanged for the Required Currency by the Trustee, is less than the full amount of the Required Currency then due and payable. Section 1.08 Language of Notices, etc. Any request, demand, ------------------------ authorization, direction, notice, consent or waiver required or permitted under this Indenture shall be in the English language, except that any published notice may be in an official language of the country of publication. ARTICLE 2. THE SECURITIES -------------- Section 2.01 Amount Unlimited; Issuable in Series. The aggregate ------------------------------------ principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution, and set forth in an Officers' Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series: (a) the title of the Securities of the series (which shall distinguish the Securities of the series from all other Securities); (b) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for in lieu of, other Securities of the series pursuant to Sections 2.04, 2.05, 2.06, 3.08 or 10.04 and except for any Securities which, pursuant to Section 2.03, are deemed never to have been authenticated and delivered hereunder); (c) the face or shares on which the principal of the Securities of the series is payable or the method of determination thereof; (d) the rate or rates, or the method of determination thereof, at which the Securities of the series shall bear interest, if any, the date or dates or method of 11 determination thereof from shall be such interest shall accrue, the Interest Payment Dates on which such interest shall be payable on the Regular Record Date for any interest payable on any Registered Securities of any Interest Payment Date; (e) the place or places where the principal of (and premium, if any) and interest, if any, on Securities and Coupons, if any) of the series shall be payable and the office or agency for the Securities of the series maintained by the Company pursuant to Section 4.02; (f) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (g) the obligation, if any, of the Company to redeem, repay or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation; (h) if other than denominations of $1,000, if registered, and $5,000, if bearer, and any integral multiple of the applicable denominations for Securities denominated in Dollars, the denominations in which Securities of the series shall be issuable; (i) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration on the Maturity thereof pursuant to Section 6.01; (j) whether Section 12.03 is not applicable to the Securities of such series or such other means of satisfaction and discharge as may be specified for the Securities and Coupons, if any, for a series; (k) any deletions or modifications of or additions to the Events of Default set forth in Section 6.01, or covenants of the Company set forth in Article 4 pertaining to the Securities of the series and application, if any, of Article 15 to Securities of such series; (l) the forms the Securities and Coupons, if any, of the series; (m) if other than such coin or currency of the United States as at the time of payment is legal tender for payment of public or private debts, the coin or currency or currencies, or currency unit or units, in which payment of the principal of (and premium, if any) and interest, if any, on the Securities of the series shall be payable and the Exchange Rate Agent, if any, for such series; (n) if the principal of (and premium, if any) or interest, if any, on the Securities of the series are to be payable at the election of the Company or a Holder thereof, or under some or all other circumstances, in a coin or currency or currencies, or 12 currency unit or units, other than that in which the Securities are denominated, the period or periods within which, and the terms and conditions upon which, such election may be made, or the other circumstances under which the Securities are to be so payable, including without limitation the application of Section 2.11(b) and any deletions to, modifications of or additions to the provisions thereof, and any provision requiring the Holder to bear currency exchange costs by deduction from such payments; (o) if the amount of payments of principal (and premium, if any) or interest, if any, on the Securities of the series may be determined with reference to an index based on (i) a coin or currency or currencies, or currency unit or units other than that in which the Securities are stated to be payable or (ii) any method not inconsistent with the provisions of this indenture specified in or pursuant to such Board Resolution, then in each case (i) and (ii) the manner in which such amounts shall be determined; (p) whether the Securities of the series are to be issued as Fully Registered Securities, Partially Registered Securities or Bearer Securities (with or without Coupons), or any combination thereof, whether Partially Registered Securities or Bearer Securities may be exchanged for Fully Registered Securities of the series and whether Fully Registered Securities may be exchanged for Partially Registered Securities or Bearer Securities of the series (if permitted by applicable laws and regulations) and the circumstances under which and the place or places where any such exchanges, if permitted, may be made; (q) whether any Securities of the series are to be issuable initially in temporary global form with or without coupons and, if so, the name of the Common Depository with respect to any such temporary global Security, and whether any Securities of the series are to be issuable in permanent global form with or without coupons and, if so, the U.S. Depository or Common Depository for such global Securities and whether beneficial owners of interests in any such permanent global Security may exchange such interests for definitive Securities of such series and of like tenor of any authorized form and denomination and the circumstances under which (including any certification requirements), and the place or places where, any such exchanges may occur, if other than in the manner provided in Section 2.05; (r) if the Securities and Coupons, if any, of the series are to be issued upon the exercise of warrants, the time, manner and place for Securities to be authenticated and delivered; (s) whether and under what circumstances and with what procedures and documentation the Company will pay additional amounts on the Securities and Coupons, if any, of the series to any Holder who is a United States Alien (including a definition of such term), in respect of any tax assessment or governmental charge withheld or deducted and, if so, whether the Company will have the option to redeem such Securities rather than pay additional amounts (and the terms of any such option); (t) whether the Securities of the series are convertible into any other security of the Company pursuant to the provisions of Article 16 or as otherwise specified in the Securities of such series; 13 (u) the Person to whom any interest on any Registered Securities of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Securities of the series shall be payable, if otherwise than upon presentation and surrender of the Coupons appertaining thereto as they severally mature, the extent to which, or the manner in which, any interest payable on the temporary global Security on any Interest Payment Date will be paid if other than in the manner provided in Section 2.04 and the extent to which, or the manner in which, any interest payable on a permanent global Security on an Interest Payment Date will be paid; (v) any paying agents, transfer agents, registrars or other agents with respect to the Securities of the series; and (w) if Bearer Securities of the series are to be issuable, (x) whether interest in respect of any portion of a temporary global Security of the series payable in respect of any Interest Payment Date prior to the exchange of such temporary global Security for a permanent global Security or for definitive Securities of the series shall be paid to any clearing organization with respect to the portion of such temporary global Security held for its account and, in such event, the terms and conditions (including any certification requirements) upon which any such interest payment received by a clearing organization will be credited to the Persons entitled to interest payable on such Interest Payment Date, and (y) the terms and conditions (including any certification requirements) upon which interests in such temporary global Security may be exchanged for interests in a permanent global Security or for definitive Securities of the series. (x) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture). All Securities of any one series and the, Coupons appertaining to any Bearer Securities of such series shall be substantially identical except, in the case of Registered Securities, as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 2.03) set forth in such Officers' Certificate referred to above or in any such indenture supplemental hereto. At the option of the Company, interest on the Registered Securities of any series that bears interest may be paid by mailing, on the applicable Interest Payment Date, a check to the address of the Person entitled thereto as such address shall appear in the Security Register. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. Section 2.02 Denominations. The Securities of each series shall be ------------- issuable in such denominations as may be established and specified in accordance with Section 2.01. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series denominated in Dollars shall be issuable in denominations of $1,000, if registered, and 14 $5,000, if bearer, and in any integral multiple of the applicable denominations. The Securities may bear such letters and numbers distinguishing the several denominations and the several Securities of each denomination as may be determined by the Company with the approval of the Trustee. At the office or agency of the Company to be maintained by the Company as provided in Section 4.02 and in the manner, subject to the limitations and upon payment of the charges provided herein, Securities of each series may be exchanged for a like aggregate principal amount of Securities of such series of other authorized denominations. Section 2.03 Execution, Authentication, Delivery and Dating. The ---------------------------------------------- Securities shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President, its Chief Operating Officer, its Chief Financial Officer, one of its Vice Presidents (whether or not designated by a number or word or words added before or after the title Vice President), its Treasurer or an Assistant Treasurer under its corporate seal reproduced thereon (which may be by facsimile) and attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Any Coupons shall be executed on behalf of the Company by the manual or facsimile signature of any such officer of the Company. Securities and Coupons bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series, together with any Coupons appertaining thereto, executed by the Company to the Trustee for authentication, together with the Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and make available for delivery such Securities; provided, however, that definitive Bearer Securities may only be delivered at an office or agency outside the United States in exchange for a portion of a Bearer Security in temporary global form of equal aggregate principal amount and series and only if (x) prior to such delivery, the owner of such Bearer Security or a financial institution or clearing organization through which the owner holds such Bearer Security directly or indirectly, shall have furnished a certificate in the form set forth in Exhibit A.1 to this Indenture (which certificate and all other certificates to this Indenture may be changed by the Company pursuant to an Officers' Certificate), dated no earlier than 15 days prior to the date on which Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), as the case may be, furnishes to the Common Depository, in accordance with the procedures established in Section 2.04, a certificate in the form set forth in Exhibit A.2 to this Indenture that relates to all or such portion of such temporary global Security, and (y) the Person to whom such certificate is provided does not know or have reason to know that the information contained in such certificate is false. A confirmation in the form set forth in Exhibit A.5 to this Indenture shall be sent to each purchaser of a Bearer Security. If any Bearer Security shall initially be represented by a portion of a temporary global Security, then, for purposes of this Section and Section 2.04, the notation of a beneficial owner's interest therein upon exchange for a portion of a permanent global Security shall be deemed to be delivery of such beneficial owner's interest in such permanent global Security. Except as permitted by Section 2.06, the 15 Trustee shall not authenticate and make available for delivery any Bearer Security unless all appurtenant Coupons for interest then matured have been detached and cancelled. If the forms or terms of the Securities of the series and any related Coupons have been established by or pursuant to one or more Board Resolutions as permitted by Sections 2.13 and 2.01, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Opinion of Counsel stating: a. if the forms of such Securities and any Coupons have been established by or pursuant to a Board Resolution as permitted by Section 2.13, that such forms have been established in conformity with the provisions of this Indenture; b. if the terms of such Securities and any Coupons have been established by or pursuant to a Board Resolution as permitted by Section 2.01, that such terms have been established in conformity with the provisions of this Indenture; and c. that such Securities, together with any Coupons appertaining thereto, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligation of the Company, entitled to the benefits of the Indenture and enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles. If such forms or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 2.01 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers' Certificate otherwise required pursuant to Section 2.01 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Registered Security shall be dated the date of its authentication; and each Bearer Security and any Bearer Security in global form shall be dated as of the date of original issuance of the indebtedness evidenced by such Bearer Security. No Security or Coupon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security, or the Security to which such Coupon appertains, a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been duly authenticated and delivered hereunder but never issued and sold by the Company, and the 16 Company shall deliver such Security to the Trustee for cancellation as provided in Section 2.08 together with a written statement (which need not comply with Section 14.06 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 2.04 Temporary Securities. Pending the preparation of -------------------- definitive Securities of any series, the Company may execute, and upon Orders of the Company, the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued, in registered form or, if authorized, in bearer form with one or more Coupons or without Coupons, and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced conclusively by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in global form representing all or a portion of the Outstanding Securities of such series. In the case of any series issuable as Bearer Securities, such temporary Securities shall be delivered in compliance with the conditions set forth in Section 2.03. Except in the case of temporary Securities in global form (which shall be exchanged in accordance with the provisions of the following paragraphs), if temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. Except as otherwise specified pursuant to Section 2.01(w) with respect to a series of Securities issuable as Bearer Securities, after the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company maintained pursuant to Section 4.02 in a Place of Payment for such series for the purpose of exchange of Securities of such series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series (accompanied by any unmatured Coupons appertaining thereto) the Company shall execute and the Trustee or an Authenticating Agent shall authenticate and make available for delivery in exchange therefor a like aggregate principal amount of definitive Securities of the same series, of like tenor and of authorized denominations; provided, however, that no definitive Bearer Security shall be delivered in exchange for a temporary Registered Security; and provided, further, that a definitive Bearer Security shall be delivered in exchange for a temporary Bearer Security only in compliance with the conditions set forth in Section 2.03. All Bearer Securities shall be issued initially in the form of a temporary global Security, and any such temporary global Security shall, unless otherwise provided therein, be delivered to the London office of a Depository or common Depository (the "Common Depository"), for the benefits of Euro-clear and CEDEL S.A. (and such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), for credit to the respective accounts of the beneficial owners of such Securities (or to such other accounts as they may direct). Without unnecessary delay but in any event not later than the date specified in, or determined pursuant to the terms of, any such temporary global Security (the "Exchange Date"), 17 the Company shall deliver to the Trustee, or its agent, definitive Securities, in aggregate principal amount equal to the principal amount of such temporary global Security, executed by the Company. On or after the Exchange Date, such temporary global Security shall be surrendered by the Common Depository to the Trustee or its agent, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities without charge and the Trustee shall authenticate and deliver, in exchange for each portion of such temporary global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such temporary global security to be exchanged; provided, however, that, unless, otherwise specified in such temporary global Security, upon such presentation by the Common Depository, such temporary global Security shall be accompanied by a certificate dated the Exchange Date or a subsequent date and signed by Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion) in each case as to the portion of such temporary global Security held for its respective account then to be exchanged, each in the form set forth in Exhibit A.2 to this Indenture. The definitive Securities to be delivered in exchange for any such temporary global Security shall be in bearer form, registered form, permanent bearer global form, permanent global registered form, or any combination thereof, as specified pursuant to Section 2.01, and, if any combination thereof is so specified, as requested by the beneficial owner thereof; provided, however, that definitive Securities shall be delivered in exchange for a portion of a temporary global Security only in compliance with the requirements of Section 2.03. Unless otherwise specified in such temporary global Security, the interest of a beneficial owner of Securities of a series in a temporary global Security shall be exchanged for definitive Securities of the same series and of like tenor following the Exchange Date when the beneficial owner of the Security, or a financial institution or clearing organization through which the beneficial owner directly holds such Security, instructs Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), as the case may be, to request such exchange on his behalf and delivers to Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), as the case may be, a certificate in the form set forth in Exhibit A.1 to this Indenture, dated no earlier than 15 days prior to the date on which Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), as the case may be, furnishes to the Common Depository in accordance with the preceding paragraph a certificate in the form set forth in Exhibit A.2 to this Indenture that relates to the interest to be exchanged for definitive Securities. Copies of the certificate in the form set forth in Exhibit A.1 to this Indenture shall be available from the offices of Euro-clear, CEDEL S.A. (and such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), the Trustee, any Authenticating Agent appointed for such series of Securities and any Paying Agent appointed for such series of Securities. Unless otherwise specified in such temporary global Security, any such exchange shall be made free of charge to the beneficial owners of such temporary global Security, except that a Person receiving definitive Securities must bear the cost of insurance, postage, transportation and the like in the event that such Person does not take delivery of such definitive Securities in person at the offices of Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion). 18 The definitive Securities in bearer form to be delivered in exchange for any portion of a temporary global Security shall be delivered only outside the United States. Until exchanged in full as hereinabove provided, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of the same series and of like tenor authenticated and delivered hereunder, except that, unless otherwise specified pursuant to Section 2.01, interest payable on a temporary global Security on an Interest Payment Date for Securities of such series occurring prior to the applicable Exchange Date shall be payable to Euro-clear and CEDEL S.A. (and such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion) on such Interest Payment Date upon delivery by Euro-clear and CEDEL S.A. (and such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion) to the Trust of a certificate or certificates in the form set forth in Exhibit A.3 to this Indenture, for credit without further interest on or after such Interest Payment Date to the respective accounts of the Persons who are the beneficial owners of such temporary global Security (or to such other accounts as they may direct) on such Interest Payment Date and who have each delivered to Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), as the case may be, a certificate in the form set forth in Exhibit A.4 to this Indenture. If such interest Payment Date occurs on or after the Exchange Date, Euro-Clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion), as the case may be, following the receipt of such certificate, shall exchange, in accordance with the procedures hereinabove provided, the portion of the temporary global Security that relates to such certificate for definitive Securities (which, in the absence of instructions to the contrary, shall be an interest in a permanent global Security). Any interest so received by Euro-clear or CEDEL S.A. (or such other entity performing similar functions as selected by the Company and approved by the Trustee in its reasonable discretion) and not paid as herein provided shall be returned to the Trustee immediately prior to the expiration of two years after such Interest Payment Date in order to be repaid to the Company in accordance with Section 12.05. Section 2.05 Registration; Registration of Transfer and Exchange. --------------------------------------------------- The Company shall cause to be kept at one of its offices or agencies maintained, in accordance with Section 4.02 a register (being the combined register of the Security Registrar and all transfer agents designated pursuant to Section 4.02 for the purpose of registration of transfer of Securities and sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Registered Securities and the registration of transfers of Registered Securities as herein provided. The Company hereby appoints the Trustee as the "Security Registrar" for the purpose of registering Registered Securities and transfers of Registered Securities as herein provided, and for facilitating exchanges of temporary global Securities for permanent global Securities or definitive Securities or both, or of permanent global Securities for definitive Securities, or both, as herein provided. Upon surrender for registration of transfer of any Registered Security of any series at the office or agency of the Company maintained for that purpose as a Place of Payment for such series, the Company shall execute, and the Trustee or the Authenticating Agent, if any, shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new 19 Registered Securities of the same series (in authorized denominations) of a like aggregate principal amount. Notwithstanding any other provision of this Section, unless and until it is exchanged in whole or in part for Securities in definitive form, a global Security representing all or a portion of the Securities of a series may not be transferred except as a whole by the U.S. Depository or Common Depository, as the case may be, for such series to a nominee of such U.S. Depository or Common Depository or by a nominee of such U.S. Depository or Common Depository to such U.S. Depository or Common Depository or another nominee of such U.S. Depository or Common Depository or by such U.S. Depository or Common Depository or any such nominee to a successor U.S. Depository or Common Depository for such series or a nominee of such successor U.S. Depository or Common Depository. At the option of the Holder, Registered Securities of any series (other than a global Security, except as set forth below) may be exchanged for other Registered Securities of the same series of any authorized denominations, of a like aggregate principal amount and tenor, upon surrender of the Registered Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee or the Authenticating Agent, if any, shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Unless otherwise determined by the Company, Bearer Securities may not be delivered by the Trustee in exchange for Registered Securities. At the option of the Holder, except as otherwise specified pursuant to Section 2.01(w) with respect to a global Security, Bearer Securities of any series may be exchanged for Registered Securities (if the Securities of such series are issuable as Registered Securities) or Bearer Securities (if Bearer Securities of such series are issuable in more than one denomination) of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Bearer Securities to be exchanged at any such office or agency, with all unmatured Coupons (except as provided below) and all matured Coupons in default thereto appertaining. If the Holder of a Bearer Security is unable to produce any such unmatured Coupon or Coupons or mature Coupon or Coupons in default, such exchange may be effected if the Bearer Securities are accompanied by payment in funds acceptable to the Company in an amount equal to the face amount of such missing Coupon or Coupons, or the surrender of such missing Coupon or Coupons, may be waived by the Company and the Trustee if there is furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to any Paying Agent any such missing Coupon in respect of which such a payment shall have been made, such Holder shall be entitled to receive the amount of such payment; provided, however, that, except as otherwise provided in Section 4.02, interest represented by Coupons shall be payable only upon presentation and surrender of those Coupons at an office or agency located outside the United States. Notwithstanding the foregoing, in case a Bearer Security of any series is surrendered at any such office or agency in exchange for a Registered Security of the same series and like tenor after the close of business at such office or agency on (i) any Regular Record Date and before the opening of business at such office or agency on the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, such Bearer Security shall be surrendered without the Coupon relating to such Interest Payment Date or proposed date for payment, as the case may be, and interest or Defaulted Interest, as the case may be, will not be payable on such Interest 20 Payment Date or proposed date for payment, as the case may be, in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such Coupon when due in accordance with the provisions of this Indenture. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. Notwithstanding the foregoing, except as otherwise specified pursuant to Section 2.01, any permanent global Security shall be exchangeable pursuant to this Section only as provided in this paragraph. If at any time the U.S. Depository or Common Depository for the Securities of a series notifies the Company that it is unwilling or unable to continue as U.S. Depository or Common Depository, as the case may be, for the Securities of such series or if at any time the U.S. Depository for the Securities of such series shall no longer be eligible under Section 2.15, the Company shall appoint a successor U.S. Depository or Common Depository, as the case may be, with respect to the Securities of such series. If (a) a successor U.S. Depository or Common Depository, as the case may be, for the Securities of such series is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, (thereby automatically making the Company's election pursuant to Section 2.01(q) no longer effective with respect to the Securities of such series), (b) the beneficial owners of interests in a permanent global Security are entitled to exchange such interests for Securities of such series and of like tenor and principal amount of another authorized form and denomination, as specified pursuant to Section 2.01, or (c) the Company in its sole discretion determines that the Securities of any series issued in the form of one or more global Securities shall no longer be represented by such global Security or Securities, then without unnecessary delay but in any event not later than the earliest date on which such interest may be so exchanged, if appropriate, the Company shall deliver to the Trustee definitive Securities in aggregate principal amount equal to the principal amount of such global Security, executed by the Company. On or after the earliest date on which such interests may be so exchanged, such global Security shall be surrendered by the U.S. Depository or Common Depository as, the case may be, to the Trustee, as the Company's agent for such purpose, to be exchanged, in whole or from time to time in part, for definitive Securities upon payment, at the option of the Company, of a service charge for such exchange and of a proportionate share of the cost of printing such definitive Securities, and the Trustee shall authenticate and deliver, (a) to each Person specified by the U.S. Depository, or Common Depository, as the case may be, in exchange for each portion of such global Security, an equal aggregate principal amount of definitive Securities of the same series of authorized denominations and of like tenor as the portion of such global Security to be exchanged which, unless the Securities of the series are not issuable both as Bearer Securities and as Registered Securities, as specified pursuant to Section 2.01, shall be in the form of Bearer Securities or Registered Securities, or any combination thereof, as shall be specified by the beneficial owner thereof and (b) to such U.S. Depository or Common Depository, as the case may be, a global Security in a denomination equal to the difference, if any, between the principal amount of the surrendered global Security and the aggregate principal amount of definitive Securities delivered to Holders thereof; provided, however, that no such exchanges may occur during a period beginning at the beginning of 15 Business Days before any selection of Securities of that series to be redeemed and ending on the relevant Redemption Date; and provided, further, that no Bearer Security delivered in exchange for a portion of a global Security shall be mailed or otherwise delivered to any location in the United States; and provided, further, that no definitive 21 Bearer Security shall be delivered in exchange for a global Security unless the Company or its agent shall have received from the Person entitled to receive such definitive Security a certificate substantially in the form of Exhibit A.1 to this Indenture. If a Registered Security is issued in exchange for any portion of a permanent global Security after the close of business at the office or agency where such exchange occurs on (i) any Regular Record Date and before the opening of business at such office of agency of the relevant Interest Payment Date, or (ii) any Special Record Date and before the opening of business at such office or agency on the related proposed date for payment of Defaulted Interest, interest or Defaulted Interest, as the case may be, will not be payable on such Interest Payment Date or proposed date for payment, as the case may be, in respect of such Registered Security, but will be payable on such Interest Payment Date or proposed date for payment, as the case may be, only to the Person to whom Interest in respect of such portion of such permanent global Security is payable in accordance with the provisions of this Indenture. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Registered Security presented or surrendered for registration of transfer or exchange shall (if so required by the Company or the Trustee or the Authenticating Agent, if any) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing and such other documentation as the Trustee may reasonably require. The Company may require payment of a service charge for any registration of transfer or exchange of Securities, and may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 2.04, 3.08 or 10.04 not involving any transfer. In the event of any redemption in part, the Company shall not be required: (i) to issue, register the transfer or exchange Securities of any series during a period beginning at the opening of 15 Business Days before any selection of Securities of that series to be redeemed and ending at the close of business on (A) if Securities of the series are issuable only as Registered Securities, the day of the mailing of the relevant notice of redemption and (B) if Securities of the series are issuable only as Bearer Securities, the day of the first publication of the relevant notice of redemption or, (C) if Securities of the series are issuable as Registered Securities and Bearer Securities and there is no publication, the day of mailing of the relevant notice of redemption, or (ii) to register the transfer or exchange of any Registered Security so selected for redemption, in whole or in part, except the unredeemed portion of any Security being redeemed in part, or (iii) to exchange any Bearer Security so selected for redemption except that such a Bearer Security may be exchanged for a Registered Security of that series and like tenor; provided that such Registered Security shall be simultaneously surrendered for redemption. Section 2.06 Mutilated, Destroyed, Lost and Stolen Securities. If ------------------------------------------------ any mutilated Security or Security with a mutilated Coupon appertaining to it is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in 22 exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding with Coupons corresponding to the Coupons, if any, appertaining to the surrendered Security. If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the mutilation, destruction, loss or theft of any Security or Coupon, and (ii) such security or indemnity as may be required by them to save each of them, and any agent of either of them harmless, then, in the absence of notice to the Company, the or the Trustee that such Security or Coupon has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee or the Authenticating Agent, if any, shall authenticate and make available for delivery in lieu of any such destroyed, lost or stolen Security or in exchange for the Security to which a destroyed, lost or stolen Coupon appertains (upon surrender to the Trustee of such Security with all appurtenant Coupons not destroyed, lost or stolen), a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding, with Coupons corresponding to the Coupons, if any, appertaining to such destroyed, lost or stolen Security or to the Security to which such destroyed, lost or stolen Coupon appertains. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security or Coupon as otherwise required above, pay such Security or Coupon; provided, however, that principal of (and premium, if any) and interest on Bearer Securities shall, except as otherwise provided in Section 4.02, be payable only at an office or agency located outside the United States and, unless otherwise specified pursuant to Section 2.01, any interest on Bearer Securities shall be payable only upon presentation and surrender of the Coupons appertaining thereto. Upon the issuance of any new Security or Coupon under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee or the Authenticating Agent, if any) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security or Coupon shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities or Coupons of that series duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities or Coupons. Section 2.07 Persons Deemed Owners. Prior to due presentment of a --------------------- Registered Security for registration of transfer, the Company, the Trustee, the Authenticating Agent, if any, and any agent of the Company, or Trustee may treat the Person in whose name such Registered Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of (and premium, if any), and (subject to Sections 2.05 and 2.09) interest on, such Security and for all other purposes whatsoever whether or not such Security be overdue, and 23 notwithstanding any notation of ownership or other writing thereon, neither the Company, the Trustee, the Authenticating Agent, if any, nor any agent of the Company, or the Trustee shall be affected by notice or knowledge to the contrary. Title to any Bearer Security and any Coupons appertaining thereto shall pass by delivery. The Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of any Bearer Security and the Holder of any Coupon as the absolute owner of such Security or Coupon for the purpose of receiving payment thereof or on account thereof and for all other purposes whatsoever, whether or not such Security or Coupon be overdue, and neither the Company, the Trustee nor the agent of the Company or the Trustee shall be affected by notice or knowledge to the contrary. Section 2.08 Cancellation. Unless otherwise provided with respect to ------------ a series of Securities, all Securities and Coupons surrendered for payment, redemption, transfer or exchange or for credit against any sinking fund payment shall if surrendered to the Company, or any agent of the Company, be delivered to the Trustee and all such Securities and Coupons so delivered shall be promptly cancelled by the Trustee. All Bearer Securities and Coupons held by the Trustee pending such cancellation shall be deemed to be delivered for cancellation for all purposes of this Indenture and the Securities. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be Promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. The Trustee may destroy, unless otherwise agreed to by the Company, all cancelled Securities and Coupons and, in which case, Trustee shall deliver a certificate of such destruction to the Company. Section 2.09 Payment of Interest; Interest Rights Preserved. Unless ---------------------------------------------- otherwise specified pursuant to Section 2.01 with respect to any series of Securities, interest on any Registered Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Registered Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein tailed "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in either clause (1) or (2) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Registered Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Registered Security of such series and the date of the 24 proposed payment (subject to the limitations on fixing the Special Record Date set forth below), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be given as provided in Section 1.04, to each holder of Registered Securities of such series, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (b) The Company may make payment of any Defaulted Interest on the Registered Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment. shall be deemed practicable by the Trustee. Defaulted Interest on any Bearer Security shall be paid upon presentation of the applicable Coupon for payment. Subject to the foregoing provisions of this Section and Section 2.05, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 2.10 Computation of Interest. Except as otherwise specified ----------------------- pursuant to Section 2.01 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. Section 2.11 Currency and Manner of Payments in Respect of --------------------------------------------- Securities. The provisions of this Section shall apply to the Securities of any series unless otherwise specified pursuant to Section 2.01. (a) The following payment provisions shall apply to any Registered Security of any series denominated in Dollars, a Foreign Currency or any currency unit, including without limitation ECU, except as provided in paragraph (b) below: 25 (1) Except as provided in subparagraph (a)(2) or in paragraph (e) below, payment of principal and premium, if any, on such Registered Security will be made at the Place of Payment by delivery of a check in the currency or currency unit in which the Security is denominated on the payment date against surrender of such Registered Security, and any interest on any Registered Security will be paid at the Place of Payment by mailing a check in the currency or currency unit in which such interest is payable (which shall be the same as that in which the Security is denominated unless otherwise provided) to the Person entitled thereto at the address of such Person appearing on the Security Register. (2) Payment of the principal of, premium, if any, and interest, if any, on such Security, may also, subject to applicable laws and regulations, be made at other place or places as may be designated by the Company by any appropriate method. (b) With respect to any Registered Security of any series denominated in any currency unit, including without limitation ECU, if the following provisions (or any substitute therefor, or addition thereto, not inconsistent with this Indenture) are established pursuant to Section 2.01 and if the Company has not, before delivery of the election referred to in clause (1) below, deposited funds or securities in compliance with Section 12.01 or clause (a) or (if specified pursuant to Section 2.01) clause (b) of Section 12.03 the following payment provisions shall apply to any payment to be made prior to the giving of any notice to Holders of any election to redeem pursuant to Section 3.05, except as otherwise provided in paragraphs (e) and (f) below: (1) A Holder of Securities of a series shall have the option to elect to receive payments of principal of, premium, if any, and interest, if any, on such Securities in a currency or currency unit (including Dollars), other than that in which the Security is denominated. Such election, as designated in the certificates for such Securities (or as provided by Section 2.01 or a supplemental indenture thereto with respect to uncertificated securities), shall be made by delivering to the Trustee a written election, to be in form and substance satisfactory to the Trustee, not later than the close of business in The City of New York, on the day 15 days prior to the applicable payment date. Such election will remain in effect for such Holder until changed by the Holder by written notice to the Trustee (but any such written notice must be received by Trustee not later than the close of business on the day 15 days prior to the next payment date to be effective for the payment to be made on such payment date and no such change may be made with respect to payments to be made on any Security of such series with respect to which notice of redemption has been given by the Company pursuant to Article Three). Any Holder of any such Security who shall not have delivered any such election to the Trustee in, accordance with this paragraph (b) will be paid the amount due on the applicable payment date in the relevant currency unit as provided in paragraph (a) of this Section 2.11. Payment of principal of and premium, if any, shall be made on the payment date therefor against surrender of such Security. Payment of principal of, premium, if any, and interest, if any, shall be made at the Place of Payment by mailing at such location a check, in the 26 applicable currency or currency unit, to the Holder entitled thereto at the address of such Holder appearing on the Security Register. (2) Payment of the principal of, premium, if any, and interest, if any, on such Security may also, subject to applicable laws and regulations, be made at such other place or places as may be designated by the Company by any appropriate method. (c) Payment of the principal of and premium, if any, and interest, if any, on any Bearer Security shall be made, except as provided in Section 2.04 with respect to temporary global Securities, unless otherwise specified pursuant to Section 2.01 and/or Section 10.01(h), at such place or places outside the United States as may be designated by the Company pursuant to any applicable laws or regulations by any appropriate method in the currency or currencies or currency unit or units in which the Security is payable (except as provided in paragraph (e) below) on the payment date therefor against surrender of the Bearer Security, in the case of payment of principal and premium, if any, or the relevant Coupon, in the case of payment of interest, if any, to a Paying Agent designated for such series pursuant to Section 4.02. (d) Not later than 10 Business Days (with respect to any Place of Payment) prior to each payment date, the Trustee (and if a calculation agent is appointed with respect to any Securities bearing interest at a rate or rates determined by reference to an interest rate formula, such calculation agent with respect to such Securities) shall deliver to the Company a copy of its record of the respective aggregate amounts of principal of, premium, if any, and interest, if any, on the Securities to be made on such payment date, in the currency or currency unit in which each of the Securities is payable, specifying the amounts so payable in respect of Registered Securities and Bearer Securities and in respect of the Registered Securities as to which the Holders of Securities denominated in any currency unit shall have elected to be paid in another currency or currency unit as provided in paragraph (b) above. If the election referred to in paragraph (b) above has been provided for pursuant to Section 2.01 and if at least one Holder has made such election, then, not later than the fifth Business Day (with respect to any Place of Payment) prior to the applicable payment date the Company shall deliver to the Trustee an Exchange Rate Officer's Certificate in respect of the Dollar or Foreign Currency or currency unit payments to be made on such payment date. The Dollar or Foreign Currency or currency unit amount receivable by Holders of Registered Securities denominated in a currency unit who have elected payment in another currency or currency unit as provided in paragraph (b) above shall be determined by the Company on the basis of the applicable Official Currency Unit Exchange Rate set forth in the applicable Exchange Rate Officer's Certificate. (e) If a Foreign Currency in which any Security is denominated or payable ceases to be recognized both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, or if ECU ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities, or if any other currency unit in which a Security is denominated or payable ceases to be used for the purposes for which it was established, 27 in each case determined in good faith by the Company, then with respect to each date for the payment of principal of, premium, if any, and interest, if any, on the applicable security denominated or payable in such Foreign Currency, ECU or such other currency unit occurring after the last date on which such Foreign Currency, ECU or such other currency unit was so recognized or used (the "Currency Conversion Date"), the Dollar shall become the currency of payment for use on each such payment date (but ECU or the Foreign Currency or the currency unit previously the currency of payment shall, at the Company's election, resume being the currency of payment on the first such payment date preceded by 15 Business Days during which the circumstances which gave rise to the Dollar becoming such currency no longer prevail, in each case as determined in good faith by the Company). The Dollar amount to be paid by the Company to the Trustee and by the Trustee or any Paying Agent to the Holder of such Security with respect to such payment date shall be the Dollar Equivalent of the Foreign Currency or, in the case of a currency unit, the Dollar Equivalent of the Currency Unit, as determined by the Exchange Rate Agent (which shall be delivered in writing to the Trustee not later than the fifth Business Day prior to the applicable payment date) as of the Currency Conversion Date or, if later, the date most recently preceding the payment date in question on which such determination is possible of performance, but not more than 15 days before such payment date (such Currency Conversion Date or date preceding a payment date as aforesaid being called the "Valuation Date") in the manner provided in paragraph (g) or (h) below. (f) (i) If the Holder of a Registered Security denominated in a currency unit elects payment in a specified Foreign Currency or currency unit as provided for by paragraph (b) and such Foreign Currency ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, in each case as determined in good faith by the Company, such Holder shall (subject to paragraph (e) above) receive payment in the currency unit in which the Security is denominated, and (ii) if ECU ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities and such Registered Security is payable in such currency unit, or if any other such currency unit ceases to be used for the purposes for which it was established and such Registered Security is payable in such currency unit, in each case as determined in good faith by the Company, such Holder shall receive payment in Dollars. Each payment covered by an election pursuant to paragraph (b) above be governed by the provisions of this paragraph (f) (but, subject to any contravening valid election pursuant to paragraph (b) above, the specified Foreign Currency in case (i) or ECU or other currency unit in case (ii) shall, at the Company's election, resume being the currency or currency unit, as applicable, of payment with respect to Holders who have so elected, but only with respect to payments on payment dates preceded by 15 Business Days during which the circumstances which gave rise to such currency unit in case (i) or the Dollar in case (ii) becoming the currency unit or currency, as applicable, of payment, no longer prevails, in each case as determined in good faith by the Company). (g) "The Dollar Equivalent of the Foreign Currency" shall be determined by the Exchange Rate Agent as of each Valuation Date and shall be obtained by converting the specified Foreign Currency into Dollars at the Market Exchange Rate on the Valuation Date. 28 (h) The "Dollar Equivalent of the Currency Unit" shall be determined by the Exchange Rate Agent as of each Valuation Date and shall be the sum obtained by adding together the results obtained by converting the Specified Amount of each Component Currency into Dollars at the Market Exchange Rate on the Valuation Date for such Component Currency. (i) For purposes of this Section 2.11 the following terms shall have the following meanings: A "Component Currency" shall mean any currency which, on the Currency Conversion Date, was a component currency of the relevant currency unit, including without limitation ECU. An "Exchange Rate Agent" means a New York clearinghouse bank appointed by the Company from time to time to determine exchange rates between Dollars and other currencies or currency units. The Company may appoint different Exchange Rate Agents for different currencies and currency units and may change an Exchange Rate Agent at any time after 15 days' notice to the Trustee. A "Specified Amount" of a Component Currency shall mean the number of units or fractions thereof which such Component Currency represented in the relevant currency unit, including without limitation ECU, on the Currency Conversion Date. If after the Currency Conversion Date the official unit of any Component Currency is altered by way of combination or subdivision, the Specified Amount of such Component Currency shall be divided or multiplied in the same proportion. If after the Currency Conversion Date two or more Component Currencies are consolidated into a single currency, the respective Specified Amounts of such Component Currencies shall be replaced by an amount in such single currency equal to the sum of the respective Specified Amounts of such consolidated Component Currencies expressed in such single currency, and such amount shall thereafter be a Specified Amount and such single currency shall thereafter be a Component Currency. If after the Currency Conversation Date any Component Currency shall be divided into two or more currencies, the Specified Amount of such Component Currency shall be replaced by specified amounts of such two or more currencies, the sum of which, at the Market Exchange Rate of such two or more currencies on the date of such replacement, shall be equal to the Specified Amounts of such currencies shall thereafter be Component Currencies. "Market Exchange Rate" shall mean for any currency the noon Dollar buying rate for that currency for cable transfers quoted in New York City on the Valuation Date as certified for customs purposes by the Federal Reserve Bank of New York. If such rates are not available for any reason with respect to one or more currencies for which an Exchange Rate is required. the Exchange Rate Agent shall use such quotation of the Federal Reserve Bank of New York as of the most recent available date, or quotations from one or more major banks with its head office in New York City or in the country of issue of the currency in question, or such other quotations as the Exchange Rate Agent shall deem appropriate. Unless otherwise specified by the Exchange Rate Agent if there is more than one market for dealing in any currency by reason of foreign exchange regulations or otherwise, the market to be used in respect of such currency shall be that upon which a nonresident issuer of securities designated in such currency would, as determined 29 in its sole discretion and without liability on the part of the Exchange Rate Agent, purchase such currency in order to make payments in respect of such securities. All decisions and determinations of the Exchange Rate Agent regarding the Dollar Equivalent of the Foreign Currency, the Dollar Equivalent of the Currency Unit and the Market Exchange Rate shall be in its sole discretion and shall, in the absence of manifest error, be conclusive for all purposes and irrevocably binding upon the Company and all Holders of the Securities and Coupons denominated or payable in the relevant currency or currency units. In the event that a Foreign Currency ceases to be used both by the government of the country which issued such currency and for the settlement of transactions by public institutions of or within the international banking community, the Company, after learning thereof, will immediately give notice thereof to the Trustee (and the Trustee will promptly thereafter give notice in the manner provided in Section 1.04 to the Holders) specifying the Currency Conversion Date. In the event the ECU ceases to be used both within the European Monetary System and for the settlement of transactions by public institutions of or within the European Communities, or any other currency unit in which Securities or Coupons are denominated or payable, ceases to be used for the purposes for which it was established, the Company, after learning thereof, will immediately give notice thereof to the Trustee (and the Trustee will promptly thereafter give notice in the manner provided in Section 1.04 to the Holders) specifying the Currency Conversion Date and the Specified Amount of each Component Currency on the Currency Conversion Date. In the event of any subsequent change in any Component Currency as set forth in the definition of Specified Amount above, the Company, after learning thereof, will similarly give notice to the Trustee. Any actions taken pursuant to the parentheticals at the end of the first sentence of Section 2.11(e) and at the end of Section 2.11(f) shall be promptly set forth in like notices from the Company to the Trustee and then from the Trustee to the Holders (which notice may be mailed with payment to the Holders). Subject to the provisions of Sections 7.01 and 7.02, the Trustee shall be fully justified and protected in conclusively relying and acting upon information received by it from the Company and the Exchange Rate Agent, and shall not otherwise have any duty or obligation to determine such information independently. Section 2.12 Compliance with Certain Laws and Regulations. If any -------------------------------------------- Bearer Securities are to be issued in any series of Securities, the Company will use reasonable efforts to provide for arrangements and procedures designed pursuant to then applicable laws and regulations, if any, to ensure that such Bearer Securities are sold or resold, exchanged, transferred and paid only in compliance with such laws and regulations and without adverse consequences to the Company, the Holders and the Trustee. Section 2.13 Security Forms Generally. The Securities of each series ------------------------ and the Coupons, if any, to be attached thereto shall be in substantially the forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions, and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the applicable laws and regulations and the rules of any securities exchange or as may, consistently herewith, be determined by the offices executing such Securities and Coupons, if any, as evidenced by their executions of the Securities and Coupons, if any. If the forms of Securities 30 of any series is established by, or by action taken pursuant to a Board Resolution, a copy of the Board Resolution together with an appropriate record of any action taken pursuant thereto, which Board Resolution or record of such action shall have amended thereto a true and correct copy of the forms of Security approved by or pursuant to such Board Resolution, shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 2.03 for the authentication and delivery of such Securities. The definitive Securities and Coupons, if any, shall be printed, lithographed or engraved on steel engraved borders and may be produced in any other manner, as all determined by the officers executing such Securities and Coupons, if any, as evidenced by their execution of such Securities and Coupons, if any. Section 2.14 Form of Trustee's certificate of Authentication. The ----------------------------------------------- Trustee's certificate of authentication shall be in substantially the following form: This is one of the Securities of the series designated therein issued under the within mentioned Indenture. [full name of Trustee] as Trustee By______________________________ Authorized [Officer] [Signatory] Section 2.15 Securities in Global Form. If Securities of a series ------------------------- are issuable in global form, as specified pursuant to Section 2.01, then, notwithstanding clause (8) of Section 2.01 and the provisions of Section 2.02, such Security shall represent such of the Outstanding Securities of such series as shall be specified therein and may provide that it shall represent the aggregate amount of Outstanding Securities from time to time endorsed thereon and that the aggregate amount of Securities represented thereby may from time to time be reduced to reflect exchanges. Any endorsement of a Security in global form to reflect the amount, or any increase or decrease in the amount, of Outstanding Securities represented thereby shall be made by the Trustee in such manner and upon written instructions given by such Person or Persons as shall be specified in such Security or in the Company Order to be delivered to the Trustee pursuant to Section 2.03 or Section 2.04. Subject to the provisions of Section 2.03 and, if applicable, Section 2.04, the Trustee shall deliver and redeliver any Security in permanent global form in the manner and upon written instructions given by the Person or Persons specified in such Security or in the applicable Company Order. If a Company Order pursuant to Section 2.03 or 2.04 has been, or simultaneously is, delivered, any instructions by the Company with respect to endorsement or delivery or redelivery of a Security in global form shall be in writing but need not comply with Section 14.06 and need not be accompanied by an Opinion of Counsel. The provisions of the last sentence of Section 2.03 shall apply to any Security represented by a Security in global form if such Security was never issued and sold by the Company and the Company delivers to the Trustee the Security in global form together with written instructions (which need not comply with Section 14.06 and need not be accompanied by 31 an Opinion of Counsel) with regard to the reduction in the principal amount of Securities represented thereby, together with the written statement contemplated by the last sentence of Section 2.03. Notwithstanding the provisions of Sections 2.13 and 2.09, unless otherwise specified pursuant to Section 2.01, payment of principal of and any premium and any interest on any Security in permanent global form shall be made to the Person or Persons specified therein. The holders of beneficial interests in any temporary or permanent global Security shall have no rights under this Indenture with respect to any global Security held on their behalf by a U.S. Depository or Common Depository, as the case may be, and such U.S. Depository or Common Depository, as the case may be, may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a U.S. Depository or Common Depository, as the case may be, or impair, as between a U.S. Depository or Common as the case may be, and holders of beneficial interests in any temporary or permanent global Security as the case may be, the operation of customary practices governing the exercise of the rights of a Holder of a Security of any series, including without limitation the granting of proxies or other authorization of participants to give or take any request, demand, authorization, direction, notice, consent, waiver or other action which a Holder is entitled to give or take under this Indenture. None of the Company, the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a global Security or for supervising or reviewing any records relating to such beneficial ownership interests. Each U.S. Depository designated pursuant to Section 2.01 for a global Security in registered form must, at the time of its designation and at all times while it serves as U.S. Depository, be a clearing agency registered under the Securities Exchange Act of 1934, as amended, and any other applicable statute or regulation. ARTICLE 3. REDEMPTION OF SECURITIES AND SINKING FUNDS ------------------------------------------ Section 3.01 Applicability of Article. Securities (including any ------------------------ Coupons) of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified pursuant to Section 2.01 for Securities (including any Coupons) of any series) in accordance with this Article. The provisions of Sections 3.08 to 3.10 of this Article shall be applicable if any sinking fund is to be provided for the retirement of Securities (including any Coupons) of any series except as otherwise specified pursuant to Section 2.01 for Securities (including any Coupons) of such series. 32 Section 3.02 Mandatory and Original Sinking Fund Payments. The -------------------------------------------- minimum amount of any sinking fund payment provided for by the terms of Securities (including any Coupons) of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities (including any Coupons) of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities (including any Coupons) of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 3.09. Each sinking fund payment shall be applied to the redemption of Securities (including any Coupons) of any series as provided for by the terms of Securities (including any Coupons) of such series. Section 3.03 Election to Redeem: Notice to Trustee. The election of -------------------------------------- the Company to redeem any Securities (including any Coupons) shall be evidenced by a Board Resolution or by an action taken pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities (including any Coupons) of any series, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless the Trustee shall allow a lesser period of time) deliver to the Trustee an Officers' Certificate (1) notifying the Trustee of such Redemption Date and of the principal amount of Securities (including any Coupons) of such series to be redeemed and (2) stating that no defaults in the payment of interest or Events of Default with respect to the Securities (including any Coupons) of that series have occurred (which have not been waived or cured). In the case of any redemption of Securities (including any Coupons) prior to the expiration of any restriction on such redemption provided in the terms of such Securities (including any Coupons) or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. Section 3.04 Selection by Trustee of Securities to be Redeemed. If ------------------------------------------------- less than all the Securities (including any Coupons) of any series are to be redeemed, the particular Securities (including any Coupons) to be redeemed shall be selected by the Trustee, not more than 45 days prior to the Redemption Date from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions equal to the minimum authorized denomination for Securities (including any Coupons) of that series, or any integral multiple thereof, of the principal amount of Securities (including any Coupons) of such series, or of a denomination larger than the minimum authorized denomination for Securities (including any Coupons) of that Series. The Trustee shall promptly notify the Company in writing of the Securities (including any Coupons) selected for redemption and, in the case of any Securities (including any Coupons) selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities (including any Coupons) shall relate, in the case of any Security (including any Coupons) redeemed or to be redeemed only in part, to the portion of the principal of such Security (including any Coupons) which has been or is to be redeemed. Securities shall be excluded from liability for selection for redemption if they are identified by registration and certificate number in an Officers' Certificate of the Company delivered to the Trustee at least 45 days prior to the Redemption Date (unless the Trustee shall 33 allow a lesser period of time) as being owned of record and beneficially by, and not pledged or hypothecated by, either (a) the Company or (b) an entity specifically identified in such written statement as an Affiliate of the Company. Section 3.05 Notice of Redemption. Notice of redemption shall be -------------------- given not less than 30 nor more than 60 days prior to the Redemption Date (unless the Trustee shall allow a lesser period of time), to each Holder of Securities to be redeemed, as provided in Section 1.04. Each such notice of redemption shall specify the Redemption Date, the Redemption Price, the Place or Places of Payment, that the Securities of such series are being redeemed at the option of the Company pursuant to provisions contained in the terms of the Securities of such series or in a supplemental indenture establishing such series, if such be the case, together with a brief statement of the facts permitting such redemption, that on the Redemption Date the Redemption Price will become due and payable upon each Security redeemed, that payment will be made upon presentation and surrender of the applicable Securities, that all Coupons, if any, maturing subsequent to the Redemption Date shall be void, that any interest accrued to the Redemption Date will be paid as specified in said notice, and that on and after said Redemption Date any interest thereon or on the portions thereof to be redeemed will cease to accrue. If the Securities of such series are convertible into other securities of the Company, the notice shall also state the conversion price, the last date on which the Securities may be converted prior to the Redemption Date, and that the Holders who wish to convert their Securities must comply with and satisfy all the terms, conditions and requirements for conversion as set forth in the Securities and/or this Indenture. If less than all the Securities of any series are to be redeemed the notice of redemption shall specify the numbers of the Securities of such series to be redeemed, and, if only Bearer Securities of any series are to be redeemed, and if such Bearer Securities may be exchanged for Registered Securities, the last date on which exchanges of Bearer Securities for Registered Securities not subject to redemption may be made. In case any Security of any series is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the Redemption Date, upon surrender of such Security and any Coupons appertaining thereto, a new Security or Securities of such series in principal amount equal to the unredeemed portion thereof and with appropriate Coupons will be issued, or, in the case of Registered Securities providing appropriate space for such notation, at the option of the Holders, the Trustee, in lieu of delivering a new Security or Securities as aforesaid, may make a notation on such Security of the payment of the redeemed portion thereof. Notice of redemption of Securities and Coupons, if any, to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 3.06 Deposit of Redemption Price. On or before the opening --------------------------- of business on any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 4.05) an amount of money in the relevant currency (or a sufficient number of currency units, as the case may be) sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities and Coupons, if any, which are to be redeemed on that date. 34 Section 3.07 Securities Payable on Redemption Date. Notice of ------------------------------------- redemption having been given as aforesaid, the Securities to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest and the Coupons for such interest appertaining to any Bearer Securities, so to be redeemed, except to the extent provided below, shall be void. Upon surrender of any such Security for redemption in accordance with said notice, together with all Coupons, if any, appertaining thereto maturing after the Redemption Date, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest on Bearer Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 4.02) and, unless otherwise specified pursuant to Section 2.01, only upon presentation and surrender of Coupons for such interest, and provided, further, that, unless otherwise specified pursuant to Section 2.01, installments of interest on Registered Securities whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular and Special Record Dates according to their terms and the provisions of Section 2.09. If any Bearer Security surrendered for redemption shall not be accompanied by all appurtenant Coupons maturing after the Redemption Date, such Security may be paid after deducting from the Redemption Price an amount equal to the face amount of all such missing Coupons, or the surrender of such missing Coupon or Coupons may be waived by the Company and the Trustee if there be furnished to them such security or indemnity as they may require to save each of them and any Paying Agent harmless. If thereafter the Holder of such Security shall surrender to the Trustee or any Paying Agent any such missing Coupon in respect of which a deduction shall have been made from the Redemption Price, such Holder shall be entitled to receive the amount so deducted; provided, however, that interest represented by Coupons shall be payable only at an office or agency located outside the United States (except as otherwise provided in Section 4.02) and, unless otherwise specified pursuant to Section 2.01, only upon presentation and surrender of those Coupons. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and any premium shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in by the Security. Section 3.08 Securities Redeemed in Part. Any Security (including --------------------------- any Coupons appertaining thereto) which is to be redeemed only in part may be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder of such Security (including any Coupons appertaining thereto) without service charge to the Holder thereof, a new Security or Securities (including any Coupons Pertaining thereto) of the same series and Stated Maturity, of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. Any Bearer Security that is redeemed only in part shall be surrendered at an office or agency of the Company located outside the United States, except as otherwise provided in 35 Section 4.02, and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security outside the United States without service charge, a new Bearer Security or Bearer Securities of the same series (or a new Registered Security or Registered Securities of the same series, if the Securities of such series are issuable as Registered Securities), of any authorized denomination as requested by such Holder in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; except in either case that if a global Security is so surrendered, the Company shall execute, and the Trustee shall authenticate and make available for delivery to the U.S. Depository or Common Depository, as the case may be, for such global Security, without service charge, a global Security in a denomination equal to and in exchange for the unredeemed portion of the principal of the global Security so surrendered. Section 3.09 Satisfaction of Sinking Fund Payments with Securities. ----------------------------------------------------- The Company (1) may deliver Outstanding Securities (including any Coupons) of a series (other than any previously called for redemption) and (2) may apply as a credit Securities (including any Coupons) of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities (including any Coupons) or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities (including any Coupons), in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities (including any Coupons) of such series required to be made pursuant to the terms of such Securities (including any Coupons) provided for by the terms of such series; provided that such Securities (including any -------- Coupons) have not been previously so credited. Such Securities (including any Coupons) shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities (including any Coupons) for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. Section 3.10 Redemption of Securities for Sinking Fund. Not less ----------------------------------------- than 45 days prior to each sinking fund payment date (unless the Trustee shall allow a lesser period of time) for any series of Securities (including any Coupons), the Company will (1) deliver to the Trustee an Officers' Certificate (A) stating that no defaults in the payment of interest or Events of Default with respect to Securities (including any Coupons) of that series have occurred (which have not been waived or cured), (B) specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities (including any Coupons) of that series pursuant to Section 3.09 and (C) if applicable, stating whether or not the Company intends to exercise its right to make an optional sinking fund payment with respect to such series on the next ensuing sinking fund payment date and, if so, specifying the amount of such optional sinking fund payment and (2) deliver to the Trustee any Securities (including any Coupons) to be so delivered. Not less than 30 days before each such sinking fund payment date the Trustee shall select the Securities (including any coupons) to be redeemed upon such sinking fund payment date in the manner specified in Section 3.04 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 3.05. Section 3.11 Redemption of Securities During Event of Default. The ------------------------------------------------ Trustee shall not redeem or cause to be redeemed any Security (including any Coupons) of a series with sinking fund moneys or otherwise as provided in this Article (unless all outstanding Securities (including any Coupons) of such series are to be redeemed) or mail any notice of any such redemption of 36 Securities (including any Coupons) of a series during the continuance of a default in payment of interest on such Securities (including any Coupons) or of any Event of Default with respect to such series known two Business Days prior to such payment or mailing to a Responsible Officer of the Trustee except that, where the mailing of notice of redemption of any Securities (including any Coupons) shall theretofore have been made, the Trustee shall redeem or cause to be redeemed such Securities (including any Coupons), provided that it shall have received from the Company a sum sufficient for such redemption. Except as aforesaid, any moneys theretofore or thereafter received by the Trustee in respect of such series of Securities at the time when any such default or Event of Default shall have occurred shall, during the continuance of such default or Event of Default, be deemed to have been collected under Article Seven and held for the payment of all the Securities (including any Coupons) of that series. In case such Event of Default shall have been waived as provided in Section 6.01 or the default cured on or before the sixtieth day preceding a sinking fund payment date or a Redemption Date, as the case may be, such moneys held thereafter shall be applied in accordance with the provisions of this Article to the redemption of such Securities Concluding any Coupons). ARTICLE 4. PARTICULAR COVENANTS OF THE COMPANY ----------------------------------- Section 4.01 Payment of Principal, Premium and Interest. The Company ------------------------------------------ covenants and agrees for the benefit of each series of Securities and Coupons, if any, that it will duly and punctually pay or cause to be paid the principal of (and premium, if any) and interest, if any, on the Securities and Coupons, if any, of that series in accordance with the terms of the Securities and Coupons, if any, of such series and this Indenture. Section 4.02 Maintenance of Office or Agency. If Securities of a ------------------------------- series are issuable only as Registered Securities, the Company will maintain in each Place of Payment for such series an office, which may be an office of the Trustee, or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. If the Securities of a series are convertible into any other security of the Company, the Company will maintain in each Place of Payment for such series an office, which may be an office of the Trustee, or agency where Securities of that series may be presented or surrendered for conversion. If Securities of a series are issuable as Bearer Securities, the Company will maintain (A) in the Borough of Manhattan, The City of New York, an office, which may be an office of the Trustee, or agency where any Registered Securities of that series may be presented or surrendered for payment, where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange, where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served and where Bearer Securities of that series and related Coupons may be presented or surrendered for payment in the circumstances described in the last proviso of this paragraph (and not otherwise), (B) subject to any laws or regulations applicable thereto, in a Place of Payment for that series which is located outside the United States, an office, which may be an office of the Trustee, or agency where Securities of that series and related Coupons may be presented and surrendered for payment (including payment of any additional amounts payable on Securities of 37 that series pursuant to Section 4.07); provided, however, that if the Securities of that series are listed on The Stock Exchange of the United Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange or any other stock exchange located outside the United States and such stock exchange shall so require, the Company will maintain a Paying Agent reasonably acceptable to the Trustee for the Securities of that series in London, Luxembourg or any other required city located outside the United States, as the case may be, so long as the Securities of that series are listed on such exchange, and (C) subject to any laws or regulations applicable thereto, in a Place of Payment for that series located outside the United States, an office, which may be an office of the Trustee, or agency where any Registered Securities of that series may be surrendered for registration of transfer, where Securities of that series may be surrendered for exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee and the Holders of the location, and any change in the location, of any such office or agency. If at any time the Company shall fail to maintain any such required office or agency in respect of any series of Securities or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders of Securities of that series may be made and notices and demands may be made or served at the Corporate Trust Office of the Trustee, except that Bearer Securities of that series and the related Coupons may be presented and surrendered for payment (including payment of any additional amounts payable on Bearer Securities of that series pursuant to Section 4.07) at the London office of the Trustee (or an agent with a London office appointed by the Trustee and acceptable to the Company), and the Company hereby appoints the same as its agent to receive such respective presentations, surrenders notices and demands. No payment of principal, premium or interest on Bearer Securities shall be made at any office or agency of the Company in the United States or by check mailed to any address in the United States or by transfer to an account maintained in the United States; provided, however, that, if the Securities of a series are denominated and payable in Dollars, payment of principal of and any premium and interest on any Bearer Security (including any additional amounts payable on Securities of such series pursuant to Section 4.07) shall be made at the office of the Company's Paying Agent in the Borough of Manhattan, The City of New York, if (but only if) payment in Dollars of the full amount of such principal, premium, interest or additional amounts, as the case may be, at all offices or agencies outside the United States maintained for the purpose by the Company in accordance with this Indenture is illegal or effectively precluded by exchange controls or other similar restrictions. The Company may also from time to time designate one or more other offices, which may be offices of the Trustee, or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee and the Holders of any such designation or rescission and of any change in the location of any such other office or agency. Section 4.03 Prohibition of Extension of Claims for Interest. In ----------------------------------------------- order to prevent any accumulation of claims for interest thereon after maturity thereof, the Company will not directly or indirectly extend or consent to the extension of the time for the payment of any claim for interest on any of the Securities and Coupons, if any, of a series and will not directly or indirectly be a party to or approve any such arrangement by the purchase or funding of said 38 claims for interest or in any other manner. No claim for interest, the time of payment of which shall have been so extended or which shall have been so purchased or funded, shall be entitled in case of an Event of Default hereunder to the benefits of this Indenture except after the prior payment in full of the principal of (and premium, if any) all the Securities and Coupons, if any, of a series and claims for interest not so extended, purchased or funded; provided, however, that this Section 4.03 shall not apply in any case where an extension shall be made pursuant to a plan proposed by the Company to the Holders of all the Securities and Coupons, if any, of a series, then outstanding. Every provision of this Indenture specifying the Holders of the Securities and Coupons, if any, of a series who are entitled to the benefits of this Indenture or relating to the distribution of the avails of any enforcement hereof shall be subject to the provisions of this Section 4.03. Section 4.04 Appointment to Fill Vacancy of Trustee. The Company, -------------------------------------- whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 7.10, a Trustee, so that there shall at all times be a Trustee hereunder. Section 4.05 Paying Agents: Money for Securities Payments Held in ---------------------------------------------------- Trust. - ----- (a) Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, at or prior to the opening of business on each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act; provided, however, the Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed upon with the Company. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto, including the Company pursuant to the proviso set forth above in this subsection (a), until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. 39 (b) If the Company shall act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, set aside, segregate and hold in trust for the benefit of the Persons entitled thereto a sell sufficient to pay such principal (and premium, if any) or interest so becoming due. The Company will promptly notify the Trustee of such action or of any failure by the Company to take such action or the failure by any other obligor on the Securities to make any payment of the principal of (and premium, if any) or interest on any of the Securities of that series when the same shall be due and payable. (c) The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. (d) Anything in this Section 4.05 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 4.05 is subject to the provisions of Section 12.02, Section 12.03 and Section 12.05. Section 4.06 Compliance Certificate. The Company will deliver to the ---------------------- Trustee for each series of Securities, within 120 days after the end of each fiscal year ending after the date hereof so long as any Security is outstanding hereunder, a certificate signed by the principal executive officer, principal financial officer or principal accounting officer of the Company stating, as to each signer thereof, that: (a) a review has been made under his or her supervision of the activities of the Company during such year and of the performance under this Indenture; and (b) to the best of his or her knowledge, based on such review, the Company has complied with all conditions and covenants under this Indenture throughout such year. For purposes of this Section, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. Section 4.07 Additional Amounts. If the Securities of a series ------------------ provide for the payment of additional amounts, the Company will pay to the Holder of any Security of such series or any Coupon appertaining thereto who are United States Aliens additional amounts as provided therein. Whenever in this Indenture there is mentioned, in any context, the payment of the principal of or any premium or interest on, or in respect of, any Security of any series or payment of any related Coupon or the net proceeds received on the sale or exchange of any Security of any series, such mention shall be deemed to include mention of the payment of additional amounts provided for in this Section to the extent that, in such context, additional amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of additional amounts (if applicable) in any provisions hereof shall not be construed as excluding additional amounts in those provisions hereof where such express mention is not made. 40 If the Securities of a series provide for the payment of additional amounts, at least 10 days prior to the first Interest Payment Date with respect to that series of Securities (or if the Securities of that series will not bear interest prior to Maturity, the first day on which a payment of principal and any premium is made), and at least 10 days prior to each date of payment of principal and any premium or interest if there has been any change with respect to the matters set forth in the Officers' Certificate to be delivered pursuant to Section 4.06, the Company will furnish the Trustee and the Company's Paying Agent or Paying Agents, if other than the Trustee, with an Officers' Certificate instructing the Trustee and such Paying Agent or Paying Agents whether such payment of principal of and any premium or interest on the Securities of that series shall be made to Holders of Securities of that series or any related Coupons who are United States Aliens without withholding for or on account of any tax, assessment or other governmental charge described in the Securities of that series. If any such withholding shall be required, then such Officers' Certificate shall specify by country the amount, if any, required to be withheld on such payments to such Holders of Securities or Coupons and the Company shall pay to the Trustee or such Paying Agent the additional amounts required by this Section. The Company covenants to indemnify the Trustee and any Paying Agent for, and to hold them harmless against, any loss, liability or expense reasonably incurred without negligence or bad faith on their part arising out of or in connection with actions taken or omitted by any of them in reliance on any Officers' Certificate furnished pursuant to this Section. ARTICLE 5. SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE --------------------------- Section 5.01 Company To Furnish Trustee Names and Addresses of ------------------------------------------------- Holders. The Company will furnish or cause to be furnished to the Trustee: - ------- (a) semiannually, not later than January 15 and July 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of each series of Registered Securities as of the preceding January 1 or July 1, as the case may be, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content, such list to be, dated as of a date not more than 15 days prior to the time such list is furnished, and (c) such information concerning the Holders of Bearer Securities which is known to the Company; provided, however, that the Company shall not have an obligation to investigate any matter relating to any Holder of a Bearer Security or a Coupon; notwithstanding the foregoing subsections (a) and (b), so long as the Trustee is the Security Registrar with respect to a particular series of Securities, no such list shall be required to be furnished in respect of such series. 41 Section 5.02 Preservation of Information: Communications to Holders. ------------------------------------------------------ (a) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the Holders of each series of Securities (1) contained in the most recent list furnished to it as provided in Section 5.01, and (2) received by it in the Paying Agent and Security Registrar (if so acting) hereunder. The Trustee shall provide information to the Company upon receipt of a Request for the same by the Company. The Trustee may destroy any list furnished to it as provided in Section 5.01 upon receipt of a new list for Securities so furnished. (b) In case three or more Holders of any series of Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security of such series for a period of at least six months preceding the date of such application and such application states that the applicants desire to communicate with other Holders of Securities of such series with respect to their rights under this Indenture or under such Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at its election, either (1) afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02, or (2) inform such applicants as to the approximate number of Holders of Securities of such series whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02 and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application. If the Trustee shall not elect to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder of such series whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 5.02, a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee by such Applicants of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless, within five days after such tender, the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that in the opinion of the Trustee such mailing would be contrary to the best interest of the Holders of Securities of such series or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for a hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such securityholders with reasonable promptness after the entry of such order and the renewal of such 42 tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Each and every Holder of the Securities or Coupons, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Paying Agent nor any Security Registrar shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with the provisions of subsection (b) of this Section 5.02, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b). Section 5.03 Reports by Company. ------------------ (a) The Company covenants and agrees to file with the Trustee, with reasonable promptness, after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. (b) The Company covenants and agrees to file with the Trustee and the Commission, in accordance with the rules and regulations prescribed from time to time by the Commission, such additional information, documents, and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations. (c) The Company covenants and agrees to transmit to the respective holders of Registered Securities, within thirty days after the filing thereof with the Trustee, in the manner and to the extent provided in subsection (c) of Section 5.04, such summaries of any information, documents and reports required to be filed by the Company pursuant to subsections (a) and (b) of this Section 5.03 as may be required by rules and regulations prescribed from time to time by the Commission. Section 5.04 Reports by Trustee. ------------------ (a) On or before the first July 15 after the earliest issuance of any Securities and on or before July 15 in every year thereafter, so long as any Securities are Outstanding hereunder, the Trustee shall transmit to Securityholders of each series as hereinafter provided in this Section 5.04, a brief report as of the preceding May 15 with respect to any of the following events which may have occurred within the previous twelve 43 (12) months (but if no such event has occurred within such period, no report need be transmitted): (1) any change to its eligibility under Section 7.09 and its qualifications under Section 7.08; (2) the creation of or any material change to a relationship specified in paragraphs (1) through (10) of Section 7.08(c) of this Indenture; (3) the character and amount of any advances to or on behalf of the Company (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) which remain unpaid on the date of such report, and for the reimbursement of which it claims or may claim a lien or charge prior to that of the Securities on any property or funds held or collected by it as Trustee, except that the Trustee shall not be required (but may elect) to report such advances if such advances so remaining unpaid aggregate not more than one-half of 1% of the principal amount of the Securities Outstanding on the date of such report; (4) the amount, interest rate and maturity date of all other indebtedness owing by the Company (or by any other obligor on the Securities) to the Trustee in its individual capacity, on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in paragraphs (2), (3), (4), or (6) of subsection (b) of Section 7.13; (5) any change to the property and funds held hereunder, if any, physically in the possession of the Trustee, as such, on the date of such report; (6) any action taken by the Trustee in the performance of its duties under this Indenture which it has not previously reported and which in its opinion materially affects the Securities, except action in respect of a default, notice of which has been or is to be withheld by it in accordance with the provisions of Section 6.07; and (7) any additional issue of Securities which the Trustee has not previously reported. (b) The Trustee shall transmit to the Securityholders, as hereinafter provided, a brief report with respect to the character and amount of any advances (and if the Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee (as such) since the date of the last report transmitted pursuant to the provisions of subsection (a) of this Section 5.04 (or if no such report has yet been so transmitted, since the date of execution of this Indenture) for the reimbursement of which it claims or may claim a lien or charge prior to that of the Securities on property or funds held or collected by it as Trustee and which it has not previously reported pursuant to this subsection, except that the Trustee shall not be required (but may elect) to report such advances if such advances remaining unpaid at any time aggregate 10% or less of the 44 principal amount of Securities outstanding at such time, such report to be transmitted within 90 days after such time. (c) Reports to the Holders of Securities pursuant to this Section 5.04 shall be transmitted in the manner as provided in Section 1.04 by mail to all Holders of Securities. (d) A copy of each such report shall, at the time of such transmission to Securityholders, be filed by the Trustee with each stock exchange upon which the Securities are listed and with the Commission and shall be furnished to the Company. The Company agrees to notify the Trustee when and as the Securities become listed on any stock exchange. ARTICLE 6. REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS IN EVENT OF DEFAULT ----------------------------------- Section 6.01 Event of Default; Acceleration, Etc. "Event of ------------------------------------ Default," wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body), unless it is either inapplicable to a particular series or it is specifically deleted or modified in or pursuant to the supplemental indenture or Board Resolution establishing such series of Securities or in the form of Security for such series: (a) default in the payment of any installment of interest upon any of the Securities of that series as and when the same shall become due and payable, and continuance of such default for a period of 30 days after the date on which written notice specifying such default and requiring the Company to remedy the same, shall have been given to the Company by the Trustee by registered mail, or to the Company and the Trustee by any one or more Holders of the Securities of that series at the time Outstanding; or (b) default in the payment of the principal of (or premium, if any, on) any of the Securities of that series as and when the same shall become due and payable either at Maturity (except Maturity arising from a call for redemption through the operation of a sinking fund), by declaration or otherwise; or (c) default in the deposit of any sinking fund payment when and as due by the terms of a Security of that series, and continuance of such default for a period of 30 days after the date on which written notice specifying such default and requiring the Company to remedy the same, shall have been given to the Company by the Trustee by registered or certified mail, return receipt requested, or to the Company and the Trustee by any one or more Holders of the Securities of that series at the time outstanding; or 45 (d) failure on the part of the Company duly to observe or perform any other covenants or agreements (other than as set forth in Section 6.01(a), (b) or (c) above) on the part of the Company in the Securities of that series or in this Indenture contained (other than a covenant or warranty which has expressly been included in this Indenture solely for the benefit of any series of Securities other than that series) and such failure shall continue unremedied for a period of 90 days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee by registered or certified mail, return receipt requested, or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Securities of that series at the time Outstanding; or (e) a decree or order by a court having jurisdiction in the premises for relief in respect of the Company under Title 11 of the United States Code, as now constituted or hereafter in effect, or any other applicable Federal or State bankruptcy, insolvency or similar law, shall have been entered, either adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company, and such decree or order shall have continued undischarged and unstayed for a period of 90 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or custodian or assignee in bankruptcy or insolvency of the Company, or of its property, or for the winding-up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged and unstayed for a period of 90 days; or (f) the Company shall institute proceedings for relief to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under Title 11 of the United States Code, as now constituted or hereafter in effect, or any other applicable Federal or State bankruptcy, insolvency or similar law, or shall consent to the institution of proceedings thereunder or to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or custodian or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or shall fail generally to pay its debts as such debts become due, or corporate action shall be taken by the Company in furtherance of any of the aforesaid purposes; or (g) any other Event of Default with respect to the Securities of that Series. If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, and in each and every such case, unless the principal of all the Securities of that series shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the Securities of that series then Outstanding hereunder, by notice in writing (except with respect to an Event of Default specified in subsections (f) and (g), for which such notice shall not be required) to the Company and to the Trustee, may declare the principal amount (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Securities of that series to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in this 46 Indenture or in the Securities of that series contained to the contrary notwithstanding. This provision, however, is subject to the conditions that if, at any time after such principal amount of the Securities of any series shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Securities of that series (with interest, to the extent that payment of such interest is enforceable under applicable law, upon overdue installments of interest, at the rate borne by the Securities of that series to the date of such payment or deposit) and such amount as shall be sufficient to cover all sums due the Trustee and each predecessor Trustee under Section 7.06, and any and all defaults under the Indenture, other than the nonpayment of the principal amount of the Securities of that series which shall have become due by acceleration, shall have been remedied, then and in every such case the Holders of a majority in aggregate principal amount of the Securities of that series then Outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences; but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of the Securities of that series shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, and the Trustee shall continue as though no such proceedings had been taken. Subject to the provisions of Section 7.01, the Trustee shall not be deemed to have knowledge of any default described in subsections (d), (e), (f), (g) or (h) of this Section 6.01 unless (i) the Trustee shall have actual knowledge of such default or (ii) the Trustee shall have received written notice thereof from the Company or any Holder. Section 6.02 Collection of Indebtedness and Suits for Enforcement by ------------------------------------------------------- Trustee. The Company covenants that (1) in case it shall default in the payment - ------- of any installment of interest on any Security, or Coupon, as and when the same shall become due and payable, and such default shall have continued for a period of thirty days (unless a different period is provided for with respect to such Security), or (2) in case it shall default in the payment of the principal of (or premium, if any, on) any of the Securities when the same shall have become payable, whether upon Maturity of such Securities or upon declaration or otherwise, then, upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of such Securities and Coupons, if any, the whole amount that then shall have become due and payable on all such Securities and Coupons, if any, for principal (and premium, if any), or interest, or both, as the case may be, with interest upon the overdue principal (and premium, if any) and (to the extent that payment of such interest is enforceable under applicable law) upon overdue installments of interest at the rate borne by such Securities and Coupons, if any, and, in addition thereto, such further amount as shall be sufficient to cover all sums due the Trustee and each predecessor Trustee under Section 7.06. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered 47 to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce such judgment or final decree against the Company or other obligor upon such Securities and Coupons, if any, and collect in the manner provided by law out of the property of the Company or other obligor upon such Securities and Coupons, if any, wherever situated, the moneys adjudged or decreed to be payable. In case there shall be pending proceedings in bankruptcy or for the reorganization of the Company or any other obligor upon the Securities and Coupons, if any, of any series under Title 11 of the United States Code, as now constituted or hereafter in effect, or any other applicable bankruptcy, insolvency or other similar law relative to the Company or to such other obligor, its creditors or its property, or in case a receiver or trustee shall have been appointed for its property, or in case of any other judicial proceedings relative to the Company or other obligor upon the Securities and Coupons, if any, of such series, its creditors or its property, the Trustee, irrespective of whether the principal of the Securities of such series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 6.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Securities and Coupons, if any, of such series, and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for sums due the Trustee and each predecessor Trustee under Section 7.06) and of the Securityholders allowed in any judicial proceedings relative to any obligor upon the Securities and Coupons, if any, of such series, its creditors or its property and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Securityholders and of the Trustee on their behalf; and any receiver, liquidator, trustee, custodian or assignee under any of the provisions of Title 11 of the United States Code, as now constituted or hereafter in effect, is hereby authorized by each of the Securityholders to make payments to the Trustee, and, in the event that the Trustee shall consent to the making of payments directly to the Securityholders, to pay to the Trustee such amount as shall be sufficient to cover all sums due the Trustee and each predecessor Trustee under Section 7.06. All rights of action and of asserting claims under this Indenture or under any of the Securities and Coupons, if any, of any series may be enforced by the Trustee without the possession of any of the Securities and Coupons, if any, of that series or the production thereof at any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for all amounts due the Trustee and each predecessor Trustee under Section 7.06, be for the ratable benefit of the Holders of the Securities and Coupons, if any, of such series. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to, or accept or adopt on behalf of any Securityholder, any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Securityholder, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding. 48 In case of an Event of Default hereunder, the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law. Section 6.03 Application of Money Collected. Any moneys collected by ------------------------------ the Trustee pursuant to Section 6.02 shall be applied in the order following, at the date or dates fixed by the Trustee, and in case of the distribution of such moneys on account of principal (or premium, if any) or interest upon presentation of the Securities, and stamping or notation thereon of the payment, if only partially paid, and upon surrender thereof if fully paid: FIRST: To the payment of out-of-pocket costs and expenses of collection, and reasonable compensation and all other amounts due to the Trustee and each predecessor Trustee under Section 7.06; SECOND: In case the principal (or premium, if any) of such Securities shall not have become due, to the payment of interest on such Securities and Coupons, if any, in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) upon the overdue installments of interest at the rate borne by such Securities and Coupons, if any, such payments to be made ratably to the Persons entitled thereto, without discrimination or preference; THIRD: In case the principal of (and premium, if any, on) such Securities shall have become due, by declaration or otherwise, to the payment of the whole amount then owing and unpaid upon such Securities and Coupons, if any, for principal (and premium, if any) and interest, with interest on the overdue principal (and premium, if any) and (to the extent that such interest has been collected by the Trustee) upon overdue installments of interest at the rate borne by such Securities and Coupons, if any; and in case such money shall be insufficient to pay in full the whole amount so due and unpaid upon such Securities, then to the payment of such principal and interest, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Security over any other Security, ratably to the aggregate of such principal and accrued and unpaid interest; and FOURTH: To the payment of the remainder and accrued interest remaining on any money collected by the Trustee pursuant to Section 6.02, if any, to the Company or its respective successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. Section 6.04 Limitation on Suits: Unconditional Rights of Holders. ----------------------------------------------------- No Holder of any Security of any series shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise, upon or under or with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless such Holder previously shall have given to the Trustee 49 written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of not less than 25% in aggregate principal amount of the Securities of that series then Outstanding shall have made written request upon the Trustee to institute such action or proceedings in its own name as trustee hereunder and shall have offered to the Trustee such reasonable security or indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of security or indemnity, shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 6.06; it being understood and intended and being expressly covenanted by the Holder of every Security of any series with every other Holder and the Trustee, that no one or more Holders of Securities of that series shall have any right in any manner whatever by virtue or by availing of any provision of this Indenture to affect, disturb or prejudice the rights of the Holders of any other of such Securities, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Securities of such series. For the protection and enforcement of the provisions of this Section 6.04, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provision in this Indenture, the Holder of any Security or any Coupon shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any), interest (subject to Section 2.09) on such Security, or Coupon on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Notwithstanding any other provision of this Indenture, the right of a Holder of any Security which is convertible into any other security of the Company to convert the Security, or to bring suit for the enforcement of the right to convert the Security, shall not be impaired or affected without the consent of the Holder. Section 6.05 Remedies Cumulative, Restoration of Rights and Remedies. ------------------------------------------------------- Except as provided by Section 2.06, all powers and remedies given by this Article 6 to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Securityholders, by judicial proceedings or otherwise, to enforce the performance and observance of the covenants and agreements contained in this Indenture, and no delay or omission of the Trustee or of any Holder of any of the Securities of any series to exercise any right or power accruing upon any default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 6.04, every power and remedy given by this Article 6 or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders 50 shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. Section 6.06 Control by Holders: Waiver of Past Default. The ------------------------------------------- Holders of a majority in aggregate principal amount of the Securities of any series at the time Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee affecting the Securities of such series; provided, however, that, subject to the provisions of Section 7.01 hereof, the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or officers, determine that the action so directed would be unduly prejudicial to the Holders of the Securities of such series not taking part in such direction (it being understood that (subject to Section 7.01) the Trustee shall have no duty to ascertain whether or not such action is unduly prejudicial to such Holders) or would involve the Trustee in personal liability. Nothing in this Indenture shall impair the right of the Trustee to take any other action deemed reasonably proper by the Trustee which is not inconsistent with such direction. Prior to the declaration of the maturity of the Securities of such series as provided in Section 6.01 hereof, the Holders of a majority in aggregate principal amount of the Securities of such series at the time Outstanding may on behalf of the Holders of all of the Securities of such series waive any past default hereunder and its consequences, except a default in the payment of the principal of (or premium, if any) or interest on any of the Securities of such series or in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Security affected. In the case of any such waiver, the Company, the Trustee and the Holders of the Securities of that series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 6.07 Notice of Defaults. Within 90 days after the occurrence ------------------ of any default hereunder with respect to the Securities of any series, the Trustee shall transmit notice as provided in Section 5.04(c) of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of Securities of such series; provided, further, that in the case of any default of the character specified in Section 6.01(d) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence of an Event of Default. For the purpose of this Section, the 51 term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Section 6.08 Undertaking for Costs. All parties to this Indenture --------------------- agree, and each Holder of any Security of any series by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 6.08 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder or group of Securityholders holding in the aggregate more than 10% in principal amount of the Securities of any series outstanding or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any), or interest on any Security of such series on or after the due date expressed in such Security (or in the case of redemption, on the Redemption Date). Section 6.09 Special Record Date for Consents. The Company may set a -------------------------------- record date for purposes of determining the identity of Securityholders entitled to vote or consent to any action by vote or consent authorized or permitted by Section 6.06 of this Indenture. Such record date shall be the later of thirty (30) days prior to the first solicitation of such consent or the date of the most recent list of holders furnished to the Trustee pursuant to Section 5.01 of this Indenture prior to such solicitation. ARTICLE 7. CONCERNING THE TRUSTEE ---------------------- Section 7.01 Certain Duties and Responsibilities. The Trustee, prior ----------------------------------- to the occurrence of an Event of Default with respect to Securities of any series and after the curing or waiving of all Events of Default with respect to Securities of any series which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture with respect to such series. In case an Event of Default with respect to Securities of any series has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Indenture with respect to such series, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that (a) prior to the occurrence of an Event of Default with respect to Securities of any series and after the curing or waiving of all Events of Default with respect to Securities of any series which may have occurred: 52 (1) the duties and obligations of the Trustee shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on the part of the Trustee, the 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 Trustee by the Company and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (c) the Trustee shall not be liable with respect to any action taken, suffered 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 aggregate principal amount of the Securities of any series at the time Outstanding (determined as provided in Section 8.04) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (d) none of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any personal financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate security or indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. Section 7.02 Certain Rights of Trustee. Subject to the provisions of ------------------------- Section 7.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, and order, bond, debenture, note or other paper or document believed by it to be genuine to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate signed in the name of the Company (unless other evidence in respect thereof be herein specifically prescribed); and 53 any resolution of the Board of Directors of the Company may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company; (c) the Trustee may consult with counsel selected by it and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such written advice or Opinion of Counsel; (d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (e) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (f) the 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, consent, order, bond, debenture, note or other paper or document, unless requested in writing so to do by the holders of a majority in aggregate principal amount of the Securities then outstanding; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security conferred upon it by the terms of this Indenture, the Trustee may require reasonable security or indemnity against such costs, expenses or liabilities as a condition to such proceeding; the reasonable expense for such investigation shall be paid by the Company, or if paid by the Trustee, shall be repaid by the Company upon demand; and (g) the 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 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. Section 7.03 Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------ The recitals contained herein and in the Securities shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of any of the Securities or of the proceeds thereof. Section 7.04 May Hold Securities. The Trustee, any Paying Agent, any ------------------- Security Registrar, or any agent of the Company or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities or warrants to purchase Securities and, subject to Sections 7.08 and 7.13, may otherwise deal with, and collect obligations owed to it by, the 54 Company with the same rights it would have if it were not Trustee, Paying Agent, Security Registrar or such agent. Section 7.05 Money Held in Trust. Subject to the provisions of ------------------- Section 12.05 hereof, all moneys received by the Trustee or any Paying Agent shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys pursuant to Section 4.05(a) shall be paid to the Company from time to time. Section 7.06 Compensation and Reimbursement. The Company covenants ------------------------------ and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed upon in writing (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and, except as otherwise expressly provided herein, the Company will pay or reimburse the Trustee upon its request for all costs and expenses of collection and all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the expenses and disbursements of its counsel and agents) except any such expense, disbursement or advance as may arise from its negligence or bad faith. The Company also covenants to indemnify each of the Trustee and any predecessor Trustee for, and to hold each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustee or such predecessor Trustee, as the case may be, arising out of or in connection with the acceptance or administration of this trust and its duties hereunder, including the reasonable cost and expense of defending itself against any claim of liability in connection with the exercise or performance of its powers or duties hereunder. The obligations of the Company under this Section 7.06 to compensate and indemnify the Trustee and any predecessor Trustee and to pay or reimburse the Trustee for costs of collection and expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be secured by a senior claim to which the Securities are hereby made subordinate upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Securities. Section 7.07 Right to Rely on Officers' Certificate. Subject to the -------------------------------------- provisions of Section 7.01, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate of the Company delivered to the Trustee and such Certificate, in the absence of bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. Section 7.08 Disqualification: Conflicting Interests. ---------------------------------------- (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section 7.08, it shall, within 90 days after ascertaining that it has such conflicting interest, and if the Event of Default (exclusive of any period of grace or requirement of 55 notice) to which such conflicting interest relates has not been cured or duly waived or otherwise eliminated before the end of each 90-day period, either eliminate such conflicting interest or, except as otherwise provided below in this Section 7.08, resign in the manner and with the effect specified in Section 7.10, such resignation to become effective upon the appointment of a successor trustee and such successor's acceptance of such appointment, and the Company shall take prompt steps to have a successor appointed in the manner provided in Section 7.10. (b) In the event that the Trustee shall fail to comply with the provisions of subsection (a) of this Section 7.08, with respect to Securities of any series, the Trustee shall, within 10 days after the expiration of such 90-day period, transmit notice of such failure to the Securityholders of such series in the manner and to the extent provided in subsection (c) of Section 5.04. (c) For the purposes of this Section 7.08, each series issued under this Indenture will be considered to have been issued under a separate indenture and the Trustee shall be deemed to have a conflicting interest with respect to any series issued under this Indenture if there shall have occurred an Event of Default and: (1) the Trustee is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company are outstanding or is a trustee for more than one outstanding series of Securities, as hereinafter defined, under a single indenture of the Company, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture; provided that there shall be excluded from the operation of this -------- paragraph this Indenture with respect to the Securities of any series other than that series or any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if (i) this Indenture and such other indenture or indentures and all series of securities issuable are wholly unsecured and rank equally and such other indenture or indentures (and such series) are specifically described in Section 7.17 of this Indenture or are hereafter qualified under the Trust Indenture Act of 1939, unless, in either case, the Commission shall have found and declared by order pursuant to subsection (b) of Section 305 or subsection (c) of Section 307 of the Trust Indenture Act of 1939 that differences exist between the provisions of this Indenture (or such series) and the provisions of such other indenture or indentures (or such series) which are so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under this Indenture or such other indenture or indentures, or (ii) the Company shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that the trusteeship under this Indenture and such other indenture or the existence of more than one outstanding series under a single indenture is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee from acting as such under one of such indentures or with respect to such series; 56 (2) the Trustee or any of its directors or executive officers is an underwriter for the Company; (3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with an underwriter for the Company; (4) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of the Company or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that (A) one individual may be a director and/or an executive officer of the Trustee and a director and/or an executive officer of the Company, but may not be at the same time an executive officer of both the Trustee and the Company; (B) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director and/or an executive officer of the Trustee and a director of the Company, and (C) the Trustee may, be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent or depository, or in any other similar capacity, or, subject to the provisions of paragraph (1) of this subsection (c), to act as trustee whether under an indenture or otherwise; (5) 10% or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more of such persons; (6) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, (A) 5% or more of the voting securities, or 10% or more of any other class of security, of the Company, not including the Securities issued under this Indenture and securities issued under any other indenture under which the Trustee is also trustee, or (B) 10% or more of any class of security of an underwriter for the Company; (7) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter defined in this subsection), 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company; (8) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter defined in this subsection), 10% or more of any class of security of any person who, to the 57 knowledge of the Trustee, owns 50% or more of the voting securities of the Company; (9) the Trustee owns, on the date of an Event of Default upon the Securities (exclusive of any period of grace or requirement of notice) or any anniversary of such Event of Default while such Event of Default upon the Securities remains outstanding, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraphs (6), (7) or (8) of this subsection (c). As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after the dates of any such Event of Default and annually in each succeeding year that such Event of Default is continuing, the Trustee shall make a check of its holdings of such securities in any of the above-mentioned capacities as of such dates. If the Company fails to make payment in full of principal of or interest on any of the Securities when and as the same become due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding the foregoing provisions of this paragraph (9), all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be, considered as though beneficially owned by the Trustee for the purposes of paragraphs (6), (7) and (8) of this subsection (c). (10) except under the circumstances described in paragraphs (1), (3), (4), (5) or (6) of Section 7.13(b) of this Indenture, the Trustee shall be or shall become a creditor of the Company. For purposes of paragraph (1) of this Section 7.08(c), the term "series of securities" or "series" means a series, class or group of securities issuable under an indenture pursuant to whose terms holders of one such series may vote to direct the indenture trustee, or otherwise take action pursuant to a vote of such holders, separately from holders of another such series; provided, -------- that "series of securities" or "series" shall not include any series of securities issuable under an indenture if all such series rank equally and are wholly unsecured. The specifications of percentages in paragraphs (5) to (9), inclusive, of this subsection (c) shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (3) or (7) of this subsection (c); or For the purposes of paragraphs (6), (7), (8) and (9) of this subsection (c) only, (A) the terms "security" and "securities" shall include only such securities as are generally known as 58 corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firm, or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be "in default' when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (C) the Trustee shall not be deemed to be the owner or holder of (i) any security which it holds as collateral security (as trustee or otherwise) for an obligation which is not in default as defined in clause (B) above, or (ii) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (iii) any security which it holds as agent for collection, or as custodian, escrow agent or depository, or in any similar representative capacity. Except as above provided, the words "security" or "securities" as used in this Indenture shall mean any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit sharing agreement, collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas or other mineral rights, or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. Except in the case of a default in the payment of the principal of or interest on any Security, the Trustee shall not be required to resign as provided by this subsection if the Trustee shall have sustained the burden of proving, on application to the Commission and after opportunity for hearing thereon, that: (i) the default under this Indenture may be cured or waived during a reasonable period and under the procedures described in such application, and (ii) a stay of the Trustee's duty to resign will not be inconsistent with the interests of holders of the Securities. The filing of such an application shall automatically stay the performance of the duty to resign until the Commission orders otherwise. (d) For the purposes of this Section 7.08: (1) The term "underwriter" when used with reference to the Company shall mean every person who, within one year prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. 59 (2) The term "director" shall mean any director of a corporation or any individual performing similar functions with respect to any organization whether incorporated or unincorporated. (3) The term "person" shall mean an individual, a corporation, a partnership, an association, a joint stock company, a trust, an unincorporated organization, or a government or political subdivision thereof. As used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (4) The term "voting security" shall mean any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are presently entitled to vote in the direction or management of the affairs of a person. (5) The term "Company" shall mean any obligor upon the Securities. (6) The term "executive officer" shall mean the president, every vice president, every trust officer, the cashier, the secretary, and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. (e) The percentages of voting securities and other securities specified in this Section 7.08 shall be calculated in accordance with the following provisions: (1) A specified percentage of the voting securities of the Trustee, the Company or any other person referred to in this Section 7.08 (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (2) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (3) The term "amount," when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security. 60 (4) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (A) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (B) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (C) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; (D) securities held in escrow if placed in escrow by the issuer thereof; provided, however, that any voting securities of an issuer shall be deemed - -------- outstanding if any person other than the issuer is entitled to exercise the voting rights thereof. (5) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. Section 7.09 Corporate Trustee Required; Eligibility. The Trustee --------------------------------------- hereunder shall at all times be a corporation organized and doing business under the laws of the United States or of any State or of the District of Columbia, authorized under such laws to exercise corporate trust powers, either (a) having a combined capital and surplus of at least fifty million dollars ($50,000,000) or (b) having a combined capital and surplus of at least ten million dollars ($10,000,000) and being a wholly-owned subsidiary of a corporation having a combined capital and surplus of at least fifty million dollars ($50,000,000), and in each case subject to supervision or examination by Federal, State or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 7.09, 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. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.09, the Trustee shall resign immediately in the manner and with the effect specified in Section 7.10. Neither the Company or any other obligor upon the Securities, nor any person directly or indirectly controlling, 61 controlled by, or under common control with such obligor shall serve as Trustee under this Indenture. Section 7.10 Resignation and Removal: Assignment of Successor. ------------------------------------------------ (a) The Trustee, or any Trustee or Trustees hereafter appointed, may resign at any time with respect to the Securities of one or more series by giving written notice of resignation to the Company and notice to the Securityholders of that series in the manner specified in Section 1.04 within 30 days after such notice is given to the Company. Upon receiving such notice of resignation and, if the Company shall deem it appropriate, evidence satisfactory to it of such mailing, the Company shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) by Order of the Company, one copy of which shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor Trustee with respect to the Securities of any series shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation, the resigning Trustee of such series may petition any court of competent jurisdiction for the appointment of a successor Trustee, or any Securityholder who has been a bona fide Holder of a Security or Securities of that series for at least six months may, subject to the provisions of Section 6.08, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor Trustee with respect to the Securities of such series. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee with respect to the Securities of such series. (b) In case at any time any of the following shall occur (1) the Trustee shall fail to comply with the provisions of subsection (a) of Section 7.08 after written request therefor by the Company or by any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months, unless the Trustee's duty to resign is stayed as provided in Section 7.08 of this Indenture, or (2) the Trustee shall cease to be eligible in accordance with the provisions of Section 7.09 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or (3) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or (4) the Company shall for any other reason determine that the Trustee shall be removed, provided that at the time of such removal there exists 62 no Event of Default or no event which, with the passage of time or giving of notice, would become an Event of Default, then, in any such case, the Company may remove the Trustee with respect to all Securities and appoint a successor Trustee by Order of the Company, one copy of which shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 6.08, any Securityholder who has been a bona fide Holder of a Security or Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee. (c) The Holders of a majority in aggregate principal amount of the Securities at the time Outstanding may at any time remove the Trustee and appoint a successor Trustee by delivery to the Trustee so removed, to the successor Trustee and to the Company of the evidence provided for in Section 8.01 of the action taken by the Securityholders. (d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant to any of the provisions of this Section 7.10 shall become effective upon acceptance of appointment by the successor Trustee or Trustees as provided in Section 7.11. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause, with respect to the Securities of one more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and such successor Trustee or Trustees shall comply with the applicable requirements of Section 7.11. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 7.11, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 7.11, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by giving notice of such 63 event to all Holders of Securities of such series as provided by Section 1.04. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 7.11 Acceptance of Appointment by Successor. -------------------------------------- (a) Any successor Trustee appointed as provided in Section 8.10 with respect to all Securities shall execute, acknowledge and deliver to the Company and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessors hereunder, with like effect as if originally named as Trustee herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the Trustee ceasing to act shall execute and deliver an instrument transferring to such successor Trustee all the rights and powers of the Trustee so ceasing to act. Upon request of any such successor Trustee, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Trustee all such rights and powers. Any Trustee ceasing to act shall, nevertheless, retain a senior claim upon all property or funds held or collected by such Trustee to secure any amounts then due it pursuant to the provisions of Section 7.06. (b) In case of the appointment of a successor Trustee as provided in Section 7.10 with respect to the Securities of one or more (but not all) series, the Company, the predecessor Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the predecessor Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of that or those series as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the predecessor Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such predecessor Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such predecessor Trustee hereunder with 64 respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Whenever there is a successor Trustee with respect to one or more (but less than all) series of Securities issued pursuant to this Indenture, the terms "Indenture" and "Securities" shall have the meanings specified in the provisos to the respective definitions of those terms in Section 1.01 which contemplate such situation. (c) No successor Trustee shall accept appointment as provided in this Section 7.11 unless at the time of such acceptance such successor Trustee shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09. Upon acceptance of appointment by a successor Trustee as provided in this Section 7.11, the Company shall mail to the Securityholders by first-class mail notice thereof. If the Company fails to mail such notice within 30 days after acceptance of appointment by the successor Trustee, the successor Trustee shall, in its discretion, cause such notice to be mailed at the expense of the Company. Section 7.12 Merger, Conversion, Consolidation, Etc. Any corporation -------------------------------------- into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger or conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be qualified under the provisions of Section 7.08 and eligible under the provisions of Section 7.09, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture and any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. Section 7.13 Preferential Collection of Claims Against Company. ------------------------------------------------- (a) Subject to the provisions of subsection (b) of this Section 7.13, if the Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company or of any other obligor on the Securities within three months prior to a default, as defined in subsection (c) of this Section 7.13, or subsequent to such a default, then, unless and until such default shall be cured, the Trustee shall set apart and hold in a special account for the benefit of the Trustee individually, the Holders of the Securities and Coupons, if any, and the holders of other indenture securities (as defined in subsection (c) of this Section 7.13): 65 (1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest, effected after the beginning of such three-month period and valid as against the Company and its creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subsection, or from the exercise of any right of set-off which the Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and (2) all property received by the Trustee in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such three-month period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds. Nothing herein contained, however, shall affect the right of the Trustee: (A) to retain for its own account (i) payments made on account of any such claim by any person (other than the Company who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee to a third person, and (iii) distributions made in cash, securities or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code, as now constituted or hereafter in effect, or applicable state law; (B) to realize, for its own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such three-month period; (C) to realize, for its own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such three-month period and such property was received as security therefor simultaneously with the creation thereof and if the Trustee shall sustain the burden of proving that at the time such property was so received the Trustee had no reasonable cause to believe that a default as defined in subsection (c) of this Section 7.13 would occur within three months; or (D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in such paragraph (B) or (C), as the case may be, to the extent of the fair value of such property. For the purposes of paragraphs (B), (C) and (D), property substituted after the beginning of such three-month period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any such paragraphs is created in renewal 66 of or in substitution for or for the purpose of repaying or refunding any pre- existing claim of the Trustee as such creditor, such claim shall have the same status as such pre-existing claim. If the Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee, the Securityholders and the holders of other indenture securities in such manner that the Trustee, the Securityholders and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code, as now constituted or hereafter in effect, or applicable bankruptcy, insolvency or other similar law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee anything on account of the receipt by it from the Company of the finds and property in such special account and before crediting to the respective claims of the Trustee, the Securityholders and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code, as now constituted or hereafter in effect, or applicable bankruptcy, insolvency or other similar law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term "dividends" shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to Title 11 of the United States Code, as now constituted or hereafter in effect, or applicable bankruptcy, insolvency or other similar law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee, the Securityholders and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee, the Securityholders and the holders of other indenture securities with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula. Any Trustee who has resigned or been removed after the beginning of such three-month period shall be subject to the provisions of this subsection (a) as though such resignation or removal had not occurred. If any Trustee has resigned or been removed prior to the beginning of such three-month period, it shall be subject to the provisions of this subsection (a) if and only if the following conditions exist: (1) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee had continued as trustee, occurred after the beginning of such three-month period; and (2) such receipt of property or reduction of claim occurred within three months after such resignation or removal. 67 (b) There shall be excluded from the operation of subsection (a) of this Section 7.13 a creditor relationship arising from: (1) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one year or more at the time of acquisition by the Trustee; (2) advances authorized by a receivership or bankruptcy court of competent jurisdiction, or by this Indenture, for the purpose of preserving any property which shall at any time be subject to the lien of this Indenture or of discharging tax liens or other prior liens or encumbrances thereon, if notice of such advance and of the circumstances surrounding the making thereof is given to the Securityholders at the time and in the manner provided in Section 5.04(c) with respect to reports pursuant to subsections (a) and (b) thereof, respectively; (3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depository, or other similar capacity; (4) an indebtedness created as a result of services rendered or premises rented, or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in subsection (c) of this Section 7.13; (5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or (6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self liquidating paper as defined in subsection (c) of this Section 7.13. (c) As used in this Section 7.13: (1) The term "default" shall mean any failure to make payment in full of the principal of or interest upon any of the Securities or upon the other indenture securities when and as such principal or interest becomes due and payable. (2) The term "other indenture securities" shall mean securities upon which the Company is an obligor (as defined in the Trust Indenture Act of 1939) outstanding under any other indenture (A) under which the Trustee is also trustee, (B) which contains provisions substantially similar to the provisions of subsection (a) of this Section 7.13, and (C) under which a default exists at the time of the apportionment of the funds and property held in said special account. 68 (3) The term "cash transaction" shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand. (4) The term "self-liquidating paper" shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation. (5) The term "Company" shall mean any obligor upon the Securities. Section 7.14 Appointment of Authenticating Agent. The Trustee may ----------------------------------- appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue or upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 2.06, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation having a combined capital and surplus of not less than the equivalent of $50,000,000 and subject to supervision or examination by Federal or State authority or the equivalent foreign authority, in the case of an Authenticating Agent who is not organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which any Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under 69 this Section 7.14 without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee, to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such termination, or in case at any time any Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 7.14, the Trustee promptly may appoint a successor Authenticating Agent and shall give written notice of such appointment to the Company, and shall cause a notice of any such appointment to be given in the manner prescribed by Section 1.04, to the Holders of Securities of the series with respect to which such Authenticating Agent shall act. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 7.14. The Trustee agrees to pay to the Authenticating Agent from time to time reasonable compensation for its services, to the extent such payment has not otherwise been made by the Company, and the Trustee shall be entitled to be reimbursed for such payments subject to the provisions of Section 7.06. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities of the series designated therein issued under the within-mentioned Indenture. [full name of Trustee] ________________________________ As Trustee By______________________________ As Authenticating Agent By______________________________ Authorized [Officer][Signatory] If all of the Securities of a series may not be originally issued at one time, and if the Trustee does not have an office capable of authenticating Securities upon original issuance located in a Place of Payment or other place where the Company wishes to have Securities of such series authenticated upon original issuance, the Trustee, if so requested by the Company in writing (which writing need not comply with Section 14.06 and need not be accompanied by an Opinion of Counsel), shall appoint in accordance with this Section an Authenticating Agent (which may 70 be an Affiliate of the Company if eligible to be appointed as an Authenticating Agent hereunder) having an office in such Place of Payment or other place designated by the Company with respect to such series of Securities. Section 7.15 Judgment Currency. If for the purpose of obtaining a ----------------- judgment in any court with respect to any obligation of the Company hereunder or under any Security or Coupon, it shall become necessary to convert into any other currency or currency unit any unit in the currency or currency unit due hereunder or under such Security or Coupon, then such conversion shall be made at the Currency Conversion Rate (as defined below) as in effect on the date the Company shall make payment to any person in satisfaction of such judgment. If pursuant to any such judgment, conversion shall be made on a date other than the date payment is made and there shall occur a change between such Currency Conversion Rate and the Currency Conversion Rate as in effect on the date of payment, the Company agrees to pay such additional amounts (if any) as may be necessary to ensure that the amount paid is the amount in such other currency or currency unit which, when converted at the Currency Conversion Rate as in effect on the date of payment or distribution, is the amount then due hereunder or under such Security or Coupon. Any amount due from the Company under this Section 7.15 shall be due as a separate debt and is not to be affected by or merged into any judgment being obtained for any other sums due hereunder or in respect of any Security or Coupon so that in any event the Company's obligations hereunder or under such Security or Coupon will be effectively maintained as obligations in such currency or currency unit. In no event, however, shall the Company be required to pay more in the currency or currency unit stated to be due hereunder or under such Security or Coupon. For purposes of this Section 7.15, "Currency Conversion Rate" shall mean the spot rate at which in accordance with normal banking procedures the currency or currency unit into which an amount due hereunder or under any Security or Coupon is to be converted could be purchased with the currency or currency unit due hereunder or under any Security or Coupon from major banks located in New York, London or any other principal market for such purchased currency or currency unit. Section 7.16 Corporate Trust Office. At the date of this Indenture, ---------------------- the Corporate Trust Office of the Trustee is located at 101 Barclay Street (21 West), New York, New York 10286. ARTICLE 8. CONCERNING THE SECURITYHOLDERS ------------------------------ Section 8.01 Acts of Holders. Any request, demand, authorization, --------------- direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders of such series may, alternatively, be embodied in and evidenced by the record of Holders of Securities of such series voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Securities of such series duly called and held in accordance with the provisions of Article 9, or a combination of such 71 instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments and record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments or so voting at any such meeting. Proof of execution of any such instrument, or any such record, or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Article 8. The record of any meeting of Holders of Securities shall be proved in the manner provided in Section 9.06. Section 8.02 Authenticity of Instruments. The fact and date of the --------------------------- execution by any Person of any such instrument or writing referred to in Section 8.01 may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. Section 8.03 Authenticity of Bearer Securities. --------------------------------- (a) The principal amount and serial numbers of Bearer Securities held by any Person, and the date of holding the same, may be proved by the production of such Bearer Securities or by a certificate executed by any trust company, bank, banker or other depository, wherever situated, showing that at the date therein mentioned such Person had on deposit with such depository, or exhibited to it, the Bearer Securities therein described; or such facts may be proved by the certificate or affidavit of the Person holding such Bearer Securities, if such certificate or affidavit is deemed by the Trustee to be satisfactory. The Trustee and the Company may assume that such ownership of any Bearer Security continues until (1) another certificate or affidavit bearing a later date issued in respect of the same Bearer Security is produced, (2) such Bearer Security is produced to the Trustee by some other Person, (3) such Bearer Security is surrendered in exchange for a Registered Security or (4) such Bearer Security is no longer Outstanding. (b) The fact and date of execution of any such instrument or writing pursuant to clause (a) above, the authority of the Person executing the same and the principal amount and serial numbers of Bearer Securities held by the Person so executing such instrument or writing and the date of holding the same may also be proved in any other manner which the Trustee deems sufficient; and the Trustee may in any instance require further proof with respect to any of the matters referred to in this clause. (c) The principal amount and serial numbers of Registered Securities held by any Person and the date of holding the same shall be proved by the Security Register. 72 (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of a Holder shall bind every future Holder of the same Security and/or Coupon and the Holder of every Security and/or Coupon issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security and/or Coupon. Section 8.04 Determination of Principal Amounts of Original Issue ---------------------------------------------------- Discount Securities and Securities in Foreign Currencies. Whenever any Act is - -------------------------------------------------------- taken hereunder by the Holders of Original Issue Discount Securities, the principal amount of an Original Issue Discount Security that will be deemed to be outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof. Whenever any Act is to be taken hereunder by the Holders of two or more series of Securities denominated in different currencies (currency units), then, for the purpose of determining the principal amount of Securities held by such Holders, the aggregate principal amount of the Securities denominated in a Foreign Currency (or any currency units) shall be deemed to be that amount of Dollars that could be obtained for such principal amount on the basis of the spot rate of exchange for such Foreign Currency or such currency unit as determined by the Company or by any authorized Exchange Rate Agent and evidenced to the Trustee by an Officers' Certificate as of the date the taking of such Act by the Holders of the requisite percentage in principal amount of the Securities is evidenced to the Trustee or such other date selected by the Company which is not more than 10 days before such date. Any such determination by the Company or by any such Exchange Rate Agent shall be conclusive and binding on all Holders, the Company and the Trustee, and neither the Company nor any such Exchange Rate Agent shall be liable therefor in the absence of bad faith. Section 8.05 Company Solicitation of Holder. If the Company shall ------------------------------ solicit from the Holders any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of the Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purpose of determining whether Holders of the requisite proportion of Outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Securities shall be computed as of such record date; provided that no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months, after the record date. 73 ARTICLE 9. SECURITYHOLDERS' MEETING ------------------------ Section 9.01 Purposes for Which Meetings May be Called. ----------------------------------------- (a) A meeting of Holders of Securities of any series may be called at any time and from time to time pursuant to the provisions of this Article Ten for any of the following purposes: (1) to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article 6; (2) to remove the Trustee and appoint a successor trustee pursuant to the provisions of Article 7; (3) to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 10.02; or (4) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Securities of a series under any other provision of this indenture or under applicable law. Section 9.02 Call, Notice and Place of Meeting. The Trustee may at --------------------------------- any time call a meeting of Securityholders of any series to take any action specified in Section 9.01, to be held at such time and at such place in the City of Los Angeles, or in the City of London, England in the event that such meeting must take place outside the United States, or at any other place, as the Company and Trustee shall determine. Notice of every meeting of the Securityholders of any series setting forth the time and the place of such meeting and in general term the action proposed to be taken at such meeting, shall be provided to all Securityholders of such series in the manner specified in Section 1.04, not less than 21 nor more than 180 days prior to the date fixed for the meeting. Section 9.03 Call of Meetings by Company or Holders. In case at any -------------------------------------- time the Company pursuant to a resolution of its Board of Directors, or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of any series shall have requested the Trustee to call a meeting of Securityholders of such series to take any action specified in Section 9.01 by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities of such series in the amount above specified may determine the time and the location in the City of Los Angeles, or the City of London, England in the event that such meeting must take place outside the United States, or the Company may determine the time and location in any other place, for such meeting and may call such meeting by providing notice thereof as provided in Section 9.02. 74 Section 9.04 Persons Entitled to Vote. To be entitled to vote at any ------------------------ meeting of Securityholders of any series a Person shall (a) be a Holder of one or more Outstanding Securities of such series; or (b) be a Person appointed by an instrument in writing as proxy for a Holder of one or more Outstanding Securities of such series. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders of any series shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel. Section 9.05 Determination of Voting Rights: Conduct and Adjournment -------------------------------------------------------- of Meetings. Notwithstanding any other provisions of this Indenture, the - ----------- Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders of a series, in regard to the proof of the holding of Securities of such series and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Securities of a series and the appointment of any proxy shall be proved in the manner specified in Article 9; provided, however, that such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Article 9. The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders of a series as provided in Section 9.03, in which case the Company or the Securityholders of that series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a secretary of the meeting shall be elected by vote of the holders of a majority in principal the Outstanding Securities of that series represented at the meeting and entitled to vote. Subject to the provisions of Section 9.09, at any meeting each Securityholder of that series or proxy shall be entitled to one vote for each $1,000 (or equivalent thereof) principal amount of Outstanding Securities of such series held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security of that series challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Securities of such series held by him or instruments in writing as aforesaid duly designating him as the person to vote on behalf of other Securityholders of that series. Any meeting of Securityholders of a series duly called pursuant to the provisions of Section 9.02 or 9.03 may be adjourned from time to time, and the meeting may be held as so adjourned without further notice. Any meeting of Holders of Securities of any series duly called pursuant to Section 9.02 or 9.03 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting; and the meeting may be held as so adjourned without further notice. Section 9.06 Counting Votes and Recording Action of Meetings. The ----------------------------------------------- vote upon any resolution submitted to any meeting of Securityholders of any series shall be by written ballots on which shall be subscribed the signatures of the Securityholders of such series or of their rep by proxy and the principal amount and serial numbers of the Outstanding Securities of such series 75 held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports of all votes cast at the meeting. A record of the proceedings of each meeting of Securityholders of a series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 9.02 or 9.03 and, if applicable, Section 9.08. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and shall be delivered to the Company and a copy shall be delivered to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. Section 9.07 No Delay in Exercise of Rights. Nothing in this Article ------------------------------ 9 contained shall be deemed or construed to require any delay in the exercise of any right or rights conferred upon or reserved to the Trustee or to the Securityholders of a series under any of the provisions of this Indenture or of the Securities of a series by reason of any call of a meeting of Securityholders of a series or any rights expressly or impliedly conferred hereunder to make such call. Section 9.08 Quorum: Action. The Persons entitled to vote a --------------- majority in principal amount of the Outstanding Securities of a series shall constitute a quorum for a meeting of Holders of Securities of such series except as provided pursuant to Section 2.01. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Securities of such series, be dissolved. In any other case, the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 10.2, except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Subject to the foregoing, at the reconvening of any such further adjourned meeting, the Persons entitled to vote 25% in aggregate principal amount of the Outstanding Securities of such series shall constitute a quorum for the taking of any action set forth in the notice of the original meeting. Notice of the reconvening of an adjourned meeting which was adjourned for lack of a quorum shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum. Except as limited by Section 6.06 and the proviso to Section 10.02, and subject to the provisions described in the next succeeding paragraph, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted by the affirmative vote of the lesser of (i) the Holders of a majority in principal amount of the Outstanding Securities of that series and (ii) 66 2/3% in principal amount of Outstanding Securities of such series represented and voting at such meeting or adjourned meeting; provided, however, that any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which this Indenture expressly provides may be made, given or taken by 76 the Holders of a specified percentage which is less than a majority, in principal amount of the Outstanding Securities of a series may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the lesser of (i) the Holders of such specified percentage in principal amount of the Outstanding Securities of that series and (ii) a majority in principal amount of Securities of such series represented and voting at such meeting or adjourned meeting. Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series and the related Coupons, whether or not present or represented at the meeting. With respect to any consent, waiver or other action which this Indenture expressly provides may be given by the Holders of a specified percentage of Outstanding Securities of all series affected thereby (acting as one class), only the principal amount of Outstanding Securities of any series represented at a meeting or adjourned meeting duly reconvened at which a quorum is present, held in accordance with this Section, and voting in favor of such action, shall be counted for purposes of calculating the aggregate principal amount of Outstanding Securities of all series affected thereby favoring such action. Section 9.09 Disregard of Securities Owned by Company or Controlling ------------------------------------------------------- Person. In determining whether the Holders of the requisite aggregate principal - ------ amount of Securities have concurred in any direction, consent or waiver under this Indenture, Securities which are owned by the Company or any other obligor on the Securities or by any person directly or indirectly controlling, controlled by or under direct or indirect common control with the Company or any other obligor on the Securities shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 9.09, if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Securities and that the pledgee is not a person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection for the Trustee. ARTICLE 10. SUPPLEMENTAL INDENTURES ----------------------- Section 10.01 Supplemental Indentures Without Consent of Holders. -------------------------------------------------- The Company when authorized by a resolution of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for one or more of the following purposes: (a) to evidence the succession of another corporation to the Company or successive successions, and the assumption by the successor corporation of the 77 covenants, agreements and obligations of the Company set forth herein and in the Securities and any Coupons; (b) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as their respective Boards of Directors and the Trustee shall consider to be for the protection of the Holders of all or any series of Securities (and if such covenants, restrictions, conditions or provisions are for the benefit of less than all series of Securities, stating that such covenants, restrictions, conditions or provisions are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions, conditions or provisions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth, provided, however, that in respect of any such additional covenant, restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default or may limit the right of the Holders of a majority in aggregate principal amount of the Securities of that series to waive such default; (c) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; to change or eliminate any restrictions on the payment of principal of or any premium or interest on Bearer Securities, to permit Bearer Securities to be issued in exchange for Registered Securities, to permit Bearer Securities to be issued in exchange for Bearer Securities of other authorized denominations; provided that any such addition or change shall not materially adversely affect the interests of the Holders of Securities of any series or any related Coupons in any material respect; (d) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provisions contained herein or in any supplemental indenture, or to convey, transfer, assign, mortgage or pledge any property to or with the Trustee, or to make such other provisions in regard to matters or questions arising under this Indenture, provided, that no such action shall adversely affect the interests of the Holders of the Securities of any series in any material respect; (e) to establish the form or terms of Securities of any series as permitted by Sections 2.01 and 2.02; (f) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 7.11; 78 (g) to change or eliminate any of the provisions of this Indenture; provided that any such change or elimination shall become -------- effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is materially adversely affected by such change in or elimination of such provision; (h) if allowed under applicable laws and regulations, to permit payment in the United States of principal, premium or interest on Bearer Securities or Coupons, if any; (i) to provide for the issuance of uncertificated Securities of one or more series in addition to or in place of certificated securities; or (j) make any other change to this Indenture or the form or terms of Securities of any series which does not have a materially adverse effect on the interests of the Holders of the Securities of any series. The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Trustee shall not be obligated to enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Any supplemental indenture authorized by the provisions of this Section 10.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Securities of each series affected by such supplemental indenture at the time Outstanding, notwithstanding any of the provisions of Section 10.02. Section 10.02 Supplemental Indentures With Consent of Holders. With ----------------------------------------------- the consent (evidenced as provided in Section 8.01) of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of all series affected by such supplemental indenture (acting as one class), by Act of said Holders delivered to the Company and the Trustee, the Company when authorized by resolutions of its Board of Directors, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act of 1939 as in force at the date of the execution thereof) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture, or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of such series; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Security of such series so affected, (a) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of any Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 6.01, or change any obligation to pay additional amounts, or change any Place of Payment 79 where, or the currency, currencies or currency unit or units in which, any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), (b) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, (c) change the obligation of the Company, with respect to Outstanding Securities of a series, to maintain an office or agency in the places and for the purposes specified in Section 4.02 for such series, (d) if the Securities of such series are convertible into any other security of the Company, make any change that would materially adversely affect the right to convert such Securities, (e) change the terms of this Section 10.02. For purposes of this Section 10.02, if the Securities of any series are issuable upon the exercise of warrants, each Holder of an unexercised and unexpired warrant with respect to such series shall be deemed to be a Holder of Outstanding Securities of such series in the amount issuable upon the exercise of such warrant. For such purposes, the ownership of any such warrant shall be determined by the Company in a manner consistent with customary commercial practices. The Trustee for such series shall be entitled to rely on an Officers' Certificate as to the principal amount of Securities of such series in respect of which consents shall have been executed by Holders of such warrants. A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. Upon the Request of the Company, accompanied by a copy of a resolution of its Board of Directors, certified by the Secretary or an Assistant Secretary of the Company, authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties, or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. The Trustee, subject to the provisions of Sections 7.01 and 7.02, may receive an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the provisions of this Article 10 and shall be entitled to rely on such opinion. 80 It shall not be necessary for the consent of the Securityholders under this Section 10.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section 10.02, the Company shall mail a notice to the Securityholders setting forth in general terms the substance of such supplemental indenture. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. Section 10.03 Effect of Supplemental Indentures. Upon the execution --------------------------------- of any supplemental indenture pursuant to the provisions of this Article 10, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the Holders of Securities of such series shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 10.04 Reference in Securities to Supplemental Indentures. -------------------------------------------------- Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 10 or after any action taken at a Securityholders' meeting pursuant to Article 9, may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture or as to any such action. New Securities of such series so modified as to conform, in the opinion of the Trustee and the Board of Directors of the Company to any modification of this Indenture contained in any such Supplemental indenture or reflecting such action may be prepared by the Company, authenticated by the Trustee and delivered in exchange for the Securities of such series then Outstanding. ARTICLE 11. CONSOLIDATION, MERGER, SALE OR CONVEYANCE ----------------------------------------- Section 11.01 Company May Consolidate, Etc., Only on Certain Terms. ---------------------------------------------------- Nothing contained in this Indenture or in any of the Securities of any series shall prevent any consolidation or merger of the Company with or into any other corporation or corporations or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale or conveyance of the property of the Company as an entirety or substantially as an entirety to any other corporation authorized to acquire and operate the same; provided, however, the Company hereby covenants and agrees, that any such consolidation, merger, sale or conveyance shall be upon the condition that (a) immediately after such consolidation, merger, sale or conveyance, the corporation (whether the Company or such other corporation) formed by or surviving any such consolidation or merger, or to which such sale or conveyance shall have been made, shall not be in default in the performance or observance of any of the terms, covenants and conditions of this Indenture to be kept or performed by the Company; (b) the corporation (if other than the Company) formed by or surviving any such consolidation or merger, or to which such sale or conveyance shall have been made, shall be a corporation 81 organized under the laws of the United States or any State thereof; (c) the due and punctual payment of the principal of (and premium, if any) and interest on all of the Securities of any series, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed or observed by the Company, as the case may be, including, without limitation, the performance of any act or obligation relating to any conversion of Securities pursuant to Article Seventeen hereof, shall be expressly assumed, by supplemental indenture, satisfactory in form to the Trustee, executed and delivered to the Trustee by the corporation formed by such consolidation, or into which the Company, as the case may be, shall have been merged, or by the corporation which shall have acquired such property. If at any time there shall be any consolidation or merger or sale or conveyance of property to which the covenant of this Section 11.01 is applicable, then in any such event the successor corporation will promptly deliver to the Trustee: (a) An Officers' Certificate stating that as of the time immediately after the effective date of any such transaction the covenants of the Company contained in this Section 11.01 have been complied with and the successor corporation is not in default under the provisions of the Indenture; and (b) An Opinion of Counsel stating that in his opinion such covenants have been complied with and that any instrument or instrument executed in the performance of such covenants comply with the requirements thereof. Section 11.02 Rights and Duties of Successor Corporation. In case of ------------------------------------------ any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by a supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of and interest on all of the Securities of that series and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor corporation shall succeed to and be substituted for the Company with the same effect as if it had been named herein as the party of the first part. Such successor corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Securities of any series issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and upon the Order of such successor corporation, instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall make available for delivery any Securities of such series which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities of such series which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities of such series so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities of that series theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities of such series had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale or conveyance, such changes in phraseology and form (but not in substance) may be made in the Securities of such series thereafter to be issued as may be appropriate. 82 Subject to the provisions of Section 11.01, nothing contained in this Indenture or in any of the Securities of any series shall prevent the Company from merging into itself any other corporation (whether or not affiliated with the Company) or acquiring by purchase or otherwise all or any part of the property of any other corporation (whether or not affiliated with the Company). ARTICLE 12. SATISFACTION AND DISCHARGE OF INDENTURE: UNCLAIMED MONEYS --------------------------------------------------------- Section 12.01 Satisfaction and Discharge of Indenture. This --------------------------------------- Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of (as applicable) registration of transfer or exchange of Securities and Coupons, if any, of such series herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to such series, when (a) either (1) all Securities and Coupons of such series theretofore authenticated and delivered (other than (i) Securities and Coupons of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.06, (ii) Securities and Coupons of such series for whose payment money has theretofore been deposited in am or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust as provided in Section 12.06 (iii) Coupons appertaining to Bearer Securities surrendered for exchange for Registered Securities and maturing after such exchange whose surrender is not required or has been waived as provided in Section 2.05, and (iv) Coupons appertaining to Securities called for redemption and maturing after the relevant Redemption Date whose surrender has been waived as provided in Section 3.07) have been delivered to the Trustee for cancellation; or (2) all such Securities and Coupons of such series not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the 83 purpose for which it was received, an amount in the currency or currency unit in which such Securities and Coupons of such series are payable sufficient to pay and discharge the entire indebtedness on such Securities and Coupons of such series not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest, if any, to the date of such deposit (in the case of Securities and Coupons of such series which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (3) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture with respect to a series, the obligations of the Company to the Trustee under Section 7.06, the obligations of the Trustee to any Authenticating Agent under Section 7.14 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 12.02 and Section 12.05 shall survive; and any obligation of the Company upon or with respect to the conversion of the Securities of a series into any other security of the Company pursuant to the terms of the Securities of such series or Article Seventeen hereof, shall survive until the Securities of such series are no longer Outstanding. Section 12.02 Application of Trust Money. Subject to Section 12.05, -------------------------- all money deposited with the Trustee pursuant to Sections 12.01 and 12.03 shall be held in trust and applied by it, in accordance with the provisions of the Securities and Coupons, if any, and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee. Section 12.03 Satisfaction, Discharge and Defeasance of Securities of ------------------------------------------------------- Any Series. Unless this Section is specified pursuant to Section 2.01, to be - ---------- not applicable to Securities and Coupons, the Company shall be Discharged (as defined below) from its obligations with respect to Securities and Coupons, if any, of such series after the applicable conditions set forth below have been satisfied: (a) (1) the Company has paid or caused to be paid all other sums payable with respect to the Outstanding Securities and Coupons, if any, of such series (in addition to any required under (b)); and (2) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the entire 84 indebtedness on all Outstanding Securities and Coupons, if any, of any such series have been complied with; (b) (1) the Company shall have deposited or caused to be deposited irrevocably with the Trustee as a trust fund specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities and Coupons, if any, of such series (i) money in an amount (in such currency, currencies or currency unit or units in which any Outstanding Securities and Coupons, if any, of such series are payable) or (ii) in the case of Securities and Coupons, if any, denominated in Dollars, U.S. Government Obligations (as defined below) or, in the case of Securities and Coupons, if any, denominated in a Foreign Currency, Foreign Government Securities (as defined below), which through the payment of interest and principal in respect thereof in accordance with their terms will provide, not later than the due date of any payment of principal (including any premium) and interest, if any, under the Securities and Coupons, if any, of such series, money in an amount or (iii) a combination of (i) and (ii) sufficient (in the opinion with respect to (ii) and (iii) of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee) to pay and discharge each installment of principal of (including any premium), and interest if any, on, the Outstanding Securities and Coupons, if any, of such series on the dates such installments of interest or principal are due, in the currency, currencies or currency unit or units, in which such Securities and Coupons, if any, are payable; provided, however, that outstanding for the purpose of this Section 12.03 shall also include all Securities of such series which may be issued upon exercise of warrants; provided, further, however, that the Company shall not make or cause to be made the deposit provided by this clause (1) unless the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that there will not occur any violation of the Investment Company Act of 1940, as amended, on the part of the Company, the trust funds representing such deposit or the Trustee as a result of such deposit and the related exercise of the Company's option under this Section 12.03; (2) (i) no Event of Default or event (including such deposit) which with notice or lapse of time would become an Event of Default shall have occurred and be continuing on the date of such deposit, (ii) no Event of Default as defined in clause (f) or (g) of Section 6.01, or event which with notice or lapse of time or both would become an Event of Default under either such clause, shall have occurred within 90 days after the date of such deposit and (iii) such deposit and the related intended consequence under (a) or (b) will not result in any default or event of default under any material indenture, agreement or other instrument binding upon the Company, or any Subsidiary or any of their properties; and (3) the Company shall have delivered to the Trustee an Opinion of Counsel or a ruling by the Internal Revenue Service in form and substance satisfactory to the Trustee, to the effect that Holders of the Securities and Coupons, if any, of such series will not recognize income, gain or loss for Federal income tax purposes as a result of the Company's exercise of its option under this Section 12.03 and will be subject to Federal income tax in the same amount, in the same 85 manner and at the same times as would have been the case if such option had not been exercised. Any deposits with the Trustee referred to in clause (b)(1) above will be made under the terms of an escrow trust agreement in form and substance satisfactory to the Trustee which shall provide that any payment of principal of (including any premium) or interest on the funds or Securities so deposited in excess of the amount required to pay each installment of principal of (including any premium) and interest, if any, on the Outstanding Securities and Coupons, if any, shall be paid to the Company from time to time. If any Outstanding Securities and Coupons of such series are to be redeemed prior to their Stated Maturity, whether pursuant to any mandatory redemption provisions or in accordance with any mandatory sinking fund requirement, the applicable escrow trust agreement will provide therefor and the Company will make arrangements for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company. Section 12.04 Definitions. The following terms, as used in this ----------- Article 12, shall have the following meanings: "Discharged" means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by, and obligations under the Securities and Coupons, if any, of the series as to which this Section is specified as applicable as aforesaid and to have satisfied all the obligations under Sections 11.01 and 11.02 of this Indenture relating to the Securities and Coupons, if any, of such series (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same) except that the rights of Holders thereof to receive, from the trust fund described in clause (b)(1) of Section 12.03, payment of (including any premium) the principal of and the interest, if any, on such Securities and Coupons, if any, when such payments are due, shall survive such discharge. The Company shall reimburse the trust fund for any loss suffered by it as a result of any tax, fee or other charge imposed on or assessed on the Trustee as a result deposited U.S. Government Obligations or Foreign Government Securities, as the case may be, or any principal or interest paid on such obligations, and, subject to the provisions of Section 7.06, shall indemnify the Trustee against any claims made against the Trustee in connection with any such loss. "Foreign Government Securities" means, with respect to the Securities and Coupons, if any, of any series that are denominated in a Foreign Currency, securities that are (i) direct obligations of the government that issued or caused to be issued such currency for the payment of which obligations its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of such government the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by such government, which, in either case under clauses (i) or (ii), are not callable or redeemable at the option of the issuer thereof. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States the timely payment of which is unconditionally 86 guaranteed as a full faith and credit obligation of the United States, which, in either case under clauses (i) or (ii), are not callable or redeemable at the option of the issuer thereof, and will also include a depository receipt issued by a bank or trust company as custodian with respect to any such U.S. Government Obligation or a specified payment of interest on or principal of any such U.S. Government Obligation held by such custodian for the account of the holder of a depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of interest on or principal of the U.S. Government Obligation evidenced by such depository receipt. Section 12.05 Repayment of Money Held by Trustee. Any moneys ---------------------------------- deposited with the Trustee or any Paying Agent for the payment of the principal of (and premium, if any) or interest on any Securities of any series and not applied but remaining unclaimed by the Holders of Securities of such series and Coupons, if any, for two years after the date upon which such payment shall have become due shall be repaid to the Company by the Trustee upon the Order of the Company, or (if then held by the Company) shall be discharged from such trust, and the Holder of such Securities and Coupons, if any, entitled to receive such payment shall thereafter, as an unsecured general creditor, look only to the Company for the payment thereof and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, the City of New York, notice that such money remains unclaimed and that, after a date specified herein, which shall not be less than 30 days after such publication or mailing, any unclaimed balance of said moneys then remaining will be returned to the Company. ARTICLE 13. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS --------------------------------------------------------------- Section 13.01 No Recourse: Exemption from Personal Liability. No ----------------------------------------------- recourse under or upon any obligation, covenant or agreement of this Indenture, or of any Security of any series or Coupon, if any, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer, director or employee, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers, directors or employee, as such, of the Company or of any successor corporation, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities of such series or Coupon, if any, or implied therefrom; and that any and all such personal liability, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, 87 officer, director or employee, as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any Security of any series or Coupon, if any, or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Securities or Coupon, if any. ARTICLE 14. MISCELLANEOUS PROVISIONS ------------------------ Section 14.01 Successors and Assigns. All the covenants, ---------------------- stipulations, promises, and agreements in this Indenture contained by or on behalf of the Company shall bind their successors and assigns, whether so expressed or not. Section 14.02 Validity of Acts by Successor Corporations. Any act or ------------------------------------------ proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done or performed with like force and effect by the like board, committee or officer of any corporation that shall at that time be the successor of the Company. Section 14.03 Surrender of Powers. The Company by instrument in ------------------- writing executed by authority of their respective Boards of Directors and delivered to the Trustee may surrender any of the powers or rights reserved to the Company and thereupon such power or right so surrendered shall terminate both as to the Company and as to any successor corporation. Section 14.04 Notices. Any notice or demand which by any provision ------- of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Securities of such series to or on the Company shall be delivered by hand or sent by first-class mail postage prepaid addressed (until another address is filed by the Company with the Trustee), as follows: Company: UNOCAL CORPORATION 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Attention: Treasury Department Any notice, direction, request or demand by any Securityholder to or upon the Trustee shall be deemed to have been sufficiently given or made for all purposes, if given or made in writing, at the Corporate Trust Office of the Trustee. Section 14.05 Governing Law. This Indenture and each Security of ------------- each series and any Coupon shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of said State, unless otherwise required by mandatory provisions of law. 88 Section 14.06 Compliance Certificates and Opinions. Upon any ------------------------------------ application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including any covenant compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent have been complied with, except that in the case of any such application or demand as to which the furnishing of such document is specifically required by any provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture, other than certificates provided pursuant to Section 4.06, shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. Section 14.07 Effect of Headings and Table of Contents. The Article ---------------------------------------- and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 14.08 Conflict with Trust Indenture Act. If and to the --------------------------------- extent that any provision of this Indenture limits, qualifies or conflicts with another provision included in this Indenture which is required to be included in this Indenture by any of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, such required provision shall control. Section 14.09 Benefits of Trust Indenture. Nothing in this Indenture --------------------------- or in the Securities of any series or any Coupons, expressed or implied, shall give or be construed to give to any person, firm or corporation, other than the parties hereto and the Holders of the Securities of such series any legal or equitable right, remedy or claim under or in respect of this Indenture, or under any covenant, condition or provision herein contained; all its covenants, conditions and provisions being for the sole benefit of the parties hereto and the Holders of the Securities of such series. Section 14.10 No Security Interest. Nothing in this Indenture or in -------------------- the Securities of any series, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction where property of the Company or its Subsidiaries is located. Section 14.11 Execution in Counterparts. This Indenture may be ------------------------- executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. 89 Section 14.12 Separability. In case any provision in this Indenture ------------ or in the Securities of any series, or coupons, if any, shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not, to the extent permitted by applicable law, in any way be affected or impaired thereby. ARTICLE 15. SUBORDINATION Section 15.01 Securities Subordinate to Senior Indebtedness. The --------------------------------------------- Company covenants and agrees, and each Holder of Securities of any series (or any Coupons appertaining thereto) by the Holder's acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article 15, the indebtedness represented by the Securities of such series (or any Coupons appertaining thereto) and the payment of the principal of (and premium, if any) and interest on each and all of the Securities of such series (or any Coupons appertaining thereto) are hereby expressly made subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, to the extent and in the manner herein set forth (unless a different manner is set forth in the Securities of such series, or any Coupons appertaining thereto). No provision of this Article 15 shall prevent the occurrence of any default or Event of Default hereunder. Section 15.02 Payment Over of Proceeds Upon Dissolution, Etc. Upon ----------------------------------------------- any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding-up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on account of the principal (and premium, if any) or interest on the Securities of any series (or any Coupons appertaining thereto); and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Securities of such series (or any Coupons appertaining thereto) or the Trustee would be entitled to receive from the Company, except for the provisions of this Article 15, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders of the Securities of such series (or any Coupons appertaining thereto) or by the Trustee under the Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Holders of the Securities of such series (or any Coupons appertaining thereto) or to the Trustee. 90 In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, and their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company, as the case may be, remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness. For purposes of this Article 15 only, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which are subordinated in right of payment to all Senior Indebtedness which may at the time be outstanding to substantially the same extent as, or to a greater extent than, the Securities of any series (or any Coupons appertaining thereto) are so subordinated as provided in this Article 15. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article 11 shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshalling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or, the Person which acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article 11. Section 15.03 Prior Payment to Senior Indebtedness Upon Acceleration ------------------------------------------------------ of Securities. In the event that any of the Securities of any series (or any - ------------- Coupons appertaining thereto) are declared due and payable before the Stated Maturity, then and in such event the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness or provision shall be made for such payment in cash, before the Holders of the Securities of such series (or any Coupons appertaining thereto) are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities of such series (or any Coupons appertaining thereto)) by the Company on account of the principal of (or premium, if any) or interest on the Securities of such series (or any Coupons appertaining thereto) or on account of the purchase or other acquisition of Securities of such series (or any Coupons appertaining thereto). In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Securities of such series (or any Coupons appertaining thereto) prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company. 91 The provisions of this Section shall not apply to any payment with respect to which Article 16 and the terms of any convertible Securities of any series set forth in an Officers' Certificate or established in one or more indentures supplemental hereto in accordance with Section 2.01 would be applicable. Section 15.04 No Payment When Senior Indebtedness in Default. In the ---------------------------------------------- event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company, as the case may be, beyond any applicable grace period with respect thereto, or in the event that the maturity of any Senior Indebtedness of the Company, as the case may be, has been accelerated because of a default, then, in any such case, no payment shall be made by the Company with respect to the principal, premium, if any, or interest on the Securities of any series (or any Coupons appertaining thereto) until such default is cured or waived or ceases to exist or any such acceleration or demand for payment has been rescinded. In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.04, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness. Section 15.05 Payment Permitted in Certain Situations. Nothing --------------------------------------- contained in this Article 15 or elsewhere in the Indenture or in any of the Securities of any series (or any Coupons appertaining thereto) shall prevent (a) the Company, at any time except during the pendency of any dissolution, winding- up, liquidation or reorganization of the Company, whether voluntary or involuntary or any bankruptcy, insolvency, receivership or other proceedings of the Company referred to in Section 15.02 or under the conditions described in Section 15.03 or 15.04, from making payments at any time of principal of, or premium, if any, or interest on the Convertible Debentures, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of, or premium, if any, or interest on the Securities of such series (or any Coupons appertaining thereto) or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article 15. Section 15.06 Subrogation to Rights of Holders of Senior ------------------------------------------ Indebtedness. Subject to the payment in full of all Senior Indebtedness or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, the rights of the Holders of Securities of any series (or any Coupons appertaining thereto) shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article 15 (equally and ratably with the holders of indebtedness of the Company which by its express terms is subordinated to indebtedness of the Company to substantially the same extent as the Securities of such series (or any Coupons appertaining thereto) are subordinated to the Senior Indebtedness and is entitled to like rights of 92 subrogation) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Securities of such series (or any Coupons appertaining thereto) shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of Securities of any series (or any Coupons appertaining thereto) or the Trustee would be entitled except for the provisions of this Article 15, and no payments over pursuant to the provisions of this Article 15 to or for the benefit of the holders of Senior Indebtedness by Holders of Securities of such series (or any Coupons appertaining thereto) or the Trustee shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Securities of such series (or any Coupons appertaining thereto), be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. Section 15.07 Provisions Solely to Define Relative Rights. The ------------------------------------------- provisions of this Article 15 are and are intended solely for the purpose of defining the relative rights of the Holders of Securities of any series (or any Coupons appertaining thereto) on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article 15 or elsewhere in the Indenture or in the Securities of such series (or any Coupons appertaining thereto) is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Securities of such series (or any Coupons appertaining thereto), the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article 15 of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company), to pay to the Holders of Securities of such series (or any Coupons appertaining thereto) the principal of (and premium, if any) and interest on, the Securities of such series (or any Coupons appertaining thereto) as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of Securities of such series (or any Coupons appertaining thereto) and creditors of the Company, as the case may be, other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Securities of such series (or any Coupons appertaining thereto) from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article 15 of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. Section 15.08 Trustee to Effectuate Subordination. Each Holder of ----------------------------------- Securities of any series (or any Coupons appertaining thereto) by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article 15 and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. Section 15.09 No Waiver of Subordination Provisions. No right of any ------------------------------------- present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. 93 Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of Securities of any series (or any Coupons appertaining thereto), without incurring responsibility to the Holders of Securities of such series (or any Coupons appertaining thereto) and without impairing or releasing the subordination provided in this Article 15 or the obligations hereunder of the Holders of Securities of such series (or any Coupons appertaining thereto) to the holders of Senior Indebtedness do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness, and (d) exercise or refrain from exercising any rights against the Company and any other Person. Section 15.10 Notice to Trustee. The Company shall give prompt ----------------- written notice to a Responsible Officer of the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of any Securities of any series (or any Coupons appertaining thereto) pursuant to the provisions of this Article 15. Notwithstanding the provisions of this Article 15 or any other provision of the Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of any Securities of any series (or any Coupons appertaining thereto) pursuant to the provisions of this Article 15, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 7.02, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall have not received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Securities of any series (or any Coupons appertaining thereto)), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such moneys and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date. Subject to the provisions of Section 7.02, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article 15, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 15, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. 94 Section 15.11 Reliance on Judicial Order or Certificate of -------------------------------------------- Liquidating Agent. Upon any payment or distribution of assets of the Company - ----------------- referred to in this Article 15, the Trustee, subject to the provisions of Section 7.02, and the Holders of Securities of any series (or any Coupons appertaining thereto) shall be entitled to conclusively rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities of such series (or any Coupons appertaining thereto), for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, as the case may be, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 15. Section 15.12 Trustee Not Fiduciary for Holders of Senior ------------------------------------------- Indebtedness. With respect to the holders of Senior Indebtedness, the Trustee - ------------ undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 15, and no implied covenants or obligations with respect to the holders of such Senior Indebtedness shall be read into the Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders or creditors if it shall in good faith pay over or distribute to Holders of Securities of any series (or any Coupons appertaining thereto) or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article 15 or otherwise. Section 15.13 Rights of Trustee as Holder of Senior Indebtedness, --------------------------------------------------- Preservation of Trustee's Rights. The Trustee in its individual capacity shall - -------------------------------- be entitled to all the rights set forth in this Article 15 with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness and nothing in the Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 15 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.06. Section 15.14 Article Applicable to Paying Agents. In case at any ----------------------------------- time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article 15 shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article 15 in addition to or in place of the Trustee: provided, however, that this Section 15.14 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. Section 15.15 Certain Conversions Deemed Payment. For the purposes ---------------------------------- of this Article 15 only, (a) the issuance and delivery of junior securities (or cash paid in lieu of fractional shares) upon conversion of Securities of any series (or any Coupons appertaining thereto) in accordance with Article 16, or pursuant to the terms set forth in an Officers' Certificate or established in one or more indentures supplemental hereto in accordance with Section 2.01, shall not be deemed to constitute a payment or distribution on account of the principal of or premium 95 or interest on Securities of such series (or any Coupons appertaining thereto) or on account of the purchase or other acquisition of Securities of such series (or any Coupons appertaining thereto), and (b) the payment, issuance or delivery of cash, property or securities (other than Junior Securities and cash paid in lieu of fractional shares) upon conversion of a Securities of any series (or any Coupons appertaining thereto) shall be deemed to constitute payment on account of the principal of such Securities of such series (or any Coupons appertaining thereto). Nothing contained in this Article 15 or elsewhere in the Indenture or in the Securities of any series (or any Coupons appertaining thereto) is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of Securities of such series (or any Coupons appertaining thereto), the right, which is absolute and unconditional, of the Holder of any Securities of such series (or any Coupons appertaining thereto) to convert such Securities of such series (or any Coupons appertaining thereto) in accordance with Article 16 and the terms set forth in an Officers' Certificate or established in one or more indentures supplemental hereto in accordance with Section 2.01. ARTICLE 16. CONVERSION ---------- Section 16.01 Applicability of Article. Securities of any series ------------------------ which are designated as being convertible into any other security of the Company prior to their stated Maturity shall be convertible in accordance with their terms and (except as otherwise specified pursuant to Section 2.01 for the Securities of such series) in accordance with this Article. Section 16.02 Conversion Privilege. A Holder of a Security of a -------------------- series, which, by its terms, is convertible into any other security of the Company, may convert such Security at any time during the period and in the manner as is set forth in the terms of the Securities of that series. The number of shares or units of such other security issuable upon conversion of a Security shall be determined in the manner set forth in the terms of such Security. Section 16.03 Conversion Procedure. To convert a Security, the -------------------- Holder thereof must comply with and satisfy all of the terms, conditions and other requirements set forth in the terms of such Security. As soon as practicable, the Company shall deliver through the Conversion Agent a certificate for the number of shares or units of the Security issuable upon the conversion. Section 16.04 Fractional Shares. The terms of the Securities shall ----------------- set forth whether the Company will issue a fractional share or units of a security upon conversion of a Security or instead will deliver its check for the value of the fractional share or units of a security. Section 16.05 Taxes on Conversion. The terms of the Security shall ------------------- state whether the Company will pay any documentary, stamp or similar issue or transfer tax, due on the issue of shares or units of the security issuable and whether upon the conversion the Holder will be required to pay any such tax which is due because such shares or units are issued in a name other than that of such Holder. 96 Section 16.06 Company to Provide Securities Issuable Upon Conversion. ------------------------------------------------------ The Company shall reserve or otherwise provide for a sufficient amount of its respective securities which would be issuable upon the conversion of the Securities, including reserving out of its respective authorized but unissued equity securities or its equity securities held in treasury enough shares of equity securities to permit the conversion of the Securities. All shares of equity securities which may be issued upon conversion of the Securities shall be fully paid and nonassessable. The Company will endeavor to comply with all securities laws regulating the offer and delivery of shares or units of its respective securities upon conversion of Securities and will endeavor to list such shares or units on any national securities exchange on which such shares or units are listed. Section 16.07 Adjustments. The terms of the Securities shall set ----------- forth the nature of mechanics for and notice of any adjustments in the number or price of securities of the Company issuable upon conversion of the Securities. Section 16.08 Valuation. The terms of the Securities shall set forth --------- the method or methods for valuing the securities of the Company issuable upon conversion of the Securities. Section 16.09 Reorganization of Company. The terms of the Securities ------------------------- shall set forth the rights, if any, of the Holders to, convert their Securities in the event that the Company is a party to a transaction subject to Article 11 or a merger which reclassifies or changes its outstanding Securities into which the Securities are convertible. Section 16.10 Trustee's Disclaimer. The Trustee has no duty to -------------------- determine when an adjustment under this Article or the terms of the Securities should be made, how it should be made or what it should be. The Trustee makes no representation as to the validity or value of any securities issued upon conversion of Securities. The Trustee shall not be responsible for the failure of the Company to comply with this Article. Each Conversion Agent other than the Company shall have the same protection under this Section as the Trustee. IN WITNESS WHEREOF, the parties hereto have caused this Multiple Series Indenture to be duly executed on the date or dates indicated in the acknowledgements and as of the day and year first above written. 97 UNOCAL CORPORATION By________________________ Name: Title: THE BANK OF NEW YORK, as Trustee By________________________ Name: Title: 98 EXHIBIT A [FORMS OF CERTIFICATION] EXHIBIT A.1 [FORM OF CERTIFICATE TO BE GIVEN BY PERSON ENTITLED TO RECEIVE BEARER SECURITY] CERTIFICATE UNOCAL CORPORATION [Insert title or sufficient description -------------------------------------- of Securities to be delivered] ----------------------------- This is to certify that the above-captioned Securities are not being acquired by or for the account or benefit of a United States person or for offer to resell or for resale to a United States person or any person who is within the United States, or if a beneficial interest in the Securities is being acquired by a United States person, that such United States person (i) is a foreign branch of a United States financial institution (as defined in U.S. Treas. Reg. section 1.165-12(c)(1)(v)) which has provided to the person from which it purchased the obligation a certificate stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986 and the regulations thereunder (a "qualifying foreign branch"), (ii) acquired such securities through a qualifying foreign branch and is holding the obligation through such qualifying foreign branch or (iii) is a financial institution holding for purposes of resale during the restricted period (as defined in U.S. Treas. Reg. section 1.163-5(c)(2)(i)(D)(7)), which financial institution has not acquired the obligation for the purposes of resale directly or indirectly to a United States person or to a person who is within the United States or its possessions. This is also to certify that the above- referenced Securities are not being acquired by or for the account or benefit of a "U.S. person," as the term is defined in Regulation S under the United States Securities Act 1933, as amended. This Certificate excepts and does not relate to ______________ principal amount of the above-captioned Securities held in the name of the undersigned as to which the undersigned is not yet able to certify and as to which it understands that exchange and delivery of definitive Securities and payment of interest on a temporary global Security cannot be made until the undersigned is able to so certify. If the undersigned is a clearing organization, the undersigned has obtained a similar certificate from its member organizations on which this certificate is based; provided, however, that if the undersigned has actual knowledge that the information contained in such a certificate is false, the undersigned will not deliver a Security in temporary or definitive bearer form to the person who signed such certificate notwithstanding the delivery of such certificate to the undersigned. As used herein, "United States person" means an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, or an estate or trust the income of which is subject to United States Federal income taxation regardless of its source; "United States" means the United States of America (including the states and the District of Columbia); and "possessions" of the United States include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island, and Northern Mariana Islands. We undertake to advise you by telex if the above statement as to beneficial ownership is not correct on the date of delivery of the above- captioned Securities in bearer form as to all of such Securities. We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceeding are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Dated: _________________, 19__ [To be dated on or after _____________, 19__ (the date determined as provided - ---------------------- in the Indenture)] - ----------------- (Name of Person Entitled to Receive Bearer Security] ______________________________ (Authorized Signatory) -------------------- Name: Title: EXHIBIT A.2 (FORM OF CERTIFICATE TO BE GIVEN BY EURO-CLEAR, CEDEL S.A. AND ANY OTHER ENTITY PERFORMING SIMILAR FUNCTIONS IN CONNECTION WITH THE EXCHANGE OF A PORTION OF A TEMPORARY GLOBAL SECURITY] CERTIFICATE UNOCAL CORPORATION [Insert title or sufficient description -------------------------------------- of Securities to be delivered] ----------------------------- This is to certify with respect to $_________________ principal amount of the above-captioned Securities (i) that we have received from each of the persons appearing in our records as persons entitled to a portion of such principal amount (our "Qualified Account Holders") a certificate with respect to such portion substantially in the form set out in Exhibit A.1 to the Indenture relating to the above-captioned Securities, and (ii) that we are not submitting herewith for exchange portion of the temporary global Security representing the above-captioned Securities excepted in such certificates. To the extent that we have knowledge that any of such certificates is false and to the extent that we have not received with respect to any Securities such certificates from Qualified Account Holders, we are not submitting for exchange any portion of the temporary global Security attributable thereto. We further certify that as of the date hereof we have not received an notification from any of our Qualified Account Holders to the effect that the statements made by such Qualified Account Holders with respect to any portion of the part submitted herewith for exchange are no longer true and cannot be relied upon as of the date hereof. We understand that this certificate is required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceeding. Date:_________________, 19__ [To be dated no earlier than --------------------------- the Exchange Date] - ----------------- [___________________________________], as Operator of the Euro-clear System] [CEDEL S.A.] By_____________________________ EXHIBIT A.3 [FORM OF CERTIFICATE TO BE GIVEN BY EURO-CLEAR, CEDEL S.A. AND ANY OTHER ENTITY PERFORMING SIMILAR FUNCTIONS TO OBTAIN INTEREST PRIOR TO AN EXCHANGE DATE] CERTIFICATE UNOCAL CORPORATION [Insert title or sufficient -------------------------- description of Securities] ------------------------- We confirm that the interest payable on the Interest Payment Date on [Insert Date] will be paid to each of the persons appearing in our records as - ------------ being entitled to interest payable on such ("Qualified Account Holders") from whom we have received a written certification, dated not earlier than such Interest Payment Date, substantially in the form set out in Exhibit A.4 to the Indenture relating to the above-captioned Securities. We undertake to retain certificates received from our member organizations in connection herewith for four years from the end of the calendar year in which certificates are received. To the extent that we have knowledge that any of such certificates is false and to the extent that we have not received with respect to any Securities such certificates from Qualified Account Holders, we are not requesting that payment be made for interest with respect thereto. We further certify that as of the date hereof we have not received any notification for any of our Qualified Account Holders to the effect that the statements made by such Qualified Account Holders with respect to any interest payment on any portion of the principal amount of the Securities referred to above are no longer true and cannot be relied upon as of the date hereof. We undertake that any interest received by us and not paid as provided above SW b returned to the Trustee for the above Securities immediately prior to the expiration of two years such Interest Payment Date in order to be repaid by such Trustee to the above issuer at the end of years after such Interest Payment Date. Date:__________________, 19__ [To be dated on or after the --------------------------- relevant Interest Payment Date] - ------------------------------ [_________________________}, as Operator of the Euro-clear System], [CEDEL S.A.] EXHIBIT A.4 [FORM OF CERTIFICATE TO BE GIVEN BY BENEFICIAL OWNERS TO OBTAIN INTEREST PRIOR TO AN EXCHANGE DATE] CERTIFICATE UNOCAL CORPORATION [Insert title or sufficient description -------------------------------------- of Securities] ------------- This is to certify that as of the Interest Payment Date on [Insert Date] and except provided in the third paragraph hereof, none of the above- captioned Securities held by you for our account was beneficially owned by a United States person or if such Securities were, as of such date, beneficially owned by a United States person, such United States person (i) was a foreign branch of a United States financial institution (as defined in U.S. Treas. Reg. section 1.165-12(c)(1)(z)) which provided to the person from which it purchased the obligation a certificate stating that it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 19 and the regulations thereunder (a "qualifying foreign branch"), (ii) acquired such securities through qualifying foreign branch and was holding the obligation through such qualifying foreign branch or (iii) was a financial institution holding for purposes of resale during the restricted period (as defined U.S. Treas. Reg. section 1.163-5(c)(2)(i)(D)(7), which financial institution did not acquire the obligatio for the purposes of resale directly or indirectly to a United States person or to a person who is the United States or its possessions. As used herein, "United States person" means an individual who is a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or a political subdivision thereof, or an estate or trust the income of which is subject to United States Federal income taxation regardless of its source; "United States" means the United States of America (including the states and the District of Columbia); and "possessions" of the United States include Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island, and Northern Mariana Islands. This certificate excepts and does not relate to U.S. $_____________ principal amount of the above-captioned Securities appearing in your books as being held for our account as to which we are not yet able to certify and as to which we understand interest cannot be credited unless and until we are able to so certify. We understand that this certificate may be required in connection with certain tax legislation in the United States. If administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate or a copy thereof to any interested party in such proceedings. Date:_______________, 19__ [Name of Person Entitled to [To be dated on or after Receive Interest] the 15th day before the relevant Interest Payment Date] ______________________________ (Authorized Signature) Name: Title: EXHIBIT A.5 [FORM OF CONFIRMATION TO BE SENT TO PURCHASERS OF BEARER SECURITIES] By your purchase of the securities referred to in the accompanying confirmation (the "Securities"): You represent that you are not a United States person (as defined below) other than (i) a foreign branch of a United States financial institution (as defined in U. S. Treas. Reg. Section 1.165-12(c)(l)(v)) which has provided to the person from which you purchased the obligation a certificate stating that you agree to comply with the requirements of Section 165(i)(3)(A), (B) and (C) of the Internal Revenue of 1986 and the regulations thereunder (a "qualifying foreign branch"), (ii) a United States person who has acquired the Securities through a qualifying foreign branch and is holding the Securities through such qualifying foreign branch or (iii) a financial institution holding for purposes of resale during the restricted period (as defined in U. S. Treas. Reg. Section 1.163-5(c)(2)(i)(D)(7), which financial institution has not acquired the obligation for the purposes of resale directly or indirectly to a United States Person or to a person who is within the United States or its possessions. "U. S. person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof or an estate or trust the income of which if subject to the United States Federal income taxation regardless of its source; "United States" means the United States of America (including the States and the District of Columbia); and the "possessions" of the United States include Puerto Rico, the U. S. Virgin Islands, Guam, American Somoa, Wake Island, and Northern Mariana Islands. You also represent that the Securities are not being acquired by or for the account or benefit of a "U. S. person", as that term is defined in Regulation S under the United States Securities Act 1933, as amended. If you are a dealer, (a) you also represent that you have not offered, sold or delivered, and agree that you will not offer, sell, resell or deliver, any of the Securities, directly or indirectly, in the United States or its possessions or to any United States person other than a United States person defined in (i), (ii) or (iii) above, or any U. S. person, and (b) you agree that you will deliver to all purchasers of the Securities from you a written statement in this form. EX-4.4 3 FORM OF FIRST SUPPLEMENTAL INDENTURE _________________________________________________________________ UNOCAL CORPORATION As Issuer and THE BANK OF NEW YORK As Trustee ______________________________ 6 1/4% Convertible Junior Subordinated Debentures ______________________________ First Supplemental Indenture ______________________________ Dated as of , 1996 ______________________________ _________________________________________________________________ TABLE OF CONTENTS
ARTICLE I DEFINITIONS SECTION 1.1 Definition of Terms.......................................1 SECTION 2.1 Designation and Principal Amount..........................9 SECTION 2.2 Maturity..................................................9 SECTION 2.3 Form and Payment..........................................9 SECTION 2.4 Global Debenture.........................................10 SECTION 2.5 Interest.................................................10 ARTICLE III REDEMPTION OF THE CONVERTIBLE DEBENTURES SECTION 3.1 Special Event Redemption.................................11 SECTION 3.2 Optional Redemption by Company...........................12 SECTION 3.3 Redemption of Less Than All Convertible Debentures.......13 SECTION 3.4 No Sinking Fund..........................................13 ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1 Extension of Interest Payment Period.....................13 SECTION 4.2 Notice of Extension......................................14 SECTION 4.3 Limitation of Transactions...............................15 ARTICLE V EXPENSES SECTION 5.1 Payment of Expenses......................................15 SECTION 5.2 Payment Upon Resignation or Removal......................16 ARTICLE VI COVENANTS SECTION 6.1 Covenants as to the Trust................................16 SECTION 6.2 Listing or Quotation of Convertible Debentures...........16 ARTICLE VII CONVERSION OF CONVERTIBLE DEBENTURES SECTION 7.1 Conversion Rights........................................17 SECTION 7.2 Conversion Procedures....................................17 SECTION 7.3 Certain Conversion Price Adjustments.....................19 SECTION 7.4 Merger, Consolidation, or Sale of Assets.................23
-i- SECTION 7.5 Spinoff..................................................25 SECTION 7.6 Notice of Adjustments of Conversion Price................28 SECTION 7.7 Prior Notice of Certain Events...........................29 SECTION 7.8 Certain Plans, Rights or Securities......................30 SECTION 7.9 Preferred Stock Purchase Rights..........................30 SECTION 7.10 Special Provisions Regarding Adjustment of Conversion Price or Other Provisions................................31 SECTION 7.11 Certain Additional Rights................................32 SECTION 7.12 Trustee Not Responsible for Determining Conversion Price or Adjustments.....................................32 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 Events of Default........................................33 ARTICLE IX FORM OF CONVERTIBLE DEBENTURE SECTION 9.1 Form of Convertible Debenture............................33 ARTICLE X ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES SECTION 10.1 Original Issue of Convertible Debentures.................33 ARTICLE XI MISCELLANEOUS SECTION 11.1 Ratification of Base Indenture; Supplemental Indenture Controls.................................................34 SECTION 11.2 Trustee Not Responsible for Recitals.....................34 SECTION 11.3 Governing Law............................................34 SECTION 11.4 Separability.............................................34 SECTION 11.5 Counterparts.............................................34
ANNEX I FORM OF CONVERTIBLE DEBENTURE -ii- THIS FIRST SUPPLEMENTAL INDENTURE, dated as of _________, 1996 (the "Supplemental Indenture"), is between Unocal Corporation, a Delaware corporation (the "Company"), and The Bank of New York, as trustee (the "Trustee"). RECITALS WHEREAS, the Company has executed and delivered the Base Indenture (as defined herein) to the Trustee to provide for the issuance of the Company's Securities from time to time in one or more series as might be determined by the Company under the Base Indenture, in an unlimited aggregate principal amount as may be authenticated and delivered as provided in the Base Indenture; WHEREAS, pursuant to the terms of the Base Indenture, the Company desires to provide for the establishment of a new series of its Securities to be known as its 6 1/4% Convertible Junior Subordinated Debentures (the "Convertible Debentures"), the form and substance of such Convertible Debentures and the terms, provisions and conditions thereof to be set forth as provided in the Base Indenture and this Supplemental Indenture; WHEREAS, Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), intends to issue up to $__________ aggregate liquidation amount of its 6 1/4% Trust Convertible Preferred Securities (the "Trust Convertible Preferred Securities") and up to $____________ aggregate liquidation amount of its 6 1/4% Common Securities (the "Trust Common Securities" and, together with the Trust Convertible Preferred Securities, the "Trust Securities"), representing undivided beneficial interests in the assets of the Trust; and WHEREAS, the Trust proposes to issue Trust Securities to the Company in exchange for Convertible Debentures in an aggregate principal amount equal to the aggregate liquidation amount of the Trust Securities issued: NOW, THEREFORE, in consideration of the issuance to the Company of Trust Securities by the Trust and the acceptance of the Convertible Debentures in exchange therefor by the Trust, and for the purpose of setting forth, as provided in the Base Indenture, the form and substance of the Convertible Debentures and the terms, provisions and conditions thereof, the Company covenants and agrees with the Trustee as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definition of Terms. ------------------- For all purposes of this Supplemental Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) unless otherwise defined herein, the capitalized terms used herein that are defined in the Base Indenture have the same meanings when used in this Supplemental Indenture; (b) the terms defined in this Article I have the meanings assigned to them in this Article I and include the plural as well as the singular; (c) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (d) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States of America, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation; (e) a reference to a Section or Article (or subdivision thereof) or the Recitals is to a Section or Article (or subdivision thereof) or the Recitals of this Supplemental Indenture; (f) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision; (g) headings are for convenience of reference only and do not affect interpretation; (h) the following terms have the meanings given to them in the Rights Agreement: (i) Distribution Date; (ii) 15% Ownership Date; and (iii) Section 13(a) Event; (i) the terms defined as follows shall have the meanings assigned to them as follows: "Additional Interest" has the meaning specified in Section 2.5(c). ------------------- "Administrative Action" means a judicial decision, official --------------------- administrative pronouncement, ruling, regulatory procedure, notice or announcement, including any notice or announcement of intent to adopt such procedures or regulations. "Applicable Price" means (i) in the event of a Non-Stock Fundamental ---------------- Change in which the holders of Common Stock receive only cash, the amount of cash received by the holder of one share of Common Stock and (ii) in the event of any other Fundamental Change, the average of the Closing Prices of the Common Stock for the 10 Trading Days immediately prior to the record date for the determination of the holders of 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, the date upon which the holders of the Common Stock shall have the right to receive such cash, securities, property or other assets. "Average Stock Price" shall mean the average of the Closing Prices of ------------------- the Common Stock for 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 -2- Spinoff Distribution Date; provided, however, that if the Spinoff Fair Value is computed with respect to Closing Prices of Spinoff Company Stock following the Spinoff Distribution Date, the Average Stock Price shall be calculated as the average of the sums of the Closing Prices of the Common Stock and the Spinoff Company Stock for the 10 Trading Days immediately following the Spinoff Distribution Date. "Base Indenture" means that Indenture dated as of even date hereof -------------- between the Company and the Trustee, as it may be amended, restated, supplemented and/or modified from time to time. "Business Day" means any day other than a Saturday, Sunday, or any ------------ other day on which banking institutions in New York, New York or Los Angeles, California are permitted or required by any applicable law to close. "Clearing Agency" means an organization registered as a "Clearing --------------- Agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation, that is acting as depositary for the Convertible Debentures and in whose name or in the name of a nominee of that organization shall be registered a Global Debenture and which shall undertake to effect book entry transfers and pledges of the Convertible Debentures. The initial Clearing Agency shall be the Depository Trust Company. "Closing Price" of any common stock on any day shall mean the last ------------- reported sale price regular way on such day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way of such common stock, in each case on the New York Stock Exchange composite tape or, if the common stock is not listed or admitted to trading on such exchange, on the principal national securities exchange or quotation system on which such common stock is listed or quoted or admitted to trading, or, if not listed or quoted or admitted to trading on any national securities exchange or quotation system, the average of the closing bid and asked prices of such common stock as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose or, if not so available in such manner, as otherwise determined in good faith by the Board of Directors. "Common Security Certificate" means a definitive certificate in fully --------------------------- registered form representing a Trust Common Security substantially in the form of Exhibit A-2 to the Declaration. "Common Stock" means shares of the common stock, $1.00 par value, of ------------ the Company. "Common Stock Fundamental Change" means any Fundamental Change in ------------------------------- which more than 50% of the value (as determined in good faith by the Board of Directors) of the consideration received by the holders of 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 or approved for quotation subject to notice of issuance on the Nasdaq National Market System; provided, however, that a Fundamental Change shall not be a Common Stock Fundamental -3- Change unless either (i) the Company continues to exist after the occurrence of such Fundamental Change and the outstanding Convertible Debentures continue to exist as outstanding Convertible Debentures, or (ii) not later than the occurrence of such Fundamental Change, the outstanding Convertible Debentures are converted into or exchanged for convertible debentures of a corporation succeeding to the business of the Company, which convertible debentures have terms substantially similar to those of the Convertible Debentures as determined in good faith by the Board of Directors. "Company" has the meaning specified in the first paragraph hereof. ------- "Compounded Interest" has the meaning specified in Section 4.1. ------------------- "Conversion Agent" means the Institutional Trustee acting as ---------------- Conversion Agent for a Holder. "Conversion Date" has the meaning specified in Section 7.2(b). --------------- "Conversion Notice" has the meaning specified in Section 7.2(a). ----------------- "Conversion Price" means $______ as of the date of this Supplemental ---------------- Indenture, as may be adjusted from time to time as set forth in Article VII. "Convertible Debentures" has the meaning specified in the Recitals. ---------------------- "Convertible Preferred Security Certificate" means a certificate ------------------------------------------ representing a Trust Convertible Preferred Security substantially in the form of Exhibit A-1 to the Declaration. "Coupon Rate" has the meaning specified in Section 2.5. ----------- "Current Market Price" means, on any date in question, the average of -------------------- the Closing Prices of such common stock for the 10 Trading Day period ending on the earlier of the day in question and, if applicable, the day before the "ex" date with respect to the issuance or distribution requiring such computation; provided, however, that if more than one event occurs that would require an adjustment pursuant to Section 7.3, the Board of Directors may make such adjustments to the Closing Prices during such 10 Trading Day period as it deems appropriate to effectuate the intent of the adjustments in Section 7.3, in which case any such determination by the Board of Directors shall be set forth in a Board Resolution and shall be conclusive. For purposes of this definition, the term "ex" date, (1) when used with respect to any issuance or distribution, means the first date on which such common stock trades regular way on the New York Stock Exchange or, if not listed on the New York Stock Exchange, on any securities exchange where such common stock may be listed or in the relevant market from which the Closing Prices were obtained, without the right to receive such issuance or distribution, and (2) when used with respect to any tender or exchange offer means the first date on which such common stock trades regular way on such securities exchange or in such market after the Expiration Time of such offer. -4- "Declaration" means the Amended and Restated Declaration of Trust of ----------- the Trust, dated as of _______________, 1996, as it may be amended, restated, supplemented and/or modified from time to time. "Deferred Interest" has the meaning specified in Section 4.1. ----------------- "Delaware Trustee" means the Delaware Trustee, if any, of the Trust. ---------------- "Dissolution Event" means that, as a result of the occurrence and ----------------- continuation of a Special Event, the Trust is to be dissolved in accordance with the Declaration, and the Convertible Debentures held by the Institutional Trustee are to be distributed to the holders of the Trust Securities issued by the Trust pro rata in accordance with the Declaration. "Dissolution Tax Opinion" means an opinion of independent tax counsel ----------------------- experienced in such matters to the effect that on or after _______________, 1996, 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 authority thereof or therein affecting taxation, (b) any 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, , 1996, there is more than an insubstantial risk that (i) the Trust is or will be within 90 days of the date thereof, subject to United States federal income tax with respect to interest accrued or received on the Convertible Debentures, (ii) the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges, or (iii) interest payable in cash by the Company to the Trust on the Convertible Debentures (other than interest attributable to the Trust Common Securities) is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Company for United States federal income tax purposes; provided, however, that such an opinion shall not be deemed to be a "Dissolution Tax Opinion" if the 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 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 as of a date that is no later than the date the interest payment related to such OID is actually paid by the Company in cash. "Distribution" means a distribution to the holders of Trust Securities ------------ of the amount of any interest (including Compounded Interest and Additional Interest), premium and/or principal paid on the Convertible Debentures. "Expiration Time" has the meaning specified in Section 7.3(e). --------------- "Extended Interest Payment Period" has the meaning specified in -------------------------------- Section 4.1. -5- "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 shall be exchanged for, converted into, acquired for or shall constitute 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 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 Common Stock received in the transaction or event as a result of which more than 50% of the Common Stock outstanding 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. "Global Debenture" has the meaning specified in Section 2.4. ---------------- "Guarantee" means that Preferred Securities Guarantee Agreement dated --------- as of even date hereof between the Company and the Preferred Guarantee Trustee (as defined therein) for the benefit of the holders of Trust Convertible Preferred Securities. "Interest Payment Date" has the meaning specified in Section 2.5. --------------------- "Investment Company Event" means that the Regular Trustees shall have ------------------------ received an opinion of independent counsel experienced in such matters 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 regulations by any legislative body, court, governmental agency or regulatory authority on or after _______________________, 1996, 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. "Institutional Trustee" means the Institutional Trustee of the Trust. --------------------- "Junior Securities" shall mean (i) shares of any stock of any class of ----------------- the Company and (ii) securities of the Company which are subordinated in right of payment to all Senior Indebtedness that may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Convertible Debentures are so subordinated as provided in Article XI. "Maturity Date" means the date on which the Convertible Debentures ------------- mature and on which the principal shall be due and payable together with all accrued and unpaid interest thereon including Compounded Interest and Additional Interest, if any. "Ministerial Action" has the meaning specified in Section 3.1. ------------------ "New Convertible Debentures" has the meaning specified in Section -------------------------- 7.5(a). "90-Day Period" has the meaning specified in Section 3.1. ------------- -6- "Non Book-Entry Convertible Preferred Securities" has the meaning ----------------------------------------------- specified in Section 2.4. "Non-Stock Fundamental Change" means any Fundamental Change other than ---------------------------- a Common Stock Fundamental Change. "No Recognition Opinion" means an opinion of independent tax counsel ---------------------- experienced in such matters (which opinion may rely on published revenue rulings of the Internal Revenue Service) to the effect that the holders of the Trust Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Convertible Debentures. "OID" means original issue discount. --- "Optional Redemption Price" has the meaning specified in Section 3.2. ------------------------- "Principal Amount of One Convertible Debenture" means $50 as of the --------------------------------------------- date of this Supplemental Indenture, as may be adjusted from time to time as set forth in Section 7.5. "Purchased Shares" has the meaning specified in Section 7.3(e). ---------------- "Purchaser Stock Price" means, with respect to any Common Stock --------------------- Fundamental Change, the average of the Closing Prices for one share of the common stock received by holders of Common Stock in such Common Stock Fundamental Change for the 10 Trading Days immediately prior to the record date for the determination of the holders of Common Stock entitled to receive such common stock or, if there is no such record date, the date upon which the holders of Common Stock shall have the right to receive such common stock. "Redemption Tax Opinion" means an opinion of independent tax counsel ---------------------- experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Company would be precluded from deducting the interest on the 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 in the Declaration. "Reference Date" has the meaning specified in Section 7.3(c). -------------- "Reference Market Price" initially means $_______, and, in the event ---------------------- of any adjustment to the Conversion Price other than as a result of a Fundamental Change or a Spinoff, the amount as adjusted so that the ratio of the Reference Market Price to the Conversion Price after giving effect to any such adjustment of the Conversion Price shall always be the same as the ratio of $_____ to the initial Conversion Price of $_____. "Regular Record Date" has the meaning specified in Section 2.5(a). ------------------- "Regular Trustee" means the Regular Trustee of the Trust. --------------- -7- "Rights" has the meaning specified in Section 7.9. ------ "Rights Agreement" shall mean that certain Rights Agreement dated as ---------------- or January 29, 1990 by and between the Company and the Rights Agent (as defined therein). "Rights Expiration Date" shall mean the "Expiration Date" as defined ---------------------- in the Rights Agreement. "Rights Record Date" has the meaning specified in Section 7.3. ------------------ "Rights Redemption Date" shall mean the "Redemption Date" as defined ---------------------- in the Rights Agreement. "Series A Stock" has the meaning specified in Section 7.9(b). -------------- "Special Event" means a Tax Event or an Investment Company Event. ------------- "Special Event Redemption Price" has the meaning specified in Section ------------------------------ 3.1. "Spinoff" has the meaning specified in Section 7.5(a). ------- "Spinoff Company" has the meaning specified in Section 7.5(a). --------------- "Spinoff Company Convertible Debenture" has the meaning specified in ------------------------------------- Section 7.5(a). "Spinoff Company Stock" has the meaning specified in Section 7.5(a). --------------------- "Spinoff Company Trust" has the meaning specified in Section 7.5(c). --------------------- "Spinoff Distribution Date" has the meaning specified in Section ------------------------- 7.5(a). "Spinoff Exchange Date" has the meaning specified in Section 7.5(c). --------------------- "Spinoff Fair Value" shall mean the product of (a) the average of the ------------------ Closing Prices for one share of Spinoff Company Stock as reported on a "when issued" basis for the 10 Trading Days immediately prior to the Spinoff Distribution Date or in the absence of "when issued" trading, for the 10 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 of Directors in good faith. "Spinoff Ratio" shall mean a fraction, the numerator of which is the ------------- Spinoff Fair Value, and the denominator of which is the Average Stock Price. -8- "Supplemental Indenture" has the meaning specified in the first ---------------------- paragraph hereof. "Tax Event" means that the Regular Trustees have received a --------- Dissolution Tax Opinion. "Trading Day" shall mean a day on which any securities are traded on ----------- the national securities exchange or quotation system used to determine the Closing Price. "Trust" has the meaning specified in the first paragraph hereof. ----- "Trust Common Securities" has the meaning specified in the Recitals. ----------------------- "Trust Convertible Preferred Securities" has the meaning specified in -------------------------------------- the Recitals. "Trustee" has the meaning specified in the Recitals. ------- "Trust Securities" has the meaning specified in the Recitals. ---------------- ARTICLE II GENERAL TERMS AND CONDITIONS OF THE CONVERTIBLE DEBENTURES SECTION 2.1 Designation and Principal Amount. -------------------------------- There is hereby authorized a series of Debentures designated the "6 1/4% Convertible Junior Subordinated Debentures," limited in aggregate principal amount to $____________, which amount shall be as set forth in a Company Order for the authentication and delivery of Convertible Debentures pursuant to Section 2.03 of the Base Indenture. SECTION 2.2 Maturity. -------- The Maturity Date is September 1, 2026. SECTION 2.3 Form and Payment. ---------------- Except as provided in Section 2.4, the Convertible Debentures shall be issued in fully registered certificated form without Coupons, in denominations of the Principal Amount of One Convertible Debenture and integral multiples thereof. Principal and interest on the Convertible Debentures issued in certificated form will be payable, the transfer of such Convertible Debentures will be registrable, and such Convertible Debentures will be exchangeable for Convertible Debentures bearing identical terms and provisions, at the office or agency of the Trustee; provided, however, that payment of interest may be made at the option of the Company by check mailed to the Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of any Convertible Debentures is the Institutional Trustee, the payment of the principal of and interest (including Compounded Interest and Additional Interest, if any) on such Convertible Debentures held by the Institutional -9- Trustee will be made at such place and to such account as may be designated by the Institutional Trustee. SECTION 2.4 Global Debenture. ---------------- (a) In connection with a Dissolution Event, (i) the Convertible Debentures in certificated form may be presented to the Trustee by the Institutional Trustee in exchange for a global Convertible Debenture in an aggregate principal amount equal to the aggregate principal amount of all outstanding Convertible Debentures (a "Global Debenture"), to be registered in the name of the Clearing Agency, or its nominee, and delivered by the Trustee to the Clearing Agency for crediting to the accounts of its participants pursuant to the instructions of the Regular Trustees. The Company upon any such presentation shall execute a Global Debenture in such aggregate principal amount and deliver the same to the Trustee for authentication and delivery in accordance with the Base Indenture. Payments on the Convertible Debentures issued as a Global Debenture will be made to the Clearing Agency; and (ii) any Convertible Preferred Security Certificate which represents Trust Convertible Preferred Securities other than Trust Convertible Preferred Securities held by the Clearing Agency or its nominee ("Non Book-Entry Convertible Preferred Securities") will be deemed to represent beneficial interests in 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 Compounded Interest) equal to accumulated and unpaid distribution on the Non Book-Entry Convertible Preferred Securities until such Convertible Preferred Security Certificates are presented to the Security Registrar for transfer or reissuance at which time such Convertible Preferred Security Certificates will be cancelled and a Convertible Debenture, registered in the name of the Holder of the Convertible Preferred Security Certificate or the transferee of the Holder of such Convertible Preferred Security Certificate, as the case may be, with an aggregate principal amount equal to the aggregate liquidation amount of the Convertible Preferred Security Certificate cancelled, will be executed by the Company and delivered to the Trustee for authentication and delivery in accordance with the Base Indenture. On issue of such Convertible Debentures, Convertible Debentures with an equivalent aggregate principal amount that were presented by the Institutional Trustee to the Trustee will be deemed to have been cancelled. (b) A Global Debenture may be transferred, in whole but not in part, only to another nominee of the Clearing Agency, or to a successor Clearing Agency selected or approved by the Company or to a nominee of such successor Clearing Agency. SECTION 2.5 Interest. -------- (a) Each Convertible Debenture will bear interest at the rate of 6 1/4% per annum (the "Coupon Rate") from ______________, 1996 until the principal thereof becomes due -10- and payable, and on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the Coupon Rate, compounded quarterly, payable (subject to the provisions of Article IV) 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 Holder of such Convertible Debenture or any Predecessor Convertible Debenture, at the close of business on the record date for such Interest Payment Date, which record date (the "Regular Record Date"), (i) in respect of (A) Convertible Debentures of which the Institutional Trustee is the only Holder and the related Trust Convertible Preferred Securities are in book- entry only form or (B) a Global Debenture, shall be the close of business on the Business Day next preceding that Interest Payment Date; and (ii) in respect of Convertible Debentures other than as set forth in (i), the Company may select a Regular Record Date for such interest installment which shall be any date at least one Business Day before an Interest Payment Date. (b) The amount of interest payable for any period shall be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed, shall be computed on the basis of 30-day months and, for periods of less than a month, the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on the Convertible Debentures is not a Business Day, then payment of interest payable on such date shall 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 date. (c) If, at any time while the Institutional Trustee is the Holder of any Convertible Debentures, the Trust or the Institutional Trustee 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 shall pay as additional interest ("Additional Interest") on the Convertible Debentures held by the Institutional Trustee such additional amounts as shall be required so that the net amounts received and retained by the Trust and the Institutional Trustee after paying such taxes, duties, assessments or other governmental charges will be equal to the amounts the Trust and the Institutional Trustee would have received had no such taxes, duties, assessments or other government charges been imposed. ARTICLE III REDEMPTION OF THE CONVERTIBLE DEBENTURES SECTION 3.1 Special Event Redemption. ------------------------ If a Special Event has occurred and is continuing and: (a) the Company has received a Redemption Tax Opinion; or -11- (b) the Regular Trustees shall have been informed by independent tax counsel experienced in such matters that, for substantive reasons, it cannot deliver a No Recognition Opinion to the Trust, then, notwithstanding Section 3.2 but subject to Section 3.3, the Company shall have the right upon not less than 30 days nor more than 60 days notice to the Holders of the Convertible Debentures to redeem the Convertible Debentures, in whole or in part, for cash within 90 days following the occurrence of such Special Event (the "90-Day Period") at a redemption price equal to 100% of the principal amount to be redeemed (the "Special Event Redemption Price") plus any accrued and unpaid interest (including Compounded and Additional Interest) thereon to but excluding the date of such redemption, provided that, if at the time there is available to the Company the opportunity to eliminate, which elimination shall be complete within the 90-Day Period, such Special 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 Company, the Trust or the Holders of the Trust Securities, or does not subject any of them to more than de minimis regulatory requirements ("Ministerial Action"), the Company shall pursue such Ministerial Action in lieu of redemption, and, provided, further, that the Company shall have no right to redeem the Convertible Debentures while the Trust is pursuing any Ministerial Action pursuant to its obligations under the Declaration; provided such Ministerial Action can eliminate such Special Event during the 90-Day Period. The Special Event Redemption Price, plus such accrued and unpaid interest, shall be paid prior to 12:00 noon, New York time, on the date fixed by the Company for such redemption or at such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Special Event Redemption Price plus such accrued and unpaid interest thereon by 10:00 a.m., New York time, on the date such Special Event Redemption Price is to be paid. SECTION 3.2 Optional Redemption by Company. ------------------------------ Subject to the provisions of Section 3.3 and to the provisions of Article 3 of the Base Indenture, the Company shall have the right to redeem the Convertible Debentures, in whole or in part at any time on or after September 3, 2000. Any redemption pursuant to this Section 3.2 will be made upon not less than 30 days nor more than 60 days notice to the Holders of the Convertible Debentures, at the following prices (expressed as percentages of the principal amount of the Convertible Debentures) (the "Optional Redemption Price") together with accrued and unpaid interest, including Compounded and Additional Interest to, but excluding, the redemption date, if redeemed during the 12-month period beginning on September 1 (other than the first period, which will begin on September 3, 2000) of the following years:
Year Redemption Price ---- ---------------- 2000................ 103.750% 2001................ 103.125% 2002................ 102.500% 2003................ 101.875% 2004................ 101.250% 2005................ 100.625%
-12- and 100% if redeemed on or after September 1, 2006. The Company may not redeem any Convertible Debentures unless all accrued and unpaid interest has been paid on all oustanding 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 on the relevant record date. The Company shall issue a press release announcing any redemption pursuant to this Section 3.2. The Optional Redemption Price plus such accrued and unpaid interest thereon shall be paid prior to 12:00 noon, New York time, on the date fixed by the Company for such redemption or at such earlier time as the Company determines, provided that the Company shall deposit with the Trustee an amount sufficient to pay the Optional Redemption Price, plus accrued and unpaid interest thereon, by 10:00 a.m., New York time, on the date such Optional Redemption Price is to be paid. In addition to the foregoing, the Company shall have the right to redeem the Convertible Debentures, in whole or in part, at any time in exchange for Spinoff Company Convertible Debentures or New Convertible Debentures in accordance with Section 7.5. SECTION 3.3 Redemption of Less Than All Convertible Debentures. -------------------------------------------------- If the Convertible Debentures are only partially redeemed, the Convertible Debentures will be redeemed pro rata or by lot or by any other method utilized by the Trustee. The Company may not redeem any Convertible Debentures unless all accrued and unpaid interest has been paid on all of the outstanding Convertible Debentures for all quarterly interest periods terminating on or prior to the last Interest Payment Date before the date of redemption. SECTION 3.4 No Sinking Fund. --------------- The Convertible Debentures are not entitled to the benefit of any sinking fund. ARTICLE IV EXTENSION OF INTEREST PAYMENT PERIOD SECTION 4.1 Extension of Interest Payment Period. ------------------------------------ As long as an Event of Default under Section 6.01(a) of the Base Indenture shall not have occurred and be continuing, the Company shall 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 of such Convertible Debentures for a period not exceeding 20 consecutive quarters (an "Extended Interest Payment Period"), during which Extended Interest Payment Period no interest shall be due and payable on the Convertible Debentures; provided that no Extended Interest Payment Period may extend beyond the Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred during an Extended Interest Payment Period, shall bear interest thereon at the Coupon Rate compounded -13- quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). Before the termination of any such Extended Interest Payment the Company may further extend such Extended Interest Payment Period, provided that such Extended Interest Payment Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date. At the end of the Extended Interest Payment Period, the Company shall pay all interest accrued and unpaid on the Convertible Debentures, including any Additional Interest and Compounded Interest (together, "Deferred Interest") that shall be payable to the Holders of Convertible Debentures in whose names the Convertible Debentures are registered in the Security Register on the first record date after the termination of the Extended Interest Payment Period. Upon the termination of any Extended Interest Payment Period and upon the payment of all Deferred Interest then due, the Company may commence a new Extended Interest Payment Period, subject to the foregoing requirements. No interest shall be due and payable during an Extended Interest Payment Period, except at the end thereof, but the Company may pay at any time all or any portion of the interest accrued during an Extended Interest Payment Period. SECTION 4.2 Notice of Extension. ------------------- (a) If the Institutional Trustee shall be the only Holder of the Convertible Debentures at the time the Company elects an Extended Interest Payment Period, the Company shall give written notice to the Regular Trustees, the Institutional Trustee and the Trustee of its election of such Extended Interest Payment Period one Business Day before the earlier of (i) the date on which Distributions on the Trust Securities are payable for the first quarter of such Extended Interest Payment Period, or (ii) the date the Regular Trustees are required to give notice of the record date or the date such Distributions are payable for the first quarter of such Extended Interest Payment Period to any national stock exchange or other organization on which the Trust Convertible Preferred Securities are listed or quoted or to holders of Trust Convertible Preferred Securities, but in any event at least one Business Day before such record date or such payment date. (b) If the Institutional Trustee shall not be the only Holder of the Convertible Debentures at the time the Company elects an Extended Interest Payment Period, the Company shall give the Holders of Convertible Debentures written notice of its election of such Extended Interest Payment Period at least 10 Business Days before the earlier of (i) the Interest Payment Date for the first quarter of such Extended Interest Payment Period, or (ii) the date the Company is required to give notice of the record date or the date of such interest payment for the first quarter of such Extended Interest Payment Period to any national stock exchange or other organization on which the Convertible Debentures are listed or quoted or to Holders of Convertible Debentures. (c) The quarter in which any notice is given pursuant to subsections (a) or (b) of this Section 4.2 shall be, and shall be counted as, one of the 20 quarters permitted in the maximum Extended Interest Payment Period permitted under Section 4.1 . -14- SECTION 4.3 Limitation of Transactions. -------------------------- If the Company shall exercise its right to defer payment of interest as provided in Section 4.1, then during such Extended Interest Payment 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 September __, 1996, (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 its 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. ARTICLE V EXPENSES SECTION 5.1 Payment of Expenses. ------------------- In connection with the issuance of the Convertible Debentures to the Institutional Trustee in exchange for the Trust Securities and in connection with the issuance of the Trust Securities by the Trust to the Company, the Company, in its capacity as borrower with respect to the Convertible Debentures, shall: (a) pay all costs and expenses relating to the offering, sale, issuance and/or exchange of the Convertible Debentures and the Trust Securities, including fees payable pursuant to the Dealer Manager Agreement dated as of _______________, 1996 by and among the Company, Morgan Stanley & Co, Incorporated and Goldman Sachs & Co., and compensation of the Trustee under the Base Indenture in accordance with the provisions of Section 7.06 of the Base Indenture; (b) pay all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization, maintenance and dissolution of the Trust, the fees and expenses of the Institutional Trustee and the Delaware Trustee, the costs and expenses relating to the operation of the Trust, including, without limitation, costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, paying agent(s), registrar(s), transfer agent(s), duplicating, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the acquisition, financing, and disposition of Trust assets); -15- (c) pay all costs and expenses related to the enforcement by the Institutional Trustee of its rights as a Holder of Convertible Debentures; (d) be primarily liable for any indemnification obligations arising with respect to the Declaration; and (e) pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. SECTION 5.2 Payment Upon Resignation or Removal. ----------------------------------- Upon termination of this Supplemental Indenture or the Base Indenture or the removal or resignation of the Trustee pursuant to Section 7.10 of the Base Indenture, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation. ARTICLE VI COVENANTS SECTION 6.1 Covenants as to the Trust. ------------------------- If the Institutional Trustee is the Holder of the Convertible Debentures, the Company shall (a) maintain 100% direct or indirect ownership of the Trust Common Securities; provided, however, that any permitted successor of the Company under the Base Indenture may succeed to the Company's ownership of the Common Securities, (b) use its reasonable efforts to cause the Trust (i) to remain a statutory business trust, except in connection with a distribution of Convertible Debentures to the holders of Trust Securities, the redemption of all of the Trust Securities, or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, and (ii) to continue to be classified as a grantor trust for United States federal income tax purposes, and (c) use its reasonable efforts to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Convertible Debentures. SECTION 6.2 Listing or Quotation of Convertible Debentures. ---------------------------------------------- If the Convertible Debentures are to be distributed to the holders of Trust Securities upon a Dissolution Event, the Company shall use its reasonable efforts to arrange to list, or seek approval for quotation of, such Convertible Debentures on any stock exchange or other organization on which the Trust Convertible Preferred Securities are then listed or quoted, if any. -16- ARTICLE VII CONVERSION OF CONVERTIBLE DEBENTURES SECTION 7.1 Conversion Rights. ----------------- Subject to and upon compliance with the provisions of this Article VII, the Convertible Debentures are convertible, at the option of the Holder thereof, at any time beginning December ___, 1996 and prior to the close of business (New York time) on September 1, 2026 (or, in the case of Convertible Debentures called for redemption, prior to the close of business (New York time) on the Business Day prior to the corresponding redemption date) into that number of fully paid and nonassessable shares of Common Stock obtained by dividing the principal amount of the Convertible Debentures to be converted by the Conversion Price. For example, the initial Conversion Price is $________ and thus each Convertible Debenture is initially convertible into ______________ shares of Common Stock (calculated by dividing the Principal Amount of One Convertible Debenture as of the date of this Supplemental Indenture by the initial Conversion Price). The Conversion Price is subject to adjustment as described in this Article VII. All calculations under this Article VII shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. SECTION 7.2 Conversion Procedures. --------------------- (a) In order to convert all or a portion of the Convertible Debentures, the Holder thereof shall (i) sign and deliver to the Conversion Agent an irrevocable notice of election to convert ("Conversion Notice") setting forth the principal amount of Convertible Debentures to be converted (which shall equal the Principal Amount of One Convertible Debenture or integral multiples thereof), together with the name or names, if other than the Holder, in which the shares of Common Stock should be issued upon conversion, (ii) if such Convertible Debentures are definitive Convertible Debentures, surrender to the Conversion Agent the Convertible Debentures to be converted, with such endorsements or transfer documents as requested by the Conversion Agent, and (iii) pay any transfer or similar tax, if required. In addition, a holder of Trust Securities may exercise its right under the Declaration to convert such Trust Securities into Common Stock by delivering to the Conversion Agent an irrevocable conversion request setting forth the information called for by the preceding sentence and directing the Conversion Agent (i) to exchange such Trust Securities for a portion of the Convertible Debentures held by the Trust (at an exchange rate of $1 of principal amount of Convertible Debentures for each $1 liquidation amount of Trust Securities) and (ii) to immediately convert such Convertible Debentures, on behalf of such holder, into Common Stock pursuant to this Article VII and, if such Trust Securities are in definitive form, surrendering such Convertible Preferred Security Certificates or Common Security Certificates, as the case may be, duly endorsed or assigned to the Trust or in blank. So long as any Trust Convertible Preferred Securities are outstanding, the Trust shall not convert any Convertible Debentures except pursuant to a conversion request delivered to the Conversion Agent by a holder of Trust Securities. Accrued but unpaid interest will not be paid in cash on Convertible Debentures that are converted, nor will such accrued interest be converted into additional shares of Common Stock upon conversion of the Convertible Debentures, but such accrued interest shall be deemed -17- to be paid in full and then returned by the Holder to the Company as partial consideration for Common Stock received on conversion, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Convertible Debentures being converted, which shall be deemed to be paid in full. If any Convertible Debentures are converted into shares of Common Stock during the period from (but excluding) a record date to (and including) the next succeeding interest payment date, then either (i) if such Convertible Debentures have been called for redemption on a redemption date that 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 interest on such Interest Payment Date in respect of such Convertible Debentures 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. (b) Each conversion shall be deemed to have been effected immediately prior to the close of business on the day on which the Conversion Notice was received (the "Conversion Date") by the Conversion Agent from the Holder or from a holder of the Trust Securities effecting a conversion thereof pursuant to its conversion rights under the Declaration, as the case may be. The Person or Persons entitled to receive Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock as of the Conversion Date. As promptly as practicable on or after the Conversion Date, the Company shall issue and deliver at the office of the Conversion Agent, unless otherwise directed by the Holder in the Conversion Notice, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same. The Conversion Agent shall deliver such certificate or certificates to such Person or Persons. (c) The Company's delivery upon conversion 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) shall be deemed to satisfy the Company's obligation to pay the principal amount at the Maturity Date of the portion of Convertible Debentures so converted and any unpaid interest (including Compounded Interest) accrued on such Convertible Debentures at the time of such conversion. (d) No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, the Company shall pay in cash an amount equal to the same fraction of the Closing Price of such fractional interest on the Conversion Date, or, if such day is not a Trading Day, on the next Trading Day. The Company shall pay such cash amount, if any, to the Conversion Agent and the Conversion Agent in turn will pay such cash amount, if any, to the Holder of the Convertible Debentures or the holder of the Trust Securities so converted, as appropriate. (e) In the event of the conversion of any Convertible Debenture in part only, a new Convertible Debenture or Convertible Debentures for the unconverted portion thereof will -18- be issued in the name of the Holder thereof upon the cancellation thereof in accordance with Section 2.08 of the Base Indenture. (f) In effecting the conversion transactions described in this Section 7.2, the Conversion Agent is acting as agent of the holders of Trust Securities (in the exchange of Trust Securities for Convertible Debentures) and as agent of the Holders of Convertible Debentures (in the conversion of Convertible Debentures into Common Stock), as the case may be. The Conversion Agent is hereby authorized (i) to exchange Convertible Debentures held by the Trust from time to time for Trust Securities in connection with the conversion of such Trust Securities in accordance with this Article VII and (ii) to convert all or a portion of the Convertible Debentures into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Article VII and to deliver to the Trust a new Convertible Debenture or Convertible Debentures for any resulting unconverted principal amount. SECTION 7.3 Certain Conversion Price Adjustments. ------------------------------------ The Conversion Price shall be adjusted from time to time as follows: (a) In case the Company shall, while any of the Convertible Debentures are outstanding, (i) pay a dividend or make a distribution with respect to Common Stock in shares of Common Stock, (ii) subdivide outstanding shares of Common Stock, (iii) combine outstanding shares of Common Stock into a smaller number of shares or (iv) issue by reclassification of shares of Common Stock any shares of capital stock of the Company, the conversion privilege and the Conversion Price for the Convertible Debentures shall be adjusted so that the Holder of any Convertible Debenture thereafter surrendered for conversion shall be entitled to receive the number of shares of capital stock of the Company which such Holder would have owned immediately following such action had such Convertible Debenture been converted immediately prior thereto. An adjustment made pursuant to this subsection (a) shall become effective immediately after the record date in the case of a dividend or other distribution and shall become effective immediately after the effective date in case of a subdivision, combination or reclassification (or immediately after the record date if a record date shall have been established for such event). If, as a result of an adjustment made pursuant to this subsection (a), the Holder of any Convertible Debenture thereafter surrendered for conversion shall become entitled to receive shares of two or more classes or series of capital stock of the Company, the Board of Directors (whose determination shall be conclusive and shall be described in a Board Resolution filed with the Trustee) shall determine in good faith the allocation of the adjusted Conversion Price for the Convertible Debentures between or among shares of such classes or series of capital stock. (b) In case the Company shall, while any of the Convertible Debentures are outstanding, issue rights or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date for the determination of stockholders entitled to receive such rights or warrants (the "Rights Record Date")) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price per share of Common Stock on the Rights Record Date, the Conversion Price for the Convertible Debentures shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the date of issuance of such rights or warrants by a fraction of -19- which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such current market price, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective immediately after the Rights Record Date. To the extent that shares of Common Stock are not so delivered after the expiration of such rights or warrants, the Conversion Price shall be readjusted to the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. For the purposes of this subsection, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Company. In case any rights or warrants referred to in this subsection in respect of which an adjustment shall have been made shall expire unexercised within 45 days after the same shall have been distributed or issued by the Company, the Conversion Price shall be readjusted at the time of such expiration to the Conversion Price that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants. (c) Subject to the last sentence of this subsection (c), in case the Company shall, by dividend or otherwise, distribute to all holders of Common Stock evidences of its indebtedness, shares of any class or series of capital stock (other than Common Stock), cash or assets or rights or warrants to subscribe for or purchase any of its securities (excluding any rights or warrants referred to in subsection (b), any dividend or distribution paid exclusively in cash and any dividend or distribution referred to in subsection (a) of this Section 7.3), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (c) by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock on the date fixed for the payment of such distribution (the "Reference Date") less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed or of such subscription rights or warrants applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the Reference Date; provided, however, that in the event the numerator shall be less than one, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Convertible Debentures shall have the right to receive upon conversion the amount of such distribution such Holder would have received had such Holder converted each Convertible Debenture immediately prior to the Reference Date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not occurred. If the Board of Directors determines the fair market value of any distribution for purposes of this subsection (c) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used -20- in computing the Current Market Price per share of Common Stock. For purposes of this subsection (c), any dividend or distribution that includes shares of Common Stock or rights or warrants to subscribe for or purchase shares of Common Stock shall be deemed instead to be (i) a dividend or distribution of the evidences of indebtedness, shares of capital stock, cash or assets other than such shares of Common Stock or such rights or warrants (making any Conversion Price reduction required by this subsection (c) immediately followed by (ii) a dividend or distribution of such shares of Common Stock or such rights or warrants (making any further Conversion Price reduction required by subsection (a) or (b)), except (A) the Reference Date of such dividend or distribution as defined in this subsection (c) shall be substituted as (1) "the record date in the case of a dividend or other distribution," and (2) "the record date for the determination of stockholders entitled to receive such rights or warrants" and (3) "the date fixed for such determination" within the meaning of subsections (a) and (b) and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed outstanding for purposes of computing any adjustment of the Conversion Price in subsection (a). (d) In case the Company shall pay or make a dividend or other distribution on the Common Stock exclusively in cash (excluding any quarterly cash dividend on Common Stock to the extent that the aggregate cash dividend per share of Common Stock in any quarter does not exceed the greater of (i) the amount per share of Common Stock of the next preceding quarterly dividend on Common Stock to the extent such preceding quarterly dividend did not require an adjustment of the Conversion Price pursuant to this subsection (d) (as adjusted to reflect subdivisions or combinations of Common Stock), and (ii) 3.75% of the Current Market Price per share, and excluding any dividend or distribution in connection with the liquidation, dissolution or winding-up of the Company), the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (d) by a fraction of which the numerator shall be the Current Market Price per share of Common Stock on the date fixed for the payment of such distribution less the amount of cash so distributed (and not excluded as provided above) applicable to one share of Common Stock and the denominator shall be such Current Market Price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price per share of Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Convertible Debentures shall have the right to receive upon conversion the amount of cash such Holder would have received had such Holder converted each Convertible Debenture immediately prior to the record date for the distribution of the cash. If an adjustment is required to be made pursuant to this subsection (d) as a result of a distribution that is a quarterly dividend, such adjustment shall be based upon the amount by which such distribution exceeds the amount of the quarterly cash dividend permitted to be excluded as provided above. If an adjustment is required to be made pursuant to this subsection (d) as a result of a distribution that is not a quarterly dividend, such adjustment shall be based upon the full amount of the distribution. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such record date had not been fixed. -21- (e) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any Subsidiary of the Company for all or any portion of the Common Stock shall expire and such tender or exchange offer shall involve the payment by the Company or such Subsidiary of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) at the last time (the "Expiration Time") tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds the Closing Price of the Common Stock on the Trading Day next succeeding the Expiration Time, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (e) by a fraction (which shall not be greater than one) of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the Closing Price of Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (i) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (ii) the product of the number of shares of the Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Closing Price of Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become retroactively effective immediately prior to the opening of business on the day following the Expiration Time. (f) In case a tender or exchange offer made by a Person other than the Company or any Subsidiary of the Company for all or any portion of the Common Stock shall expire and such tender or exchange offer shall involve the payment by a Person other than the Company or any Subsidiary of the Company of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) at the applicable Expiration Time that exceeds the Closing Price of the Common Stock on the Trading Day next succeeding the applicable Expiration Time in which as of the closing date of the offer the Board of Directors of the Company is not recommending rejection of the offer, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the effectiveness of the Conversion Price reduction contemplated by this subsection (f) by a fraction (which shall not be greater than one) of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) at the Expiration Time multiplied by the Closing Price of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (i) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the Purchased Shares and (ii) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Closing Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become retroactively effective immediately prior to the opening of business on the day following the Expiration Time; provided, however, that the reduction of the Conversion Price contemplated by this subsection (f) will only be made if the tender offer or exchange offer is made for an amount that increases that Person's ownership of Common Stock to more than -22- 25% of the total shares of Common Stock outstanding and provided, further, that the reduction of the Conversion Price contemplated by this subsection (f) will not be made 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 of the Company or a sale of all or substantially all of the assets of the Company. (g) The Company may make such reductions in the Conversion Price, in addition to those required by subsections (a) through (f), as the Board of Directors considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase 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. The Company, at its option, may from time to time reduce the Conversion Price by any amount for any period of time if the period is at least 20 days, the reduction is irrevocable during the period, and the Board of Directors shall have made a determination in good faith that such reduction would be in the best interest of the Company, which determination shall be conclusive. Whenever the Conversion Price is reduced pursuant to the preceding sentence, the Company shall mail to Holders of record of the Convertible Debentures a notice of the reduction at least 15 days prior to the date the reduced Conversion Price takes effect, and such notice shall state the reduced Conversion Price and the period it will be in effect. (h) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price; provided, however, that any adjustments which by reason of this subsection (h) are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment shall be required. (i) 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 Convertible Debentures. SECTION 7.4 Merger, Consolidation, or Sale of Assets. ---------------------------------------- (a) In the event that the Company shall be a party to (i) any recapitalization or reclassification of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock), (ii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger that does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of 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 shares of Common Stock shall be converted into the right to receive other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the Holder of each Convertible Debenture then outstanding shall have the right thereafter to convert such Convertible Debenture only into: -23- (A) in the case of any such transaction that does not constitute a Common Stock Fundamental Change 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/or 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 Convertible Debenture immediately prior to such recapitalization, reclassification, consolidation, merger, sale, transfer or share exchange, after giving effect, in the case of any such transaction that is a Non-Stock Fundamental Change, to any adjustment in the Conversion Price in accordance with clause (i) of subsection (c) of this Section 7.4; and (B) in the case of any such transaction that constitutes a Common Stock Fundamental Change, common stock of the kind received by holders of Common Stock as a result of such Common Stock Fundamental Change in an amount of shares of common stock of such kind equal to the Principal Amount of One Convertible Debenture divided by the Conversion Price as adjusted in accordance with clause (ii) of subsection (c) of this Section 7.4. (b) The company or the Person (i) formed by such consolidation, (ii) resulting from such merger, (iii) that acquired such assets or the shares of the Common Stock or (iv) that is the issuer of the securities into which the Common Stock was converted into the right to receive, as the case may be, shall make provision in its certificate or articles of incorporation or other constituent document to establish the rights set forth in this Section 7.4. Such certificate or articles of incorporation or other constituent document shall provide for adjustments that, for events subsequent to the effective date of such certificate or articles of incorporation or other constituent document (or the amendment thereto), shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article VII. The above provisions shall similarly apply to successive transactions of the foregoing type. (c) Notwithstanding any other provision of this Section 7.4 to the contrary, if any Fundamental Change 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 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, but after giving effect to any other prior adjustments effected pursuant to Section 7.3, and (B) the product of (1) the greater of the Applicable Price or the then applicable Reference Market Price and (2) a fraction, the numerator of which shall be the Principal Amount of One Convertible Debenture and the denominator of which shall be (x) the amount of the Optional Redemption Price set forth in Section 3.2 for the Convertible Debentures if the redemption date were the date of such Non-Stock Fundamental Change (or, for the period from the date of this Supplemental Indenture through August 31, 1997, the twelve-month periods commencing on September 1, 1997 and September 1, 1998 and the period from September 1, 1999 to September 3, 2000, the product of 1.06250, 1.05625, 1.05000 and 1.04375, respectively, multiplied by the Principal -24- Amount of One Convertible Debenture) plus (y) any then-accrued and unpaid interest on the Principal Amount of One Convertible Debenture to but excluding the date of such Non-Stock Fundamental Change; and (ii) in the case of a Common Stock Fundamental Change, the Conversion Price immediately following such Common Stock Fundamental Change shall 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 Section 7.3, multiplied by a fraction, the numerator of which is the Purchaser Stock Price 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 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 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 Common Stock as a result of such Common Stock Fundamental Change. SECTION 7.5 Spinoff. ------- (a) 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, subject to Section 7.5(b), the Company shall: (i) exchange all, but not less than all, of the Convertible Debentures for new convertible debentures of the Spinoff Company ("Spinoff Company Convertible Debentures") having the same Principal Amount of One Convertible Debenture, interest rate, accrued and unpaid interest, if any, redemption provisions, and conversion provisions of the Convertible Debentures and other terms substantially similar to those of the Convertible Debentures except that (A) such Spinoff Company Convertible Debentures shall be convertible into Spinoff Company Stock instead of Common Stock, (B) the conversion price applicable to the Spinoff Company Convertible Debentures immediately following such exchange shall be equal to the product of the Conversion Price in effect immediately prior to such Spinoff multiplied by the Spinoff Ratio, and (C) the reference market price with respect to such Spinoff Company Convertible Debentures shall be equal to the Reference Market Price in effect immediately prior to such Spinoff multiplied by the Spinoff Ratio; or (ii) exchange all, but not less than all, of the Convertible Debentures for: -25- (A) Spinoff Company Convertible Debentures having the same interest rate, redemption provisions, and conversion provisions of the Convertible Debentures and other terms substantially similar to those of the Convertible Debentures except that (1) such Spinoff Company Convertible Debentures shall be convertible into Spinoff Company Stock instead of Common Stock, (2) the principal amount of each Spinoff Company Convertible Debenture shall be equal to the product of the Principal Amount of One Convertible Debenture immediately prior to such Spinoff multiplied by the Spinoff Ratio, (3) the conversion price applicable to the Spinoff Company Convertible Debentures immediately following such exchange shall be equal to the product of the Conversion Price in effect immediately prior to such Spinoff multiplied by the Spinoff Ratio, (4) the reference market price with respect to such Spinoff Company Convertible Debentures shall be equal to the product of the Reference Market Price in effect immediately prior to such Spinoff multiplied by the Spinoff Ratio, and (5) the accrued and unpaid interest on such Spinoff Company Convertible Debentures immediately following such exchange shall be equal to the amount of the accrued and unpaid interest, if any, on the Convertible Debentures through such date of exchange multiplied by the Spinoff Ratio; and (B) new convertible debentures of the Company (the "New Convertible Debentures") having the same interest rate, redemption provisions, and conversion provisions of the Convertible Debentures and other terms substantially similar to those of the Convertible Debentures except that (1) the principal amount of each New Convertible Debenture shall be equal to the product of (x) the Principal Amount of One Convertible Debenture immediately prior to such Spinoff multiplied by (y) one minus the Spinoff Ratio, (2) the conversion price applicable to the New Convertible Debentures immediately following such exchange shall be equal to the product of (x) the Conversion Price in effect immediately prior to such Spinoff and (y) one minus the Spinoff Ratio, (3) the reference market price with respect to such New Convertible Debentures shall be equal to the product of (x) the Reference Market Price in effect immediately prior to such Spinoff multiplied by (y) one minus the Spinoff Ratio, and (4) the accrued and unpaid interest on such New Convertible Debentures immediately following such exchange shall be equal to the product of (x) the amount the accrued and unpaid interest, if any, on the Convertible Debentures through such date of exchange multiplied by (y) one minus the Spinoff Ratio; or (iii) with respect to all, but not less than all, of the Convertible Debentures: (A) distribute to the Holders thereof Spinoff Company Convertible Debentures having the same interest rate, redemption provisions, and conversion provisions of the Convertible Debentures and other terms substantially similar to those of the Convertible Debentures except that (1) such Spinoff Company Convertible Debentures shall be convertible into Spinoff Company Stock instead of Common Stock, (2) the principal amount of each Spinoff Company Convertible Debenture shall be equal to the product of the Principal Amount of One Convertible Debenture immediately prior to such Spinoff multiplied by the Spinoff Ratio, (3) the conversion price applicable to the Spinoff Company Convertible Debentures immediately following such distribution shall be equal to the product of the Conversion Price in effect immediately prior to such Spinoff multiplied by the Spinoff Ratio, and (4) the reference market price with respect to such Spinoff Company Convertible Debentures shall be equal to the product of the Reference Market Price in effect immediately prior to such Spinoff multiplied by the Spinoff Ratio, and (5) the accrued and unpaid interest on such Spinoff Company Convertible Debentures immediately following such distribution shall be equal to the amount the accrued and unpaid interest, if any, on the Convertible Debentures through such date of exchange multiplied by the Spinoff Ratio; and (B) adjust the terms of the Convertible Debentures such that (1) the Principal Amount of One Convertible Debenture shall be equal to the product of (x) the Principal Amount of One Convertible Debenture immediately prior to such Spinoff -26- multiplied by (y) one minus the Spinoff Ratio, (2) the Conversion Price shall be equal to the product of (x) the Conversion Price in effect immediately prior to such Spinoff multiplied by (y) one minus the Spinoff Ratio, (3) the Reference Market Price shall be equal to (x) the Reference Market Price in effect immediately prior to such Spinoff multiplied by (y) one minus the Spinoff Ratio, and (4) the accrued and unpaid interest thereon shall be equal to (x) the amount the accrued and unpaid interest, if any, through such date of adjustment multiplied by (y) one minus the Spinoff Ratio; or (iv) adjust the Conversion Price by multiplying the Conversion Price 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; (b) The options of the Company in the event of a Spinoff as set forth in subsection (a) of this Section 7.5, shall be subject to the following provisions: (i) The Company shall have the option described in subsection (a)(i) of this Section 7.5 only if the Spinoff Company will, as determined in good faith by the Board of Directors prior to the Spinoff Distribution Date, have consolidated net assets in an amount greater than 40% of the consolidated net assets of the Company as of the day immediately prior to the Spinoff Distribution Date; (ii) the Company shall have the options described in subsections (a)(ii) and (a)(iii) of this Section 7.5 only if the Spinoff Company will, as determined in good faith by the Board of Directors prior to the Spinoff Distribution Date, have consolidated net assets in an amount greater than 20% of the consolidated net assets of the Company as of the day immediately prior to the Spinoff Distribution Date; and (iii) the Company shall have the options described in subsections (a)(i), (a)(ii) and (a)(iii) of this Section 7.5 only if (A) the Spinoff Distribution Date is on or prior to September 1, 2023 and (B) the Company and the Regular Trustees shall have received an opinion of 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 thereafter, to more than a de minimis amount of taxes, duties or other governmental charges in connection with the exchange or distribution and adjustment described therein. (c) In the event the Company shall choose (subject to subsection (b) of this Section 7.5) to effect an exchange described in subsections (a)(i), (a)(ii) or (a)(iii) of this Section 7.5: (i) no less than 20 Business Days prior to the date on which an exchange of the Convertible Debentures or a distribution and adjustment as contemplated by subsection (a)(iii) above has been completed (the "Spinoff Exchange Date"), the Company must provide notice to the Holders of the Convertible Debentures of the Spinoff Exchange Date, reasonable detail concerning relevant adjustments to interest rate, redemption provisions and conversion provisions, and the kind and amount of the securities into which such Convertible Debentures will be exchanged as a result of the Spinoff; -27- (ii) the Company shall make provisions, as part of the Spinoff, to establish the right of the holders of the Convertible Debentures to the securities to be issued in such exchange or a distribution and adjustment as contemplated by subsection (a)(iii), 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, except in the case of the distribution and adjustment described in subsection (a)(iii) of this Section 7.5, all rights of Holders of Convertible Debentures (including, but not limited to, the right to accrue interest) shall cease, and the Convertible Debentures 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 Convertible Debentures in exchange therefor pursuant to the Spinoff; (iv) following the Spinoff Exchange Date, the Holders of the Convertible Debentures shall be considered the holders of record of any Spinoff Company Convertible Debentures and New Convertible Debentures (or in the case of subsection (a)(iii) of this Section 7.5, the Convertible Debentures) 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 Base Indenture, this Supplemental Indenture, including for the purposes of giving of notice or voting thereunder; and (v) each Holder of Convertible Debentures, by such Holder's acceptance thereof, agrees to such exchange and the effects of such exchange as set forth in this Section 7.5(c). (d) For the purposes of this Section 7.5, the determination of whether after the Spinoff, the Spinoff Company Convertible Debentures or the New Convertible Debentures have terms substantially similar to those of the Convertible Debentures prior to the Spinoff shall be determined in good faith by the Board of Directors. (e) In the event of a Spinoff, the provisions set forth in this Section 7.5 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 Convertible Debentures upon conversion due solely to such Spinoff; provided, however, that notice of a conversion price adjustment pursuant to subsection (a)(iv) of this Section 7.5 shall be given in accordance with Section 7.6, and notice of a Spinoff shall be given in accordance with Section 7.7. The implementation of any of the provisions set forth in this Section 7.5 shall not require the approval of Holders of Convertible Debentures. SECTION 7.6 Notice of Adjustments of Conversion Price. ----------------------------------------- Whenever the Conversion Price or other conversion provisions of the Convertible Debentures are adjusted as provided in this Article VII (other than pursuant to subsections (a)(i), (a)(ii) or a(iii) of Section 7.5): -28- (a) the Company shall compute the adjusted Conversion Price and shall prepare a certificate signed by the Chief Financial Officer or the Treasurer of the Company setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed with the Trustee and the transfer agent for the Trust Convertible Preferred Securities and the Convertible Debentures; and (b) a notice stating the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall as soon as practicable be mailed by the Company to all record holders of Trust Convertible Preferred Securities and Holders of the Convertible Debentures at their last addresses as they appear upon the securities transfer books of the Company and the Trust. SECTION 7.7 Prior Notice of Certain Events. ------------------------------ In case: (a) the Company shall (i) declare any dividend (or any other distribution) on its Common Stock, other than (A) a dividend payable in shares of Common Stock or (B) a dividend payable in cash that would not require an adjustment pursuant to Section 7.3(c) or (d) or (ii) authorize a tender or exchange offer that would require an adjustment pursuant to Section 7.3(e); (b) the Company shall authorize the granting to all holders of Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or series or of any other rights or warrants; (c) of any reclassification of Common Stock (other than a subdivision or combination of the outstanding Common Stock, or a change in par value, or from par value to no par value, or from no par value to par value), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company shall be required, or of the sale or transfer of all or substantially all of the assets of the Company or of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or other property; (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) any Spinoff; then the Company shall (i) if any Trust Convertible Preferred Securities are outstanding, cause to be filed with the transfer agent for the Trust Convertible Preferred Securities, and shall cause to be mailed to the holders of record of the Trust Convertible Preferred Securities, at their last addresses as they shall appear upon the securities transfer books of the Trust or (ii) shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 15 days prior to the applicable record or effective date hereinafter specified, a notice stating (A) the date on which a record (if any) is to be taken for the purpose of such dividend, distribution, rights or warrants or distribution of Spinoff Company Stock, or, if a record is not -29- to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants or distribution of Spinoff Company Stock are to be determined or (B) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). SECTION 7.8 Certain Plans, Rights or Securities. ----------------------------------- Notwithstanding the foregoing provisions, no adjustment of the Conversion Price shall be made upon (a) the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in shares of Common Stock under any such plan, (b) the issuance of any shares of Common Stock, or options or rights to purchase shares of Common Stock pursuant to any present or future employee benefit plan or program, or present or future director plan or program of the Company or (c) the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of __________, 1996. There shall also be no adjustment of the Conversion Price in case of the issuance of any stock (or securities convertible into or exchangeable for stock) of the Company except as specifically described in this Article VII. SECTION 7.9 Preferred Stock Purchase Rights. ------------------------------- (a) So long as Rights of a kind similar to those declared and distributed by the Board of Directors in January 1990 pursuant to the Rights Agreement, as the same may hereafter be amended or reissued ("Rights"), are attached to the outstanding shares of Common Stock, each share of Common Stock issued upon conversion of the Convertible Debentures prior to the earliest of any Distribution Date, the date of redemption of the Rights or the date of expiration of the Rights shall be issued with Rights in a number equal to the number of Rights then attached to each such outstanding share of Common Stock. (b) For the purposes of Section 7.3(b), upon the earlier to occur of (i) the eleventh Business Day (as such term is defined in the Rights Agreement) following a 15% Ownership Date and (ii) a Section 13(a) Event, then an issuance of rights to purchase shares of Common Stock during a period not exceeding 45 days from the date of such dividend or other distribution shall be deemed to have occurred, unless a Rights Redemption Date or a Rights Expiration Date has occurred prior to such eleventh Business Day (as defined in the Rights Agreement) or such Section 13(a) Event, as the case may be, or unless the Company has taken action pursuant to Section 7(e) of the Rights Agreement to substitute other consideration for all or any portion of the Series A Junior Participating Cumulative Preferred Stock ("Series A Stock") otherwise issuable upon exercise of a Right. For purposes of the reduction of the conversion price provided for in Section 7.3(b) upon such deemed issuance of rights, each share of Series A Stock shall be deemed to constitute 100 shares of Common Stock (subject to -30- adjustment as provided in the Rights Plan), and the date fixed for determination of stockholders entitled to receive such rights shall be the close of business on the tenth such Business Day following such 15% Ownership Date or the date of such Section 13(a) Event, as the case may be; provided, however, that the current market price per share of the Common Stock shall be determined based on the 10 consecutive Trading Days prior to and including the Distribution Date. (c) For the purposes of Section 7.3(c), if the Company has taken action pursuant to Section 7(e) of the Rights Agreement to substitute other consideration for all or any portion of the Series A Stock otherwise issuable upon exercise of a Right, upon the earlier to occur of (x) the eleventh Business Day (as defined in the Rights Agreement) following a 15% Ownership Date and (y) a Section 13(a) Event, then an issuance of Securities shall be deemed to have occurred, unless a Rights Redemption Date or a Rights Expiration Date has occurred prior to such eleventh Business Day or such Section 13(a) Event, as the case may be. For purposes of the reduction of the conversion price provided for in Section 7.3(c) upon such deemed issuance of Securities, the date fixed for determination of stockholders entitled to receive such rights shall be the close of business on the tenth such Business Day following such 15% Ownership Date or the date of such Section 13(a) Event, as the case may be; provided, however, that the current market price per share of the Common Stock shall be determined based on the 10 consecutive Trading Days prior to and including the Distribution Date. (d) For purposes of Section 7.3(b) and Section 7.3(c), the redemption by the Company of Rights shall be deemed to be an expiration of such rights. (e) If any Convertible Debenture has been converted on or after the Distribution Date and on or before the tenth Business Day (as defined in the Rights Agreement) following such 15% Ownership Date or the date of such Section 13(a) Event, as the case may be, then as soon as practicable following the date on which the adjustment required by subsection (b) and (c) of this Section 7.3 is made, the Company shall issue to the holder of the Convertible Debenture so converted a number of additional shares of Common Stock (and cash in lieu of any fractional share) that would have been issuable upon such conversion had such adjustment been made immediately prior to such conversion. SECTION 7.10 Special Provisions Regarding Adjustment of Conversion Price or -------------------------------------------------------------- Other Provisions. - ---------------- In the event that the provisions of this Article VII specifying the methods by which the Conversion Price or other provisions are adjusted would require an adjustment that is determined in good faith by the Board of Directors to be inconsistent with the purposes of the provisions hereof providing for Conversion Price or other adjustments (generally, to place the holders of the Convertible Debenture and the Trust Securities in a position equivalent to the position they were in prior to the event requiring an adjustment to the Conversion Price or other adjustments), the Board of Directors may make an adjustment (in lieu of that required pursuant to such provisions) that it determines in good faith to place the Holders of the Convertible Debentures in a position at least equivalent to the position they were in prior to such event, which determination shall be described in a Board Resolution. -31- SECTION 7.11 Certain Additional Rights. ------------------------- In case the Company shall, by dividend or otherwise, declare or make a distribution on the Common Stock referred to in Section 7.3(c) or 7.3(d) (including, without limitation, dividends or distributions referred to in the last sentence of Section 7.3(d)) the Holder of Convertible Debentures, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the Conversion Price adjustment in respect of such distribution, shall also be entitled to receive for each share of Common Stock into which Convertible Debentures are converted, the portion of the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock; provided, however, that, at the election of the Company (whose election shall be evidenced by a resolution of the Board of Directors) with respect to all Holders so converting, the Company may, in lieu of distributing to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount in cash equal to the fair market value thereof (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors). If any conversion of Convertible Debentures described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Common Stock which the Holder of Convertible Debentures so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a resolution of the Board of Directors) to distribute to such Holder a due bill for the shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets to which such Holder is so entitled, provided, that such due bill (a) meets any applicable requirements of the principal securities exchange or other market on which the Common Stock is then traded and (b) requires payment or delivery of such shares of Common Stock, rights, warrants, evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of shares of Common Stock receiving such distribution. SECTION 7.12 Trustee Not Responsible for Determining Conversion Price or ----------------------------------------------------------- Adjustments. ----------- Neither the Trustee nor any Conversion Agent shall at any time be under any duty or responsibility to any Holder of any Convertible Debenture to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or whether this supplemental indenture need be entered into. Neither the Trustee nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind of account) of any shares of Common Stock or of any securities or property, which may at any time be issued or delivered upon the conversion of any Convertible Debenture; and neither the Trustee nor any Conversion Agent makes any representation with respect thereto. Neither the Trustee nor any Conversion Agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any shares of Common Stock or stock certificates or other securities or property upon the surrender of any Convertible Debenture for the purpose of conversion. -32- ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1 Events of Default. ----------------- (a) In addition to those events set forth in Section 6.01 of the Base Indenture, "Event of Default" with respect to the Convertible Debentures, shall include the following events: (i) in the event the Institutional Trustee is the Holder of the Convertible Debentures, the Trust shall have voluntarily or involuntarily dissolved, wound-up its business or otherwise terminated its existence except in connection with (i) the distribution of Convertible Debentures to holders of Trust Securities in liquidation of their interest in the Trust, (ii) the redemption of all of the outstanding Trust Securities, or (iii) certain mergers, consolidations or amalgamations, each as permitted by the Declaration; and (ii) the failure by the Company to deliver the Common Stock upon a valid conversion election by a Holder of Convertible Debentures to convert such Convertible Debentures into shares of Common Stock (whether or not such conversion is prohibited by the subordination provisions set forth in the Base Indenture). (b) Notwithstanding any other provision to the contrary, a valid extension of the interest payment period of the Convertible Debentures pursuant to Section 4.1 shall not constitute a default in the payment of an installment of interest under Section 6.01(a) of the Base Indenture. ARTICLE IX FORM OF CONVERTIBLE DEBENTURE SECTION 9.1 Form of Convertible Debenture. ----------------------------- The Convertible Debentures and the Trustee's Certificate of Authentication to be endorsed thereon shall be substantially in the form set forth as Annex I to this Supplemental Indenture. ARTICLE X ORIGINAL ISSUE OF CONVERTIBLE DEBENTURES SECTION 10.1 Original Issue of Convertible Debentures. ---------------------------------------- Convertible Debentures in the aggregate principal amount of up to $__________ may, upon or following execution of this Supplemental Indenture, be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and -33- make available for delivery said Convertible Debentures to or upon the written order of the Company, signed by its Chairman, its Vice Chairman, its President, or any Vice President and its Treasurer or an Assistant Treasurer, without any further action by the Company. ARTICLE XI MISCELLANEOUS SECTION 11.1 Ratification of Base Indenture; Supplemental Indenture ------------------------------------------------------ Controls. --------- The Base Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Base Indenture in the manner and to the extent herein and therein provided. The provisions of this Supplemental Indenture shall supersede the provisions of the Base Indenture to the extent the Base Indenture is inconsistent herewith. SECTION 11.2 Trustee Not Responsible for Recitals. ------------------------------------ The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. SECTION 11.3 Governing Law. ------------- This Supplemental Indenture and each Convertible Debenture shall be deemed to be a contract made under the internal laws of the State of New York, and for all purposes shall be construed in accordance with the laws of said State. SECTION 11.4 Separability. ------------ In case any one or more of the provisions contained in this Supplemental Indenture or in the Convertible Debentures shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture or of the Convertible Debentures, but this Supplemental Indenture and the Convertible Debentures shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein. SECTION 11.5 Counterparts. ------------ This Supplemental Indenture may be executed in any number of counterparts each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. -34- IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed on the date or dates indicated in the acknowledgements and as of the day and year first above written. UNOCAL CORPORATION By________________________ Name: Title: THE BANK OF NEW YORK, as Trustee By________________________ Name: Title: -35- ANNEX I FORM OF CONVERTIBLE DEBENTURE [FORM OF FACE OF CONVERTIBLE DEBENTURE] [IF THE CONVERTIBLE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT THE FOLLOWING: This Convertible Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee of a Depositary. This Convertible Debenture is exchangeable for Convertible Debentures registered in the name of a Person other than the Depositary or its nominee only in the limited circumstances described in the Indenture, and] no transfer of this Convertible Debenture (other than a transfer of this Convertible Debenture as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in such limited circumstances.] [IF THE CLEARING AGENCY IS THE DEPOSITORY TRUST COMPANY, INSERT THE FOLLOWING: Unless this Convertible Debenture is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Convertible Debenture issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] No. ______________________ CUSIP No. _______________ UNOCAL CORPORATION 6 1/4% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE Unocal Corporation, a Delaware corporation (the "Company", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to _______________________________________, or registered assigns, the principal sum of _____________ Dollars ($__________) on September 1, 2026, and to pay interest on said principal sum from September __, 1996, or from the most recent date on which interest has been paid to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on March 1, June 1, September 1, and December 1 of each year (each, an "Interest Payment Date") commencing December 1, 1996, at the rate of 6 1/4% per annum until the principal hereof shall have become due and payable, and on any overdue principal and premium, if any, and overdue installment of interest -i- at the same rate per annum compounded quarterly (without duplication and to the extent that payment of such interest is enforceable under applicable law). The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. Except as provided in the following sentence, the amount of interest payable for any period shorter than a full quarterly period for which interest is computed will be computed on the basis of 30-day months and, for periods of less than a month, the actual number of days elapsed per 30-day month. In the event that any date on which interest is payable on this Convertible Debenture is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture (referred to on the reverse hereof), be paid to the person in whose name this Convertible Debenture (or one or more Predecessor Convertible Debentures) is registered on the Regular Record Date for such interest installment. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holders on such Regular Record Date and may be paid to the Person in whose name this Convertible Debenture (or one or more Predecessor Convertible Debentures) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered Holders of the Convertible Debentures not less than 10 days prior to such special record date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Convertible Debentures may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The principal of (and premium, if any) and the interest on this Convertible Debenture shall be payable at the office or agency of the Trustee maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Security Debenture. Notwithstanding the foregoing, so long as the Holder of this Convertible Debenture is the Institutional Trustee, the payment of the principal of (and premium, if any) and interest on this Convertible Debenture will be made at such place and to such account as may be designated by the Institutional Trustee. The indebtedness evidenced by this Convertible Debenture is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Convertible Debenture is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Convertible Debenture, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee his or her attorney-in-fact for any and all such purposes. Each Holder hereof, by his or her acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such Holder upon said provisions. -ii- This Convertible Debenture shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee. The provisions of this Convertible Debenture are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Company has caused this instrument to be executed. UNOCAL CORPORATION By: ________________________ Name: Title Attest: By: ________________________ Name: Title: [FORM OF CERTIFICATE OF AUTHENTICATION] CERTIFICATE OF AUTHENTICATION This is one of the Convertible Debentures of the series of Convertible Debentures described in the within-mentioned Indenture. Dated: ___________________ THE BANK OF NEW YORK, as Trustee or as Authentication Agent By __________________________ By _____________________________ Authorized Signatory Authorized Signatory -iii- [FORM OF REVERSE OF DEBENTURE] This Convertible Debenture is one of a duly authorized series of Securities of the Company specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture (the "Base Indenture") dated as of __________, 1996, duly executed and delivered between the Company and The Bank of New York, as Trustee (the "Trustee"), as supplemented by the Supplemental Indenture dated as of _______________, 1996, between the Company and the Trustee (such Supplemental Indenture, as it supplements the Base Indenture, the "Indenture"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of Convertible Debentures. By the terms of the Indenture, the Securities are issuable thereunder in series that may vary as to amount, date of maturity, rate of interest and in other respects as provided in the Indenture. This series of Securities is limited in aggregate principal amount as specified in said Supplemental Indenture and is herein sometimes referred to as the "Convertible Debentures." Because of the occurrence and continuation of a Special Event, in certain circumstances, this Convertible Debenture may become due and payable, in whole or in part, at 100% of the principal amount (the "Special Event Redemption Price") together with any interest accrued thereon, including Compounded Interest and Additional Interest to, but excluding the redemption date. The Special Event Redemption Price plus such accrued and unpaid interest, shall be paid prior to 12:00 noon, New York time, on the date of such redemption or at such earlier time as the Company determines. In addition, the Company shall have the right to redeem this Convertible Debenture at the option of the Company, upon not less than 30 nor more than 60 days notice, without premium or penalty, in whole or in part at any time on or after September 3, 2000 at the following prices (expressed as percentages of the principal amount of the Convertible Debentures) (the "Optional Redemption Price") together with accrued and unpaid interest, including Additional Interest and Compounded Interest to, but excluding, the redemption date, if redeemed during the 12 month period beginning on September 1 (other than the first period, which will begin on September 3, 2000) of the following years:
Year Redemption Price ---- ---------------- 2000 103.750% 2001 103.125% 2002 102.500% 2003 101.875% 2004 101.250% 2005 100.625%
and 100% if redeemed on or after September 1, 2006. In the event of a Spinoff, the Company also has the right to redeem the Convertible Debentures, in whole or in part, in exchange for Spinoff Company Convertible Debentures and/or New Convertible Debentures, and each Holder, by its acceptance of the Convertible Debenture, agrees to such exchange and the effects of such exchange as set forth in the Indenture. 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 -iv- 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 on the relevant record date. The Company shall issue a press release announcing any Optional Redemption. If the Convertible Debentures are only partially redeemed by the Company pursuant to an Optional Redemption, the Convertible Debentures will be redeemed pro rata . In the event of redemption of this Convertible Debenture in part only, a new Convertible Debenture or Convertible Debentures of this series for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Convertible Debentures may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture. The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Securities of such series; provided, however, that no such supplemental indenture shall (a) extend the fixed maturity of any Securities of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or make any change that adversely affects the right to convert any Securities of any series or make any change in the subordination provisions that adversely affects the rights of any Holders of any Securities of any series, without the consent of the Holder of each Debenture so affected, or (b) reduce the aforesaid percentage of Securities of such series, the Holders of which are required to consent to any such supplemental indenture, without the consent of the Holders of each Security of any series then outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities of any series at the time outstanding affected thereby, on behalf of all of the Holders of the Securities of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any Securities of such series or a failure to convert any Securities of such series in accordance with its terms upon an election by the Holders thereof. Any such consent or waiver by the registered Holder of this Convertible Debenture (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Convertible Debenture and of any Convertible Debenture issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Convertible Debenture. No reference herein to the Indenture and no provision of this Convertible Debenture or of the Indenture shall alter or impair the obligation of the Company, which is -v- absolute and unconditional, to pay the principal of and premium, if any, and interest on this Convertible Debenture at the time and place and at the rate and in the money herein prescribed. As long as an Event of Default under Section 6.01(a) of the Base Indenture shall not have occurred and be continuing, the Company shall 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 of the Convertible Debentures for a period not exceeding 20 consecutive quarters (an "Extended Interest Payment Period") during which Extended Interest Payment Period no interest shall be due and payable on the Convertible Debentures; provided, that no Extended Interest Payment Period may extend beyond the Maturity Date. To the extent permitted by applicable law, interest, the payment of which has been deferred during an Extended Interest Payment Period, shall bear interest thereon at the rate specified for these Convertible Debentures, compounded quarterly for each quarter of the Extended Interest Payment Period ("Compounded Interest"). Before the termination of any such Extended Interest Payment Period, the Company may further extend such Extended Interest Payment Period, provided, that such Extended Interest Payment Period together with all such previous and further extensions thereof shall not exceed 20 consecutive quarters, or extend beyond the Maturity Date. At the end of the Extended Interest Payment Period, the Company shall pay all interest then accrued and unpaid on the Convertible Debentures, including any Additional Interest and Compounded Interest, that shall be payable to the Holders of Convertible Debentures on the first record date after the termination of the Extended Interest Payment Period. Upon the termination of any such Extended Interest Payment Period and upon the payment of all accrued and unpaid interest (including Compounded Interest to the extend permitted by applicable law), the Company may commence a new Extended Interest Payment Period. The Company may pay at any time all or any portion of the interest accrued during an Extended Interest Payment Period, subject to the requirements set forth in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, this Convertible Debenture is transferable by the registered Holder hereof on the Security Register of the Company, upon surrender of this Convertible Debenture for registration of transfer at the office or agency of the Trustee in the City and State of New York accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Convertible Debentures of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees. No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto. Prior to due presentment for registration of transfer of this Convertible Debenture, the Company, the Trustee, any paying agent and the Security Registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Convertible Debenture shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary. -vi- No recourse shall be had for the payment of the principal of or the interest on this Convertible Debenture, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released. Subject to and upon compliance with Article VII of the Supplemental Indenture, the Holder of this Convertible Debenture has the right, exercisable at any time beginning December __, 1996 and prior to the close of business (New York time) on September 1, 2026 (or, in the event this Convertible Debenture is called for redemption, prior to the close of business (New York time) on the Business Day prior to the corresponding redemption date), to convert the principal amount hereof (or any portion thereof that is an integral multiple of the Principal Amount of One Convertible Debenture) into that number of fully paid and nonassessable shares of Common Stock obtained by dividing the principal amount of the Convertible Debentures to be converted by the Conversion Price in effect on the Conversion Date. For example, the initial Conversion Price is $__.__ and thus each Convertible Debenture is initially convertible into 1.__ shares of Common Stock (calculated by dividing the Principal Amount of One Convertible Debenture as of the date of the Supplemental Indenture by the initial Common Price). The Conversion Price is subject to adjustment as described in the Indenture. All conversion price and conversion provision calculations shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. To convert all or a portion of this Convertible Debenture, a Holder must (a) complete and sign an irrevocable notice of election to convert substantially in the form attached hereto and deliver such Conversion Notice to the Conversion Agent, (b) surrender the Convertible Debenture to the Conversion Agent, (c) furnish appropriate endorsements or transfer documents if required by the Conversion Agent and (d) pay any transfer or similar tax, if required. Accrued but unpaid interest will not be paid in cash on Convertible Debentures that are converted, nor will such accrued interest be converted into additional shares of Common Stock upon conversion of the Convertible Debentures, but such accrued interest shall be deemed to be paid in full and then returned by the Holder to the Company as partial consideration for Common Stock received on conversion, and the Company shall not make nor be required to make any other payment, adjustment or allowance with respect to accrued but unpaid interest on the Convertible Debentures being converted, which shall be deemed to be paid in full. If any Convertible Debentures are converted during the period from (but excluding) a record date to (and including) the next succeeding interest payment date, then either (i) if such Convertible Debentures have been called for redemption on a redemption date that 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 interest on such Interest Payment Date in respect of such Convertible Debentures 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. No fractional shares will be issued upon conversion but a cash payment shall be made by the Company in lieu of such fractional interest. The outstanding principal amount of -vii- any Convertible Debenture shall be reduced by the principal amount thereof converted into shares of Common Stock. The Company's delivery upon conversion of the fixed number of shares of Common Stock into which the Convertible Debentures are convertible (together with cash in lieu of fractional shares) shall be deemed to satisfy the Company's obligation to pay the principal amount at the Maturity Date of the portion of Convertible Debentures so converted and any unpaid interest (including Compounded Interest) accrued on such Convertible Debentures at the time of such conversion. The Convertible Debentures of this series are issuable only in registered form without Coupons in denominations of the Principal Amount of One Convertible Debenture and any integral multiple thereof. [IF THE CONVERTIBLE DEBENTURE IS TO BE A GLOBAL DEBENTURE, SUBSTITUTE THE FOLLOWING FOR THE PREVIOUS SENTENCE: This Global Debenture is exchangeable for Convertible Debentures in definitive form only under certain limited circumstances set forth in the Indenture. Convertible Debentures of this series so issued are issuable only in registered form without Coupons in denominations of the Principal Amount of One Convertible Debenture and any integral multiple thereof.] As provided in the Indenture and subject to certain limitations therein set forth, Convertible Debentures of this series are exchangeable for a like aggregate principal amount of Convertible Debentures of this series of a different authorized denomination, as requested by the Holder surrendering the same. All terms used in this Convertible Debenture that are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE CONVERTIBLE DEBENTURES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. -viii- [FORM OF ELECTION TO CONVERT] ELECTION TO CONVERT To: Unocal Corporation The undersigned Holder of this Convertible Debenture hereby irrevocably exercises the option to convert this Convertible Debenture, or the portion below designated, into Common Stock of UNOCAL CORPORATION in accordance with the terms of the Indenture referred to in this Convertible Debenture, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: _______________, ____ in whole ___ in part __ Portion of principal amount of the Convertible Debenture to be converted (the Principal Amount of One Convertible Debenture or integral multiples thereof): $______________________ ____________________________________ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ____________________________________ ____________________________________ ____________________________________ Signature Guarantee:/1/ __________ _________________________ /1/ Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. -ix- ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible Debenture to: _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ (Insert assignee's social security or tax identification number) _________________________________________________________________ _________________________________________________________________ _________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________ _________________________________________________________________ _________________________________________________________________ agent to transfer this Convertible Debenture on the books of the Trust. The agent may substitute another to act for him or her. Date: ______________________ Signature: __________________ (Sign exactly as your name appears on the other side of this Convertible Debenture) Signature Guarantee:/*/ _____________________________ _______________________ /*/ Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Debenture Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. -x- EX-4.6 4 FORM OF AMENDED AND RESTATED DELARATION ____________________________________ AMENDED AND RESTATED DECLARATION OF TRUST OF UNOCAL CAPITAL TRUST Dated as of , 1996 ___________________________________ TABLE OF CONTENTS
ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions..................................... 1 ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act: Application................ 8 SECTION 2.2 Lists of Holders of Securities.................. 9 SECTION 2.3 Reports by the Institutional Trustee............ 9 SECTION 2.4 Periodic Reports to Institutional Trustee....... 9 SECTION 2.5 Evidence of Compliance with Conditions Precedent....................................... 10 SECTION 2.6 Events of Default; Waiver....................... 10 SECTION 2.7 Event of Default: Notice........................ 11 ARTICLE III ORGANIZATION SECTION 3.1 Name........................................... 12 SECTION 3.2 Office......................................... 12 SECTION 3.3 Purposes and Functions......................... 12 SECTION 3.4 Authority...................................... 12 SECTION 3.5 Title to Property of the Trust................. 13 SECTION 3.6 Powers, Duties and Authority of the Regular Trustees....................................... 13 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees....................................... 16 SECTION 3.8 Powers and Duties of the Institutional Trustee........................................ 16 SECTION 3.9 Certain Duties and Responsibilities of the Institutional Trustee.......................... 18 SECTION 3.10 Certain Rights of Institutional Trustee........ 20 SECTION 3.11 Delaware Trustee............................... 22 SECTION 3.12 Execution of Documents......................... 22 SECTION 3.13 Not Responsible for Recitals or Issuance of Securities..................................... 22 SECTION 3.14 Duration of Trust.............................. 23 SECTION 3.15 Mergers........................................ 23 ARTICLE IV SPONSOR SECTION 4.1 Issuance of Securities to Sponsor............... 24 SECTION 4.2 Responsibilities of the Sponsor................. 25
i TABLE OF CONTENTS (continued)
ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees.............................. 25 SECTION 5.2 Delaware Trustee................................ 26 SECTION 5.3 Institutional Trustee; Eligibility.............. 26 SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware Trustee Generally.................. 27 SECTION 5.5 Regular Trustees................................ 27 SECTION 5.6 Delaware Trustee................................ 27 SECTION 5.7 Appointment, Removal and Resignation of Trustees........................................ 27 SECTION 5.8 Vacancies Among Trustees........................ 29 SECTION 5.9 Effect of Vacancies............................. 29 SECTION 5.10 Meetings........................................ 29 SECTION 5.11 Delegation of Power by Regular Trustees......... 30 SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business..................................... 30 ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions................................... 30 ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities......... 31 SECTION 7.2 Execution and Authentication.................... 31 SECTION 7.3 Form and Dating................................. 32 SECTION 7.4 Paying Agent.................................... 32 ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust............................ 33
ii TABLE OF CONTENTS (continued)
ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities.......................... 34 SECTION 9.2 Transfer of Certificates........................ 34 SECTION 9.3 Deemed Security Holders......................... 34 SECTION 9.4 Book Entry Interests............................ 35 SECTION 9.5 Notices to Clearing Agency...................... 35 SECTION 9.6 Appointment of Successor Clearing Agency........ 36 SECTION 9.7 Definitive Convertible Preferred Security Certificates.................................... 36 SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates.................................... 36 ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability....................................... 37 SECTION 10.2 Exculpation..................................... 38 SECTION 10.3 Fiduciary Duty.................................. 38 SECTION 10.4 Indemnification................................. 39 SECTION 10.5 Outside Business................................ 41 ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year..................................... 42 SECTION 11.2 Certain Accounting Matters...................... 42 SECTION 11.3 Banking......................................... 43 SECTION 11.4 Withholding..................................... 43 ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments...................................... 43 SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent................................. 45
iii TABLE OF CONTENTS (continued)
ARTICLE XIII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Institutional Trustee..... 46 SECTION 13.2 Representations and Warranties of Delaware Trustee.......... 47 ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices.................................................... 47 SECTION 14.2 Governing Law.............................................. 49 SECTION 14.3 Intention of the Parties................................... 49 SECTION 14.4 Headings................................................... 49 SECTION 14.5 Successors and Assigns..................................... 49 SECTION 14.6 Partial Enforceability..................................... 49 SECTION 14.7 Counterparts............................................... 50 ANNEX I TERMS OF SECURITIES............................................. I-1 EXHIBIT A-1 FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE................................................... A1-1 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE............................. A2-1 EXHIBIT B SPECIMEN OF DEBENTURE........................................... B-1
iv AMENDED AND RESTATED DECLARATION OF TRUST OF UNOCAL CAPITAL TRUST , 1996 THIS AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") by and among the Trustees (as defined herein), the Sponsor (as defined herein) and the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration is dated and effective as of , 1996. RECITALS WHEREAS, the Trustees and the Sponsor established Unocal Capital Trust (the "Trust"), a trust under the Delaware Business Trust Act pursuant to a Declaration of Trust dated as of July 17, 1996, (the "Original Declaration") and a Certificate of Trust filed with the Secretary of State of the State of Delaware on July 17, 1996, for the sole purpose of issuing certain securities representing undivided beneficial interests in the assets of the Trust in exchange for certain Debentures of the Debenture Issuer; WHEREAS, as of the date hereof, no interests in the Trust have been issued; WHEREAS, all of the Trustees and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration; and NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Business Trust Act and that this Declaration constitute the gov erning instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I INTERPRETATION AND DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration, including the Annexes and Exhibits hereto, as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles, Sections, Recitals, Annexes, and Exhibits are to Articles, Sections and the Recitals of, and Annexes and Exhibits to, this Declaration unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Declaration unless otherwise defined in this Declaration or unless the context otherwise requires; and (f) a reference to the singular includes the plural and vice versa. "Administrative Action" has the meaning specified in Annex I. --------------------- "Affiliate" has the same meaning as given to that term in Rule 405 of --------- the Securities Act or any successor rule thereunder. "Agent" means any Paying Agent or Conversion Agent. ----- "Authorized Officer" of a Person means any Person that is authorized ------------------ to bind such Person. "Base Indenture" means that Indenture dated as of September ___, 1996 -------------- between Unocal and The Bank of New York, as Trustee. "Book Entry Interest" means a beneficial interest in a Global ------------------- Certificate, ownership and transfers of which shall be maintained and made through book entries by a Clearing Agency as described in Section 9.4. "Business Day" means any day other than a Saturday, Sunday, or any ------------ other day on which banking institutions in New York, New York or Los Angeles, California are permitted or required by any applicable law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code (S)3801 et seq., as it may be amended from time to time, or ------- ---- -- --- any successor legislation. "Certificate" means a Common Security Certificate or a Convertible ----------- Preferred Security Certificate. "Change in 1940 Act Opinion" has the meaning specified in Annex I. -------------------------- "Clearing Agency" means an organization registered as a "Clearing --------------- Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary for the Convertible Preferred Securities and in whose name or in the name of a nominee of that organization shall be registered a Global Certificate and which shall undertake to effect book entry transfers and 2 pledges of the Convertible Preferred Securities. The initial Clearing Agency shall be the Depository Trust Company. "Clearing Agency Participant" means a broker, dealer, bank, other --------------------------- financial institution or other Person for whom from time to time the Clearing Agency effects book entry transfers and pledges of securities deposited with the Clearing Agency. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time, or any successor legislation. "Commission" means the Securities and Exchange Commission. ---------- "Common Securities Guarantee" means the guarantee agreement, to be --------------------------- dated as of , 1996, of the Sponsor in respect of the Common Securities. "Common Securities" has the meaning specified in Section 7.1. ----------------- "Common Security Certificate" means a definitive certificate in fully --------------------------- registered form representing a Common Security substantially in the form of Exhibit A-2. "Common Stock" means shares of the common stock, $1.00 par value, of ------------ Unocal. "Conversion Agent" has the meaning set forth in Section 7.4. ---------------- "Conversion Date" has the meaning set forth in Annex I. --------------- "Conversion Request" has the meaning set forth in Annex I. ------------------ "Convertible Preferred Securities Guarantee" means the guarantee ------------------------------------------ agreement, to be dated as of , 1996, of the Sponsor in respect of the Convertible Preferred Securities. "Convertible Preferred Securities" has the meaning specified in -------------------------------- Section 7.1. "Convertible Preferred Security Beneficial Owner" means, with respect ----------------------------------------------- to a Book Entry Interest, a Person who is the beneficial owner of such Book Entry Interest, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly as a Clearing Agency Participant or as an indirect participant, in each case in accordance with the rules of such Clearing Agency). "Convertible Preferred Security Certificate" means a certificate ------------------------------------------ representing a Convertible Preferred Security substantially in the form of Exhibit A-1. "Corporate Trust Office" means the office of the Institutional Trustee ---------------------- at which the corporate trust business of the Institutional Trustee shall be, at any particular time, principally administered, which office at the date of execution of this Agreement is located at 101 Barclay Street, Floor 21 West, New York, New York 10286. 3 "Coupon Rate" has the meaning set forth in Annex I. ----------- "Covered Person" means: (a) any officer, director, shareholder, -------------- partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities. "Dealer Manager Agreement" means the Dealer Manager Agreement dated as ------------------------ of __________, 1996 by and among the Company, Morgan Stanley & Company Incorporated and Goldman Sachs & Co. "Debenture Issuer" means Unocal Corporation (or its successor) in its ---------------- capacity as issuer of the Debentures under the Indenture. "Debenture Trustee" means The Bank of New York, as trustee under the ----------------- Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Debentures" means the series of 6 1/4% Convertible Junior ---------- Subordinated Debentures issued or to be issued by the Debenture Issuer under the Indenture and held by the Institutional Trustee, a specimen certificate for such series of Debentures being Exhibit B. "Definitive Convertible Preferred Security Certificates" has the ------------------------------------------------------ meaning set forth in Section 9.7. "Delaware Trustee" has the meaning set forth in Section 5.2. ---------------- "Direct Action" has the meaning set forth in Section 3.8(e). ------------- "Dissolution Tax Opinion" has the meaning set forth in Annex I. ----------------------- "Distribution" has the meaning set forth in Section 6.1. ------------ "Event of Default" in respect of the Securities means an Indenture ---------------- Event of Default has occurred and is continuing. "Exchange Act" means the Securities Exchange Act of 1934, as amended ------------ from time to time, or any successor legislation. "Extension Period" has the meaning set forth in Annex I. ---------------- "Fiduciary Indemnified Person" has the meaning set forth in Section ---------------------------- 10.4(b). "Fiscal Year" has the meaning set forth in Section 11.1. ----------- "Global Certificate" has the meaning set forth in Section 9.4(a). ------------------ "Holder" means a Person in whose name a Certificate representing a ------ Security is registered, such Person being a beneficial owner within the meaning of the Business Trust Act. 4 "Indemnified Person" means a Sponsor Indemnified Person or a Fiduciary ------------------ Indemnified Person. "Indenture" means the Base Indenture and the Supplemental Indenture --------- pursuant to which the Debentures are or are to be issued. "Indenture Event of Default" means an "Event of Default" as defined in -------------------------- the Indenture. "Institutional Trustee" has the meaning set forth in Section 5.3. --------------------- "Institutional Trustee Account" has the meaning set forth in Section ----------------------------- 3.8(c). "Investment Company" means an investment company as defined in the ------------------ Investment Company Act. "Investment Company Act" means the Investment Company Act of 1940, as ---------------------- amended from time to time, or any successor legislation. "Investment Company Event" has the meaning set forth in Annex I. ------------------------ "Legal Action" has the meaning set forth in Section 3.6(g). ------------ "Liquidation Distribution" has the meaning set forth in Annex I. ------------------------ "List of Holders" has the meaning set forth in Section 2.2. --------------- "Majority in liquidation amount of the Securities" means, except as ------------------------------------------------ provided [in the terms of the Convertible Preferred Securities or] by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class who are the record owners of more than 50% of the aggregate liquidation amount of all outstanding Securities or, if the context so requires, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Common Securities voting separately as a class who are the record owners of more than 50% of the aggregate liquidation amount of all outstanding securities of the relevant class. "Ministerial Action" has the meaning set forth in Annex I. ------------------ "New Trust Common Security" has the meaning set forth in Section 9(a). ------------------------- "New Trust Convertible Preferred Security" has the meaning set forth ---------------------------------------- in Section 9(a). "New Trust Securities" has the meaning set forth in Section 9(a). -------------------- "90-Day Period" has the meaning set forth in Annex I. ------------- "No Recognition Opinion" has the meaning set forth in Annex I. ---------------------- 5 "Officers' Certificate" means, with respect to any Person, a --------------------- certificate signed by two Authorized Officers of such Person or, if such Person is an individual, signed by such Person. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "OID" has the meaning set forth in Annex I. --- "Original Declaration" has the meaning set forth in the Recitals. -------------------- "Payment Amount" has the meaning set forth in Section 6.1. -------------- "Paying Agent" has the meaning set forth in Section 3.8(h). ------------ "Person" means a legal person, including any individual, corporation, ------ estate, partnership, joint venture, association, joint stock company, limited liability company, trust, business trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Pro Rata" has the meaning set forth in Annex I. -------- "Quorum" means a majority of the Regular Trustees or, if there are ------ only two Regular Trustees, both of them. "Redemption/Distribution Notice" has the meaning set forth in Annex I. ------------------------------ "Redemption Tax Opinion" has the meaning set forth in Annex I. ---------------------- "Regular Trustee" has the meaning set forth in Section 5.1. --------------- "Related Party" means, with respect to the Sponsor, any direct or ------------- indirect wholly owned subsidiary of the Sponsor or any other Person that owns, directly or indirectly, 100% of the outstanding voting securities of the Sponsor. 6 "Responsible Officer" means, with respect to the Institutional ------------------- Trustee, any officer within the Corporate Trust Office of the Institutional Trustee, including any vice president, any assistant vice president, any assistant secretary, the treasurer, any assistant treasurer or other officer of the Corporate Trust Office of the Institutional 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. "Rule 3a-5" means Rule 3a-5 under the Investment Company Act. --------- "Securities" means the Common Securities and the Convertible Preferred ---------- Securities. "Securities Act" means the Securities Act of 1933, as amended from -------------- time to time or any successor legislation. "Securities Guarantees" means the Common Securities Guarantee and the --------------------- Convertible Preferred Securities Guarantee. "Special Event" has the meaning set forth in Annex I. ------------- "Spinoff Company Trust Common Security" has the meaning set forth in ------------------------------------- Section 9(a). "Spinoff Company Trust Convertible Preferred Security" has the meaning ---------------------------------------------------- set forth in Section 9(a). "Spinoff Company Securities" has the meaning set forth in Section -------------------------- 9(a). "Sponsor" means Unocal Corporation (or its successor), in its ------- capacity as sponsor of the Trust, and any transferee of the Common Securities permitted by Article IX. "Sponsor Indemnified Person" means (a) any Regular Trustee; (b) any -------------------------- Affiliate of any Regular Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Regular Trustee; or (d) any officer, employee or agent of the Trust or its Affiliates. "Successor Delaware Trustee" has the meaning set forth in Section -------------------------- 5.7(b)(ii). "Successor Entity" has the meaning set forth in Section 3.15(b)(i). ---------------- "Successor Securities" has the meaning set forth in Section -------------------- 3.15(b)(i)(B). "Successor Institutional Trustee" has the meaning set forth in Section ------------------------------- 5.7(b)(i). "Super Majority" has the meaning set forth in Section 2.6(a)(ii). -------------- "Supplemental Indenture" means that First Supplemental Indenture dated ---------------------- as of September __, 1996 between Unocal and The Bank of New York, as Trustee. 7 "Tax Event" has the meaning set forth in Annex I. --------- "10% in liquidation amount of the Securities" means, except as ------------------------------------------- provided in the terms of the Convertible Preferred Securities or by the Trust Indenture Act, Holder(s) of outstanding Securities voting together as a single class or, as the context may require, Holders of outstanding Convertible Preferred Securities or Holders of outstanding Common Securities voting separately as a class, who are the record owners of 10% or more of the aggregate liquidation amount (including the stated amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all outstanding Securities of the relevant class. "$3.50 Convertible Preferred Stock" means the $3.50 Convertible --------------------------------- Preferred Stock of Unocal. "Treasury Regulations" means the income tax regulations, including -------------------- temporary and proposed regulations, promulgated under the Code by the United States Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Trust" has the meaning set forth in the Recitals. ----- "Trustee" or "Trustees" means each Person who has signed this ------- -------- Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and each other Person who may from time to time be duly appointed, qualified and serving as a Trustee in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Indenture Act" means the Trust Indenture Act of 1939, as ------------------- amended from time to time, or any successor legislation. "Unocal" mean Unocal Corporation, a Delaware corporation, or any ------ successor entity in a merger, consolidation or amalgamation. ARTICLE II TRUST INDENTURE ACT SECTION 2.1 Trust Indenture Act: Application. -------------------------------- (a) This Declaration is subject to the provisions of the Trust Indenture Act that are required to be part of this Declaration and shall, to the extent applicable, be governed by such provisions. (b) The Institutional Trustee shall be the only Trustee which is a Trustee for the purposes of the Trust Indenture Act. 8 (c) If and to the extent that any provision of this Declaration limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. (d) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. SECTION 2.2 Lists of Holders of Securities. ------------------------------ (a) Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide the Institutional Trustee (i), except while the Convertible Preferred Securities remain in book-entry only form, at least one Business Day prior to the date for payment of Distributions, a list, in such form as the Institutional Trustee may reasonably require, of the names and addresses of the Holders of the Securities ("List of Holders") as of such record date, provided that neither the Sponsor nor the Regular Trustees on behalf of the Trust shall 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 Institutional Trustee by the Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other time, within 30 days of receipt by the Trust 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 Institutional Trustee. The Institutional Trustee shall preserve, in as current a form as is reasonably practicable, all information contained in Lists of Holders given to it or which it receives in the capacity as Paying Agent (if acting in such capacity) provided that the Institutional Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Institutional Trustee shall comply with its obligations under (S)(S) 311(a), 311(b) and 312(b) of the Trust Indenture Act. SECTION 2.3 Reports by the Institutional Trustee. ------------------------------------ Within 60 days after May 15 of each year, the Institutional Trustee shall provide to the Holders of the Convertible Preferred Securities such reports as are required by (S) 313 of the Trust Indenture Act, if any, in the form and in the manner provided by (S) 313 of the Trust Indenture Act. The Institutional Trustee shall also comply with the requirements of (S) 313(d) of the Trust Indenture Act. SECTION 2.4 Periodic Reports to Institutional Trustee. ----------------------------------------- Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Institutional Trustee such documents, reports and information as required by (S) 314 (if any) and the compliance certificate required by (S) 314 of the Trust Indenture Act in the form, in the manner and at the times required by (S) 314 of the Trust Indenture Act. Delivery of such reports, information and documents to the Institutional Trustee is for informational purposes only and the Institutional Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information 9 contained therein, including the Sponsor's compliance with any of its covenants hereunder (as to which the Institutional Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 2.5 Evidence of Compliance with Conditions Precedent. ------------------------------------------------ Each of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the Institutional Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in (S) 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to (S) 314(c)(1) may be given in the form of an Officers' Certificate. SECTION 2.6 Events of Default; Waiver. ------------------------- (a) The Holders of a Majority in liquidation amount of Convertible Preferred Securities may, by vote, on behalf of the Holders of all of the Convertible Preferred Securities, waive any past Event of Default in respect of the Convertible Preferred Securities and its consequences, provided that, if the underlying Indenture Event of Default: (i) is not waivable under the Indenture, such Event of Default under the Declaration shall also not be waivable; or (ii) requires the consent or vote of the holders of greater than a majority (a "Super Majority") in principal amount of the Debentures to be waived under the Indenture, such Event of Default under the Declaration may only be waived by the vote of the Holders of at least the same Super Majority percentage in liquidation amount of the Convertible Preferred Securities as is required under the Indenture of aggregate principal amount of the Debentures outstanding. The foregoing provisions of this Section 2.6(a) shall be in lieu of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such Indenture Event of Default shall cease to exist, and any Event of Default with respect to the Convertible Preferred Securities arising therefrom shall be deemed to have been cured, for every purpose of this Declaration, but no such waiver shall extend to any subsequent or other Indenture Event of Default or Event of Default with respect to the Convertible Preferred Securities or impair any right consequent thereon. Any waiver by the Holders of the Convertible Preferred Securities of an Event of Default with respect to the Convertible Preferred Securities shall also be deemed to constitute a waiver by the Holders of the Common Securities of any such Event of Default with respect to the Common Securities for all purposes of this Declaration without any further act, vote, or consent of the Holders of the Common Securities. (b) The Holders of a Majority in liquidation amount of the Common Securities may, by vote, on behalf of the Holders of all of the Common Securities, waive any past Event of Default with respect to the Common Securities and its consequences, provided that, if the underlying Indenture Event of Default: 10 (i) is not waivable under the Indenture, such Event of Default under the Declaration shall also not be waivable unless the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b); (ii) requires the consent or vote of a Super Majority in principal amount of the holders of the Debentures to be waived under the Indenture, except where such Event of Default under the Declaration may only be waived by the vote of the Holders of at least the same Super Majority percentage in liquidation amount of the Common Securities as is required under the Indenture of aggregate principal amount of the Debentures outstanding, unless the Holders of the Common Securities are deemed to have waived such Event of Default under the Declaration as provided below in this Section 2.6(b); provided further, each Holder of Common Securities will be deemed to have waived any such Indenture Event of Default and all Events of Default with respect to the Common Securities and its consequences until all Events of Default with respect to the Convertible Preferred Securities have been cured, waived or otherwise eliminated, and until such Events of Default with respect to the Convertible Preferred Securities have been so cured, waived or otherwise eliminated, the Institutional Trustee will be deemed to be acting solely on behalf of the Holders of the Convertible Preferred Securities and only the Holders of the Convertible Preferred Securities will have the right to direct the Institutional Trustee in accordance with the terms of the Securities. The foregoing provisions of this Section 2.6(b) shall be in lieu of (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such (S)(S) 316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon such cure, waiver or other elimination, any such Indenture Event of Default shall cease to exist and any Event of Default with respect to the Common Securities arising therefrom shall be deemed to have been cured, waived or otherwise eliminated for every purpose of this Declaration, but no such cure, waiver or other elimination shall extend to any subsequent or other Indenture Event of Default or Event of Default with respect to the Common Securities or impair any right consequent thereon. (c) A waiver of an Indenture Event of Default by the Institutional Trustee at the direction of the Holders of the Convertible Preferred Securities, constitutes a waiver of the corresponding Event of Default under this Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of (S) 316(a)(1)(B) of the Trust Indenture Act and such (S) 316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this Declaration and the Securities, as permitted by the Trust Indenture Act. SECTION 2.7 Event of Default: Notice. ------------------------ (a) The Institutional Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Securities, notices of all defaults with respect to the Securities actually known to a Responsible Officer of the Institutional Trustee, unless such defaults have been cured before the giving of such notice (the term "defaults" for the purposes of this Section 2.7(a) being hereby defined to be an Indenture Event of Default, not including any periods of grace provided for therein and irrespective of the 11 giving of any notice provided therein); provided that, except for a default in the payment of principal of (or premium, if any) or interest on any of the Debentures, the Institutional Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Institutional Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of the Securities. (b) The Institutional Trustee shall not be deemed to have knowledge of any default except: (i) a default under Sections 6.01(a) or (b) of the Base Indenture; or (ii) any default as to which the Institutional Trustee shall have received written notice or of which a Responsible Officer of the Institutional Trustee charged with the administration of the Declaration shall have actual knowledge. ARTICLE III ORGANIZATION SECTION 3.1 Name. ---- The Trust is named "Unocal Capital Trust." Such name may be modified from time to time by the Regular Trustees following written notice to the Holders of Securities. The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Regular Trustees. SECTION 3.2 Office. ------ The address of the principal office of the Trust is c/o Unocal Corporation, 2141 Rosecrans Avenue, Suite 4000, El Segundo, California 90245. On 10 Business Days written notice to the Holders of Securities, the Regular Trustees may designate another principal office. SECTION 3.3 Purposes and Functions. ---------------------- The sole purposes and functions of the Trust are (a) to issue Securities in exchange for Debentures having an aggregate stated principal amount equal to the aggregate stated liquidation amount of such Securities, and (b) except as otherwise limited herein, to engage in only those other activities necessary, or incidental thereto. The Trust shall not borrow money, issue debt or reinvest proceeds derived from investments, pledge any of its assets, or otherwise undertake (or permit to be undertaken) any activity that would cause the Trust not to be classified for United States federal income tax purposes as a grantor trust. SECTION 3.4 Authority. --------- Subject to the limitations provided in this Declaration and to the specific duties of the Institutional Trustee, the Regular Trustees shall have exclusive and complete authority to carry out the purposes and functions of the Trust. An action taken by the Regular Trustees in 12 accordance with their powers shall constitute the act of and serve to bind the Trust and an action taken by the Institutional Trustee on behalf of the Trust in accordance with its powers shall constitute the act of and serve to bind the Trust. In dealing with the Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Trustees as set forth in this Declaration. SECTION 3.5 Title to Property of the Trust. ------------------------------ Except as provided in Section 3.8 with respect to the Debentures and the Institutional Trustee Account or as otherwise provided in this Declaration, legal title to all assets of the Trust shall be vested in the Trust. The Holders shall not have legal title to any part of the assets of the Trust, but shall have an undivided beneficial interest in the assets of the Trust. SECTION 3.6 Powers, Duties and Authority of the Regular Trustees. ---------------------------------------------------- The Regular Trustees shall have the exclusive power, duty and authority to cause the Trust to engage in the following activities: (a) to issue and sell or exchange the Convertible Preferred Securities and the Common Securities in accordance with this Declaration; provided, however, that the Trust may issue no more than one series of Convertible Preferred Securities and no more than one series of Common Securities, and, provided further, that there shall be no interests in the Trust other than the Securities, and the issuance of Securities shall be limited to an issuance of Convertible Preferred Securities and Common Securities in exchange for Debentures; (b) in connection with the issuance of the Securities in exchange for the Debentures, at the direction of the Sponsor, to: (i) execute and file with the Commission the registration statement on Form S-4 prepared by the Sponsor, including any amendments thereto, pertaining to the issuance of Convertible Preferred Securities in exchange for the Debentures and the exchange by the Sponsor of the Convertible Preferred Securities for the $3.50 Convertible Preferred Stock; (ii) execute and file any documents prepared by the Sponsor, or take any acts as determined by the Sponsor to be necessary in order to qualify or register all or part of the Convertible Preferred Securities in any State in which the Sponsor has determined to qualify or register such Convertible Preferred Securities for sale; (iii) if desired by the Sponsor, execute and file an application, prepared by the Sponsor, to the New York Stock Exchange, the American Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing or quotation upon notice of issuance of any Convertible Preferred Securities; (iv) execute and file with the Commission a request for exemption from the reporting requirements of the Securities Exchange Act of 1934, as amended; 13 (v) execute and enter into the Dealer Manager Agreement; (c) to acquire the Debentures in exchange for Convertible Preferred Securities and Common Securities; provided, however, that the Regular Trustees shall cause legal title to the Debentures to be held of record in the name of the Institutional Trustee for the benefit of the Holders of the Convertible Preferred Securities and the Holders of Common Securities; (d) to give the Sponsor and the Institutional Trustee prompt written notice of the occurrence of a Special Event; provided that the Regular Trustees shall consult with the Sponsor and the Institutional Trustee before taking or refraining from taking any Ministerial Action in relation to a Special Event; (e) to establish a record date with respect to all actions to be taken hereunder that require a record date be established, including and with respect to, for the purposes of (S)316 (c) of the Trust Indenture Act, Distributions, voting rights, redemptions and exchanges, and to issue relevant notices to the Holders of Convertible Preferred Securities, holders of Common Securities and, to the extent applicable, to any stock exchange or other organization on which the Convertible Preferred Securities are listed or quoted, as to such actions and applicable record dates; (f) to take all actions and perform such duties as may be required of the Regular Trustees pursuant to the terms of the Securities; (g) to bring or defend, pay, collect, compromise, settle, terminate, arbitrate, resort to legal action, or otherwise adjust claims or demands of or against the Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Institutional Trustee has the exclusive power to bring such Legal Action; (h) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, and consultants and pay reasonable compensation for such services; (i) to cause the Trust to comply with the Trust's obligations under the Trust Indenture Act; (j) to give the certificate required by (S) 314(a)(4) of the Trust Indenture Act to the Institutional Trustee, which certificate may be executed by any Regular Trustee; (k) to incur expenses that are necessary or incidental to carry out any of the purposes or functions of the Trust; (l) to act as, or appoint another Person to act as, registrar and transfer agent for the Securities; 14 (m) to give prompt written notice to the Holders of the Securities of any notice received from the Debenture Issuer of its election to defer payments of interest on the Debentures as permitted under the Indenture; (n) to take all action that may be necessary or appropriate for the preservation and the continuation of the Trust's valid existence, rights, franchises and privileges as a statutory business trust under the laws of the State of Delaware and of each other jurisdiction in which such existence is necessary to protect the limited liability of the Holders of the Securities or to enable the Trust to effect the purposes for which the Trust was created; (o) to take any action, not inconsistent with this Declaration or with applicable law, that the Regular Trustees determine in their discretion to be necessary or desirable in carrying out the activities of the Trust as set out in this Section 3.6, including, but not limited to: (i) causing the Trust not to be deemed to be an Investment Company required to be registered under the Investment Company Act; (ii) causing the Trust not to be classified as other than a grantor trust for United States federal income tax purposes; and (iii) cooperating with the Debenture Issuer so that the Debentures will be treated as indebtedness of the Debenture Issuer for United States federal income tax purposes, provided that such action does not adversely affect the interests of Holders; (p) to take all action necessary to cause all applicable tax returns and tax information reports that are required to be filed with respect to the Trust to be duly prepared and filed by the Regular Trustees, on behalf of the Trust; and (q) to execute all documents, agreements or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary or incidental to the foregoing. The Regular Trustees must exercise the powers set forth in this Section 3.6 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Regular Trustees shall not take any action that is inconsistent with the purposes and functions of the Trust set forth in Section 3.3. Subject to this Section 3.6, the Regular Trustees shall have none of the powers or the authority of the Institutional Trustee set forth in Section 3.8. Any expenses incurred by the Regular Trustees pursuant to this Section 3.6 shall be reimbursed by the Sponsor. 15 SECTION 3.7 Prohibition of Actions by the Trust and the Trustees. ---------------------------------------------------- (a) The Trust shall not, and the Trustees (including the Institutional Trustee) shall not, engage in any activity other than as required or authorized by this Declaration. In particular, the Trust shall not and the Trustees (including the Institutional Trustee) shall cause the Trust not to: (i) invest any proceeds received by the Trust from holding the Debentures, but shall distribute all such proceeds to Holders of Securities pursuant to the terms of this Declaration and of the Securities; (ii) acquire any assets other than as expressly provided herein; (iii) possess Trust property for other than a Trust purpose; (iv) make any loans or incur any indebtedness other than loans represented by the Debentures; (v) possess any power or otherwise act in such a way as to vary the Trust assets or the terms of the Securities in any way whatsoever except as specifically provided herein; (vi) issue any securities or other evidences of beneficial ownership of, or beneficial interest in, the Trust other than the Securities; or (vii) other than as provided in this Declaration or Annex I, (A) direct the time, method and place of exercising any trust or power conferred upon the Debenture Trustee with respect to the Debentures, (B) waive any past default that is waivable under the Indenture, (C) exercise any right to rescind or annul any declaration that the principal of all the Debentures shall be due and payable, or (D) consent to any amendment, modification or termination of the Indenture or the Debentures where such consent shall be required unless the Trust shall have received an opinion of counsel to the effect that such modification will not cause more than an insubstantial risk that for United States federal income tax purposes the Trust will not be classified as a grantor trust. SECTION 3.8 Powers and Duties of the Institutional Trustee. ---------------------------------------------- (a) Unless distributed to the Holders of the Securities in accordance with the terms thereof, the legal title to the Debentures shall be owned by and held of record in the name of the Institutional Trustee in trust for the benefit of the Holders of the Securities. The right, title and interest of the Institutional Trustee to the Debentures shall vest automatically in each Person who may hereafter be appointed as Institutional Trustee in accordance with Section 5.7. Such vesting and succession of title shall be effective whether or not conveyancing documents with regard to the Debentures have been executed and delivered. 16 (b) The Institutional Trustee shall not transfer its right, title and interest in the Debentures to the Regular Trustees or to the Delaware Trustee (if the Institutional Trustee does not also act as Delaware Trustee). (c) The Institutional Trustee shall: (i) establish and maintain a segregated non-interest bearing trust account (the "Institutional Trustee Account") in the name of and under the exclusive control of the Institutional Trustee on behalf of the Holders of the Securities and, upon the receipt of payments of funds made in respect of the Debentures held by the Institutional Trustee, deposit such funds into the Institutional Trustee Account and make payments to the Holders of the Convertible Preferred Securities and Holders of the Common Securities from the Institutional Trustee Account in accordance with Section 6.1. Funds in the Institutional Trustee Account shall be held uninvested until disbursed in accordance with this Declaration. The Institutional Trustee Account shall be an account that is maintained with a banking institution the rating on whose long-term unsecured indebtedness is at least equal to the rating assigned to the Convertible Preferred Securities by a "nationally recognized statistical rating organization", as that term is defined for purposes of Rule 436(g)(2) under the Securities Act; (ii) engage in such ministerial activities as shall be necessary or appropriate to effect the redemption of the Convertible Preferred Securities and the Common Securities to the extent the Debentures are redeemed or mature; and (iii) upon written notice of distribution issued by the Regular Trustees in accordance with the terms of the Securities, engage in such ministerial activities as shall be necessary or appropriate to effect the distribution of the Debentures to Holders of Securities upon the occurrence of certain special events (as may be defined in the terms of the Securities) arising from a change in law or a change in legal interpretation or other specified circumstances pursuant to the terms of the Securities. (d) The Institutional Trustee shall take all actions and perform such duties as may be specifically required of the Institutional Trustee pursuant to the terms of the Securities. (e) The Institutional Trustee shall take any Legal Action which arises out of or in connection with an Event of Default of which a Responsible Officer of the Institutional Trustee has actual knowledge or the Institutional Trustee's duties and obligations under this Declaration or the Trust Indenture Act; provided however, that if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the case of redemption, on the redemption date), then a Holder of Convertible Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on Debentures having a principal amount equal to the aggregate liquidation amount of the Convertible Preferred Securities of such Holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the Holders of the Common Securities will be subrogated to the rights of such Holder of Convertible Preferred Securities to the extent of any payment made by 17 the Debenture Issuer to such Holder of Convertible Preferred Securities in such Direct Action. Except as provided in the preceding sentences, the Holders of Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holder of the Debentures. (f) The Institutional Trustee shall not resign as a Trustee unless either: (i) the Trust has been completely liquidated and the proceeds of the liquidation distributed to the Holders of Securities pursuant to the terms of the Securities; or (ii) a Successor Institutional Trustee has been appointed and has accepted that appointment in accordance with Section 5.7. (g) The Institutional Trustee shall have the legal power to exercise all of the rights, powers and privileges of a holder of Debentures under the Indenture and, if an Event of Default actually known to a Responsible Officer of the Institutional Trustee occurs and is continuing, the Institutional Trustee shall, for the benefit of Holders of the Securities, enforce its rights as holder of the Debentures subject to the rights of the Holders pursuant to the terms of such Securities. (h) The Institutional Trustee may authorize one or more Persons (each, a "Paying Agent") to pay Distributions on behalf of the Trust with respect to all securities and any such Paying Agent shall comply with (S) 317(b) of the Trust Indenture Act. Any Paying Agent may be removed by the Institutional Trustee at any time and a successor Paying Agent or additional Paying Agents may be appointed at any time by the Institutional Trustee.k,. (i) Subject to this Section 3.8, the Institutional Trustee shall have none of the duties, liabilities, powers, or the authority of the Regular Trustees set forth in Section 3.6. The Institutional Trustee must exercise the powers set forth in this Section 3.8 in a manner that is consistent with the purposes and functions of the Trust set out in Section 3.3, and the Institutional Trustee shall not take any action that is inconsistent with the purposes and functions of the Trust set out in Section 3.3. SECTION 3.9 Certain Duties and Responsibilities of the Institutional --------------------------------------------------------- Trustee. ------- (a) The Institutional 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 Declaration and no implied covenants shall be read into this Declaration against the Institutional Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) of which a Responsible Officer of the Institutional Trustee has actual knowledge, the Institutional Trustee shall exercise such of the rights and powers vested in it by this Declaration, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 18 (b) No provision of this Declaration shall be construed to relieve the Institutional 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 an 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 Institutional Trustee shall be determined solely by the express provisions of this Declaration and the Institutional Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Declaration, and no implied covenants or obligations shall be read into this Declaration against the Institutional Trustee; and (B) in the absence of bad faith on the part of the Institutional Trustee, the Institutional 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 Institutional Trustee and conforming to the requirements of this Declaration; but in the case of any such certificates or opinions that by any provision hereof are specifically required to be furnished to the Institutional Trustee, the Institutional Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Declaration; (ii) the Institutional Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Institutional Trustee, unless it shall be proved that the Institutional Trustee was negligent in ascertaining the pertinent facts; (iii) the Institutional 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 Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the Institutional Trustee under this Declaration; (iv) no provision of this Declaration shall require the Institutional 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 it 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 Declaration or indemnity reasonably satisfactory to the Institutional Trustee against such risk or liability is not reasonably assured to it; (v) the Institutional Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Debentures and the Institutional Trustee Account shall be to deal with such property in a similar manner as the Institutional 19 Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Institutional Trustee under this Declaration and the Trust Indenture Act; (vi) the Institutional Trustee shall have no duty or liability for or with respect to the value, genuineness, existence or sufficiency of the Debentures or the payment of any taxes or assessments levied thereon or in connection therewith; (vii) the Institutional Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree in writing with the Sponsor. Money held by the Institutional Trustee need not be segregated from other funds held by it except in relation to the Institutional Trustee Account maintained by the Institutional Trustee pursuant to Section 3.8(c)(i) and except to the extent otherwise required by law; and (viii) the Institutional Trustee shall not be responsible for monitoring the compliance by the Regular Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Institutional Trustee be liable for any default or misconduct of the Regular Trustees or the Sponsor. SECTION 3.10 Certain Rights of Institutional Trustee. --------------------------------------- (a) Subject to the provisions of Section 3.9: (i) the Institutional 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 Sponsor or the Regular Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate; (iii) whenever in the administration of this Declaration, the Institutional Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Institutional 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 Sponsor or the Regular Trustees; (iv) the Institutional Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or registration thereof; 20 (v) the Institutional Trustee may consult with counsel of its selection or other experts and the advice or opinion of such counsel and experts with respect to legal matters or advice within the scope of such experts' area of expertise 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 Sponsor or any of its Affiliates, and may include any of its employees. The Institutional Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (vi) the Institutional Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any Holder, unless such Holder shall have provided to the Institutional Trustee security and indemnity, reasonably satisfactory to the Institutional Trustee, against the costs, expenses (including attorneys' fees and expenses and the expenses of the Institutional Trustee's agents, nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Institutional Trustee provided, that, nothing contained in this Section 3.10(a)(vi) shall be taken to relieve the Institutional Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Declaration; (vii) the Institutional 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 Institutional Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; (viii) the Institutional Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, custodians, nominees or attorneys and the Institutional 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 Institutional Trustee or its agents hereunder shall bind the Trust and the Holders of the Securities, and the signature of the Institutional Trustee or its agents alone shall be sufficient and effective to perform any such action and no third party shall be required to inquire as to the authority of the Institutional Trustee to so act or as to its compliance with any of the terms and provisions of this Declaration, both of which shall be conclusively evidenced by the Institutional Trustee's or its agent's taking such action; (x) whenever in the administration of this Declaration the Institutional Trustee shall deem it desirable to receive written instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Institutional Trustee (i) may request written instructions from the Holders of the Securities which 21 instructions may only be given by the Holders of the same proportion in liquidation amount of the Securities as would be entitled to direct the Institutional Trustee under the terms of the Securities in respect of such remedy, right or action, (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 or accordance with such instructions; (xi) except as otherwise expressly provided by this Declaration, the Institutional Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (xii) the Institutional 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 Declaration. (b) No provision of this Declaration shall be deemed to impose any duty or obligation on the Institutional 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 Institutional 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 Institutional Trustee shall be construed to be a duty. SECTION 3.11 Delaware Trustee. ---------------- Notwithstanding any other provision of this Declaration other than Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Regular Trustees or the Institutional Trustee described in this Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of (S) 3807 of the Business Trust Act. SECTION 3.12 Execution of Documents. ---------------------- Except as otherwise required by the Business Trust Act, any Regular Trustee is authorized to execute on behalf of the Trust any documents that the Regular Trustees have the power and authority to execute pursuant to Section 3.6; provided that, the registration statement referred to in Section 3.6(b)(i), including any amendments thereto, shall be signed by all of the Regular Trustees. SECTION 3.13 Not Responsible for Recitals or Issuance of Securities. ------------------------------------------------------ The recitals contained in this Declaration and the Securities shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property 22 of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration or the Securities. SECTION 3.14 Duration of Trust. ----------------- The Trust, unless terminated pursuant to the provisions of Article VIII hereof, shall have existence for thirty-five (35) years from the date of the Original Declaration. SECTION 3.15 Mergers. ------- (a) 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 in Sections 3.15(b) and (c) or Section 9 of Annex I. (b) The Trust may, with the consent of the Regular Trustees or, if there are more than two, a majority of the Regular Trustees and without the consent of the Holders of the 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 ( the "Successor Entity") either: (A) expressly assumes all of the obligations of the Trust under the Securities; or (B) substitutes for the Securities other securities having substantially the same terms as the Convertible Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Convertible Preferred Securities rank with respect to Distributions and payments upon liquidation, redemption and otherwise; (ii) the Debenture Issuer expressly acknowledges a trustee of the Successor Entity that possesses the same powers and duties as the Institutional Trustee as the Holder of the Debentures; (iii) the Debenture Issuer uses its reasonable efforts to cause the Convertible Preferred Securities or any Successor Securities to be listed or quoted, or to cause any Successor Securities to be listed or quoted upon notification of issuance, on any national securities exchange or with another organization on which the Convertible Preferred Securities are then listed or quoted; (iv) such merger, consolidation, amalgamation or replacement does not cause the Convertible Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (v) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of the Securities 23 (including any Successor Securities) in any material respect (other than with respect to any dilution of such Holders' interests in the Convertible Preferred Securities new entity); (vi) such Successor Entity has a purpose identical to that of the Trust; (vii) prior to such merger, consolidation, amalgamation or replacement, the Sponsor has received an opinion of 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 legal rights, preferences and privileges of the Holders of the 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 the Successor Entity will be required to register as an Investment Company under the Investment Company Act; (C) following such merger, consolidation, amalgamation or replacement, the Trust (or the Successor Entity) will continue to be, or will be, classified as a grantor trust for United States federal income tax purposes; and (viii) the Sponsor guarantees the obligations of such Successor Entity under the Successor Securities at least to the extent provided by the Convertible Preferred Securities Guarantees. (c) Notwithstanding Section 3.15(b), the Trust shall not, except with the consent of Holders of 100% in liquidation amount of the 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 Successor Entity to be classified as other than a grantor trust for United States federal income tax purposes. ARTICLE IV SPONSOR SECTION 4.1 Issuance of Securities to Sponsor. --------------------------------- The Sponsor will issue and exchange Debentures for Securities issued by the Trust. The Debentures exchanged for Convertible Preferred Securities shall be in the same aggregate principal amount as the aggregate stated liquidation amount of the Convertible Preferred Securities exchanged therefor. The Debentures exchanged for Common Securities shall be in the same aggregate principal amount as the aggregate stated liquidation amount of the Common Securities exchanged therefor, provided, that, the aggregate stated liquidation amount of Common Securities outstanding at any time shall be no less than 1% of the capital of the Trust. 24 SECTION 4.2 Responsibilities of the Sponsor. ------------------------------- In connection with the issuance of the Convertible Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare for filing by the Trust with the Commission a registration statement on Form S-4, including any amendments thereto, pertaining to the issuance of the Convertible Preferred Securities in exchange for the Debentures, the exchange of the Convertible Preferred Securities for the $3.50 Convertible Preferred Stock, and the issuance of the Convertible Preferred Securities Guarantees; (b) to determine the States in which to take appropriate action to qualify or register all or part of the Convertible Preferred Securities and the Convertible Preferred Securities Guarantees and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (c) if the Sponsor so desires, to prepare for filing by the Trust an application to the New York Stock Exchange or any other national stock exchange or the Nasdaq National Market for listing upon notice of issuance of any Convertible Preferred Securities; and (d) to negotiate the terms of the Dealer Manager Agreement. ARTICLE V TRUSTEES SECTION 5.1 Number of Trustees. ------------------ The number of Trustees initially shall be five (5), and: (a) at any time before the issuance of any Securities, the Sponsor may, by written instrument, increase or decrease the number of Trustees; and (b) after the issuance of any Securities, the number of Trustees may be increased or decreased by vote of the Holders of a majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities or by written consent; provided, however, that the number of Trustees shall in no event be less than two (2); provided further that (i) if required by Section 5.2, one Trustee shall be the Delaware Trustee; (ii) there shall be at least one Trustee who is an employee or officer of, or is affiliated with the Sponsor (a "Regular Trustee"); and (iii) if required by Section 5.3, one Trustee shall be the Institutional Trustee, and such Institutional Trustee may also serve as Delaware Trustee if it meets the applicable requirements. 25 SECTION 5.2 Delaware Trustee. ---------------- (a) If required by the Business Trust Act, one Trustee (the "Delaware Trustee") shall be: (i) a natural person who is a resident of the State of Delaware; or (ii) if not a natural person, an entity which has its principal place of business in the State of Delaware, and otherwise meets the requirements of applicable law. (b) If the Institutional Trustee meets the requirements of Section 5.2(a), then the Institutional Trustee shall also be the Delaware Trustee and Section 3.11 shall have no application. SECTION 5.3 Institutional Trustee; Eligibility. ---------------------------------- (a) For so long as this Declaration is required to qualify as an indenture under the Trust Indenture Act, there shall at all times be one Trustee (the "Institutional Trustee") which shall: (i) not be an Affiliate of the Sponsor; 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 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 the purposes of this Section 5.3(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 Institutional Trustee shall cease to be eligible to so act under Section 5.3(a), the Institutional Trustee shall immediately resign in the manner and with the effect set forth in Section 5.7(c). (c) If the Institutional Trustee has or shall acquire any "conflicting interest" within the meaning of (S) 310(b) of the Trust Indenture Act, the Institutional Trustee and the Holder of the Common Securities (as if it were the obligor referred to in (S) 310(b) of the Trust Indenture Act) shall in all respects comply with the provisions of (S) 310(b) of the Trust Indenture Act. (d) The Convertible Preferred Securities Guarantee shall be deemed to be specifically described in this Declaration for purposes of clause (i) of the first provision contained in Section 310(b) of the Trust Indenture Act. 26 (e) The initial Institutional Trustee shall be: The Bank of New York SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware Trustee --------------------------------------------------------------- Generally. --------- Each Regular Trustee and the Delaware Trustee (unless the Institutional Trustee also acts as Delaware Trustee) shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more Authorized Officers. SECTION 5.5 Regular Trustees. ---------------- (a) The initial Regular Trustees shall be: Darrell D. Chessum Daniel A. Franchi Richard L. Walton (b) Except as expressly set forth in this Declaration and except if a meeting of the Regular Trustees is called with respect to any matter over which the Regular Trustees have power to act, any power of the Regular Trustees may be exercised by, or with the consent of, any one such Regular Trustee. (c) Unless otherwise determined by the Regular Trustees, and except as otherwise required by the Business Trust Act or applicable law, any Regular Trustee is authorized to execute on behalf of the Trust any documents which the Regular Trustees have the power and authority to cause the Trust to execute pursuant to Section 3.6, provided, that, the registration statement referred to in Section 3.6, including any amendments thereto, shall be signed by all of the Regular Trustees personally or by power of attorney. SECTION 5.6 Delaware Trustee. ---------------- The initial Delaware Trustee shall be: The Bank of New York, Delaware. SECTION 5.7 Appointment, Removal and Resignation of Trustees. ------------------------------------------------ (a) Subject to Section 5.7(b), Trustees may be appointed or removed without cause at any time: (i) until the issuance of any Securities, by written instrument executed by the Sponsor; and (ii) after the issuance of any Securities, by vote of the Holders of a Majority in liquidation amount of the Common Securities voting as a class at a meeting of the Holders of the Common Securities. 27 (b) (i) the Trustee that acts as Institutional Trustee shall not be removed in accordance with Section 5.7(a) until a successor Institutional Trustee (a "Successor Institutional Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Institutional Trustee and delivered to the Regular Trustees and the Sponsor; and (ii) the Trustee that acts as Delaware Trustee shall not be removed in accordance with this Section 5.7(a) until a successor Trustee possessing the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been appointed and has accepted such appointment by written instrument executed by such Successor Delaware Trustee and delivered to the Regular Trustees and the Sponsor. (c) A Trustee appointed to office shall hold office until his successor shall have been appointed or until his death, removal or resignation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing signed by the Trustee and delivered to the Sponsor and the Trust, which resignation shall take effect upon such delivery or upon such later date as is specified therein; provided, however, that: (i) No such resignation of the Trustee that acts as the Institutional Trustee shall be effective: (A) until a Successor Institutional Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Institutional Trustee and delivered to the Trust, the Sponsor and the resigning Institutional Trustee; or (B) until the assets of the Trust have been completely liquidated and the proceeds thereof distributed to the holders of the Securities; and (ii) no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee. (d) The Holders of the Common Securities shall use their best efforts to promptly appointment a Successor Delaware Trustee or Successor Institutional Trustee as the case may be if the Institutional Trustee or the Delaware Trustee delivers an instrument of resignation in accordance with this Section 5.7. (e) If no Successor Institutional Trustee or Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 5.7 within 60 days after delivery of an instrument of resignation or removal, the Institutional Trustee or Delaware Trustee resigning or being removed, as applicable, may petition any court of competent jurisdiction for appointment of a Successor Institutional Trustee or Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper and prescribe, appoint a Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. 28 (f) No Institutional Trustee or Delaware Trustee shall be liable for the acts or omissions to act of any Successor Institutional Trustee or Successor Delaware Trustee, as the case may be. SECTION 5.8 Vacancies Among Trustees. ------------------------ If a Trustee ceases to hold office for any reason and the number of Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Section 5.1, or if the number of Trustees is increased pursuant to Seton 5.1, a vacancy shall occur. A resolution certifying the existence of such vacancy by the Regular Trustees or, if there are more than two, a majority of the Regular Trustees shall be conclusive evidence of the existence of such vacancy. The vacancy shall be filled with a Trustee appointed in accordance with Section 5.7. SECTION 5.9 Effect of Vacancies. ------------------- The death, resignation, retirement, removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is filled by the appointment of a Regular Trustee in accordance with Section 5.7, the Regular Trustees in office, regardless of their number, shall have all the powers granted to the Regular Trustees and shall discharge all the duties imposed upon the Regular Trustees by this Declaration. SECTION 5.10 Meetings. -------- If there is more than one Regular Trustee, meetings of the Regular Trustees shall be held from time to time upon the call of any Regular Trustee. Regular meetings of the Regular Trustees may be held at a time and place fixed by resolution of the Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 48 hours before such meeting. Notice of any telephonic meetings of the Regular Trustee or any committee thereof shall be hand delivered or otherwise delivered in writing (including by facsimile, with a hard copy by overnight courier) not less than 24 hours before a meeting. Notices shall contain a brief statement of the time, place and anticipated purposes of the meeting. The presence (whether in person or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice of such meeting except where a Regular Trustee attends a meeting for the express purpose of objecting to the transaction of any activity on the ground that the meeting has not been lawfully called or convened. Unless provided otherwise in this Declaration, any action of the Regular Trustees may be taken at a meeting by vote of a majority of the Regular Trustees present (whether in person or by telephone) and eligible to vote with respect to such matter, provided that a Quorum is present, or without a meeting by; the unanimous written consent of the Regular Trustees. In the event there is only one Regular Trustee, any and all action of such Regular Trustee shall be evidenced by a written consent of such Regular Trustee. 29 SECTION 5.11 Delegation of Power by Regular Trustees. --------------------------------------- (a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents, including, but not limited to those contemplated by Sections 3.6, 3.12 and 5.5(b), or by executing or making any other governmental filing. (b) The Regular Trustees shall have power to delegate from time to time to such of their number or to officers of the Trust the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business. ----------------------------------------------------------- Any corporation into which the Institutional Trustee or the Delaware Trustee, as the case may be, may be merged or converted or with which either may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Institutional Trustee or the Delaware Trustee, as the case may be, shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Institutional Trustee or the Delaware Trustee, as the case may be, shall be the successor of the Institutional Trustee or the Delaware Trustee, as the case may be, hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. ARTICLE VI DISTRIBUTIONS SECTION 6.1 Distributions. ------------- Holders shall receive Distributions (as defined herein) in accordance with the applicable terms of the relevant Holder's Securities. Distributions shall be made on the Convertible Preferred Securities and the Common Securities in accordance with the preferences set forth in their respective terms. If and to the extent that the Debenture Issuer makes a payment of interest (including Compounded Interest (as defined in the Indenture) and Additional Interest (as defined in the Indenture), premium and/or principal on the Debentures held by the Institutional Trustee (the amount of any such payment being a "Payment Amount"), the Institutional Trustee shall and is directed, to the extent funds are available for that purpose, to make a distribution (a "Distribution") of the Payment Amount to Holders. 30 ARTICLE VII ISSUANCE OF SECURITIES SECTION 7.1 General Provisions Regarding Securities. --------------------------------------- (a) The Regular Trustees shall on behalf of the Trust issue one class of 6 1/4% convertible preferred securities having such terms as are set forth in Annex I (the "Convertible Preferred Securities") and one class of convertible common securities having such terms as are set forth in Annex I (the "Common Securities"). The Securities represent undivided beneficial interests in the assets of the Trust. The Trust shall issue no securities or other interests in the assets of the Trust other than the Convertible Preferred Securities and the Common Securities. (b) The consideration received by the Trust for the issuance of the Securities shall constitute a contribution to the capital of the Trust and shall not constitute a loan to the Trust. (c) Upon issuance of the Securities as provided in this Declaration, the Securities so issued shall be deemed to be validly issued, fully paid and non-assessable. (d) Every Person, by virtue of having become a Holder or a Convertible Preferred Security Beneficial Owner in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. SECTION 7.2 Execution and Authentication. ---------------------------- (a) The Certificates shall be signed on behalf of the Trust by a Regular Trustee. In case any Regular Trustee of the Trust who shall have signed any of the Securities shall cease to be such Regular Trustee before the Certificates so signed shall be delivered by the Trust, such Certificates nevertheless may be delivered as though the person who signed such Certificates had not ceased to be such Regular Trustee; and any Certificate may be signed on behalf of the Trust by such persons who, at the actual date of execution of such Security, shall be the Regular Trustees of the Trust, although at the date of the execution and delivery of the Declaration any such person was not such a Regular Trustee. (b) One Regular Trustee shall sign the Convertible Preferred Securities for the Trust by manual or facsimile signature. Unless otherwise determined by the Trust, such signature shall, in the case of Common Securities, be a manual signature. A Convertible Preferred Security shall not be valid until authenticated by the manual signature of an authorized signatory of the Institutional Trustee. The signature shall be conclusive evidence that the Convertible Preferred Security has been authenticated under this Declaration. Upon a written order of the Trust signed by one Regular Trustee, the Institutional Trustee shall authenticate the Preferred Securities for original issue. The Institutional Trustee may appoint an authenticating agent acceptable to the Trust to authenticate Convertible Preferred Securities. An authenticating agent may authenticate 31 Convertible Preferred Securities whenever the Institutional Trustee may do so. Each reference in this Declaration to authentication by the Institutional Trustee includes authentication by such agent. An authenticating agent has the same rights as the Institutional Trustee to deal with the Company or an Affiliate. SECTION 7.3 Form and Dating. --------------- The Convertible Preferred Securities and the Institutional Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1 and the Common Securities shall be substantially in the form of Exhibit A-2, each of which is hereby incorporated in and expressly made a part of this Declaration. Certificates may be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof. The Securities may have letters, numbers, notations or other marks of identification or designation and such legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Trust). The Trust at the direction of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the Institutional Trustee in writing. Each Convertible Preferred Security Certificate shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Annex I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent applicable, the Institutional Trustee and the Sponsor, by their execution and delivery of this Declaration, expressly agree to such terms and provisions and to be bound thereby. SECTION 7.4 Paying Agent. ------------ In the event that the Convertible Preferred Securities are not in book-entry only form, the Trust shall maintain in the Borough of Manhattan, City of New York, State of New York, an office or agency where the Convertible Preferred Securities may be presented for payment ("Paying Agent"). The Trust shall maintain an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Trust may appoint the Paying Agent and the Conversion Agent and may appoint one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and the term "Conversion Agent" includes any additional conversion agent. The Trust may change any Paying Agent or Conversion Agent without prior notice to any Holder. The Trust shall notify the Institutional Trustee in writing of the name and address of any Agent not a party to this Declaration. If the Trust fails to appoint or maintain another entity as Paying Agent or Conversion Agent, the Institutional Trustee shall act as such. The Trust or any of its Affiliates may act as Paying Agent or Conversion Agent. The Trust shall act as Paying Agent and Conversion Agent for the Common Securities. The Trust initially appoints the Institutional Trustee as Conversion Agent for the Convertible Preferred Securities. 32 ARTICLE VIII TERMINATION OF TRUST SECTION 8.1 Termination of Trust. -------------------- (a) The Trust shall terminate: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor; the filing of a certificate of cancellation with respect to the Trust after having obtained the consent of a majority in liquidation amount of the Securities voting together as a single class to file such certificate of cancellation or the revocation of the Sponsor's charter and the expiration of 90 days after the date of revocation without a reinstatement thereof; (iii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; (iv) when all of the Securities shall have been called for redemption and the amounts necessary for redemption thereof shall have been paid to the Holders in accordance with the terms of the Securities; (v) upon the occurrence and continuation of a Special Event pursuant to which the Trust shall have been dissolved in accordance with the terms of the Securities and all of the Debentures held by the Institutional Trustee shall have been distributed to the Holders of Securities in exchange for all of the Securities; (vi) upon the distribution of the Sponsor's common stock to all Securities Holders upon conversion of all outstanding Convertible Preferred Securities; (vii) the expiration of the term of the Trust on July 16, 2031; or (viii) before the issuance of any Securities, with the consent of all of the Regular Trustees and the Sponsor. (b) As soon as is practicable after the occurrence of an event referred to in Section 8.1(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. (c) The provisions of Sections 3.9 and 3.10 and Article X shall survive the termination of the Trust. 33 ARTICLE IX TRANSFER OF INTERESTS SECTION 9.1 Transfer of Securities. ---------------------- (a) Securities may only be transferred, in whole or in part, in accordance with the terms and conditions set forth in this Declaration and in the terms of the Securities. Any transfer or purported transfer of any Security not made in accordance with this Declaration shall be null and void. (b) Subject to this Article IX, Convertible Preferred Securities shall be freely transferable. (c) Subject to this Article IX, the Sponsor and any Related Party may only transfer Common Securities to the Sponsor or a Related Party of the Sponsor; provided that, any such transfer is subject to the condition precedent that the transferor obtain the written opinion of independent counsel experienced in such matters that such transfer would not cause more than an insubstantial risk that: (i) the Trust would be classified for United States federal income tax purposes as other than a grantor trust; and (ii) the Trust would be an Investment Company required to be registered under the Investment Company Act. SECTION 9.2 Transfer of Certificates. ------------------------ The Regular Trustees shall provide for the registration of Certificates and of transfers of Certificates, which will be effected without charge but only upon payment (with such indemnity as the Regular Trustees may require) in respect of any tax or other government charges that may be imposed in relation to it. Upon surrender for registration of transfer of any Certificate, the Regular Trustees shall cause one or more new Certificates to be issued in the name of the designated transferee or transferees. Every Certificate surrendered for registration of transfer shall be accompanied by a written instrument of transfer in form satisfactory to the Regular Trustees duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Certificate surrendered for registration of transfer shall be canceled by the Regular Trustees. A transferee of a Certificate shall be entitled to the rights and subject to the obligations of a Holder hereunder upon the receipt by such transferee of a Certificate. By acceptance of a Certificate, each transferee shall be deemed to have agreed to be bound by this Declaration. SECTION 9.3 Deemed Security Holders. ----------------------- The Trustees may treat the Person in whose name any Certificate shall be registered on the books and records of the Trust as the sole holder of such Certificate and of the Securities represented by such Certificate for purposes of receiving Distributions and for all other purposes whatsoever and, accordingly, shall not be bound to recognize any equitable or other claim to or 34 interest in such Certificate or in the Securities represented by such Certificate on the part of any Person, whether or not the Trust shall have actual or other notice thereof. SECTION 9.4 Book Entry Interests. -------------------- (a) On original issuance to the Sponsor, the Convertible Preferred Securities Certificates will be issued by or on behalf of the Trust in the form of one or more, fully registered, global Convertible Preferred Security Certificates (each a "Global Certificate"), either to the Sponsor or to the initial Clearing Agency for the benefit of the Sponsor. The Convertible Preferred Securities Certificates, upon the initial transfer from the Sponsor, will be in the form of Global Certificates held by the Clearing Agency. (b) Except as provided in Sections 9.4(a) and 9.7: (i) Global Certificates delivered to the Clearing Agency shall be registered on the books and records of the Trust in the name of the Clearing Agency or its nominee, and no Convertible Preferred Security Beneficial Owner will receive a definitive Convertible Preferred Security Certificate representing such Convertible Preferred Security Beneficial Owner's interests in such Global Certificates; (ii) the Trust and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration (including the payment of Distributions on the Global Certificates and receiving approvals, votes or consents hereunder) as the Holder of the Convertible Preferred Securities and the sole holder of the Global Certificates and shall have no obligation to the Convertible Preferred Security Beneficial Owners; (iii) to the extent that the provisions of this Section 9.4 conflict with any other provisions of this Declaration, the provisions of this Section 9.4 shall control; and (iv) the rights of the Convertible Preferred Security Beneficial Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Convertible Preferred Security Beneficial Owners and the Clearing Agency and/or the Clearing Agency Participants and receive and transmit payments of Distributions on the Global Certificates to such Clearing Agency Participants. The Clearing Agency will make book entry transfers among the Clearing Agency Participants. SECTION 9.5 Notices to Clearing Agency. -------------------------- Whenever a notice or other communication to the Convertible Preferred Security Holders is required under this Declaration, unless and until Definitive Convertible Preferred Security Certificates shall have been issued to the Convertible Preferred Security Beneficial Owners pursuant to Section 9.7, the Regular Trustees shall give all such notices and communications specified herein to be given to the Convertible Preferred Security Holders to the Clearing Agency, and shall have no notice obligations to the Convertible Preferred Security Beneficial Owners. 35 SECTION 9.6 Appointment of Successor Clearing Agency. ---------------------------------------- If any Clearing Agency elects to discontinue its services as securities depositary with respect to the Convertible Preferred Securities, the Regular Trustees may, in their sole discretion, appoint a successor Clearing Agency with respect to such Convertible Preferred Securities. SECTION 9.7 Definitive Convertible Preferred Security Certificates. ------------------------------------------------------ If: (a) a Clearing Agency elects to discontinue its services as securities depositary with respect to the Convertible Preferred Securities and a successor Clearing Agency is not appointed within 90 days after such discontinuance pursuant to Section 9.6; or (b) the Regular Trustees elect after consultation with the Sponsor to terminate the book entry system through the Clearing Agency with respect to the Convertible Preferred Securities, then: (c) definitive, fully registered Convertible Preferred Security Certificates (the "Definitive Convertible Preferred Security Certificates") shall be prepared by the Regular Trustees on behalf of the Trust with respect to such Convertible Preferred Securities; and (d) upon surrender of the Global Certificates by the Clearing Agency, accompanied by registration instructions, the Regular Trustees shall cause Definitive Certificates to be delivered to Convertible Preferred Security Beneficial Owners in accordance with the instructions of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any delay in delivery of such instructions and each of them may conclusively rely on and shall be protected in relying on, said instructions of the Clearing Agency. The Definitive Convertible Preferred Security Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Regular Trustees, as evidenced by their execution thereof, and may have such letters, numbers or other marks of identification or designation and such legends or endorsements as the Regular Trustees may deem appropriate, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which Convertible Preferred Securities may be listed, or to conform to usage. SECTION 9.8 Mutilated, Destroyed, Lost or Stolen Certificates. ------------------------------------------------- If: (a) any mutilated Certificates should be surrendered to the Regular Trustees, or if the Regular Trustees shall receive evidence to their satisfaction of the destruction, loss or theft of any Certificate; and 36 (b) there shall be delivered to the Regular Trustees such security or indemnity as may be required by them to keep each of them harmless. then, in the absence of notice that such Certificate shall have been acquire by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall execute and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like denomination. In connection with the issuance of any new Certificate under this Section 9.8, the Regular Trustees may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of an ownership interest in the relevant Securities, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 10.1 Liability. --------- (a) Except as expressly set forth in this Declaration, the Securities Guarantees and the terms of the Securities, the Sponsor shall not be: (i) personally liable for the return of any portion of the capital contributions (or any return thereon) of the Holders of the Securities which shall be made solely from assets of the Trust; or (ii) be required to pay to the Trust or to any Holder of Securities any deficit upon dissolution of the Trust or otherwise. (b) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of the Common Securities shall be 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, provided, however, the Holder of the Common Securities shall be liable for all of the debts and obligations of the Trust (other than with respect to the Securities) to the extent not satisfied out of the Trust's assets, and, upon dissolution of the Trust, shall pay or make reasonable provision to pay all claims and obligations, including all contingent, conditional or unmatured claims and obligations known to the Trust and all claims and obligations which are known to the Trust but for which the identity of the claimant is unknown (other than with respect to amounts payable pursuant to the terms of the Securities). (c) Pursuant to (S) 3803(a) of the Business Trust Act, the Holders of the Convertible Preferred Securities shall be 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. 37 SECTION 10.2 Exculpation. ----------- (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration 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 gross 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 Trust and upon such information, opinions, reports or statements presented to the Trust 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 Trust, 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 of Securities might properly be paid. SECTION 10.3 Fiduciary Duty. -------------- (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity (other than the duties imposed on the Institutional Trustee under the Trust Indenture Act), are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person. (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between any Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not 38 constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise. (c) Whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 10.4 Indemnification. --------------- (a) (i) The Sponsor shall indemnify, to the full extent permitted by law, any Sponsor Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Sponsor Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Sponsor Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (ii) The Sponsor shall indemnify, to the full extent permitted by law, any Sponsor Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Sponsor Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Sponsor Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. 39 (iii) To the extent that a Sponsor Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iv) Any indemnification under paragraphs (i) and (ii) of this Section 10.4(a) (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Sponsor Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Regular Trustees by a majority vote of a quorum consisting of such Regular Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (v) Expenses (including attorneys' fees) incurred by a Sponsor Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Sponsor Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Regular Trustees by a majority vote of a quorum of disinterested Regular Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Regular Trustees so directs, by independent legal counsel in a written opinion or (iii) the Common Security Holder of the Trust, that, based upon the facts known to the Regular Trustees, counsel or the Common Security Holder at the time such determination is made, such Sponsor Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Sponsor Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Regular Trustees, independent legal counsel or Common Security Holder reasonably determine that such person deliberately breached his duty to the Trust or its Common or Convertible Preferred Security Holders. (vi) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Convertible Preferred Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 10.4(a) shall be deemed to be provided by a contract between the Sponsor and each Sponsor Indemnified Person who 40 serves in such capacity at any time while this Section 10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall not affect any rights or obligations then existing. (vii) The Sponsor or the Trust may purchase and maintain insurance on behalf of any person who is or was a Sponsor Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 10.4(a) (viii) For purposes of this Section 10.4(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 10.4(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (ix) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Sponsor Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Sponsor agrees to indemnify the (i) Institutional Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Institutional Trustee and the Delaware Trustee, and (iv) any officers, directors, shareholders, members, partners, employees, representatives, custodians, nominees or agents of the Institutional Trustee and the Delaware Trustee (each of the Persons in (i) through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary 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 or 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 10.4(b) shall survive the satisfaction and discharge of this Declaration. SECTION 10.5 Outside Business. ---------------- Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the Institutional Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, 41 and any Covered Person, shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person, the Delaware Trustee and the Institutional Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor of its Affiliates. ARTICLE XI ACCOUNTING SECTION 11.1 Fiscal Year. ----------- The fiscal year ("Fiscal Year") of the Trust shall be the calendar year, or such other year as is required by the Code. SECTION 11.2 Certain Accounting Matters. -------------------------- (a) At all times during the existence of the Trust, Trustees shall keep, or cause to be kept, full books, records and supporting documents, which shall reflect detail, each transaction of the Trust. The books of account shall be maintained on the accrual method of accounting in compliance with generally accepted accounting principles, consistently applied. The Trust shall use the accrual method of accounting for the United States federal income tax purposes. The books of account and the records of the Trust shall be examined by and reported upon as of the end of each Fiscal Year of the Trust by a firm of independent certified public accountants selected by the Regular Trustees. (b) The Regular Trustees shall cause to be prepared and delivered to each of the Holders of Securities, within 90 days after the end of each Fiscal Year of the Trust, annual financial statements of the Trust, including a balance sheet of the Trust as of the end of such Fiscal Year, and the related income or loss. (c) The Regular Trustees shall cause to be duly prepared and delivered to each of the Holders of Securities, any annual United States federal income tax information statement, required by the Code, containing such information with regard to the Securities held by each Holder as is required by the Code and the Treasury Regulations. Notwithstanding any right under the Code to deliver any such statement at a later date, the Regular Trustees shall endeavor to deliver all such statements within 30 days after the end of each Fiscal Year of the Trust. (d) The Regular Trustees shall cause to be duly prepared and filed with the appropriate taxing authority, an annual United States federal income tax return, on a Form 1041 or such other form required by United States federal income tax law, and any other annual income tax returns required to be filed by the Regular Trustees on behalf of the Trust with any state or local taxing authority. 42 SECTION 11.3 Banking. ------- The Trust shall maintain one or more bank accounts in the name and for the sole benefit of the Trust; provided, however, that all payments of funds in respect of the Debentures held by the Institutional Trustee shall be made directly to the Institutional Trustee Account and no other funds of the Trust shall be deposited in the Institutional Trustee Account. The sole signatories for such accounts shall be designated by the Regular Trustees; provided, however, that the Institutional Trustee shall designate the signatories for the Institutional Trustee Account. SECTION 11.4 Withholding. ----------- The Trust and the Regular Trustees shall comply with all withholding requirements under United States federal, state and local law. The Trust shall request, and the Holders shall provide to the Trust, such forms or certificates as are necessary to establish an exemption from withholding with respect to each Holder, and any representations and forms as shall reasonably be requested by the Trust to assist it in determining the extent of, and in fulfilling, its withholding obligations. The Regular Trustees shall file required forms with applicable jurisdictions and, unless an exemption from withholding is properly established by a Holder, shall remit amounts withheld with respect to the Holder to applicable jurisdictions. To the extent that the Trust is required to withhold and pay over any amounts to any authority with respect to distributions or allocations to any Holder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Holder. In the event of any claimed over withholding, Holders shall be limited to an action against the applicable jurisdiction. If the amount required to be withheld was not withheld from actual Distributions made, the Trust may reduce subsequent Distributions by the amount of such withholding. ARTICLE XII AMENDMENTS AND MEETINGS SECTION 12.1 Amendments. ---------- (a) Except as otherwise provided in this Declaration or by any applicable terms of the Securities, this Declaration may only be amended by a written instrument approved and executed by: (i) the Regular Trustees (or, if there are more than two Regular Trustees a majority of the Regular Trustees) ; (ii) if the amendment affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, the Institutional Trustee; and (iii) if the amendment affects the rights, powers, duties, obligations or immunities of the Delaware Trustee, the Delaware Trustee. (b) No amendment shall be made, and any such purported amendment shall be void and ineffective : 43 (i) unless, in the case of any proposed amendment, the Institutional Trustee shall have first received an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); (ii) unless, in the case of any proposed amendment which affects the rights, powers, duties, obligations or immunities of the Institutional Trustee, the Institutional Trustee shall have first received: (A) an Officers' Certificate from each of the Trust and the Sponsor that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (B) an opinion of counsel (who may be counsel to the Sponsor or the Trust) that such amendment is permitted by, and conforms to, the terms of this Declaration (including the terms of the Securities); and (iii) to the extent the result of such amendment would be to: (A) cause the trust to be classified for purposes of United States federal income taxation as other than a grantor trust; (B) reduce or otherwise adversely affect the powers of the Institutional Trustee in contravention of the Trust Indenture Act; or (C) cause the Trust to be deemed to be an Investment Company required to be registered under the Investment Company Act. (c) At such time after the Trust has issued any securities that remain outstanding, any amendment that would adversely affect the rights, privileges or preferences of any Holder of Securities may be effected only with such additional requirements as may be set forth in the terms of such Securities. (d) Section 9.1(c) and this Section 12.1 shall not be amended without the consent of all of the Holders of the Securities. (e) Article IV shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities. (f) The rights of the holders of the Common Securities under Article V to increase or decrease the number of, and appoint and remove Trustees shall not be amended without the consent of the Holders of a Majority in liquidation amount of the Common Securities . (g) Notwithstanding Section 12.1(c), this Declaration may be amended without the consent of the Holders of the Securities to: 44 (i) cure any ambiguity; (ii) correct or supplement any provision in this declaration that may be defective or inconsistent with any other provision of this Declaration; (iii) add to the covenants, restrictions or obligations of the Sponsor; and (iv) to conform to any change in Rule 3a-5 or written change in interpretation or application of Rule 3a-5 by any legislative body, court, government agency or regulatory authority which amendment does not have a material adverse effect on the right, preferences or privileges of the Holders. SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent. ---------------------------------------------------------------- (a) Meetings of the Holders of any class of Securities may be called at any time by the Regular Trustees (or as provided in the terms of the Securities) to consider and act on any matter on which Holders of such class of Securities are entitled to act under the terms of this Declaration, the terms of the Securities or the rules of any stock exchange on which the Convertible Preferred Securities are listed or admitted for trading. The Regular Trustees shall call a meeting of the Holders of such class if directed to do so by the Holders of at least 10% in liquidation amount of such class of Securities. Such direction shall be given by delivering to the Regular Trustees one or more calls in a writing stating that the signing Holders of Securities wish to call a meeting and indicating the general or specific purpose for which the meeting is to be called. Any Holders of Securities calling a meeting shall specify in writing the Security Certificates held by the Holders of Securities exercising the right to call a meeting and only those Securities specified shall be counted for purposes of determining whether the required percentage set forth in the second sentence of this paragraph has been met. (b) Except to the extent otherwise provided in the terms of the Securities, the following provisions shall apply to meetings of Holders of Securities: (i) notice of any such meeting shall be given to all the Holders of Securities having a right to vote thereat at least 7 days and not more than 60 days before the date of such meeting. Whenever a vote, consent or approval of the Holders of Securities is permitted or required under this Declaration or the rules of any stock exchange on which the Convertible Preferred Securities are listed or admitted for trading, such vote, consent or approval may be given at a meeting of the Holders of Securities. Any action that may be taken at a meeting of the Holders of Securities may be taken without a meeting if a consent in writing setting forth the action so taken is signed by the Holders of Securities owning not less than the minimum amount of Securities in liquidation amount that would be necessary to authorize or take such action at a meeting at which all Holders of Securities having a right to vote thereon were present and voting. Prompt notice of the taking of action without a meeting shall be given to the Holders of Securities entitled to vote who have not consented in writing. The Regular Trustees may specify that any written ballot submitted to the Security Holder for the purpose of taking any action without a meeting shall be returned to the Trust within the time specified by the Regular Trustees; 45 (ii) each Holder of a Security may authorize any Person to act for it by proxy on all matters in which a Holder of Securities is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Holder of Securities executing it. Except as otherwise provided herein, all matters relating to the giving, voting or validity of proxies shall be governed by the General Corporation Law of the State of Delaware relating to proxies, and judicial interpretations thereunder, as if the Trust were a Delaware corporation and the Holders of the Securities were stockholders of a Delaware corporation ; (iii) each meeting of the Holders of the Securities shall be conducted by the Regular Trustees or by such other Person that the Regular Trustees may designate; an d (iv) unless this Declaration, the terms of the Securities, the Trust Indenture Act or the listing rules of any stock exchange on which the Convertible Preferred Securities are then listed or trading, otherwise provides, the Regular Trustees, in their sole discretion, shall establish all other provisions relating to meetings of Holders of Securities, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Holders of Securities, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote. ARTICLE XIII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE SECTION 13.1 Representations and Warranties of Institutional Trustee. ------------------------------------------------------- The Trustee that acts as initial Institutional Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Institutional Trustee represents and warrants, as applicable, to the Trust and the Sponsor at the time of the Successor Institutional Trustee's acceptance of its appointment as Institutional Trustee that: (a) the Institutional Trustee is eligible to act as such under Section 5.3(a); (b) the Institutional Trustee is duly organized, validly existing and in good standing, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (c) the execution, delivery and performance by the Institutional Trustee of the Declaration has been duly authorized by all necessary corporate action on the part of the Institutional Trustee. The Declaration has been duly executed and delivered by the Institutional Trustee, and it constitutes a legal, valid and binding obligation of the Institutional Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting 46 creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (d) the execution, delivery and performance of the Declaration by the Institutional Trustee does not conflict with or constitute a breach of the charter or by-laws of the Institutional Trustee; and (e) no consent, approval or authorization of, or registration with or notice to, any state or federal banking or other regulatory authority is required for the execution, delivery or performance by the Institutional Trustee, of the Declaration. SECTION 13.2 Representations and Warranties of Delaware Trustee. -------------------------------------------------- The Trustee that acts as initial Delaware Trustee represents and warrants to the Trust and to the Sponsor at the date of this Declaration, and each Successor Delaware Trustee represents and warrants to the Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance of its appointment as Delaware Trustee that: (a) The Delaware Trustee is a Delaware banking corporation with trust powers, duly organized, validly existing and in good standing, with trust power and authority to execute and deliver, and to carry out and perform its obligations under the terms of, the Declaration; (b) The Delaware Trustee has been authorized to perform its obligations under the Certificate of Trust and the Declaration. The Declaration under Delaware law constitutes a legal, valid and binding obligation of the Delaware Trustee, enforceable against it in accordance with its terms, subject to applicable bankruptcy, reorganization, moratorium, insolvency, and other similar laws affecting creditors' rights generally and to general principles of equity and the discretion of the court (regardless of whether the enforcement of such remedies is considered in a proceeding in equity or at law); (c) No consent, approval or authorization of, or registration with or notice to, any Delaware or federal banking or other regulatory authority is required for the execution, delivery or performance by the Delaware Trustee, of the Declaration; and (d) The Delaware Trustee is a natural person who is a resident of the State of Delaware or, if not a natural person, an entity that has its principal place of business in the State of Delaware. 47 ARTICLE XIV MISCELLANEOUS SECTION 14.1 Notices. ------- All notices provided for in this Declaration shall be in writing, duly signed by the party giving such notice, and shall be delivered, telecopied or mailed by first class mail, as follows: (a) if given to the Trust, in care of the Regular Trustees at the Trust's mailing address set forth below (or such other address as the Trust may give notice of to the Holders of the Securities): Unocal Capital Trust c/o Unocal Corporation 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Attention: General Counsel (b) if given to the Delaware Trustee, at the mailing address set forth below (or such other address as Delaware Trustee may give notice of to the Holders of the Securities): The Bank of New York, Delaware White Clay Center Route 273 Newark, Delaware 19711 Attention: (c) if given to the Institutional Trustee, at its Corporate Trust Office to the attention of Corporate Trust Trustee Administration (or such other address as the Institutional Trustee may give notice of to the Holders of the Securities). (d) if given to the Holder of the Common Securities, at the mailing address of the Sponsor set forth below (or such other address as the Holder of the Common Securities may give notice to the Trust): Unocal Corporation 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Attention: General Counsel (e) if given to any other Holder, at the address set forth on the books and records of the Trust. 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 48 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. SECTION 14.2 Governing Law. ------------- This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws of the State of Delaware or any other jurisdiction that would call for the application of the law of any jurisdiction other than the State of Delaware; provided, however, that there shall not be applicable to the Trust, the Trustees or this Declaration any provision of the laws (statutory or common) of the State of Delaware pertaining to trusts that relate to or regulate, in a manner inconsistent with the terms hereof, (i) the filing with any court or governmental body or agency of trustee accounts or schedules of trustee fees and charges, (ii) affirmative requirements to post bonds for trustees, officers, agents or employees of a trust, (iii) the necessity for obtaining court or other governmental approval concerning the acquisition, holding or disposition of real or personal property, (iv) fees or other sums payable to trustees, officers, agents or employees of a trust, (v) the allocation of receipts and expenditures to income or principal, (vi) restrictions or limitations on the permissible nature, amount or concentration of trust investments or requirements relating to the titling, storage or other manner of holding or investing trust assets, or (vii) the establishment of fiduciary or other standards of responsibility or limitations on the acts or powers of trustees that are inconsistent with the limitations or liabilities or authorities and powers of the Trustees as set forth or referenced in this Declaration. Section 3540 of Title 12 of the Delaware Code shall not apply to the Trust. SECTION 14.3 Intention of the Parties. ------------------------ It is the intention of the parties hereto that the Trust be classified for United States federal income tax purposes as a grantor trust. The provisions of this Declaration shall be interpreted to further this intention of the parties . SECTION 14.4 Headings. -------- Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 14.5 Successors and Assigns. ---------------------- Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 14.6 Partial Enforceability. ---------------------- If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of 49 such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 14.7 Counterparts. ------------ This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 50 IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the day and year first above written. _______________________________________ Darrell D. Chessum, as Regular Trustee _______________________________________ Daniel A. Franchi, as Regular Trustee _______________________________________ Richard L. Walton, as Regular Trustee THE BANK OF NEW YORK, DELAWARE, as Delaware Trustee By:_______________________________ Name: Title: THE BANK OF NEW YORK, as Institutional Trustee By:_______________________________ Name: Title: UNOCAL CORPORATION, as Sponsor By:_______________________________ Name: Title: 51 ANNEX I TERMS OF 6 1/4% TRUST CONVERTIBLE PREFERRED SECURITIES 6 1/4% COMMON SECURITIES Pursuant to Section 7.1 of the Amended and Restated Declaration of Trust of Unocal Capital Trust (the "Trust"), dated as of , 1996 (as amended from time to time, the "Declaration"), the designation, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Preferred Securities and the Common Securities are set out below (each capitalized term used but not defined herein has the meaning set forth in the Declaration: 1. Designation and Number. ---------------------- (a) Convertible Preferred Securities. ________________________ -------------------------------- (_____________) convertible preferred securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of ___________________ Dollars ($____________), and an initial liquidation amount with respect to the assets of $50 per convertible preferred security, are hereby designated for the purposes of identification only as "6 1/4% Trust Convertible Preferred Securities" (the "Convertible Preferred Securities"). The Convertible Preferred Security Certificates evidencing the Convertible Preferred Securities shall be substantially in the form of Exhibit A-1 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice or to conform to the rules of any stock exchange or other organization on which the Convertible Preferred Securities are listed or quoted. (b) Common Securities. _____________________ (___________) common ----------------- securities of the Trust with an aggregate liquidation amount with respect to the assets of the Trust of ___________________ Dollars ($___________), and an initial liquidation amount with respect to the assets of the Trust of $50 per common security, are hereby designated for the purposes of identification only as "6 1/4% Common Securities" (the "Common Securities"). The Common Security Certificates evidencing the Common Securities shall be substantially in the form of Exhibit A-2 to the Declaration, with such changes and additions thereto or deletions therefrom as may be required by ordinary usage, custom or practice. 2. Distributions. ------------- (a) Distributions payable on each Security will be fixed at a rate per annum of 6 1/4% (the "Coupon Rate") of the liquidation amount of any Security, such rate being the rate of interest payable on the Debentures held or to be held by the Institutional Trustee. To the extent permitted by applicable law, Distributions not paid on the regularly scheduled payment date therefor will accumulate interest thereon at the Coupon Rate compounded quarterly. The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. Distributions are payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period shall be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve I-1 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, shall be computed on the basis of 30-day months and, for periods of less than a month, the actual number of days elapsed per 30-day month. (b) Distributions on the Securities shall be cumulative, shall accumulate from, , 1996, and shall be payable quarterly in arrears, on March 1, June 1, September 1 and December 1 of each year, commencing on December 1, 1996, when, as and if funds are available for payment and except as otherwise described below. So long as the Debenture Issuer shall not be in default in the payment of interest on the Debentures, the Debenture Issuer has 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 Debentures for a period not exceeding 20 consecutive quarterly interest payment periods (each an "Extension Period"), during which Extension Period no interest shall be due and payable on the Debentures, provided that no Extension Period shall last beyond the date of maturity of the Debentures. As a consequence of such deferral, Distributions will also be deferred. To the extent permitted by applicable law, during such Extension Period, deferred quarterly Distributions will continue to accumulate with interest thereon at the Coupon Rate, for each quarter of the Extension Period. Before the termination of any such Extension Period, the Debenture Issuer may furthe r extend such Extension 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 date of maturity of the Debentures. At the end of the Extension Period, payments of accumulated Distributions shall be payable to Holders of Convertible Preferred Securities on the first record date after the termination of such Extension Period. Upon the termination of any such Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the above requirements . (c) Distributions on the Securities shall be payable to the Holders thereof as they appear on the books and records of the Trust as of the close of business on the relevant record dates. While the Convertible Preferred Securities are represented by a Global Certificate, the relevant record dates shall be the close of business on the Business Day next preceding such distribution payment date, unless otherwise provided in the Declaration or unless a different regular record date is established or provided for the corresponding interest payment date on the Debentures. The relevant record dates for the Common Securities shall be the same as for the Convertible Preferred Securities. If the Convertible Preferred Securities shall not continue to remain in book-entry only form, the relevant record dates for the Convertible Preferred Securities shall be selected by the Regular Trustees, which dates shall conform to the rules of any securities exchange or other organization on which the Securities are listed or quoted, if any, and, shall be at least one Business Day prior to the relevant payment dates, which payment dates correspond to the interest payment dates on the Debentures. Distributions payable on any Securities that are not punctually paid on any Distribution payment date, as a result of the Debenture Issuer having failed to make a payment under the Debentures, shall cease to be payable to the Person in whose name such Securities are registered on the relevant record date, and such defaulted Distribution will instead be payable to the Person whose name such Securities are registered on the special record date or other specified date determined in accordance with the Indenture. If any date on which Distributions are payable on the Securities is not a Business Day, then payment of the Distribution 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 I-2 delay), except that, if such Business Day is in the next succeeding calendar year, such payment all be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such payment date. (d) Accumulated but unpaid Distributions shall not be payable in cash on Securities converted by the Holder into Common Stock through the Conversion Agent into Common Stock pursuant to the terms of the Securities as set forth in this Annex I to the Declaration, nor will such accumulated but unpaid Distributions be converted into additional shares of Common Stock upon conversion, but such accumulated but unpaid Distributions shall be deemed to be paid in full and then returned by the Holder to the Sponsor as partial consideration for Common Stock received on conversion, and no payment, allowance or adjustment shall be made with respect to accumulated and unpaid Distributions on such Securities, which shall be deemed to be paid in full. If any 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 Securities have been called for redemption on a redemption date that occurs during such period, or are to be redeemed in connection with a Special Event which occurs during such period, the Trust shall not be required to pay Distributions on such distribution payment date in respect of such Securities or (ii) if otherwise converted during such period, such Securities shall be accompanied by funds equal to the Distributions payable on such succeeding distribution payment date on the liquidation amount so converted. (e) In the event that there is any money or other property held by or for the Trust that is not accounted for hereunder, such property shall be distributed Pro Rata (as defined herein) among the Holders of the Securities. 3. Liquidation Distribution Upon Dissolution. ----------------------------------------- In the event of any voluntary or involuntary dissolution, winding-up or termination of the Trust, the Holders of the Securities on the date of the dissolution, winding-up or termination, as the case may be, shall be entitled to receive out of the assets of the Trust available for distribution to Holders of Securities after satisfaction of liabilities of creditors an amount equal to the aggregate liquidation amount of the Securities plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"), unless, such dissolution, winding-up or termination occurs in connection with a Special Event in which, in accordance with Section 4(c), Debentures in an aggregate principal amount equal to the aggregate liquidation amount of such Securities, with an interest rate equal to the Coupon Rate of, and bearing accrued and unpaid interest in an amount equal to the accumulated and unpaid Distributions on, such Securities, shall be distributed on a Pro Rata basis to the Holders of the Securities in exchange for such Securities. If, upon any such dissolution, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable directly by the Trust on the Securities shall be paid on a Pro Rata basis. I3 4. Redemption and Distribution. --------------------------- (a) Upon the repayment of the Debentures in whole or in part, whether at maturity or upon redemption (either at the option of the Debenture Issuer or pursuant to a Special Event as described below), the proceeds from such repayment or payment shall be substantially simultaneously applied to redeem Securities having an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so repaid or redeemed at a redemption price per Security equal to the redemption price of the Debentures, together with accrued and unpaid Distributions thereon through the date of the redemption, payable in cash. Holders will be given not less than 30 nor more than 60 days notice of such redemption. (b) If fewer than all the outstanding Securities are to be so redeemed, the Common Securities and the Convertible Preferred Securities will be redeemed Pro Rata and the Convertible Preferred Securities to be redeemed will be as described in Section 4(g) below. (c) If, at any time, a Tax Event or an Investment Company Event (each, as defined below, a "Special Event") shall occur and be continuing, the Regular Trustees may with the consent of the Debenture Issuer, except in certain limited circumstances described in this Section 4(c), dissolve the Trust and, after satisfaction of creditors, cause Debentures held by the Institutional Trustee, having an aggregate principal amount equal to the aggregate liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on, and having the same record date for payment as the Securities, to be distributed to the Holders of the Securities in liquidation of such Holders' interests in the Trust on a Pro Rata basis, within 90 days following the occurrence of such Special Event (the "90-Day Period"); provided, however, that such dissolution and distribution shall be conditioned on (i) the Regular Trustees' receipt of an opinion of independent tax counsel experienced in such matters (a "No Recognition Opinion"), which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Securities will not recognize any gain or loss for United States federal income tax purposes as a result of the dissolution of the Trust and the distribution of Debentures, (ii) the Debenture Issuer or the Trust being unable to eliminate, which elimination shall be complete within the 90-Day Period, such Special Event by taking some ministerial action that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the Securities or does not subject any of them to additional regulatory requirements ("Ministerial Action"), such as filing a form or making an election, or pursuing some other similar reasonable measure, and (iii) the Debenture Issuer's prior written consent to such dissolution and distribution . If in the event of a Special Event (i) after receipt of a Dissolution Tax Opinion (as defined hereinafter) by the Regular Trustees, the Debenture Issuer has received an opinion (a "Redemption Tax Opinion") of independent tax counsel experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Debenture Issuer would be precluded from deducting the interest on the Debentures for United States federal income tax purposes even after the Debentures were distributed to the Holders of Securities in liquidation of such Holders' interests in the Trust as described in this Section 4(c), 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, for substantive reasons, cannot deliver a No Recognition Opinion to the Trust , I-4 the Debenture Issuer shall have the right, upon not less than 30 nor more than 60 days notice, to redeem the Debentures, in whole or in part, at a redemption price equal to 100% of the principal amount to be redeemed plus accrued and unpaid interest thereon to but excluding the date of such redemption, for cash within the 90-Day Period. Following such redemption, Securities with an aggregate liquidation amount equal to the aggregate principal amount of the Debentures so redeemed shall be redeemed by the Trust at a redemption price equal to 100% of the liquidation amount to be redeemed on a Pro Rata basis, plus accumulated but unpaid Distributions thereon to but excluding such redemption date; provided, however, that if at the time there is available to the Debenture Issuer or the Trust the opportunity to eliminate, which elimination shall be complete within the 90-Day Period, such Special Event by taking some Ministerial Action, the Trust or the Debenture Issuer will pursue such Ministerial Action in lieu of redemption . "Tax Event" means that the Regular Trustees shall have received an opinion of independent tax counsel experienced in such matters (a "Dissolution Tax Opinion") to the effect that on or after , 1996, 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 authority thereof or therein affecting taxation, (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, , 1996, there is more than an insubstantial risk that (i) the Trust is or will be within 90 days of the date thereof, subject to United States federal the Trust is, or will be within 90 days of the date thereof, subject to more than a de minimis amount of taxes, duties or other governmental charges , or (iii) interest payable in cash by the Debenture Issuer to the Trust on the Debentures, other than interest attributable to the Common Securities, is not, or within 90 days of the date thereof will not be, deductible, in whole or in part, by the Debenture Issuer for United States federal income tax purposes; provided, however, that such an opinion shall not be deemed to be a "Dissolution Tax Opinion" if the change in tax law that requires the Debenture Issuer for United States federal income tax purposes to defer taking a deduction for any original issue discount ("OID") that accrues with respect to the Debentures until the interest payment related to such OID is paid by the Debenture Issuer in cash, provided such change in tax law does not create more than an insubstantial risk that the Debenture Issuer will be prevented from taking a deduction for OID accruing with respect to the Debentures as of a date that is no later than the date the interest payment related to such OID is actually paid by the Debenture Issuer in cash. "Investment Company Event" means that the Regular Trustees shall have received an opinion of 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 regulations by any legislative body, court, I-5 governmental agency or regulatory authority on or after , 1996, 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. On and from the date fixed by the Regular Trustees for any distribution of Debentures upon dissolution of the Trust: (i) the Securities will be deemed to be not outstanding, (ii) the Clearing Agency or its nominee, as the record Holder of the Convertible Preferred Securities, will receive a registered certificate or certificates representing the Debentures to be delivered upon such distribution, and (iii) any certificates representing Securities, except for certificates representing Convertible Preferred Securities held by the Clearing Agency or its nominee (or any successor Clearing Agency or its nominee), will be deemed to represent Debentures having an aggregate principal amount equal to the aggregate stated liquidation amount of, with an interest rate identical to the Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid Distributions on such Convertible Preferred Securities until such certificates are presented to the Debenture Issuer or its agent for transfer or reissue. (d) The Trust may not redeem any of the outstanding Convertible Preferred Securities unless all accumulated and unpaid Distributions have been paid on all of the outstanding Convertible Preferred Securities for all quarterly Distribution periods terminating on or before the date of redemption. (e) If the Debentures are distributed to holders of the Securities, pursuant to the terms of the Indenture, the Debenture Issuer will use its reasonable efforts to have the Debentures listed on the New York Stock Exchange or listed or quoted on any national securities exchange, or with another organization on which the Convertible Preferred Securities were listed or quoted immediately prior to the distribution of the Debentures, if any. (f) Notice of any redemption of, or notice of distribution of Debentures in exchange for the Securities (a "Redemption/Distribution Notice") will be given by the Trust by mail to each Holder of Securities to be redeemed or exchanged not fewer than 30 nor more than 60 days before the date fixed for redemption or exchange thereof which, in the case of a redemption, will be the date fixed for redemption of the Debentures. For purposes of the calculation of the date of redemption or exchange and the dates on which notices are given pursuant to this Section 4(f), a Redemption/Distribution Notice shall be deemed to be given on the day such notice is first mailed by first-class mail, postage prepaid, or by such other means suitable to assure delivery of such written notice, to Holders of Securities. Each Redemption/Distribution Notice shall be addressed to the Holders of Securities at the address of each such Holder appearing in the books and records of the Trust. No defect in the Redemption/Distribution Notice or in the mailing of either thereof with respect to any Holder shall affect the validity of the redemption or exchange proceedings with respect to any other Holder. (g) In the event that fewer than all the outstanding Securities are to be redeemed, the Securities to be redeemed shall be redeemed Pro Rata from each Holder of Convertible Preferred Securities, it being understood that, in respect of Convertible Preferred Securities registered in the name of and held of record by the Clearing Agency or its nominee, the distribution of the proceeds of such redemption will be made to each Clearing Agency I-6 Participant (or Person on whose behalf such nominee holds such securities) in accordance with the procedures applied by such Clearing Agency or nominee. (h) If Securities are to be redeemed and the Trust gives a Redemption/Distribution Notice, which notice may only be issued if the Debentures are redeemed as set out in this Section 4 (which notice will be irrevocable), then (i) while the Convertible Preferred Securities are in book- entry form, with respect to the Convertible Preferred Securities, by 12:00 noon, New York City time, on the redemption date, provided that the Debenture Issuer has paid the Institutional Trustee, the Institutional Trustee will deposit irrevocably with the Clearing Agency or its nominee funds sufficient to pay the applicable redemption price and accumulated but unpaid Distributions thereon with respect to the Convertible Preferred Securities and will give the Clearing Agency irrevocable instructions and authority to pay such amounts to the Holders of the Convertible Preferred Securities, and (ii) with respect to Convertible Preferred Securities issued in definitive form and Common Securities, provided that the Debenture Issuer has paid the Institutional Trustee a sufficient amount of cash in connection with the related redemption or maturity of the Debentures, the Institutional Trustee will pay the relevant redemption price and accumulated but unpaid Distributions thereon to the Holders of such Securities by check mailed to the address of the relevant Holder appearing on the books and records of the Trust on the redemption date. If a Redemption/Distribution Notice shall have been given and funds deposited as required, if applicable, then immediately prior to the close of business on the required date of such deposit, distributions will cease to accrue on the Securities so called for redemption and all rights of Holders of such Securities so called for redemption will cease, except the right of the Holders of such Securities to receive the redemption price and accumulated but unpaid Distributions thereon, but without interest thereon. Neither the Regular Trustees nor the Trust shall be required to register or cause to be registered the transfer of any Securities that have been so called for redemption. If any date fixed for redemption of Securities is not a Business Day, then payment of the redemption price and accumulated but unpaid Distributions thereon 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 falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date fixed for redemption. In the event that payment of the redemption price and accumulated but unpaid Distributions thereon in respect of any Securities is improperly withheld or refused and not paid either by the Institutional Trustee or, if paid to the Institutional Trustee, by the Sponsor as guarantor pursuant to the relevant Securities Guarantee, Distributions on such Securities will continue to accumulate at the Coupon 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 and the accumulated but unpaid Distributions thereon. (i) Redemption/Distribution Notices shall be sent by the Regular Trustees on behalf of the Trust to (A) in respect of the Convertible Preferred Securities, the Clearing Agency or its nominee if the Global Certificates have been issued or, if Definitive Convertible Preferred Security Certificates have been issued, to the Holder thereof, and (B) in respect of the Common Securities to the Holder thereof. I-7 (j) Subject to the foregoing and applicable law (including, without limitation, United States federal securities laws), the Sponsor or any of its subsidiaries may at any time and from time to time purchase outstanding Convertible Preferred Securities by tender, in the open market or otherwise. 5. Conversion Rights. ----------------- The Holder of Securities shall have the right at any time, beginning December __, 1996 and prior to the close of business (New York time) on September 1, 2026 (or, in the case of Securities called for redemption, prior to the close of business (New York time) on the Business Day prior to the redemption date), at their option, to cause the Conversion Agent to convert Securities, on behalf of the converting Holders, into shares of Common Stock in the manner described herein on and subject to the following terms and conditions: (a) The Securities will be convertible at the office of the Conversion Agent into fully paid and nonassessable shares of Common Stock pursuant to the Holder's direction to the Conversion Agent to exchange such Securities for a portion of the Debentures theretofore held by the Trust on the basis of $1 in liquidation amount of a Security per $1 in principal amount of Debentures, and immediately convert such amount of Debentures into that number of fully paid and nonassessable shares of Common Stock obtained by dividing the principal amount of such Debentures to be converted by the conversion price of the Debentures. The initial conversion price of the Debentures is $__.__. The conversion price and the securities into which the Securities are convertible are subject to certain adjustments set forth in Article VII of the Supplemental Indenture . (b) In order to convert Securities into Common Stock the Holder shall deliver to the Conversion Agent at the office referred to above an irrevocable request to convert Securities on behalf of such Holder (the "Conversion Request"), together, if the Securities are in certificated form, with such certificates. The Conversion Request shall (i) set forth the number of Securities to be converted and the name or names, if other than the Holder, in which the shares of Common Stock should be issued and (ii) direct the Conversion Agent (A) to exchange such Securities for a portion of the Debentures held by the Trust (at the rate of exchange specified in the preceding paragraph) and (B) to immediately convert such Debentures on behalf of such Holder, into Common Stock (at the conversion rate specified in the preceding paragraph). The Conversion Agent shall notify the Trust of the Holder's election to exchange Securities for a portion of the Debentures held by the Trust and the Trust shall, upon receipt of such notice, deliver to the Conversion Agent the appropriate principal amount of Debentures for exchange in accordance with this Section. The Conversion Agent shall thereupon notify the Sponsor of the Holder's election to convert such Debentures into shares of Common Stock. Except as provided above, neither the Trust nor the Sponsor will make, or be required to make, any payment, allowance or adjustment upon any conversion on account of any accumulated and unpaid Distributions accrued on the Securities (including any Additional Amounts accrued thereon) surrendered for conversion, or on account of any accumulated and unpaid dividends on the shares of Common Stock issued upon such conversion. Securities shall be deemed to have been converted immediately prior to the close of business on the day on which a Conversion Request relating to such Securities is received by the Trust in accordance with the foregoing provision (the "Conversion Date"). The Person or Persons entitled to receive Common Stoc k I-8 issuable upon conversion of the Debentures shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the Conversion Date, the Sponsor shall issue and deliver at the office of the Conversion Agent a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with the cash payment, if any, in lieu of any fraction of any share to the Person or Persons entitled to receive the same, unless otherwise directed by the Holder in the notice of conversion and the Conversion Agent shall distribute such certificate or certificates and cash payments, if any, to such Person or Persons. (c) Each Holder of a Security by his acceptance thereof appoints the Institutional Trustee as "Conversion Agent" for the purpose of effecting the conversion of Securities in accordance with this Section. In effecting the conversion and transactions described in this Section, the Conversion Agent shall be acting as agent of the Holders of Securities directing it to effect such conversion transactions. The Conversion Agent is hereby authorized (i) to exchange Securities from time to time for Debentures held by the Trust in connection with the conversion of such Securities in accordance with this Section and (ii) to convert all or a portion of the Debentures into Common Stock and thereupon to deliver such shares of Common Stock in accordance with the provisions of this Section and to deliver to the Trust a new Debenture or Debentures for any resulting unconverted principal amount. (d) No fractional shares of Common Stock will be issued as a result of conversion, but in lieu thereof, such fractional interest will be paid in cash by the Sponsor to the Conversion Agent, which in turn will make such payment to the Holder or Holders of Securities so converted . (e) Unocal shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of the Debentures, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the Debentures then outstanding. Notwithstanding the foregoing, Unocal shall be entitled to deliver upon conversion of Debentures, shares of Common Stock reacquired and held in the treasury of Unocal (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances. Any shares of Common Stock issued upon conversion of the Debentures shall be duly authorized, validly issued and fully paid and nonassessable. The Trust shall deliver the shares of Common Stock received upon conversion of the Debentures to the converting Holder free and clear of all liens, charges, security interests and encumbrances, except for United States withholding taxes. Each of Unocal and the Trust shall prepare and shall use its best efforts to obtain and keep in force such governmental or regulatory permits or other authorizations as may be required by law, and shall comply with all applicable requirements as to registration or qualification of Common Stock (and all requirements to list Common Stock issuable upon conversion of Debentures that are at the time applicable), in order to enable Unocal to lawfully issue Common Stock to the Trust upon conversion of the Debentures and the Trust to lawfully deliver Common Stock to each Holder upon conversion of the Securities. (f) Unocal will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Debentures and the delivery of the I-9 shares of Common Stock by the Trust upon conversion of the Securities. Unocal shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the Securities so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Trust the amount of any such tax, or has established to the satisfaction of the Trust that such tax has been paid. (g) Nothing in the preceding Paragraph (f) shall limit the requirement of the Trust to withhold taxes pursuant to the terms of the Securities or set forth in this Annex I to the Declaration or to the Declaration itself or otherwise require the Institutional Trustee or the Trust to pay any amounts on account of such withholdings. (h) Notwithstanding the foregoing, no holder of Common Securities may convert such number of Common Securities which, after giving effect to such conversion, would result in the holders of Common Securities in the aggregate holding less then 1% of the capital of the Trust. 6. Voting Rights - Convertible Preferred Securities. ------------------------------------------------ (a) Except as provided under Sections 6(b) and 8 and as otherwise required by law and the Declaration, the Holders of the Convertible Preferred Securities will have no voting rights. (b) Subject to the requirements set forth in this paragraph, the Holders of a Majority in liquidation amount of the Convertible Preferred Securities, voting separately as a class, may 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 Debentures, to (i) exercise the remedies available under the Indenture with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 5.13 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided, however, that, where a consent or action under the Indenture would require the consent or act of holders of more than a majority (a "Super Majority") in aggregate principal amount of Debentures, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the same Super Majority percentage in liquidation amount of the Convertible Preferred Securities as is required under the Indenture of aggregate principal amount of the Debentures outstanding. The Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Convertible Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Convertible Preferred Securities under this paragraph 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. If an Event of Default has occurred and is continuing and such event is attributable to the failure of the Debenture Issuer to pay interest or principal on the Debentures on the date such interest or principal is otherwise payable (or in the I-10 case of redemption, on the redemption date), then a holder of Convertible Preferred Securities may directly institute a proceeding for enforcement of payment to such Holder of the principal of or interest on Debentures having a principal amount equal to the aggregate liquidation amount of the Convertible Preferred Securities of such holder (a "Direct Action") on or after the respective due date specified in the Debentures. In connection with such Direct Action, the rights of the holders of the Common Securities will be subrogated to the rights of such Holder of Convertible Preferred Securities to the extent of any payment made by the Debenture Issuer to such Holder of Convertible Preferred Securities in such Direct Action. Except as provided in the preceding sentence, the Holders of Convertible Preferred Securities will not be able to exercise directly any other remedy available to the holder of the Debentures. Any approval or direction of Holders of Convertible Preferred Securities may be given at a separate meeting of Holders of Convertible Preferred Securities convened for such purpose, at a meeting of all of the Holders of Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of 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 Convertible Preferred Securities. Each such notice will include a statement setting forth (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 the Convertible Preferred Securities will be required for the Trust to redeem, exchange and/or cancel Convertible Preferred Securities or to distribute Debentures, each in accordance with the Declaration and the terms of the Securities. Notwithstanding that Holders of Convertible Preferred Securities are entitled to vote or consent under any of the circumstances described above, any of the Convertible Preferred Securities that are owned by the Sponsor or any Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if they were not outstanding. 7. Voting Rights - Common Securities. --------------------------------- (a) Except as provided under Sections 7(b), (c) and 8 and as otherwise required by law and the Declaration, the Holders of the Common Securities will have no voting rights. (b) The Holders of the Common Securities are entitled, in accordance with Article V of the Declaration, to vote to appoint, remove or replace any Trustee or to increase or decrease the number of Trustees. (c) Subject to Section 2.6 of the Declaration and only after any Event of Default with respect to the Convertible Preferred Securities has been cured, waived, or otherwise eliminated and subject to the requirements of the second to last sentence of this paragraph, the Holders of a Majority in liquidation amount of the Common Securities, voting separately as a class, may direct the time, method, and place of conducting any proceeding for any remedy available to the Institutional Trustee, or exercising any trust or power conferred upon the I-11 Institutional Trustee under the Declaration, including (i) directing the time method, place of conducting any proceeding for any remedy available to the Debenture Trustee, or exercising any trust or power conferred on the Debenture Trustee with respect to the Debentures, (ii) waive any past default and its consequences that is waivable under Section 5.13 of the Indenture, or (iii) exercise any right to rescind or annul a declaration that the principal of all the Debentures shall be due and payable, provided that, where a consent or action under the Indenture would require the consent or act of the holders of a Super Majority in aggregate principal amount of the Debentures, the Institutional Trustee may only give such consent or take such action at the written direction of the Holders of at least the same Super Majority percentage in liquidation amount of the Common Securities as is required under the Indenture of aggregate principal amount of the Debentures outstanding. Pursuant to this Section 7(c), the Institutional Trustee shall not revoke any action previously authorized or approved by a vote of the Holders of the Convertible Preferred Securities. Other than with respect to directing the time, method and place of conducting any remedy available to the Institutional Trustee or the Debenture Trustee as set forth above, the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Common Securities under this paragraph unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. If the Institutional Trustee fails to enforce its rights under the Declaration, any Holder of Common Securities may institute a legal proceeding directly against any Person to enforce the Institutional Trustee's rights under the Declaration, without first instituting a legal proceeding against the Institutional Trustee or any other Person. Any approval or direction of Holders of Common Securities may be given at a separate meeting of Holders of Common Securities convened for such purpose, at a meeting of all of the Holders of Securities or pursuant to written consent. The Regular Trustees will cause a notice of any meeting at which Holders of Common 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 Common Securities. Each such notice will include a statement setting forth (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 the Common Securities will be required for the Trust to redeem and cancel Common Securities or to distribute Debentures in accordance with the Declaration and the terms of the Securities. 8. Amendments to Declaration and Indenture. --------------------------------------- (a) In addition to any requirements under Section 12.1 of the Declaration, if any proposed amendment to the Declaration 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 Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than as described in Section 8.1 of the Declaration, then the Holders of outstanding Securities voting together as a single class, will be entitled to vote on such amendment or proposal (but not on any other amendment or proposal) I-12 and such amendment or proposal shall not be effective except with the approval of the Holders of at least a Majority in liquidation amount of the Securities affected thereby; provided, however, if any amendment or proposal referred to in clause (i) above would adversely affect only the Convertible Preferred Securities or only the Common Securities, then only the affected 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 a Majority in liquidation amount of such class of Securities. (b) In the event the consent of the Institutional Trustee, as the holder of the Debentures, is required under the Indenture with respect to any amendment, modification or termination of the Indenture or the Debentures, the Institutional Trustee shall request the written direction of the Holders of the 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 Securities voting together as a single class; provided, however, that where a consent under the Indenture would require the consent of the holders of a Super Majority in aggregate principal amount of the Debentures, 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 Securities as is required under the Indenture of aggregate principal amount of the Debentures outstanding; provided, further, that the Institutional Trustee shall not take any action in accordance with the directions of the Holders of the Securities under this Section 7(b) unless the Institutional Trustee has obtained an opinion of tax counsel to the effect that for the purposes of United States federal income tax the Trust will not be classified as other than a grantor trust on account of such action. 9. Spinoff. ------- (a) If, in connection with a Spinoff (as defined in Section 7.5 of the Supplemental Indenture), the Convertible Debentures are exchanged pursuant to such Section 7.5 for Spinoff Company Convertible Debentures (as defined in such Section 7.5) or New Convertible Debentures (as defined in such Section 7.5), then, simultaneously with such exchange, the Convertible Preferred Securities and the Common Securities shall be deemed to be exchanged into: (i) in the event of an exchange pursuant to Section 7.5(a)(i) of the Supplemental Indenture, a new trust convertible preferred security ("Spinoff Company Trust Convertible Preferred Security") and new trust common security ("Spinoff Company Trust Common Security" and, together with the Spinoff Company Trust Convertible Preferred Securities, the "Spinoff Company Trust Securities"), as the case may be, of the Spinoff Company Trust (as defined in Section 7.5(c)(ii) of the Supplemental Indenture) having the same distribution rate, accumulated and unpaid distributions, if any, redemption provisions, and conversion provisions of these Securities and other terms substantially similar to those of these Securities except that (A) upon conversion the Spinoff Company Trust Securities will convert into Spinoff Company Stock (as defined in Section 7.5(a) of the Supplemental Indenture), and (B) the conversion price and Reference Market Price of the Spinoff Company Trust Securities shall be adjusted as provided in Section 7.5(a)(i) of the Supplemental Indenture; or I-13 (ii) in the event of an exchange pursuant to Section 7.5(a)(ii) of the Supplemental Indenture: (A) Spinoff Company Trust Securities having the same distribution rate, redemption provisions, and conversion provisions of these Securities and other terms substantially similar to those of these Securities except that (A) upon conversion the Spinoff Company Trust Securities will convert into Spinoff Company Stock, and (B) the liquidation amount, conversion price and Reference Market Price of, and accrued but unpaid distributions, if any, on, the Spinoff Company Trust Securities shall be adjusted as provided in Section 7.5(a)(ii)(A) of the Supplemental Indenture; and (B) new trust convertible preferred securities ("New Trust Convertible Preferred Securities") and new trust common securities ("New Trust Common Securities" and, together with the New Trust Convertible Preferred Securities, the "New Trust Securities"), as the case may be, having the same distribution rate, accumulated and unpaid distributions, redemption provisions, and conversion provisions of these Securities and other terms substantially similar to those of these Securities except that (A) the liquidation amount, conversion price and Reference Market Price of, and accrued but unpaid distributions, if any, on, the New Trust Securities shall be adjusted as provided in Section 7.5(a)(ii)(B) of the Supplemental Indenture. (b) In the event of an exchange pursuant to Section 9(a): (i) no less than 20 Business Days prior to the Spinoff Exchange Date (as defined in Section 7.5(c)(i) of the Supplemental Indenture), the Trustees will provide notice to the Holders of the Spinoff Exchange Date and the kind and amount of securities into which these Securities will be exchanged as a result of the Spinoff; (ii) following the Spinoff Exchange Date, the holders of Spinoff Company Trust Securities shall have the benefit of guarantees with terms substantially similar to that of the Convertible Preferred Securities Guarantee and Common Securities Guarantee, as the case may be, from Spinoff Company (as defined in Section 7.5(a) of the Supplemental Indenture) as guarantor, and the holders of New Trust Securities shall have the benefit of guarantees with terms substantially similar to that of the Convertible Preferred Securities Guarantee and Common Securities Guarantee, as the case may be, from the Debenture Issuer as guarantor; (iii) following the Spinoff Exchange Date, all rights of Holders of these Securities (including, but not limited to, the right to accrue distributions) shall cease, and these 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 these Securities in exchange therefor pursuant to this Section 9; (iv) following the Spinoff Exchange Date, the holders of record of these Securities will be considered the holders of record of any Spinoff Trust Securities and New Trust Securities for the purposes of the governing instruments with respect to such securities, including, but not limited to, any indenture, declaration or certificate of I-14 designations and the Indenture, including for the purposes of giving of notice or voting thereunder; and (v) each Holder of these Securities, by acceptance of these Securities, agrees to such exchange and to the effects of such exchange as set forth herein. (c) For the purposes of this Section 9, the determination of whether after the Spinoff the Spinoff Trust Securities or the New Trust Securities have terms substantially similar to those of these Securities prior to the Spinoff shall be determined in good faith by the Regular Trustees. 10. Pro Rata. -------- A reference in these terms of the Securities to any distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder of Securities according to the aggregate liquidation amount of the Securities held by the relevant Holder in relation to the aggregate liquidation amount of all Securities outstanding unless, in relation to a payment, an Event of Default has occurred and is continuing, in which case any funds available to make such payment shall be paid first to each Holder of the Convertible Preferred Securities pro rata according to the aggregate liquidation amount of Convertible Preferred Securities held by such Holder relative to the aggregate liquidation amount of all Convertible Preferred Securities outstanding, and only after satisfaction of all amounts owed to the Holders of the Convertible Preferred Securities, to each Holder of Common Securities pro rata according to the aggregate liquidation amount of Common Securities held by such Holder relative to the aggregate liquidation amount of all Common Securities outstanding. 11. Ranking. ------- The Convertible Preferred Securities rank pari passu, and payment thereon shall be made Pro Rata with, the Common Securities, except that where an Event of Default occurs and is continuing, the rights of Holders of the Common Securities to payment in respect of Distributions and payments upon liquidation, redemption, and otherwise are subordinated to the rights to payment of the Holders of the Convertible Preferred Securities. 12. Acceptance of Securities Guarantee and Indenture. ------------------------------------------------ Each Holder of Convertible Preferred Securities and Common Securities, by the acceptance thereof, agrees to the provisions of the Convertible Preferred Securities Guarantee and the Common Securities Guarantee, respectively, including the subordination provisions therein and to the provisions of the Indenture. 13. No Preemptive Rights. -------------------- The Holders of the Securities shall have no preemptive rights to subscribe for any additional securities. I-15 14. Miscellaneous. ------------- These terms constitute a part of the Declaration. The Sponsor will provide a copy of the Declaration, the Convertible Preferred Securities Guarantee or the Common Securities Guarantee (as may be appropriate), and the Indenture to a Holder without charge on written request to the Sponsor at its principal place of business. I-16 EXHIBIT A-1 FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE [FORM OF FACE OF SECURITY CERTIFICATE] [IF THE CONVERTIBLE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT THE FOLLOWING: This Convertible Preferred Security is a Global Certificate within the meaning of the Declaration hereinafter referred to and is registered in the name of the Clearing Agency or a nominee of the Clearing Agency. This Convertible Preferred Security is exchangeable for Convertible Preferred Securities registered in the name of a person other than the Clearing Agency or its nominee only in the circumstances described in the Declaration and no transfer of this Convertible Preferred Security (other than a transfer of this Convertible Preferred Security as a whole by the Clearing Agency to a nominee of the Clearing Agency or by a nominee of the Clearing Agency to the Clearing Agency or another nominee of the Clearing Agency) may be registered except in such circumstances.] [IF THE CLEARING AGENCY IS THE DEPOSITORY TRUST COMPANY, INSERT THE FOLLOWING: Unless this Convertible Preferred Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the Trust or its agent for registration of transfer, exchange or payment, and any Convertible Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.] Certificate Number Number of Convertible Preferred Securities CUSIP NO. [ ] CERTIFICATE EVIDENCING 6 1/4% TRUST CONVERTIBLE PREFERRED SECURITIES OF UNOCAL CAPITAL TRUST 6 1/4% Trust Convertible Preferred Securities (liquidation amount $50 per Trust Convertible Preferred Security) A1-1 Unocal Capital Trust, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________________________________ (the "Holder") is the registered owner of convertible preferred securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the 6 1/4% Trust Convertible Preferred Securities (liquidation amount $50 per Trust Convertible Preferred Security) (the "Convertible Preferred Securities"). The Convertible Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Convertible Preferred Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of , 1996, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Convertible Preferred Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Convertible Preferred Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Convertible Preferred Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Convertible Preferred Securities as evidence of indirect beneficial ownership in the Debentures. These Convertible Preferred Securities shall not be entitled to any benefit under the Declaration, be valid or become obligatory for any purpose, until the Certificate of Authentication hereon shall have been signed by or on behalf of the Institutional Trustee. The provisions of these Convertible Preferred Securities are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, the Trust has caused this certificate to be executed. UNOCAL CAPITAL TRUST By:_________________________ Name: Regular Trustee A1-2 [FORM OF CERTIFICATE OF AUTHENTICATION] INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Convertible Preferred Securities referred to in the within-mentioned Declaration. Dated: ____________________ [INSTITUTIONAL TRUSTEE NAME,] as Institutional Trustee or as Authentication Agent By:__________________________ By:_________________________ Authorized Signatory Authorized Signatory A1-3 [FORM OF REVERSE OF SECURITY] Distributions payable on each Convertible Preferred Security will be fixed at a rate per annum of 6 1/4% (the "Coupon Rate") of the liquidation amount per Convertible Preferred Security, such rate being the rate of interest payable on the Debentures held by the Institutional Trustee. Distributions not paid on the regularly scheduled payment date therefor will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of 30-day months and, for periods of less than a month, the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Preferred Securities shall be cumulative, shall accumulate from September ___, 1996 and shall be payable quarterly (subject to deferral as set forth in the Declaration and the Indenture) in arrears, on March 1, June 1, September 1 and December 1 of each year, commencing December 1, 1996, which payment dates shall correspond to the interest payment dates on the Debentures, when, as and if funds are available for payment, to Holders at the close of business on the regular record date for such distribution, which regular record date shall be, while these Convertible Preferred Securities are represented by a Global Certificate, the close of business on the Business Day next preceding such distribution payment date, unless otherwise provided in the Declaration or unless a different regular record date is established or provided for the corresponding interest payment date on the Debentures. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period (each an "Extension Period") not exceeding 20 consecutive quarterly interest payment periods during which Extension Period no interest is due and payable on the Debentures; provided that no Extension Period shall last beyond the date of the maturity of the Debentures. As a consequence of such deferral, Distributions will also be deferred. To the extent permitted by applicable law, during such Extension Period deferred quarterly Distributions will continue to accumulate with interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extension Period. Before the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity date of the Debentures. At the end of the Extension Period, Payments of accumulated Distributions shall be payable to Holders of Convertible Preferred Securities on the first record date after the termination of such Extension Period. Upon the termination of any such Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the requirements set forth in the Indenture. A1-4 Upon repayment of the Debentures in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be substantially simultaneously applied to redeem the Securities as provided in the Declaration. The Convertible Preferred Securities shall be exchangeable at the option of the Debenture Issuer in certain events as set forth in the Declaration and in the Supplemental Indenture. The Convertible Preferred Securities shall be convertible into shares of Common Stock at the holder's direction to the Conversion Agent as set forth in the Declaration. A1-5 CONVERSION REQUEST To: [ ] as Conversion Agent of Unocal Capital Trust The undersigned Holder of these Convertible Preferred Securities hereby irrevocably exercises the option to convert these Convertible Preferred Securities, or the portion below designated, into Common Stock of Unocal Corporation (the "Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust of Unocal Capital Trust, dated as of September __, 1996 (as amended from time to time, the "Declaration"). Pursuant to the aforementioned exercise of the option to convert these Convertible Preferred Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) on behalf of the undersigned to (i) exchange such Convertible Preferred Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Convertible Preferred Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures, into Common Stock pursuant to the terms of the Indenture (as defined in the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares of Common Stock issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: _______________, _____ in whole ___ in part ___ Number of Convertible Preferred Securities to be converted: ____________________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Common Stock A1-6 are to be issued, along with the address or addresses of such person or persons __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ __________________________________ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number __________________________________ __________________________________ __________________________________ Signature Guarantee:/*/ ______________________________ _____________________________ /*/(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A1-7 ___________________ ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Convertible Preferred Security Certificate to: _______________________________________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee and irrevocably appoints _______________________________________________________ agent to transfer this Convertible Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:___________________________________ Signature:______________________________ (Sign exactly as your name appears on the other side of this Convertible Preferred Security Certificate) Signature Guarantee/*/ - ------------------- ____________________________ /*/Signature must be guaranteed by an "eligible guarantor institution" that is a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities and Exchange Act of 1934, as amended. A1-8 EXHIBIT A-2 FORM OF COMMON SECURITY CERTIFICATE [FORM OF FACE OF SECURITY CERTIFICATE] Certificate Number Number of Common Securities CERTIFICATE EVIDENCING 6 1/4% COMMON SECURITIES OF UNOCAL CAPITAL TRUST 6 1/4% Common Securities (liquidation amount $50 per Common Security) Unocal Capital Trust, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________________________________ (the "Holder") is the registered owner of common securities of the Trust representing undivided beneficial interests in the assets of the Trust designated the 6 1/4% Common Securities (liquidation amount $50 per Common Security) (the "Common Securities"). The Common Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer. The designation, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities represented hereby are issued and shall in all respects be subject to the provisions of the Amended and Restated Declaration of Trust of the Trust dated as of , 1996, as the same may be amended from time to time (the "Declaration"), including the designation of the terms of the Common Securities as set forth in Annex I to the Declaration. Capitalized terms used herein but not defined shall have the meaning given them in the Declaration. The Holder is entitled to the benefits of the Common Securities Guarantee to the extent provided therein. The Sponsor will provide a copy of the Declaration, the Common Securities Guarantee and the Indenture to a Holder without charge upon written request to the Trust at its principal place of business. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. By acceptance, the Holder agrees to treat, for United States federal income tax purposes, the Debentures as indebtedness and the Common Securities as evidence of indirect beneficial ownership in the Debentures. The provisions of these Common Securities are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. A2-1 IN WITNESS WHEREOF, the Trust has caused this certificate to be executed. UNOCAL CAPITAL TRUST By:_________________ Name: Regular Trustee A2-2 [FORM OF REVERSE OF SECURITY] Distributions payable on each Common Security will be fixed at a rate per annum of 6 1/4% (the "Coupon Rate") of the liquidation amount per Common Security, such rate being the rate of interest payable on the Debentures held by the Institutional Trustee. Distributions not paid on the regularly scheduled payment date therefor will bear interest thereon compounded quarterly at the Coupon Rate (to the extent permitted by applicable law). The term "Distributions" as used herein includes such cash distributions and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Debentures held by the Institutional Trustee and to the extent the Institutional Trustee has funds available therefor. The amount of Distributions payable for any period will be computed for any full quarterly Distribution period on the basis of a 360-day year of twelve 30-day months, and for any period shorter than a full quarterly Distribution period for which Distributions are computed, Distributions will be computed on the basis of 30-day months and, for periods of less than a month, the actual number of days elapsed per 30-day month. Except as otherwise described below, distributions on the Preferred Securities shall be cumulative, shall accumulate from September ___, 1996 and shall be payable quarterly (subject to deferral as set forth in the Declaration and the Indenture) in arrears, on March 1, June 1, September 1 and December 1 of each year, commencing December 1, 1996, which payment dates shall correspond to the interest payment dates on the Debentures, when, as and if funds are available for payment, to Holders at the close of business on the regular record date for such distribution, which regular record date shall be, while these Common Securities are represented by a Global Certificate, the close of business on the Business Day next preceding such distribution payment date, unless otherwise provided in the Declaration or unless a different regular record date is established or provided for the corresponding interest payment date on the Debentures. The Debenture Issuer has the right under the Indenture to defer payments of interest by extending the interest payment period from time to time on the Debentures for a period (each an "Extension Period") not exceeding 20 consecutive quarterly interest payment periods during which Extension Period no interest is due and payable on the Debentures, provided that no Extension Period shall last beyond the date of the maturity of the Debentures. As a consequence of such deferral, Distributions will also be deferred. To the extent permitted by applicable law, during such Extension Period deferred quarterly Distributions will continue to accumulate with interest thereon at the Coupon Rate compounded quarterly for each quarter of the Extension Period. Before the termination of any such Extension Period, the Debenture Issuer may further extend such Extension Period; provided that such Extension Period together with all such previous and further extensions thereof may not exceed 20 consecutive quarters or extend beyond the maturity date of the Debentures. At the end of the Extension Period, Payments of accumulated Distributions shall be payable to Holders of Common Securities on the first record date after the termination of such Extension Period. Upon the termination of any such Extension Period and the payment of all amounts then due, the Debenture Issuer may commence a new Extension Period, subject to the requirements set forth in the Indenture. Upon repayment of the Debentures, in whole or in part, whether at maturity or upon redemption, the proceeds from such repayment or payment shall be substantially simultaneously applied to redeem the Securities as provided in the Declaration. A2-3 The Common Securities shall be convertible into shares of Common Stock at the holder's direction to the Conversion Agent as set forth in the Declaration. The Common Securities shall be exchangeable at the option of the Debenture Issuer in certain events as set forth in the Declaration and in the Supplemental Indenture. A2-4 CONVERSION REQUEST To: [ ] as Conversion Agent of Unocal Capital Trust The undersigned Holder of these Common Securities hereby irrevocably exercises the option to convert these Common Securities, or the portion below designated, into Common Stock of Unocal Corporation (the "Common Stock") in accordance with the terms of the Amended and Restated Declaration of Trust of Unocal Capital Trust, dated as of September __, 1996 (as amended from time to time, the "Declaration"). Pursuant to the aforementioned exercise of the option to convert these Common Securities, the undersigned hereby directs the Conversion Agent (as that term is defined in the Declaration) on behalf of the undersigned to (i) exchange such Common Securities for a portion of the Debentures (as that term is defined in the Declaration) held by the Trust (at the rate of exchange specified in the terms of the Common Securities set forth as Annex I to the Declaration) and (ii) immediately convert such Debentures, into Common Stock pursuant to the terms of the Indenture (as defined in the Declaration). The undersigned does also hereby direct the Conversion Agent that the shares of Common Stock issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Date: _____________, _____ in whole ___ in part ___ Number of Common Securities to be converted: _______________ If a name or names other than the undersigned, please indicate in the spaces below the name or names in which the shares of Common Stock A2-5 are to be issued, along with the address or addresses of such person or persons ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ ___________________________________ Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number ___________________________________ ___________________________________ ___________________________________ Signature Guarantee:/*/________________________________ _________________________ /*/(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Conversion Agent, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Conversion Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A2-6 ___________________ ASSIGNMENT ---------- FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security Certificate to: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert assignee's social security or tax identification number) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Insert address and zip code of assignee) and irrevocably appoints ________________________________________ agent to transfer this Common Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date:___________________________________ Signature:______________________________ (Sign exactly as your name appears on the other side of this Common Security Certificate) Signature Guarantee/*/:__________________________________________ __________________________ /*/(Signature must be guaranteed by an "eligible guarantor institution" that is, a bank, stockbroker, savings and loan association or credit union meeting the requirements of the Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.) A2-7 EXHIBIT B SPECIMEN OF DEBENTURE B-1 EX-5.1 5 OPINION OF MUNGER, TOLLES & OLSON EXHIBIT 5.1 [LETTERHEAD OF MUNGER, TOLLES & OLSON] MUNGER, TOLLES & OLSON 355 SOUTH GRAND AVENUE THIRTY-FIFTH FLOOR LOS ANGELES, CALIFORNIA 90071-1560 TELEPHONE (213) 683-9100 TELEX 6502019297 FACSIMILE (213) 687-3702 (213) 683-9100 August 7, 1996 Unocal Corporation Unocal Capital Trust 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Dear Sir or Madam: We have acted as counsel to Unocal Corporation, a Delaware corporation (the "Company"), and Unocal Capital Trust, a Delaware statutory business trust (the "Trust" and, together with the Company, the "Registrants"), in connection with the preparation of the Registration Statement on Form S-4 (File Nos. 333-09137 and 333-09137-01), as amended by Pre-Effective Amendment No. 1 thereto (as amended, the "Registration Statement"), filed jointly by the Registrants with the Securities and Exchange Commission (the "SEC"). The Registration Statement relates to the offer and sale (the "Exchange Offer") by the Company of 6 1/4% Trust Convertible Preferred Securities (the "Trust Convertible Preferred Securities") of the Trust in exchange for outstanding shares of the $3.50 Convertible Preferred Stock (the "$3.50 Convertible Preferred Stock") of the Company. This opinion is delivered in accordance with the requirement of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the "Securities Act"). Certain capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Registration Statement. [LETTERHEAD OF MUNGER, TOLLES & OLSON] Unocal Corporation August 7, 1996 Page 2 We have examined and are familiar with originals or copies of such documents, corporate records, and other instruments as we have deemed necessary or appropriate in connection with this opinion, including (1) the Registration Statement, (2) the Amended and Restated Declaration of Trust of the Trust, in the form filed as an exhibit to the Registration Statement, pursuant to which the Trust Convertible Preferred Securities will be issued, (3) the Multiple Series Indenture (the "Base Indenture") and First Supplemental Indenture (the "Supplemental Indenture" and, together with the Base Indenture, the "Indenture") between the Company and The Bank of New York, as trustee (the "Indenture Trustee"), in the form filed as an exhibit to the Registration Statement, under which the Company will issue its 6 1/4% Convertible Junior Subordinated Debentures (the "Convertible Debentures") to the Trust in exchange for the Trust Convertible Preferred Securities and all of the common securities of the Trust (together with the Trust Convertible Preferred Securities, the "Trust Securities"), (4) the Preferred Securities Guarantee Agreement (the "Guarantee Agreement") between the Company and The Bank of New York, as trustee (the "Guarantee Trustee"), in the form filed as an exhibit to the Registration Statement, pursuant to which the Company will guarantee certain payment obligations of the Trust to the extent set forth therein, (5) the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware on July 17, 1996 (the "Certificate"), (6) the Declaration of Trust of the Trust dated as of July 17, 1996 as executed by the trustees of the Trust (the "Trustees"), (7) the Dealer Manager Agreement (the "Dealer Manager Agreement") among the Company, the Trust, Morgan Stanley & Co. Incorporated, and Goldman, Sachs & Co., in the form filed as an exhibit to the Registration Statement, (8) the Restated Certificate of Incorporation of the Company, as amended to the date hereof, (9) the Bylaws of the Company, as amended to the date hereof, and (10) resolutions adopted to the date hereby by the Board of Directors of the Company and the Management Committee of the Company relating to, among other things, the Registration Statement, the Exchange Offer, and the Agreement. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photocopies, and the authenticity of the originals of such latter documents. As to any facts material to the opinions expressed herein, other than those assumed, we have relied without independent verification upon the documents [LETTERHEAD OF MUNGER, TOLLES & OLSON] Unocal Corporation August 7, 1996 Page 3 referred to above, the accuracy of factual matters contained therein, and oral or written statements and representations of officers and other representatives of the Company, the Trust and others, including public officials. We are members of the Bar of the State of California. This opinion is limited to the laws of the State of California, the General Corporation Law of the State of Delaware, and the laws of the United States. We do not express any opinion as to the laws of any other jurisdiction or as to any other laws of the State of Delaware. We note that the Indenture, the Debentures, and Guarantee Agreement each include a provision choosing the law of the State of New York as the governing law. As to certain questions pertaining to New York law, we have relied, with their consent, upon an opinion of Davis Polk & Wardwell, counsel for the Dealer Managers, to be delivered pursuant to the Dealer Manager Agreement. We have assumed that the law of the State of California is identical to the law of the State of New York insofar as New York law would be applicable to the opinions expressed in paragraphs 1 and 2 below. We have assumed the due authorization, execution, and delivery by or on behalf of each of the parties thereto of the securities and documents referred to above, other than the Company, and that (a) the Exchange Offer will occur and be conducted as described above and in the Registration Statement, (b) the Debentures will be duly authenticated by the Indenture Trustee, (c) the Guarantee Agreement will be held by the Guarantee Trustee for the benefit of the holders of Trust Convertible Preferred Securities; (d) the execution and delivery by the Company of, and the performance by the Company of its obligations under, the Indenture and Guarantee Agreement will not violate or conflict with, or result in a default under or breach of any agreement or instrument binding upon the Company or any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company; (e) all applicable provisions of the Securities Act of 1993, as amended, and such state "blue sky" or other securities laws as may be applicable have been or shall duly be complied with; (f) the Indenture and Guarantee Agreement shall be qualified under the Trust Indenture Act of 1939, as amended, prior to commencement of the Exchange Offer, and (g) the Registration Statement, as finally amended, shall become [LETTERHEAD OF MUNGER, TOLLES & OLSON] Unocal Corporation August 7, 1996 Page 4 effective under the Securities Act prior to commencement of the Exchange Offer. Based upon the foregoing and subject to the limitations expressed below, we are of the opinion that: 1. The Convertible Debentures, when executed, authenticated, and delivered to the Trust in exchange for the Trust Securities as contemplated by the Registration Statement and in accordance with the Indenture, will be duly executed and issued and will constitute the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms. 2. The Guarantee Agreement, when executed and delivered to the Guarantee Trustee as contemplated by the Registration Statement, will be duly executed and issued and will constitute the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms. 3. The shares of common stock, par value $1.00 per share (the "Common Stock") of the Company into which the Trust Convertible Preferred Securities and the Convertible Debentures are convertible will, upon conversion and issuance of such shares pursuant to the Amended Declaration, in the case of conversion of Trust Convertible Preferred Securities, or the Indenture, in the case of conversion of the Convertible Debentures, be validly issued, fully paid, and nonassessable shares of Common Stock of the Company. The opinions expressed in paragraphs 1 and 2 above are subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other similar laws relating to or affecting creditors' rights generally, and to general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the caption "Legal Matters" in the prospectus forming a part of the Registration Statement. In giving such consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules or regulations of the SEC promulgated thereunder. [LETTERHEAD OF MUNGER, TOLLES & OLSON] Unocal Corporation August 7, 1996 Page 5 Very truly yours, /s/ MUNGER, TOLLES & OLSON EX-5.2 6 OPINION OF MORRIS NICHOLS ARHST & TUNNELL EXHIBIT 5.2 [LETTERHEAD OF MORRIS NICHOLS ARHST & TUNNELL] MORRIS NICHOLS ARHST & TUNNELL 1201 NORTH MARKET STREET POST OFFICE BOX 1347 WILIMINGTON, DELAWARE 19899 August 7, 1996 Unocal Corporation Unocal Capital Trust 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Re: Unocal Capital Trust -------------------- Ladies and Gentlemen: We have acted as special Delaware counsel to Unocal Capital Trust, a Delaware statutory business trust (the "Trust"), in connection with certain matters relating to the organization of the Trust and the proposed issuance of Convertible Preferred Securities to beneficial owners pursuant to and as described in Registration Statement Nos. 333-09137 and 333-09137-01 (and the Prospectus forming a part thereof) on Form S-4 filed with the Securities and Exchange Commission on July 30, 1996, as amended by Pre-Effective Amendment No. 1 thereto (as so amended, the "Registration Statement"). Capitalized terms used herein and not otherwise herein defined are used as defined in the Amended and Restated Declaration of Trust of the Trust in the form attached as an exhibit to the Registration Statement (the "Governing Instrument"). In rendering this opinion, we have examined copies of the following documents in the forms provided to us: the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on July 17, 1996 (the "Certificate"); a Declaration of Trust of the Trust dated as of July 17, 1996 (the "Original Governing Instrument"); the Governing Instrument; the Multiple Series Indenture of Unocal Corporation (the "Base Indenture"); the Preferred Securities Guarantee Agreement to be entered into between Unocal Corporation and The Bank of New York, as trustee; the Common Securities Guarantee Agreement to be entered into between Unocal Corporation and The Bank of New York, as trustee; the First Supplemental Indenture, supplementing the Base Indenture, to be entered into between Unocal Corporation and The Bank of New York, as trustee; the Dealer Manager Agreement relating to the Convertible Preferred Unocal Corporation August 7, 1996 Page 2 Securities among Unocal Corporation, the Trust, Morgan Stanley & Co. Incorporated and Goldman, Sachs & Co. (the "Dealer Manager Agreement"); the Registration Statement; and a certificate of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as drafts or copies or forms of documents to be executed and the legal capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion: (i) the due formation or organization, valid existence and good standing of each entity (other than the Trust) that is a party to any of the documents reviewed by us under the laws of the jurisdiction of its respective formation or organization; (ii) the due authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced documents (including, without limitation, the due authorization, execution and delivery of the Governing Instrument and the Dealer Manager Agreement prior to the first issuance of Convertible Preferred Securities); (iii) that no event has occurred subsequent to the filing of the Certificate that would cause a dissolution or liquidation of the Trust under the Original Governing Instrument or the Governing Instrument, as applicable; (iv) that the activities of the Trust have been and will be conducted in accordance with the Original Governing Instrument or the Governing Instrument, as applicable, and the Delaware Business Trust Act, 12 Del. C. (S) 3801 et seq. (the "Delaware Act"); (v) that the Company, as Sponsor, - ---- -- -- ---- will issue and exchange Debentures in the same aggregate principal amount as the aggregate stated liquidation amount of the Common Securities and the Convertible Preferred Securities to be exchanged therefor in accordance with the terms and conditions of the Governing Instrument, Registration Statement and Dealer Manager Agreement; (vi) that each Person that will acquire Convertible Preferred Securities will validly tender shares of $3.50 Convertible Preferred Stock of the Company in exchange therefor, that such shares of $3.50 Convertible Preferred Stock will be duly accepted, and that such Person will duly receive Convertible Preferred Securities Certificates in consideration thereof, all in accordance with the terms and conditions of the Governing Instrument, Registration Statement and Dealer Manager Agreement and that the Convertible Preferred Securities are otherwise issued and sold to the Convertible Preferred Securities Holders in accordance with the terms, conditions, requirements and procedures set forth in the Governing Instrument, Registration Statement and Dealer Manager Agreement; and (vii) that the documents examined by us are in full force and effect, express the entire understanding of the parties thereto with respect to the subject matter thereof and have not been modified, supplemented or otherwise amended, except as herein referenced. No opinion is expressed with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. We express no opinion as to, and assume no responsibili- Unocal Corporation August 7, 1996 Page 3 ty for, the Registration Statement or any other offering materials relating to the Convertible Preferred Securities. As to any fact material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained. Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that: 1. The Trust is a duly created and validly existing business trust in good standing under the laws of the State of Delaware. 2. The Convertible Preferred Securities, upon issuance, will constitute validly issued and, subject to the qualifications set forth in paragraph 3 below, fully paid and nonassessable beneficial interests in the assets of the Trust. 3. Under the Delaware Act and the terms of the Governing Instrument, each Convertible Preferred Security Holder of the Trust, in such capacity, will be entitled to the same limitation of personal liability as that extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; provided, however, we express no opinion with respect to the liability of any Convertible Preferred Security Holder who is, was or may become a named Trustee of the Trust. Notwithstanding the foregoing, we note that pursuant to Section 11.4 of the Governing Instrument, the Trust may withhold amounts otherwise distributable to a Holder and pay over such amounts to the applicable jurisdictions in accordance with federal, state and local law and any amount withheld will be deemed to have been distributed to such Holder and that, pursuant to the Governing Instrument, Convertible Preferred Security Holders may be obligated to make payments or provide indemnity or security under the circumstances set forth therein. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name and reference to our opinion under the heading "LEGAL MATTERS" in the Prospectus forming a part thereof. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts, and on our review of the above referenced documents and the application of Delaware law as the same exist as of the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of Unocal Corporation August 7, 1996 Page 4 any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. This opinion is intended solely for the benefit of the addressee hereof in connection with the matters contemplated hereby and may not be relied on by any other person or entity or for any other purpose without our prior written consent. Very truly yours, /s/ MORRIS, NICHOLS, ARSHT & TUNNELL EX-8.1 7 OPINION OF MILLER & CHEVALIER, CHARTERED EXHIBIT 8.1 [LETTERHEAD OF MILLER & CHEVALIER, CHARTERED] MILLER & CHEVALIER, CHARTERED 655 15TH STREET, N.W., SUITE 900 WASHINGTON, D.C. 20005 August 7, 1996 Unocal Corporation 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Unocal Capital Trust 2141 Rosecrans Avenue, Suite 4000 El Segundo, California 90245 Re: Unocal Capital Trust - Trust Convertible Preferred Securities ------------------------------------------------------------- Dear Sir or Madam: We have acted as tax counsel to Unocal Corporation and Unocal Capital Trust and in that connection have reviewed the registration statement on Form S-4 (File Nos. 333-09137 and 333-09137-01) filed by you with the Securities and Exchange Commission on July 30, 1996, as amended by Pre-Effective Amendment No. 1 to be filed on August 7, 1996 with respect to Unocal Corporation's offer to exchange Trust Convertible Preferred Securities of Unocal Capital Trust (the "Trust Convertible Preferred Securities") for $3.50 Convertible Preferred Stock of Unocal Corporation. This will confirm that, in our opinion, the consequences described under the heading "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" in the Prospectus included in such registration statement are the material United States federal income tax consequences of acquiring by exchange, owning, and disposing of the Trust Convertible Preferred Securities under present law and that the descriptions contained under that heading, to the extent that such descriptions relate to matters of law or legal conclusion, are fair, complete, and accurate in all material respects. Our opinion is subject to the qualifications stated in the first paragraph under that heading. It is also our opinion that Unocal Capital Trust will be treated as a "grantor trust" for federal income tax purposes under existing law. We consent to the references to us and this opinion in Unocal Corporation Unocal Capital Trust August 7, 1996 Page 2 the Prospectus and to the filing of this opinion as an exhibit to the registration statement. Very truly yours, /s/ MILLER & CHEVALIER, CHARTERED EX-23.1 8 CONSENT OF COOPERS & LYBRAND LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in this Pre-Effective Amendment No. 1 to the 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 August 6, 1996 -----END PRIVACY-ENHANCED MESSAGE-----