AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 2002
REGISTRATION NO. 333-68592
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CUMMINS INC.
CUMMINS CAPITAL TRUST I
(Exact name of registrant as specified in its charter)
INDIANA 35-0257090
DELAWARE 35-6720159
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation of organization)
500 JACKSON STREET, BOX 3005
COLUMBUS, INDIANA 47202-3005
(812) 377-5000
(Address, including zip code, and telephone number, including area code,
of Cummins Inc.'s principal executive offices)
------------------------
MARYA M. ROSE, ESQ.
VICE PRESIDENT--GENERAL COUNSEL AND SECRETARY
CUMMINS INC.
500 JACKSON STREET, BOX 3005
COLUMBUS, INDIANA 47202-3005
(812) 377-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPY TO:
WILLIAM J. WHELAN, III, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement, as determined
by the Registrants.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT(5) OFFERING PRICE(5) FEE*(6)
7% Convertible Cumulative
Quarterly Income Preferred
Securities of Cummins
Capital Trust I ("preferred
securities")................ 6,000,000 $50 $300,000,000 $75,000
7% Junior Subordinated
Convertible Debentures of
Cummins Inc.
("debentures").............. (2) N/A N/A N/A
Common Stock of Cummins Inc.
("common stock")............ (3) N/A N/A N/A
Guarantee of the Preferred
Securities of Cummins
Capital Trust I by Cummins
Inc. ("preferred securities
guarantee")................. (4) N/A N/A N/A
TOTAL......................... $300,000,000 $75,000
* Previously paid on August 29, 2001.
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act.
(2) $300,000,000 in aggregate principal amount of junior subordinated
convertible debentures were issued and sold to Cummins Capital Trust I (the
"trust") in connection with the issuance by the trust of 6,000,000 of its
preferred securities. The junior subordinated convertible debentures may be
distributed, under certain circumstances, to the holders of preferred
securities for no additional consideration.
(3) 6,311,400 shares of common stock are issuable initially upon conversion of
the preferred securities being registered hereunder at the conversion rate
of 1.0519 shares of common stock for each preferred security. An
indeterminate number of shares of common stock may be issuable upon
conversion of the preferred securities registered hereunder, including such
shares as may be issuable pursuant to antidilution adjustments. The common
stock issuable upon conversion of the preferred securities, if issued, will
be issued for no additional consideration.
(4) Includes the rights of holders of the preferred securities of the trust
under the preferred securities guarantee and back-up undertakings,
consisting of obligations by Cummins Inc. to provide certain indemnities in
respect of, and pay and be responsible for certain expenses, costs,
liabilities, and debts of the trust and such other obligations of
Cummins Inc. set forth in the amended and restated trust agreement and the
junior subordinated convertible debentures indenture, in each case as
further described in the Registration Statement. No separate consideration
will be received for the preferred securities guarantee or any back-up
undertakings.
(5) Exclusive of accrued interest and distributions, if any.
(6) Calculated pursuant to Rule 457 of the rules and regulations under the
Securities Act.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SUBJECT TO COMPLETION DATED NOVEMBER 25, 2002
PROSPECTUS
6,000,000 Preferred Securities
[LOGO]
CUMMINS CAPITAL TRUST I
7% Convertible Cumulative Quarterly Income Preferred Securities
(Convertible QUIPS(SM)* securities)
(liquidation preference $50 per preferred security)
guaranteed to the extent set forth herein by, and convertible into common stock
of,
CUMMINS INC.
---------------
The selling securityholders identified in this prospectus may offer from
time to time up to 6,000,000, 7% convertible cumulative quarterly income
preferred securities, referred to as preferred securities. The preferred
securities represent undivided beneficial ownership interests in the assets of
Cummins Capital Trust I, or the trust. Cummins Inc., or Cummins, owns all of the
beneficial interests in the assets of the trust represented by the common
securities of the trust. The trust invested the proceeds of the original
offering in 7% junior subordinated convertible debentures due June 15, 2031 of
Cummins, referred to in this prospectus as the debentures.
A brief description of the preferred securities can be found under "Summary
Information--Q & A" beginning on page 3 and under "Summary of Terms" beginning
on page 5.
The selling securityholders may sell these securities from time to time
directly to purchasers or through agents, underwriters or dealers. The names of
any agents or underwriters involved in the sale of these securities and any
applicable agent's commission, dealer's purchase price or underwriter's discount
will be set forth in a supplement to this prospectus. If required, the names of
any other selling securityholders will be set forth in a post-effective
amendment to the registration statement of which this prospectus is a part.
Neither Cummins nor the trust will receive any proceeds from the sale of
these securities by the selling securityholders. Neither Cummins nor the trust
will pay any underwriting discounts or commissions in the offering of these
securities by the selling securityholders.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
YOU SHOULD CONSIDER BEFORE INVESTING IN THE PREFERRED SECURITIES.
------------------------
OFFERING PRICE: $50 PER PREFERRED SECURITY
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
* QUIPS is a servicemark of Goldman, Sachs & Co.
------------------------------
The date of this prospectus is , 2002.
You should rely only on the information contained in or incorporated by
reference in this prospectus. Neither Cummins nor the trust has authorized
anyone to provide you with different information. The selling securityholders
are not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information contained in or
incorporated by reference in this prospectus is accurate as of any date other
than the date on the front of this prospectus.
--------------------
TABLE OF CONTENTS
--------------------
Page
--------
Available Information................ i
Incorporation of Certain Documents by
Reference.......................... ii
Special Note Regarding Forward-
Looking Statements................. iii
Recent Developments.................. 1
Summary Information--Q&A............. 3
Summary of Terms..................... 5
Risk Factors......................... 9
Use of Proceeds...................... 13
Cummins Capital Trust I.............. 13
Cummins Inc.......................... 14
Accounting Treatment................. 18
Ratio of Earnings to Fixed Charges... 18
Price Range of Common Stock and
Dividends.......................... 18
Description of the Preferred
Securities......................... 19
Page
--------
Description of the Debentures........ 41
Description of the Preferred
Securities Guarantee............... 52
Relationship Among the Preferred
Securities, the Debentures and the
Preferred Securities Guarantee..... 56
Description of Cummins Common Stock.. 58
United States Federal Income Tax
Considerations..................... 60
Certain ERISA Considerations......... 64
Selling Securityholders.............. 67
Plan of Distribution................. 71
Legal Matters........................ 72
Experts.............................. 72
Appendix A........................... A-1
AVAILABLE INFORMATION
Cummins is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. In accordance with the
Exchange Act, Cummins files reports, proxy statements and other information with
the Securities and Exchange Commission, or the SEC. Such reports, proxy
statements and other information may be inspected and copied at the following
public reference facility maintained by the SEC:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington D.C. 20549
You can obtain information on the operation of the SEC's public reference
facilities by calling the SEC at 1-800-SEC-0330. You may also access the
information that Cummins files with the SEC electronically by means of the SEC's
Internet web site located at http://www.sec.gov. In addition, such reports and
other information may be inspected at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005 and the Pacific Exchange
Incorporated, 301 Pine Street, Suite 1104, San Francisco, California 94104.
This prospectus is part of a registration statement on Form S-3 filed with
the SEC, which may be inspected without charge at the SEC's public reference
facilities described above. This prospectus does not contain all of the
information contained in the registration statement and all of the exhibits and
schedules thereto. For further information about Cummins or the trust, please
see the complete registration statement. Any statement made in this prospectus
concerning the
i
contents of any agreement or other document is only a summary of the actual
document. If we have filed any agreement or other document as an exhibit to the
registration statement, you should read the exhibit for a more complete
understanding of the document or the matter involved. Each statement regarding
an agreement or other document is qualified in its entirety by reference to the
actual document.
No separate financial statements of the trust have been included herein.
Cummins does not consider that such financial statements would be material to
holders of the preferred securities because:
- all of the voting securities of the trust are owned, directly or
indirectly, by Cummins, a reporting company under the Exchange Act;
- the trust has no independent operations and was established for the sole
purpose of issuing securities representing undivided beneficial interests
in the assets of the trust and investing the proceeds thereof in
debentures issued by Cummins; and
- the obligations of the trust with respect to the preferred securities are
fully and unconditionally guaranteed by Cummins as described herein.
See "Description of the Preferred Securities," "Description of the
Debentures," "Description of the Preferred Securities Guarantee" and
"Relationship Among the Preferred Securities, the Debentures and the Preferred
Securities Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Cummins hereby incorporates by reference the documents listed below and any
future filings it makes with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Exchange Act prior to the completion of this offering:
- Cummins' Annual Report on Form 10-K for the year ended December 31, 2001;
- Cummins' Quarterly Report on Form 10-Q for the quarter ended March 31,
2002;
- Cummins' Quarterly Report on Form 10-Q for the quarter ended June 30,
2002;
- Cummins' Quarterly Report on Form 10-Q for the quarter ended
September 29, 2002;
- Cummins' Current Report on Form 8-K, filed April 3, 2002;
- Cummins' Current Report on Form 8-K, filed June 5, 2002;
- Cummins' Current Report on Form 8-K, filed August 14, 2002;
- Cummins' Current Report on Form 8-K, filed October 28, 2002;
- Cummins' Current Report on Form 8-K, filed November 6, 2002; and
- Cummins' Current Report on Form 8-K, filed November 20, 2002.
The information incorporated by reference is an important part of this
prospectus and information that Cummins files later with the SEC that is deemed
to be incorporated by reference herein will automatically update and supersede
this information. You may request a copy of these filings at no cost, by writing
or telephoning the office of Chip Wochumurka, Vice President--Investor Relations
and Strategic Planning, Cummins Inc., 500 Jackson Street, Box 3005 (Mail code
60118), Columbus, Indiana 47202-3005, telephone number (812) 377-3121.
Cummins will mail any incorporated documents you request by first class mail
or another equally prompt means.
ii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Any statements in this prospectus about Cummins' expectations, beliefs,
plans, objectives, assumptions or future events or performance are not
historical facts and are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, also referred to as the Securities
Act, and Section 21E of the Exchange Act.
These statements are often, but not always, made through the use of words or
phrases such as "will likely result," "expect," "will continue," "anticipate,"
"estimate," "intend," "plan," "projection," "would" and "outlook." Accordingly,
these statements involve estimates, assumptions and uncertainties that could
cause actual results to differ materially from those expressed in them. Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout this document. The following cautionary statements
identify important factors that could cause Cummins' actual results to differ
materially from those projected in the forward-looking statements made in this
document. Factors that could cause or contribute to such differences include,
but are not limited to:
- increasing price and product competition by foreign and domestic
competitors, including new entrants;
- rapid technological developments and changes;
- the ability to continue to introduce competitive new products on a timely,
cost-effective basis;
- the mix of products;
- the achievement of lower costs and expenses;
- domestic and foreign governmental and public policy changes, including
environmental regulations;
- protection and validity of patent and other intellectual property rights;
- reliance on large customers;
- technological, implementation and cost/financial risks in increasing use
of large, multi-year contracts;
- the cyclical nature of Cummins' business;
- the outcome of pending and future litigation and governmental proceedings;
- continued availability of financing, financial instruments and financial
resources in the amounts, at the times and on the terms required to
support Cummins' future business; and
- management's ability to manage risks that result from these and other
factors.
The forward-looking statements contained herein are based on management's
current views about future events. Those statements speak only as of the date on
which they are made. Cummins does not intend to update forward-looking
statements and disclaims any obligation or undertaking to update or revise any
such statements to reflect any change in its expectations or any change in
events, conditions, circumstances or assumptions on which forward-looking
statements are based.
iii
CUMMINS INC.
Cummins is a leading worldwide designer and manufacturer of diesel engines,
ranging from 55 to 3,500 horsepower, and the largest producer of commercial
diesel engines above 50 horsepower. Cummins also produces natural gas engines
and engine components and subsystems. Cummins provides power and components for
a wide variety of equipment in its key businesses: power generation, filtration
and engines.
Cummins sells its products to original equipment manufacturers, or OEMs,
distributors and other customers worldwide. The company has manufacturing
facilities worldwide, including major operations in Europe, India, Mexico, China
and Brazil. Parts distribution centers in Brazil, Mexico, Australia, Singapore,
China, India and Belgium are strategically located to supply service parts to
Cummins' extensive customer base. Cummins supports its customer base with a
significant global distribution system of more than 500 independent distributors
and nearly 5,000 dealers in 131 countries.
In 2001, approximately 54% of net sales were in the United States. Major
international markets include Asia and Australia (16% of net sales); Europe and
the CIS (15% of net sales); Mexico and Latin America (8% of net sales), Canada
(5% of net sales) and Africa and the Middle East (2% of net sales).
RECENT DEVELOPMENTS
NEW REVOLVING CREDIT FACILITY
We are offering the notes in connection with a refinancing plan in which we
replaced our prior revolving credit facility with a new $385 million revolving
credit facility. We closed on the new revolving credit facility on November 5,
2002. The new revolving credit facility provides for aggregate borrowings of up
to $385 million, and is available on a revolving basis for a period of three
years following the closing of the facility. We and a number of our subsidiaries
are permitted to borrow and obtain letters of credit under the new revolving
credit facility, although the aggregate amount of borrowings incurred by, and
letters of credit issued for the benefit of, our subsidiaries under the new
revolving credit facility may not exceed $60 million at any one time
outstanding. We guarantee all borrowings of our subsidiaries under the new
revolving credit facility. In addition, our principal domestic subsidiaries
guarantee all borrowings under the new revolving credit facility, although
certain of those guarantees are limited by the terms of the indenture governing
the notes and the terms of the existing public indenture governing a number of
our existing notes and debentures. Our obligations and the obligations of our
subsidiaries under the new revolving credit facility are secured by security
interests in substantially all of our assets and the assets of our domestic
subsidiaries that guarantee obligations under the facility (other than shares of
stock or indebtedness of our subsidiaries that are "restricted subsidiaries"
under the terms of our existing public indenture and other than assets that are
considered "principal properties" of us or our "restricted subsidiaries" under
the terms of our existing public indenture).
REPAYMENT OF ESOP TRUST NOTES
On November 5, 2002, we repaid all of the outstanding 5.61% notes due 2010
issued by the trust related to our Employee Stock Ownership Plan (ESOP) (the
"ESOP Trust Notes"). The aggregate redemption price was approximately
$51 million, plus redemption premiums and accrued interest of approximately
$9 million. We financed our repayment of the ESOP Trust Notes with the sale of
approximately $42 million of accounts receivable under our accounts receivable
securitization program and approximately $18 million of cash on hand.
1
EPA ENGINE CERTIFICATIONS
On September 30, 2002, we announced that our 11 liter ISM engine had
received certification from the U.S. Environmental Protection Agency (EPA) for
compliance with new stringent emissions standards for heavy-duty diesel engines.
This certification was the third that we had received from the EPA under these
standards. On April 2, 2002, our 15 liter ISX diesel truck engine was certified
as in compliance with the new standards, followed by the certification of our
5.9 liter ISB engine on August 15, 2002. The new emissions standards for
heavy-duty diesel engines implemented the terms of a consent decree that we and
a number of other engine manufacturers entered into with the EPA, the U.S.
Department of Justice (DOJ) and the California Air Resources Board (CARB) in
response to concerns raised by these agencies regarding the level of nitrogen
oxide emissions from heavy-duty diesel engines, These new emissions standards
went into effect in the United States on October 1, 2002.
2
SUMMARY INFORMATION--Q&A
The following information supplements, and should be read together with, the
information contained in other parts of this prospectus. This summary highlights
selected information from this prospectus to help you understand the preferred
securities and the related preferred securities guarantee and debentures. You
should carefully read this prospectus to understand fully the terms of the
preferred securities as well as the tax and other considerations that are
important to you in making a decision about whether to invest in the preferred
securities. You should pay special attention to the "Risk Factors" section
beginning on page 9 to determine whether an investment in the preferred
securities is appropriate for you.
WHAT ARE THE PREFERRED SECURITIES?
Each preferred security represents an undivided beneficial ownership
interest in the assets of the trust. Each preferred security entitles the holder
to receive quarterly cash distributions as described in this prospectus.
WHO IS THE TRUST?
The trust is a Delaware business trust and a subsidiary of Cummins. Its
principal offices are located at 500 Jackson Street, Box 3005, Columbus, Indiana
47202-3005, and its telephone number is (812) 377-5000. All of the common
securities of the trust are owned by Cummins. The trust used the proceeds from
the sales of its preferred securities and common securities to buy Cummins' 7%
junior subordinated convertible debentures due June 15, 2031, which have the
same financial terms as the preferred securities.
WHO IS CUMMINS INC.?
Cummins was incorporated on February 3, 1919, under the laws of the State of
Indiana. Cummins' principal executive offices are located at 500 Jackson Street,
Box 3005, Columbus, Indiana 47202-3005, and its telephone number is
(812) 377-5000.
WHEN WILL YOU RECEIVE DISTRIBUTIONS ON THE PREFERRED SECURITIES?
If you hold preferred securities, you are entitled to receive cumulative
cash distributions at an annual rate of 7% of the liquidation amount of $50 per
preferred security. Distributions, which began to accumulate from the date the
trust first issued the preferred securities, are to be paid quarterly in arrears
on March 15, June 15, September 15 and December 15 of each year, beginning
September 15, 2001. The trust's only source of cash to make payments on the
preferred securities is payments on the debentures it purchased from Cummins.
WHEN CAN PAYMENT OF YOUR DISTRIBUTIONS BE DEFERRED?
Cummins may defer interest payments on the debentures, on one or more
occasions, for up to 20 consecutive quarters, subject to certain exceptions. See
"Description of the Debentures--Option to Extend Interest Payment Period." If
Cummins defers interest payments on the debentures, the trust will also defer
distributions on the preferred securities. During any deferral period, with
limited exceptions, Cummins will not be permitted to:
- declare or pay any dividend or make any distributions on its capital stock
or redeem, purchase, acquire or make a liquidation payment on any of its
capital stock; or
- make an interest, principal or premium payment on, or repay, repurchase or
redeem, any of its debt securities (including guarantees of indebtedness)
that rank equally with or junior to the debentures.
3
WHEN CAN YOU CONVERT THE PREFERRED SECURITIES INTO CUMMINS COMMON STOCK?
You can convert each preferred security into common stock of Cummins at a
rate of 1.0519 shares of Cummins common stock for each preferred security at any
time before 5:00 p.m., New York City time, on June 13, 2031. The conversion
ratio, which is subject to adjustment in certain circumstances, is equivalent to
a conversion price of $47.53 per share of Cummins common stock. The last
reported sale price of the Cummins common stock on the NYSE Composite Tape on
January 8, 2002 was $38.76 per share. See "Description of the Preferred
Securities--Conversion Rights."
WHEN CAN THE TRUST REDEEM THE PREFERRED SECURITIES?
The trust must redeem all of the outstanding trust securities when the
debentures are paid at maturity on June 15, 2031. In addition, Cummins can
redeem the debentures before their maturity, on one or more occasions, in whole
or in part at the prices specified herein at any time on or after June 15, 2006.
Furthermore, Cummins may redeem the debentures at any time at 100% of their
principal amount if specific changes in tax or investment company law occur and
other conditions are satisfied, as more fully described under "Description of
the Preferred Securities--Special Event Redemption."
If Cummins redeems any debentures before their maturity, the trust will use
the cash it receives from the redemption of the debentures to redeem, in the
same proportion, preferred securities and common securities of the trust having
a combined liquidation amount equal to the principal amount of the debentures
redeemed.
WHAT IS CUMMINS' GUARANTEE OF THE PREFERRED SECURITIES?
Cummins has irrevocably guaranteed that if a payment on the debentures is
made to the trust but, for any reason, the trust does not make the corresponding
distribution or redemption payment to the holders of the preferred securities,
then Cummins will make payments directly to the holders of the preferred
securities. The guarantee does not cover payments when the trust does not have
sufficient funds to make payments on the preferred securities. Your remedy in
such an event is as described under "Relationship Among the Preferred
Securities, the Debentures and the Preferred Securities Guarantee." Cummins'
obligations under the guarantee are subordinated as described under "Description
of the Preferred Securities Guarantee--Status of the Preferred Securities
Guarantee."
WHEN COULD THE DEBENTURES BE DISTRIBUTED TO YOU?
Cummins has the right to terminate the trust at any time. If Cummins
terminates the trust, the trust will liquidate by distributing the debentures to
holders of the preferred securities and common securities of the trust on a
proportionate basis. See "Description of the Preferred Securities--Distribution
of Debentures" and "Description of the Debentures--Distribution of Debentures."
DO HOLDERS OF THE PREFERRED SECURITIES HAVE ANY VOTING RIGHTS?
Generally, holders of the preferred securities do not have any voting
rights. See "Description of the Preferred Securities--Voting Rights."
IN WHAT FORM WERE THE PREFERRED SECURITIES ISSUED?
The preferred securities are represented by one or more global certificates
that have been deposited with and registered in the name of The Depository Trust
Company or its nominee. This means that holders of the preferred securities have
not received certificates for their preferred securities.
4
SUMMARY OF TERMS
Securities Offered............ 6,000,000 convertible cumulative quarterly income preferred
securities.
Issuer........................ Cummins Capital Trust I, a Delaware business trust. The only
assets of the trust consist of the 7% junior subordinated
convertible debentures due June 15, 2031 of Cummins.
Guarantor..................... Cummins Inc., an Indiana corporation.
Distributions................. Distributions on the preferred securities began to accrue
from the date of original issuance and are payable at an
annual rate of 7% of the liquidation preference of $50 per
preferred security. Subject to the deferral provisions
described below, distributions are cumulative payable
quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing September 15, 2001.
Because distributions on the preferred securities are
considered interest for United States Federal income tax
purposes, corporate holders are not entitled to a
dividends-received deduction.
Distribution Deferral
Provisions.................. The ability of the trust to pay distributions on the
preferred securities depends on the receipt of interest
payments from Cummins on the debentures. As long as Cummins
does not default in the payment of interest on the
debentures, Cummins has the right to defer payments of
interest on the debentures for up to 20 consecutive
quarterly interest periods. Cummins may not, however, defer
interest payments beyond the maturity of the debentures. If
Cummins defers the payment of interest on the debentures,
the trust will defer the quarterly distributions on the
preferred securities for a corresponding period. Upon the
termination of a deferral period, payment will become due on
all accrued and unpaid amounts on the debentures. Upon such
payment, the trust will be required to pay all accumulated
and unpaid distributions to holders of the preferred
securities. If a deferral of an interest payment occurs, the
holders of the preferred securities will accrue income for
United States Federal income tax purposes notwithstanding
the deferral of the corresponding cash distribution.
Rights Upon Deferral of
Distributions............... During any period in which interest payments on the
debentures are deferred, interest will accrue on the
debentures and quarterly distributions will continue to
accumulate additional distributions at an annual rate of 7%,
compounded quarterly. During any such period, Cummins has
agreed not to declare or pay any dividend or make any
distribution on its capital stock or redeem, purchase,
acquire or make a liquidation payment with respect to its
capital stock or make any interest, principal or premium
payment on, or repay, repurchase or redeem, any of its debt
securities (including guarantees) that rank equally with or
junior
5
to the debentures. The foregoing does not apply to any stock
dividends payable on Cummins common stock.
Conversion Rights............. Each preferred security is convertible at any time before
5:00 p.m., New York City time, on June 13, 2031 (or, in the
case of preferred securities called for redemption, before
the close of business on the business day before the
applicable redemption date) at the option of the holder into
shares of Cummins common stock, at the rate of 1.0519 shares
of Cummins common stock for each preferred security
(equivalent to a conversion price of $47.53 per share of
Cummins common stock), subject to adjustment in certain
circumstances. The reported last sale price of Cummins
common stock on the NYSE composite tape on November 20, 2002
was $28.09 per share. In connection with any preferred
security presented for conversion, the conversion agent will
exchange these preferred securities for the appropriate
principal amount of the debentures held by the trust and
immediately convert these debentures into Cummins common
stock. No fractional shares of Cummins common stock will be
issued as a result of a conversion. Instead, fractional
interests will be paid by Cummins in cash.
Liquidation Amount............ If the trust is liquidated, you will be entitled to receive
$50 per preferred security plus an amount equal to any
accrued and unpaid distributions thereon to the date of
payment, unless the debentures are distributed to holders.
Optional Redemption........... Cummins may redeem the debentures, in whole or in part, for
cash from time to time on or after June 15, 2006 at the
prices specified herein plus any accrued and unpaid interest
thereon. If Cummins redeems any debentures, the trust must
redeem preferred securities and common securities of the
trust having a liquidation amount equal to the principal
amount of the debentures so redeemed at a redemption price
corresponding to the redemption price of the debentures. The
preferred securities do not have a stated maturity date,
although they are subject to mandatory redemption upon the
repayment of the debentures at their stated maturity
(June 15, 2031), upon acceleration, earlier redemption, or
otherwise.
Special Event Redemption...... Cummins may redeem the debentures in whole upon the
occurrence of an investment company event (as defined in
"Description of the Preferred Securities--Special Event
Redemption") or in whole or in part upon the occurrence of a
tax event (as defined in "Description of the Preferred
Securities--Special Event Redemption") at a redemption price
equal to 100% of the principal amount of the debentures to
be redeemed plus accrued and unpaid interest thereon. If
Cummins redeems any debentures, the trust must redeem the
equivalent amount of preferred securities and common
securities of the trust at the liquidation amount thereof
plus any accrued and unpaid distributions thereon.
6
Termination of the Trust...... Cummins has the right, at any time, to terminate the trust
and, after satisfaction of the creditors of the trust as
provided by applicable law, cause the trust to distribute
the debentures to holders of its preferred securities and
common securities on a proportionate basis.
Additional Sums............... Cummins is required to pay all additional taxes and other
expenses of the trust. See "Description of the Debentures--
Expenses of the Trust." Consequently, if a tax event occurs
and Cummins does not elect to redeem the debentures or
liquidate the trust, the amount of distributions then due
and payable by the trust on the outstanding preferred
securities will not be reduced as a result of the tax event.
Debentures of Cummins......... The debentures mature on June 15, 2031 and bear interest at
the rate of 7% per annum, payable quarterly in arrears. As
long as Cummins is not in default with its interest payments
on the debentures, Cummins has the right, on one or more
occasions, to defer payments of interest on the debentures
for up to 20 consecutive quarterly interest periods.
However, no interest may be deferred beyond the stated
maturity of the debentures. During any deferral period, no
interest will be due, but interest will continue to accrue
and compound quarterly. Upon termination of any deferral
period, payment will become due on all accrued and unpaid
amounts. After the payment of all amounts then due, Cummins
may commence a new deferral period, subject to the
conditions of this paragraph. During any deferral period,
Cummins will be prohibited from declaring or paying
dividends or making distributions on any of its capital
stock or redeeming, purchasing, acquiring or making a
liquidation payment on any of its capital stock or making
any interest, principal or premium payment on or repaying,
repurchasing or redeeming any of its debt securities
(including guarantees) that rank equally with or junior to
the debentures; provided, among other things, that the
foregoing shall not apply to any stock dividends payable on
Cummins common stock. The payment of principal and interest
on the debentures will rank junior to all present and future
senior and subordinated debt of Cummins. The indenture,
under which the debentures will be issued, does not limit
the aggregate amount of senior and subordinated debt that
may be incurred by Cummins. The debentures will have
provisions with respect to interest, optional redemption,
special event redemption and conversion and certain other
terms substantially similar to those of the preferred
securities.
Preferred Securities
Guarantee................... Cummins has irrevocably and unconditionally guaranteed, on a
subordinated basis and to the extent set forth herein, the
payment in full of (1) any accrued and unpaid distributions
and the amount payable upon redemption of the preferred
securities to the extent Cummins has made a payment to the
property trustee of interest or principal on the debentures
and (2)
7
generally, the liquidation amount of the preferred
securities to the extent the trust has assets available for
distribution to holders of the preferred securities. The
guarantee is unsecured and is subordinate and junior in
right of payment to all of Cummins' senior and subordinated
debt. The preferred securities guarantee also ranks equal in
right of payment with the most senior preferred or
preference stock issued, from time to time, by Cummins and
ranks equal with any other preferred securities guarantee
issued by Cummins on behalf of holders of preferred
securities issued by any other trust established by Cummins
or its affiliates. The preferred securities guarantee will
be senior to the common stock of Cummins.
Voting Rights; Enforcement
of Rights................... Generally, holders of the preferred securities do not have
any voting rights. If the property trustee fails to enforce
its rights under the debentures or the guarantee trustee
fails to enforce its rights under the preferred securities
guarantee, a record holder of the preferred securities may
institute a legal proceeding directly against Cummins to
enforce these rights without first instituting any legal
proceeding against any other person or entity.
Notwithstanding the foregoing, if an event of default under
the indenture occurs and is continuing and is caused by the
failure of Cummins to pay interest or principal on the
debentures or Cummins has failed to make a payment with
respect to the preferred securities guarantee, a holder of
the preferred securities may directly institute a proceeding
against Cummins for enforcement of that payment.
8
RISK FACTORS
YOUR INVESTMENT IN THE PREFERRED SECURITIES, THE DEBENTURES AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THE PREFERRED SECURITIES OR THE DEBENTURES
WILL INVOLVE SOME RISKS. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING DISCUSSION
OF RISKS AND THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING WHETHER AN
INVESTMENT IN THE PREFERRED SECURITIES IS SUITABLE FOR YOU.
Because the trust will rely on the payments it receives on the debentures to
fund all payments on the preferred securities, and because the trust may
distribute the debentures in exchange for the preferred securities, prospective
purchasers of the preferred securities are making an investment regarding the
debentures as well as the preferred securities. You should carefully review the
information in this prospectus about the preferred securities, the debentures,
preferred securities guarantee and the common stock issuable upon conversion of
the preferred securities or the debentures.
CUMMINS' OBLIGATIONS UNDER THE DEBENTURES AND THE GUARANTEE ARE DEEPLY
SUBORDINATED
Cummins' obligations under the debentures and the preferred securities
guarantee are junior in right of payment to all of its existing and future
senior and subordinated debt. This means that Cummins cannot make any payments
to you on the debentures or the preferred securities guarantee if it is in
default on any of its senior or subordinated debt and does not cure that default
within the applicable grace period or if any senior or subordinated debt becomes
immediately due because of a default and has not yet been paid in full. In
addition, in the event of the bankruptcy, liquidation or dissolution of Cummins,
its assets would be used to pay off its senior and subordinated obligations in
full before any payments would be made on the debentures or the preferred
securities guarantee.
As of September 29, 2002, Cummins had outstanding aggregate senior and
subordinated debt of approximately $1.001 billion. None of the indenture
governing the debentures, the preferred securities guarantee or the trust
agreement limit Cummins' ability to incur additional indebtedness.
In April, 2002, Moody's Investors Service, Inc., or Moody's, lowered
Cummins' ratings for long-term debt to Ba1 from Baa3. In October 2002, Moody's
changed their outlook to "negative" from "stable." On April 24, 2001,
Standard & Poor's Rating Services, or S&P, lowered Cummins' corporate ratings
for long-term debt to BB+ from BBB- and retained a negative outlook.
Debt rated Ba by Moody's is judged to have speculative elements. Debt rated
Ba1 ranks at the highest end of this generic rating category. Debt rated BB by
S&P is regarded as having significant speculative characteristics. Debt rated
BB+ is less vulnerable to nonpayment than other speculative issues.
A rating by Moody's or S&P is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time. All ratings
should be evaluated independently of each other. However, Cummins' credit
ratings influence the cost and availability to Cummins of debt financing. This
may, in turn, affect its earnings and liquidity.
IF CUMMINS DOES NOT MAKE PAYMENTS ON THE DEBENTURES, THE TRUST WILL NOT BE ABLE
TO MAKE DISTRIBUTIONS AND OTHER PAYMENTS ON THE PREFERRED SECURITIES AND THE
PREFERRED SECURITIES GUARANTEE WILL NOT APPLY
The trust's ability to make timely distribution and redemption payments on
the preferred securities is completely dependent upon Cummins making timely
payments on the debentures. If Cummins defaults on the debentures, the trust
will lack funds for the payments on the preferred securities. If this happens,
you will not be able to rely upon the preferred securities guarantee for payment
of such amounts because the preferred securities guarantee only guarantees that
9
Cummins will make distribution and redemption payments on the preferred
securities if the trust has the funds to do so itself but does not. Instead, you
or the property trustee may proceed directly against Cummins for payment of any
amounts due on the debentures.
For more information, see below under the caption "Description of the
Preferred Securities--Enforcement of Certain Rights by Holders of Preferred
Securities."
DISTRIBUTIONS ON THE PREFERRED SECURITIES COULD BE DEFERRED, WHICH MIGHT AFFECT
THE TRADING PRICE OF THE PREFERRED SECURITIES AND WOULD HAVE ADVERSE TAX
CONSEQUENCES FOR YOU
As long as the debentures are not in default, Cummins can, on one or more
occasions, defer interest payments on the debentures for up to 20 consecutive
quarterly periods, but not beyond the maturity date of the debentures. Because
interest payments on the debentures fund distributions on the preferred
securities, each such deferral would result in a corresponding deferral of
distributions on the preferred securities.
Cummins does not intend to defer interest payments on the debentures.
However, if it does so in the future, the preferred securities may trade at a
price that does not reflect fully the value of the accrued but unpaid
distributions. Even if Cummins does not do so, its right to defer interest
payments on the debentures could mean that the market price for the preferred
securities may be more volatile than that of other securities without interest
deferral rights.
If Cummins defers interest payments on the debentures, you will still be
required to accrue interest income for United States Federal income tax purposes
in respect of your proportionate share of the accrued but unpaid interest on the
debentures held by the trust, even if you normally report income when received.
As a result, you will be required to include the accrued interest in your gross
income for United States Federal income tax purposes before receiving any cash
distribution. If you sell your preferred securities before the record date for
the first distribution after a deferral period, you will never receive the cash
related to the accrued interest that you reported for tax purposes.
For more information regarding the tax consequences of purchasing and
holding the preferred securities, see "United States Federal Income Tax
Considerations." You should consult with your own tax advisor regarding the tax
consequences of an investment in the preferred securities.
THE PREFERRED SECURITIES MAY BE REDEEMED PRIOR TO MATURITY; YOU MAY BE TAXED ON
THE PROCEEDS AND YOU MAY NOT BE ABLE TO REINVEST THE PROCEEDS AT THE SAME OR A
HIGHER RATE OF RETURN
The debentures, and therefore the preferred securities, may be redeemed in
whole or, in certain cases, in part on one or more occasions on or after
June 15, 2006, or, at any time upon the occurrence of specified events relating
to changes in tax or investment company law. If redeemed on or after June 15,
2006 and no tax event or investment company event has occurred, the redemption
price will be equal to a specified percentage of the principal amount of the
debentures to be redeemed, plus accrued and unpaid interest thereon. If redeemed
on or after June 15, 2011, or upon the occurrence of a tax event or an
investment company event, the redemption price for the debentures will be equal
to 100% of the principal amount of the debentures to be redeemed, plus accrued
and unpaid interest thereon. See "Description of the Debentures--Optional
Redemption; Special Event Redemption." Upon redemption of the debentures, the
trust must use the redemption price it receives to redeem on a proportionate
basis preferred securities and common securities of the trust having an
aggregate liquidation amount equal to the aggregate principal amount of the
debentures redeemed.
The redemption of the preferred securities would be a taxable event to you
for United States Federal income tax purposes.
10
In addition, you may not be able to reinvest the money that you receive in
the redemption at a rate that is equal to or higher than the rate of return on
the preferred securities.
THERE COULD BE ADVERSE TAX CONSEQUENCES TO YOU IF CUMMINS TERMINATES THE TRUST
AND DISTRIBUTES DEBENTURES TO YOU
Cummins has the right to terminate the trust at any time. If Cummins decides
to exercise its right to terminate the trust, the trust will redeem the
preferred securities and the common securities of the trust by distributing the
debentures to holders of the preferred securities and the common securities on a
proportionate basis. Under current United States Federal income tax law, a
distribution of debentures to you upon the dissolution of the trust should not
be a taxable event to you. However, if the trust is characterized for United
States Federal income tax purposes as an association taxable as a corporation at
the time it is dissolved or if there is a change in law, the distribution of
debentures could be a taxable event to you. See "United States Federal Income
Tax Considerations--Distribution of the Debentures or Cash Upon Liquidation of
the Trust."
THERE COULD BE ADVERSE TAX CONSEQUENCES TO YOU IF YOU HOLD DEBENTURES AND
CUMMINS DISCHARGES THE INDENTURE
Cummins has the right to obtain a discharge of the indenture, subject to
certain limitations, by depositing money or securities in a trust that will
provide money in an amount sufficient to fund all of the required payments on
the debentures. Under United States Federal income tax law, this deposit would
be treated as an exchange of the debentures for other property. Accordingly, if
you hold debentures, you may be required to recognize a gain or loss for United
States Federal income tax purposes. In addition, you may be further required to
recognize income on the property deposited in the trust, which could be
different from the amount that you would recognize if Cummins had not obtained
such a discharge. See "Description of the Debentures--Defeasance, Covenant
Defeasance and Discharge."
SINCE YOUR VOTING RIGHTS WILL BE VERY LIMITED, YOU CANNOT PREVENT THE TRUSTEES
FROM TAKING ACTION YOU MAY NOT AGREE WITH
You will only have limited voting rights. In particular, you may not elect
or remove any trustees.
AN ACTIVE TRADING MARKET FOR THE PREFERRED SECURITIES OR THE DEBENTURES MAY NOT
DEVELOP OR BE SUSTAINED, WHICH COULD ADVERSELY AFFECT THE LIQUIDITY AND PRICE OF
THE PREFERRED SECURITIES AND THE DEBENTURES
There is no existing market for the preferred securities or the debentures
and there can be no assurance as to the ability of the holders to sell their
preferred securities or debentures. Future trading prices of the preferred
securities, the debentures and the common stock of Cummins issuable upon
conversion of the preferred securities or the debentures will depend on many
factors including, among other things, prevailing interest rates, Cummins'
operating results and the market for similar securities. The initial purchasers
have informed the trust and Cummins that the initial purchasers intend to make a
market for the preferred securities offered hereby; however, the initial
purchasers are not obligated to do so and any such market making activity will
be subject to the limits imposed by applicable law and may be discontinued at
any time without notice.
11
OUR FORMER INDEPENDENT PUBLIC ACCOUNTANT, ARTHUR ANDERSEN LLP, HAS BEEN FOUND
GUILTY OF A FEDERAL OBSTRUCTION OF JUSTICE CHARGE, AND YOU MAY BE UNABLE TO
EXERCISE EFFECTIVE REMEDIES AGAINST IT IN ANY LEGAL ACTION.
Our former independent public accountant, Arthur Andersen LLP, provided us
with auditing services for prior fiscal periods through December 31, 2001,
including issuing an audit report to our audited consolidated financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2001 and incorporated by reference in this registration statement.
On June 15, 2002, a jury in Houston, Texas found Arthur Andersen LLP guilty of a
Federal obstruction of justice arising from the Federal government's
investigation of Enron Corp. On August 31, 2002, Arthur Andersen LLP ceased
practicing before the SEC.
We are therefore unable to obtain Arthur Andersen LLP's consent to
incorporate by reference its report included in our Annual Report on Form 10-K
for the year ended December 31, 2001. Under these circumstances, Rule 437a under
the Securities Act of 1933 permits us to dispose with the requirement to file
their consent. As a result, you may not have an effective remedy against Arthur
Andersen LLP in connection with a material misstatement or omission with respect
to our audited consolidated financial statements that are incorporated by
reference in this registration statement, any subsequent registration statement
with respect to the securities following this registration statement or any
other filing we may make with the SEC, including any claim under Section 11 of
the Securities Act. In addition, even if you were able to assert such a claim,
as a result of its conviction and other lawsuits, Arthur Andersen LLP may fail
or otherwise have insufficient assets to satisfy claims made by investors or by
us that might arise under Federal securities laws or otherwise relating to any
alleged material misstatement or omission with respect to our audited
consolidated financial statements.
12
USE OF PROCEEDS
Neither the trust nor Cummins will receive any proceeds from the sale of the
securities being offered by the selling securityholders.
CUMMINS CAPITAL TRUST I
The trust is a statutory business trust created on May 3, 2001 under the
Delaware Business Trust Act, as amended, or the Trust Act, pursuant to a
declaration of trust among Cummins, as depositor, the property trustee and the
Delaware trustee. The declaration of trust was amended and restated in its
entirety on June 18, 2001. As amended and restated, the declaration is referred
to in this prospectus as the trust agreement.
The trust was established solely for the following purposes:
- to issue the preferred securities, which represent undivided beneficial
ownership interests in the trust's assets;
- to issue common securities to Cummins in a total liquidation amount equal
to at least 3% of the trust's total capital;
- to invest the proceeds of the issuance and sale of the preferred
securities and the common securities in the debentures issued by Cummins;
and
- to engage in other activities that are directly related to the activities
described above, such as registering the transfer of the preferred
securities.
Pursuant to the trust agreement, there are five initial trustees of the
trust. There are three administrative trustees who are individuals who are
employees or officers of, or who are affiliated with, Cummins. The fourth
trustee, the property trustee, is a financial institution that is unaffiliated
with Cummins. The fifth trustee, the Delaware trustee, is an entity that
maintains its principal place of business in the State of Delaware. Initially,
BNY Midwest Trust Company is acting as property trustee and its affiliate, The
Bank of New York (Delaware), is acting as Delaware trustee until, in each case,
removed or replaced by the holder of the common securities of the trust. BNY
Midwest Trust Company is also acting as the guarantee trustee under the
preferred securities guarantee and as the indenture trustee under the indenture
governing the debentures.
The property trustee holds legal title to the debentures for the benefit of
the holders of the preferred securities and the common securities of the trust,
and the property trustee has the power to exercise all rights, powers and
privileges under the indenture as the holder of the debentures. In addition, the
property trustee maintains exclusive control of a segregated non-interest
bearing bank account to hold all payments made in respect of the debentures for
the benefit of the holders of the preferred securities and the common securities
of the trust. The guarantee trustee holds the preferred securities guarantee for
the benefit of the holders of the preferred securities of the trust. Cummins is
obligated to pay all fees and expenses related to the trust. See "Description of
the Debentures--Expenses of the Trust."
Because the trust was established only for the purposes listed above, the
debentures are the trust's sole assets. Payments on the debentures will be the
trust's sole source of income. The trust will only issue one series of preferred
securities.
The place of business and the telephone number of the trust are the
principal executive offices and telephone number of Cummins. See "Summary
Information--Q&A."
13
CUMMINS INC.
OVERVIEW
Cummins is a leading worldwide designer and manufacturer of diesel engines,
ranging from 55 to 3,500 horsepower, and the largest producer of commercial
diesel engines above 50 horsepower. Cummins also produces natural gas engines
and engine components and subsystems. Cummins provides power and components for
a wide variety of equipment in its key businesses: power generation, filtration
and engines.
Cummins sells its products to original equipment manufacturers, or OEMs,
distributors and other customers worldwide. The company has manufacturing
facilities worldwide, including major operations in Europe, India, Mexico, China
and Brazil. Parts distribution centers in Brazil, Mexico, Australia, Singapore,
China, India and Belgium are strategically located to supply service parts to
Cummins' extensive customer base. Cummins supports its customer base with a
significant global distribution system of more than 500 independent distributors
and nearly 5,000 dealers in 131 countries.
In 2001, approximately 54% of net sales were in the United States. Major
international markets include Asia and Australia (16% of net sales); Europe and
the CIS (15% of net sales); Mexico and Latin America (8% of net sales), Canada
(5% of net sales) and Africa and the Middle East (2% of net sales).
POWER GENERATION BUSINESS
The Power Generation business segment represented 24% of Cummins' net sales
in 2001. Cummins offers reciprocating engine-based power generation systems
worldwide with a power range of 2 kilowatts to 2 megawatts for either standby or
prime power applications. Engines are offered with a choice of fuels, including
diesel, natural gas and gasoline. Newage, a subsidiary of Cummins, is a leader
in the alternator industry, supplying alternators with a range of up to 4
megawatts. Newage supplies their products internally as well as to other
generator set assemblers globally.
Cummins' Power Generation business serves a diversified set of customers in
key markets around the world. Standby power solutions are provided to customers
reliant on uninterrupted sources of power and sophisticated backup power
systems. Prime power customers include those in developing countries with less
comprehensive electrical power infrastructures. Cummins is also a key player in
the distributed power generation market, in which the generating capacity is
moved closer to end-users rather than kept solely in large, centralized utility
plants. Cummins is a market leader in recreational vehicle generator sets, which
is a growing market segment, especially in North America, as the population
ages. Cummins' Power Rent business offers the rental of power equipment for both
standby and prime power purposes. Cummins' Power Generation business also
markets service contracts, whereby Cummins sells power by the hour rather than
the actual power-generating equipment. The Power Generation business provides a
range of services including long-term maintenance contracts and turnkey power
solutions including a complete range of maintenance and services.
The Power Generation business is one of the most integrated providers of
power solutions in the world, as it designs and manufactures most of the
components that make up power generation systems, including loose engines,
controls, alternators, transfer switches, and switchgear. Cummins' Power
Generation business not only assembles complete generator sets for its
customers, but also sells the components separately. The Power Generation
business continuously explores emerging technologies such as microturbines and
fuel cells and is leveraging Cummins' experience in building business
partnerships in order to bring to market cost-effective and environmentally
sound power solutions.
14
FILTRATION BUSINESS AND OTHER
The Filtration Business and Other segment accounted for 15% of Cummins' net
sales in 2001. This segment is comprised of the Filtration Business (Fleetguard,
Nelson, Kuss, Universal Silencer), the Holset turbocharger business and
company-owned distributors.
Fleetguard is a leading designer and manufacturer of filters and filtration
systems for heavy-duty equipment. Its products are produced and sold in global
markets, including Europe, North America, South America, India, China, Australia
and the Far East. Nelson designs and manufactures air filtration and exhaust
systems for on- and off-highway applications ranging from heavy-duty equipment
to small engine driven consumer applications. Together, Fleetguard and Nelson
provide advanced, integrated filtration systems, including air intake and
exhaust filtration, emission and noise reduction, engine filtration and mobile
hydraulic filtration systems. The Filtration Business also makes products for
the automotive specialty filtration market and the industrial filtration market
through its Kuss subsidiary, located in Findlay, Ohio, and Universal Silencer,
located in Stoughton, Wisconsin. Filtration Business revenue is split between
first-fit OEM customers (approximately 40%) and the replacement-part business
(approximately 60%).
Holset designs, manufactures and markets turbochargers worldwide. Holset
manufactures in five countries and has sales and distribution across the globe.
Holset provides critical technology for engines to meet worldwide emissions
standards, including variable geometry turbochargers.
Cummins owns 17 distributorships, covering over 25 countries, with most
distributorships located outside of the United States. Most distributors engage
in the selling of engines, generator sets and service parts, as well as perform
service and repair activities on Cummins products. Cummins' distributors serve
the dealers and end users in their territory. The company-owned distributors are
a critical component in the company's overall distribution system.
ENGINE BUSINESS
The Engine Business is Cummins' largest business segment, accounting for 55%
of net sales in 2000. This business provides a broad array of diesel engines
ranging from 3.3 liters to 91 liters, for use in a variety of global end
markets. In addition, through its extensive distribution network, the Engine
Business provides a full range of new and remanufactured parts, engines and
service to support its customer base. Parts and service are a key element of
providing complete power solutions to a diverse set of end users. The Engine
Business organizes its engine, parts and service businesses around the following
end-user focused groups: Light-duty Automotive; Medium-duty Truck and Bus;
Heavy-duty Truck; Construction, Agriculture and Marine; and High Horsepower.
LIGHT-DUTY AUTOMOTIVE
Cummins is the exclusive provider of diesel engines used by DaimlerChrysler
in its Dodge Ram pickup trucks. Cummins has a thirteen-year relationship with
DaimlerChrysler, and in 2000 a record 119,000 engines were shipped for use in
the Dodge Ram. Cummins' light-duty automotive engines are also being used in
Brazil by Ford. Cummins is the leading manufacturer of diesel engines for use in
the Class A motorhome segment of the recreational vehicle market. Cummins holds
a 29% share of the overall class A motorhome market and a 76% share of the
diesel segment. This market is predominantly North American.
MEDIUM-DUTY TRUCK AND BUS MARKET
Cummins is a supplier of diesel engines to the global market for medium-duty
trucks and buses. In the North American diesel-powered medium-duty truck engine
market, the company held a 19% share in 2000, and its share in Europe and Latin
America continues to grow. Cummins is the
15
worldwide market share leader in the transit bus market. Cummins offers natural
gas-powered engines, primarily to transit and school bus markets, where demand
for alternative fuels is growing.
HEAVY-DUTY TRUCK MARKET
Cummins supplies the most modern diesel engine product line in the industry
to the global heavy-duty truck market. All major heavy-duty truck manufacturers
in North America offer Cummins' heavy-duty diesel engines as standard or
optional power. In 2000, Cummins held a 28% share of the North American
heavy-duty truck engine market. Cummins also has significant market shares
overseas, including Europe and Latin America, and is the market leader in
Mexico, South Africa and Australia.
CONSTRUCTION, AGRICULTURE, MARINE
Cummins engines power a wide variety of equipment in construction,
agricultural and marine markets throughout the world. The company's major
construction equipment OEM customers are in North America, Europe, South
America, South Korea and Japan. These OEMs manufacture equipment for a diverse
set of applications that utilize engines from Cummins' complete product range.
Agricultural equipment OEM customers use Cummins' medium- and heavy-duty engines
in their equipment. These OEM customers are primarily in North America, South
America and Europe, serving end-use markets that span the globe. In the marine
market, Cummins holds the lead market position in the North American
recreational boat segment. Cummins engines are sold to both recreational and
commercial boat builders, primarily in North America, Europe and Asia.
HIGH HORSEPOWER
Cummins is also a supplier of diesel engines to mining, rail, government and
petroleum markets. Cummins offers a full product line for mining applications
that compete in all segments from small underground mining equipment up to
400-ton haul trucks. Cummins occupies the number two global position in the
mining segment. Cummins is the market share leader in the worldwide railcar
market, with rail market demand concentrated in Europe and Asia. Cummins' sales
into the government market are concentrated in North America and Europe.
Petroleum markets currently represent a small but growing part of the high
horsepower business.
JOINT VENTURES AND BUSINESS INVESTMENTS
For many years, Cummins has made investments and entered into alliances with
leading business partners in various areas of the world in order to increase its
market penetration, expand its product line, streamline its supply chain, and
develop new technologies.
Cummins is the majority owner of Cummins India Limited, which is publicly
listed on the Bombay Stock Exchange. This business grew out of a partnership
established in 1962 with the Kirloskar family and eventually expanded to include
other local partners. Cummins India Limited produces mid-range, heavy-duty and
high horsepower engines for the Indian and export markets.
Consolidated Diesel Company, located in the United States, is a joint
venture with CNH Global that dates to 1980. This partnership produces midrange
engines and engine products for construction, agriculture and automotive markets
in North America and Europe.
Cummins and Komatsu have formed a broad relationship, including three joint
ventures and numerous exclusive supply arrangements. Two joint ventures were
formed in 1992, one to manufacture Cummins' B Series engines in Japan, the other
to build high horsepower Komatsu-designed engines in the United States. A third
joint venture, established in 1997, is designing next-generation industrial
engines in Japan.
16
Tata Cummins Limited is a joint venture between Cummins and TELCO, the
largest automotive company in India. This joint venture, established in 1992,
manufactures the Cummins B Series engine in India for use in TELCO trucks.
Cummins has entered into a joint venture with China National Heavy Duty
Truck Corporation in Chongqing to manufacture a broad line of Cummins heavy-duty
and high horsepower diesel engines in China. This joint venture was formed in
1995.
Cummins partnered with Dong Feng in 1995 to form a joint venture in China
for the production of Cummins' C Series engine. Cummins has also licensed Dong
Feng to manufacture Cummins' B Series engines.
The European Engine Alliance, established in 1996, is a joint venture
between Cummins and two of the Fiat Group companies--Iveco (trucks and buses)
and CNH Global (agricultural equipment)--to develop a new generation of 4-, 5-
and 6-liter engines based on Cummins 4- and 6-liter B Series engines.
Cummins and Scania have a joint venture to produce fuel systems for
heavy-duty diesel engines. This joint venture was formed in 1999.
In 2001, Cummins formed a joint venture with Westport Innovations, of
British Columbia, to develop and market low-emissions, high performance natural
gas engines for on-highway, industrial and power generation markets.
Cummins also has numerous joint ventures around the world that provide
engine components, such as turbochargers, alternators and filtration products.
In addition, Cummins has entered into license agreements that provide for the
manufacture and sale of its products in Turkey, China, Pakistan, South Korea,
Indonesia and other countries.
RESEARCH AND DEVELOPMENT
Cummins' markets are driven by technology and emissions regulations. The
company conducts an extensive research and engineering program to meet these
requirements and to achieve product improvements, innovations and cost
reductions for its customers. The company has a unique portfolio of technologies
to develop such products as fuel systems, electronic controls, air-handling
systems, filtration, exhaust, after-treatment and combustion technologies.
Cummins also offers alternate-fuel engines for certain of its markets, and
continues to explore new alternate fuel opportunities. Technology has been the
driving factor behind many of the company's business alliances, and its
technological leadership has enabled it to partner with leading equipment
OEMs worldwide.
DISTRIBUTION
There are approximately 8,900 locations in North America, primarily owned
and operated by OEMs or their dealers, at which Cummins-trained service
personnel and parts are available to maintain and repair Cummins products.
Cummins also sells engines, parts and related products through distributorships
worldwide. While Cummins' distribution channel is comprised primarily of
independent distributors and dealers, in key strategic areas Cummins owns many
of the distributors itself. Currently, Cummins owns 17 distributors, and
numerous distribution branches across the globe. In addition, Cummins' parts
distribution centers are located strategically to meet customer and distribution
needs throughout the world. Cummins believes its distribution system is a
critical component of its marketing strategy and competitive position.
EMPLOYMENT
Cummins employs approximately 24,900 persons worldwide.
17
ACCOUNTING TREATMENT
For financial reporting purposes, the trust is treated as a subsidiary of
Cummins, and its accounts are included in Cummins' consolidated financial
statements. In its financial reports, Cummins presents the preferred securities
as part of a separate line item on its consolidated balance sheet; records
distributions payable on the preferred securities as an expense; and includes a
footnote in its consolidated financial statements stating, among other things,
that the sole assets of the trust are the debentures issued by Cummins and
providing information about the preferred securities, the debentures and the
preferred securities guarantee.
RATIO OF EARNINGS TO FIXED CHARGES
Cummins' consolidated ratio of earnings to fixed charges for each of the
periods shown is as follows:
THIRD QUARTER YEAR ENDED DECEMBER 31,
------------- ----------------------------------------------------
2002 2001 2000 1999 1998 1997
---- -------- -------- -------- -------- --------
3.0 -- 1.1 2.9 1.0 5.4
For purposes of the above calculations, "earnings" include income before
income taxes, extraordinary items, the cumulative effects of changes in
accounting principles and earnings or losses of equity investees and fixed
charges. "Fixed charges" consist of interest on all indebtedness, including
interest incurred by consolidated companies, and that portion of lease expense
that management believes to be representative of interest. Our earnings were
insufficient to cover fixed charges for the year ended December 31, 2001 by
approximately $132 million.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
Cummins common stock is listed on the New York Stock Exchange under the
symbol "CUM." The following table sets forth, for the accounting quarters shown,
the range of high and low composite prices of the common stock on the New York
Stock Exchange and the cash dividends declared on the common stock. The last
reported sale price of Cummins common stock on November 20, 2002 was $28.09 per
share.
DIVIDENDS
HIGH LOW DECLARED
------------- ------------- ---------
2002
First quarter............................................. $47.96 $35.00 $ .30
Second quarter............................................ 50.19 30.62 .30
Third quarter............................................. 33.14 23.42 .30
Fourth quarter (through November 20)...................... 28.09 19.69 .30
2001
First quarter............................................. $42.63 $36.16 $ .30
Second quarter............................................ 45.32 36.01 .30
Third quarter............................................. 42.75 29.31 .30
Fourth quarter............................................ 39.38 31.01 .30
2000
First quarter............................................. $49 5/8 $31 1/16 $ .30
Second quarter............................................ 38 5/8 29 15/16 .30
Third quarter............................................. 36 7/8 27 1/4 .30
Fourth quarter............................................ 37 15/16 29 1/16 .30
1999
First quarter............................................. $42 1/4 $35 $.275
Second quarter............................................ 58 1/8 36 1/8 .275
Third quarter............................................. 64 9/16 49 .275
Fourth quarter............................................ 52 9/16 39 1/16 .30
The declaration and payment of future dividends by the Board of Directors of
Cummins will be dependent upon Cummins' earnings and financial condition,
economic and market conditions and other factors deemed relevant by the Board of
Directors. Thus, no assurance can be given as to the amount or timing of the
declaration and payment of future dividends. For a description of restrictions
on the payment of dividends by Cummins, see "Description of Cummins Common
Stock."
18
DESCRIPTION OF THE PREFERRED SECURITIES
This description summarizes the material terms of the preferred securities
and the material provisions of documents described below and is subject to, and
is qualified in its entirety by reference to, all of the provisions of such
documents (including the definitions therein of certain terms), forms of which
are incorporated by reference as exhibits to the registration statement of which
this prospectus is a part. The terms of the preferred securities include those
stated in the trust agreement, the Trust Act and the Trust Indenture Act of
1939, as amended. Wherever particular sections of, or terms defined in, such
documents are referred to herein, such sections or defined terms are
incorporated by reference herein.
GENERAL
The trust agreement authorized the administrative trustees, on behalf of the
trust, to issue the preferred securities and the common securities, which are
together referred to in this prospectus as the trust securities. The trust
securities represent undivided beneficial interests in the assets of the trust.
Cummins or one of its subsidiaries owns all of the common securities. The common
securities rank equally with the preferred securities, and payments to Cummins
on the common securities are to be made on a proportionate basis with the
preferred securities, except as described under "--Subordination of Common
Securities." Legal title to the debentures is held by the property trustee in
trust for the benefit of the holders of the preferred securities and common
securities.
The trust agreement does not permit the trust to issue any securities other
than the preferred securities and the common securities or to incur any
indebtedness. Cummins has guaranteed on a subordinated basis the payment of
distributions by the trust, and payments upon redemption of the preferred
securities or liquidation of the trust, to the extent the trust has funds
available to make these payments, as described under "Description of the
Preferred Securities Guarantee." The preferred securities guarantee is held by
the guarantee trustee for the benefit of the holders of the preferred
securities. The preferred securities guarantee does not cover payment of
distributions when the trust does not have sufficient available funds to pay
such distributions. The remedy of a holder of preferred securities in such an
event is as described below under "--Enforcement of Certain Rights by Holders of
Preferred Securities" and "Description of the Preferred Securities
Guarantee--Events of Default; Enforcement of Certain Rights by Holders of
Preferred Securities."
DISTRIBUTIONS
Distributions on each preferred security are payable at the annual rate of
7% of the liquidation preference of $50 per preferred security. Distributions
have accrued from and including June 18, 2001 and are payable quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year,
commencing September 15, 2001. The amount of distributions payable for any
period is computed on the basis of a 360-day year of twelve 30-day months.
So long as no indenture event of default has occurred and is continuing,
Cummins has the right under the indenture governing the debentures to defer the
payment of interest on the debentures at any time or from time to time for a
period not to exceed 20 consecutive quarters with respect to each deferral
period, provided that Cummins may not defer the payment of interest beyond the
stated maturity of the debentures. If Cummins defers the payment of interest on
the debentures, the trust will defer the quarterly distributions on the
preferred securities for a corresponding period. In this case, distributions on
the preferred securities will continue to accrue and will accumulate additional
distributions thereon at an annual rate of 7%, compounded quarterly from the
relevant payment date for such distributions. The term "distributions" as used
in this prospectus includes any such additional distributions.
19
If Cummins elects to defer the payment of interest on the debentures, it may
not, and must cause its subsidiaries not to:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of Cummins'
capital stock; or
- make any payment of principal, interest or premium, if any, on, or repay,
repurchase or redeem any debt securities (including guarantees of
indebtedness for money borrowed) of Cummins that rank equally with or
junior to the debentures.
Notwithstanding the foregoing, Cummins may take any of the following actions
during a deferral period:
- make any dividend, redemption, liquidation, interest, principal or
guarantee payment by way of securities, including capital stock, that rank
equally with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made;
- redeem or purchase any rights pursuant to Cummins' shareholders' rights
plan (or any successor to such rights plan), declare a dividend of such
rights or issue stock under such plan in the future;
- make payments under the preferred securities guarantee;
- purchase common stock issued under any of Cummins' benefit plans for its
directors, officers or employees;
- make payments or distributions in connection with a reclassification of
Cummins' capital stock or the exchange or conversion of one series or
class of Cummins' capital stock for another series or class of Cummins'
capital stock; and
- purchase fractional interests in shares of Cummins' capital stock pursuant
to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged.
Before the termination of any such deferral period, Cummins may further
extend the interest payment period, provided that no deferral period may exceed
20 consecutive quarters or extend beyond the stated maturity of the debentures.
Upon the termination of any such deferral period and the payment of all amounts
then due on any interest payment date, Cummins may elect to begin a new deferral
period. See "Description of the Debentures--Option to Extend Interest Payment
Period."
Cummins has no current intention to exercise its right to defer payments of
interest by extending the interest payment period on the debentures.
Distributions on the preferred securities will be made on the dates payable,
subject to the deferral provisions described above, to the extent that the trust
has funds available for the payment of such distributions in the property
account. The funds of the trust available for distribution to holders of the
preferred securities will be limited to payments received by the trust from
Cummins under the debentures. See "Description of the Debentures." If Cummins
does not make interest payments on such debentures, the property trustee will
not have funds available to pay distributions on the preferred securities. The
payment of distributions (if and to the extent the trust has funds on hand
available for the payment of such distributions and cash sufficient to make such
payments) is guaranteed by Cummins on a limited and subordinated basis as
described under "Description of the Preferred Securities Guarantee."
Distributions on the preferred securities are payable to the holders thereof
as they appear on the register of the trust at the close of business on the
relevant record date, which shall be the fifteenth day (whether or not a
business day) next preceding the relevant distribution date. As long
20
as the preferred securities remain in book-entry form, subject to any applicable
laws and regulations and the provisions of the trust agreement, each such
payment will be made as described under "--Form, Transfer, Exchange and
Book-Entry Procedures."
CONVERSION RIGHTS
The preferred securities are convertible into shares of Cummins common stock
at any time before the close of business on June 13, 2031 (or, in the case of
the preferred securities called for redemption, before the close of business on
the business day before the applicable redemption date) at the option of the
holders of preferred securities and in the manner described below, at an initial
conversion rate of 1.0519 shares of Cummins common stock for each preferred
security (equivalent to a conversion price of $47.53 per share of Cummins common
stock), subject to adjustment as described below. Whenever Cummins issues shares
of common stock upon conversion of preferred securities and Cummins has in
effect at such time a rights plan under which holders of common stock are issued
rights entitling the holders thereof under certain circumstances to purchase an
additional share or shares of common stock, Cummins will issue, together with
each such share of common stock, an appropriate number of such rights. For a
description of Cummins' existing rights plan, see "Description of Cummins'
Common Stock--Shareholders' Rights Plan."
If a preferred security is surrendered for conversion after the close of
business on any regular record date for payment of a distribution and before the
opening of business on the corresponding distribution payment date, then,
notwithstanding such conversion, the distribution payable on such distribution
payment date will be paid in cash to the person in whose name the preferred
security is registered at the close of business on such record date, and, other
than a preferred security or a portion of a preferred security called for
redemption on a redemption date occurring after such record date and before such
distribution payment date, when so surrendered for conversion, the preferred
security must be accompanied by payment of an amount equal to the distribution
payable on such distribution payment date.
The terms of the preferred securities provide that a holder of preferred
securities wishing to exercise its conversion right shall surrender such
preferred securities, together with an irrevocable conversion notice, to the
property trustee, as conversion agent, who shall, on behalf of such holder,
exchange such preferred securities for an equivalent amount of debentures and
immediately convert such debentures into Cummins common stock. Holders may
obtain copies of the required form of the conversion notice from the conversion
agent. So long as a book-entry system for the preferred securities is in effect,
however, procedures for converting the preferred securities into shares of
Cummins common stock will differ, as described under "--Book-Entry Only
Issuance--The Depository Trust Company."
No fractional shares of Cummins common stock will be issued as a result of
conversion. Instead, Cummins will pay holders cash in lieu thereof based on the
market price of Cummins common stock on the date such preferred securities are
surrendered for conversion.
CONVERSION PRICE ADJUSTMENTS--GENERAL
The initial conversion price is subject to adjustment in certain events,
including the events listed below. In the event of any conversion price
adjustment, Cummins will disseminate a press release not later than three
business days before the relevant conversion price adjustment date through Dow
Jones & Company, Inc. or Bloomberg Business News containing this information.
(1) The issuance of Cummins common stock as a dividend or distribution on
Cummins common stock.
21
(2) Certain subdivisions and combinations of Cummins common stock.
(3) The issuance to all holders of Cummins common stock of certain rights or
warrants to purchase Cummins common stock at less than the current market
price (except pursuant to Cummins' existing shareholders' rights plan).
(4) The distribution to all holders of Cummins common stock of:
(A) equity securities of Cummins (other than Cummins common stock),
(B) evidences of indebtedness of Cummins, or
(C) other assets, including securities but excluding:
(i) any rights or warrants referred to in clause (3) above,
(ii) any rights or warrants to acquire any capital stock of any
entity other than Cummins,
(iii) any dividends or distributions in connection with the
liquidation, dissolution or winding-up of Cummins,
(iv) any dividends payable solely in cash that may from time to time
be fixed by the Board of Directors of Cummins, and
(v) any dividends or distributions referred to in clause (1) above.
(5) Cash distributions to all holders of Cummins common stock, excluding:
(A) any cash dividends on Cummins common stock to the extent that the
aggregate amount of cash dividends per share of Cummins common stock
in any consecutive 12-month period does not exceed the greater of:
(i) the amount per share of Cummins common stock of the cash
dividends paid on Cummins common stock in the immediately
preceding 12-month period, to the extent that such dividends
for the immediately preceding 12-month period did not require
an adjustment of the conversion price pursuant to this
clause (5) (as adjusted to reflect subdivisions or combinations
of common stock), and
(ii) 15% of the average of the daily closing price (as defined in
the indenture) of Cummins common stock for the ten consecutive
trading days (as defined in the indenture) immediately before
the date of declaration of such dividend, and
(B) any dividend or distribution in connection with the liquidation,
dissolution or winding up of Cummins or a redemption of any rights
issued under a rights agreement; provided, however, that no
adjustment shall be made pursuant to this clause (5) if such
distribution would otherwise constitute a fundamental change (as
defined below) and be reflected in a resulting adjustment described
below.
(6) Payment in respect of a tender or exchange offer by Cummins or any
subsidiary of Cummins for Cummins common stock to the extent that the
cash and value of any other consideration included in such payment per
share of Cummins common stock exceed (by more than 10%, with any smaller
excess being disregarded in computing the adjustment provided hereby) the
first reported sale price per share of Cummins common stock on the
trading day next succeeding the expiration time (each as defined in the
indenture) for such tender or exchange offer.
If any adjustment is required to be made as set forth in clause (5) above as
a result of a distribution that is a dividend described in subclause (A), such
adjustment would be based upon
22
the amount by which such distribution exceeds the amount of the dividend
permitted to be excluded pursuant to subclause (A) of clause (5). If an
adjustment is required to be made as set forth in clause (5) above as a result
of a distribution that is not such a dividend, such adjustment would be based
upon the full amount of such distribution. If an adjustment is required to be
made as set forth in clause (6) above, such adjustment would be calculated based
upon the amount by which the aggregate consideration paid for the Cummins common
stock acquired in the tender or exchange offer exceeds 110% of the value of such
shares based on the first reported sale price of Cummins common stock on the
trading day next succeeding the expiration time.
In lieu of making such a conversion price adjustment in the case of certain
dividends or distributions, Cummins may provide that upon the conversion of the
preferred securities the holder converting such preferred securities will
receive, in addition to the Cummins common stock to which such holder is
entitled, the cash, securities or other property which such holder would have
received if such holder had, immediately before the record date for such
dividend or distribution, converted its preferred securities into Cummins common
stock.
No adjustment of the conversion price will be made upon the issuance of any
shares of Cummins common stock pursuant to any present or future plan providing
for the reinvestment of dividends or interest payable on securities of Cummins
and the investment of additional optional amounts in shares of Cummins common
stock under any such plan, or the issuance of any shares of Cummins common stock
or options or rights to purchase such shares pursuant to any present or future
employee benefit plan or program of Cummins or pursuant to any option, warrant,
right, or exercisable, exchangeable or convertible security which does not
constitute an issuance to all holders of Cummins common stock of rights or
warrants entitling holders of such rights or warrants to subscribe for or
purchase Cummins common stock at less than the current market price.
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. If any action would require adjustment of the conversion price
pursuant to more than one of the anti-dilution 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 holders of the preferred
securities.
If the distribution date for rights under Cummins' existing shareholders'
rights plan or the date on which the rights plan becomes operative (see
"Description of Cummins' Common Stock--Shareholders' Rights Plan") occurs before
the date a preferred security is converted, holders of the preferred securities
who convert such preferred securities after the distribution date or operative
date will be entitled to receive the rights that would otherwise be attached
(but for the date of conversion) to the shares of Cummins common stock received
upon such conversion unless the Board of Directors elects to redeem the rights
or such attachment of rights is prohibited under applicable law.
Cummins from time to time may, to the extent permitted by law, reduce the
conversion price by any amount for any period of at least 20 business days (as
defined in the indenture), in which case Cummins shall give at least 15 days'
notice of such reduction. In particular, Cummins may, at its option, make such
reduction in the conversion price, in addition to those set forth above, as
Cummins deems advisable to avoid or diminish any income tax to holders of common
stock resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for tax purposes or for any other
reasons. See "United States Federal Income Tax Considerations--Adjustment of
Conversion Price."
23
CONVERSION PRICE ADJUSTMENTS--FUNDAMENTAL CHANGE
If Cummins shall be a party to any transaction or series of transactions
constituting a fundamental change, including, without limitation:
- any recapitalization or reclassification of Cummins common stock (other
than a change in par value or as a result of a subdivision or combination
of common stock);
- any consolidation or merger (other than a merger that does not result in a
reclassification, conversion, exchange or cancellation of the outstanding
common stock) of Cummins with or into another corporation as a result of
which holders of Cummins common stock shall be entitled to receive
securities or other property or assets (including cash) with respect to or
in exchange for Cummins common stock;
- any sale or transfer of all or substantially all of the assets of Cummins;
or
- any compulsory share exchange, pursuant to any of which holders of Cummins
common stock shall be entitled to receive other securities, cash or other
property;
then appropriate provision shall be made so that the holder of any preferred
securities then outstanding shall have the right thereafter to convert such
preferred securities only as follows:
- if any such transaction does not constitute a common stock fundamental
change (as defined below), the kind and amount of the securities, cash or
other property as the holder of the preferred securities would have
received upon such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange had such holder converted its
preferred securities into shares of Cummins common stock immediately
before such recapitalization, reclassification, consolidation, merger,
sale, transfer or share exchange, after, in the case of a non-stock
fundamental change (as defined below), giving effect to any adjustment in
the conversion price in accordance with the first bullet point of the
second next paragraph; and
- if any such transaction constitutes a common stock fundamental change,
shares of common stock of the kind received by holders of Cummins common
stock as a result of such common stock fundamental change in an amount
determined in accordance with the second bullet point of the second next
paragraph.
The company formed by such consolidation or resulting from such merger or
that acquires such assets or that acquires the common stock of Cummins, as the
case may be, shall enter into a supplemental indenture with the indenture
trustee, satisfactory in form to the indenture trustee and executed and
delivered to the indenture trustee, the provisions of which shall establish such
right. Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture shall be
as nearly equivalent as practical to the relevant adjustments provided for in
the preceding paragraphs and in this paragraph.
Notwithstanding any other provision in the preceding paragraph, if any
fundamental change occurs, the conversion price in effect will be adjusted
immediately after that fundamental change as follows:
- in the case of a non-stock fundamental change, the conversion price per
share of Cummins common stock immediately following the non-stock
fundamental change will be the lower of:
(A) the conversion price in effect immediately before such non-stock
fundamental change, but after giving effect to any other prior
adjustments; and
(B) the result obtained by multiplying the greater of the applicable
price (as defined below) or the then applicable reference market
price (as defined below) by a fraction,
24
the numerator of which will be 100 and the denominator of which will
be an amount based on the date such non-stock fundamental change
occurs. For the 12-month period beginning June 15, 2001, the
denominator will be 107.00, and the denominator will decrease by 0.70
during each successive 12-month period; provided that the denominator
shall in no event be less than 100;
- in the case of a common stock fundamental change, the conversion price per
share of common stock immediately following the common stock fundamental
change will be the conversion price in effect immediately before the
common stock fundamental change, but after giving effect to any other
prior adjustments, 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
Cummins common stock (subject to certain limited exceptions) is
shares of common stock of the successor, acquiror or other third
party (and cash, if any, paid with respect to any fractional
interests in the shares of common stock resulting from the common
stock fundamental change), and
(B) all of the common stock of Cummins (subject to certain limited
exceptions) shall have been exchanged for, converted into, or
acquired for, shares of common stock (and cash, if any, with respect
to fractional interests) of the successor, acquiror or other third
party,
the conversion price per share of common stock immediately following the
common stock fundamental change shall be the conversion price in effect
immediately before the 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 Cummins common stock as a
result of the common stock fundamental change.
The foregoing conversion price adjustments are designed, in fundamental
change transactions where all or substantially all of the common stock of
Cummins is converted into securities, cash, or property and not more than 50% of
the value received by the holders of Cummins common stock consists of stock
listed or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the Nasdaq National Market (a "non-stock
fundamental change," as defined herein), to increase the securities, cash or
property into which each preferred securities is convertible.
In a fundamental change transaction where all or substantially all the
Cummins common stock is converted into securities, cash, or property and more
than 50% of the value received by the holders of Cummins common stock (subject
to certain limited exceptions) consists of listed or Nasdaq National Market
traded common stock (a "common stock fundamental change," as defined herein),
the foregoing conversion price adjustments are designed to provide in effect
that:
- where Cummins common stock is converted partly into such common stock and
partly into other securities, cash, or property, each preferred security
will be convertible solely into a number of shares of such common stock
determined so that the initial value of such shares (measured as described
in the definition of purchaser stock price below) equals the value of the
shares of Cummins common stock into which such preferred security was
convertible immediately before the transaction (measured as aforesaid);
and
- where Cummins common stock is converted solely into such common stock,
each preferred security will be convertible into the same number of shares
of such common stock receivable
25
by a holder of the number of shares of Cummins common stock into which
such preferred security was convertible immediately before such
transaction.
In determining the amount and type of consideration received by a holder of
Cummins common stock in the event of a fundamental change, consideration
received by a holder of Cummins common stock pursuant to a statutory right of
appraisal will be disregarded.
As used herein, "applicable price" means (i) in the event of a non-stock
fundamental change in which the holders of Cummins common stock receive only
cash, the amount of cash receivable by a holder of one share of Cummins common
stock and (ii) in the event of any other fundamental change, the average of the
closing prices for one share of Cummins common stock during the ten trading days
immediately before the record date for the determination of the holders of
Cummins 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, before the date on which the holders of the Cummins common stock will have
the right to receive such cash, securities, property or other assets.
As used herein, "common stock fundamental change" means any fundamental
change in which more than 50% of the value (as determined in good faith by
Cummins' board of directors) of the consideration received by holders of Cummins
common stock (subject to certain limited exceptions) pursuant to such
transaction consists of shares of common stock that, for the ten consecutive
trading days immediately before such fundamental change had been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the Nasdaq National Market; provided, however,
that a fundamental change will not be a common stock fundamental change unless
either (1) Cummins continues to exist after the occurrence of such fundamental
change and the outstanding preferred securities continue to exist as outstanding
preferred securities or (2) the outstanding preferred securities continue to
exist as preferred securities and are convertible into shares of common stock of
the successor to Cummins.
As used herein, "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 of Cummins 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, that, in the case of a plan
involving more than one such transaction or event, for purposes of adjustment of
the conversion price, such fundamental change will be deemed to have occurred
when substantially all of the Cummins 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 Cummins common stock received in the
transaction or event as a result of which more than 50% of the Cummins common
stock shall have been exchanged for, converted into, or acquired for, or shall
constitute solely the right to receive such cash, securities, properties or
other assets.
As used herein, "non-stock fundamental change" means any fundamental change
other than a common stock fundamental change.
As used herein, "purchaser stock price" means, with respect to any common
stock fundamental change, the average of the closing prices for one share of
common stock received by holders of Cummins common stock in such common stock
fundamental change during the ten trading days immediately before the record
date for the determination of the holders of Cummins common stock entitled to
receive such shares of common stock or, if there is no such record date, before
the date upon which the holders of Cummins common stock shall have the right to
receive such shares of common stock.
26
As used herein, "reference market price" will initially mean $26.41 (which
is 66 2/3% of the last reported sale price per share of Cummins' common stock on
the NYSE on June 12, 2001) and, in the event of any adjustment to the conversion
price other than as a result of a fundamental change, 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 the initial reference market price to the initial conversion
price of the preferred securities.
Conversions of the preferred securities may be effected by delivering them
to the office or agency of Cummins maintained for such purpose in Chicago,
Illinois.
Conversion price adjustments may, in certain circumstances, result in
constructive distributions that could be taxable as dividends under the Internal
Revenue Code of 1986, as amended, to holders of preferred securities or to
holders of the common stock issued upon conversion thereof. See "United States
Federal Income Tax Considerations--Adjustment of Conversion Price."
SPECIAL EVENT REDEMPTION
Cummins may redeem the debentures, at its option, before the maturity of the
debentures:
- at any time, in whole but not in part, within 90 days after an investment
company event, as described below; and
- at any time, in whole or in part, within 90 days after a tax event, as
described below.
Promptly following any such redemption of the debentures, the trust will
redeem preferred securities and common securities of the trust having an
aggregate liquidation amount equal to the aggregate principal amount of the
debentures redeemed at a redemption price equal to the liquidation amount of
such trust securities plus accrued and unpaid distributions thereon to the
redemption date. The common securities will be redeemed on a proportionate basis
with the preferred securities, except that if a trust agreement event of default
has occurred and is continuing, the preferred securities will have a priority
over the common securities with respect to the redemption price.
If a tax event occurs and is continuing and Cummins does not elect to redeem
the debentures or distribute the debentures in liquidation of the trust (see
"--Distribution of Debentures"), Cummins will pay all additional taxes and other
expenses of the trust (see "Description of the Debentures--Expenses of the
Trust"), so that the amount of distributions then due and payable by the trust
on the outstanding trust securities will not be reduced as a result of any
additional taxes and other expenses to which the trust has become subject as a
result of a tax event.
A "tax event" means the receipt by the property trustee, on behalf of the
trust, of an opinion of counsel, rendered by a law firm having a national tax
and securities practice (which opinion shall not have been rescinded by such law
firm), to the effect that, as a result of:
- any amendment to, or change, including any announced prospective change,
in, the laws (or any regulations thereunder) of the United States or any
political subdivision or taxing authority thereof or therein affecting
taxation, or
- as a result of any official administrative pronouncement or judicial
decision interpreting or applying such laws or regulations,
which amendment or change is effective or such pronouncement or decision is
announced on or after the date of issuance of the preferred securities under the
trust agreement, there is more than an insubstantial risk that:
- the trust is, or within 90 days of the date thereof will be, subject to
United States Federal income tax with respect to income received or
accrued on the debentures,
27
- interest payable by Cummins on such debentures is not, or within 90 days
of the date thereof will not be, deductible by Cummins, in whole or in
part, for United States Federal income tax purposes, or
- the trust is, or within 90 days of the date thereof will be, subject to
more than a DE MINIMIS amount of other taxes, duties or other governmental
charges.
An "investment company event" means the receipt by the property trustee, on
behalf of the trust, of an opinion of counsel, rendered by a law firm having a
recognized national tax and securities practice (which opinion shall not have
been rescinded by such law firm), to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority effective on or after the date of original
issuance of the preferred securities, there is more than an insubstantial risk
that the trust is or will be considered an "investment company" that is required
to be registered under the Investment Company Act of 1940, as amended.
The trust may not redeem the preferred securities in part unless all accrued
and unpaid distributions have been paid in full on all outstanding preferred
securities for all quarterly distribution periods terminating on or before the
redemption date. If fewer than all the outstanding preferred securities are to
be redeemed, the preferred securities to be so redeemed will be selected by The
Depository Trust Company, or DTC, as described under "--Form, Transfer, Exchange
and Book-Entry Procedures."
OPTIONAL REDEMPTION
Except as provided under "--Mandatory Redemption" below and "--Special Event
Redemption" above, the trust may not redeem the preferred securities before
June 15, 2006.
On and after such date, upon any permitted redemption by Cummins of the
debentures, the preferred securities are subject to redemption, in whole or in
part, at the following percentages of the liquidation preference thereof plus
accrued and unpaid distributions, if any, to the date fixed for redemption if
redeemed during the twelve-month period commencing June 15 in each of the
following years indicated:
YEAR REDEMPTION PRICE YEAR REDEMPTION PRICE
---- ---------------- ---- ----------------
2006........................ 103.50% 2009........................ 101.40%
2007........................ 102.80% 2010........................ 100.70%
2008........................ 102.10% 2011 and thereafter......... 100.00%
The trust may not redeem the preferred securities in part unless all accrued
and unpaid distributions have been paid in full on all outstanding preferred
securities for all quarterly distribution periods terminating on or before the
redemption date. If fewer than all the outstanding preferred securities are to
be redeemed, the preferred securities to be so redeemed will be selected by DTC
as described under "--Form, Transfer, Exchange and Book-Entry Procedures."
MANDATORY REDEMPTION
Upon repayment of the debentures at maturity or as a result of the
acceleration of the debentures upon the occurrence of an indenture event of
default described under "Description of the Debentures--Indenture Events of
Default," the trust shall use the cash it receives to redeem preferred
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the debentures so repaid plus accrued and unpaid
distributions. In the case of acceleration of the debentures, the trust will
redeem the preferred securities only after it actually receives repayment of the
debentures.
28
REDEMPTION PROCEDURES
The property trustee will give you at least 30, but not more than 60 days'
notice of any redemption of preferred securities, which notice will be
irrevocable. If the property trustee gives a notice of redemption of the
preferred securities, then by 12:00 noon, New York City time, on the redemption
date, the property trustee will deposit irrevocably with DTC or the conversion
agent, as the case may be, funds sufficient to pay the applicable redemption
price to the extent Cummins has paid the property trustee a sufficient amount of
cash in connection with the related redemption or repayment of the debentures.
The property trustee will also give DTC or the conversion agent, as the case may
be, irrevocable instructions and authority to pay the redemption price to the
holders of such preferred securities. See "--Form, Transfer, Exchange and
Book-Entry Procedures." If such preferred securities are no longer in book-entry
form, the property trustee, to the extent funds are available, will irrevocably
deposit with the paying agent funds sufficient to pay the applicable redemption
price and will give the paying agent irrevocable instructions and authority to
pay the redemption price to the holders thereof upon surrender of their
certificates evidencing such preferred securities.
If notice of redemption shall have been given and funds deposited as
required, then, upon the date of such deposit, immediately before the close of
business on the date of such deposit, distributions will cease to accrue on the
preferred securities called for redemption, such preferred securities shall no
longer be deemed to be outstanding and all rights of the holders of such
preferred securities so called for redemption will cease, except the right of
the holders of such preferred securities to receive the redemption price, but
without interest on such redemption price.
If payment of the redemption price in respect of preferred securities called
for redemption is improperly withheld or refused and not paid either by the
trust or by Cummins pursuant to the preferred securities guarantee as described
under "Description of the Preferred Securities Guarantee," distributions on such
preferred securities will continue to accrue at the then applicable rate, from
the redemption date originally established by the trust to the date such
redemption price is actually paid, in which case the actual payment date will be
the date fixed for redemption for purposes of calculating the redemption price.
Subject to applicable law including, without limitation, United States
Federal securities law, Cummins or its subsidiaries may at any time and from
time to time purchase outstanding preferred securities by tender, in the open
market or by private agreement.
Payment of the redemption price on the preferred securities and any
distribution or exchange of debentures to holders of preferred securities shall
be made to the applicable record holders thereof as they appear on the register
for such preferred securities on the relevant record date, which shall be the
fifteenth day (whether or not a business day) before the redemption date or
liquidation date, as applicable.
If the trust redeems less than all of the trust securities on a redemption
date, then the aggregate liquidation amount of such trust securities to be
redeemed shall be allocated proportionately among the preferred securities and
the common securities. The property trustee shall select the particular
preferred securities to be redeemed not more than 45 days before the redemption
date from the outstanding preferred securities not previously called for
redemption, by lot or by such method as the property trustee shall deem fair and
appropriate and which may provide for the selection for redemption of portions
of the liquidation amount of the preferred securities. The property trustee
shall promptly notify the conversion agent in writing of the preferred
securities selected for redemption and, in the case of any preferred securities
selected for partial redemption, the liquidation amount thereof to be redeemed;
it being understood that, in the case of preferred securities held by DTC (or
any successor) or its nominee, the distribution of the proceeds of such
redemption will be made in accordance with the procedures of DTC or its nominee.
For all
29
purposes of the trust agreement, unless the context otherwise requires, all
provisions relating to the redemption of preferred securities shall relate, in
the case of any preferred securities redeemed or to be redeemed only in part, to
the portion of the aggregate liquidation amount of preferred securities that has
been or is to be redeemed.
DISTRIBUTION OF DEBENTURES
At any time, Cummins has the right to terminate the trust and, after
satisfaction of the liabilities of creditors of the trust as provided by
applicable law, cause the debentures to be distributed to the holders of the
preferred securities in liquidation of the trust. See "Description of the
Debentures--Distribution of Debentures." Circumstances under which Cummins may
determine to exercise such right could include:
- the occurrence of a tax event or an investment company event;
- adverse tax consequences to Cummins or the trust that are not within the
definition of a tax event because they do not result from an amendment or
change described in such definition; or
- changes in the accounting requirements applicable to the preferred
securities as described under "Accounting Treatment."
Under current United States Federal income tax law and interpretations and
assuming, as expected, the trust is not treated as an association taxable as a
corporation for United States Federal income tax purposes, a distribution of the
debentures should not be a taxable event to the trust and holders of the
preferred securities. Should there be a change in law, a change in legal
interpretation, a tax event or other circumstances, however, the distribution
could be a taxable event to holders of the preferred securities. See "United
States Federal Income Tax Considerations--Distribution of the Debentures or Cash
Upon Liquidation of the Trust."
After the liquidation date fixed for any distribution of the debentures:
- the preferred securities will no longer be deemed to be outstanding;
- DTC or its nominee, as the record holder of such preferred securities,
will receive a registered global certificate or certificates representing
the debentures to be delivered upon such distribution; and
- any certificates representing such preferred securities not held by DTC or
its nominee will be deemed to represent the debentures having a principal
amount equal to the liquidation amount of such preferred securities, and
bearing accrued and unpaid interest in an amount equal to the accrued and
unpaid distributions on such preferred securities until such certificates
are presented to the property trustee for transfer or reissuance.
LIQUIDATION DISTRIBUTION UPON TERMINATION
In the event of any voluntary or involuntary liquidation, termination,
dissolution or winding up of the trust, any of which are referred to as a
liquidation, the holders of the preferred securities at that time 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 stated liquidation amount of $50 per preferred security plus accrued and
unpaid distributions to the date of payment, unless, in connection with the
liquidation, debentures in an aggregate principal amount equal to the aggregate
stated liquidation amount of the trust securities and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid distributions on such
trust securities, have been distributed on a proportionate basis to the holders
of trust securities in exchange for such trust securities. See "--Distribution
of Debentures."
30
If, upon any liquidation, the liquidation distribution can be paid only in
part because the trust has insufficient assets available to pay it in full, then
the trust will pay the amounts on a proportionate basis. The holder(s) of the
common securities will be entitled to receive liquidation distributions upon any
such liquidation on a proportionate basis with the holders of the preferred
securities, except that if an indenture event of default has occurred and is
continuing, the preferred securities shall have a priority over the common
securities in those liquidation distributions. See "--Subordination of Common
Securities" below.
Pursuant to the trust agreement, the trust shall automatically terminate
upon expiration of its term on June 15, 2031 and shall also terminate on the
first to occur of:
- certain events of bankruptcy, dissolution or liquidation of Cummins;
- the distribution of debentures to the holders of the trust securities, if
Cummins, as depositor, has given written direction to the property trustee
to terminate the trust (which direction is optional and wholly within the
discretion of Cummins, as depositor);
- the redemption, conversion, or exchange of all of the preferred securities
and common securities; and
- the entry by a court of competent jurisdiction of an order for the
dissolution of the trust.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption price of, the preferred
securities and common securities of the trust shall be made on a proportionate
basis based on the liquidation amount of such trust securities; provided,
however, that if on any distribution date or redemption date a trust agreement
event of default, as described below, shall have occurred and be continuing,
- no payment of any distribution on, or redemption price of, any of the
common securities of the trust, and no other payment on account of the
redemption, liquidation or other acquisition of such common securities,
shall be made unless payment in full in cash of all accumulated and unpaid
distributions on all of the outstanding preferred securities for all
distribution periods terminating on or before such distribution date or
redemption date, or in the case of payment of the redemption price the
full amount of such redemption price on all of the outstanding preferred
securities then called for redemption, shall have been made or provided
for; and
- all funds available to the property trustee shall first be applied to the
payment in full in cash of all distributions on, or redemption price of,
the preferred securities then due and payable.
In the case of any trust agreement event of default, Cummins as holder of
the common securities will be deemed to have waived any right to act with
respect to any such trust agreement event of default until all such trust
agreement events of default with respect to the preferred securities have been
cured, waived or otherwise eliminated. Until all such trust agreement events of
default with respect to the preferred securities have been cured, waived or
otherwise eliminated, the property trustee shall act solely on behalf of the
holders of the preferred securities and not on behalf of Cummins as holder of
the common securities, and only the holders of the preferred securities will
have the right to direct the property trustee to act on their behalf.
TRUST AGREEMENT EVENTS OF DEFAULT
An event of default under the indenture, referred to in this prospectus as
an indenture event of default, constitutes an event of default under the trust
agreement with respect to the trust securities whatever the reason for such
indenture 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
31
court or any order, rule or regulation of any administrative or governmental
body. Any event of default under the trust agreement is referred to in this
prospectus as a trust agreement event of default.
Within ten days after the occurrence of any trust agreement event of default
actually known to the property trustee, the property trustee shall transmit
notice of such trust agreement event of default to the holders of the preferred
securities, the administrative trustees and Cummins, as depositor, unless such
trust agreement event of default shall have been cured or waived. Cummins, as
depositor, and the administrative trustees, on behalf of the trust, are required
to file annually with the property trustee a certificate as to whether or not
they are in compliance with all the conditions and covenants applicable to them
under the trust agreement.
If a trust agreement event of default has occurred and is continuing, the
preferred securities shall have preference over the common securities upon
termination of the trust as described above. See "--Subordination of Common
Securities." The existence of a trust agreement event of default does not
entitle the holders of preferred securities to accelerate the maturity of the
preferred securities.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a trust agreement event of default has occurred and is continuing, then a
holder of the preferred securities will rely on the property trustee to enforce
its rights as a holder of the debentures against Cummins. In addition, the
holders of a majority in aggregate liquidation amount of the preferred
securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the property trustee or to
direct the exercise of any trust or power conferred upon the property trustee
under the trust agreement, including the right to direct the property trustee to
exercise the remedies available to it as a holder of the debentures. If the
property trustee fails to enforce its rights as holder of the debentures after a
request therefor by a holder of the preferred securities, such holder may
proceed to enforce such rights directly against Cummins without first
instituting any legal proceeding against the property trustee or any person or
entity.
Notwithstanding the foregoing, if a trust agreement event of default has
occurred and is continuing and such event is attributable to the failure of
Cummins 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 preferred securities may sue Cummins directly
to collect its proportionate share of payments owed, without first:
- directing the property trustee to enforce the terms of the debentures;
- instituting a legal proceeding against Cummins to enforce the property
trustee's rights under the debentures; or
- instituting a legal proceeding against the property trustee or any other
person or entity.
Cummins will be able to set off any payment made to a holder of preferred
securities.
MERGER OR CONSOLIDATION OF TRUSTEES
Any corporation into which the property trustee, the Delaware trustee or any
administrative trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which such trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of such trustee, shall be the successor of such trustee under the trust
agreement, provided such corporation shall be otherwise qualified and eligible.
32
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
The trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below.
The trust may, at the request of Cummins, with the consent of the
administrative trustees and without the consent of the property trustee, the
Delaware trustee or the holders of the preferred securities, merge with or into,
consolidate, amalgamate, be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State, provided that:
- such successor entity either:
(A) expressly assumes all of the obligations of the trust with respect to
the trust securities, or
(B) substitutes for the preferred securities other securities having
substantially the same terms as the preferred securities so long as
the successor securities rank the same as the preferred securities
with respect to distributions and payments upon liquidation,
redemption and otherwise;
- Cummins expressly appoints a trustee of such successor entity possessing
the same powers and duties as the property trustee as the holder of the
debentures;
- the merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not cause the preferred securities (including any successor
securities) to be downgraded by any nationally recognized statistical
rating organization;
- the merger, consolidation, amalgamation, replacement, conveyance, transfer
or lease does not adversely affect the rights, preferences and privileges
of the holders of the preferred securities including any successor
securities in any material respect;
- such successor entity has a purpose identical to that of the trust;
- before the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, Cummins has received an opinion from independent
counsel to the trust experienced in such matters to the effect that:
(A) the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the preferred 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 the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the trust nor such successor
entity will be required to register as an "investment company" under
the Investment Company Act; and
- Cummins or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the successor securities at least to the extent
provided by the preferred securities guarantee.
Notwithstanding the foregoing, the trust shall not, except with the consent
of holders of 100% in aggregate liquidation amount of the trust securities,
consolidate, amalgamate, merge with or into, be replaced by or convey, transfer
or lease its properties and assets substantially as an entirety to any other
entity or permit any other entity to consolidate, amalgamate, merge with or
into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease
33
would cause the trust or the successor entity to be classified as other than a
grantor trust for United States Federal income tax purposes.
VOTING RIGHTS
Except as provided below and under "Description of the Preferred Securities
Guarantee--Amendments and Assignment" and as otherwise required by law and the
trust agreement, the holders of the preferred securities have no voting rights.
The holders of a majority in aggregate liquidation amount of preferred
securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the property trustee and to direct the
exercise of any trust or power conferred upon the property trustee under the
trust agreement, including the right to direct the property trustee to exercise
the remedies available to it as a holder of the debentures. So long as any
debentures are held by the property trustee, the trustees shall not:
- direct the time, method and place of conducting any proceeding for any
remedy available to the indenture trustee or executing any trust or power
conferred on the indenture trustee with respect to such debentures;
- waive any past default that is waivable under the indenture;
- exercise any right to rescind or annul a declaration that the principal of
all the debentures shall be due and payable; or
- consent to any amendment, modification or termination of the indenture or
the debentures where such consent shall be required;
without, in each case, obtaining the prior approval of the holders of a majority
in aggregate liquidation amount of all outstanding preferred securities, except
in the case of the last bullet point, which consent, if no trust agreement event
of default shall occur and be continuing, shall be of the holders of a majority
in aggregate liquidation amount of preferred securities and common securities,
voting together as a single class.
However, where a consent under the indenture would require the consent of
each holder of debentures affected thereby, no such consent shall be given by
the property trustee without the prior written consent of each holder of the
preferred securities. The trustees shall not revoke any action previously
authorized or approved by a vote of the holders of the preferred securities
except by subsequent vote of the holders of the preferred securities. The
property trustee shall notify each holder of record of the preferred securities
of any notice of default with respect to the debentures.
A waiver of an indenture event of default will constitute a waiver of the
corresponding trust agreement event of default.
Any required approval or direction of holders of preferred securities may be
given at a separate meeting of holders of preferred securities convened for such
purpose, at a meeting of all of the holders of the trust securities or pursuant
to written consent. The property trustee will cause a notice of any meeting at
which holders of preferred securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of preferred securities in the manner set forth in the
trust agreement.
No vote or consent of the holders of preferred securities is required for
the trust to redeem and cancel the preferred securities in accordance with the
trust agreement.
Notwithstanding that holders of preferred securities are entitled to vote or
consent under any of the circumstances described above, any of the preferred
securities that are owned at such time by Cummins, the trustees or any affiliate
of any trustee shall, for purposes of such vote or consent, be treated as if
such preferred securities were not outstanding.
34
The procedures by which holders of preferred securities may exercise their
voting rights are described below. See "--Form, Transfer, Exchange and
Book-Entry Procedures."
Holders of the preferred securities have no rights to appoint or remove the
trustees, who may be appointed, removed or replaced solely by Cummins, as the
direct or indirect holder of all the common securities.
AMENDMENT OF THE TRUST AGREEMENT
Cummins and the trustees may amend the trust agreement from time to time,
without the consent of the holders of the preferred securities:
- to cure any ambiguity or correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, in each case
so long as such amendment does not adversely affect in any material
respect the interests of any holder of trust securities;
- to modify, eliminate or add to any provision of the trust agreement to
such extent as shall be necessary to ensure that the trust will be
classified for United States Federal income tax purposes as a grantor
trust or to ensure that the trust will not be required to register as an
"investment company" under the Investment Company Act; or
- to maintain the qualification of the trust agreement under the Trust
Indenture Act.
Any amendments of the trust agreement shall become effective when notice
thereof is given to the holders of the trust securities.
In addition, Cummins and the trustees may amend the trust agreement upon:
- the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding preferred securities and common
securities, acting as a single class unless such amendment would adversely
affect only the preferred securities or only the common securities in
which case only the affected class would be entitled to vote; and
- receipt by the trustees of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the trustees in
accordance with such amendment will not affect the trust's status as a
grantor trust for United States Federal income tax purposes or the trust's
exemption from the status of an "investment company" under the Investment
Company Act;
provided, however, that Cummins and the trustees may not amend the trust
agreement without the consent of each holder of trust securities if such
amendment will change the amount or timing of any distribution on the trust
securities or otherwise adversely affect the amount of any distribution required
to be made in respect of the trust securities as of a specified date, or
restrict the right of a holder of trust securities to institute suit for the
enforcement of any such payment on or after such date.
If any proposed amendment of the trust agreement provides for, or the
trustees otherwise propose to effect, the dissolution, winding-up or termination
of the trust, other than pursuant to the terms of the trust agreement, then the
holders of the then outstanding preferred securities, as a class, are entitled
to vote on such amendment or proposal and such amendment or proposal shall not
be effective except with the approval of the holders of the majority in
aggregate liquidation amount of the preferred securities.
35
PAYMENT AND PAYING AGENCY
The trust shall make all payments in respect of the preferred securities to
DTC or its nominee, as the registered owner of the global certificates
representing the preferred securities. It is expected that DTC will then make
payments to its participants by crediting the relevant accounts at DTC on the
applicable distribution dates.
If the preferred securities are not held by DTC, the paying agent shall make
all payments in respect of the preferred securities by check mailed to the
address of the holder entitled thereto as such address shall appear on the
security register (as such term is defined in the trust agreement). The paying
agent shall initially be the property trustee and any co-paying agent chosen by
the property trustee and acceptable to the administrative trustees and Cummins.
The paying agent shall be permitted to resign as paying agent upon 30 days'
written notice to the property trustee and Cummins. If the property trustee
shall no longer be the paying agent, the administrative trustees shall appoint a
successor (which shall be a bank or trust company acceptable to the
administrative trustees and Cummins) to act as paying agent.
GOVERNING LAW
The trust agreement and the preferred securities will be governed by, and
construed in accordance with, the laws of the State of Delaware.
FORM, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The preferred securities are represented by one or more certificates in
registered, global form, referred to in this prospectus as the global
certificate. The global certificate was deposited upon issuance with the
property trustee as custodian for DTC, in Chicago, Illinois and registered in
the name of DTC or its nominee, in each case for credit to an account of a
direct or indirect participant in DTC as described below. Transfers of
beneficial interests in the global certificate are subject to the applicable
rules and procedures of DTC and its direct or indirect participants, which may
change from time to time.
Except as set forth below, the global certificate may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the global certificate may not be
exchanged for preferred securities in certificated form except in the limited
circumstances described below under "--Exchanges of Book-Entry Certificates for
Certificated Preferred Securities."
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a global certificate to such persons may be
limited to that extent. Because DTC can act only on behalf of its participants,
which in turn act on behalf of indirect participants and certain banks, the
ability of a person having beneficial interests in 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 interests, may be affected
by the lack of a physical certificate evidencing such interests.
EXCHANGES OF BOOK-ENTRY CERTIFICATES FOR CERTIFICATED PREFERRED SECURITIES
A beneficial interest in a global certificate may not be exchanged for a
certificated preferred security unless:
- DTC notifies the trust and Cummins that it is unwilling or unable to
continue as depository for the global certificate or has ceased to be a
clearing agency registered under the Exchange Act and in either case the
trust and Cummins fail to appoint a successor depository within 90 days;
36
- Cummins, at its option, notifies the property trustee in writing that it
elects to cause the issuance of the preferred securities in certificated
form; or
- there shall have occurred and be continuing a trust agreement event of
default and the holders of a majority in liquidation amount of the
outstanding preferred securities determine that the global certificate
will be exchangeable for certificated preferred securities.
In all cases, certificated preferred securities delivered in exchange for
any global certificate or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
DTC (in accordance with its customary procedures). Any such exchange will be
effected through the DWAC system and an appropriate adjustment will be made in
the records of the security registrar (as such term is defined in the trust
agreement) to reflect a decrease in the principal amount of the relevant global
certificate.
CERTAIN BOOK-ENTRY PROCEDURES FOR GLOBAL CERTIFICATES
The descriptions of the operations and procedures of DTC that follow are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of DTC and are subject to changes by it from time to
time. Neither the trust nor Cummins takes responsibility for these operations
and procedures, and they urge investors to contact DTC or its participants
directly to discuss these matters.
DTC has advised the trust and Cummins as follows: DTC is a limited-purpose
trust company organized under the laws of the State of New York, 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
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical transfer and delivery of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations and may
include certain other organizations. Indirect access to the DTC system is
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly ("indirect participants").
DTC has advised the trust and Cummins that its current practice, upon the
issuance of the global certificate, is to credit, on its internal system, the
respective principal amount of the individual beneficial interests represented
by the global certificate to the accounts with DTC of the participants through
which such interests are to be held. Ownership of beneficial interests in the
global certificate will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants and indirect
participants (with respect to interests of persons other than participants).
As long as DTC, or its nominee, is the registered holder of a global
certificate, DTC or such nominee, as the case may be, will be considered the
sole owner and holder of the preferred securities represented by such global
certificate for all purposes under the trust agreement and the preferred
securities. Except in the limited circumstances described above, owners of
beneficial interests in a global certificate will not be entitled to have any
portions of such global certificate registered in their names, will not receive
or be entitled to receive physical delivery of preferred securities in
definitive form and will not be considered the owners or holders of the global
certificate (or any preferred securities represented thereby) under the trust
agreement or the preferred securities.
37
Investors may hold their interests in the global certificate directly
through DTC, if they are participants in such system, or indirectly through
organizations that are participants in such system. Payments of distributions on
the global certificates will be made to DTC or its nominee as the registered
owner thereof. None of the trust, Cummins, the property trustee nor any of their
respective agents will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in the global certificate or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The trust and Cummins expect that DTC or its nominee, upon receipt of any
payment of distributions in respect of a global certificate representing any
preferred securities held by it or its nominee, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global
certificate for such preferred securities as shown on the records of DTC or its
nominee. The trust and Cummins also expect that payments by participants to
owners of beneficial interests in such global certificate held through such
participants will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers registered in
"street name." Such payments will be the responsibility of such participants.
Interests in the global certificates will trade in DTC's settlement system
and secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures of
DTC and its participants. Transfers between participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same-day funds.
DTC has advised the trust and Cummins that it will take any action permitted
to be taken by a holder of certificates, including the presentation of preferred
securities for exchange as described below and the conversion of preferred
securities, only at the direction of one or more participants to whose account
with DTC interests in the global certificates are credited and only in respect
of such portion of the aggregate liquidation amount of the preferred securities
as to which such participant or participants has or have given such direction.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of beneficial ownership interests in the global certificate among
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the trust, Cummins, the property trustee nor any of their respective agents will
have any responsibility for the performance by DTC, its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations, including maintaining, supervising or reviewing the
records relating to, or payments made on account of, beneficial ownership
interests in the global certificates.
Redemption notices shall be sent to DTC or its nominee as the registered
holder of the preferred securities. If less than all of the preferred securities
are being redeemed, DTC's current practice is to determine by lot the amount of
the interest of each participant to be redeemed.
Although voting with respect to the preferred securities is limited to the
holders of record of the preferred securities, in those instances in which a
vote is required, neither DTC nor its nominee will itself consent or vote with
respect to preferred securities. Under its usual procedures, DTC would mail an
omnibus proxy to the property trustee as soon as possible after the record date.
The omnibus proxy assigns DTC's or its nominee's consenting or voting rights to
those participants to whose accounts such preferred securities are credited on
the record date and identified in a listing attached to the omnibus proxy.
Conveyance of notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners of the preferred securities and the voting
rights of participants, indirect participants and beneficial owners
38
of preferred securities will be governed by arrangements among them, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Cummins, at its option, may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depository).
TRANSFER AGENT, REGISTRAR AND PAYING, CONVERSION AND EXCHANGE AGENT
The property trustee presently acts as transfer agent, registrar and paying,
conversion and exchange agent for the preferred securities.
Registration of transfers or exchanges of preferred securities will be
effected by or on behalf of the trust without charge, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The trust is not required to register or cause to be
registered the transfer of the preferred securities after such preferred
securities have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee, other than during the occurrence and continuance of a
trust agreement event of default, undertakes to perform only such duties as are
specifically set forth in the trust agreement. During the occurrence and
continuance of a trust agreement event of default, the property trustee
undertakes to exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs.
However, the property trustee is under no obligation to exercise any of the
powers vested in it by the trust agreement at the request of any holder of
preferred securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
If no trust agreement event of default has occurred and is continuing and
the property trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the trust agreement or is unsure of the
application of any provision of the trust agreement, and the matter is not one
on which holders of preferred securities are entitled under the trust agreement
to vote, then the property trustee shall take such action as is directed by
Cummins and, if not so directed, shall take such action as it deems necessary
and will have no liability except for its own bad faith, negligence or willful
misconduct.
Cummins and certain of its subsidiaries may maintain deposit accounts and
banking relationships and conduct other banking and corporate securities
transactions with the property trustee in the ordinary course of their
businesses.
MISCELLANEOUS
The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that the trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States Federal income tax purposes and so that the debentures will be
treated as indebtedness of Cummins for United States Federal income tax
purposes. In this connection, Cummins and the administrative trustees are
authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the trust or the trust agreement, that Cummins and the
administrative trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the preferred securities.
Holders of the preferred securities have no preemptive or similar rights.
39
The trust may not borrow money or issue debt or mortgage or pledge any of
its assets.
REGISTRATION RIGHTS
In connection with the original offering of the preferred securities,
Cummins and the trust entered into a registration rights agreement with the
initial purchasers of the preferred securities pursuant to which Cummins and the
trust agreed, at the expense of Cummins, to file with the SEC on or before the
date 90 days after the date of orginal issuance of the preferred securities a
shelf registration statement on such form as Cummins deems appropriate covering
resale by holders of all preferred securities, the debentures issuable in
respect of the preferred securities, the common stock issuable upon conversion
of the preferred securities and the debentures, and the preferred securities
guarantee, referred to in this prospectus as the registrable securities. Cummins
has agreed to use its best efforts:
- to cause the shelf registration statement to be declared effective as
promptly as practicable and in no event later than 180 days after the date
of original issuance of the preferred securities, and
- to keep the shelf registration statement effective until the earliest of
(A) two years after the date such shelf registration statement is declared
effective, (B) the sale of all registrable securities registered under the
shelf registration statement and (C) the date the holders of registrable
securities (other than affiliates of Cummins) are able to sell all
registrable securities immediately without restriction pursuant to
Rule 144(k) under the Securities Act or any successor rule thereto or
otherwise.
The trust and Cummins are permitted to suspend the use of the prospectus,
which is a part of the shelf registration statement, in connection with sales of
registrable securities by holders during certain periods of time under certain
circumstances relating to pending corporate developments affecting Cummins and
public filings with the SEC and similar events.
The trust and Cummins will provide to each registered holder copies of such
prospectus, notify each registered holder when the shelf registration statement
has become effective, and take certain other actions as are required to permit
unrestricted sales of the registrable securities.
In the registration rights agreement, the trust and Cummins agreed to
indemnify the holders of registrable securities against certain liabilities,
including liabilities under the Securities Act, subject to certain customary
limitations, and each holder of registrable securities included in the shelf
registration statement will be obligated to indemnify the trust and Cummins, any
other holder and any underwriters participating in the offering of registrable
securities against any liabilities with respect to information furnished by such
holder in writing to the trust and Cummins (including the information in a
selling securityholder's questionnaire) expressly for use in the shelf
registration statement.
If:
- on or before the date 90 days after the date of original issuance of the
preferred securities, Cummins has not filed a shelf registration statement
with the SEC, or
- on or before the date 180 days after the date of original issuance of the
preferred securities, such shelf registration statement has not been
declared effective,
each of which is referred to herein as a registration default, additional
interest will accrue on the debentures, and, accordingly, additional
distributions will accrue on the preferred securities, from and including the
day following such registration default until such registration default is
cured. Additional interest will be paid quarterly in arrears, with the first
quarterly payment due on the first interest or distribution payment date, as
applicable, following the date on which such additional
40
interest begins to accrue, and will accrue at a rate per annum equal to an
additional one quarter of one percent (0.25%) of the principal amount or
liquidation amount, as applicable, to and including the 90th day following such
registration default and one-half of one percent (0.50%) thereof from and after
the 91st day following such registration default.
If the shelf registration statement ceases to be effective during the
effectiveness period for more than 30 days, whether or not consecutive, in any
90-day period, or for more than 90 days, whether or not consecutive, during any
12-month period, then the interest rate borne by the debentures and the
distribution rate borne by the preferred securities will each increase by an
additional annual rate of one-half of one percent (0.50%) from the 31st day of
the applicable 90-day period or the 91st day of the applicable 12-month period
such shelf registration statement ceases to be effective until such time as the
shelf registration statement again becomes effective.
The specific provisions relating to the registration statement described
above are contained in the registration rights agreement entered into for the
benefit of holders of the registrable securities, on the date of original
issuance of the preferred securities. This summary of certain provisions of the
registration rights agreement does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all the provisions of the
registration rights agreement, a copy of the form of which is filed as an
exhibit to the registration statement of which this prospectus is a part.
AGREEMENT BY PURCHASERS OF CERTAIN TAX TREATMENT
Each purchaser of preferred securities, by acceptance of a beneficial
interest in the preferred securities, agrees to treat the debentures as
indebtedness for all United States Federal, state and local tax purposes.
DESCRIPTION OF THE DEBENTURES
The debentures were issued under an indenture, a copy of which is
incorporated by reference as an exhibit to the registration statement of which
this prospectus is a part. This description summarizes the material terms and
provisions of the debentures and the indenture and is subject to, and is
qualified in its entirety by reference to, the indenture. Whenever particular
defined terms of the indenture are referred to herein, such defined terms are
incorporated by reference herein.
GENERAL
The debentures are unsecured and rank junior and subordinate in right of
payment to all future senior and subordinated debt of Cummins. The debentures
are limited in aggregate principal amount to approximately $309,278,400, such
amount being the sum of the aggregate stated liquidation amount of the preferred
securities and capital contributed by Cummins to purchase the common securities.
The indenture does not limit the incurrence or issuance of other senior or
subordinated debt of Cummins, whether under the indenture relating to the
debentures or any existing or other indenture that Cummins may enter into in the
future or otherwise. See "--Subordination." The property trustee holds legal
title to the debentures for the benefit of the holders of the preferred
securities and common securities.
INTEREST
The debentures bear interest at the annual rate of 7%, payable quarterly in
arrears on March 15, June 15, September 15 and December 15 of each year,
commencing on September 15, 2001, to the person in whose name each debenture is
registered at the close of business on the fifteenth day next preceding such
interest payment date, subject to certain exceptions. As long as the preferred
securities remain in book-entry form, the record date for the debentures shall
be the
41
corresponding record date for the preferred securities. The amount of interest
payable for any period is computed on the basis of a 360-day year of twelve
30-day months.
If any date on which interest is payable on the 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, without any interest or other payment in
respect of any such delay. Accrued interest that is not paid on the applicable
interest payment date will bear additional interest on the amount thereof, to
the extent permitted by law, at the annual rate of 7%, compounded quarterly. The
term "interest" as used in this prospectus includes quarterly interest payments,
interest on quarterly interest payments not paid on the applicable interest
payment date and additional sums paid by Cummins as described under "--Expenses
of the Trust."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as no indenture event of default has occurred and is continuing,
Cummins has the right to defer the payment of interest, including any additional
interest, on the debentures at any time or from time to time for a period not
exceeding 20 consecutive quarters with respect to each deferral period, provided
that Cummins may not defer the payment of interest beyond the stated maturity of
the debentures. At the end of any such deferral period, Cummins must pay all
interest then accrued and unpaid, together with interest thereon at the stated
annual rate, compounded quarterly, to the extent permitted by applicable law.
During a deferral period, interest will continue to accrue and holders of the
debentures, or holders of the preferred securities while the preferred
securities are outstanding, will continue to be required to accrue interest
income for United States Federal income tax purposes. See "United States Federal
Income Tax Considerations--Interest Income and Original Issue Discount."
During any such deferral period, Cummins may not, and must cause its
subsidiaries not to:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of Cummins'
capital stock; or
- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees of
indebtedness for money borrowed) of Cummins that rank equally with or
junior to the debentures.
Notwithstanding the foregoing, Cummins may take any of the following actions
during a deferral period:
- make any dividend, redemption, liquidation, interest, principal or
guarantee payment by way of securities, including capital stock, that rank
equally with or junior to the securities on which such dividend,
redemption, interest, principal or guarantee payment is being made;
- redeem or purchase any rights pursuant to Cummins' rights plan (or any
successor to such rights plan), declare a dividend of such rights or issue
stock under such plan in the future;
- make payments under the preferred securities guarantee;
- purchase common stock issued under any of Cummins' benefit plans for its
directors, officers or employees;
- make payments or distributions in connection with a reclassification of
Cummins' capital stock or the exchange or conversion of one series or
class of Cummins' capital stock for another series or class of Cummins'
capital stock; and
- purchase fractional interests in shares of Cummins' capital stock pursuant
to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged.
42
Before the termination of any such deferral period, Cummins may further
extend the interest payment period, provided that no deferral period may exceed
20 consecutive quarters or extend beyond the stated maturity of the debentures.
Upon the termination of any such deferral period and the payment of all amounts
then due on any interest payment date, Cummins may elect to begin a new deferral
period subject to the above requirements. No interest shall be due and payable
during a deferral period, except at the end thereof.
Cummins shall give the property trustee, the administrative trustees and the
indenture trustee notice of its election to begin any deferral period at least
one business day before the earlier of:
- the record date for distributions on the preferred securities or, if no
preferred securities are outstanding, for interest on the debentures; and
- the date the property trustee is or, if no preferred securities are
outstanding, the indenture trustee is required to give notice to holders
of such preferred securities or, if no preferred securities are
outstanding, to the holders of such debentures of such record date.
The indenture trustee and the property trustee shall give notice of Cummins'
election to begin a deferral period to the holders of the debentures and the
preferred securities, respectively.
ADDITIONAL INTEREST
If a registration default occurs as defined under "Description of the
Preferred Securities--Registration Rights," additional interest will accrue on
the debentures from and including the day following such registration default
until such registration default is cured. Additional interest will be paid
quarterly in arrears, with the first quarterly payment due on the first interest
payment date following the date on which such additional interest begins to
accrue, and will accrue at a rate per annum equal to an additional one quarter
of one percent (0.25%) of the principal amount to and including the 90th day
following such registration default and one-half of one percent (0.50%) thereof
from and after the 91st day following such registration default.
If the shelf registration statement ceases to be effective during the
effectiveness period for more than 30 days, whether or not consecutive, in any
90-day period, or for more than 90 days, whether or not consecutive, during any
12-month period, then the interest rate borne by the debentures will increase by
an additional annual rate of one-half of one percent (0.50%) from the 31st day
of the applicable 90-day period or the 91st day of the applicable 12-month
period such shelf registration statement ceases to be effective until such time
as the shelf registration statement again becomes effective.
CONVERSION OF THE DEBENTURES
The debentures are convertible into shares of Cummins common stock at the
option of the holders of debentures at any time before the close of business on
June 13, 2031 (or, in the case of debentures called for redemption, before the
close of business on the business day before the redemption date) at the initial
conversion price subject to the conversion price adjustments described under
"Description of the Preferred Securities--Conversion Rights." The trust has
agreed not to convert the debentures held by it except pursuant to a notice of
conversion delivered to the conversion agent by a holder of the preferred
securities. Upon surrender of preferred securities to the conversion agent for
conversion, the trust will distribute debentures to the conversion agent on
behalf of the holder of the preferred securities so converted, whereupon the
conversion agent will convert such debentures to common stock on behalf of such
holder. The delivery by Cummins to the holders of the debentures (through the
conversion agent) of the fixed number of shares of Cummins common stock into
which the debentures are convertible (together with the cash payment, if any, in
lieu of fractional shares) will be deemed to satisfy the obligation of Cummins
to
43
pay the principal amount of the 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 a debenture is surrendered for conversion after the close of business on
any regular record date for payment of interest and before the opening of
business on the corresponding interest payment date, then, notwithstanding such
conversion, the interest payable on such interest payment date will be paid in
cash to the person in whose name the debenture is registered at the close of
business on such record date, and, other than a debenture or a portion of a
debenture called for redemption on a redemption date occurring after such record
date and before such interest payment date, when so surrendered for conversion,
the debenture must be accompanied by payment of an amount equal to the interest
payable on such interest payment date.
OPTIONAL REDEMPTION; SPECIAL EVENT REDEMPTION
Except upon repayment at maturity or as a result of acceleration upon the
occurrence of an indenture event of default or pursuant to a tax event or
investment company event, Cummins may not redeem the debentures before June 15,
2006. On and after June 15, 2006, Cummins will have the right, at any time and
from time to time, to redeem the debentures, in whole or in part, at the
following redemption prices (expressed as a percentage of the principal amount
of the debentures being redeemed), together with any accrued but unpaid interest
on the portion being redeemed.
YEAR REDEMPTION PRICE YEAR REDEMPTION PRICE
---- ---------------- ---- ----------------
2006........................ 103.50% 2009........................ 101.40%
2007........................ 102.80% 2010........................ 100.70%
2008........................ 102.10% 2011 and thereafter......... 100.00%
For so long as the trust is the holder of all the outstanding debentures,
the proceeds of any such redemption will be used by the trust to redeem trust
securities in accordance with their terms. See "Description of the Preferred
Securities--Optional Redemption." Cummins may not redeem the debentures in part
unless all accrued and unpaid interest has been paid in full on all outstanding
debentures. Cummins may not, in any case, redeem the debentures unless all
accrued and unpaid interest thereon has been paid in full on all outstanding
debentures through the last interest payment date before and including the date
of redemption.
Cummins has the right to redeem the debentures at any time upon the
occurrence of a tax event or an investment company event at a redemption price
equal to 100% of the principal amount of the debentures so redeemed at such
times and in such manner as described in "Description of the Preferred
Securities--Special Event Redemption."
REDEMPTION PROCEDURES
Notices of any redemption of the debentures and the procedures for such
redemption shall be the same as those described for the redemption of the
preferred securities under "Description of the Preferred Securities--Redemption
Procedures." Notice of any redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each holder of debentures to be
redeemed at its registered address. Unless Cummins defaults in payment of the
redemption price, on and after the redemption date interest will cease to accrue
on such debentures or portions thereof called for redemption.
44
DISTRIBUTION OF DEBENTURES
At any time, Cummins has the right to terminate the trust and cause the
debentures to be distributed to the holders of the preferred securities in
liquidation of the trust after satisfaction of liabilities to creditors of the
trust as provided by applicable law. Circumstances under which Cummins may
determine to exercise such right could include:
- the occurrence of a tax event or an investment company event;
- adverse tax consequences to Cummins or the trust that are not within the
definition of a tax event because they do not result from an amendment or
change described in such definition; and
- changes in the accounting requirements applicable to the preferred
securities as described under "Accounting Treatment."
If distributed to holders of preferred securities in liquidation of the
trust, the debentures will be issued in the same form as the preferred
securities that such debentures replace. If the debentures are issued in the
form of one or more global securities, then DTC, or any successor depository for
the preferred securities, will act as depository for the debentures. It is
anticipated that the depository arrangements for the debentures would be
substantially identical to those in effect for the preferred securities. See
"--Global Securities." There can be no assurance as to the market price of any
debentures that may be distributed to the holders of preferred securities. For a
description of DTC and the terms of the depository arrangements, see
"Description of the Preferred Securities--Form, Transfer, Exchange and
Book-Entry Procedures."
MODIFICATION OF THE INDENTURE
From time to time, Cummins and the indenture trustee may, without the
consent of the holders of debentures, amend, waive or supplement the indenture
for specified purposes, including, among other things:
- to cure ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interest of the holders of
the debentures, or the holders of the preferred securities so long as they
remain outstanding); and
- to qualify, or maintain the qualification of, the indenture under the
Trust Indenture Act.
The indenture contains provisions permitting Cummins and the indenture
trustee, with the consent of the holders of not less than a majority in
principal amount of the outstanding debentures, to modify the indenture in a
manner affecting the rights of the holders of the debentures. However, no such
modification may, without the consent of the holder of each outstanding
debenture so affected:
- change the stated maturity of the debentures, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of
interest thereon (other than deferrals of interest as permitted under
"--Option to Extend Interest Payment Period");
- impair the right of a holder of debentures to institute suit for the
enforcement of any such payment;
- change the subordination provisions or the conversion provisions of the
indenture in a manner adverse to the holders; or
- reduce the percentage of aggregate principal amount required to consent to
any such modification of the indenture.
45
In addition, so long as any of the preferred securities remain outstanding,
no such modification may be made that adversely affects the holders of such
preferred securities in any material respect, and no termination of the
indenture may occur, and no waiver of any indenture event of default or
compliance with any covenant under the indenture may be effective, without the
prior consent of the holders of at least a majority in aggregate liquidation
amount of the preferred securities then outstanding unless and until the
principal of the debentures and all accrued and unpaid interest thereon has been
paid in full.
INDENTURE EVENTS OF DEFAULT
The occurrence of any of the following events with respect to the debentures
will constitute an indenture event of default with respect to such debentures:
- Cummins' failure for 30 days to pay any interest on the debentures when
due (unless Cummins has extended the interest payment period as described
under "--Option to Extend Interest Payment Period");
- Cummins' failure to pay any principal of, or premium, if any, on, the
debentures when due whether at maturity, upon redemption, by declaration
or otherwise;
- Cummins' failure to deliver shares of Cummins common stock upon an
appropriate election by holders of the debentures to convert such
debentures;
- Cummins' failure to observe or perform any other covenant or agreement
contained in the indenture for 60 days after written notice thereof as
provided in the indenture; or
- certain events of bankruptcy, insolvency or reorganization relating to
Cummins.
If an indenture event of default shall have occurred and be continuing,
unless Cummins shall have discharged its obligations under the indenture as
described under "--Defeasance, Covenant Defeasance and Discharge," either the
indenture trustee or the holders of not less than 25% in aggregate principal
amount of the debentures then outstanding, by written notice to Cummins (and to
the indenture trustee if given by such holders), may declare the principal of
all debentures and the interest, if any, accrued thereon to be due and payable
immediately. If the indenture trustee or the holders of the debentures should
fail to make such declaration, the holders of at least 25% in aggregate
liquidation amount of the preferred securities then outstanding shall have the
right to make such declaration.
Upon certain conditions, any such declarations may be rescinded and annulled
if all indenture events of default, other than the nonpayment of accelerated
principal, with respect to the debentures then outstanding shall have been cured
or waived as provided in the indenture by the holders of a majority in aggregate
principal amount of the debentures then outstanding. If the holders of the
debentures should fail to waive such default, the holders of a majority in
aggregate liquidation amount of the preferred securities shall have the right to
waive such default.
The indenture provides that the indenture trustee will be under no
obligation to exercise any of its rights or powers under the indenture at the
request, order or direction of the holders of the debentures, unless such
holders shall have offered to the indenture trustee reasonable indemnity.
Subject to such provisions for indemnity and certain other limitations contained
in the indenture, the holders of a majority in aggregate principal amount of the
debentures then outstanding (voting as one class) will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the indenture trustee, or exercising any trust or power conferred on the
indenture trustee, with respect to the debentures.
The indenture provides that no holder of the debentures may institute any
action against Cummins under the indenture (except actions for payment of
overdue principal, premium or
46
interest) unless such holder previously shall have given to the indenture
trustee written notice of default and continuance thereof and unless:
- the holders of not less than 25% in aggregate principal amount of the
debentures then outstanding (voting as one class) shall have requested the
indenture trustee to institute such action and shall have offered the
indenture trustee reasonable indemnity;
- the indenture trustee shall not have instituted such action within
60 days of such request; and
- the indenture trustee shall not have received direction inconsistent with
such request by the holders of a majority in aggregate principal amount of
the debentures then outstanding (voting as one class).
The indenture requires Cummins to furnish annually to the indenture trustee
a statement as to Cummins' compliance with all conditions and covenants under
the indenture. The indenture provides that the indenture trustee may withhold
notice to the holders of the debentures of any default, except defaults as to
payment of principal, premium or interest on the debentures, if it considers
such withholding of notice to be in the interest of the holders of the
debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If an indenture event of default has occurred and is continuing and such
event is attributable to the failure of Cummins to pay interest or principal on
the debentures on the date such interest or principal is otherwise payable, a
holder of preferred securities may institute a direct action for payment after
the respective due date specified in the debentures. Cummins will be able to
set-off any payment made to a holder of preferred securities.
Cummins may not amend the indenture to remove the foregoing right to bring a
direct action without the prior written consent of the holders of all of the
preferred securities.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture provides that Cummins shall not consolidate with or merge into
any other entity or convey, transfer or lease its properties and assets
substantially as an entirety to any entity, and no entity shall consolidate with
or merge into Cummins or convey, transfer or lease its properties and assets
substantially or as an entirety to Cummins, unless:
- in case Cummins consolidates with or merges into another entity or
conveys, transfers or leases its properties and assets substantially as an
entirety to any entity, the successor entity is organized under the laws
of the United States or any State of the United States or the District of
Columbia, and such successor entity expressly assumes Cummins' obligations
on the debentures;
- immediately after giving effect thereto, no indenture event of default,
and no event which, after notice or lapse of time or both, would become an
indenture event of default, shall have happened and be continuing;
- such transaction is permitted under the trust agreement and the preferred
securities guarantee and does not give rise to any breach or violation of
the trust agreement or preferred securities guarantee; and
- certain other conditions as prescribed in the indenture are met.
The general provisions of the indenture do not afford holders of the
debentures protection in the event of a highly leveraged or other transaction
involving Cummins that may adversely affect holders of the debentures.
47
EXPENSES OF THE TRUST
Pursuant to the indenture, Cummins will pay all of the costs, expenses or
liabilities of the trust, other than obligations of the trust to pay to the
holders of any trust securities the amounts due such holders pursuant to the
terms of the trust securities. Such costs, expenses and liabilities shall
include any taxes to which the trust may become subject, whether as a result of
a tax event or otherwise, other than withholding taxes.
DEFEASANCE, COVENANT DEFEASANCE AND DISCHARGE
The indenture provides that, at the option of Cummins:
- Cummins will be discharged from any and all obligations in respect of the
debentures then outstanding (except for certain obligations to register
the transfer of or exchange the debentures, to replace stolen, lost or
mutilated debentures, to maintain paying agencies and to maintain the
trust); or
- Cummins need not comply with certain restrictive covenants of the
indenture (including those described under "--Consolidation, Merger, Sale
of Assets and Other Transactions");
in each case if Cummins irrevocably deposits in trust with the indenture trustee
money or securities backed by the full faith and credit of the United States, or
both, that, through the payment of the principal thereof and the interest
thereon in accordance with their terms, will provide money in an amount
sufficient to pay all the principal of and premium, if any, and interest,
including any additional interest, on the debentures on the stated maturity of
such debentures (which may include one or more redemption dates designated by
Cummins) in accordance with the terms thereof.
To exercise such option, Cummins is required, among other things, to deliver
to the indenture trustee an opinion of independent counsel to the effect that
the exercise of such option would not cause the holders of the debentures to
recognize income, gain or loss for United States Federal income tax purposes as
a result of such defeasance, and such holders will be subject to United States
Federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance had not occurred, and, in the
case of a discharge described in the first bullet point above, such opinion is
to be accompanied by a private letter ruling to the same effect received from
the Internal Revenue Service, a revenue ruling to such effect pertaining to a
comparable form of transaction published by the Internal Revenue Service or
appropriate evidence that since the date of the indenture there has not been a
change in the applicable Federal income tax law.
If Cummins exercises its option to effect a covenant defeasance with respect
to the debentures and the debentures are thereafter declared due and payable
because of the occurrence of any indenture event of default other than an event
of default caused by the failure to comply with the covenants which are
defeased, and the amount of money and securities on deposit with the indenture
trustee would be insufficient to pay amounts due on the debentures at the time
of the acceleration resulting from such indenture event of default, Cummins
would remain liable for such amounts.
Cummins may also obtain a discharge of the indenture with respect to all
debentures then outstanding, except for certain obligations to register the
transfer of or to exchange such debentures to replace stolen, lost or mutilated
debentures, to maintain paying agencies and to maintain the trust described
below, by irrevocably depositing in trust with the indenture trustee money or
securities backed by the full faith and credit of the United States, or both,
that, through the payment of the principal thereof and the interest thereon in
accordance with their terms, will provide money in an amount sufficient to pay
all the principal of and premium, if any, and interest, including any additional
interest, on the debentures on the stated maturities thereof (including one
48
or more redemption dates), provided that such debentures are by their terms due
and payable, or are to be called for redemption, within one year.
For United States Federal income tax purposes any deposit contemplated in
the preceding paragraph would be treated as an exchange of the debentures
outstanding for other property. Accordingly, holders of the debentures
outstanding may be required to recognize a gain or loss for United States
Federal income tax purposes upon such exchange. In addition, such holders
thereafter may be required to recognize income from such property which could be
different from the amount that would be includable in the absence of such
deposit. Prospective investors are urged to consult their own tax advisors as to
the specific consequences to them of such deposit.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the debentures
is, to the extent and in the manner set forth in the indenture, subordinated in
right of payment to the prior payment in full, in cash or cash equivalents, of
all senior and subordinated debt of Cummins.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, receivership, reorganization, assignment
for the benefit of creditors, marshalling of assets and liabilities or any
bankruptcy, insolvency or similar proceedings of Cummins, the holders of all
senior and subordinated debt will first be entitled to receive payment in full
of all amounts due or to become due thereon before the holders of the debentures
will be entitled to receive any payment in respect of the principal of, premium,
if any, or interest on the debentures.
No payments on account of principal, premium, if any, or interest in respect
of the debentures may be made by Cummins if there shall have occurred and be
continuing a default in any payment with respect to senior and subordinated debt
or during certain periods when an event of default under certain senior and
subordinated debt permits the lenders thereunder to accelerate the maturity of
such senior and subordinated debt. In addition, during the continuance of any
other event of default, other than a payment default, with respect to designated
senior and subordinated debt pursuant to which the maturity thereof may be
accelerated, from and after the date of receipt by the indenture trustee of
written notice from holders of such designated senior and subordinated debt or
from an agent of such holders, no payments on account of principal, premium, if
any, or interest in respect of the debentures may be made by Cummins during a
period, referred to herein as the payment blockage period, commencing on the
date of delivery of such notice and ending 179 days thereafter, unless such
payment blockage period shall be terminated by written notice to the indenture
trustee from the holders of such designated senior and subordinated debt or from
an agent of such holders, or such event of default has been cured or waived or
has ceased to exist. Only one payment blockage period may be commenced with
respect to the debentures during any period of 360 consecutive days. No event of
default that existed or was continuing on the date of the commencement of any
payment blockage period with respect to the designated senior and subordinated
debt initiating such payment blockage period shall be, or be made, the basis for
the commencement of any subsequent payment blockage period by the holders of
such designated senior and subordinated debt, unless such event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
By reason of such subordination, in the event of insolvency, funds that
would otherwise be payable to holders of the debentures will be paid to the
holders of senior and subordinated debt of Cummins to the extent necessary to
pay such debt in full, and Cummins may be unable to meet fully its obligations
under the debentures.
As used herein, "debt" means, with respect to any person on any date of
determination, without duplication:
- all indebtedness for borrowed money;
49
- all obligations evidenced by bonds, debentures, notes or other similar
instruments;
- all obligations in respect of letters of credit or bankers' acceptance or
other similar instruments, or reimbursement obligations with respect
thereto;
- all obligations of such person under conditional sale or other title
retention agreements relating to property or assets purchased by such
person;
- all obligations issued or assumed as the deferred purchase price of
property or services, but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business;
- all obligations as lessee under capitalized leases;
- all debt of others secured by (or for which the holder of such debt has an
existing right, contingent or otherwise, to be secured by) a lien on any
asset of such person, whether or not such debt is assumed by such person;
provided that, for purposes of determining the amount of any debt of the
type described in this clause, if recourse with respect to such debt is
limited to such asset, the amount of such debt shall be limited to the
lesser of the fair market value of such an asset or the amount of such
debt;
- all debt of others guaranteed by such person to the extent such debt is
guaranteed by such person; and
- to the extent not otherwise included in this definition, all obligations
of such person under currency agreements and interest rate agreements.
As used herein, "designated senior and subordinated debt" means:
- debt under the amended and restated credit agreement dated as of
January 8, 1998 among Cummins, the banks named on the signature pages
thereof and Morgan Guaranty Trust Company of New York, as agent for the
banks, as such agreement has been and may be amended, restated,
supplemented or otherwise modified from time to time; and
- debt constituting senior and subordinated debt that, at the time of its
determination:
(A) has an aggregate principal amount of at least $20 million; and
(B) is specifically designated in the instrument evidencing such senior
and subordinated debt as "designated senior and subordinated debt" by
Cummins.
As used herein, "senior and subordinated debt" means the principal of, and
premium, if any, and interest on all debt of Cummins whether created, incurred
or assumed before, on or after the date of the indenture; provided that such
senior and subordinated debt shall not include:
- debt that, when incurred and without respect to any election under
Section 1111(b) of Title 11 of the U.S. Code, was without recourse;
- debt that by its terms is expressly subordinated to, or ranks equally in
right of payment to the debentures; and
- debt to any affiliate of Cummins including all debt securities and
guarantees issued to any trust, partnership or other entity affiliated
with Cummins that is a financing vehicle of Cummins in connection with an
issuance of preferred securities by such financing entity.
PAYMENT AND PAYING AGENTS
If the debentures are represented by a global security, Cummins shall make
payments on the debentures to DTC, as the depository for the debentures.
Otherwise, payment of principal of and premium, if any, and any interest on the
debentures will be payable, the transfer of the debentures will be registrable,
and the debentures will be exchangeable for debentures of other denominations
50
of a like aggregate principal amount at the corporate office of the indenture
trustee in the City of Chicago or at the office of such paying agent or paying
agents as Cummins may designate, except that, at the option of Cummins, payment
of any interest may be made:
- by check mailed to the address of the person entitled thereto as such
address shall appear in the security register; or
- by wire transfer to an account maintained by the person entitled thereto
as specified in the security register, provided that proper transfer
instructions have been received by the regular record date (as such term
is defined in the indenture).
Payment of any interest on debentures will be made to the person in whose
name such debentures are registered at the close of business on the regular
record date for such interest. The regular record date for the interest payable
on any interest payment date shall be the fifteenth day, whether or not a
business day, next preceding such interest payment date, subject to certain
exceptions. Cummins may at any time designate additional paying agents or
rescind the designation of any paying agent.
Any monies deposited with the indenture trustee or any paying agent, or then
held by Cummins in trust, for the payment of the principal of and premium, if
any, or interest on any debentures and remaining unclaimed for two years after
such principal and premium, if any, or interest has become due and payable
shall, at the request of Cummins, be repaid to Cummins and the holder of such
debentures shall thereafter look, as a general unsecured creditor, only to
Cummins for payment thereof.
GOVERNING LAW
The indenture and the debentures will be governed by, and construed in
accordance with, the laws of the State of New York.
GLOBAL SECURITIES
If distributed to holders of the preferred securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the trust,
the debentures will be issued in the same form as the preferred securities that
such debentures replace. Any global certificate will be replaced by one or more
global securities each of which is referred to herein as a global security,
registered in the name of DTC or its nominee. Except under the limited
circumstances described below, the debentures represented by the global security
will not be exchangeable for, and will not otherwise be issuable as, debentures
in definitive form. The global security may not be transferred except by DTC to
a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or to a
successor depository or its nominee. For a description of DTC and the specific
terms of the depository arrangements, see "Description of the Preferred
Securities--Form, Transfer, Exchange and Book-Entry Procedures."
Except as provided below, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of debentures in
definitive form and will not be considered the holders thereof for any purpose
under the indenture. Accordingly, each beneficial owner of preferred securities
must rely on the procedures of DTC or if such person is not a participant, on
the procedures of the participant through which such person owns its interest to
exercise any rights of a holder under the indenture.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a global security.
None of Cummins, the indenture 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
51
of beneficial ownership interests of the global security representing such
debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
A global security shall be exchangeable for debentures registered in the
names of persons other than DTC or its nominee only if:
- DTC notifies Cummins that it is unwilling or unable to continue as a
depository for such global debenture or has ceased to be a clearing agency
registered under the Exchange Act at a time when DTC is required to be so
registered to act as such depository and in either case Cummins fails to
appoint a successor depository within 90 days;
- Cummins in its sole discretion determines that such global security shall
be so exchangeable; or
- there shall have occurred and be continuing an indenture event of default
and the holders of a majority in principal amount of the outstanding
debentures determine that the global security will be so exchangeable.
Any global security that is exchangeable pursuant to the preceding sentence
shall be exchangeable for definitive certificates registered in such names as
DTC shall direct. It is expected that such instructions will be based upon
directions received by DTC from its participants with respect to ownership of
beneficial interests in such global security. If debentures are issued in
definitive form, such debentures will be in denominations of $50 and integral
multiples thereof and may be transferred or exchanged at the offices described
in "--Payment and Paying Agents" above.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The indenture trustee is under no obligation to exercise any of the powers
vested in it by the indenture at the request of any holder of the debentures,
unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The indenture trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the indenture trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
The preferred securities guarantee was executed and delivered by Cummins
concurrently with the issuance by the trust of the preferred securities for the
benefit of the holders from time to time of such preferred securities. BNY
Midwest Trust Company presently acts as guarantee trustee under the preferred
securities guarantee. This description summarizes the material terms and
provisions of the preferred securities guarantee and is subject to, and
qualified in its entirety by reference to, all of the provisions of the
preferred securities guarantee (a copy of which is filed as an exhibit to the
registration statement of which this prospectus is a part). The guarantee
trustee holds the preferred securities guarantee for the benefit of the holders
of the preferred securities.
GENERAL
To the extent set forth in the preferred securities guarantee, Cummins has
irrevocably agreed to pay in full on a subordinated basis to the holders of the
preferred securities, except to the extent paid by the trust, the payments
listed below as and when due, regardless of any defense, right of set-off or
counterclaim that the trust may have or assert other than the defense of
payment:
- any accrued and unpaid distributions required to be paid on the preferred
securities, to the extent that the trust has funds available for those
payments;
- the redemption price with respect to any preferred securities called for
redemption to the extent that the trust has funds available for those
payments; or
52
- upon a voluntary or involuntary dissolution, winding up or liquidation of
the trust (unless the debentures are distributed to holders of the
preferred securities), the lesser of:
(A) the liquidation distribution plus accrued and unpaid distributions
required to be paid on the preferred securities, to the extent that
the trust has funds available for those payments, and
(B) the amount of assets of the trust remaining available for
distribution to holders of the preferred securities.
Cummins' obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by Cummins to the holders of the preferred
securities or by causing the trust to pay such amounts to such holders.
The preferred securities guarantee is an irrevocable guarantee on a
subordinated basis of the trust's obligations under the preferred securities,
but applies only to the extent that the trust has funds sufficient to make such
payments. It is not in and of itself a guarantee that you will collect amounts
owed to you under the preferred securities. If Cummins does not make interest
payments on the debentures held by the trust, the trust will not be able to pay
distributions on the preferred securities and will not have funds legally
available to pay such distributions.
Cummins has, through the preferred securities guarantee, the trust
agreement, the debentures and the indenture, taken together, fully, irrevocably
and unconditionally guaranteed all of the trust's obligations under the
preferred securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the preferred securities. See "Relationship Among the
Preferred Securities, the Debentures and the Preferred Securities Guarantee."
Cummins has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the trust with respect to the common securities to
the same extent as the preferred securities guarantee, except that upon the
occurrence and during the continuation of a trust agreement event of default,
holders of preferred securities shall have priority over holders of common
securities with respect to distributions and payments on liquidation, redemption
or otherwise.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
Cummins' obligations under the preferred securities guarantee are:
- subordinate and junior in right of payment to all of its senior and
subordinated debt;
- equal in rank with any other guarantee similar to the guarantee issued by
Cummins on behalf of the holders of preferred securities issued by any
other trust established by Cummins or its affiliates;
- equal in right of payment with Cummins' most senior preferred or
preference stock; and
- senior to its common stock.
The preferred securities guarantee will constitute a guarantee of payment
and not of collection. That is, the guaranteed party may institute a legal
proceeding directly against Cummins to enforce its rights under the preferred
securities guarantee without first instituting a legal proceeding against any
other person or entity.
AMENDMENTS AND ASSIGNMENT
Except for any changes that do not materially adversely affect the rights of
holders of the preferred securities, in which case no vote is required, the
preferred securities guarantee may not be amended without the prior approval of
the holders of not less than a majority in aggregate
53
liquidation amount of the outstanding preferred securities. The manner of
obtaining any such approval is as set forth under "Description of the Preferred
Securities--Voting Rights." All guarantees and agreements contained in the
preferred securities guarantee shall bind the successors, assigns, receivers,
trustees and representatives of Cummins and shall inure to the benefit of the
holders of the preferred securities then outstanding.
CERTAIN COVENANTS OF CUMMINS
Cummins has covenanted that, so long as any preferred securities remain
outstanding, it will not, and it will cause its subsidiaries not to:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of Cummins'
capital stock; or
- make any payment of principal of or, interest or premium, if any, on or
repay or repurchase or redeem any debt securities (including guarantees of
indebtedness for money borrowed), of Cummins that rank equally with or
junior to the debentures, other than:
(A) any dividend, redemption, liquidation, interest, principal or
guarantee payment by Cummins where the payment is made by way of
securities (including capital stock) that rank equally with or junior
to the securities on which such dividend, redemption, interest,
principal or guarantee payment is being made;
(B) redemptions or purchases of any rights pursuant to Cummins'
shareholders' rights plan or any successor to such rights plan and
the declaration of a dividend of such rights or the issuance of stock
under such plan in the future;
(C) payments under the preferred securities guarantee;
(D) purchases of common stock issued under any of Cummins' benefit plans
for its directors, officers or employees;
(E) payments or distributions in connection with a reclassification of
Cummins' capital stock or the exchange or conversion of one series or
class of Cummins' capital stock for another series or class of
Cummins' capital stock; and
(F) purchases of fractional interests in shares of Cummins' capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged;
if at such time:
- there shall have occurred any event of which Cummins has actual knowledge
that with the giving of notice or the lapse of time, or both, would
constitute an indenture event of default and in respect of which Cummins
shall not have taken reasonable steps to cure;
- Cummins shall be in default with respect to its payment of any obligations
under the preferred securities guarantee; or
- Cummins shall have given notice of its election to defer payments of
interest as provided in the indenture and shall not have rescinded such
notice, or such deferral period, or any extension thereof, shall be
continuing.
Under the trust agreement and the indenture, taken together, Cummins also
covenanted:
- for so long as preferred securities are outstanding, not to cause the
trust to convert debentures except pursuant to a notice of conversion
delivered to the conversion agent by a holder of preferred securities;
- to maintain directly or indirectly 100% ownership of the common
securities, provided that certain successors which are permitted pursuant
to the indenture may succeed to Cummins' ownership of the common
securities;
54
- not to voluntarily terminate, wind-up or liquidate the trust, except:
(A) in connection with a distribution of the debentures to the holders of
the preferred securities in liquidation of the trust, or
(B) in connection with certain mergers, consolidations or amalgamations
permitted by the trust agreement;
- to maintain the reservation for issuance of the number of shares of
Cummins common stock that would be required from time to time upon the
conversion of all the debentures then outstanding;
- to use its reasonable efforts, consistent with the terms and provisions of
the trust agreement, to cause the trust to remain classified as a grantor
trust and not as an association taxable as a corporation for United States
Federal income tax purposes;
- to deliver shares of common stock upon an election by the holders of the
preferred securities to convert such preferred securities into common
stock; and
- to honor all obligations relating to the conversion or exchange of
preferred securities into or for Cummins common stock or debentures.
EVENTS OF DEFAULT; ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED
SECURITIES
An event of default under the preferred securities guarantee will occur upon
the failure of Cummins to perform any of its payment or other obligations
thereunder. The holders of a majority in aggregate liquidation amount of the
preferred securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the guarantee trustee in
respect of the preferred securities guarantee or to direct the exercise of any
trust or power conferred upon the guarantee trustee under the preferred
securities guarantee.
If the guarantee trustee fails to enforce the preferred securities
guarantee, any holder of the preferred securities may institute a legal
proceeding directly against Cummins to enforce its rights under the preferred
securities guarantee without first instituting a legal proceeding against the
trust, the guarantee trustee or any other person or entity. In addition, any
record holder of preferred securities shall have the right, which is absolute
and unconditional, to proceed directly against Cummins to obtain guarantee
payments, without first waiting to determine if the guarantee trustee has
enforced the preferred securities guarantee or instituted a legal proceeding
against the trust, the guarantee trustee or any other person or entity. Cummins
has waived any right or remedy to require that any action be brought just
against the trust, or any other person or entity before proceeding directly
against Cummins.
Cummins, as guarantor, is required to file annually with the guarantee
trustee a certificate as to whether or not Cummins is in compliance with all the
conditions and covenants applicable to it under the preferred securities
guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee, other than during the occurrence and continuance of a
default by Cummins in performance of the preferred securities guarantee, has
undertaken to perform only such duties as are specifically set forth in the
preferred securities guarantee. During the occurrence and continuance of a
default under the preferred securities guarantee, the guarantee trustee must
exercise the same degree of care and skill as a prudent person would exercise or
use under the circumstances in the conduct of his or her own affairs.
However, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by the preferred securities guarantee at the request of any
holder of preferred securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred thereby.
55
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The preferred securities guarantee will terminate and be of no further force
and effect:
- upon full payment of the redemption price of the preferred securities;
- upon full payment of the amounts payable upon liquidation of the trust;
- upon conversion of all the preferred securities into Cummins common stock;
or
- upon distribution of debentures to the holders of the preferred securities
in exchange for all of the preferred securities.
The preferred securities guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of preferred
securities must restore payment of any sums paid under such preferred securities
or the preferred securities guarantee.
GOVERNING LAW
The preferred securities guarantee will be governed by, and construed in
accordance with, the laws of the State of New York.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE DEBENTURES
AND THE PREFERRED SECURITIES GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Taken together, Cummins' obligations under the debentures, the indenture,
the trust agreement and the preferred securities guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
distributions and other amounts due on the preferred securities. No single
document standing alone or operating in conjunction with fewer than all of the
other documents constitutes such a guarantee. It is only the combined operation
of these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the trust's obligations under the preferred
securities. If and to the extent that Cummins does not make payments on the
debentures, the trust will not pay distributions or other amounts due on the
preferred securities. The guarantee does not cover payment of distributions when
the trust does not have sufficient funds to pay such distributions. In such an
event, a holder of preferred securities may institute a direct action directly
against Cummins to enforce payment of such distributions to such holder after
the respective due dates.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
debentures, such payments will be sufficient to cover distributions and other
payments due on the preferred securities, primarily because:
- the aggregate principal amount of the debentures is equal to the sum of
the aggregate stated liquidation amount of the preferred securities and
common securities;
- the interest rate and interest and other payment dates on the debentures
match the distribution rate and distribution and other payment dates for
the preferred securities;
- Cummins shall pay for all and any costs, expenses and liabilities of the
trust except the trust's obligations to holders of the preferred
securities under such preferred securities; and
- the trust agreement provides that the trust will not engage in any
activity that is not consistent with the limited purpose of the trust.
Notwithstanding anything to the contrary in the indenture, Cummins has the
right to set-off any payment it is otherwise required to make thereunder with
and to the extent Cummins has
56
theretofore made, or is concurrently on the date of such payment making, a
payment under the preferred securities guarantee.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any preferred security may institute a legal proceeding directly
against Cummins to enforce its rights under the preferred securities guarantee
without first instituting a legal proceeding against the guarantee trustee, the
trust or any other person or entity.
A holder may institute a direct action against Cummins to enforce its rights
under the trust agreement only if a trust agreement event of default has
occurred and is continuing and is attributable to the failure of Cummins to pay
interest or principal on the debentures on the date such interest or principal
is otherwise payable. A default or event of default under any senior and
subordinated debt of Cummins will not constitute an indenture event of default.
However, in the event of payment defaults under, or acceleration of, senior and
subordinated debt of Cummins, the subordination provisions of the indenture
provide that no payments may be made in respect of the debentures until such
senior and subordinated debt have been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
debentures would constitute an indenture event of default.
LIMITED PURPOSE OF TRUST
The preferred securities evidence a beneficial interest in the trust, and
the trust was created for the sole purpose of issuing the preferred securities
and common securities and investing the proceeds thereof in the debentures. A
principal difference between the rights of a holder of preferred securities and
a holder of debentures is that a holder of debentures is entitled to receive
from Cummins the principal amount of and interest accrued on the debentures,
while a holder of preferred securities is entitled to receive distributions from
the trust, including any amounts to be received upon redemption of the preferred
securities, or from Cummins under the applicable guarantee, if and to the extent
the trust has funds available for the payment of such distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
the trust involving the liquidation of the debentures, the holders of the
preferred securities are entitled to receive, out of assets held by the trust,
the liquidation distribution in cash. See "Description of the Preferred
Securities--Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of Cummins, the property trustee, as
holder of the debentures, would be a subordinated creditor of Cummins,
subordinated in right of payment to all senior and subordinated debt, but
entitled to receive payment in full of principal and interest before any common
stockholders of Cummins receive payments or distributions. Since Cummins is the
guarantor under the preferred securities guarantee and has agreed to pay for all
costs, expenses and liabilities of the trust, other than the trust's obligations
to the holders of the preferred securities, the positions of a holder of such
preferred securities and a holder of such debentures relative to other creditors
and to stockholders of Cummins in the event of liquidation or bankruptcy of
Cummins would be substantially the same.
57
DESCRIPTION OF CUMMINS COMMON STOCK
The following is a description of certain terms of Cummins common stock.
This description does not purport to be complete and is subject to, and
qualified in its entirety by, reference to the Cummins' Restated Articles of
Incorporation.
GENERAL. Cummins is authorized to issue up to 150 million shares of common
stock. As of September 23, 2001, there were approximately 41.3 million shares of
common stock outstanding held by approximately 4,800 shareholders of record.
Subject to the limitations described below and the prior rights of Cummins
preferred stock and preference stock, if any, the common stock, $2.50 par value,
of Cummins is entitled to dividends when and as declared by the Board of
Directors out of funds legally available therefor. Holders of common stock are
entitled to one vote per share. There is no provision for cumulative voting or
preemptive rights. The holders of Cummins preferred stock and the holders of
Cummins preference stock, if any, are each entitled to elect two directors of
Cummins upon default in the payment of six quarterly dividends on any series of
such class and have voting rights with respect to amendments of the Restated
Articles of Incorporation affecting certain of their rights and in the case of
certain mergers, consolidations and dispositions of substantially all of
Cummins' assets. Upon any liquidation, voluntary or involuntary, of Cummins,
holders of common stock are entitled ratably to all the assets of Cummins after
payment of Cummins' liabilities and satisfaction of the liquidation preferences
of the preferred stock and the preference stock of Cummins. The outstanding
shares of common stock are, upon issuance against full payment therefor, fully
paid and non-assessable.
Cummins common stock is listed on the New York and Pacific Stock Exchanges.
The transfer agent and registrar for the common stock is Wells Fargo Shareowner
Services, St. Paul, Minnesota.
DIVIDENDS. No dividends or distributions may be declared or paid or made
on, or acquisitions made of, any common stock unless dividends on all
outstanding preferred stock and preference stock of Cummins for all past
quarterly dividend periods have been declared and paid or a sum sufficient for
payment set apart. A number of the agreements under which Cummins has borrowed
money restrict its payment of dividends (other than stock dividends) and
distributions on and the redemption, purchase and acquisition by Cummins of its
capital stock, including its preferred stock and preference stock. These
restrictions typically limit the sum of all such payments, distributions,
redemptions, purchases and acquisitions from a given date to a specified amount
of retained earnings at such date plus consolidated net income and the net
proceeds to Cummins from the sale of its capital stock and indebtedness
converted into such stock after such date. Several such agreements require
Cummins to maintain minimum net worth and working capital at specified levels.
In addition, at any time Cummins is in default under its revolving credit
facility or certain other financing arrangements, it would be prohibited from
paying dividends. Cummins is presently unaware of any facts or circumstances
that would give rise to any such default.
SHAREHOLDERS' RIGHTS PLAN. Cummins has a shareholders' rights plan which it
first adopted in 1986. The rights plan provides that each share of Cummins
common stock has associated with it a stock purchase right. The rights plan
becomes operative when a person or entity acquires 15% of Cummins common stock
or commences a tender offer to purchase 20% or more of Cummins common stock
without the approval of Cummins' Board of Directors. In the event a person or
entity acquires 15% of Cummins common stock, each right, except for the
acquiring person's rights, can be exercised to purchase $400 worth of common
stock for $200. In addition, for a period of 10 days after such acquisition, the
Board of Directors can exchange such right for a new right which permits the
holders to purchase one share of Cummins common stock for $1. If a person or
entity commences a tender offer to purchase 20% or more of Cummins common stock,
unless the Board of Directors redeems the rights within 10 days of the event for
a redemption price equal to $.01 per whole right, each right can be exercised to
purchase one share for $200. If the person or
58
entity becomes an acquiring person, then the provisions noted above apply. The
rights plan also allows holders of the rights to purchase shares of the
acquiring person's stock at a discount if Cummins is acquired or 50% of the
assets or earnings power of Cummins is transferred to an acquiring person.
ANTITAKEOVER PROVISIONS OF INDIANA LAW. Indiana Code Section 23-1-42 (the
"Control Share Act") provides that any person or group of persons that acquires
the power to vote more than one-fifth of certain corporations' shares shall not
have the right to vote such shares unless granted voting rights by the holders
of a majority of the outstanding shares of the corporation and by the holders of
a majority of the outstanding shares excluding "interested shares." Interested
shares are those shares held by the acquiring person, officers of the
corporation and employees of the corporation who are also directors of the
corporation. If the approval of voting power for the shares is obtained,
additional shareholder approvals are required when a shareholder acquires the
power to vote more than one-third and more than a majority of the voting power
of the corporation's shares. In the absence of such approval, the additional
shares acquired by the shareholder may not be voted.
If the shareholders grant voting rights to the shares after a shareholder
has acquired more than a majority of the voting power, all shareholders of the
corporation are entitled to exercise statutory dissenters' rights and to demand
the value of their shares in cash from the corporation. If voting rights are not
accorded to the shares, the corporation may have the right to redeem them. The
provisions of the Control Share Act do not apply to acquisitions of voting power
pursuant to a merger or share exchange agreement to which the corporation is a
party.
Cummins' By-laws provide that Cummins is not subject to the Control Share
Act; however, such By-laws may be amended by the Board of Directors without a
shareholder vote.
Indiana Code Section 23-1-43 (the "Business Combination Act") prohibits a
person who acquires beneficial ownership of 10% or more of certain corporations'
shares (an "interested shareholder"), or any affiliate or associate of an
interested shareholder, from effecting a merger or other business combination
with the corporation for a period of five years from the date on which the
person became an interested shareholder, unless the transaction in which the
person became an interested shareholder was approved in advance by the
corporation's Board of Directors. Following the five-year period, a merger or
other business combination may be effected with an interested shareholder only
if (a) the business combination is approved by the corporation's shareholders,
excluding the interested shareholder and any of its affiliates or associates, or
(b) the consideration to be received by shareholders in the business combination
is at least equal to the highest price paid by the interested shareholder in
acquiring its interest in the corporation, with certain adjustments, and certain
other requirements are met. The Business Combination Act broadly defines the
term "business combination" to include mergers, sales or leases of assets,
transfers of shares of the corporation, proposals for liquidation and the
receipt by an interested shareholder of any financial assistance or tax
advantage from the corporation, except proportionately as a shareholder of the
corporation.
The overall effect of the above provisions may be to render more difficult
or to discourage a merger, tender offer, proxy contest, the assumption of
control of Cummins by a holder of a large block of Cummins stock or other
person, or the removal of incumbent management, even if such actions may be
beneficial to the shareholders of Cummins generally.
59
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the material United States Federal income tax
consequences of the purchase, ownership and disposition of the preferred
securities and of the common stock into which the preferred securities may be
converted as of the date of this prospectus. Where noted, it constitutes the
opinion of Cravath, Swaine & Moore, counsel to Cummins and the trust. However,
the discussion is limited in the following ways:
- The discussion only covers you if you are a "U.S. holder." For this
purpose, a U.S. holder is
- an individual U.S. citizen or resident alien;
- a corporation or entity taxable as a corporation for United States
Federal income tax purposes that was created under the laws of the United
States or any political subdivision thereof; or
- an estate or trust whose world-wide income is subject to United States
Federal income tax.
- The discussion only covers you if you hold your preferred securities and
the common stock of Cummins into which the preferred securities may be
converted as a capital asset (that is, for investment purposes), and if
you do not have a special tax status.
- The discussion does not cover tax consequences that depend upon your
particular tax situation in addition to your ownership of the preferred
securities and/or the common stock into which the preferred securities may
be converted. You should consult your tax advisor about the consequences
of holding preferred securities and the common stock into which the
preferred securities may be converted in your particular situation.
- The discussion is based on current law. Changes in the law may change the
tax treatment of the preferred securities and/or the common stock of
Cummins into which the preferred securities may be converted, possibly
with retroactive effect.
- The discussion does not cover state, local or foreign law.
- No ruling from the Internal Revenue Service, or the IRS, has been
requested with respect to any of the tax consequences of owning the
preferred securities or the Cummins common stock into which the preferred
securities may be converted. As a result, the IRS could disagree with
portions of this discussion.
IF A PARTNERSHIP HOLDS PREFERRED SECURITIES, THE TAX TREATMENT OF A PARTNER WILL
GENERALLY DEPEND UPON THE STATUS OF THE PARTNER AND UPON THE ACTIVITIES OF THE
PARTNERSHIP. IF YOU ARE A PARTNER OF A PARTNERSHIP HOLDING PREFERRED SECURITIES,
YOU SHOULD CONSULT YOUR TAX ADVISOR.
IF YOU ARE CONSIDERING BUYING PREFERRED SECURITIES, YOU SHOULD CONSULT YOUR TAX
ADVISOR ABOUT THE TAX CONSEQUENCES OF HOLDING THE PREFERRED SECURITIES AND THE
COMMON STOCK INTO WHICH THE PREFERRED SECURITIES MAY BE CONVERTED IN YOUR
PARTICULAR SITUATION.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the preferred securities, Cravath,
Swaine & Moore is of the opinion that under current law and assuming full
compliance with the terms of the trust agreement, and based upon certain facts
and assumptions contained in such opinion, the trust will be classified as a
grantor trust for United States Federal income tax purposes and not as an
association taxable as a corporation. As a result, for United States Federal
income tax purposes, you generally will be treated as the beneficial owner of a
pro rata portion of the debentures held by the trust. Thus, you will be required
to include in your gross income your proportionate share of the interest income
or original issue discount ("OID") that is paid or accrued on the debentures.
See below under the caption "--Interest Income and Original Issue Discount" in
this section.
60
CLASSIFICATION OF THE DEBENTURES
Cummins intends to take the position that the debentures will be classified
for all United States tax purposes as indebtedness of Cummins under current law.
Cummins, the trust and you (by your acceptance of a beneficial ownership
interest in the preferred securities) agree to treat the debentures as
indebtedness for all United States tax purposes. The remainder of this
discussion assumes that the debentures will be classified as indebtedness of
Cummins.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
It is expected that the debentures will not be issued with an issue price
that is less than their stated redemption price at maturity. In this case,
subject to the discussion below, the debentures will not be subject to the
special OID rules, so that you will generally be taxed on the stated interest on
the debentures as ordinary income at the time it is paid or accrued in
accordance with your regular method of tax accounting.
If, however, Cummins exercises its right to defer payments of interest on
the debentures, the debentures will become OID instruments at such time. In such
case, you will be subject to the special OID rules described below. Once the
debentures become OID instruments, they will be taxed as OID instruments for as
long as they remain outstanding.
Under the OID economic accrual rules, the following occur:
- regardless of your method of tax accounting, you must accrue an amount of
interest income each year that approximates the stated interest payments
called for under the terms of the debentures using the
constant-yield-to-maturity method of accrual described in Section 1272 of
the Internal Revenue Code;
- the actual cash payment of interest you receive on the debentures would
not be reported separately as taxable income;
- any amount of OID included in your gross income (whether or not during a
deferral period) with respect to the preferred securities would increase
your tax basis in such preferred securities; and
- the amount of distributions in respect of such accrued OID would reduce
your tax basis in such preferred securities.
The Treasury regulations dealing with the deferral of interest payments have
not yet been addressed in any rulings or other interpretations by the IRS. It is
possible that the IRS could assert that the debentures were issued initially
with OID. If the IRS were successful, regardless of whether Cummins exercises
its option to defer payments of interest on such debentures, you would be
subject to the special OID rules described above.
Because income on the debentures will constitute interest for United States
Federal income tax purposes, corporate holders will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the debentures.
MARKET DISCOUNT AND BOND PREMIUM
Holders of preferred securities other than a holder who purchased such
preferred securities upon original issuance at their original issue price may be
considered to have acquired their undivided interest in the debentures with
"market discount" or "acquisition premium," as such phrases are defined for
United States Federal income tax purposes. Cummins recommends that such holders
consult their tax advisors as to the United States Federal income tax
consequences of the acquisition, ownership and disposition of the preferred
securities and the common stock into which the preferred securities may be
converted.
61
DISTRIBUTION OF THE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
As described under the caption "Description of the Preferred
Securities--Distribution of Debentures" in this prospectus, the debentures held
by the trust may be distributed to you in exchange for your preferred securities
if the trust is liquidated before the maturity of the debentures.
Under current law, except as described below, this type of distribution from
a grantor trust would not be taxable. Upon such a distribution, you will receive
your proportionate share of the debentures previously held indirectly through
the trust. Your holding period and total tax basis in the debentures will equal
the holding period and total tax basis that you had in your preferred securities
before the distribution.
If, however, the trust is treated as an association taxable as a
corporation, a tax event will occur. If we elect to distribute the debentures to
you at this time, the distribution would likely be taxable both to the trust and
to you.
If you receive debentures in exchange for your preferred securities, you
would accrue interest in respect of the debentures received from the trust in
the manner described above under the caption "Interest Income and Original Issue
Discount" in this section.
In certain circumstances described above under the captions "Description of
the Preferred Securities--Optional Redemption," "--Special Event Redemption" and
"--Liquidation Distribution Upon Termination," Cummins may distribute cash in
liquidation of the trust. This distribution of cash would be taxable as
described below under "Redemption of Debentures" in this section.
CONVERSION OF PREFERRED SECURITIES INTO COMMON STOCK
You generally will not recognize any income, gain or loss upon converting
preferred securities into common stock of Cummins. If you receive cash in lieu
of a fractional share of Cummins common stock, however, you would be treated as
if you received such fractional share and then had such fractional share
redeemed for such cash. You would generally recognize capital gain or loss equal
to the difference between the cash received and that portion of your basis in
the common stock attributable to such fractional share. Your aggregate tax basis
in the common stock of Cummins will equal your adjusted tax basis in the
preferred securities (less the basis allocable to the fractional share for which
cash is received). Your holding period for the common stock of Cummins received
upon conversion generally will include the period during which you held the
preferred securities.
DIVIDENDS ON COMMON STOCK
If, after you convert preferred securities into common stock of Cummins,
Cummins makes a distribution in respect of the common stock, the distribution
will be treated as a dividend, taxable to you as ordinary income, to the extent
that it is paid from Cummins' current or accumulated earnings and profits, as
calculated for United States Federal income tax purposes ("E&P"). If the
distribution exceeds Cummins' E&P, the excess will be treated first as a
tax-free return of capital to the extent of your tax basis in the common stock,
and any remaining amount will be treated as capital gain. If you are a U.S.
corporation, you may be able to claim the dividends-received deduction equal to
a portion of any dividends you receive from Cummins provided you meet the
minimum holding period and other requirements.
ADJUSTMENT OF CONVERSION PRICE
The terms of the preferred securities allow for changes in the conversion
price in certain circumstances. A change in conversion price that allows holders
of the preferred securities to receive more shares of common stock on conversion
may increase the holders' proportionate interests in Cummins' E&P or assets. In
that case, the holders of the preferred securities would be treated as though
they received a dividend in the form of common stock of Cummins. Such a
constructive stock dividend could be taxable to the holders of preferred
securities, although they
62
would not actually receive any cash or other property. A taxable constructive
stock dividend would result, for example, if the conversion price is adjusted to
compensate holders of preferred securities for distributions of cash or property
to Cummins' shareholders. Not all changes in conversion price that allow holders
of preferred securities to receive more stock on conversion, however, increase
the holders' proportionate interests in the company. For instance, a change in
conversion price could simply prevent the dilution of the holders' interests
upon a stock split or other change in capital structure. Changes of this type,
if made pursuant to a bona fide, reasonable adjustment formula, are not treated
as constructive stock dividends. Any taxable constructive stock dividends
resulting from a change to, or failure to change, the conversion price would be
treated in the same manner as an actual distribution made in respect of Cummins
common stock as described above in "Dividends on Common Stock."
SALES OF PREFERRED SECURITIES OR COMMON STOCK
If you sell, exchange or otherwise dispose of your preferred securities or
the common stock of Cummins received upon the conversion of the preferred
securities, as the case may be, you generally will recognize capital gain or
loss equal to the difference between:
- the amount realized on the sale, exchange or other disposition of the
preferred securities (less an amount equal to any accrued but unpaid
qualified stated interest that you did not previously include in income,
which will be taxable as such) or common stock, as applicable, and
- your adjusted tax basis in your preferred securities or common stock, as
applicable, so sold, exchanged or otherwise disposed.
The gain or loss will generally be long-term capital gain or loss if you
have held your preferred securities or the common stock, as applicable, for more
than one year. The deductibility of capital losses is subject to limitations.
If you are deemed to have acquired your preferred securities with market
discount, then you generally will be required to treat a portion of any gain on
a sale of such preferred securities as ordinary income to the extent of the
market discount accrued to the date of the disposition, less any accrued market
discount previously reported as ordinary income. If you are deemed to have
acquired your preferred securities at a premium, then, if you have elected to
deduct bond premium, you may be permitted to deduct any remaining unamortized
bond premium (generally speaking, the excess of your tax basis over the sale
price) as ordinary loss in the taxable year of the disposition.
REDEMPTION OF DEBENTURES
If you receive cash upon the redemption of the debentures, you generally
will be treated in the same manner as if you sold preferred securities, as
described above under the caption "Sales of Preferred Securities or Common
Stock."
DISCHARGE OF INDENTURE
If Cummins were to obtain a discharge of the indenture with respect to all
of the debentures then outstanding, as described above under "Description of the
Debentures--Defeasance, Covenant Defeasance and Discharge," such discharge would
generally be deemed to constitute an exchange of the debentures outstanding for
other property. In such case, you may be required to recognize capital gain or
loss in connection with such deemed exchange. In addition, after such deemed
exchange, you might also be required to recognize income from the property
deemed to have been received in such exchange over the remaining life of the
transaction in a manner or amount that is different than if the discharge had
not occurred. You should consult your tax advisor as to the specific
consequences arising from a discharge in your situation.
63
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally speaking, under applicable Treasury regulations, information
reporting requirements will apply to payments of interest and accruals of OID on
the preferred securities, dividends on the common stock and to the proceeds of
the sale, exchange, redemption or other disposition of preferred securities or
the common stock, as applicable, made to you (unless you are an exempt recipient
such as a corporation). A backup withholding tax will apply to such payments if
you fail to provide a taxpayer identification number, a certification of exempt
status, or fail fully to report income. In such case, the relevant intermediary
must withhold at (i) a rate of 31% on payments made with respect to the
preferred securities starting January 1, 2011 and (ii) the fourth lowest rate of
tax applicable to unmarried individual U.S. persons on payments made with
respect to the preferred securities for any other period (30.5% in 2001, 30% in
2002 and 2003, 29% in 2004 and 2005, and 28% in 2006 through 2010).
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against your United States Federal income tax liability
provided the required information is furnished to the IRS.
CERTAIN ERISA CONSIDERATIONS
Each fiduciary of an employee benefit plan subject to Title I of ERISA, a
plan described in Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code"), including an individual retirement account or a Keogh plan, a plan
subject to provisions under applicable Federal, state, local, non-U.S. or other
laws or regulations that are similar to the provisions of Title I of ERISA or
Section 4975 of the Code ("Similar Laws"), and an entity whose underlying assets
include "plan assets" by reason of any such employee benefit plan's or plan's
investment in such entity (each of which we refer to as a "Plan") should
consider the fiduciary responsibility and prohibited transaction provisions of
ERISA, applicable Similar Laws and Section 4975 of the Code in the context of
the Plan's particular circumstances before authorizing an investment in the
preferred securities. Accordingly, such a fiduciary should consider, among other
factors, that each Plan investing in the preferred securities will be deemed to
have represented that the Plan's purchase of the preferred securities is covered
by one or more prohibited transaction exemptions. Plan fiduciaries should also
consider whether the Plan's investment in the preferred securities would satisfy
the prudence and diversification requirements of ERISA and would be consistent
with the documents and instruments governing their Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit each Plan from
engaging in certain transactions involving "plan assets" with persons who are
"parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") with respect to such Plan. A violation of these
"prohibited transaction" rules may result in an excise tax, penalty or other
liabilities under ERISA and/or Section 4975 of the Code for such persons or, in
the case of an individual retirement account ("IRA"), the occurrence of a
prohibited transaction involving the individual who established the IRA, or his
or her beneficiaries, would cause the IRA to lose its tax-exempt status, unless
exemptive relief is available under an applicable statutory, class or individual
exemption.
ERISA and the Code do not define "plan assets." However, regulations (the
"Plan Assets Regulations") promulgated under ERISA by the U.S. Department of
Labor ("DOL") generally provide that when a Plan subject to Title I of ERISA or
Section 4975 of the Code acquires an equity interest in an entity that is
neither a "publicly-offered security" nor a security issued by an investment
company registered under the Investment Company Act, the Plan's assets include
both the equity interest and an undivided interest in each of the underlying
assets of the entity unless it is established either that equity participation
in the entity by "benefit plan investors" is not "significant" or that the
entity is an "operating company," in each case as defined in the Plan Assets
Regulations. The trust is not expected to qualify as an operating company and
will not be an
64
investment company registered under the Investment Company Act. At the time of
the original offering, the preferred securities were not expected to constitute
"publicly offered securities." However, after resales pursuant to the shelf
registration statement of which this prospectus forms a part, the preferred
securities may qualify as "publicly offered securities," although such result
cannot be assured.
For purposes of the Plan Assets Regulations, equity participation in an
entity by benefit plan investors will not be significant if they hold, in the
aggregate, less than 25% of the value of any class of such entity's equity,
excluding equity interests held by persons (other than a benefit plan investor)
with discretionary authority or control over the assets of the entity or who
provide investment advice for a fee (direct or indirect) with respect to such
assets, and any affiliates thereof. For purposes of this 25% test (the "Benefit
Plan Investor Test"), "benefit plan investors" include Plans, governmental
plans, and pension plans maintained by foreign corporations. No assurance can be
given that the value of the preferred securities held by "benefit plan
investors" will be less than 25% of the total value of such preferred securities
at the completion of the original offering of the preferred securities or
thereafter, and no monitoring or other measures will be taken regarding the
satisfaction of the conditions to this exception.
Since there can be no assurance that any of the exceptions set forth in the
Plan Assets Regulations will apply to the preferred securities, an investing
Plan's assets could be considered to include an undivided interest in the assets
held by the trust (including the debentures). If the assets of the trust were to
be deemed to be "plan assets" under ERISA, this would result, among other
things, in (i) the application of the prudence and other fiduciary
responsibility standards of ERISA to transactions engaged in by the trust and
(ii) the possibility that certain transactions in which the trust might seek to
engage could constitute "prohibited transactions" under ERISA and the Code. In
such event, any person who exercises any authority or control respecting the
management or disposition of the assets of the trust would be considered to be a
fiduciary of Plan investors. For example, the property trustee could therefore
become a fiduciary of the Plans that invest in the preferred securities and be
subject to the general fiduciary requirements of ERISA in exercising its
authority with respect to the management of the assets of the trust. However,
the property trustee will have only limited discretionary authority with respect
to the trust's assets and the remaining functions and the responsibilities
performed by the property trustee will be for the most part custodial and
ministerial in nature. Inasmuch as the property trustee or another person with
authority or control respecting the management or disposition of the trust's
assets may become a fiduciary with respect to the Plans that purchase the
preferred securities, there may be an improper delegation by such Plans (or
their fiduciaries) of the responsibility to manage plan assets.
If a prohibited transaction occurs for which no exemption is available, any
fiduciary that has engaged in the prohibited transaction could be required
(i) to restore to the Plan any profit realized on the transaction and (ii) to
reimburse the Plan for any losses suffered by the Plan as a result of the
investment. In addition, each disqualified person (within the meaning of
Section 4975 of the Code) involved could be subject to an excise tax equal to
15% of the amount involved in the prohibited transaction for each year the
transaction continues and, unless the transaction is corrected within
statutorily required periods, to an additional tax of 100%. Plan fiduciaries who
decide to invest in the trust could, under certain circumstances, be liable for
prohibited transactions or other violations as a result of their investment in
the trust or as co-fiduciaries for actions taken by or on behalf of the trust.
With respect to an IRA that invests in the trust, the occurrence of a non-exempt
prohibited transaction involving the individual who established the IRA, or his
or her beneficiaries, would cause the IRA to lose its tax-exempt status.
Regardless of whether the assets of the trust are deemed to be "plan assets"
of Plans investing in the trust, as discussed above, the acquisition and holding
of the preferred securities with "plan assets" of a Plan could itself result in
a prohibited transaction. The DOL has issued five prohibited transaction class
exemptions ("PTCEs") that may provide exemptive relief for direct or
65
indirect prohibited transactions resulting from the purchase and/or holding of
the preferred securities by a Plan. These class exemptions are:
- PTCE 96-23 (for certain transactions determined by "in-house asset
managers");
- PTCE 95-60 (for certain transactions involving insurance company general
accounts);
- PTCE 91-38 (for certain transactions involving bank collective investment
funds);
- PTCE 90-1 (for certain transactions involving insurance company pooled
separate accounts); and
- PTCE 84-14 (for certain transactions determined by independent "qualified
professional asset managers").
Such class exemptions may not, however, apply to all of the transactions
that could be deemed prohibited transactions in connection with a Plan's
investment in the preferred securities.
Any insurance company considering the use of its general account assets to
purchase preferred securities should consult with its counsel concerning matters
affecting its purchase decision.
Because of ERISA's prohibitions and those of Section 4975 of the Code,
discussed above, and the potential application of Similar Laws to Plans not
subject to Title I of ERISA or Section 4975 of the Code (a "Non-ERISA Plan"),
the preferred securities, or any interest therein, should not be purchased or
held by any Plan or any person investing "plan assets" of any Plan, unless such
purchase and holding is covered by the exemptive relief available under PTCE
96-23, 95-60, 91-38, 90-1 or 84-14 (or some other applicable class or individual
exemption) (or, in the case of a Non-ERISA Plan, a similar exemption applicable
to the transaction). Accordingly, each purchaser or holder of the preferred
securities or any interest therein will be deemed to have represented by its
purchase and holding thereof that either:
- it is not a Plan and no part of the assets to be used by it to purchase
and/or hold such preferred securities or any interest therein constitutes
"plan assets" of any Plan; or
- it is itself a Plan, or is purchasing or holding the preferred securities
or an interest therein on behalf of, or with "plan assets" of, one or more
Plans, and each such purchase and holding of such securities either
(i) satisfies the requirements of, and is entitled to full exemptive
relief under, PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 (or some other
applicable exemption) (or, in the case of a Non-ERISA Plan, a similar
exemption applicable to the transaction) or (ii) will not result in a
prohibited transaction under ERISA or the Code or its equivalent under
applicable Similar Laws.
Although governmental plans and certain other plans are not subject to
ERISA, including the prohibited transaction provisions thereof, or of
Section 4975 of the Code, Similar Laws governing the investment and management
of the assets of such plans may contain fiduciary and prohibited transaction
provisions similar to those under ERISA and Section 4975 of the Code, discussed
above. Similarly, fiduciaries of other plans not subject to ERISA may be subject
to other legal restrictions under applicable Similar Laws. Accordingly,
fiduciaries of governmental plans or other plans not subject to ERISA, in
consultation with their advisors, should consider the impact of their respective
Similar Laws on their investment in preferred securities, and the considerations
discussed above, to the extent applicable.
The foregoing discussion is general in nature and is not intended to be all
inclusive. Consequently, and due to the complexity of the fiduciary
responsibility and prohibited transaction rules described above and the
penalties that may be imposed upon persons involved in non-exempt prohibited
transactions, it is particularly important that fiduciaries or other persons
considering purchasing the preferred securities on behalf of or with "plan
assets" of any Plan consult with their counsel, prior to any such purchase,
regarding the potential applicability of ERISA, Section 4975 of the Code and any
Similar Laws to such investment and whether any exemption would be applicable
and determine on their own whether all conditions of such exemption or
exemptions have been satisfied such that the acquisition and holding of capital
securities by the purchaser Plan are entitled to full exemptive relief
thereunder.
66
SELLING SECURITYHOLDERS
The holders listed below are the selling securityholders under this
prospectus. The following table sets forth, as of a recent practicable date
prior to the effectiveness of the registration statement of which this
prospectus forms a part, certain information with respect to the selling
securityholders named below and the respective number of preferred securities
owned by each selling securityholder that may be offered pursuant to this
prospectus. Such information has been obtained from the selling securityholders,
DTC and/or the property trustee.
NUMBER OF
PREFERRED
SELLING SECURITYHOLDER SECURITIES
---------------------- ----------
1976 Distribution Trust FBO A.R. Lauder/Zinterhofer......... 210
1976 Distribution Trust FBO Jane A. Lauder.................. 417
2000 Revocable Trust FBO A.R. Lauder/Zinterhofer............ 209
Advent Convertible Master Cayman L.P........................ 91,885
Aegon/Transamerica Series Fund, Inc.
on behalf of its Federated Growth & Income Fund........... 49,500
AFTRA Health Fund........................................... 7,400
AIG SoundShore Holdings Ltd................................. 234,900
AIG SoundShore Opportunity Holding Fund Ltd................. 158,200
AIG SoundShore Strategic Holding Fund Ltd................... 96,900
Alexandra Global Investment Fund I, Ltd..................... 20,000
Allstate Insurance Company.................................. 24,800
Allstate Life Insurance Company............................. 9,200
Alpine Associates........................................... 84,000
Alpine Partners, L.P........................................ 13,000
American High-Income Trust.................................. 180,000
American Motorist Insurance Company......................... 15,946
American Samoa Government................................... 1,900
American Funds Insurance Series, High Yield Bond Fund....... 40,000
Arapahoe County Colorado.................................... 1,559
Bank Austria Cayman Islands Ltd............................. 82,500
BP Amoco PLC, Master Trust.................................. 44,885
British Virgin Islands Social Security Board................ 1,204
CALAMOS-Registered Trademark- Market Neutral
Fund-CALAMOS-Registered Trademark- Investment
Trust..................................................... 225,100
Capital Guardian Global High-Yield Fixed-Income Fund
(Semi-Monthly Valued)..................................... 2,500
Capital Guardian U.S. High-Yield Fixed-Income Master Fund... 20,000
Capital Income Builder, Inc................................. 100,000
CFFX, LLC................................................... 65,000
CIBC World Markets.......................................... 4,000
City of New Orleans......................................... 6,433
City University of New York................................. 3,841
Coastal Convertibles Ltd.................................... 20,000
Consulting Group Capital Markets Funds...................... 9,200
Convertible Securities Fund................................. 2,000
CSFB Convertible & Quantitative Strategies.................. 100,000
67
NUMBER OF
PREFERRED
SELLING SECURITYHOLDER SECURITIES
---------------------- ----------
Deutsche Banc Alex. Brown Inc............................... 110,000
Equity & Convertible Fund................................... 30,000
Evergreen Equity Income Fund................................ 200,000
Federated Equity Funds
on behalf of its Federated Market Opportunity Fund........ 16,900
Forest Alternative Strategies Fund II....................... 2,600
Forest Fulcrum Fund L.L.P................................... 26,500
Forest Global Convertible Fund Series A-5................... 99,400
GLG Global Convertible Fund................................. 126,750
GLG Global Convertible UCITS Fund........................... 23,250
Global Bermuda Limited Partnership.......................... 30,000
Goldman Sachs & Company..................................... 161,350
Grady Hospital Foundation................................... 3,369
Harris Insight Convertible Securities Fund.................. 2,000
HFR Convertible Arbitrage Account........................... 7,710
HFR Master Fund, Ltd........................................ 1,100
Hotel Union & Hotel Industry of Hawaii...................... 20,450
J. P. Morgan Securities Inc................................. 7,150
Jefferies & Company Inc..................................... 445
KBC Financial Products USA Inc.............................. 10,000
Kellner, DiLeo & Co......................................... 100,000
Lakeshore International, Ltd................................ 127,500
LLT Limited................................................. 3,900
Lyxor Master Fund
c/o Forest Investment Mngt. L.L.C......................... 5,000
Mainstay Convertible Fund................................... 108,400
Mainstay VP Convertible Portfolio........................... 29,600
McMahan Securities Co. L.P.................................. 40,000
Merrill Lynch, Pierce, Fenner & Smith Inc................... 31,000
Minnesota Power and Light................................... 5,865
Morgan Stanley & Co......................................... 15,000
Morgan Stanley Dean Witter Convertible Securities Trust..... 50,000
Municipal Employees......................................... 5,776
Nations Convertible Securities Fund......................... 25,000
New Orleans Firefighters Pension/Relief Fund................ 3,491
New York Life Insurance Company............................. 100,000
New York Life Insurance & Annuity Corporation............... 20,000
New York Life Insurance Company (Ordinary Life Post 1982
AC2)........................................................ 86,500
New York Life Insurance Company (Ordinary Life Pre 1982
AC1)........................................................ 36,500
New York Life Separate Account #7........................... 14,600
Northern Income Equity Fund................................. 95,000
Occidental Petroleum Corporation............................ 6,508
Onex Industrial Partners Limited............................ 54,500
Oppenheimer Convertible Securities Fund..................... 100,000
68
NUMBER OF
PREFERRED
SELLING SECURITYHOLDER SECURITIES
---------------------- ----------
Pebble Capital Inc.......................................... 11,500
Penn Series Funds, Inc -- Flexibly Managed Series........... 30,000
Peoples Benefit Life Insurance Company TEAMSTERS............ 21,000
Pioneer High Yield Fund..................................... 647,500
Pioneer High Yield VCT Portfolio............................ 25,000
Policeman and Fireman Retirement System of the
City of Detroit........................................... 16,656
President & Fellows of Harvard College...................... 75,000
Pro-mutual.................................................. 19,079
Quattro Fund, Ltd........................................... 25,000
Raytheon Master Pension Trust............................... 6,231
RBC Capital Services Inc.
c/o Forest Investment Mngt. L.L.C......................... 2,600
RCG Latitude Master Fund Ltd................................ 27,500
Sage Capital................................................ 40,000
Shell Pension Trust......................................... 10,133
Silverado Arbitrage Trading, Ltd............................ 15,000
Silvercreek II Limited...................................... 64,000
Silvercreek Limited Partnership............................. 20,000
St. Albans Partners Ltd..................................... 21,000
State of Maryland Retirement Agency......................... 81,594
Sylvan (IMA) Ltd.
c/o Forest Investment Mngt. L.L.C......................... 3,000
T. Rowe Price Capital Appreciation Fund..................... 80,000
The Bond Fund of America, Inc............................... 180,000
The Estate of James Campbell................................ 6,350
The GCG Trust -- Fully Managed Series....................... 30,000
The Grable Foundation....................................... 3,013
The Income Fund of America, Inc............................. 356,000
The James Campbell Corporation.............................. 8,070
TQA Master Fund, Ltd........................................ 105,000
TQA Master Plus Fund, Ltd................................... 105,000
Tribeca Investments L.L.C................................... 100,000
Viacom Inc. Pension Plan Master Trust....................... 2,150
Zazove Hedged Convertible Fund L.P.......................... 18,000
Zurich Institutional Benchmarks............................. 7,250
Zurich Institutional Benchmarks Master Fund LTD............. 16,000
Zurich Master Hedge Fund
c/o Forest Investment Mngt. L.L.C......................... 7,000
All other beneficial owners(1).............................. 154,571
---------
Total................................................... 6,000,000
=========
------------------------
(1) No such beneficial owners may offer or sell preferred securities, debentures
or common stock issuable upon conversion of the preferred securities or the
debentures until such holder is
69
included as a selling securityholder in a post-effective amendment to the
registration statement of which this prospectus forms a part.
To the extent that any of the selling securityholders identified above are
broker/dealers, they are deemed to be, under interpretations of the Securities
and Exchange Commission, "underwriters" within the meaning of the Securities
Act. With respect to selling securityholders that are affiliates of
broker/dealers, the trust and Cummins believe that such entities acquired their
preferred securities in the ordinary course of business and at the time of the
purchase of their preferred securities such selling securityholders had no
agreements or understandings, directly or indirectly, with any person to
distribute those preferred securities.
To the extent that the trust or Cummins determines that such entities did
not acquire their preferred securities in the ordinary course of business or did
have such an agreement or understanding, the trust and Cummins will file a
post-effective amendment to the registration statement of which this prospectus
forms a part to designate such affiliate as an "underwriter" within the meaning
of the Securities Act.
None of the selling securityholders has, or within the past three years has
had, any position, office or other material relationship with the trust or
Cummins or any of their predecessors or affiliates.
Because the selling securityholders may, pursuant to this prospectus, offer
all or some portion of the preferred securities, the debentures or the common
stock issuable upon conversion of the preferred securities, no estimate can be
given as to the amount of the preferred securities, the debentures or the common
stock issuable upon conversion of the preferred securities or the debentures
that will be held by the selling securityholders upon termination of any such
sales. In addition, the selling securityholders identified above may have sold,
transferred or otherwise disposed of all or a portion of their preferred
securities, since the date on which they provided the information regarding
their preferred securities, in transactions exempt from the registration
requirements of the Securities Act. See "Plan of Distribution."
Only selling securityholders identified above who beneficially own the
preferred securities set forth opposite each such selling securityholder's name
in the foregoing table on the effective date of the registration statement, of
which this prospectus forms a part, may sell such securities pursuant to the
registration statement. Prior to any use of this prospectus in connection with
an offering of the preferred securities, the debentures or the common stock
issuable upon conversion of the preferred securities or the debentures by any
holder not identified above, the registration statement of which this prospectus
forms a part will be amended by a post-effective amendment to set forth the name
and number of shares beneficially owned by the selling securityholder intending
to sell such preferred securities, debentures or common stock, and the number of
preferred securities, the aggregate amount of debentures or the number of shares
of common stock to be offered. The prospectus, which will be a part of such a
post-effective amendment, will also disclose whether any selling securityholder
selling in connection with such prospectus has held any position or office with,
has been employed by or otherwise has had a material relationship with the trust
or Cummins or any of their predecessors or affiliates during the three years
prior to the date of the prospectus if such information has not been disclosed
herein.
70
PLAN OF DISTRIBUTION
The preferred securities, debentures or common stock issuable upon
conversion of the preferred securities or the debentures, collectively, the
securities, may be sold from time to time to purchasers directly by the selling
securityholders. Alternatively, the selling securityholders may from time to
time offer the securities to or through underwriters, broker/dealers or agents,
who may receive compensation in the form of underwriting discounts, concessions
or commissions from the selling securityholders or the purchasers of such
securities for whom they may act as agents. The selling securityholders and any
underwriters, broker/dealers or agents that participate in the distribution of
securities may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker/dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
The securities may be sold from time to time in one or more transactions at
fixed prices, at the prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. The sale of
securities may be effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or quotation service on
which the securities may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. At the
time a particular offering of the securities is made, a prospectus supplement,
if required, will be distributed, which will set forth the aggregate amount and
type of securities being offered and the terms of the offering, including the
name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
securityholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the securities will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the securities may not be offered or sold unless they have been registered or
qualified for sale in such jurisdictions or any exemption from registration or
qualification is available and is complied with.
The selling securityholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the securities by the selling
securityholders. The foregoing may affect the marketability of such securities.
Pursuant to the registration rights agreement, Cummins will pay the costs of
the registration of the securities, including, without limitation, SEC filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that the selling securityholders will pay all underwriting
discounts and selling commissions, if any. The selling securityholders will be
indemnified by Cummins and the trust, jointly and severally against certain
civil liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith. Cummins and the trust
will be indemnified by the selling securityholders severally against certain
civil liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith.
The trust does not intend to list the preferred securities on any securities
exchange. The trust has been advised by the initial purchasers in the original
offering that they intend to make a market in them as permitted by applicable
laws and regulations. The initial purchasers are not obligated, however, to make
a market in the preferred securities and any such market-making may be
discontinued at any time at the sole discretion of the initial purchasers.
Accordingly, no assurance can be given as to the liquidity of, or trading
markets for, the preferred securities.
71
LEGAL MATTERS
The validity of the debentures and the preferred securities guarantee have
been passed upon for Cummins and the trust by Cravath, Swaine & Moore and Marya
M. Rose, Esq., Vice President--General Counsel and Secretary of Cummins, the
validity of the Cummins common stock issuable upon conversion of the preferred
securities or the debentures have been passed upon for Cummins and the trust by
Ms. Rose, and certain matters of Delaware law relating to the trust and the
validity of the preferred securities have been passed upon for the trust by
Richards, Layton & Finger, P.A., special Delaware counsel to the trust and
Cummins. Ms. Rose owns beneficially approximately 10,500 shares of Cummins
common stock. She holds options to purchase 25,675 additional shares of Cummins
common stock that were granted to her pursuant to Cummins' 1992 Stock Incentive
Plan.
Certain matters relating to United States Federal income tax considerations
as noted under the heading "United States Federal Income Tax Considerations"
have been passed upon for Cummins by Cravath, Swaine & Moore, special tax
counsel to Cummins and the trust.
EXPERTS
The consolidated financial statements and schedules incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto. Arthur Andersen LLP has not
consented to the inclusion of its audit report in this registration statement.
As a result, you may not have an effective remedy against Arthur Andersen LLP in
connection with any material misstatement or omission in the consolidated
financial statements to which its audit report relates. In addition, even if you
were also able to assert such claim, as result of its recent conviction of
Federal obstruction of justice charges and other lawsuits, Arthur Andersen LLP
may fail or otherwise have insufficient assets to satisfy claims made by
investors that might arise under Federal securities laws or otherwise with
respect to its audit report.
72
APPENDIX A
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
Cummins Capital Trust I
c/o BNY Midwest Trust Company
2 North LaSalle Street
Suite 1020
Chicago, IL 60602
Attention: Corporate Finance Unit
Re: Cummins Capital Trust I (the "Trust")
7% Convertible Cumulative Quarterly Income
Preferred Securities (the "Preferred Securities")
Dear Sirs:
Please be advised that ____________________________ has transferred
shares of Preferred Securities, or $ aggregate principal amount of
Cummins Inc. (the "Company") 7% Junior Subordinated Convertible Debentures Due
June 15, 2031 (the "Debentures") or $ aggregate principal amount of
the Company's common stock, $2.50 par value, issued on conversion of the
Preferred Securities or the Debentures, or both, ("Common Stock") pursuant to an
effective Shelf Registration Statement on Form S-3 (File No. 333-68592) filed by
the Company.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Preferred Securities, Debentures or Common Stock is
named as a "Selling Securityholder" in the Prospectus dated , or in
supplements thereto, and that the aggregate principal amount of the Debentures,
the Preferred Securities or the Common Stock transferred are the Debentures, the
Preferred Securities or the Common Stock listed in such Prospectus opposite such
owner's name.
Dated:
Very truly yours,
---------------------------------------------
(Name)
By:
-----------------------------------------
(Authorized Signature)
A-1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6,000,000 Preferred Securities
CUMMINS CAPITAL TRUST I
7% Convertible Cumulative Quarterly Income
Preferred Securities
("Convertible QUIPS")
guaranteed to the extent set forth herein by,
and convertible into common stock of,
CUMMINS INC.
---------------
[LOGO]
---------------
PROSPECTUS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee........................................ $ 75,000
Printing.................................................... 50,000
Legal Fees and Expenses..................................... 100,000
Accounting Fees and Expenses................................ 30,000
Trustee Fees and Expenses................................... 15,000
Miscellaneous............................................... 18,000
--------
Total....................................................... $288,000
========
The foregoing expenses, except for the SEC Registration Fee, are estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
CUMMINS, INC.
The Indiana Business Corporation Law (Indiana Code of 1986,
Section 23-1-37) provides in regard to indemnification of directors and officers
as follows:
23-1-37-8. BASIS. (a) A corporation may indemnify an individual made a party to
a proceeding because the individual is or was a director against liability
incurred in the proceeding if:
(1) the individual's conduct was in good faith; and
(2) the individual reasonably believed:
(A) in the case of conduct in the individual's official capacity with the
corporation, that the individual's conduct was in its best interests;
and
(B) in all other cases, that the individual's conduct was at least not
opposed to its best interests; and
(3) in the case of any criminal proceeding, the individual either:
(A) had reasonable cause to believe the individual's conduct was lawful;
or
(B) had no reasonable cause to believe the individual's conduct was
unlawful.
(b) A director's conduct with respect to an employee benefit plan for a purpose
the director reasonably believed to be in the interests of the participants
in and beneficiaries of the plan is conduct that satisfies the requirement
of subsection (a)(2)(B).
(c) The termination of a proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director did not meet the standard of conduct
described in this Section.
23-1-37-9. AUTHORIZED. Unless limited by its articles of incorporation, a
corporation shall indemnify a director who was wholly successful, on the merits
or otherwise, in the defense of any proceeding to which the director was a party
because the director is or was a director of the corporation against reasonable
expenses incurred by the director in connection with the proceeding.
II-1
23-1-37-13. OFFICERS, EMPLOYEES OR AGENTS. Unless a corporation's articles of
incorporation provide otherwise:
(1) An officer of the corporation, whether or not a director, is entitled to
mandatory indemnification under Section 9 of this chapter, and is
entitled to apply for court-ordered indemnification under Section 11 of
this chapter, in each case to the same extent as a director;
(2) The corporation may indemnify and advance expenses under this chapter to
an officer, employee, or agent of the corporation, whether or not a
director, to the same extent as to a director; and
(3) A corporation may also indemnify and advance expenses to an officer,
employee, or agent, whether or not a director, to the extent, consistent
with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of
directors, or contract.
23-1-37-15. REMEDY NOT EXCLUSIVE OF OTHER RIGHTS. (a) The indemnification and
advance for expenses provided for or authorized by this chapter does not exclude
any other rights to indemnification and advance for expenses that a person may
have under:
(1) A corporation's articles of incorporation or bylaws;
(2) A resolution of the board of directors or of the shareholders; or
(3) Any other authorization, whenever adopted, after notice, by a majority
vote of all the voting shares then issued and outstanding.
(b) If the articles of incorporation, bylaws, resolutions of the board of
directors or of the shareholders, or other duly adopted authorization of
indemnification or advance for expenses limit indemnification or advance for
expenses, indemnification and advance for expenses are valid only to the
extent consistent with the articles, bylaws, resolution of the board of
directors or of the shareholders, or other duly adopted authorization of
indemnification or advance for expenses.
(c) This chapter does not limit a corporation's power to pay or reimburse
expenses incurred by a director, officer, employee, or agent in connection
with the person's appearance as a witness in a proceeding at a time when the
person has not been made a named defendant or respondent to the proceeding.
Reference is made to Article VI, Section 6.2 of the registrant's by-laws
(filed as an exhibit to the registrant's quarterly report on Form 10-Q for the
quarter ended October 2, 1994), which, under certain circumstances, permits
indemnification by the registrant of its officers and directors. In general, the
registrant's by-laws permit indemnification if: (1) the indemnified person acted
in good faith for a purpose which he reasonably believed to be in the best
interest of the registrant; (2) in the case of an action brought by or in the
right of the registrant to procure a judgment in its favor, the indemnified
person has not been found liable for negligence or misconduct in the performance
of his duty to the registrant; and (3) in criminal actions, the indemnified
person had no reasonable cause to believe his conduct to be unlawful. Any such
person would be entitled to indemnification as a matter of right if he has been
wholly successful, on the merits, with respect to any such actions; if not, his
indemnification would be dependent on a determination by the board of directors
acting by disinterested members, or by independent legal counsel, or
shareholders, that the required standards of conduct have been met. Conviction
or a plea of nolo contendere in a criminal action would not of itself preclude
indemnification. Indemnification could include reasonable expenses of the
indemnified person, judgments, fines and settlement payments, but could not
include any amount payable by any such person to the registrant in satisfaction
of any judgment or
II-2
settlement. The by-laws authorize the registrant to advance funds for expenses
to an indemnified person, but only against an undertaking that he will repay the
same unless it shall ultimately be determined that he is entitled to
indemnification. The rights of indemnification provided by the by-law would not
be exclusive of any other rights to which any indemnified person may otherwise
be entitled, and such rights would extend to the heirs and legal representatives
of such person.
The registrant also maintains a directors' and officers' liability insurance
policy providing coverage of up to $35,000,000 for each occurrence for all
corporate directors and officers acting in their respective capacities.
CUMMINS CAPITAL TRUST I
The amended and restated trust agreement provides that, to the fullest
extent permitted by applicable law, Cummins will fully indemnify and hold
harmless (i) each trustee, (ii) any affiliate of any trustee, (iii) any officer,
director, shareholder, employee, representative or agent of any trustee, and
(iv) any employee or agent of the trust or its affiliates (referred to as an
"indemnified person") from and against any and all loss, damage, liability, tax,
penalty, expense (including legal fees and expenses) or claim of any kind or
nature whatsoever incurred by such indemnified person by reason of the creation,
operation or termination of the trust or 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
authority conferred on such indemnified person by the amended and restated trust
agreement, except that no indemnified person shall be entitled to be indemnified
in respect of any loss, damage or claim determined by a court of competent
jurisdiction to have been caused by such indemnified person's own negligence or
willful misconduct with respect to such acts or omissions (or, in the case of
the Delaware Trustee, any such loss, damage or claim as may be attributable to
its, his or her gross negligence, bad faith or willful misconduct).
II-3
ITEM 16. EXHIBITS.
EXHIBITS DESCRIPTION OF EXHIBIT
-------- ----------------------
4.1 Junior Subordinated Convertible Debentures Indenture dated
as of June 18, 2001, between Cummins Inc. and BNY Midwest
Trust Company (incorporated by reference to exhibit 4.1 to
Cummins' Quarterly report on form 10-Q for the quarter ended
June 24, 2001)
4.2* Registration Rights Agreement dated as of June 18, 2001
among Cummins Inc. and Cummins Capital Trust I and Goldman,
Sachs & Co., J.P. Morgan Securities Inc. and Salomon Smith
Barney Inc.
4.3 Amended and Restated Trust Agreement of Cummins Capital
Trust I dated as of June 18, 2001, among Cummins Inc., BNY
Midwest Trust Company, The Bank of New York (Delaware) and
the Administrative Trustees named therein (incorporated by
reference to exhibit 4.2 to Cummins' Quarterly report on
form 10-Q for the quarter ended June 24, 2001.)
4.4* Certificate of Trust of Cummins Capital Trust I
4.5 Form of Preferred Security (included in Exhibit 4.3)
4.6 Form of Junior Subordinated Convertible Debentures (included
in Exhibit 4.1)
4.7 Guarantee Agreement dated as of June 18, 2001, between
Cummins Inc. and BNY Midwest Trust Company relating to the
Preferred Securities of Cummins Capital Trust I
(incorporated by reference to exhibit 4.3 to Cummins'
Quarterly report on form 10-Q for the quarter ended June 24,
2001.)
5.1* Opinion of Marya M. Rose
5.2* Opinion of Cravath, Swaine & Moore
5.3* Opinion of Richards, Layton & Finger
12.1* Statement re: Computation of ratio of earnings to fixed
charges
23.1 Consent of Marya M. Rose (included in Exhibit 5.1)
23.2 Consent of Cravath, Swaine & Moore (included in Exhibit 5.2)
23.3 Consent of Richards, Layton & Finger (included in Exhibit
5.3)
24.1* Powers of Attorney for Cummins Inc.
25.1* Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of BNY Midwest Trust Company, as Trustee,
with respect to the Junior Subordinated Convertible
Debentures Indenture
25.2* Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of BNY Midwest Trust Company, as Property
Trustee, with respect to the Preferred Securities of Cummins
Capital Trust I
II-4
EXHIBITS DESCRIPTION OF EXHIBIT
-------- ----------------------
25.3* Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of BNY Midwest Trust Company, as Guarantee
Trustee, with respect to the Preferred Securities Guarantee
of Cummins Inc., with respect to the Preferred Securities of
Cummins Capital Trust I
------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(A) The undersigned registrants, which we refer to in this registration
statement as the registrants, hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in this registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the
form of a prospectus filed with the Securities and Exchange
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;
PROVIDED, HOWEVER, that the undertakings set forth in paragraphs
(1)(i) and (1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained
in periodic reports filed by the registrants pursuant to Section 13 or
Section 15(d) of the Exchange Act, that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(B) The registrants hereby undertake that, for purposes of determining any
liability under the Securities Act, each filing of Cummins's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the 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.
II-5
(C) 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 foregoing provisions described under Item 15
above, or otherwise, the registrants have 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.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants certify
that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on their behalf by the undersigned thereunto duly
authorized, in the city of Columbus, state of Indiana, on the 22nd day of
November, 2002.
CUMMINS INC.,
By: /s/ TOM LINEBARGER
-----------------------------------------
Name: Tom Linebarger
Title: Vice President and Chief Financial
Officer (Principal Financial
Officer)
CUMMINS CAPITAL TRUST I,
BY: CUMMINS INC., AS DEPOSITOR
By: /s/ TOM LINEBARGER
-----------------------------------------
Name: Tom Linebarger
Title: Vice President and Chief Financial
Officer (Principal Financial
Officer)
II-7
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below on the 22nd day of November, 2002
by the following persons in the capacities indicated.
SIGNATURES TITLE
---------- -----
* Director and Chairman of the Board of
------------------------------------------- Directors and Chief Executive Officer
Theodore M. Solso (Principal Executive Officer)
* Director
-------------------------------------------
Robert J. Darnall
* Director
-------------------------------------------
John M. Deutch
* Director
-------------------------------------------
Walter Y. Elisha
* Director
-------------------------------------------
William I. Miller
* Director
-------------------------------------------
William D. Ruckelshaus
* Director
-------------------------------------------
Franklin A. Thomas
* Director
-------------------------------------------
J. Lawrence Wilson
* Director
-------------------------------------------
Alexis M. Herman
/s/ SUSAN K. CARTER Vice President-Corporate Controller
------------------------------------------- (Principal Accounting Officer)
Susan K. Carter
*By: /s/ TOM LINEBARGER
--------------------------------------
Tom Linebarger
As Attorney-in-Fact
II-8
EXHIBIT INDEX
EXHIBITS DESCRIPTION OF EXHIBIT
-------- ----------------------
4.1 Junior Subordinated Convertible Debentures Indenture dated
as of June 18, 2001, between Cummins Inc. and BNY Midwest
Trust Company (incorporated by reference to exhibit 4.1 to
Cummins' Quarterly report on form 10-Q for the quarter ended
June 24, 2001)
4.2* Registration Rights Agreement dated as of June 18, 2001
among Cummins Inc. and Cummins Capital Trust I and Goldman,
Sachs & Co., J.P. Morgan Securities Inc. and Salomon Smith
Barney Inc.
4.3 Amended and Restated Trust Agreement of Cummins Capital
Trust I dated as of June 18, 2001, among Cummins Inc., BNY
Midwest Trust Company, The Bank of New York (Delaware) and
the Administrative Trustees named therein (incorporated by
reference to exhibit 4.2 to Cummins' Quarterly report on
form 10-Q for the quarter ended June 24, 2001)
4.4* Certificate of Trust of Cummins Capital Trust I
4.5 Form of Preferred Security (included in Exhibit 4.3)
4.6 Form of Junior Subordinated Convertible Debentures (included
in Exhibit 4.1)
4.7 Guarantee Agreement dated as of June 18, 2001, between
Cummins Inc. and BNY Midwest Trust Company relating to the
Preferred Securities of Cummins Capital Trust I,
(incorporated by reference to exhibit 4.3 to Cummins'
Quarterly report on form 10-Q for the quarter ended June 24,
2001)
5.1* Opinion of Marya M. Rose
5.2* Opinion of Cravath, Swaine & Moore
5.3* Opinion of Richards, Layton & Finger
12.1* Statement re: Computation of ratio of earnings to fixed
charges
23.1 Consent of Marya M. Rose (included in Exhibit 5.1)
23.2 Consent of Cravath, Swaine & Moore (included in Exhibit 5.2)
23.3 Consent of Richards, Layton & Finger (included in Exhibit
5.3)
24.1* Powers of Attorney for Cummins Inc.
25.1* Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of BNY Midwest Trust Company, as Trustee,
with respect to the Junior Subordinated Convertible
Debentures Indenture
25.2* Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of BNY Midwest Trust Company, as Property
Trustee, with respect to the Preferred Securities of Cummins
Capital Trust I
25.3* Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of BNY Midwest Trust Company, as Guarantee
Trustee, with respect to the Preferred Securities Guarantee
of Cummins Inc., with respect to the Preferred Securities of
Cummins Capital Trust I
------------------------
* Previously filed.