<PAGE>
As filed with the Securities and Exchange Commission on November 13,
1997 File No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
GE FINANCIAL ASSURANCE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 54-1829180
(State of incorporation) (I.R.S. Employer Identification Number)
</TABLE>
6604 WEST BROAD STREET
RICHMOND, VIRGINIA 23230
(804) 281-6000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
<TABLE>
<S> <C>
LEON E. RODAY BRUCE C. BENNETT
SENIOR VICE PRESIDENT AND GENERAL COUNSEL ASSOCIATE GENERAL COUNSEL
GE FINANCIAL ASSURANCE HOLDINGS, INC. GENERAL ELECTRIC CAPITAL CORPORATION
6604 WEST BROAD STREET 260 LONG RIDGE ROAD
RICHMOND, VIRGINIA 23230 STAMFORD, CONNECTICUT 06927
(804) 281-6000 (203) 357-4000
</TABLE>
COPIES TO:
<TABLE>
<S> <C>
GARY I. HOROWITZ WINTHROP B. CONRAD, JR.
SIMPSON THACHER & BARTLETT DAVIS POLK & WARDWELL
425 LEXINGTON AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10017
(212) 455-2000 (212) 450-4000
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
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 market conditions.
------------------------------
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, please 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 the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Debt Securities........................... $1,000,000,000 100% $1,000,000,000 $303,031
</TABLE>
(1) Or, if any Debt Securities are issued (i) with an initial offering price
denominated in a foreign currency or a unit of two or more currencies, such
amount as shall result in an aggregate initial offering price equivalent to
$1,000,000,000 or (ii) at an original issue discount, such greater amount as
shall result in an aggregate initial offering price of $1,000,000,000.
(2) Estimated solely for the purpose of determining the registration fee.
------------------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Subject to completion, dated November 13, 1997
PROSPECTUS
GE FINANCIAL ASSURANCE HOLDINGS, INC.
DEBT SECURITIES
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
GE Financial Assurance Holdings, Inc. ("GE Financial Assurance," and
together with its subsidiaries, the "Company") may offer from time to time its
senior, unsecured debt securities ("Debt Securities"). The Debt Securities are
hereinafter in this Prospectus referred to as the "Debt Securities," although
any series of Debt Securities to which the accompanying Prospectus Supplement
relates may bear a different title. The Debt Securities will be offered on terms
determined at the time of sale. The accompanying Prospectus Supplement sets
forth specifically with regard to the Debt Securities in respect of which this
Prospectus is being delivered:
- the title of the Debt Securities,
- the aggregate principal amount offered,
- the currency, currencies or currency units in which payments on the Debt
Securities are payable,
- the rate or method of calculation, and the dates of payment of interest,
if any,
- the date or dates from which such interest shall accrue,
- the method of determining holders to whom any such interest shall be
payable,
- the authorized denominations, if other than as provided herein,
- the maturity,
- the offering price or terms,
- the terms of any sinking fund, purchase fund or mandatory redemption, and
of any redemption or repayment at the option of GE Financial Assurance or
the holder,
- the underwriter or underwriters or agent or agents, if any, for the Debt
Securities, their compensation or the basis of determining the same and
the net proceeds to GE Financial Assurance, and
- the exchanges, if any, on which the Debt Securities may be listed.
The Debt Securities will be sold either through underwriters or dealers,
through agents designated from time to time, or directly by GE Financial
Assurance.
SEE "RISK FACTORS," BEGINNING ON PAGE 4, FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PURCHASERS OF THE DEBT SECURITIES.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF DEBT SECURITIES FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE DEBT
SECURITIES OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE DEBT SECURITIES.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THE OFFERING NOR HAS SUCH COMMISSIONER PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
WITH RESPECT TO THE FIRST OFFERING OF DEBT SECURITIES HEREUNDER, UNTIL 25
DAYS AFTER THE DATE OF THE PROSPECTUS SUPPLEMENT RELATING TO SUCH OFFERING, ALL
DEALERS EFFECTING TRANSACTIONS IN SUCH DEBT SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION OF SUCH DEBT SECURITIES, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GE
FINANCIAL ASSURANCE OR BY ANY AGENT, UNDERWRITER OR DEALER. NEITHER THE DELIVERY
OF THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT, NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF GE FINANCIAL ASSURANCE SINCE THE DATES AS OF
WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS AND IN THE ACCOMPANYING PROSPECTUS
SUPPLEMENT. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
-------------------
AVAILABLE INFORMATION
GE Financial Assurance is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and in accordance
therewith files reports and other information which contain information about GE
Financial Assurance with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, as well as the Regional Offices of the Commission
at 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center,
New York, New York 10048 and copies can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains a Web site at
http://www.sec.gov. which contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
-------------------
GE Financial Assurance is not required to deliver annual reports to its
security holders pursuant to the 1934 Act or any stock exchange requirement.
Copies of its annual, quarterly and periodic reports to the Commission on Forms
10-K, 10-Q and 8-K (containing financial information audited by independent
accountants in the case of its annual report on Form 10-K) are required to be
furnished to the trustee under the indenture pursuant to which the Debt
Securities will be issued.
2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
There is hereby incorporated in this Prospectus by reference GE Financial
Assurance's Registration Statement on Form 10 filed with the Commission pursuant
to Section 12(g) of the 1934 Act, to which reference is hereby made.
All documents filed by GE Financial Assurance pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of the initial filing of the
Registration Statement of which this Prospectus is a part and prior to the
termination of the offering of the Debt Securities offered by the accompanying
Prospectus Supplement shall be deemed to be incorporated in this Prospectus by
reference and to be a part hereof from the date of filing of such documents.
GE Financial Assurance hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus has
been delivered, on the written or oral request of such person, a copy of any or
all of the documents referred to above which have been or may be incorporated in
this Prospectus by reference, other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference into such documents.
Requests for such copies should be directed to Stephen N. DeVos, Vice President
and Controller, GE Financial Assurance Holdings, Inc., 6604 West Broad Street,
Richmond, Virginia 23230, Telephone No. (804) 281-6000.
3
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors before
purchasing any Debt Securities offered hereby.
REGULATORY RESTRICTIONS ON DECLARATION OF DIVIDENDS BY A SUBSIDIARY
Because the operations of GE Financial Assurance are conducted through its
subsidiaries, GE Financial Assurance is dependent upon dividends from its
subsidiaries to service its debt and meet its other obligations. The payment of
dividends and other payments to GE Financial Assurance by its subsidiaries is
subject to regulatory approval by various state insurance departments. See "The
Company--Insurance Regulation" and "Description of Debt Securities--General."
SUBORDINATION OF THE NOTES TO THE OBLIGATIONS OF THE SUBSIDIARIES
GE Financial Assurance is a non-operating holding company which conducts its
business through its subsidiaries. The Debt Securities will be effectively
subordinated to the liabilities of GE Financial Assurance's subsidiaries. In the
event of the insolvency, liquidation or other reorganization of any of GE
Financial Assurance's insurance subsidiaries, the creditors and shareholders of
GE Financial Assurance would have no right to proceed against any such
subsidiary or to cause the liquidation or bankruptcy of any such subsidiary
under federal or state bankruptcy laws. The insurance laws of the domiciliary
state would govern such proceedings and the relevant insurance commissioner
would act as liquidator or rehabilitator for the subsidiary. Creditors and
policyholders of any such subsidiary would be entitled to payment in full from
the assets of the subsidiary before GE Financial Assurance, as a shareholder,
would be entitled to receive any distribution therefrom. See "Description of
Debt Securities--General."
LEGISLATIVE AND REGULATORY PROPOSALS
The Company is subject to comprehensive state regulation and supervision
throughout the United States. The laws of the various state jurisdictions
establish supervisory agencies with broad administrative powers with respect to,
among other things, licensing to transact business, admitting assets, regulating
premium rates, approving policy forms, regulating unfair trade and claims
practices, establishing reserve requirements and solvency standards, fixing
maximum interest rates on life insurance policy loans and minimum rates for
accumulation of surrender values, restricting certain transactions between
affiliates and regulating the type, amounts and valuation of investments
permitted. State insurance regulators and the National Association of Insurance
Commissioners ("NAIC") are continually re-examining existing laws and
regulations.
In addition to state regulation, federal legislation and administrative
policies in several areas, including pension regulation, financial services
regulation and federal taxation, can significantly and adversely affect the
insurance industry, and thus the Company. For example, Congress has from time to
time considered legislation relating to the deferral of taxation on the
accretion of value within certain annuities and life insurance products. It is
not possible to predict whether future state or federal legislation or
regulation adversely affecting the insurance industry may be enacted or, if
enacted, the extent to which such legislation or regulation would have an effect
on the Company and its competitors. See "The Company--Insurance Regulation."
COMPETITION
GE Financial Assurance and its subsidiaries operate in a highly competitive
environment. While the Company believes it has assembled a unique collection of
products and distribution channels, there are competitors that have also
assembled a similar array of financial products and have similar strategic
goals. The Company competes with other financial services companies, such as
banks, thrift institutions, third party marketers, investment companies, and
brokerage firms which offer investment, insurance and other
4
<PAGE>
products similar to those offered by the Company. Competition from banks and
other financial institutions is likely to increase as the regulations currently
in existence are revised by legislation, judicial determinations or
administrative rulings. Although the effect of these developments on GE
Financial Assurance and its subsidiaries and their competitors is uncertain,
both the persistency of the Company's existing products and the Company's
ability to sell products could be materially impacted in the future. Also,
several proposals to repeal or modify the Glass-Steagall Act of 1933, as amended
(the "Glass-Steagall Act"), and the Bank Holding Company Act of 1956, as amended
(the "Bank Holding Company Act"), have been made by members of Congress and the
Executive Branch. Certain of these proposals would repeal or modify the current
restrictions that prevent banks from being affiliated with insurance companies.
None of these proposals has yet been enacted, and it is not possible to predict
whether any of these proposals will be enacted or, if enacted, what their
potential effect on the Company or its competitors would be. See "The
Company--Competition."
TAXPAYER RELIEF ACT OF 1997
Among the Company's principal products are deferred annuities, both fixed
and variable. During the accumulation period of a deferred annuity, amounts
credited by the Company accrue on a tax deferred basis to the policy owner. When
the policy owner withdraws amounts from the annuity, proceeds are taxed as
ordinary income rather than as capital gains. This differs from the tax
treatment applicable to certain other investments, such as mutual funds, where
proceeds are generally taxed as capital gains. The Taxpayer Relief Act of 1997
(the "Act") reduces the maximum tax rate on capital gains of individuals from
28% to 20% on assets held 18 months or longer. Thus, the Act may make other
investments, such as mutual funds, relatively more attractive to certain
investors than deferred annuities. It is not possible to predict what the actual
effect of the Act on the Company will be.
RATINGS
Concerns regarding the financial stability of insurance companies have
resulted in emphasis being placed upon insurance company ratings and have
created some measure of competitive advantage for insurance carriers with higher
ratings. There can be no assurance that the ratings for GE Financial Assurance's
subsidiaries will be maintained. Any downgrade in the ratings of GE Financial
Assurance's material subsidiaries could impact the Company's ability to write
new business. See "The Company-- Ratings."
THE COMPANY
GE Financial Assurance, through its direct and indirect subsidiaries, is
principally engaged in the life insurance and annuity business primarily in the
United States and increasingly abroad. All the outstanding common stock of GE
Financial Assurance is owned by General Electric Capital Corporation ("GE
Capital"), a wholly owned subsidiary of General Electric Capital Services, Inc.
The Company's principal executive offices are located at 6604 West Broad Street,
Richmond, Virginia 23230 (telephone (804) 281-6000).
OWNERSHIP OF THE COMPANY
GE Capital operates in four financing industry segments and in a specialty
insurance industry segment. GE Capital's financing activities include a full
range of middle-market leasing and lending, equipment management sales and
services, specialized financing and consumer services. GE Capital's specialty
insurance activities include providing financial guaranty insurance, principally
on municipal bonds and structured finance issues, private mortgage insurance and
creditor insurance covering international customer loan repayments. The
long-term debt obligations of GE Capital are rated "AAA" by Standard & Poor's
Corporation ("S&P") and "Aaa" by Moody's Investors Services, Inc. ("Moody's").
5
<PAGE>
GENERAL DESCRIPTION OF BUSINESS
GE Financial Assurance is a holding company that through its subsidiaries
provides consumers financial security solutions by selling a wide variety of
insurance, investment and retirement products primarily in the United States.
The Company effectively began operations in April 1993 with the acquisition of
GNA Corporation and its principal operating company, Great Northern Insured
Annuity Corporation. The Company has continued to broaden its operations through
a series of acquisitions consummated since 1993. See "The Company--Significant
Acquisitions." The Company's product offerings are divided along two major
segments of consumer needs: (i) Wealth Accumulation and Transfer and (ii) Wealth
and Lifestyle Protection.
The Company's principal product lines under the Wealth Accumulation and
Transfer segment are (i) annuities (deferred and immediate; either fixed or
variable), (ii) life insurance (universal, term, ordinary and group), (iii)
guaranteed investment contracts ("GICs") and (iv) mutual funds. Wealth
Accumulation and Transfer products are used by customers as vehicles for
accumulating wealth, often on a tax-deferred basis, transferring wealth to
beneficiaries, or providing a means to replace the insured's income in the event
of premature death. The Company's distribution of Wealth Accumulation and
Transfer products is accomplished through three distribution methods: (i)
intermediaries, (ii) career or dedicated sales forces and (iii) marketing
through businesses and affinity groups.
The Company's principal product lines under the Wealth and Lifestyle
Protection segment are (i) long-term care insurance, (ii) supplemental accident
and health insurance, (iii) personal lines of automobile insurance and (iv)
credit insurance. Wealth and Lifestyle Protection products are used by customers
as vehicles to protect their income and assets from the adverse economic impacts
of automobile accidents and related liabilities or significant health care costs
or other unanticipated events that cause temporary or permanent loss of earnings
capabilities (including the ability to repay certain indebtedness). The
Company's distribution of Wealth and Lifestyle Protection products is
accomplished through four distribution methods: (i) intermediaries, (ii) career
or dedicated sales forces, (iii) marketing through businesses and affinity
groups and (iv) direct marketing.
The following table sets forth selected information regarding the Company
presented on a basis consistent with generally accepted accounting principles
("GAAP").
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------------ ---------
<S> <C> <C> <C> <C> <C>
1993* 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
AT END OF PERIOD
Invested Assets............................................ $ 12,256 $ 14,845 $ 18,470 $ 35,810 $ 36,737
Total Assets............................................... 13,243 16,852 21,820 45,361 47,014
Policyholder Liabilities(1)................................ 11,907 15,611 19,094 35,493 36,233
Debt Outstanding........................................... -- -- -- 175 175
Shareholder's Interest..................................... 1,127 992 2,319 5,721 6,093
FOR THE PERIOD THEN ENDED
Premiums................................................... 23 149 485 1,386 1,013
Total Revenues............................................. 574 1,091 1,749 3,366 2,605
Net Income................................................. 35 72 101 229 203
Investment Contracts Issued................................ 490 1,064 1,239 1,998 1,792
</TABLE>
- ------------------------
(1) Includes future annuity and contract benefits, unearned premiums, liability
for policy and contract claims, and other policyholder liabilities.
* Represents the period from the date of acquisition, April 1, 1993 through
December 31, 1993.
6
<PAGE>
RECENT TRANSACTION
The Company acquired Colonial Penn Insurance Company and its subsidiaries
("Colonial Penn") from Leucadia Corporation on November 4, 1997. Colonial Penn
is a low-cost direct marketer of personal lines of automobile insurance.
Colonial Penn is included in the Company's Wealth and Lifestyle Protection
segment. The Company believes that the acquisition of Colonial Penn will
significantly increase its direct marketing capability.
STRATEGY
The Company believes that changes in demographics such as the increased
number of baby boomers entering middle and late middle age, longer life
expectancies due to medical advances, the reduction in government- and
employer-sponsored benefit programs and the increased need for estate planning
for the most affluent group of retirees in history, have and will continue to
increase the demand for innovative products and services to solve individual
financial challenges. The Company's strategy is designed to take advantage of
these trends by offering a broad array of products and services through the
Company's four major channels of distribution. See "Marketing and Distribution."
The Company's approach to this opportunity is to accumulate a number of
businesses with unique product and distribution capabilities designed to deliver
innovative products and services associated with accumulating, transferring and
protecting the consumer's wealth and lifestyle. Most of the Company's products
are targeted at middle to upper income consumers and individuals employed by
small to mid-sized companies. To date, the Company has operated primarily in the
United States and to a lesser extent in selected international markets. The
Company's strategy consists of the following seven elements:
- MARKETPLACE FOCUS. The Company's business units focus on key customer
groups and distribution channels which are well positioned to maximize
penetration into these groups. The Company believes that its customers are
becoming increasingly sophisticated in assessing their needs for savings,
insurance and retirement. The Company's products and services are designed
to meet needs based on input from customers and the distributors who
service them. To enable the Company to obtain this input, it endeavors to
create and maintain direct contact with its key customer groups, as well
as the distributors who service them.
- COST LEADERSHIP. The Company recognizes that consolidation in the
financial services industry will create fewer, but larger competitors.
Effective competition will be dependent upon, among other things, the
Company's ability to reduce its expenses through the elimination of
duplicate functions and the use of enhanced technology. The Company's
continued commitment to bring together its recent acquisitions into an
integrated platform with common information systems is designed to create
a competitive advantage in the marketplace.
- GROW CAPABILITIES AND ENTER NEW MARKETS. GE Financial Assurance has
acquired a number of companies which offer a broad array of products and
services designed to address the wealth accumulation and transfer and
wealth and lifestyle protection needs of consumers. While the Company's
primary focus will be on increasing its sales of existing products by
enhancing its marketing and sales, product development and service
capabilities, the Company will continue to consider opportunities to enter
new markets. Entry into these new markets will be accomplished through (1)
development of new products for sale through existing channels, (2)
development of new products to serve new channels, (3) creation of new
distribution segments within established channels and (4) acquisition of
entities with an established presence in existing markets or distribution
channels.
- LEVERAGE EXISTING DISTRIBUTION. GE Financial Assurance's distribution
strategy is focused on penetrating its targeted consumers through four
types of distribution methods: (i) intermediaries, (ii) career or
dedicated sales forces, (iii) marketing through businesses and affinity
groups and
7
<PAGE>
(iv) direct marketing. In each distribution type, internal growth will be
driven by the effective cross-marketing of selected products, and
enhancing the presence, effectiveness, and loyalty of the distributors.
While the Company believes that the diversity of its distribution channels
is a competitive advantage, it recognizes the need to coordinate its
efforts to provide a unified face to its customers and distributors. The
Company has worked, and will continue to work, to promptly integrate its
recent acquisitions, many of which have enhanced existing distribution
channels or added new ones. See--"Marketing and Distribution."
- PURSUE NEW DISTRIBUTION. A key component of GE Financial Assurance's
strategy is to continue to diversify its distribution channels. Many of
the Company's acquisitions have provided new distribution channels. The
Company believes that its multiplicity of distribution channels will
continue to be an important competitive advantage as the financial
services industry becomes less regulated and the Company is faced with
increased competition. New distribution opportunities could arise in many
forms resulting in a variety of new relationships (i.e. acquisitions,
alliances, partnering, reinsurance and de novo operations).
- INTERNATIONAL EXPANSION. The Company recognizes that demographic trends
similar to those existing in the United States are also emerging in other
developed countries. Additionally, other markets are in the process of
developing financial services capabilities currently available in the
United States. The Company continually monitors these developments and
considers opportunities to participate in these markets. GE Financial
Assurance believes that industrialization and expansion of the middle
class in Asia and Latin America and the consolidation of the financial
services industry in Europe will create opportunities for international
expansion in the future.
- STRONG OPERATING FUNDAMENTALS. The Company's dedication to providing
quality products to its customers, maintaining strong risk management and
compliance and utilizing technology for competitive advantage all provide
a solid foundation for the Company's successful execution of its business
strategy. Risk management and compliance have been a long-standing
strength of GE Capital, and the Company has developed processes and
practices appropriate for its operating businesses using GE Capital's
practices and experience as a guide. The Company believes that its
commitment to technology, as demonstrated by its upgrading of its life
insurance administration and underwriting systems and its development of
integrated computer systems which propose, issue and administer various
types of complex contracts, will enable the Company and its distributors
to be increasingly more productive and thus provide competitive advantages
in the marketplace.
8
<PAGE>
SIGNIFICANT ACQUISITIONS
The Company effectively began operations in April 1993 with the acquisition
of GNA Corporation and its principal operating company Great Northern Insured
Annuity Corporation. The Company has continued to broaden its operations through
a series of acquisitions since 1993. The following table sets forth the primary
acquisitions that GE Financial Assurance has made over the last few years with a
brief description of the new products and principal distribution channels each
acquisition brought to GE Financial Assurance.
<TABLE>
<CAPTION>
ACQUISITION DATE PRINCIPAL PRODUCTS PRINCIPAL DISTRIBUTION CHANNEL
- ------------------------------ ------------------ ------------------------------ ------------------------------
<S> <C> <C> <C>
GNA Corporation April 1993 Deferred annuities and mutual Intermediaries
funds
United Pacific Life Insurance July 1993 Deferred annuities and Intermediaries
Co. (subsequently renamed structured settlements
General Electric Capital
Assurance Company)
The Federal Home Life November 1994 Annuities, supplemental Career or dedicated sales
Companies accident and health and credit force and intermediaries
products
AMEX Life Assurance Company October 1995 Long-term care and Career or dedicated sales
(subsequently merged into corporate-owned life insurance force
General Electric Capital
Assurance Company)
Union Fidelity Life Insurance April 1996 Credit products and Direct marketing and marketing
Company supplemental accident and through businesses and
health products affinity groups
The Life Insurance Company of April 1996 Variable annuities, universal Intermediaries and career or
Virginia life insurance and GICs dedicated sales force
First Colony Life Insurance December 1996 Life insurance, retirement Intermediaries
Company annuities and structured
settlements
Colonial Penn Insurance November 1997 Personal lines of automobile Direct marketing
Company insurance
</TABLE>
9
<PAGE>
RATINGS
GE Financial Assurance's principal subsidiaries are rated by A.M. Best
Company, an independent rating agency ("A.M. Best"), as follows:
<TABLE>
<CAPTION>
COMPANY RATING
- ------------------------------------------------------------------------------------ ------------------
<S> <C>
First Colony Life Insurance Company................................................. A++ (superior)
General Electric Capital Assurance Company.......................................... A+ (superior)
GE Capital Life Assurance Company of New York....................................... A+ (superior)
American Mayflower Life Insurance Company of New York............................... A+ (superior)
Federal Home Life Insurance Company................................................. A+ (superior)
The Harvest Life Insurance Company.................................................. A+ (superior)
The Life Insurance Company of Virginia.............................................. A+ (superior)
Great Northern Insured Annuity Corporation.......................................... A+ (superior)
Union Fidelity Life Insurance Company............................................... A (excellent)
Colonial Penn Insurance Company..................................................... A- (excellent)
PHF Life Insurance Company.......................................................... B+ (very good)
</TABLE>
A.M. Best's ratings for insurance companies currently range from A++ to F,
and some companies are not rated. A.M. Best's ratings are based upon an
evaluation of a company's: (i) financial strength (leverage/ capitalization,
capital structure/holding company, quality and appropriateness of reinsurance
program, adequacy of loss/policy reserves, quality and diversification of
assets, and liquidity); (ii) operating performance (profitability, revenue
composition, and management experience and objectives) and (iii) market profile
(market risk, competitive market position, spread of risk, and event risk).
"A++" and "A+" ratings are assigned to those companies that in A.M. Best's
opinion have, on balance, superior financial strength, operating performance and
market profile when compared to the standards established by A.M. Best and have
a very strong ability to meet their ongoing obligations to policyholders. "A"
and "A-" ratings are assigned to those companies that in A.M. Best's opinion
have, on balance, excellent financial strength, operating performance and market
profile when compared to the standards established by A.M. Best and have a
strong ability to meet their ongoing obligations to policyholders. "B+" ratings
are assigned to those companies that in A.M. Best's opinion have, on balance,
very good financial strength, operating performance and market profile when
compared to the standards established by A.M. Best and have a good ability to
meet their ongoing obligations to policyholders. A.M. Best's ratings are based
upon factors of concern to policyholders, agents and intermediaries and are not
directed toward the protection of investors.
PRODUCTS
WEALTH ACCUMULATION AND TRANSFER PRODUCTS
ANNUAL LIFE INSURANCE
The following table presents the aggregate amount of annual life insurance
the Company had in force as of the dates indicated.
ANNUAL LIFE INSURANCE IN FORCE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Annualized Premiums of Life Insurance in Force:
Term...................................................................................... $ 1 $ 4 $ 109
Permanent................................................................................. 9 45 322
--- --- ---------
Total................................................................................... $ 10 $ 49 $ 431
--- --- ---------
--- --- ---------
</TABLE>
10
<PAGE>
The following table presents total sales of the Company's annual life
insurance products for the periods presented.
DISTRIBUTION OF ANNUAL LIFE INSURANCE POLICIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Annual Life Insurance:
Term...................................................................................... $ -- $ -- $ 7
Permanent................................................................................. 4 32 105
--- --- ---------
Total................................................................................... $ 4 $ 32 $ 112
--- --- ---------
--- --- ---------
</TABLE>
TERM LIFE INSURANCE. Term life insurance provides life insurance protection
for a limited time: a death benefit is paid only if the insured dies during the
specified term. The Company's term life insurance products include competitively
priced graded premium whole life insurance products that offer low cost
insurance protection. These products generally have level premiums for initial
terms of 1, 5, 10, 15, 20 or 30 years and give the policyholder the contractual
right to continue coverage for life.
PERMANENT LIFE INSURANCE. Permanent life insurance provides life insurance
protection for the entire life of the insured and, unlike term life insurance,
has an investment component. The Company's permanent life insurance products
include a variety of guaranteed premium interest-sensitive whole life insurance,
universal life insurance, and employee plans/salary savings products.
IMPAIRED RISK UNDERWRITING. An insured who is an impaired risk has a shorter
life expectancy than one who is accepted on a standard or preferred basis at
normal rates; for this reason the insured pays a higher premium for the same
coverage. During 1996, approximately 8% of the Company's life insurance premiums
and 6% of the face amount of its new business was underwritten on an impaired
risk basis. The Company's impaired risk underwriting capability was acquired as
part of the Life of Virginia and First Colony acquisitions in 1996. Prior to
that date, the amount of the Company's life insurance premiums represented by
impaired risk business was not material.
The following table identifies those states that accounted for 5% or more of
the Company's annual life insurance premiums collected during 1996 (includes a
small amount of single premium life insurance).
ANNUAL LIFE INSURANCE PREMIUMS PRODUCED BY STATE
<TABLE>
<CAPTION>
YEAR ENDED
STATE DECEMBER 31, 1996
- ------------------------------------------------------------------ -----------------------------
<S> <C>
(PERCENT OF TOTAL PREMIUMS)
California........................................................ 11%
Virginia.......................................................... 10
Florida........................................................... 6
New York.......................................................... 6
Texas............................................................. 5
</TABLE>
11
<PAGE>
SINGLE PREMIUM IMMEDIATE ANNUITIES
The following table presents the aggregate amount of single premium
immediate annuities ("SPIAs") in force measured by reserves as of the dates
indicated.
SINGLE PREMIUM IMMEDIATE ANNUITIES IN FORCE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Single Premium Immediate Annuities:
Structured settlement............................................................. $ 2,274 $ 2,426 $ 8,041
Retirement........................................................................ 1,569 1,615 2,617
--------- --------- ---------
Total........................................................................... $ 3,843 $ 4,041 $ 10,658
--------- --------- ---------
--------- --------- ---------
</TABLE>
SPIAs provide long-term guaranteed benefit payment streams utilizing a fixed
interest assumption. SPIAs guarantee a stream of payments beginning immediately
and continuing over a future period of years and, in some cases, for the life of
the annuitant. The Company's SPIAs fall into two categories: structured
settlement and retirement.
SPIAs differ from deferred annuities in that they generally provide for
payments to begin immediately, are not subject to surrender or borrowing by the
policyholder and the payment stream is contractually guaranteed. The implicit
interest rate on SPIAs is based on market conditions when the policy is issued
and is guaranteed for the term of the annuity. Since immediate annuities are not
subject to surrender or borrowing by the policyholder, they provide the
opportunity for an insurance company to match closely the underlying investment
of premium received to the cash benefits to be paid under a policy, thereby
providing an anticipated margin for expenses and profit, subject to mortality
risk. The Company is one of the few companies that offers medically underwritten
annuities. This allows retirees with medical conditions that could shorten their
life expectancies to purchase annuities at lower prices or higher payouts which
reflect their individual life expectancies.
The following table presents total sales of the Company's single premium
immediate annuity products for the periods presented. Premiums related to single
premium immediate annuity contracts without life contingencies are reported as
deposit liabilities under GAAP.
DISTRIBUTION OF SINGLE PREMIUM IMMEDIATE ANNUITIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Single Premium Immediate Annuities:
Structured Settlement................................................................ $ 101 $ 188 $ 303
Retirement........................................................................... 19 19 39
--------- --------- ---------
Total.............................................................................. $ 120 $ 207 $ 342
--------- --------- ---------
--------- --------- ---------
</TABLE>
SINGLE PREMIUM IMMEDIATE ANNUITIES-STRUCTURED SETTLEMENT. Structured
settlements provide an alternative to a lump sum settlement in a personal injury
case and are generally purchased by property and casualty insurance companies
for the benefit of an injured claimant with benefits scheduled over a fixed
period and/or for the life of the claimant thereafter. Structured settlements
offer tax advantaged long-range financial security to the injured party and
facilitate claim settlement for the casualty insurance carrier. First Colony
Life Insurance Company ("First Colony") was a pioneer in this business in the
late 1970's and early 1980's and has consistently been a significant provider
since the market's inception. GE Capital Assurance has been a significant
provider since 1993.
12
<PAGE>
Structured settlement contracts are long-term in nature, guarantee a fixed
benefit stream and generally cannot be surrendered or borrowed against. Since
many structured settlement contracts generally provide for guaranteed payments
for a predetermined period that do not depend on the survival of the annuitant,
the mortality risk portion of the Company's liability with respect to such
policies is relatively small.
SINGLE PREMIUM IMMEDIATE ANNUITIES-RETIREMENT. SPIAs used for retirement
purposes are identical to those used to facilitate structured settlements in
that payments begin immediately, cannot be surrendered or borrowed against and
guarantee a fixed stream of benefits. Retirement annuities are typically sold to
older annuitants and therefore are somewhat shorter in average contract life
than structured settlement annuities.
The Company has been able to use much of the technology it developed in the
structured settlement annuity market to its advantage in the retirement annuity
market. Its software allows agents to design and quote innovative and customized
income patterns for their clients.
SINGLE PREMIUM LIFE INSURANCE, SINGLE PREMIUM DEFERRED ANNUITIES AND GICS
The following table presents the Company's single premium life insurance,
single premium deferred annuities and GICs in force for the periods presented.
Premiums related to these products are reported as deposit liabilities under
GAAP.
SINGLE PREMIUM LIFE INSURANCE,
SINGLE PREMIUM DEFERRED ANNUITIES
AND GICS IN FORCE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Single Premium Life Insurance.................................................... $ 714 $ 657 $ 2,812
Single Premium Deferred Annuities
Fixed.......................................................................... 10,596 10,434 13,277
Variable....................................................................... -- 18 3,167
GICs............................................................................. -- -- 1,341
Other............................................................................ 18 15 145
--------- --------- ---------
Total...................................................................... $ 11,328 $ 11,124 $ 20,742
--------- --------- ---------
--------- --------- ---------
</TABLE>
DISTRIBUTION OF SINGLE PREMIUM LIFE INSURANCE AND
SINGLE PREMIUM DEFERRED ANNUITY AND GIC SALES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Single Premium Life Insurance....................................................... $ 4 $ 4 $ 25
Single Premium Deferred Annuities
Fixed............................................................................. 1,026 1,060 756
Variable.......................................................................... -- 17 796
GICs................................................................................ -- -- 245
--------- --------- ---------
Total........................................................................... $ 1,030 $ 1,081 $ 1,822
--------- --------- ---------
--------- --------- ---------
</TABLE>
13
<PAGE>
The following table identifies those states that accounted for 5% or more of
the Company's 1996 production of annuities.
ANNUITY PRODUCTION BY STATE
<TABLE>
<CAPTION>
YEAR ENDED
STATE DECEMBER 31, 1996
- ------------------------------------------------------------------ -------------------------------
<S> <C>
(PERCENT OF TOTAL PREMIUMS)
Virginia.......................................................... 11%
California........................................................ 10
Washington........................................................ 8
New York.......................................................... 7
Florida........................................................... 6
Michigan.......................................................... 6
Connecticut....................................................... 6
Illinois.......................................................... 5
</TABLE>
SINGLE PREMIUM LIFE INSURANCE
The Company's single premium life insurance products are interest
rate-sensitive policies that, for a single payment, provide the insured with
non-participating life insurance with a guaranteed cash value and death benefit.
Current interest is credited to the policy's cash values based upon interest
rates that are revised periodically by the Company to reflect current economic
conditions. In most cases, this accrual of interest during the accumulation
period is on a tax-deferred basis to the insured. The Company guarantees that in
no event will the interest rate credited on cash values be less than the
guaranteed rate specified in the policy. The policy owner is permitted to take
loans and withdrawals against the cash value. Withdrawals in the early years of
the contract are subject to a significant surrender charge. In 1997, most
policies being issued provide surrender charges which are 8% for the first six
policy years and decrease to zero over the subsequent 10-year period. The
product permits up to a 10% annual withdrawal without penalty.
SINGLE PREMIUM DEFERRED ANNUITIES
FIXED ANNUITIES. A fixed single premium deferred annuity (an "SPDA")
provides for a single premium payment at time of issue, an accumulation period
and an annuity payout period at some future date. During the accumulation
period, the insurance company credits the account value of the annuitant with
interest earnings at a current interest rate (the "crediting rate") that is
guaranteed for a period of one to five years, at the annuitant's option, and,
thereafter, is subject to change based on prevailing market rates and product
profitability. Each contract also has a minimum guaranteed rate. This accrual of
interest during the accumulation period is on a tax deferred basis to the policy
owner. After the number of years specified in the annuity contract, the owner
may elect to take the proceeds of the annuity as a single payment, a specified
income for life or a specified income for a fixed number of years. The policy
owner is permitted at any time during the accumulation period to withdraw all or
part of the single premium paid plus the amount credited to his account.
Withdrawals in the early years of the contract are subject to a significant
surrender charge. In 1997, policies being issued provide surrender charges which
vary from 5-8% of the account value starting in the year of policy issue and
decrease to zero over a five to nine year period. SPDAs permit up to a 10%
annual withdrawal after the first twelve months without penalty.
At least once each month the Company establishes an interest crediting rate
for its new fixed SPDA policies. In determining the Company's interest crediting
rate on new policies, management considers the competitive position of the
Company, prevailing market rates and the profitability of the annuity product.
The Company maintains the initial crediting rate for a minimum period of one
year. Thereafter, the Company may adjust the crediting rate not more frequently
than once per year for a given SPDA policy. Interest rates credited on the
Company's in-force SPDA policies ranged from 4.7% to 8.7% at June 30,
14
<PAGE>
1997. All of the Company's annuity products have minimum guaranteed crediting
rates ranging from 3.0% to 5.5% for the life of the policy.
The Company offers an SPDA product where the amount of interest credited is
linked to the S&P 500 Index. This indexed annuity allows customers to
participate in the growth in the S&P 500 while providing protection of principal
and a guaranteed return. The guaranteed minimum crediting rate on the product is
3% per annum. The product has a ten-year surrender charge period with surrender
charges of 8%. The Company earns an annual administrative fee on the product
which is computed based on the policy's accumulated value.
VARIABLE ANNUITIES. A variable annuity incorporates all the features of a
fixed SPDA, but also involves maintaining a portion of the policyholders'
premiums in a separate account maintained for variable annuities, distinct from
the Company's general assets and liabilities. Policyholders have discretion to
allocate their premiums among several available fund options (mutual funds and
other investment funds, including a fixed account, which is held by the
Company). The cash surrender value of a variable annuity policy depends on the
performance of these underlying funds, which the policyholder may reallocate
from time to time. There is no guaranteed minimum rate in the mutual fund
components of variable annuity policies. Similarly, during the variable
annuity's payout period, the payments distributed to the annuitant fluctuate
with the performance of the underlying funds selected by the annuitant. Variable
annuities provide the Company with fee based revenue in the form of management
and administrative fees charged to the policyholder's account.
GICS
GICs are deposit-type products that provide a guaranteed return (on a fixed
or indexed basis) to the contract holder. GICs are purchased by ERISA qualified
defined contribution plans, including but not limited to, 401(k) plans where
plan participants elect a stable value option. Funding Agreements, which operate
substantially similarly to GICs, are purchased by institutional accredited
investors for various kinds of plans and programs that are not ERISA qualified.
Examples of such agreements include money market funds, bank common trust funds
and other corporate and trust accounts.
GICs credit interest at fixed or indexed interest rates (determined by
market conditions) and fixed GICs have a fixed maturity ranging from three to
five years, both of which are set at the time of sale. Substantially all GICs
allow for the payment of benefits at contract value to ERISA plan participants
in the event of death, disability, retirement or change in investment election.
The Company underwrites these risks before placing a GIC with a plan. In
addition, the Company requires plans buying its GICs to have certain
restrictions on participant transfers to money market and similar funds in order
to reduce disintermediation risk. The Company's GICs can also be terminated
prior to their maturity by the contract holder, but only after an adjustment to
the contract value for changes in the level of interest rates and the
application of a significant penalty (net payment amount may not exceed contract
value). Funding Agreements credit interest at a rate that is indexed to LIBOR
(London Interbank Offered Rate). These contracts are renewed annually, however,
either the Company or the contract holders can terminate the Funding Agreement
with seven days' notice.
MUTUAL FUNDS
Since 1987, a predecessor to the Company has marketed and managed mutual
funds under the Investors Trust name. On September 26, 1997, the various
Investors Trust mutual funds were merged into mutual funds (the "GE Funds") with
similar investment composition and objectives managed by General Electric
Investment Management Incorporated ("GEIM"), a wholly owned subsidiary of
General Electric Company and an affiliate of the Company. The Company offers the
GE Funds to retail customers through its bank and other distribution channels.
15
<PAGE>
In addition, the Company markets GE Investments Funds, Inc. ("GEI Funds"), a
family of mutual funds also managed by GEIM and offered exclusively as
investment vehicles for certain variable annuity contracts and variable life
insurance contracts issued by the Company or by other insurers, and for
qualified pension and retirement plans.
WEALTH AND LIFESTYLE PROTECTION PRODUCTS
The Company's Wealth and Lifestyle Protection product lines include
long-term care insurance, supplemental accident and health, medicare supplement,
credit insurance and automobile insurance.
The following table presents total sales of the Company's Wealth and
Lifestyle Protection products for the periods presented.
DISTRIBUTION OF WEALTH AND LIFESTYLE PROTECTION PRODUCTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Long-Term Care.......................................................................... $ 1 $ 27 $ 83
Supplemental Accident and Health (including Medicare Supplement)........................ 9 41 123
Credit Insurance........................................................................ 6 39 48
--------- --------- ---------
Total............................................................................... $ 16 $ 107 $ 254
--------- --------- ---------
--------- --------- ---------
</TABLE>
LONG-TERM CARE INSURANCE
The Company is one of two leading companies in the sale of individual
long-term care insurance policies when measured by first-year annualized premium
and policies in force. Such policies provide coverage within prescribed limits,
for nursing home, community and in-home care. The long-term care insurance plans
are sold to senior citizens (primarily 60 years of age or older). Long-term care
insurance policies are expected to account for an increasing percentage of the
Company's wealth and lifestyle protection premiums because of the growing demand
for such products among senior citizens, especially in the area of home health
care.
Current nursing home coverages in force include both expense incurred and
daily fixed dollar benefit policies. Currently, only expense incurred policies
are being sold, with an elimination period (which, similar to a deductible,
requires the insured to pay for a certain number of days of nursing home care
before the insurance coverage begins) and a maximum benefit period. Home health
care benefits also have an elimination period, and pay covered charges, after
Medicare coordination, subject to a daily or weekly maximum dollar limit and an
overall maximum. The applicant may select from one of several available benefits
levels.
The Company's policies are guaranteed renewable and, consequently, the
Company has the right to change premiums by policy class, but not based on age
or health of any individual.
SUPPLEMENTAL ACCIDENT AND HEALTH
The Company offers supplemental accident, health and disability products to
employer and employee groups, associations and other affinity groups and
residents of farm and rural communities. The Company markets supplemental
accident and health products because it believes that offering a broad range of
products is essential in order to be a preferred provider of benefits
effectively meeting the needs of employers and consumers. The Company's
supplemental accident and health products include a variety of coverages such as
medicare supplement products (described below), specified disease policies,
hospital
16
<PAGE>
indemnity coverages, accident policies and disability income policies. These
policies pay for the policyholder's medical costs directly (after certain
deductibles or co-payment arrangements have been met), pay a lump sum upon the
occurrence of a covered event, or in the case of disability income, provide
continuous payments to insureds during periods of disability. Many of the
Company's supplemental accident and health products have defined benefit limits.
The Company has a maximum retention of risk per any single case or individual
which limits risk in the event that its claims experience deviates from the
assumptions used in setting premium rates.
MEDICARE SUPPLEMENT
Medicare supplement policies provide coverage for many of the medical
expenses which the Medicare program does not cover, such as the deductible and
coinsurance costs (in which the insured and Medicare share the costs of medical
expenses) and specified losses which exceed the federal program's maximum
benefits. In marketing these products, the Company concentrates on individuals
who have just reached the age of 65 and, thus, have become eligible for
Medicare. Approximately one-half of the Company's new sales of Medicare
supplement policies are to individuals who have just reached age 65. The
Company's Medicare supplement plans automatically adjust coverages to reflect
changes in Medicare benefits. Premium increases on the Company's Medicare
supplement policies must be approved by the insurance departments of each state
in which the Company sells such products.
CREDIT INSURANCE
The Company's credit insurance operations consist of life and accident and
health insurance coverages offered to consumer debtors, chiefly through banks
and finance companies. Typically, this insurance will pay outstanding loan
obligations in the event of an insured loss. This coverage is issued on either
the single-premium or outstanding loan balance basis. Credit life is sold on a
reducing or level-term basis and is available on a single-life or, if permitted
by state law, on a joint-life basis where the related loan is co-signed. Credit
accident and health insurance will normally only be written by the Company in
conjunction with credit life insurance. The maximum term is generally 10 years
for credit life insurance and five to six years for credit accident and health
insurance. During 1997, maximum issue age for credit life and credit accident
and health insurance is 70 and 66, respectively. All of the foregoing terms and
limits are subject to statutory requirements which may vary from state to state.
The Company currently reinsures a portion of its credit insurance risk
through an affiliate, which also offers reinsurance to third parties.
AUTOMOBILE INSURANCE
The Company, through its recent acquisition of Colonial Penn primarily
writes personal automobile insurance which covers the legal liability of
individuals arising out of the ownership or operation of an automobile and also
provides physical damage insurance on the automobile, medical payments insurance
and protection against uninsured motorists. All of the Company's personal
automobile insurance policies are written for a term of one year. In many
states, however, the Company offers a "guaranteed lifetime protection" provision
to certain qualifying policyholders that ensures their policies will be renewed
at rates then in effect for their classification.
PRODUCT/SERVICE CENTERS
The Company has established four primary product/service centers for
creating and servicing its products (prior to the acquisition of Colonial Penn)
for its businesses as follows: (i) the fixed life and annuities business
primarily operates in Lynchburg, Virginia; (ii) the variable life and annuities
business primarily operates in Richmond, Virginia; (iii) the long-term care
insurance business primarily operates in San Rafael, California; and (iv) the
supplemental accident and health insurance and credit insurance business
primarily operates in Trevose, Pennsylvania.
17
<PAGE>
MARKETING AND DISTRIBUTION
The Company distributes its products through four primary channels:
- Intermediaries, such as brokerage general agents ("BGAs"), banks,
securities brokerage firms, personal producing general agents ("PPGAs")
and specialized brokers;
- Career or dedicated sales forces;
- Marketing through businesses and affinity groups; and
- Direct marketing.
INTERMEDIARIES
BGAS. The Company distributes many of its products (including fixed and
variable annuities and life products, long term care, universal and term life
insurance (including impaired risk underwriting), and immediate annuities)
through more than 250 independent insurance brokerage firms located throughout
the United States. These BGAs market the Company's products through
approximately 150,000 licensed insurance agents or brokers, who also represent
other companies. The Company believes its consistent commitment to this system
has helped earn it a reputation as a leading provider of life insurance among
BGAs. The Company endeavors to be placed at the top of the BGAs' list of sources
of insurance products and services in which the Company specializes. To achieve
this objective the Company seeks to provide innovative and competitive products
and services for BGA and end-customer needs, personalized quality service for
the BGAs' agents and brokers and competitive pricing. Service offered by the
Company to the BGAs' agents and brokers includes the opportunity to participate
in the Company's First Colony University, an integrated insurance training
curriculum which is recognized for its excellence throughout the industry. The
Company also offers agents and brokers access to its automated PDQ system, a
computer-based data access system which gives the agents and brokers instant
access to data regarding their customers' policies and applications with the
Company and information systems to run their businesses.
The Company's commitment to the independent general agency system has
allowed it to develop a loyal relationship with these general agencies. Of the
Company's 20 leading BGAs in 1996 on the basis of commissions earned, most were
among the leading general agents of the Company 10 years before. No individual
general agency accounted for more than 9% of premiums produced in the first six
months of 1997, and the top ten general agencies collectively produced almost
35% of the Company's ordinary life insurance premiums by BGAs. The Company
believes the loss of any one BGA relationship in any given year would not
materially impact the Company's financial results.
BANKS AND SECURITIES BROKERAGES. Banks are a significant distribution
channel for the Company's fixed and variable annuities, life insurance products
and mutual funds. The Company's credit life and credit accident and health
insurance is also distributed primarily through banks, credit unions, and
finance companies. Bank of America and The Chase Manhattan Bank are currently
the largest bank distributors of the Company's products. During 1996, these
banks generated 12% of the Company's annuity sales. While the loss of these two
banks would not materially impact the Company's financial results, it could
potentially reduce annual annuity sales by a material amount.
Over the last few years distribution of the Company's products through
securities brokerages has substantially increased, primarily due to the
Company's acquisition of The Life Insurance Company of Virginia ("Life of
Virginia") which distributed its variable annuity products through a large
network of securities brokerage firms. In addition, a significant percentage of
the Company's single premium immediate annuities are sold through major stock
brokerage firms and banks.
PPGAS. The Company sells through PPGAs some of its products under the Wealth
Accumulation and Transfer segment, such as fixed and variable annuities and
universal and term life insurance. PPGAs primarily include personal financial
planners whose emphasis is on providing investment and insurance
18
<PAGE>
products to one of the Company's target customer groups. The Company believes
that this segment presents an opportunity for growth within the intermediary
distribution channel.
SPECIALIZED BROKERS AND OTHER DISTRIBUTION. The Company's single premium
immediate annuities used to facilitate structured settlements are sold through a
network of specialized independent brokers. These brokers are skilled in claims
negotiation and experts in the creation of benefit plans tailored to the needs
of individual claimants and their families. As a pioneer in this industry, the
Company has the oldest and largest distribution system in this market. Its
products are sold through approximately 350 specialized brokers located
throughout the United States. The Company's relationship with many of these
specialized brokers dates back to the inception of this market. The Company
believes, due to its position in this market, new brokers could be added.
The Company sells GICs through specialized GIC brokers, fund managers,
employee benefit investment advisors and directly to large employee benefit
plans. The Company sells Funding Agreements through institutional accredited
investors or banks acting in a fiduciary capacity.
CAREER OR DEDICATED SALES FORCES
Career or dedicated sales forces consist primarily of non-employees who sell
products of the Company on an exclusive basis and to a lesser extent, a sales
force employed directly by the Company. All non-employee career or dedicated
sales force agents are affiliated with an insurance agency. Career or dedicated
sales forces are compensated by the Company primarily on a commission basis.
The Company's long-term care insurance policies are sold through a network
of specialized career agents who sell these products exclusively. The Company
believes that long-term care insurance policies will account for an increasing
percentage of the Company's premiums due to the growing demand for such products
among senior citizens. Prospective customers are reached through direct mail
advertising and referrals. The Company contributes leads generated through these
advertising campaigns to agents.
The Company has another group of non-employee career agents who specialize
in selling the Company's annuity, life insurance and supplemental accident and
health insurance products to residents of farm and rural communities.
Prospective customers are reached through direct mail, policyholder referrals
and advertising in controlled circulation farming and ranching magazines. In
1991, a predecessor to the Company entered into an agreement with The Farm
Progress Companies, Inc. ("Farm Progress," a wholly owned subsidiary of ABC/Cap
Cities, Inc.) under which Farm Progress agreed to exclusively advertise certain
of the Company's products in its magazines until 2016.
The Company's subsidiary, Life of Virginia, has an employee career agent
force which specializes in selling life insurance products and annuities. This
career force is heavily concentrated in the mid-Atlantic states.
The Company provides certain of its career agents with sales leads generated
through direct mail advertising campaigns. These campaigns target subscribers of
certain publications or those with demographic characteristics that indicate a
possible need for specific products and services. The Company believes that its
lead generation programs provide its sales forces opportunities to increase
their sales effectiveness.
MARKETING THROUGH BUSINESSES AND AFFINITY GROUPS
In 1996, the Company began selling supplemental accident and health
insurance and universal life products through payroll deduction
employer-sponsored programs. Under these programs, the Company enters into a
contractual arrangement with a corporate customer permitting agents of the
Company to market these products directly to the corporate customers' employees
on site. Employees are able to pay premiums on products they purchase by means
of automatic deductions from their paychecks.
19
<PAGE>
DIRECT MARKETING
The Company's acquisition of Colonial Penn provides the Company with a
substantial direct marketing distribution channel for personal automobile
insurance. Direct marketing is a form of marketing in which a company and a
customer deal directly with each other, rather than through an insurance agent.
As a direct marketer, the Company deals directly with the public and endeavors
to be the lowest cost provider in this market. The Company also uses direct mail
and telemarketing to generate qualified leads for agents selling other products
of the Company. Within the bank channel this approach has created new sales
opportunities with bank customers.
Direct marketing is also an additional distribution channel for the
Company's credit-related products and supplemental accident and health insurance
products, primarily through Union Fidelity Life Insurance Company ("Union
Fidelity").
COMPETITION
The Company operates in a highly competitive environment. While the Company
believes it has assembled a unique collection of products and distribution
channels, there are competitors that have also assembled a similar array of
financial products and have similar strategic goals. The Company believes that
the principal competitive factors in the sale of insurance are product features,
commission structure, perceived stability of the insurer, claims paying ability
ratings, service, name recognition and price. Many other insurance companies are
capable of competing for sales in the Company's target markets. The Company's
ability to compete is affected in part by its ability to provide competitive
products and quality service to the insurance consumer, general agents, licensed
insurance agents and brokers. However, the Company believes that it competes
primarily on the basis of its high level of customer service, its financial
strength and its competitively priced products.
The Company's competition from banks and other financial institutions is
likely to increase as the regulations currently in existence are revised by
legislation, judicial determinations or administrative rulings. Although the
effect of these developments on GE Financial Assurance and its subsidiaries and
their competitors is uncertain, both the persistency of the Company's existing
products and the Company's ability to sell products could be materially impacted
in the future. Also, several proposals to repeal or modify the Glass-Steagall
Act and the Bank Holding Company Act have been made by members of Congress and
the Executive Branch. Certain of these proposals would repeal or modify the
current restrictions that prevent banks from being affiliated with insurance
companies. None of these proposals has yet been enacted, and it is not possible
to predict whether any of these proposals will be enacted or, if enacted, what
their potential effect on the Company or its competitors would be.
RISK MANAGEMENT AND COMPLIANCE
During the last few years GE Financial Assurance has grown rapidly through
acquisitions. See "The Company--Significant Acquisitions." In an effort to
integrate each acquired business, GE Financial Assurance maintains a strong
commitment to risk management and compliance, and avails itself of GE Capital's
long-standing strength and experience in risk management. For example, the
Company's commitment to risk management processes and compliance includes
requiring underwriting of all new products and reviews of all existing product
performance, both of which are reviewed by a team of risk managers and
actuaries. In addition, both internal and external periodic reviews of the
Company's products, internal processes and pricing strategy are conducted. The
Company also has committed to meeting Insurance Marketplace Standards
Association (IMSA) certification and has instituted company-wide compliance
initiatives such as centralized complaint databases and agent tracking and
licensing.
20
<PAGE>
COMPUTER SYSTEMS CONVERSION
The Company has formed a special project team to consider the impact of the
Year 2000 issue on its computer systems and applications and developed a
remediation plan. Conversion activities are in process and the Company expects
conversion and testing to be completed in the middle of 1999. However, if such
activities or the remedial activities of other companies on which the Company's
systems rely are not timely completed, the Year 2000 issue may have a
significant impact on the Company.
The Company expects that completion of the Year 2000 project will result in
additional expenditures of approximately $18 million.
UNDERWRITING
Applications for most of the Company's underwritten insurance related
products are individually reviewed and analyzed by the Company's dedicated
underwriting staff based on standardized underwriting guidelines and procedures.
After initial processing, each file is reviewed and additional information (such
as medical examinations, attending physician's statements and special medical
tests, if applicable) is obtained to make an underwriting decision. The
independent sales agents and the Company's own sales staff do not retain any
underwriting authority. The Company employs a professional underwriting staff of
approximately 205 persons who collectively have an average of 17 years of
experience in the insurance industry.
RESERVES
In accordance with applicable insurance regulations, the Company establishes
and carries as liabilities actuarially determined reserves which are calculated
to meet the Company's future obligations. The reserves are based on actuarially
recognized methods using prescribed morbidity and mortality tables in general
use in the United States modified to reflect the Company's actual experience
when appropriate. These reserves are computed at amounts that, with additions
from premiums to be received and with interest on such reserves compounded
annually at certain assumed rates, are expected to be sufficient to meet the
Company's policy obligations at their maturities or in the event of an insured's
death. Reserves include unearned premiums, premium deposits, claims reported but
not yet paid, claims incurred but not reported and claims in the process of
settlement.
For the Company's individual life policies, universal life and
interest-sensitive whole life policies, reserves are set according to premiums
collected, plus interest, less charges. Reserves for other fixed death benefit
and supplemental accident and health policies are based on assumed investment
yield, persistency, mortality and morbidity as per commonly used actuarial
tables, expenses and margins for adverse deviations. For the Company's accident
and health policies, the level of reserves is based on a variety of factors
including particular diagnoses, termination rates and benefit payments.
The stability of the Company's annuity and other interest-sensitive life
insurance reserves is enhanced by policy restrictions on withdrawal of funds.
Withdrawals in excess of allowable penalty-free amounts are assessed a surrender
charge during a penalty period ranging from five years to twenty years. Such
surrender charge is initially a percentage of the accumulation value, which
varies by product, and generally decreases gradually during the penalty period.
Surrender charges are set at levels to protect the Company from loss on early
terminations and to reduce the likelihood of policyholders terminating their
policies during periods of increasing interest rates, thereby lengthening the
effective duration of policy liabilities and improving the Company's ability to
maintain profitability on such policies. The Company's reserves comply in all
material respects with state insurance department statutory requirements;
however, in the Consolidated Financial Statements, insurance reserves are
determined in accordance with GAAP, which may vary from statutory requirements.
21
<PAGE>
REINSURANCE
The Company follows the usual industry practice of reinsuring ("ceding")
portions of its life insurance risks with other companies, a practice that
permits it to write policies in amounts larger than the risk it is willing to
retain on any one life, and also to continue writing a larger volume of new
business. The maximum amount of individual ordinary life insurance normally
retained by the Company on any one life policy is $1,000,000. Certain
supplemental accident and health and long-term care policies are reinsured on
either a quota share or excess of risk basis. The Company cedes insurance
primarily on a treaty basis, under which risks are ceded to a reinsurer on
specific blocks of business where the underlying risks meet certain
predetermined criteria, and, to a lesser extent, on a facultative basis, under
which the reinsurer's prior approval is required on each risk reinsured. Use of
reinsurance does not discharge an insurer from liability on the insurance ceded.
An insurer is required to pay the full amount of its insurance obligations
regardless of whether it is entitled or able to receive payments from its
reinsurer. The principal reinsuring companies (and their corresponding A.M. Best
ratings) at December 31, 1996 were: Employers Reassurance Corporation, whose
parent, GE Global Insurance Holding Corporation, is an affiliate of the Company,
rated A++; UNUM, rated A++; Combined Insurance Company of America, rated A+;
American United Life Insurance Company, rated A+; IDS Life Insurance Company,
rated A+; The Lincoln National Life Insurance Company, rated A+; Reinsurance
Group of America, rated A+; Transamerica Occidental Life Insurance Company,
rated A+; Phoenix Home Life Mutual Insurance Company, rated A; and Swiss Re Life
Company of America, rated A.
INVESTMENTS
The Company manages its investment portfolio to meet the diversification,
credit quality, yield and liquidity requirements of its policy liabilities by
investing primarily in fixed maturity instruments, including government and
corporate bonds, mortgage backed bonds, and mortgage loans on real estate. At
December 31, 1996, the Company held $33.9 billion, or 94.7% of its investment
portfolio, in fixed maturity instruments and mortgage loans. The Company's
investment philosophy focuses on purchasing assets the durations of which
approximate policyholder obligations. To match some of its longer term policy
liabilities, the Company has followed a strategy of buying bonds with adequate
call protection. The Company also invests in preferred stock, policy loans,
short-term securities and other investments, which comprised the remaining 5.3%
of its investment portfolio at December 31, 1996.
The Company primarily purchases investment-grade (BBB-/Baa3 or above) bonds.
At December 31, 1996, $27.9 billion, or 88.7%, of the fixed maturity securities
held by the Company were bonds rated by a rating agency (S&P or Moody's), or
were government/agency bonds. The remaining $3.6 billion, or 11.3%, was
comprised primarily of private placement bonds not rated by either rating
agency. At December 31, 1996, the Company held $763 million of bonds rated below
investment grade (excluding split-rated bonds). In addition, the Company held
$193 million of "not-rated" bonds which the Company believes are below
investment grade. Below investment grade bonds include those bonds originally
purchased as investment grade but subsequently downgraded in rating, as well as
bonds purchased as below investment grade. The Company holds this small
percentage of below investment grade bonds in order to enhance the yield on its
investment portfolio. During 1997, the Company plans to purchase approximately
$900 million of below investment grade bonds, in order to further enhance the
yield on its investment portfolio, while still maintaining adequate quality,
diversification and liquidity characteristics.
Investments in mortgage backed bonds include $6,714 million in
collateralized mortgage obligations (CMOs) and asset-backed securities and
$1,355 million of pass-through securities. These bonds are secured primarily by
pools of residential mortgages and generally carry high credit ratings.
Approximately 58% of the mortgage-backed bonds are backed by securities issued
by Government National Mortgage Association, Federal Home Loan Mortgage
Corporation, or Federal National Mortgage Association. In the aggregate, the
mortgage-backed bonds had an average rating of AAA/Aaa at December 31, 1996.
Most CMO and pass-through securities are subject to prepayment and extension
risk (i.e. principal can be
22
<PAGE>
received earlier or later than anticipated, based on the rate of mortgage
prepayments in the underlying residential mortgage pools).
At December 31, 1996, the Company's investments in equity securities
totalled $494 million, of which $478 million was preferred stock and $16 million
was common stock. The investments in preferred stock generally pay dividends on
a quarterly basis at yields comparable to bonds.
The Company has classified all of its fixed maturity and equity securities
as available-for-sale. Therefore, these securities are carried on the balance
sheet at current fair values and marked to market quarterly. Changes in market
value, net of the effect on present value of future profits, deferred policy
acquisition costs and deferred income taxes, are recorded as unrealized
appreciation or depreciation directly in shareholder's interest and,
accordingly, have no effect on net income. At December 31, 1996, the amortized
cost basis of the Company's fixed maturity securities was $31,717 million,
representing net unrealized losses of $215 million, while the cost basis of
equity securities was $485 million, representing net unrealized gains of $9
million.
The Company's mortgage loan portfolio consisted of 1,917 loans at December
31, 1996. The loans, which are originated through a network of mortgage bankers,
are made only on completed, leased properties and have a maximum loan-to-value
ratio of 75% at the date of origination. Commercial loans comprise the majority
of the portfolio, with $1,165 million (46.9%), $565 million (22.8%) and $373
million (15.0%) attributable to the retail, industrial and office sectors,
respectively. The remainder of the loans, $381 million (15.3%), are attributable
to the residential and other miscellaneous sectors. The mortgage loans are
secured by property throughout the U.S., with concentrations in the Pacific
region (32.3%) and the South Atlantic region (27.8%).
Certain policies issued by the Company allow the policyholders to borrow
against the policy. These loans are classified in the asset side of the balance
sheet as Policy Loans. At December 31, 1996, the outstanding loans of $971
million bore interest at an average rate of 8.6%, which is determined by the
terms of the policy.
Other invested assets of $182 million at December 31, 1996 were comprised of
several types of assets. The Company has made investments in mutual funds
offered by the Company's mutual fund and variable annuity distribution channels
of $101 million in order to provide seed money for these funds. Pursuant to a
periodic review of its asset allocation strategy, the Company has also made
investments in limited partnerships ($34 million) and real estate and other
properties ($19 million) in order to achieve higher investment returns on an
incremental portion of the portfolio.
23
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------
<S> <C> <C>
FAIR MARKET VALUE PERCENTAGE OF TOTAL
----------------- -------------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Fixed Maturity Securities--Available For Sale(1)
U.S. Government and Agencies.............................................. $ 1,591 4.4%
State and Municipal....................................................... 38 0.1
Foreign Government........................................................ 132 0.4
Foreign Corporate......................................................... 1,392 4.0
U.S. Corporate............................................................ 20,280 56.6
Mortgage Backed(2)........................................................ 8,069 22.5
------- -----
Total Fixed Maturity Securities......................................... 31,502 88.0
------- -----
Equity Securities--Available For Sale(3)
Common Stock.............................................................. 16 0.0
Preferred Stock, Non-Redeemable........................................... 478 1.3
------- -----
Total Equity Securities................................................. 494 1.3
------- -----
Mortgage Loans on Real Estate............................................... 2,426 6.8
Policy Loans................................................................ 971 2.7
Short Term Investments...................................................... 235 0.7
Other Invested Assets
Mutual Funds.............................................................. 101 0.3
Limited Partnerships...................................................... 34 0.1
Properties Held For Investment............................................ 19 0.1
Real Estate Owned......................................................... 12 0.0
Other Assets.............................................................. 16 0.0
------- -----
Total Other Invested Assets............................................. 182 0.5
------- -----
Total Investments........................................................... $ 35,810 100.0%
------- -----
------- -----
</TABLE>
- ------------------------
(1) Fixed maturity securities available-for-sale are stated at current market
values. Amortized cost of fixed maturity securities available-for-sale at
December 31, 1996 was $31,717 million, representing net unrealized losses of
$215 million. Changes in market value, net of the effect on present value of
future profits, deferred policy acquisition costs and deferred federal
income taxes, are reflected as unrealized appreciation or depreciation
directly in shareholder's interest and, accordingly, have no effect on net
income.
(2) Mortgage Backed Securities are comprised of CMOs ($6,714 million) and
Pass-throughs ($1,355 million).
(3) Equity securities available-for-sale are stated at current market values.
The cost basis of equity securities available-for-sale at December 31, 1996
was $485 million, representing net unrealized gains of $9 million. Changes
in market value, net of the effect on present value of future profits,
deferred policy acquisition costs and deferred federal income taxes, are
reflected as unrealized appreciation or depreciation directly in
shareholder's interest and, accordingly, have no effect on net income.
24
<PAGE>
The following table summarizes the Company's investment results for the
periods indicated.
INVESTMENT RESULTS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Total Invested Assets(1).................................................. $ 13,175 $ 16,417 $ 24,144
Net Investment Income(2).................................................. $ 881 $ 1,194 $ 1,773
Effective Yield(3)........................................................ 6.9% 7.5% 7.6%
Net Realized Investment Gains(4).......................................... $ 7 $ 6 $ 15
</TABLE>
- ------------------------
(1) Average of cash and total invested assets on an amortized cost basis,
adjusted for impact of timing on acquired companies.
(2) Net investment income is net of investment expenses and excludes capital
gains or losses or provision for income taxes.
(3) Net investment income divided by the sum of the (i) average cash and total
invested assets minus (ii) one-half of net investment income.
(4) Excludes provision for income taxes.
The credit quality of the Company's bond portfolio as stated below is based
upon the higher of the ratings published by S&P or Moody's.
PORTFOLIO CREDIT QUALITY
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
<S> <C> <C>
FAIR MARKET PERCENTAGE
VALUE OF TOTAL
----------- -----------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Agencies and Treasuries................................................................. $ 5,739 18.2%
AAA/Aaa................................................................................. 3,664 11.6
AA/Aa................................................................................... 1,960 6.2
A/A..................................................................................... 8,112 25.8
BBB/Baa................................................................................. 7,706 24.5
BB/Ba................................................................................... 703 2.2
B/B..................................................................................... 53 0.2
CCC/Caa................................................................................. 1 0.0
D/D..................................................................................... 6 0.0
Not Rated............................................................................... 3,558 11.3
----------- -----
Total............................................................................... $ 31,502 100.0%
----------- -----
----------- -----
</TABLE>
As of December 31, 1996, the Company's bond portfolio had an average rating
of A+/A1. According to S&P and Moody's, bonds which are rated "A" possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. S&P applies "+" and "-" modifiers in each generic rating
classification from AA to CCC. Moody's applies numerical modifiers "1", "2" and
"3" in each generic rating classification from Aa to B. Modifier "1" indicates a
bond in the higher end of a generic rating classification.
Fixed maturity securities with ratings ranging from AAA/Aaa to BBB-/Baa3 are
generally regarded as investment grade. Some agencies and treasuries (that is,
those securities issued by the U.S. Government or an agency thereof) are not
rated, but are considered to be investment grade securities. Finally, some
25
<PAGE>
securities, such as private placements, have not been assigned a rating by any
rating service and are therefore categorized as "not rated." This has neither
positive nor negative implications regarding the credit quality of the security.
At December 31, 1996, there were fixed maturity securities in default with a
fair value of $14 million. There were no fixed maturity securities in default at
December 31, 1995.
The following table sets forth scheduled maturities for the Company's
investments in fixed maturities at December 31, 1996.
SCHEDULED MATURITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
<S> <C> <C>
FAIR MARKET PERCENTAGE
VALUES OF TOTAL
----------- -----------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Due in one year or less................................................................. $ 890 2.8%
Due after one year through five years................................................... 4,636 14.7
Due after five years through 10 years................................................... 6,036 19.2
Due after 10 years...................................................................... 11,871 37.7
Mortgage-Backed Bonds................................................................... 8,069 25.6
----------- -----
Total............................................................................... $ 31,502 100.0%
----------- -----
----------- -----
</TABLE>
Expected maturities may differ from scheduled maturities because issuers of
securities may have the right to call or prepay obligations with or without call
or prepayment penalties. At December 31, 1996, $6,117 million of the Company's
investments (excluding mortgage-backed bonds) were subject to certain call
provisions.
INSURANCE REGULATION
GENERAL REGULATION AT STATE LEVEL
The insurance business of the Company is subject to comprehensive state and
federal regulation and supervision throughout the United States. The laws of the
various jurisdictions establish supervisory agencies with broad administrative
powers with respect to, among other things, licensing to transact business,
licensing agents, admittance of assets, regulating premium rates, approving
policy forms, regulating unfair trade and claims practices, establishing reserve
requirements and solvency standards, fixing maximum interest rates on life
insurance policy loans and minimum rates for accumulation of surrender values,
restricting certain transactions between affiliates and regulating the type,
amounts and valuations of investments permitted.
As a holding company with no significant business operations of its own, the
Company relies on dividends from its subsidiaries as the principal source of
cash to meet its obligations, including the payment of principal and interest on
the Debt Securities. The Company's insurance subsidiaries are subject to various
state statutory and regulatory restrictions, applicable generally to each
insurance company in its state of domicile, which limit the amount of dividends
or distributions an insurance company may pay to its shareholders without
regulatory approval.
The Company's principal insurance subsidiaries are domiciled in the states
of Delaware, Florida, Illinois, Indiana, New York, Ohio, Pennsylvania, Virginia
and Washington. Each of these states has laws and regulations which govern the
parameters for approval and payment of dividends.
Generally, dividends may be paid out of earned surplus without approval with
thirty days prior written notice within certain limits. The limits are generally
based on 10% of the prior year surplus (net of adjustments in some cases) and
prior year statutory income (net gain from operations, net income adjusted
26
<PAGE>
for realized capital gains, or net investment income). Dividends paid or
distributed within any twelve consecutive months in excess of the prescribed
limits or the company's earned surplus are deemed extraordinary and require
formal state insurance commission approval.
Delaware (GE Capital Assurance), Washington (Great Northern Insured Annuity
Corporation), Indiana (Federal Home Life Insurance Company), Ohio (The Harvest
Life Insurance Company), Illinois (Union Fidelity) and Pennsylvania (Colonial
Penn) allow companies to pay dividends up to the greater of 10% of prior year
surplus or 100% of prior year statutory net gain from operations to the extent
of their earned surplus; however, Ohio requires companies to adjust the net gain
from operations to include realized investment gains in the computation of prior
year statutory net income. Florida (PHF Life Insurance Company) allows companies
to pay dividends up to the greater of 10% of prior year surplus adjusted for
unrealized gains or 100% of prior year statutory net income (including realized
capital gains). Virginia (Life of Virginia, First Colony) allows companies to
pay dividends up to the lesser of 10% of prior year surplus or 100% of prior
year statutory net gain from operations, to the extent of earned surplus. New
York (GE Capital Life Assurance of New York, American Mayflower Life Insurance
Company of New York) requires regulatory approval for the payment of any
dividends.
Each insurance subsidiary's dividend capacity is calculated separately;
therefore, total dividend capacity for the Company is driven in part by its
legal structure. Union Fidelity and Colonial Penn are owned directly by the
Company and GE Capital Assurance is owned directly by GNA Corporation which is,
in turn, owned 100% by GE Financial Assurance. All other insurance subsidiaries
are 100% owned by GE Capital Assurance, except for Life of Virginia and First
Colony which are owned 80% by GE Capital Assurance and 20% by GE Financial
Assurance. Thus, the Company's dividend capacity is the sum of capacity for GE
Capital Assurance, Union Fidelity, Colonial Penn and 20% of First Colony and
Life of Virginia. GNA Corporation, which is a holding company, is not subject to
the regulatory restrictions on dividends imposed on the Company's insurance
subsidiaries.
Insurance laws of the states in which the Company's insurance subsidiaries
are domiciled generally provide that no person may acquire control of the
Company, and thus indirect control of these insurance company subsidiaries,
without the prior approval of the appropriate insurance regulators. In general,
any person who acquires beneficial ownership of 10% (5% in Florida) or more of
the voting securities of the Company would be presumed to have acquired such
control, although the appropriate insurance regulators, upon application, may
determine otherwise.
Each insurance company is required to file detailed annual reports with
supervisory departments in each of the jurisdictions in which it does business
and its operations and accounts are subject to examination by such departments
at regular intervals. Each of the Company's life insurance subsidiaries prepares
statutory financial statements in accordance with accounting practices
prescribed or permitted by the insurance departments of their respective states
of domicile. Prescribed statutory accounting practices include publications of
the NAIC, as well as state laws, regulations and general administrative rules.
Life insurance companies are required to establish an Asset Valuation
Reserve ("AVR") consisting of two components: (i) a "default component" which
provides for future credit-related losses on fixed maturity investments and (ii)
an "equity component" which provides for losses on all types of equity
investments, including real estate. Insurers are also required to establish an
Interest Maintenance Reserve ("IMR") for fixed maturity net realized capital
gains and losses, net of tax, related to changes in interest rates. The IMR is
required to be amortized into statutory earnings on a basis reflecting the
remaining period to maturity of the fixed maturity securities sold. These
reserves are required by state insurance regulatory authorities to be
established as a liability on a life insurer's statutory financial statements,
but do not affect financial statements of the Company prepared in accordance
with GAAP. Although future additions to AVR will reduce the future statutory
surplus of the Company's insurance subsidiaries, the Company does not believe
that the impact under current regulations of such reserve requirements will
27
<PAGE>
materially affect the ability of its insurance subsidiaries to grow their
statutory surplus and pay dividends to the Company in the future.
The NAIC has adopted risk-based capital ("RBC") standards, which are used to
determine the amount of Total Adjusted Capital (as defined by the NAIC) that a
life insurance company must have, taking into account the risk characteristics
of such company's investments and liabilities. The formula establishes a
standard of capital adequacy that is related to risk. The RBC formula
establishes capital requirements for four categories of risk: asset risk,
insurance risk, interest rate risk and business risk. For each category, the
capital requirements are determined by applying specified factors to various
asset, premium, reserve and other items, with the factor being higher for items
with greater underlying risk and lower for items with less risk. The formula is
used by insurance regulators as an early warning tool to identify deteriorating
or weakly capitalized companies for the purpose of initiating regulatory action.
The NAIC's RBC requirements provide for four levels of regulatory attention
depending on the ratio of the company's Total Adjusted Capital to its Authorized
Control Level RBC ("ACL") (as defined by the NAIC). If a company's Total
Adjusted Capital is less than 200% of its ACL but greater than or equal to 150%
of its ACL, or if a negative trend has occurred (as defined by the NAIC) and
Total Adjusted Capital is less than 250% of its ACL, the company must submit a
comprehensive plan to the regulatory authority which discusses proposed
corrective actions to improve its capital position. If a company's Total
Adjusted Capital is less than 150% of its ACL but greater than or equal to 100%
of its ACL, in addition to the above required actions, the regulatory authority
will perform a special examination of the company and issue an order specifying
corrective actions that must be followed. If a company's Total Adjusted Capital
is less than 100% of its ACL but greater than or equal to 70% of its ACL, in
addition to the above required actions, the regulatory authority may take any
action it deems necessary, including placing the company under its control. If a
company's Total Adjusted Capital is less than 70% of its ACL, the regulatory
authority is mandated to place the company under its control. The Total Adjusted
Capital for each of the Company's insurance subsidiaries is in excess of 250% of
their respective ACL.
In addition, as part of their routine regulatory oversight process, state
insurance departments conduct detailed examinations periodically (generally once
every three to five years) of the books, records, accounts and market conduct of
insurance companies domiciled in their states. Such examinations are generally
conducted in cooperation with the departments of two or three other states under
guidelines promulgated by the NAIC. None of the recent regulatory examinations
have disclosed any findings that would have a material adverse impact on the
Company.
REGULATORY INITIATIVES
State insurance regulators and the NAIC are continually re-examining
existing laws and regulations, specifically focusing on insurance company
investments and solvency issues, risk-adjusted capital guidelines,
interpretations of existing laws, the development of new laws, the
implementation of non-statutory guidelines and the circumstances under which
dividends may be paid. These initiatives may be adopted by the various states in
which the Company's insurance subsidiaries are licensed, but the ultimate
content and timing of any statutes and regulations adopted by the states cannot
be determined at this time. It is impossible to predict the future impact of
changing state and federal regulations on the Company's operations, and there
can be no assurance that existing or future insurance-related laws and
regulations will not become more restrictive.
Recently, state regulatory authorities, industry groups and rating agencies
have developed several initiatives regarding market conduct. For example, the
NAIC has adopted the NAIC Model Life Insurance Illustrations Regulation, which
applies to group and individual life insurance policies and certificates, and
the Market Conduct Examiners Handbook which sets out required parameters for
such examinations. State regulators have imposed significant fines on various
insurers for improper market conduct. The American Council on Life Insurance is
establishing the Insurance Market Place Standards Association, a
28
<PAGE>
self-regulatory organization, to implement its Principles and Code of Ethical
Life Insurance Market Conduct, which includes a third-party assessment
procedure. Market conduct also has become one of the criteria used to establish
the ratings of an insurance company. For example, A.M. Best's ratings analysis
now includes a review of the insurer's compliance program. Management does not
believe that these market conduct initiatives will have a material adverse
effect on its business, financial condition or results of operation.
In addition, the NAIC has issued the Valuation of Life Insurance Policies
Model Regulation, which would establish new minimum reserve requirements for
individual life insurance policies written in the future. Before the new reserve
standards can become effective, individual states must enact the model
regulation. If these reserve standards were adopted in their current form,
companies selling certain individual life insurance products such as term life
products with guaranteed premium periods and universal life products with
no-lapse guarantees would be required to adjust reserves for policies issued
after the respective state-by-state effective dates. It is impossible at this
time to predict if the model regulation will be enacted and, if enacted, when it
will become applicable, in any of the states in which the Company's insurance
subsidiaries are domiciled. However, the Company anticipates no material impact
as a result of the enactment of this regulation.
ASSESSMENTS AGAINST INSURERS
Under the insurance guaranty fund laws existing in each state, the District
of Columbia and Puerto Rico, licensed insurers can be assessed by state
insurance guaranty associations for certain obligations of insolvent insurance
companies to policyholders and claimants. Recent regulatory actions against
certain large life insurers encountering financial difficulty have prompted
various state insurance guaranty associations to begin assessing life insurance
companies for the deemed losses. Most of these states do provide, however, that
an assessment may be excused or deferred if it would threaten an insurer's
solvency and further provide for annual limits on such assessments. A large part
of the assessments paid by the Company's insurance subsidiaries pursuant to
these laws may be used as credits for a portion of the Company's insurance
subsidiaries' premium taxes. The Company's insurance subsidiaries paid
assessments of $11 million, $11 million and $9 million in 1994, 1995 and 1996,
respectively. Since such assessments are typically not made for several years
after an insurer fails and depend upon the final outcome of liquidation or
rehabilitation proceedings, the Company cannot accurately determine the amount
or timing of any future assessment on the Company's insurance subsidiaries.
However, based on the best information presently available, management believes
the Company's total future assessments will not be material to its business,
financial condition or results of operation.
REGULATION AT FEDERAL LEVEL
Although the federal government does not directly regulate the business of
insurance, federal legislation and administrative policies in several areas,
including pension regulation, financial services regulation and federal
taxation, can significantly and adversely affect the insurance industry and thus
the Company. For example, Congress has from time to time considered legislation
relating to the deferral of taxation on the accretion of value within certain
annuities and life insurance products, the removal of barriers preventing banks
from engaging in the insurance business, changes in ERISA regulations, the
alteration of the federal income tax structure and the availability of Section
401(k) or individual retirement accounts. In particular, Congress has reviewed
various proposals to repeal or modify the McCarran-Ferguson Act (which exempts
the insurance industry from certain federal laws), the Glass-Steagall Act (which
restricts banks from engaging in the securities-related business) and the Bank
Holding Company Act (which prohibits banks from being affiliated with insurance
companies).
Moreover, the United States Supreme Court held on January 18, 1995 in
NATIONSBANK OF NORTH CAROLINA V. VARIABLE ANNUITY LIFE INSURANCE COMPANY that
annuities are not insurance for purposes of the National Bank Act. In addition,
the Supreme Court also held on March 26, 1996 in BARNETT BANK OF MARION
29
<PAGE>
COUNTY V. NELSON that state laws prohibiting national banks from selling
insurance in small town locations are preempted by federal law. The Office of
the Comptroller of the Currency also adopted a ruling in November 1996 that
permits national banks, under certain circumstances, to expand into other
financial services, thereby increasing competition for the Company. At present,
the extent to which banks can sell insurance and annuities without regulation by
state insurance departments is being litigated in various courts in the United
States. Although the effect of these recent developments on the Company and its
competitors is uncertain, both the persistency of the Company's existing
products and the Company's ability to sell products may be materially impacted
in the future.
SECURITIES LAWS
Certain of the Company's subsidiaries and certain policies and contracts
offered by them are subject to regulation under the federal securities laws
administered by the Commission and certain state securities laws. Certain
separate accounts of the Company's insurance subsidiaries are registered as
investment companies under the Investment Company Act of 1940, as amended (the
"Investment Company Act"). Separate accounts through which certain variable
annuity contracts and certain variable insurance policies issued by the
Company's insurance subsidiaries are made available are also registered under
the Securities Act. Certain other subsidiaries of the Company are registered as
broker-dealers under the Exchange Act and are members of, and subject to
regulation by, the National Association of Securities Dealers, Inc.
Certain of the Company's subsidiaries are investment advisors registered
under the Investment Advisers Act of 1940, as amended. The investment companies
managed by such subsidiaries are registered with the Commission under the
Investment Company Act and the shares of certain of these entities are qualified
for sale in certain states in the United States and the District of Columbia.
Certain subsidiaries of the Company are also subject to the Commission's net
capital rules.
In October 1996, the National Securities Markets Improvements Act of 1996
was enacted into law. Of particular interest to the variable products industry
are the provisions establishing a new "reasonableness standard" for all fees and
charges in variable annuity and variable life insurance policies. Because
insurers no longer will have to explain each and every component of their fees
and charges to the Commission, and instead will be subject to an overall
reasonableness standard for aggregate fees and charges, the Company believes the
legislative changes will provide the industry with greater flexibility in
product design. However, given the significant barriers to market entry, such as
entering into relationships with broker-dealers and systems constraints, the
Company believes that the legislation overall will have a minimal competitive
impact.
All aspects of the Company's investment advisory activities are subject to
various federal and state laws and regulations. These laws and regulations are
primarily intended to benefit investment advisory clients and investment company
stockholders and generally grant supervisory agencies broad administrative
powers, including the power to limit or restrict the carrying on of business for
failure to comply with such laws and regulations. In such event, the possible
sanctions which may be imposed include the suspension of individual employees,
limitations on the activities in which the investment advisor may engage,
suspension or revocation of the investment advisor's registration as an advisor,
censure and fines.
ERISA CONSIDERATIONS
Enacted into law on August 20, 1996, the Small Business Protection Job Act
(the "SBPJA") offered insurers protection from potential litigation exposure
prompted by the 1993 U.S. Supreme Court decision in JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY V. HARRIS TRUST & SAVINGS BANK (the "Harris Trust Decision")
in which the Court held that, with respect to a portion of the funds held under
certain general account group annuity contracts, an insurer is subject to the
fiduciary requirements of ERISA. The pertinent SBPJA provisions provide that
generally all persons are protected from liability in connection with prohibited
transactions on the basis of a claim that the assets of an insurer constitute
the assets of a
30
<PAGE>
plan for conduct occurring prior to 18 months following the Department of
Labor's issuance of proposed regulations. However, insurers remain subject to
federal criminal law and liable for actions brought by the Secretary of Labor
alleging breaches of fiduciary duties that also constitute a violation of
federal or state criminal law. The SBPJA also provides that contracts issued
from an insurer's general account on or before December 31, 1998, that are not
guaranteed benefit policies, will be permanently grandfathered if they meet the
requirements of regulations the United States Department of Labor has to issue
by December 31, 1997. The SBPJA further provides that contracts issued from an
insurer's general account after December 31, 1998, that are not guaranteed
benefit policies, will be subject to ERISA. Although the Company does not
believe that the Harris Trust Decision had a material adverse effect on its
business, financial condition or results of operations, the Company supported
and welcomed the enactment of the aforementioned provisions of the SBPJA as a
means to remove an area of potential exposure for the insurance industry
generally.
With respect to employee welfare benefit plans subject to ERISA, Congress
periodically has considered amendments to the law's federal preemption
provision, which would expose the Company, and the insurance industry generally,
to state law causes of action, and accompanying extra-contractual (e.g.,
punitive) damages in lawsuits involving, for example, group life and group
disability claims. To date, all such amendments to ERISA have been defeated.
USE OF PROCEEDS
Except as may be otherwise set forth in the Prospectus Supplement
accompanying this Prospectus, the Company intends to apply the net proceeds from
the sale of any Debt Securities for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------- SIX MONTHS ENDED
1993 1994 1995 1996 JUNE 30, 1997
- --------------- ----------- ----------- ----------- ---------------------
<S> <C> <C> <C> <C>
51 42 57 63 34
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed
charges, earnings consist of net earnings adjusted for the provision for income
taxes, minority interest and fixed charges. Fixed charges consist of interest
and discount on all indebtedness and one-third of annual rentals, which GE
Financial Assurance believes is a reasonable approximation of the interest
factor of such rentals.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities are to be issued in one or more series under an
Indenture (the "Indenture"), between GE Financial Assurance and The Chase
Manhattan Bank (the "Trustee"). The Indenture does not limit the amount of Debt
Securities or other unsecured, senior debt which may be issued thereunder or
limit the amount of other debt, secured or unsecured, which may be issued by GE
Financial Assurance. The Debt Securities will be obligations exclusively of GE
Financial Assurance. GE Financial Assurance is a non-operating holding company
which conducts business through its subsidiaries and the Debt Securities will be
effectively subordinated to the liabilities of GE Financial Assurance's
subsidiaries, including substantial claims for policy benefits under contracts
of insurance. Since GE Financial Assurance's subsidiaries are subject to
regulatory control by various state insurance departments and other foreign
insurance regulatory authorities, the ability of such subsidiaries to pay
dividends or make loans or advances to GE Financial Assurance without prior
regulatory approval is limited by applicable laws and regulations.
31
<PAGE>
During 1996 and the period ended June 30, 1997, no dividends were paid to GE
Financial Assurance. See "The Company--Insurance Regulation."
The statements under this heading are subject to the detailed provisions of
the Indenture, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Wherever particular provisions
of the Indenture or terms defined therein are referred to, such provisions or
definitions are incorporated by reference as a part of the statements made and
the statements are qualified in their entirety by such reference.
Reference is made to the Prospectus Supplement accompanying this Prospectus
for the terms specified by GE Financial Assurance pursuant to the Indenture of,
and other information with respect to, the Debt Securities being offered
thereby, including: (1) the designation, the aggregate principal amount and the
authorized denominations of such Debt Securities; (2) the percentage of their
principal amount at which such Debt Securities will be issued; (3) the date or
dates on which such Debt Securities will mature; (4) the currency, currencies or
currency units in which the payments on such Debt Securities will be payable;
(5) the rate or rates at which such Debt Securities will bear interest, if any,
or the method of determination of such rate or rates; (6) the date or dates from
which such interest, if any, shall accrue, the dates on which such interest, if
any, will be payable and the method of determining holders to whom any such
interest shall be payable; (7) the prices, if any, at which, and the dates at or
after which, such Debt Securities must or may be repaid, repurchased or redeemed
and (8) the exchanges, if any, on which the Debt Securities may be listed.
(Section 2.02.) Interest, if any, is to be payable to the persons, and in the
manner, specified in the Prospectus Supplement accompanying this Prospectus and,
unless otherwise specified in such Prospectus Supplement, will be computed on
the basis of a 360-day year consisting of twelve 30-day months. (Section 2.10.)
The Debt Securities will be unsecured and will rank PARI PASSU (equally and
ratably) with all other unsecured and unsubordinated indebtedness of GE
Financial Assurance.
Some of the Debt Securities may be issued as discounted Debt Securities to
be sold at a substantial discount below their stated principal amount. Federal
income tax consequences and other special considerations applicable to any such
discounted Debt Securities will be described in the Prospectus Supplement with
respect to any such Debt Securities.
The Indenture does not contain any provisions that limit the ability of GE
Financial Assurance to incur indebtedness or that afford holders of Debt
Securities protection in the event GE Capital, as sole stockholder of GE
Financial Assurance, causes GE Financial Assurance to engage in a highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction.
GLOBAL DEBT SECURITIES, DELIVERY AND FORM
The Debt Securities may be issued in the form of one or more global
securities (a "Global Security") that will be deposited with a depositary (a
"Depositary") or with a nominee for a Depositary identified in an appropriate
Prospectus Supplement and registered in the name of the Depositary or a nominee
thereof. In such case, one or more Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding Debt Securities to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive registered form, a Global Security may not be
transferred, except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such Depositary
or another nominee of such Depositary or by such Depositary or any such nominee
to a successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any Debt
Securities to be represented by a Global Security will be described in the
Prospectus Supplement relating thereto.
32
<PAGE>
MODIFICATION OF THE INDENTURE
The Indenture permits GE Financial Assurance and the Trustee, with the
consent of the holders of not less than 66 2/3% in aggregate principal amount of
the Debt Securities of each series affected outstanding, to add any provisions
to or change in any manner or eliminate any of the provisions of the Indenture
or modify in any manner the rights of the holders of Debt Securities of each
such series, PROVIDED that no such addition or modification shall (i) among
other things, extend the fixed maturity of any Debt Securities or reduce the
principal amount thereof (including in the case of a discounted Debt Security
the amount payable upon acceleration of the maturity thereof), reduce the
redemption premium thereon or reduce the rate or extend the time of payment of
interest, if any, thereon, or (ii) reduce the aforesaid percentage of principal
amount of such Debt Securities of any series, the consent of the holders of
which is required for any addition or modification or any waiver of any past
default, without in each case the consent of the holder of each such Debt
Security so affected. (Section 10.02.)
EVENTS OF DEFAULT
An Event of Default with respect to any series of Debt Securities is defined
in the Indenture as being: (a) default in any payment of principal or premium,
if any, on any Debt Security of such series; (b) default for 30 days in the
payment of any interest on any Debt Security of such series; (c) default in the
making or satisfaction of any sinking fund payment or analogous obligation on
the Debt Securities of such series; (d) default for 60 days after written notice
to GE Financial Assurance by the Trustee or the holders of at least 25% in
aggregate principal amount of the Debt Securities of such series in the
performance of any other covenant in respect of the Debt Securities of such
series contained in the Indenture; (e) a default, as defined, with respect to
any other series of Debt Securities outstanding under the Indenture or as
defined in any other indenture or instrument evidencing or under which GE
Financial Assurance has outstanding any indebtedness for borrowed money, as a
result of which such other series or such other indebtedness of GE Financial
Assurance shall have been accelerated and such acceleration shall not have been
annulled within 10 days after written notice thereof by the Trustee or the
holders of at least 25% in aggregate principal amount of the Debt Securities of
such series (PROVIDED, that the resulting Event of Default with respect to such
series of Debt Securities may be remedied, cured or waived by the remedying,
curing or waiving of such other default under such other series or such other
indebtedness); or (f) certain events of bankruptcy, insolvency or
reorganization. (Section 6.01.) The Indenture requires GE Financial Assurance to
deliver to the Trustee annually a written statement as to the presence or
absence of any default under the terms thereof. (Section 4.05.) No Event of
Default with respect to a particular series of Debt Securities under the
Indenture necessarily constitutes an Event of Default with respect to any other
series of Debt Securities issued thereunder. The Indenture provides that the
Trustee may withhold notice to the holders of any series of Debt Securities
issued thereunder of any default (except in the payment of principal, premium,
if any, or interest, if any, on any of the Debt Securities of such series or in
the making of any sinking fund instalment or analogous obligation with respect
to such series) if the Trustee considers it in the interest of such
securityholders to do so. (Section 6.08.)
The Indenture provides that during the continuance of an Event of Default
with respect to any series of Debt Securities, either the Trustee or the holders
of 25% in aggregate principal amount of the outstanding Debt Securities of such
series may declare the principal, or in the case of discounted Debt Securities,
such portion thereof as may be described in the Prospectus Supplement
accompanying this Prospectus, of all such Debt Securities to be due and payable
immediately, but under certain conditions such declaration may be annulled by
the holders of a majority in principal amount of such Debt Securities then
outstanding. The Indenture provides that past defaults with respect to a
particular series of Debt Securities (except, unless theretofore cured, a
default in payment of principal of, premium, if any, or interest, if any, on any
of the Debt Securities of such series, or the payment of any sinking fund
instalment or analogous obligation on the Debt Securities of such series or in
respect of a covenant or provision which cannot be modified without the consent
of the holder of each Debt Security affected) may be waived on
33
<PAGE>
behalf of the holders of all Debt Securities of such series by the holders of a
majority in principal amount of such Debt Securities then outstanding. (Sections
6.01 and 6.07.)
Subject to the provisions of the Indenture relating to the duties of the
Trustee in case an Event of Default with respect to any series of Debt
Securities shall occur and be continuing, the Trustee shall be under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any holders of Debt Securities of any series
issued thereunder unless such holders shall have offered to the Trustee
reasonable indemnity. (Sections 7.01 and 7.02.) Subject to such indemnification
provision, the Indenture provides that the holders of a majority in principal
amount of the Debt Securities of any series issued thereunder at the time
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee with respect to the Debt Securities
of such series, PROVIDED that the Trustee may decline to follow any such
direction if it has not been offered reasonable indemnity therefor or if it
determines that the proceedings so directed would be illegal or involve it in
any personal liability. (Section 6.07.)
CONCERNING THE TRUSTEE
The Chase Manhattan Bank acts as trustee under several indentures with
affiliates of GE Financial Assurance and other subsidiaries of GE Company.
Any material business and other relationships (including additional
trusteeships), other than the present and prospective trusteeships referred to
in the foregoing paragraph, between, on the one hand, GE Financial Assurance, GE
Company or other affiliates of GE Company and, on the other hand, each Trustee
under any Indenture pursuant to which any of the Debt Securities to which the
Prospectus Supplement accompanying this Prospectus relates are to be issued, are
described in such Prospectus Supplement.
34
<PAGE>
PLAN OF DISTRIBUTION
GE Financial Assurance may sell any issue of the Debt Securities in any one
or more of the following ways: (i) through one or more underwriters or dealers;
(ii) directly to one or more purchasers; or (iii) through one or more agents.
From time to time, GE Financial Assurance may receive, and may solicit,
offers from underwriters to purchase all or a part of the Debt Securities, to be
reoffered to the public through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone or
otherwise. The managing underwriter or underwriters, if any, with respect to the
offer and sale of the Debt Securities to which the Prospectus Supplement
accompanying this Prospectus relates are set forth in such Prospectus Supplement
and the members of the underwriting syndicate, if any, are named in such
Prospectus Supplement. GE Financial Assurance will execute an underwriting
agreement (the "Underwriting Agreement") with any such underwriters and the
names of the underwriters and the terms of the transaction will be set forth in
the Prospectus Supplement, which will be used by the underwriters to make
resales of the Debt Securities in respect of which this Prospectus is delivered
to the public. Such Prospectus Supplement also states the discounts and
commissions, if any, to be allowed or paid to the underwriters by GE Financial
Assurance, and describes all other items, if any, constituting underwriting
compensation and the discounts and commissions to be allowed or paid to dealers,
if any. If underwriters or dealers are used in the sale, the Debt Securities
will be acquired by the underwriters or dealers for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
by the underwriter or dealer at the time of sale. The relevant Underwriting
Agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent, and GE Financial Assurance will agree, under the
Underwriting Agreement, to indemnify the underwriters against certain civil
liabilities, including liabilities under the Securities Act of 1933.
Any agent involved in the offer or sale of the Debt Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable by
GE Financial Assurance to such agent will be set forth, in the Prospectus
Supplement accompanying this Prospectus. Unless otherwise indicated in the
Prospectus Supplement, any such agent will be acting on a best efforts basis for
the period of its appointment. Agents and dealers may be entitled under
agreements entered into with GE Financial Assurance to indemnification by GE
Financial Assurance against certain civil liabilities, including liabilities
under the Securities Act of 1933.
For further information with respect to the terms of the offering of Debt
Securities in respect of which this Prospectus is being delivered, see the
Prospectus Supplement accompanying this Prospectus.
LEGAL MATTERS
Except as may be otherwise specified in the Prospectus Supplement
accompanying this Prospectus, certain legal matters in connection with the Debt
Securities will be passed upon for GE Financial Assurance by Simpson Thacher &
Bartlett (a partnership which includes professional corporations), New York, New
York, and for the underwriters, agents or dealers by Davis Polk & Wardwell, New
York, New York.
EXPERTS
The financial statements and schedules of GE Financial Assurance and
consolidated affiliates included in GE Financial Assurance's Registration
Statement on Form 10, filed on November 13, 1997 with the Commission pursuant to
Section 12(g) of the 1934 Act have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
35
<PAGE>
The financial statements of Amex Life included in GE Financial Assurance's
Registration Statement on Form 10, filed on November 13, 1997 with the
Commission pursuant to Section 12(g) of the 1934 Act have been incorporated by
reference herein in reliance upon the report of Ernst & Young LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The 1996 financial statements of Life of Virginia included in GE Financial
Assurance's Registration Statement on Form 10, filed on November 13, 1997 with
the Commission pursuant to Section 12(g) of the 1934 Act have been incorporated
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. Such report, dated
January 15, 1997, contains an explanatory paragraph that states that effective
April 1, 1996, General Electric Capital Corporation acquired all of the
outstanding stock of Life of Virginia in a business combination accounted for as
a purchase. As a result of the acquisition, the consolidated financial
information for the periods after the acquisition is presented on a different
cost basis than that for the periods before the acquisition and, therefore, is
not comparable.
The 1995 and 1994 financial statements of Life of Virginia included in GE
Financial Assurance's Registration Statement on Form 10, filed on November 13,
1997 with the Commission pursuant to Section 12(g) of the 1934 Act have been
incorporated herein in reliance upon the report of Ernst & Young LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of First Colony included in GE Financial
Assurance's Registration Statement on Form 10, filed on November 13, 1997 with
the Commission pursuant to Section 12(g) of the 1934 Act have been incorporated
herein in reliance upon the report of Coopers & Lybrand LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
36
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
<TABLE>
<S> <C>
Filing Fee for Registration Statement..................................... $ 303,031
Accounting Fees and Expenses.............................................. *
Fees to GE Financial Assurance's Counsel.................................. *
Trustee's Fees and Expenses (including counsel fees)...................... *
Blue Sky filing and counsel fees.......................................... *
Printing and Engraving Fees............................................... *
Rating Agency Fees........................................................ *
Miscellaneous............................................................. *
---------
Total................................................................. $ *
---------
---------
</TABLE>
- ------------------------
*To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware provides
that in certain circumstances a corporation may indemnify directors and officers
against the reasonable expenses, (including attorney's fees), judgments, fines
and amounts paid in settlement, actually and reasonably incurred by them in
connection with any action, suit or proceeding by reason of being or having been
directors or officers, if such person shall have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, except that if such action, suit or proceeding shall be in the
right of the corporation, indemnification shall be provided only against
reasonable expenses (including attorney's fees) and no such indemnification
shall be provided as to any claim, issue or matter as to which such person shall
have been judged to have been liable to the corporation, unless and to the
extent that the Court of Chancery of the State of Delaware or any other court in
which the suit was brought shall determine upon application that, in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity. A corporation shall be required to indemnify against reasonable
expenses (including attorney's fees) any director or officer who successfully
defends any such actions. The foregoing statements are subject to the detailed
provisions of Section 145 of the General Corporation Law of the State of
Delaware.
The By-Laws of GE Financial Assurance provide that each person who at any
time is or shall have been a director, officer, employee or agent of GE
Financial Assurance, or is or shall have been serving at the request of GE
Financial Assurance as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, and his
heirs, executors and administrators, shall be indemnified by GE Financial
Assurance in accordance with and to the full extent permitted by the General
Corporation Law of the State of Delaware.
GE Financial Assurance intends to enter into one or more underwriting
agreements which will include provisions regarding the indemnification of GE
Financial Assurance and its officers and directors by one or more underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The directors of GE Financial Assurance are insured under officers and
directors liability insurance policies purchased by GE Company. The directors,
officers and employees of GE Company are also insured against fiduciary
liabilities under the Employee Retirement Income Security Act of 1974.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement.
4 -- Form of Indenture.
5 -- Opinion and consent of Simpson Thacher & Bartlett.
12 -- Computation of ratio of earnings to fixed charges.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Coopers & Lybrand LLP.
23.4 -- Consent of Simpson Thacher & Bartlett is included in their opinion referred to in Exhibit 5 above.
24 -- Power of Attorney. (included on Signature Page)
25 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank in respect of the Indenture filed as Exhibit 4(a).
27 -- Financial Data Schedule.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a)(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 the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than 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 clauses (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
II-2
<PAGE>
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) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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 registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant,
GE Financial Assurance Holdings, Inc., certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Richmond, the
Commonwealth of Virginia, on the 13th day of November, 1997.
<TABLE>
<S> <C> <C>
GE FINANCIAL ASSURANCE HOLDINGS, INC.
By /s/ MICHAEL D. FRAIZER
-----------------------------------------
Michael D. Fraizer
President, Chief Executive Officer
and Chairman
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Stephen N. DeVos, James A. Parke, Leon E. Roday and Jeffrey S. Werner as his
attorneys-in-fact and agents, each acting singly, with full power of
substitution and resubstitution for him in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement,
and to file the same, with exhibits thereto and other documents in connection
therewith or in connection with the registration of the Debt Securities under
the Securities and Exchange Act of 1934, as amended, with the Securities and
Exchange Commission, granting unto each of such attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary in connection with such matters and hereby ratifying and
confirming all that each of such attorneys-in-fact and agents or his substitutes
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
President, Chief Executive
/s/ MICHAEL D. FRAIZER Officer and Chairman
- ------------------------------ (Principal Executive November 10, 1997
Michael D. Fraizer Officer)
Senior Vice President and
/s/ THOMAS W. CASEY Chief Financial Officer
- ------------------------------ (Principal Financial November 10, 1997
Thomas W. Casey Officer)
/s/ LEON E. RODAY
- ------------------------------ Director November 10, 1997
Leon E. Roday
/s/ GEOFFREY S. STIFF
- ------------------------------ Director November 10, 1997
Geoffrey S. Stiff
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
1 -- Form of Underwriting Agreement.
4 -- Form of Indenture.
5 -- Opinion and consent of Simpson Thacher & Bartlett.
12 -- Computation of ratio of earnings to fixed charges.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Ernst & Young LLP.
23.3 -- Consent of Coopers & Lybrand LLP.
23.4 -- Consent of Simpson Thacher & Bartlett is included in their opinion referred to in Exhibit 5 above.
24 -- Power of Attorney. (included on Signature Page)
25 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The
Chase Manhattan Bank in respect of the Indenture filed as Exhibit 4(a).
27 -- Financial Data Schedule.
</TABLE>
<PAGE>
Exhibit 1
UNDERWRITING AGREEMENT
As of ________, 199_
GE Financial Assurance Holdings, Inc.
6604 West Broad Street
Richmond, Virginia 23230
Dear Sirs:
We (the "Manager") are acting on behalf of the underwriter or
underwriters (including ourselves) named below (such underwriter or
underwriters being herein called the "Underwriters"), and we understand that
GE Financial Assurance Holdings, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell [Currency and Principal Amount]
aggregate principal amount of [Full title of Notes] (the "Notes"). The Notes
will be issued pursuant to the provisions of the Indenture listed below (as
such Indenture shall be supplemented to the date hereof) (the "Indenture")
between the Company and the Trustee named below (the "Trustee").
Subject to the terms and conditions set forth or incorporated by
reference herein, the Company hereby agrees to sell and the Underwriters agree
to purchase, severally and not jointly, the respective principal amounts of
Notes set forth below opposite their names at a purchase price of ____% of the
principal amount of Notes [plus accrued interest, if any, from [Date of Notes]
to the date of payment and delivery:
<PAGE>
2
Principal Amount
Name of Notes
-------------------- ----------------
Total. . . $
============
The Underwriters will pay for the Notes upon delivery thereof at
the location identified below at _____ a.m. (New York time) on ___________,
199_, or at such other time, not later than 3:00 p.m. (New York time) on
_________, 199_, as shall be agreed upon by the Company and the Manager. The
time and date of such payment and delivery are hereinafter referred to as the
"Closing Date."
The Notes shall have the terms set forth in the Prospectus dated
_________, 199_ and the Prospectus Supplement dated _________, 199_, including
the following:
Registration Statement No.
Manager(s) and address(es):
Certain Terms of the Notes:
Title of Notes:
Aggregate Principal Amount of Notes:
Maturity Date:
Interest Rate:
Principal and Interest ___________ __ and
Payment Dates: ___________ __,
commencing
___________ __, 199_
Record Dates: ___________ __ and
___________ __
Redemption Provisions:
Repayment Provisions:
<PAGE>
3
Title of Indenture:
Trustee:
Note Transfer Agent and Registrar:
Closing Date and Location:
The Notes are to be offered to the public at the Initial Public
Offering Price specified below, and to dealers at prices which represent
concessions not in excess of the Dealer Concession set forth below, and the
Underwriters may allow and such dealers may reallow concessions not in excess
of the Reallowance Concession set forth below:
Initial Public Offering Price: ___% of the principal
amount of the Notes
[plus accrued
interest from _____,
199_](1)
Purchase Price: __% of the principal
amount of the Notes
[plus accrued
interest from ____,
199__](1)
Dealer Concession: ____% of the
principal amount of
the Notes
Reallowance Concession: ____% of the
principal amount of
the Notes
[In addition to the conditions to the several obligations of the
Underwriters incorporated by reference herein, the several obligations of the
Underwriters hereunder are subject to the condition that the Notes shall be
rated no lower than "__" by Standard & Poor's Corporation and "__" by Moody's
Investors Service, Inc.](2)
All provisions contained in the document entitled GE Financial
Assurance Holdings, Inc. Underwriting Agreement Standard Provisions (Debt
Securities) dated__ , 199__ (the "Standard Provisions"), are herein
incorporated by
- ----------
(1) To be added only if the transaction does not close flat.
(2) To be included only in the Underwriting Agreement relating to the first
issuance of Notes.
<PAGE>
4
reference in their entirety and shall be deemed to be a part of this
Agreement to the same extent as if such provisions had been set forth in full
herein, except that if any term defined in such document is otherwise defined
herein, the definition set forth herein shall control.
This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
<PAGE>
5
Please confirm your agreement by having an authorized officer
sign a copy of this Agreement as of the date first set forth above in the
space set forth below.
Very truly yours,
[Name(s) of Representative(s)
or Underwriter(s)]
[Acting on behalf of
itself and the several
Underwriters named herein]
By: [Name of Signing
Representative or
Underwriter]
By: __________________________
Name:
Title:
GE FINANCIAL ASSURANCE
HOLDINGS, INC.
By: _____________________________
Name:
Title:
<PAGE>
1
GE FINANCIAL ASSURANCE HOLDINGS, INC.
UNDERWRITING AGREEMENT
STANDARD PROVISIONS
(DEBT SECURITIES)
___________, 199__
From time to time, GE Financial Assurance Holdings, Inc., a
Delaware corporation (the "Company"), may enter into one or more underwriting
agreements that provide for the sale of designated debt securities to the
several underwriters named therein. The standard provisions set forth herein
may be incorporated by reference in any such underwriting agreement (with
respect to such designated debt securities, the "Underwriting Agreement").
The Underwriting Agreement, including the provisions incorporated therein by
reference, is herein referred to as this Agreement. Terms defined in the
Underwriting Agreement are used herein as therein defined.
The Company has filed with the Securities and Exchange Commission (the
"Commission"), and there has become effective, a registration statement (the
file number of which will be set forth in the Underwriting Agreement),
including a prospectus, relating to debt securities of the Company, including
the Notes, and has filed with, or transmitted for filing to, or shall
promptly hereafter file with or transmit for filing to, the Commission a
prospectus supplement (the "Prospectus Supplement") specifically relating to
the Notes pursuant to Rule 424 under the Securities Act of 1933, as amended
(the "Securities Act"). The term "Registration Statement" means such
registration statement, including the exhibits thereto, as amended to the
date of this Agreement. The term "Basic Prospectus" means the prospectus
included in the Registration Statement. The term "Prospectus" means the Basic
Prospectus together with the Prospectus Supplement. The term "preliminary
prospectus" means a preliminary prospectus supplement specifically relating
to the Notes, together with the Basic Prospectus. As used herein, the terms
"Basic Prospectus," "Prospectus" and "preliminary prospectus" shall include
in each case the documents incorporated by reference therein. The terms
"supplement" and "amendment" or "amend" as used herein shall include all
documents deemed to be incorporated by reference in the Prospectus that are
filed subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
1. Public Offering. The Company is advised by the Manager that the
Underwriters propose to make a public offering
<PAGE>
2
of their respective portions of the Notes as soon after this Agreement is
entered into as in the Manager's judgment is advisable. The terms of the public
offering of the Notes are as specified in the Underwriting Agreement.
2. Purchase and Delivery. Payment for the Notes shall be made by
wire transfer in immediately available funds (unless payment in other form of
funds is specified in the Underwriting Agreement) to the account specified by
the Company to the Manager the business day prior to the time of closing, on
the date and at the time specified in the Underwriting Agreement, upon
delivery to the nominee of The Depository Trust Company for the respective
accounts of the several Underwriters of one or more global notes representing
the Notes.
3. Conditions to Closing. The several obligations of the
Underwriters hereunder are subject to the following conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before or (to the knowledge of the Company) threatened by
the Commission; there shall have been no material adverse change and no
development involving a prospective material adverse change in the condition
of the Company and its consolidated affiliates, taken as a whole, from that
set forth in the Registration Statement and the Prospectus, as amended or
supplemented as of the date of the Underwriting Agreement; and the
representations and warranties of the Company contained herein shall be true
and correct on and as of the Closing Date as if made on and as of the Closing
Date; and the Manager shall have received on the Closing Date a certificate,
dated the Closing Date and signed by an executive officer of the Company, to
the effect that no stop order suspending the effectiveness of the
Registration Statement is in effect and no proceedings for such purpose are
pending before or (to the knowledge of such executive officer) threatened by
the Commission, there has been no material adverse change and no development
involving a prospective material adverse change in the condition of the
Company and its consolidated affiliates, taken as a whole, from that set
forth in the Registration Statement and the Prospectus, as amended or
supplemented as of the date of the Underwriting Agreement and the
representations and warranties of the Company contained herein are true and
correct on and as of the Closing Date as if made on and as of the Closing
Date.
(b) The Manager shall have received on and as of the Closing Date
an opinion of Simpson Thacher & Bartlett, counsel for the Company, dated the
Closing Date, to the effect that:
(i) the Company has been duly incorporated and is validly existing
and in good standing as a corporation under the laws of the State of
Delaware with all requisite
<PAGE>
3
corporate power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) the Indenture has been duly authorized, executed and delivered
by the Company and duly qualified under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act") and, assuming due authorization,
execution and delivery thereof by the Trustee, constitutes a valid and
legally binding instrument of the Company enforceable against the Company
in accordance with its terms;
(iii) the Notes have been duly authorized, executed and issued by
the Company and, assuming due authentication thereof by the Trustee and
upon payment and delivery in accordance with the Underwriting Agreement,
will constitute valid and binding obligations of the Company enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture;
(iv) this Agreement has been duly authorized, executed and delivered
by the Company;
(v) no consent, approval, authorization, order, registration or
qualification of or with any Federal or New York court or governmental
agency or body or any Delaware court or governmental agency or body acting
pursuant to the Delaware General Corporation Law is required for the issue
and sale of the Notes by the Company or the consummation by the Company of
the other transactions contemplated by this Agreement and the Indenture
except for the registration under the Securities Act and such as may be
required under the securities or blue sky laws in connection with the
purchase and distribution of the Notes by the Underwriters, nor will the
issue and sale of the Notes by the Company or the compliance by the
Company with all of the provisions of this Agreement or the Indenture or
the consummation of the transactions herein and therein contemplated
violate the Company's Certificate of Incorporation or By-laws or any
Federal or New York statute or the Delaware General Corporation Law or any
rule or regulation or any judgment, order or decree known to such counsel
that has been issued pursuant to any Federal or New York statute or the
Delaware General Corporation Law by any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or
any of their properties or breach or result in any default under any
indenture, mortgage or other agreement or instrument known to such
counsel;
(vi) the statements made in the Prospectus under the captions
"Description of Debt Securities" and "Certain Terms of Notes," insofar as
they purport to constitute summaries of certain terms of documents
referred to therein, constitute accurate summaries of the terms of such
documents in all material respects;
<PAGE>
4
(vii) there are no contracts or other documents known to such
counsel that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement or incorporated by reference therein that are not described
and filed or incorporated by reference as required; and
(viii) the Registration Statement has become effective under the
Securities Act, and to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or
threatened by the Commission; the Prospectus was filed with the
Commission pursuant to Rule 424(b) of the rules and regulations under
the Securities Act.
In addition, such counsel shall state that they have participated
in conferences with certain officers and employees of the Company,
representatives of the Company's independent public accountants, the
Underwriters and their counsel, and although such counsel is not passing
upon, and does not assume any responsibility for, the accuracy, completeness
or fairness of the statements contained in the Registration Statement or the
Prospectus and has not made any independent check or verification thereof
except to the extent described in (vi) and (vii) above, on the basis of the
foregoing, based upon their examination of the Registration Statement and the
Prospectus (including the documents incorporated by reference therein), their
investigations made in connection with the preparation of the Registration
Statement and the Prospectus (including the documents incorporated by
reference therein) and their participation in the conferences referred to
above, (i) such counsel is of the opinion that the Registration Statement, as
of its effective date, or if the Registration Statement has been amended, as
of the effective date of such amendment, and the Prospectus, as of the date
of the Prospectus Supplement relating to the Notes, complied as to form in
all material respects with the requirements of the Securities Act, the Trust
Indenture Act and the applicable rules and regulations of the Commission
thereunder, except that in each case such counsel expresses no opinion with
respect to the financial statements or other financial or statistical data
contained in the Registration Statement or the Prospectus, or with respect to
the Statement of Eligibility on Form T-1 of the Trustee, (ii) such counsel is
of the opinion that each document incorporated by reference in the Prospectus
pursuant to Item 12 of Form S-3, when such document was filed or became
effective, or if any incorporated documents was amended, when such amendment
was filed or became effective, complied as to form in all material respects
with the requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder, except that in each case such
counsel expresses no opinion with respect to the financial statements or
other financial or statistical data contained in any such document, and (iii)
such counsel has no
<PAGE>
5
reason to believe that the Registration Statement, as of its effective date
and as of the date of the Prospectus Supplement relating to the Notes,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of the date of
the Prospectus Supplement relating to the Notes, contained, and the
Prospectus (as amended or supplemented) contains any untrue statement of a
material fact or omitted or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that in each case such counsel
expresses no opinion or belief with respect to the financial statements or
other financial or statistical data contained in the Registration Statement
or the Prospectus, or with respect to the Statement of Eligibility on Form
T-1 of the Trustee.
(c) The Manager shall have received on and as of the Closing Date
an opinion of _____________________ of the Company dated the Closing Date, to
the effect that:
(i) each of Colonial Penn P&C Group, First Colony Life Insurance
Company, General Electric Capital Assurance Company, Great Northern
Insured Annuity Corporation and The Life Insurance Company of Virginia
(collectively, the "Subsidiaries") has been duly incorporated and is
validly existing and in good standing as a corporation under the laws of
its jurisdiction of incorporation with all requisite corporate power and
authority to own its properties and conduct its business as described in
the Prospectus;
(ii) each of the Company and the Subsidiaries is duly qualified
to transact business and is in good standing in the jurisdictions in
which the conduct of its business or the ownership of its property
requires such qualification, except where the failure to be so
qualified or in good standing would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole;
(iii) all of the issued shares of capital stock of or other
ownership interests in each Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable and, except
as set forth in the Prospectus or for directors' qualifying shares, are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(iv) the issuance and sale of the Notes by the Company as provided
herein, the compliance by the Company with all of the provisions of the
Notes, the Indenture and this Agreement and the consummation of the
transactions contemplated herein and therein will not contravene the
organizational documents of any of the Subsidiaries or result in any
violation of any of the terms or provisions of
<PAGE>
6
(x) any law, order, rule or regulation (other than with respect to
applicable state securities or Blue Sky laws or state insurance
securities laws, as to which such counsel need not express any opinion)
or (y) any indenture, mortgage or other agreement or instrument known
to such counsel by which the Company or any of its subsidiaries is
bound, except, in the case of this clause (y), for such violations that
would not, individually or in the aggregate, have a material adverse
affect on the Company and its subsidiaries, taken as a whole;
(v) each of the Company and the Subsidiaries has all licenses,
consents, approvals, authorizations, orders, registrations and
qualifications of or from, and has made all filings with, all courts and
governmental agencies and bodies necessary to own, lease, license and use
its properties and conduct its business as described or contemplated by
the Prospectus and is in compliance with all laws, orders, rules and
regulations of all courts and governmental agencies and bodies having
jurisdiction over it and any of its properties, except where the failure
to have any such license, consent, approval, authorization, order,
registration or qualification, or so to comply, would not, individually or
in the aggregate with all other such failures, have a material adverse
effect on the Company and its subsidiaries, taken as a whole; and, to the
best of such counsel's knowledge, after due inquiry, there is no pending
or threatened action, suit, proceeding or investigation that reasonably
could lead to the revocation, termination or suspension of, or render
invalid or otherwise ineffective, any such license, consent, approval,
authorization, order, registration or qualification, other than any such
revocation, termination, suspension, invalidity or ineffectiveness that
would not, individually or in the aggregate with all other such
revocations, terminations, suspensions, invalidities and ineffectiveness,
have a material adverse effect on the Company and its subsidiaries, taken
as a whole;
(vi) the statements contained in the Prospectus under the caption
"The Company -- Regulatory Matters" and in Item 8 of the Company's
Registration Statement on Form 10 as filed with the Commission on
November 13, 1997, insofar as they purport to constitute summaries of
certain proceedings, legal matters or terms of documents referred to
therein, constitute accurate summaries of such proceedings, legal
matters or terms of such documents in all material respects; and
(vii) except as disclosed in the Prospectus, there are no pending
or threatened actions, suits or proceedings known to such counsel
against the Company or any of its
<PAGE>
7
subsidiaries that are required to be disclosed in the Registration
Statement that are not so disclosed.
In addition, such counsel shall state that he has participated in
conferences with certain officers and employees of the Company,
representatives of the Company's independent public accountants, the
Underwriters and their counsel, and although such counsel is not passing
upon, and does not assume any responsibility for, the accuracy, completeness
or fairness of the statements contained in the Registration Statement or the
Prospectus and has not made any independent check or verification thereof
except to the extent described in (vi) and (vii) above, on the basis of the
foregoing, based upon his examination of the Registration Statement and the
Prospectus (including the documents incorporated by reference therein), his
investigations made in connection with the preparation of the Registration
Statement and the Prospectus (including the documents incorporated by
reference therein) and his participation in the conferences referred to
above, such counsel has no reason to believe that the Registration Statement,
as of its effective date and as of the date of the Prospectus Supplement
relating to the Notes, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, as of
the date of the Prospectus Supplement relating to the Notes, contained, and
the Prospectus (as amended or supplemented) contains any untrue statement of
a material fact or omitted or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that in each case such counsel
expresses no opinion or belief with respect to the financial statements or
other financial or statistical data contained in the Registration Statement
or the Prospectus, or with respect to the Statement of Eligibility on Form
T-1 of the Trustee.
(d) The Manager shall have received on and as of the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the
Closing Date, covering the matters in (ii), (iii), (iv) and (vi) of paragraph
(b) above.
In addition, such counsel shall state that they have participated
in conferences with certain officers and employees of the Company,
representatives of the Company's independent public accountants, the
Underwriters and their counsel, and although such counsel is not passing
upon, and does not assume any responsibility for, the accuracy, completeness
or fairness of the statements contained in the Registration Statement or the
Prospectus and has not made any independent check or verification thereof
except to the extent described in (vi) of paragraph (b) above, on the basis
of the foregoing, based upon their consideration of the Registration
Statement and the Prospectus and their participation in the conferences
referred to above, (i) such counsel is of the opinion that the Registration
Statement,
<PAGE>
8
as of its effective date, or if the Registration Statement has been amended,
as of the effective date of such amendment, and the Prospectus as of the date
of the Prospectus Supplement relating to the Notes, complied as to form in
all material respects with the requirements of the Securities Act, the Trust
Indenture Act and the applicable rules and regulations of the Commission
thereunder, except that in each case such counsel expresses no opinion with
respect to the financial statements or other financial or statistical data
contained in the Registration Statement or the Prospectus, or with respect to
the Statement of Eligibility on Form T-1 of the Trustee and (ii) such counsel
has no reason to believe that the Registration Statement, as of its effective
date and as of the date of the Prospectus Supplement relating to the Notes,
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus, as of the date of
the Prospectus Supplement relating to the Notes, contained, and the
Prospectus (as amended or supplemented) contains any untrue statement of a
material fact or omitted or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that in each case such counsel
expresses no opinion or belief with respect to the financial statements or
other financial or statistical data contained in the Registration Statement
or the Prospectus, or with respect to the Statement of Eligibility on Form
T-1 of the Trustee.
In rendering the opinions referred to in paragraphs (b) and (d)
above, such counsel may state that the opinions set forth in (ii) and (iii)
of paragraph (b) are subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceedings in equity or at law) and an
implied covenant of good faith and fair dealing.
(e) The Manager shall have received on the date of this
Agreement, a letter dated such date, from KPMG Peat Marwick LLP, independent
public accountants, and on the Closing Date, a letter dated the Closing Date
from KPMG Peat Marwick LLP, in each case in form and substance satisfactory
to the Manager, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to
the financial statements and certain financial and pro forma information
contained in or incorporated by reference into the Registration Statement and
the Prospectus.
4. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants as
follows:
(a) To furnish to the Manager, without charge (i) upon the
request of the Manager, two conformed copies of the
<PAGE>
9
Registration Statement (including exhibits and documents incorporated by
reference), and for delivery to each other Underwriter a conformed copy of
the Registration Statement (without exhibits but including documents
incorporated by reference) and (ii) during the period mentioned in paragraph
(c) below, as many copies of the Prospectus and any amendments or supplements
thereto prepared pursuant to paragraph (c) below as the Manager may
reasonably request.
(b) To prepare and file (or mail for filing) with the Commission
pursuant to Rule 424 under the Securities Act as promptly as practicable
after the execution of this Agreement, a prospectus supplement in a form
approved by the Manager setting forth such information as is necessary so
that the Prospectus, when delivered to a purchaser of the Notes, will comply
with law and, before amending the Registration Statement or supplementing the
Prospectus with respect to the Notes, to furnish the Manager a copy of each
such proposed amendment or supplement.
(c) If, during such period after the first date of the public
offering of the Notes as in the opinion of Davis Polk & Wardwell a prospectus
is required by law to be delivered in connection with sales by an Underwriter
or dealer, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement the
Prospectus to comply with law, forthwith to prepare and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and addresses
the Manager shall furnish to the Company) to which Notes may have been sold
by the Manager on behalf of the Underwriters and to any other dealers upon
request, either amendments or supplements to the Prospectus so that the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading
or so that the Prospectus will comply with law.
(d) To endeavor to qualify the Notes for offer and sale under the
securities or Blue Sky laws or insurance securities laws of such
jurisdictions as the Manager shall reasonably request and to pay all expenses
(including fees and disbursements of counsel) reasonably incurred in
connection with such qualification and in connection with the determination
of the eligibility of the Notes for investment under the laws of such
jurisdictions as the Manager may so designate; provided that the Company
shall not be required to qualify to do business in any jurisdiction where it
is not now qualified, to take any action which would subject it to general or
unlimited service of process in any jurisdiction where it is not now subject
or to qualify the Notes for offer and sale in any jurisdiction (notified to
the Manager prior to the execution of the Underwriting Agreement) in which
the Company is unable or
<PAGE>
10
unwilling to comply with disclosure or reporting requirements imposed by such
jurisdiction.
(e) To make generally available to its security holders as soon
as practicable an earnings statement (which need not be audited) covering a
twelve-month period beginning after the date of this Agreement which shall
satisfy the provisions of Section 11(a) of the Securities Act and the rules
and regulations of the Commission thereunder.
5. Representations and Warranties; Indemnification and
Contribution. The Company represents and warrants to each Underwriter that
(i) each document filed by the Company pursuant to the Exchange Act which is
incorporated by reference in the Prospectus complied when so filed in all
material respects with the Exchange Act and the rules and regulations
thereunder, and each document, if any, hereafter filed and so incorporated by
reference in the Prospectus will comply when so filed in all material
respects with the Exchange Act and the rules and regulations thereunder; (ii)
the Registration Statement and the Prospectus comply, and the Registration
Statement and the Prospectus (and any amendments and supplements thereto,
other than supplements relating only to debt securities other than the Notes)
will on the Closing Date comply in all material respects with the Securities
Act and the rules and regulations of the Commission thereunder; (iii) each
preliminary prospectus, if any, filed pursuant to Rule 424 under the
Securities Act complied when so filed in all material respects with the
Securities Act and the rules and regulations thereunder; (iv) the
Registration Statement, at the time it became effective and as of the date of
the Prospectus Supplement relating to the Notes, did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and the Prospectus as of the date of the Prospectus Supplement relating to
the Notes did not, and the Prospectus (as amended or supplemented, other than
as to supplements relating only to debt securities other than the Notes) on
the Closing Date will not, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
except that these representations and warranties do not apply to statements
or omissions in the Registration Statement or the Prospectus based upon
information furnished to the Company in writing by any Underwriter expressly
for use therein; and (v) the Company has complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
from and against any and all losses, claims, damages and liabilities caused
by any untrue statement or alleged untrue statement of a material fact
contained in the
<PAGE>
11
Registration Statement, any preliminary prospectus or the Prospectus (if used
within the period set forth in paragraph (c) of Section 4 hereof and as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished in
writing to the Company by any Underwriter expressly for use therein;
provided, however, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or liabilities
purchased Notes, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendment or supplements thereto) was not sent or given by or
on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Notes to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or
liability.
Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and any person who controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with reference to information relating to such
Underwriter furnished in writing by such Underwriter expressly for use in the
Registration Statement, the Prospectus or any preliminary prospectus.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either of the two preceding paragraphs, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party, and any others the indemnifying party may designate in
such proceeding and shall pay the reasonable fees and expenses of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
<PAGE>
12
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying
party shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees and expenses of more
than one separate firm (in addition to local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by the Manager
in the case of parties indemnified pursuant to the second preceding paragraph
and by the Company in the case of parties indemnified pursuant to the first
preceding paragraph. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
If the indemnification provided for in this Section 5 is
unavailable to an indemnified party under the second or third paragraphs
hereof in respect of any losses, claims, damages or liabilities referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other
hand from the offering of the Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the Prospectus, bear to the aggregate public offering price of the
Notes. The relative fault of the Company on the one hand and of the
Underwriters on the other shall be determined by reference to, among other
things, whether the untrue statement of a material fact or the omission to
state a material fact relates to
<PAGE>
13
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations provided for in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 5, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Notes underwritten by such
Underwriter and distributed to the public were offered to the public exceeds
the amount of any damages which such Underwriter has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 5 are several, in proportion to the respective amounts of the
Notes underwritten by each of such Underwriters, and not joint. The remedies
provided for in this Section 5 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to any indemnified party
at law or in equity.
The indemnity and contribution agreements contained in this Section
5 and the representations and warranties of the Company in this Agreement shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter or by or on behalf of the
Company, its directors or officers or any person controlling the Company and
(iii) acceptance of and payment for any of the Notes.
6. Termination. Unless otherwise provided in the Underwriting
Agreement, this Agreement shall be subject to termination in the discretion
of the Manager at any time prior to the Closing Date, by notice given by the
Manager to the Company, if (i) trading in securities generally on the New
York Stock Exchange shall have been suspended or materially limited; (ii) a
general moratorium on commercial banking activities in the State of New York
or the United States shall have been declared by Federal or New York State
authorities; or (iii) there shall have occurred any material outbreak, or
material escalation, of
<PAGE>
14
hostilities or other national or international calamity or crisis, of such
magnitude and severity in its effect on the financial markets of the United
States, in the reasonable judgment of the Manager, as to prevent or
materially impair the marketing, or enforcement of contracts for sale, of the
Notes.
If this Agreement shall be terminated by the Underwriters, or any
of them, because (a) of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement,
or (b) for any reason the Company shall be unable to perform its obligations
under this Agreement, the Company will reimburse the Underwriters or such
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and
disbursements of their counsel) reasonably incurred by such Underwriters in
connection with the Notes.
7. Defaulting Underwriters. If, on the Closing Date any one or
more of the Underwriters shall fail or refuse to purchase Notes which it or
they have agreed to purchase hereunder on such date, and the aggregate
principal amount of Notes which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the Notes to be purchased on such date, the
other Underwriters shall be obligated severally in the proportions that the
principal amount of Notes set forth opposite their respective names in the
Underwriting Agreement bears to the aggregate principal amount of Notes set
forth opposite the names of all such non-defaulting Underwriters, or in such
other proportions as the Manager may specify, to purchase the Notes which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the principal amount
of Notes that any Underwriter has agreed to purchase be increased pursuant to
this Section by an amount in excess of one-ninth of such principal amount of
Notes without the written consent of such Underwriter. If, on the Closing
Date any Underwriter or Underwriters shall fail or refuse to purchase Notes
which it or they have agreed to purchase hereunder on such date, and the
aggregate principal amount of Notes with respect to which such default occurs
is more than one-tenth of the aggregate principal amount of Notes to be
purchased on such date, and arrangements satisfactory to the Manager and the
Company for the purchase of such Notes are not made within 36 hours after
such edfault, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter or the Company. In any such case either the
Manager or the Company shall have the right to postpone the Closing Date but
in no event for longer than seven days, in order that the required changes,
if any, in the Prospectus or in any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
<PAGE>
15
8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
9. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
<PAGE>
Exhibit 4
<PAGE>
TABLE OF CONTENTS(1)
Page
----
ARTICLE ONE
DEFINITIONS ............................. 1
Section 1.01. Definitions........................................... 1
ARTICLE TWO
DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF SECURITIES ........................ 5
Section 2.01. Forms................................................. 5
Section 2.02. Amount Unlimited; Issuable in Series.................. 6
Section 2.03. Authentication........................................ 8
Section 2.04. Date and Denomination of Securities................... 9
Section 2.05. Execution of Securities............................... 10
Section 2.06. Exchange and Registration of Transfer of
Securities............................................ 11
Section 2.07. Mutilated, Destroyed, Lost or Stolen
Securities............................................ 12
Section 2.08. Temporary Securities.................................. 13
Section 2.09. Cancellation of Securities Paid, etc.................. 14
Section 2.10. Computation of Interest............................... 14
ARTICLE THREE
REDEMPTION OF SECURITIES; SINKING FUNDS ............... 14
Section 3.01. Applicability of Article.............................. 14
Section 3.02. Notice of Redemption; Selection of Securitie.......... 15
Section 3.03. Payment of Securities Called for Redemption........... 16
Section 3.04. Satisfaction of Mandatory Sinking Fund
Payments with Securities.............................. 16
Section 3.05. Redemption of Securities for Sinking Fund............. 17
Section 3.06. Repayment at the Option of the Holder................. 19
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY ................. 19
Section 4.01. Payment of Principal, Premium and Interest............ 19
- ----------
(1) This table of contents shall not, for any purpose, be deemed to be a part
of this Indenture.
i
<PAGE>
Page
----
Section 4.02. Offices for Notices and Payments, etc................. 19
Section 4.03. Appointments to Fill Vacancies in
Trustee's Office...................................... 20
Section 4.04. Provision as to Paying Agent.......................... 20
Section 4.05. Statement as to Compliance............................ 21
ARTICLE FIVE
SECURITYHOLDER LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE ........................... 22
Section 5.01. Securityholder Lists................................. 22
Section 5.02. Reports by the Company............................... 22
Section 5.03. Reports by the Trustee............................... 22
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON
EVENT OF DEFAULT ........................... 22
Section 6.01. Events of Default..................................... 22
Section 6.02. Payment of Securities on Default; Suit Therefor....... 26
Section 6.03. Application of Moneys Collected by Trustee............ 28
Section 6.04. Proceedings by Securityholders........................ 29
Section 6.05. Proceedings by Trustee................................ 30
Section 6.06. Remedies Cumulative and Continuing. .................. 30
Section 6.07. Direction of Proceedings and Waiver of
Defaults by Securityholders........................... 30
Section 6.08. Notice of Defaults.................................... 31
Section 6.09. Undertaking to Pay Costs.............................. 31
ARTICLE SEVEN
CONCERNING THE TRUSTEE ........................ 32
Section 7.01. Duties and Responsibilities of Trustee................ 32
Section 7.02. Reliance on Documents, Opinions, etc.................. 33
Section 7.03. No Responsibility for Recitals, etc................... 34
Section 7.04. Ownership of Securities............................... 35
Section 7.05. Moneys to be Held in Trust............................ 35
Section 7.06. Compensation and Expenses of Trustee.................. 35
Section 7.07. Officers' Certificate as Evidence..................... 36
Section 7.08. Indentures Not Creating Potential
Conflicting Interests for the
Trustee............................................... 36
Section 7.09. Eligibility of Trustee................................ 36
Section 7.10. Resignation or Removal of Truste...................... 37
Section 7.11. Acceptance by Successor Trustee....................... 38
Section 7.12. Succession by Merger, etc............................. 39
Section 7.13. Other Matters Concerning the Trustee.................. 40
Section 7.14. Appointment of Authenticating Agent................... 40
ii
<PAGE>
Page
----
ARTICLE EIGHT
CONCERNING THE SECURITYHOLDERS .................... 42
Section 8.01. Action by Securityholders............................. 42
Section 8.02. Proof of Execution by Securityholders................. 42
Section 8.03. Who Are Deemed Absolute Owners........................ 42
Section 8.04. Company-Owned Securities Disregarded.................. 43
Section 8.05. Revocation of Consents; Future Holders Bound.......... 43
ARTICLE NINE
SECURITYHOLDERS' MEETINGS ...................... 44
Section 9.01. Purposes of Meetings.................................. 44
Section 9.02. Call of Meetings by Trustee........................... 44
Section 9.03. Call of Meetings by Company or Securityholders........ 44
Section 9.04. Qualifications for Voting............................. 45
Section 9.05. Regulations........................................... 45
Section 9.06. Voting................................................ 46
Section 9.07. No Delay of Rights by Meeting......................... 46
ARTICLE TEN
SUPPLEMENTAL INDENTURES ....................... 46
Section 10.01. Supplemental Indentures without Consent
of Securityholders.................................... 46
Section 10.02. Supplemental Indentures with Consent of
Securityholders....................................... 48
Section 10.03. Compliance with Trust Indenture Act;
Effect of Supplemental Indentures..................... 49
Section 10.04. Notation on Securities................................ 49
Section 10.05. Evidence of Compliance of Supplemental
Indenture to be Furnished Trustee..................... 50
ARTICLE ELEVEN
CONSOLIDATION, MERGER, SALE OR CONVEYANCE .............. 50
Section 11.01. Company May Not Consolidate, etc.,
Except Under Certain Conditions....................... 50
Section 11.02. Successor Corporation to be Substituted............... 50
Section 11.03. Documents to be Given Trustee......................... 51
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE ............... 51
Section 12.01. Discharge of Indenture................................ 51
iii
<PAGE>
Page
----
Section 12.02. Deposited Moneys to be Held in Trust by Trustee....... 52
Section 12.03. Paying Agent to Repay Moneys Held..................... 52
Section 12.04. Return of Unclaimed Moneys............................ 52
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS ........................ 53
Section 13.01. Indenture and Securities Solely
Corporate Obligations................................. 53
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS ....................... 53
Section 14.01. Provisions Binding on Company's Successors............ 53
Section 14.02. Official Acts by Successor Corporation................ 53
Section 14.03. Addresses for Notices, etc............................ 53
Section 14.04. New York Contract..................................... 54
Section 14.05. Evidence of Compliance with Conditions Precedent...... 54
Section 14.06. Legal Holidays........................................ 54
Section 14.07. Securities in a Specified Currency other than
Dollars............................................... 54
Section 14.08. Trust Indenture Act to Control........................ 55
Section 14.09. Table of Contents, Headings, etc. .................... 55
Section 14.10. Execution in Counterparts............................. 55
Section 14.11. Separability; Benefits................................ 56
iv
<PAGE>
THIS INDENTURE, dated as of ________ between GE Financial Assurance
Holdings, Inc., a Delaware corporation (the "Company"), and The Chase Manhattan
Bank, National Association, a national association duly organized and existing
under the laws of the United States of America (the "Trustee"),
W I T N E S S E T H:
WHEREAS, the Company has duly authorized the issue from time to
time of its unsecured debentures, notes or other evidences of indebtedness to
be issued in one or more series (the "Securities") up to such principal
amount or amounts as may from time to time be authorized in accordance with
the terms of this Indenture and to provide, among other things, for the
authentication, delivery and administration thereof, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, all things necessary to make this Indenture a valid
indenture and agreement according to its terms have been done;
NOW, THEREFORE:
In consideration of the premises and the purchases of the
Securities by the holders thereof, the Company and the Trustee mutually
covenant and agree for the equal and proportionate benefit of the respective
holders from time to time of the Securities as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitions. The terms defined in this Section 1.01
(except as herein otherwise expressly provided or unless the context
otherwise requires) for all purposes of this Indenture shall have the
respective meanings specified in this Section 1.01. All other terms used in
this Indenture which are defined in the Trust Indenture Act of 1939, as
amended, or which are by reference therein defined in the Securities Act of
1933, as amended (except as herein otherwise expressly provided or unless
the context otherwise requires), shall have the meanings assigned to such
terms in said Trust Indenture Act and in said Securities Act as in force at
the date of this Indenture as originally executed. The words "herein,"
"hereof," and "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
<PAGE>
2
Authenticating Agent:
The term "Authenticating Agent" means any Person authorized by
the Trustee pursuant to Section 7.14 to act on behalf of the Trustee to
authenticate Securities.
Board of Directors:
The term "Board of Directors" shall mean the Board of Directors
of the Company or any Committee of such Board to which the powers of such
Board have been lawfully delegated.
Company:
The term "Company" shall mean GE Financial Assurance Holdings,
Inc., a Delaware corporation, until any successor corporation shall have
become such pursuant to the provisions of Article Eleven, and thereafter
"Company" shall mean such successor, except as otherwise provided in Section
11.02.
Dollar:
The term "Dollar" shall mean the coin or currency of the United
States of America as at the time of payment is legal tender for the payment
of public and private debts.
Event of Default:
The term "Event of Default" shall have the meaning specified in
Section 6.01.
Indenture:
The term "Indenture" shall mean this instrument as originally
executed or as it may be amended or supplemented from time to time as herein
provided, and shall include the form and terms of particular series of
Securities established as contemplated hereunder.
Interest:
The term "interest," when used with respect to a non-interest
bearing Security, means interest payable after the principal thereof has
become due and payable whether at maturity, by declaration of acceleration,
by call for redemption, pursuant to a sinking fund, or otherwise.
Officers' Certificate:
The term "Officers' Certificate" shall mean a certificate signed by
the President, the Chairman or any Vice Chairman of the Board or any Vice
President and by the Treasurer or any Assistant Treasurer, the Controller or
the Secretary or any Assistant Secretary of the Company and delivered to the
Trustee. Each such
<PAGE>
3
certificate shall comply with Section 314 of the Trust Indenture Act of 1939
and include the statements provided for in Section 14.05 if and to the extent
required by the provisions of such Section.
Opinion of Counsel:
The term "Opinion of Counsel" shall mean an opinion in writing
signed by legal counsel, who may be an employee of or of counsel to the
Company, or may be other counsel satisfactory to the Trustee. Each such
opinion shall comply with Section 314 of the Trust Indenture Act of 1939 and
include the statements provided for in Section 14.05 if and to the extent
required by the provisions of such Section.
Original Issue Discount Security:
The term "Original Issue Discount Security" shall mean any
Security which provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the maturity
thereof pursuant to Section 6.01.
Overdue Rate:
The term "Overdue Rate" with respect to each series of Securities
shall mean the rate of interest designated as such in the resolution of the
Board of Directors or the supplemental indenture, as the case may be,
relating to such series as contemplated by Section 2.02, or if no such rate
is specified, the rate at which such Securities shall bear interest.
Person:
The term "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Principal Office of the Trustee:
The term "principal office of the Trustee," or other similar
term, shall mean the principal office of the Trustee at which at any
particular time its corporate trust business shall be administered.
Responsible Officer:
The term "Responsible Officer" when used with respect to the
Trustee shall mean the chairman or any vice chairman of the board of
directors, the chairman or any vice chairman of the executive committee of
the board of directors, the president, any executive vice president, any
senior vice president, any vice president, any second vice president, any
assistant vice president, the cashier, any assistant cashier, the secretary,
any
<PAGE>
4
assistant secretary, the treasurer, any assistant treasurer, any trust officer,
any assistant trust officer, or any other officer or assistant officer of the
Trustee customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of his knowledge of and familiarity
with the particular subject.
Security or Securities; Outstanding:
The terms "Security" or "Securities" shall mean any Security or
Securities, as the case may be, authenticated and delivered under this
Indenture.
The term "Outstanding," when used with reference to Securities,
shall, subject to the provisions of Section 8.04, mean, as of any particular
time, all Securities authenticated and delivered by the Trustee under this
Indenture, except
(a) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or
redemption of which moneys in the necessary amount shall have been
deposited in trust with the Trustee or with any paying agent (other
than the Company) or shall have been set aside and segregated in trust
by the Company (if the Company shall act as its own paying agent),
provided that if such Securities are to be redeemed prior to the
maturity thereof, notice of such redemption shall have been mailed as
in Article Three provided, or provision satisfactory to the Trustee
shall have been made for mailing such notice; and
(c) Securities in lieu of or in substitution for which other
Securities shall have been authenticated and delivered, or which shall
have been paid, pursuant to the terms of Section 2.07, unless proof
satisfactory to the Trustee is presented that any such Securities are
held by persons in whose hands any of such Securities is a valid,
binding and legal obligation of the Company.
In determining whether the holders of the requisite principal amount of
Outstanding Securities have given any request, demand, authorization,
direction, notice, consent or waiver hereunder, the principal amount of an
Original Issue Discount Security that shall be deemed to be Outstanding for
such purposes shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon a declaration of
acceleration of the maturity thereof pursuant to Section 6.01.
Securityholder:
The term "Securityholder," "holder of Securities," or other
similar terms, shall mean any person in whose name at the
<PAGE>
5
time a particular Security is registered on the books of the Company kept for
that purpose in accordance with the terms hereof.
Specified Currency:
The term "Specified Currency" shall mean the currency in which a
Security is denominated, which may include Dollars, any foreign currency or any
composite of two or more currencies.
Trust Indenture Act of 1939:
The term "Trust Indenture Act of 1939" shall mean the Trust
Indenture Act of 1939 as it was in force at the date of execution of this
Indenture, except as provided in Section 10.03.
Trustee:
The term "Trustee" shall mean the corporation or association named
as Trustee in this Indenture and, subject to the provisions of Article Seven
hereof, shall also include its successors and assigns as Trustee hereunder. If
pursuant to the provisions of this Indenture there shall be at any time more
than one Trustee hereunder, the term "Trustee" as used with respect to
Securities of any series shall mean the Trustee with respect to Securities of
that series.
ARTICLE TWO
DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF SECURITIES.
Section 2.01. Forms. (a) The Securities of each series shall be in
substantially such form as shall be established by or pursuant to a resolution
of the Board of Directors or in one or more indentures supplemental hereto, in
each case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
legends or endorsements placed thereon as the officers executing the same may
approve (execution thereof to be conclusive evidence of such approval) and as
are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Securities of such series may be listed, or to conform to usage.
(b) The resolutions adopted by the Board of Directors
establishing the form and terms of the Securities of any series pursuant to
Sections 2.01 and 2.02, respectively, of this Indenture, may provide for
issuance of the Securities in global form. If Securities of a series are so
authorized to be issued in global form, any such global Security may provide
that it
<PAGE>
6
shall represent that aggregate amount of Securities from time to time
endorsed thereon and may also provide that the aggregate amount of
Outstanding Securities represented thereby may from time to time be reduced
to reflect exchanges. Any endorsement of a Security in global form to reflect
the amount, or any increase or decrease in the amount or changes in the
rights of holders of Securities represented thereby, shall be made in such
manner and by such person or persons as shall be specified therein.
(c) The Trustee's Certificate of Authentication on all Securities
shall be in substantially the following form:
"This is one of the Securities of the series designated therein
described in the within-mentioned Indenture.
------------------------,
as Trustee
By
------------------
Authorized Officer
Section 2.02. Amount Unlimited; Issuable in Series. The aggregate
principal amount of Securities which may be authenticated and delivered under
this Indenture is unlimited.
The Securities may be issued in one or more series. There shall
be established in or pursuant to a resolution of the Board of Directors or
established in one or more indentures supplemental hereto, prior to the
issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this
Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 2.06, 2.07, 2.08, 3.03, 3.06
or 10.04);
(3) the date or dates on which the principal and premium, if any,
of the Securities of the series is payable;
(4) the rate or rates, or the method of determination thereof, at
which the Securities of the series shall bear interest, if any, the
date or dates from which such interest shall accrue, the interest
payment dates on which such interest shall be payable and, if other
than as set forth in Section 2.04, the record dates for the
determination of holders to whom interest is payable;
<PAGE>
7
(5) in addition to the office or agency of the Company in the
Borough of Manhattan, The City of New York required to be maintained
pursuant to Section 4.02, any other place or places where the principal
of, and premium, if any, and any interest on Securities of the series
shall be payable;
(6) the Specified Currency of the Securities of the series;
(7) the currency or currencies in which payments on the Securities
of the series are payable, if other than the Specified Currency;
(8) the price or prices at which, the period or periods within which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company, pursuant to
any sinking fund or otherwise;
(9) the obligation, if any, of the Company to redeem, purchase or
repay Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of a holder thereof and the price at which or
process by which and the period or periods within which and the terms and
conditions upon which Securities of the series shall be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligation;
(10) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series
shall be issuable;
(11) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the maturity thereof pursuant to Section
6.01;
(12) if other than the Specified Currency, the coin or currency in
which payment of the principal of or interest on the Securities of the
series shall be payable;
(13) if the principal of or interest on the Securities of the
series are to be payable, at the election of the Company or a holder
thereof, in a coin or currency other than the Specified Currency, the
period or periods within which, and the terms and conditions upon
which, such election may be made;
(14) if the amount of payments of principal of and interest on the
Securities of the series may be determined with reference to an index
based on a coin or currency other than the Specified Currency, the manner
in which such amounts shall be determined;
<PAGE>
8
(15) any Events of Default with respect to the Securities of the
series, if not set forth herein;
(16) if other than the rate of interest stated in the title of the
Securities of the series, the applicable Overdue Rate;
(17) in the case of any series of non-interest bearing Securities,
the applicable dates for purposes of clause (a) of Section 5.01; and
(18) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or
pursuant to such resolution of the Board of Directors or in any such
indenture supplemental hereto.
Section 2.03. Authentication. At any time and from time to time
after the execution and delivery of this Indenture, the Company may deliver
Securities of any series executed by the Company to the Trustee for
authentication. Except as otherwise provided in this Article Two, the Trustee
shall thereupon authenticate and deliver said Securities to or upon the
written order of the Company, signed by its President, its Chairman or any
Vice Chairman of the Board or one of its Vice Presidents and by its Treasurer
or its Comptroller. In authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive and (subject to Section
7.01) shall be fully protected in relying upon:
(1) a copy of any resolution or resolutions of the Board of
Directors relating thereto and, if applicable, an appropriate record of
any action taken pursuant to such resolution, in each case certified by
the Secretary or an Assistant Secretary of the Company;
(2) an executed supplemental indenture, if any, relating thereto;
(3) an Officers' Certificate prepared in accordance with Section
14.05 which shall also state to the best knowledge of the signers of such
Certificate that no Event of Default with respect to any series of
Securities shall have occurred and be continuing; and
(4) an Opinion of Counsel prepared in accordance with Section 14.05
which shall also state
(a) that the form of such Securities has been established by
or pursuant to a resolution of the Board of Directors or by a
supplemental indenture as permitted
<PAGE>
9
by Section 2.01 in conformity with the provisions of this
Indenture;
(b) that the terms of such Securities have been established
by or pursuant to a resolution of the Board of Directors or by a
supplemental indenture as permitted by Section 2.02 in conformity
with the provisions of this Indenture;
(c) that such Securities, when authenticated and delivered
by the Trustee and issued by the Company in the manner and
subject to any conditions specified in such Opinion of Counsel,
will constitute legal, valid and binding obligations of the
Company, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting the enforcement of
creditors' rights and to general equity principles;
(d) that the Company has the corporate power to issue such
Securities, and has duly taken all necessary corporate action with
respect to such issuance;
(e) that the issuance of such Securities will not
contravene the organizational certificate or by-laws of the
Company or result in any violation of any of the terms or
provisions of any law or regulation or of any indenture, mortgage
or other agreement known to such Counsel by which the Company or
any of its Subsidiaries is bound; and
(f) that all laws and requirements in respect of the
execution and delivery by the Company of such Securities and the
related supplemental indenture, if any, have been complied with
and that authentication and delivery of such Securities and the
execution and delivery of the related supplemental indenture, if
any, by the Trustee will not violate the terms of this Indenture.
The Trustee shall have the right to decline to authenticate and
deliver or cause to be authenticated any Securities under this Section if the
Trustee, being advised by counsel, determines that such action may not
lawfully be taken or if the Trustee in good faith by its board of directors
or trustees, executive committee, or a trust committee of directors or
trustees and/or vice presidents shall determine that such action would expose
the Trustee to personal liability to existing Securityholders.
Section 2.04. Date and Denomination of Securities. The Securities
of each series shall be issuable in registered form without coupons in such
denominations as shall be specified as contemplated by Section 2.02. In the
absence of any such
<PAGE>
10
specification with respect to the Securities of any series, the Securities of
such series shall be issuable in denominations of $1,000 and any multiple of
$1,000. Securities of each series shall be numbered, lettered or otherwise
distinguished in such manner or in accordance with such plan as the officers
of the Company executing the same may determine with the approval of the
Trustee.
Every Security shall be dated the date of its authentication.
The person in whose name any Security of a particular series is
registered at the close of business on any record date (as hereinafter
defined) with respect to any interest payment date for such series shall be
entitled to receive the interest payable on such interest payment date
notwithstanding the cancellation of such Security upon any registration of
transfer or exchange subsequent to the record date and prior to such interest
payment date; provided, however, that if and to the extent that the Company
shall default in the payment of the interest due on such interest payment
date, such defaulted interest shall be paid to the persons in whose names
Outstanding Securities of such series are registered on a subsequent record
date established by notice given by mail by or on behalf of the Company to
the holders of such Securities not less than 15 days preceding such
subsequent record date, such record date to be not less than five days
preceding the date of payment of such defaulted interest. Except as otherwise
specified as contemplated by Section 2.02 for Securities of a particular
series, the term "record date" as used in this Section with respect to any
regular interest payment date, shall mean, the first day of the calendar
month if such interest payment date is the fifteenth day of such calendar
month, and shall mean the fifteenth day of the calendar month preceding such
interest payment date if such interest payment date is the first day of a
calendar month, whether or not such day shall be a day on which banking
institutions in The City of New York are authorized or required by law or
executive order to close or remain closed.
Interest on the Securities may at the option of the Company be
paid by check mailed to the persons entitled thereto at their respective
addresses as such appear on the registry books of the Company.
Section 2.05. Execution of Securities. The Securities shall be
signed in the name and on behalf of the Company by the manual or facsimile
signature of its President or its Chairman of the Board and its Treasurer or
its Secretary, under its corporate seal (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise). Only such
Securities as shall bear thereon a certificate of authentication
substantially in the form herein recited, executed by the Trustee, shall be
entitled to the benefits of this Indenture or be valid or obligatory for any
purpose. Such certificate by the Trustee upon
<PAGE>
11
any Security executed by the Company shall be conclusive evidence that the
Security so authenticated has been duly authenticated and delivered hereunder
and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of
the Securities shall cease to be such officer before the Securities so signed
shall have been authenticated and delivered by the Trustee, or disposed of by
the Company, such Securities nevertheless may be authenticated and delivered
or disposed of as though the person who signed such Securities had not ceased
to be such officer of the Company; and any Security may be signed on behalf
of the Company by such persons as, at the actual date of the execution of
such Security, shall be the proper officers of the Company, although at the
date of the execution of this Indenture any such person was not such an
officer.
Section 2.06. Exchange and Registration of Transfer of
Securities. Securities of any series may be exchanged for a like aggregate
principal amount of Securities of the same series of other authorized
denominations. Securities to be exchanged shall be surrendered, at the option
of the holders thereof, either at the office or agency designated and
maintained by the Company for such purpose in the Borough of Manhattan, The
City of New York, in accordance with the provisions of Section 4.02 or at any
of such other offices or agencies as may be designated and maintained by the
Company for such purpose in accordance with the provisions of Section 4.02,
and the Company shall execute and register and the Trustee shall authenticate
and deliver in exchange therefor the Security or Securities which the
Securityholder making the exchange shall be entitled to receive. Each person
designated by the Company pursuant to the provisions of Section 4.02 as a
person authorized to register and register transfer of the Securities is
sometimes herein referred to as a "Security registrar".
The Company shall keep, at each such office or agency, a register
for each series of Securities issued hereunder (the registers of all Security
registrars being herein sometimes collectively referred to as the "Security
register" or the "registry books of the Company") in which, subject to such
reasonable regulations as it may prescribe, the Company shall register
Securities and shall register the transfer of Securities as in this Article
Two provided. The Security register shall be in written form or in any other
form capable of being converted into written form within a reasonable time.
At all reasonable times the Security registrar shall be open for inspection
by the Trustee and any Security registrar other than the Trustee. Upon due
presentment for registration or registration of transfer of any Security of
any series at any designated office or agency, the Company shall execute and
register and the Trustee shall authenticate and deliver in the name of the
transferee or transferees a new Security or Securities of the same series for
an equal aggregate principal amount. Registration or
<PAGE>
12
registration of transfer of any Security by any Security registrar in the
registry books of the Company maintained by such Security registrar, and
delivery of such Security, duly authenticated, shall be deemed to complete
the registration or registration of transfer of such Security.
The Company will at all times designate one person (who may be
the Company and who need not be a Security registrar) to act as repository of
a master list of names and addresses of the holders of the Securities. The
Company shall act as such repository unless and until some other person is,
by written notice from the Company to the Trustee and each Security
registrar, designated by the Company to act as such. The Company shall cause
each Security registrar to furnish to such repository, on a current basis,
such information as to all registrations of transfer and exchanges effected
by such registrar, as may be necessary to enable such repository to maintain
such master list on as current a basis as is practicable.
No person shall at any time be designated as or act as a Security
registrar unless such person is at such time empowered under applicable law
to act as such under and to the extent required by applicable law and
regulations.
All Securities presented for registration of transfer or for
exchange, redemption or payment shall (if so required by the Company or the
Trustee) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange in form satisfactory to the Company and
the Trustee duly executed by, the holder or his attorney duly authorized in
writing.
No service charge shall be made for any exchange or registration
of transfer of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith.
The Company shall not be required to exchange or register a
transfer of (a) any Securities of any series for the period of 15 days next
preceding the selection of Securities of that series to be redeemed and
thereafter until the date of the mailing of a notice of redemption of
Securities of that series selected for redemption, or (b) any Securities
selected, called or being called for redemption in whole or in part except,
in the case of any Security to be redeemed in part, the portion thereof not
so to be redeemed.
Section 2.07. Mutilated, Destroyed, Lost or Stolen Securities. In
case any temporary or definitive Security shall become mutilated or be
destroyed, lost or stolen, the Company in the case of a mutilated Security
shall, and in the case of a lost, stolen or destroyed Security may in its
discretion, execute and, upon the written request or authorization of any
officer of the Company, the Trustee shall authenticate and deliver, a new
<PAGE>
13
Security of the same series, bearing a number not contemporaneously
Outstanding, in exchange and substitution for the mutilated Security, or in
lieu of and in substitution for the Security so destroyed, lost or stolen. In
every case the applicant for a substituted Security shall furnish to the
Company and to the Trustee such security or indemnity as may be required by
them to save each of them harmless, and, in every case of destruction, loss
or theft, the applicant shall also furnish the Company and to the Trustee
evidence to their satisfaction of the destruction, loss or theft of such
Security and the ownership thereof.
Upon the issuance of any substituted Security, the Company may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. In case any Security which has matured or is
about to mature shall become mutilated or be destroyed, lost or stolen, the
Company may, instead of issuing a substituted Security, pay or authorize the
payment of the same (without surrender thereof except in the case of a
mutilated Security) if the applicant for such payment shall furnish to the
Company and to the Trustee such security or indemnity as may be required by
them to save each of them harmless and, in case of destruction, loss or
theft, evidence satisfactory to the Company and the Trustee of the
destruction, loss or theft of such Security and the ownership thereof.
Every substituted Security issued pursuant to the provisions of
this Section 2.07 by virtue of the fact that any Security is destroyed, lost
or stolen shall constitute an additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Security shall be found
at any time, and shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities of the same
series duly issued hereunder. All Securities shall be held and owned upon the
express condition that the foregoing provisions are exclusive with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities
and shall preclude (to the extent lawful) any and all other rights or
remedies with respect to the replacement or payment of negotiable instruments
or other securities without their surrender.
Section 2.08. Temporary Securities. Pending the preparation of
definitive Securities of any series the Company may execute and the Trustee
shall authenticate and deliver temporary Securities (printed, lithographed or
typewritten). Temporary Securities shall be issuable in any authorized
denomination and substantially in the form of the definitive Securities in
lieu of which they are issued, but with such omissions, insertions and
variations as may be appropriate for temporary Securities, all as may be
determined by the Company. Every such temporary Security shall be
authenticated by the Trustee upon the same conditions and in substantially
the same manner, and with the same effect, as the definitive Securities in
<PAGE>
14
lieu of which they are issued. Without unreasonable delay the Company will
execute and deliver to the Trustee definitive Securities of such series and
thereupon any or all temporary Securities of such series may be surrendered in
exchange therefor, at the option of the holders thereof, either at the office or
agency to be designated and maintained by the Company for such purpose in the
Borough of Manhattan, The City of New York, in accordance with the provisions of
Section 4.02 or at any of such other offices or agencies as may be designated
and maintained by the Company for such purpose in accordance with the provisions
of Section 4.02, and the Trustee shall authenticate and deliver in exchange for
such temporary Securities an equal aggregate principal amount of definitive
Securities of the same series. Such exchange shall be made by the Company at its
own expense and without any charge therefor. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of the same series authenticated
and delivered hereunder.
Section 2.09. Cancellation of Securities Paid, etc. All Securities
surrendered for the purpose of payment, redemption, repayment, exchange or
registration of transfer or for credit against any sinking fund shall, if
surrendered to the Company, any Security registrar, any paying agent or any
other agent of the Company or of the Trustee, be delivered to the Trustee and
promptly cancelled by it, or, if surrendered to the Trustee, shall be promptly
cancelled by it, and no Securities shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee may
destroy cancelled Securities and deliver a certificate of such destruction to
the Company or, at the written request of the Company, shall deliver cancelled
Securities to the Company. If the Company shall acquire any of the Securities,
however, such acquisition shall not operate as a redemption or satisfaction of
the indebtedness represented by such Securities unless and until the same are
delivered to the Trustee for cancellation.
Section 2.10. Computation of Interest. Except as otherwise specified
as contemplated by Section 2.02 for Securities of any series, interest on the
Securities of each series shall be computed on the basis of a 360-day year of
twelve 30-day months.
ARTICLE THREE
REDEMPTION OF SECURITIES; SINKING FUNDS
Section 3.01. Applicability of Article. The provisions of this
Article shall be applicable, as the case may be, (i) to the Securities of any
series which are redeemable before their maturity and (ii) to any sinking fund
for the retirement of Securities of any series, in either case except as
otherwise
<PAGE>
15
specified as contemplated by Section 2.02 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "mandatory sinking
fund payment", and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "optional
sinking fund payment".
Section 3.02. Notice of Redemption; Selection of Securities. In case
the Company shall desire to exercise any right to redeem all, or, as the case
may be, any part of, the Securities of any series in accordance with their
terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the holders of Securities of such series so to be redeemed as a
whole or in part at their last addresses as the same appear on the registry
books of the Company and to the Trustee, except as the resolutions adopted by
the Board of Directors to establish the terms of any series of Securities may
otherwise provide. Such mailing shall be by first class mail. The notice if
mailed in the manner herein provided shall be conclusively presumed to have been
duly given, whether or not the holder receives such notice. In any case, failure
to give such notice by mail or any defect in the notice to the holder of any
Security of a series designated for redemption as a whole or in part shall not
affect the validity of the proceedings for the redemption of any other Security
of such series.
Each such notice of redemption shall specify the date fixed for
redemption, the redemption price at which the Securities of such series are to
be redeemed, the place or places of payment, that payment will be made upon
presentation and surrender of such Securities, that any interest accrued to the
date fixed for redemption will be paid as specified in said notice, and that on
and after said date any interest thereon or on the portions thereof to be
redeemed will cease to accrue. If less than all the Securities of a series are
to be redeemed the notice of redemption shall specify the number or numbers of
the Securities of that series to be redeemed. In case any Security of a series
is to be redeemed in part only, the notice of redemption shall state the portion
of the principal amount thereof to be redeemed and shall state that on and after
the date fixed for redemption, upon surrender of such Security, a new Security
or Securities of that series in principal amount equal to the unredeemed portion
thereof will be issued.
Prior to the redemption date specified in the notice of redemption
given as provided in this Section 3.02, the Company will deposit with the
Trustee or with one or more paying agents (or if the Company is acting as its
own paying agent will segregate and hold in trust as provided in Section 4.04)
an amount of money sufficient to redeem on the redemption date all
<PAGE>
16
the Securities or portions thereof so called for redemption, together with
accrued interest to the date fixed for redemption. If less than all the
Securities of a series are to be redeemed the Company will give the Trustee
notice not less than 60 days prior to the redemption date as to the aggregate
principal amount of Securities of such series to be redeemed and the Trustee
shall select or cause to be selected, in such manner as in its sole discretion
it shall deem appropriate and fair, the Securities of that series or portions
thereof to be redeemed. Securities of a series may be redeemed in part only in
multiples of the smallest authorized denomination of that series.
Section 3.03. Payment of Securities Called for Redemption. If notice
of redemption has been given as provided in Section 3.02 or Section 3.05, the
Securities or portions of Securities of the series with respect to which such
notice has been given shall become due and payable on the date and at the place
or places stated in such notice at the applicable redemption price, together
with any interest accrued to the date fixed for redemption, and on and after
said date (unless the Company shall default in the payment of such Securities or
portions of such Securities, together with any interest accrued to said date)
any interest on the Securities of such series or portions of Securities of such
series so called for redemption shall cease to accrue. On presentation and
surrender of such Securities at a place of payment in said notice specified, the
said Securities or the specified portions thereof shall be paid and redeemed by
the Company at the applicable redemption price, together with any interest
accrued thereon to the date fixed for redemption; provided, however, that any
semi-annual instalment of interest becoming due on or prior to the date fixed
for redemption shall be payable to holders of such Securities registered as such
on the relevant record date according to their terms.
Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and deliver to the holder
thereof, at the expense of the Company, a new Security or Securities of the same
series, of authorized denominations, in aggregate principal amount equal to the
unredeemed portion of the Security so presented.
Section 3.04. Satisfaction of Mandatory Sinking Fund Payments with
Securities. In lieu of making all or any part of any mandatory sinking fund
payment with respect to any Securities of a series in cash, the Company may at
its option (a) deliver to the Trustee Securities of that series theretofore
purchased or otherwise acquired by the Company, or (b) receive credit for the
principal amount of Securities of that series which have been redeemed either at
the election of the Company pursuant to the terms of such Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Securities; provided that such Securities have not been previously
so credited. Such Securities shall be received and
<PAGE>
17
credited for such purpose by the Trustee at the redemption price specified in
such Securities for redemption through operation of the sinking fund and the
amount of such mandatory sinking fund payment shall be reduced accordingly.
Section 3.05. Redemption of Securities for Sinking Fund. Not less
than 60 days prior to each sinking fund payment date for any series of
Securities, the Company will deliver to the Trustee a certificate signed by the
Treasurer or any Assistant Treasurer of the Company specifying the amount of the
next ensuing sinking fund payment for that series pursuant to the terms of that
series, the portion thereof, if any, which is to be satisfied by payment of cash
(which cash may be deposited with the Trustee or with one or more paying agents,
or if the Company is acting as its own paying agent segregated and held in trust
as provided in Section 4.04) and the portion thereof, if any, which is to be
satisfied by delivering and crediting Securities of that series pursuant to
Section 3.04 (which Securities, if not theretofore delivered, will accompany
such certificate) and whether the Company intends to exercise its right to make
a permitted optional sinking fund payment with resect to such series. Such
certificate shall also state that no Event of Default has occurred and is
continuing with respect to such series. Such certificate shall be irrevocable
and upon its delivery the Company shall be obligated to make the cash payment or
payments therein referred to, if any, on or before the next succeeding sinking
fund payment date. In the case of the failure of the Company to deliver such
certificate (or to deliver the Securities specified in this paragraph), the
sinking fund payment due on the next succeeding sinking fund payment date for
that series shall be paid entirely in cash and shall be sufficient to redeem the
principal amount of such Securities subject to a mandatory sinking fund payment
without the option to deliver or credit Securities as provided in Section 3.04
and without the right to make any optional sinking fund payment, if any, with
respect to such series.
Any sinking fund payment or payments (mandatory or optional) made in
cash plus any unused balance of any preceding sinking fund payments made in cash
which shall equal or exceed $100,000 (or a less sum if the Company shall so
request or determine) with respect to the Securities of any particular series
shall be applied by the Trustee (or by the Company if the Company is acting as
its own paying agent) on the sinking fund payment date on which such payment is
made (or, if such payment is made before a sinking fund payment date, on the
next sinking fund payment date following the date of such payment) to the
redemption of such Securities at the redemption price specified in such
Securities for operation of the sinking fund together with accrued interest, if
any, to the date fixed for redemption. Any sinking fund moneys not so applied or
allocated by the Trustee (or by the Company if the Company is acting as its own
paying agent) to the redemption of Securities shall be added to the next cash
sinking fund payment received by the Trustee (or if
<PAGE>
18
the Company is acting as its own paying agent, segregated and held in trust as
provided in Section 4.04) for such series and, together with such payment (or
such amount so segregated), shall be applied in accordance with the provisions
of this Section 3.05. Any and all sinking fund moneys with respect to the
Securities of any particular series held by the Trustee (or if the Company is
acting as its own paying agent, segregated and held in trust as provided in
Section 4.04) on the last sinking fund payment date with respect to Securities
of such series and not held for the payment or redemption of particular
Securities of such series shall be applied by the Trustee (or by the Company if
the Company is acting as its own paying agent), together with other moneys, if
necessary, to be deposited (or segregated) sufficient for the purpose, to the
payment of the principal of the Securities of that series at maturity.
The Trustee shall select or cause to be selected the Securities to
be redeemed upon such sinking fund payment date in the manner specified in the
last paragraph of Section 3.02 and the Company shall cause notice of the
redemption thereof to be given in the manner provided in Section 3.02 except
that the notice of redemption shall also state that the Securities are being
redeemed by operation of the sinking fund. Such notice having been duly given,
the redemption of such Securities shall be made upon the terms and in the manner
stated in Section 3.03.
On or before each sinking fund payment date, the Company shall pay
to the Trustee in cash (or if the Company is acting as its own paying agent will
segregate and hold in trust as provided in Section 4.04) a sum equal to any
interest accrued to the date fixed for redemption of Securities or portions
thereof to be redeemed on such sinking fund payment date pursuant to this
Section.
Neither the Trustee nor the Company shall redeem any Securities of a
series with sinking fund moneys or mail any notice of redemption of such
Securities by operation of the sinking fund for such series during the
continuance of a default in payment of interest, if any, on such Securities or
of any Event of Default (other than an Event of Default occurring as a
consequence of this paragraph) with respect to such Securities, except that if
the notice of redemption of any such Securities shall theretofore have been
mailed in accordance with the provisions hereof, the Trustee (or the Company if
the Company is acting as its own paying agent) shall redeem such Securities if
cash sufficient for that purpose shall be deposited with the Trustee (or
segregated by the Company) for that purpose in accordance with the terms of this
Article. Except as aforesaid, any moneys in the sinking fund for such series at
the time when any such default or Event of Default shall occur and any moneys
thereafter paid into such sinking fund shall, during the continuance of such
default or Event of Default, be held as security for the payment of such
Securities; provided, however, that in case such default or Event of Default
shall have been
<PAGE>
19
cured or waived as provided herein, such moneys shall thereafter be applied on
the next sinking fund payment date for such Securities on which such moneys may
be applied pursuant to the provisions of this Section.
Section 3.06. Repayment at the Option of the Holder. Any series of
Securities may be made, by provision contained in or established pursuant to a
supplemental indenture or a resolution of the Board of Directors pursuant to
Section 2.02 hereof, subject to repayment, in whole or in part, at the option of
the holder on a date or dates specified prior to maturity, at a price equal to
100% of the principal amount thereof, together with accrued interest to the date
of repayment, on such notice as may be required, provided, however, that the
holder of a Security may only elect partial repayment in an amount that will
result in the portion of such Security that will remain Outstanding after such
repayment constituting an authorized denomination, or combination thereof, of
such Securities.
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
Section 4.01. Payment of Principal, Premium and Interest. The
Company covenants and agrees for the benefit of each series of Securities that
it will duly and punctually pay or cause to be paid the principal of, premium,
if any, and interest, if any, on each of the Securities of that series at the
places, at the respective times and in the manner provided in such Securities.
Section 4.02. Offices for Notices and Payments, etc. As long as any
of the Securities of a series remain Outstanding, the Company will designate and
maintain in the Borough of Manhattan, The City of New York, an office or agency
where the Securities of that series may be presented for payment, an office or
agency where the Securities of that series may be presented for registration of
transfer and for exchange as in this Indenture provided and an office or agency
where notices and demands to or upon the Company in respect of the Securities of
that series or of this Indenture may be served. In addition to such office or
offices or agency or agencies, the Company may from time to time designate and
maintain one or more additional offices or agencies within or outside the
Borough of Manhattan, The City of New York, where the Securities of that series
may be presented for registration of transfer or for exchange, and the Company
may from time to time rescind such designation, as it may deem desirable or
expedient. The Company will give to the Trustee written notice of the location
of each such office or agency and of any change of location thereof. In case the
Company shall fail to maintain any such office or agency in the Borough of
Manhattan, The City of New York, or shall fail to give such notice of the
location or of any change in the location thereof,
<PAGE>
20
presentations and demands may be made and notices may be served at the principal
office of the Trustee.
The Company hereby initially designates the office of the Trustee
located at 1 Chase Manhattan Plaza, Floor 1B, New York, New York 10081 as the
office or agency of the Company in the Borough of Manhattan, The City of New
York, where the Securities of each series may be presented for payment, for
registration of transfer and for exchange as in this Indenture provided and
where notices and demands to or upon the Company in respect of the Securities of
each series or of this Indenture may be served. The Company is also designated
as repository pursuant to Section 2.06 for the master list of the names and
addresses of the holders of the Securities of each series.
Section 4.03. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 7.10, a successor
trustee, so that there shall at all times be a Trustee with respect to each
series of Securities hereunder.
Section 4.04. Provision as to Paying Agent. (a) If the Company shall
appoint a paying agent other than the Trustee with respect to the Securities of
any series, it will cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section 4.04,
(1) that it will hold all sums held by it as such agent for
the payment of the principal of, premium, if any, or interest, if
any, on the Securities of such series (whether such sums have been
paid to it by the Company or by any other obligor on the Securities
of such series) in trust for the benefit of the holders of the
Securities of such series;
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Securities of such series)
to make any payment of the principal of, premium, if any, or
interest, if any, on the Securities of such series when the same
shall be due and payable; and
(3) that at any time during the continuance of any failure by
the Company (or by any other obligor on the Securities of such
series) specified in the preceding paragraph (2), such payment agent
will, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by it.
(b) If the Company shall act as its own paying agent with respect to
the Securities of any series, it will, on or before each due date of the
principal of, premium, if any, or
<PAGE>
21
interest, if any, on the Securities of such series, set aside, segregate and
hold in trust for the benefit of the holders of such Securities a sum sufficient
to pay such principal, premium, if any, or interest, if any, so becoming due and
will promptly notify the Trustee of any failure to take such action and of any
failure by the Company (or by any other obligor on the Securities of such
series) to make any payment of the principal of, premium, if any, or interest,
if any, on the Securities of such series when the same shall become due and
payable.
(c) Anything in this Section 4.04 to the contrary notwithstanding,
the Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section, such sums to be held by the Trustee upon the trusts
herein contained.
(d) Anything in this Section 4.04 to the contrary notwithstanding,
the agreement to hold sums in trust as provided in this Section 4.04 is subject
to Sections 12.03 and 12.04.
(e) Whenever the Company shall have one or more paying agents with
respect to the Securities of any series, it will, prior to each due date of the
principal of, premium, if any, or interest, if any, on the Securities of such
series, deposit with a designated paying agent a sum sufficient to pay the
principal, premium, if any, and interest, if any, so becoming due, such sum to
be held in trust for the benefit of the persons entitled to such principal,
premium, if any, or interest, if any, and (unless such paying agent is the
Trustee) the Company will promptly notify the Trustee of any failure so to act.
Section 4.05. Statement as to Compliance. The Company will furnish
to the Trustee on or before January 1, in each year (beginning with January 1,
199__) a brief certificate (which need not comply with Section 14.05) from the
principal executive, financial or accounting officer of the Company stating that
in the course of the performance by the signer of his duties as an officer of
the Company he would normally have knowledge of any default or non-compliance by
the Company in the performance of any terms, covenants or conditions of this
Indenture, stating whether or not he has knowledge of any such default or
non-compliance (without regard to any period of grace or requirement of notice
provided hereunder) and, if so, specifying each such default or non-compliance
of which the signer has knowledge and the nature thereof.
<PAGE>
22
ARTICLE FIVE
SECURITYHOLDER LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
Section 5.01. Securityholder Lists. If and so long as the Trustee
shall not be the Security registrar for the Securities of any series, the
Company and any other obligor on the Securities will furnish or cause to be
furnished to the Trustee a list in such form as the Trustee may reasonably
require of the names and addresses of the holders of the Securities of such
series pursuant to Section 312 of the Trust Indenture Act of 1939 (a)
semi-annually not more than 15 days after each record date for the payment of
interest on such Securities, as hereinabove specified, as of such record date,
and on dates to be determined pursuant to Section 2.02 for non-interest bearing
Securities in each year, and (b) at such other times as the Trustee may request
in writing, within thirty days after receipt by the Company of any such request
as of a date not more than 15 days prior to the time such information is
furnished.
Section 5.02. Reports by the Company. The Company covenants to file
with the Trustee, within 15 days after the Company is required to file the same
with the Securities and Exchange Commission, copies of the annual reports and of
the information, documents and other reports that the Company may be required to
file with the Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 or pursuant to Section 314
of the Trust Indenture Act of 1939.
Section 5.03. Reports by the Trustee. Any Trustee's report required
under Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted on
or before February 1 in each year beginning February 1, 199__, as provided in
Section 313(c) of the Trust Indenture Act of 1939, so long as any Securities are
Outstanding hereunder, and shall be dated as of a date convenient to the Trustee
no more than 60 days prior thereto.
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS ON
EVENT OF DEFAULT
Section 6.01. Events of Default. The term "Event of Default"
whenever used herein with respect to Securities of any series means any one of
the following events and such other events as may be established with respect to
the Securities of such series as contemplated by Section 2.02 hereof, continued
for the period of time, if any, and after the giving of notice, if any,
designated in this Indenture or as may be established with respect to such
Securities as contemplated by Section 2.02
<PAGE>
23
hereof, as the case may be, unless it is either inapplicable or is specifically
deleted or modified in the applicable resolution of the Board of Directors or in
the supplemental indenture under which such series of Securities is issued, as
the case may be, as contemplated by Section 2.02:
(a) default in the payment of any instalment of interest upon
any Security of such series as and when the same shall become due
and payable, and continuance of such default for a period of 30
days; or
(b) default in the payment of the principal of, or premium, if
any, on any Security of such series as and when the same shall
become due and payable whether at maturity, upon redemption, by
declaration, repayment or otherwise; or
(c) default in the making or satisfaction of any sinking fund
payment or analogous obligation as and when the same shall become
due and payable by the terms of the Securities of such series; or
(d) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the
Company in respect of the Securities of such series contained in
this Indenture (other than a covenant or agreement in respect of the
Securities of such series a default in whose observance or
performance is elsewhere in this Section specifically dealt with)
continued for a period of 60 days after the date on which written
notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Trustee by registered
mail, or to the Company and the Trustee by the holders of at least
twenty-five percent in aggregate principal amount of the Securities
of such series at the time Outstanding; or
(e) an event of default with respect to any other series of
Securities issued or hereafter issued pursuant to this Indenture or
as defined in any indenture or instrument evidencing or under which
the Company has at the date of this Indenture or shall hereafter
have outstanding any indebtedness for borrowed money shall happen
and be continuing and such other series of Securities or such
indebtedness, as the case may be, shall have been accelerated so
that the same shall be or become due and payable prior to the date
on which the same would otherwise have become due and payable, and
such acceleration shall not be rescinded or annulled within ten days
after written notice thereof shall have been given to the Company by
the Trustee or to the Company and the Trustee by the holders of at
least twenty-five percent in aggregate principal amount of the
Securities of such series at the time Outstanding;
<PAGE>
24
provided, however, that if such event of default with respect to
such other series of Securities or under such indenture or
instrument, as the case may be, shall be remedied or cured by the
Company, or waived by the holders of such other series of Securities
or of such indebtedness, as the case may be, the Event of Default
hereunder by reason thereof shall be deemed likewise to have been
thereupon remedied, cured or waived without further action upon the
part of either the Trustee or any of the Securityholders of such
series; and provided further that, subject to the provisions of
Sections 6.08 and 7.01, the Trustee shall not be charged with
knowledge of any such event of default or any remedy, cure or waiver
thereof or any such acceleration unless written notice thereof shall
have been given to the Trustee by the Company, by a holder or an
agent of a holder of any Securities of such other series or of any
such indebtedness, as the case may be, or by the trustee then acting
under this Indenture with respect to such other series of Securities
or under any indenture or other instrument, as the case may be,
under which such event of default shall have occurred, or by the
holders of at lest twenty-five percent in aggregate principal amount
of the Securities of such series at the time Outstanding; or
(f) a decree or order by a court having jurisdiction in the
premises shall have been entered adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization of the Company under the Federal Bankruptcy Code or
any other similar applicable Federal or State law, and such decree
or order shall have continued undischarged and unstayed for a period
of 60 days; or a decree or order of a court having jurisdiction in
the premises for the appointment of a receiver or liquidator or
trustee or assignee (or other similar official) in bankruptcy or
insolvency of the Company or of all or substantially all of its
property, or for the winding up or liquidation of its affairs, shall
have been entered, and such decree or order shall have continued
undischarged and unstayed for a period of 60 days; or
(g) the Company shall institute proceedings to be adjudicated
a voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under the Federal Bankruptcy Code or any
other similar applicable Federal or State law, or shall consent to
the filing of any such petition, or shall consent to the appointment
of a receiver or liquidator or trustee or assignee (or other similar
official) in bankruptcy or insolvency of it or of its property, or
shall make an assignment for the benefit of creditors, or
<PAGE>
25
shall admit in writing its inability to pay its debts generally as
they become due or
(h) any other Event of Default provided in the applicable
resolution of the Board of Directors or in the supplemental
indenture under which such series of Securities is issued, as the
case may be, as contemplated by Section 2.02.
If an Event of Default with respect to Securities of any series at
the time Outstanding occurs and is continuing, then and in each and every such
case, unless the principal of all of the Securities of such series shall have
already become due and payable, either the Trustee or the holders of not less
than twenty-five percent in aggregate principal amount of the Securities of such
series then Outstanding hereunder, by notice in writing to the Company (and to
the Trustee if given by Securityholders of such series), may declare the
principal amount (or, if the Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of such series) of all the Securities of such series to be due and
payable immediately, and upon any such declaration the same shall become and
shall be immediately due and payable, anything in this Indenture or in the
Securities of such series contained to the contrary notwithstanding. This
provision, however, is subject to the condition that if, at any time after the
principal amount (or, if the Securities of such series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of such series) of the Securities of any series shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, the
Company shall pay or shall deposit with the Trustee a sum sufficient to pay all
matured installments of interest, if any, upon all of the Securities of such
series and the principal of, and premium, if any, on any and all Securities of
such series which shall have become due otherwise than by acceleration (with
interest on overdue installments of interest (to the extent that payment of such
interest is enforceable under applicable law) and on such principal at the
Overdue Rate applicable to such series, to the date of such payment or deposit)
and all amounts payable to the Trustee pursuant to the provisions of Section
7.06, and any and all defaults under this Indenture with respect to such series
of Securities, other than the nonpayment of principal of and accrued interest on
Securities of such series which shall have become due solely by acceleration,
shall have been remedied or cured or waived or provision shall have been made
therefor to the satisfaction of the Trustee -- then and in every such case the
holders of a majority in aggregate principal amount of the Securities of such
series then Outstanding, by written notice to the Company and to the Trustee,
may waive all default with respect to such series and rescind and annul such
declaration and its consequences; but no such waiver or rescission and annulment
<PAGE>
26
shall extend to or shall affect any subsequent default or shall impair any right
consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceeding shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company and the Trustee shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Company and the Trustee shall continue as though no such proceeding had been
taken.
Section 6.02. Payment of Securities on Default; Suit Therefor. The
Company covenants that (a) in case default shall be made in the payment of any
instalment of interest upon any Security of any series as and when the same
shall become due and payable, and such default shall have continued for a period
of 30 days, (b) in case default shall be made in the payment of the principal
of, or premium, if any, on any Security of any series as and when the same shall
become due and payable, whether at maturity of the Securities of that series or
upon redemption or by declaration, repayment or otherwise or (c) in case of
default in the making or satisfaction of any sinking fund payment or analogous
obligation when the same becomes due by the terms of the Securities of any
series -- then, upon demand of the Trustee, the Company will pay to the Trustee,
for the benefit of the holder of any such Security (or holders of any series of
Securities in the case of clause (c) above) the whole amount that then shall
have become due and payable on any such Security (or Securities of any such
series in the case of clause (c) above) for principal, premium, if any, and
interest, if any, with interest upon the overdue principal and premium, if any,
and (to the extent that payment of such interest is enforceable under applicable
law) upon the overdue installments of interest, if any, at the Overdue Rate
applicable to any such Security (or Securities of any such series in the case of
clause (c) above); and, in addition thereto, such further amount as shall be
sufficient to cover costs and expenses of collection, and any further amounts
payable to the Trustee pursuant to the provisions of Section 7.06.
In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of any express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or any other obligor upon such
Securities and collect in the manner provided by law out of the property of the
Company or any other obligor on such Securities wherever situated the moneys
adjudged or decreed to be payable.
<PAGE>
27
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Securities of any
series under the Federal Bankruptcy Code or any other similar applicable Federal
or State law, or in case a receiver or trustee (or other similar official) shall
have been appointed for the property of the Company or such other obligor, or in
the case of any other similar judicial proceedings relative to the Company or
other obligor on the Securities of any series, or to the creditors or property
of the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Securities of any series shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand pursuant to the provisions of this Section
6.02, shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of principal
(or, if the Securities of any series are Original Issue Discount Securities,
such portion of the principal amount as may be due and payable with respect to
such series pursuant to a declaration in accordance with Section 6.01), premium,
if any, and interest, if any, owing and unpaid in respect of the Securities of
any series and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee and of the Securityholders of any series allowed
in such judicial proceedings relative to the Company or any other obligor on the
Securities of any series, its or their creditors, or its or their property, and
to collect and receive any moneys or other property payable or deliverable on
any such claims, and to distribute the same after the deduction of costs and
expenses of collection, and any further amounts payable to the Trustee pursuant
to the provisions of Section 7.06 and incurred by it up to the date of such
distribution; and any receiver, assignee or trustee (or other similar official)
in bankruptcy or reorganization is hereby authorized by each of the
Securityholders to make such payments to the Trustee, and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee costs and expenses of collection and any
further amounts payable to the Trustee pursuant to the provisions of Section
7.06 and incurred by it up to the date of such distribution.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting any of
the Securities of any series or the rights of any holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding.
All rights of action and of asserting claims under this Indenture,
or under the Securities of any series, may be enforced by the Trustee without
the possession of any of the Securities of such series or the production thereof
in any trial or other
<PAGE>
28
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the holders of the
Securities in respect of which such action was taken. In any proceedings brought
by the Trustee (and also any proceedings in which a declaratory judgment of a
court may be sought as to the interpretation or construction of any provision of
this Indenture, to which the Trustee shall be a party) the Trustee shall be held
to represent all the holders of the Securities to which such proceedings relate,
and it shall not be necessary to make any holders of such Securities parties to
any such proceedings.
Section 6.03. Application of Moneys Collected by Trustee. Any moneys
collected by the Trustee pursuant to this Article shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the several Securities in respect of which
moneys have been collected, and the notation thereon of the payment, if only
partially paid, and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee pursuant
to the provisions of Section 7.06;
SECOND: In case the principal of the Outstanding Securities in
respect of which such moneys have been collected shall not have
become due (at maturity, upon redemption, by declaration, repayment
or otherwise) and be unpaid, to the payment of interest, if any, on
such Securities, in the order of the maturity of the installments of
such interest, with interest (to the extent that such interest has
been collected by the Trustee) upon the overdue installments of
interest at the Overdue Rate applicable to such Securities, such
payments to be made ratably to the person entitled thereto;
THIRD: In case the principal of the Outstanding Securities in
respect of which such moneys have been collected shall have become
due (at maturity, upon redemption, by declaration, repayment or
otherwise), to the payment of the whole amount then owing and unpaid
upon such Securities for principal, premium, if any, and interest,
if any, with interest on the overdue principal, and premium, if any,
and (to the extent that such interest has been collected by the
Trustee) upon overdue installments of interest, if any, at the
Overdue Rate applicable to such Securities; and in case such moneys
shall be insufficient to pay in full the whole amounts so due and
unpaid upon such Securities, then to the payment of such principal,
premium, if any, and interest, if any, without preference or
priority of principal, and premium, if any, over interest, if any,
or of interest, if any,
<PAGE>
29
over principal, and premium, if any, or of any instalment of
interest, if any, over any other instalment of interest, if any, or
of any such Security over any other such Security, ratably to the
aggregate of such principal, premium, if any, and accrued and unpaid
interest, if any; and
FOURTH: To the payment of the remainder, if any, to the
Company, it successors or assigns, or to whosoever may be lawfully
entitled to receive the same, or as a court of competent
jurisdiction may direct.
Section 6.04. Proceedings by Securityholders. No holder of any
Security of any series shall have any right by virtue of or by availing of any
provision of this Indenture to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Indenture or for the
appointment of a receiver or trustee (or other similar official), or for any
other remedy hereunder, unless such holder previously shall have given to the
Trustee written notice of default with respect to Securities of such series and
of the continuance thereof, as hereinbefore provided, and unless also the
holders of not less than twenty-five percent in aggregate principal amount of
the Securities of such series then Outstanding shall have made written request
upon the Trustee to institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, it being understood and intended,
and being expressly covenanted by the taker and holder of every Security with
every other taker and holder and the Trustee, that no one or more holders of
Securities of such series shall have any right in any manner whatever by virtue
or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other holder of Securities of such series, or to
obtain or seek to obtain priority over or preference to any other such holder,
or to enforce any right under this Indenture, except in the matter herein
provided and for the equal, ratable and common benefit of all holders of
Securities of such series.
Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Security to receive payment of the principal of,
premium, if any, and interest, if any, on such Security, on or after the
respective due dates expressed in such Security, or upon redemption, by
declaration, repayment or otherwise, or to institute suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such holder, and no provision of the Securities
of any series or of this Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, premium,
if
<PAGE>
30
any, and interest, if any, on the Securities of such series at the respective
places, at the respective times, at the respective rates and in the coin or
currency, therein and herein prescribed.
Section 6.05. Proceedings by Trustee. In case of an Event of Default
hereunder the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
Section 6.06. Remedies Cumulative and Continuing. All powers and
remedies given by this Article Six to the Trustee or to the Securityholders of
any series shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
Trustee or the holders of such Securities, by judicial proceedings or otherwise,
to enforce the performance or observance of the covenants and agreements
contained in this Indenture, and no delay or omission of the Trustee or of any
holder of any such Securities to exercise any right or power accruing upon any
default occurring and continuing as aforesaid shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 6.04, every
power and remedy given by this Article Six or by law to the Trustee or to the
Securityholders of any series may be exercised from time to time, and as often
as shall be deemed expedient, by the Trustee or by the Securityholders of such
series.
Section 6.07. Direction of Proceedings and Waiver of Defaults by
Securityholders. (a) The holders of a majority in aggregate principal amount of
the Securities of any series at the time Outstanding shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Securities of such series; provided, however, that
(subject to the provisions of Section 7.01) the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action or proceeding so directed may not lawfully be taken
or if the Trustee in good faith by its board of directors or trustees, executive
committee, or a trust committee of directors or trustees and/or Responsible
Officers shall determine that the action or proceeding so directed would involve
the Trustee in personal liability.
(b) Prior to any declaration accelerating the maturity of the
Securities of any series, the holders of a majority in
<PAGE>
31
aggregate principal amount of the Securities of such series at the time
Outstanding may on behalf of the holders of all of the Securities of such series
waive any past default or Event of Default with respect to such series and its
consequences except a default in the payment of interest, if any, on, or the
principal of or premium, if any, on any Security of such series, or in the
payment of any sinking fund instalment or analogous obligation with respect to
Securities of such series, or in respect of a covenant or provision hereof which
under Section 10.02 cannot be modified or amended without the consent of the
holder of each Security affected. Upon any such waiver the Company, the Trustee
and the holders of the Securities of that series shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by this Section 6.07(b), said default or
Event of Default shall for all purposes of the Securities of such series and
this Indenture be deemed to have been cured and to be not continuing.
Section 6.08. Notice of Defaults. The Trustee shall, within 90 days
after the occurrence of a default with respect to the Securities of any series,
mail to all holders of Securities of such series, as the names and addresses of
such holders appear upon the registry books of the Company, notice of all
defaults with respect to such series known to the Trustee, unless such defaults
shall have been cured before the giving of such notice (the term "defaults" for
the purpose of this Section 6.08 being hereby defined to be the events specified
in Section 6.01 or established with respect to such Securities as contemplated
by Section 2.02, not including the periods of grace, if any, provided for
therein or established with respect to such Securities as contemplated by
Section 2.02 and irrespective of the giving of the notices specified in clauses
(d) and (e) of Section 6.01 or established with respect to such Securities as
contemplated by Section 2.02); provided, however, that except in the case of
default in the payment of the principal of, premium, if any, or interest, if
any, on any of the Securities of such series or in the making of any sinking
fund instalment or analogous obligation with respect to such series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee, or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determines that the
withholding of such notice is in the interest of the holders of Securities of
such series.
Section 6.09. Undertaking to Pay Costs. All parties to this
Indenture agree, and each holder of any Security by his acceptance thereof shall
be deemed to have agreed, that any court may in its discretion require, in any
suit for the enforcement of any right or remedy under this Indenture, or in any
suit against the Trustee for any action taken, omitted or suffered by it as
Trustee, the filing by any party litigant in such suit of an
<PAGE>
32
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 6.09 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any holder of Securities of any series or
group of such holders, holding in the aggregate more than ten percent in
principal amount of the Outstanding Securities of such series or to any suit
instituted by any Securityholder for the enforcement of the payment of the
principal of, premium, if any, or interest, if any, on any Security on or after
the due date expressed in such Security, on or after the date fixed for
redemption or repayment or after such Security shall have become due by
declaration.
ARTICLE SEVEN
CONCERNING THE TRUSTEE
Section 7.01. Duties and Responsibilities of Trustee. With respect
to the holders of any series of Securities issued hereunder, the Trustee, prior
to the occurrence of an Event of Default with respect to the Securities of such
series and after the curing or waiving of all Events of Default which may have
occurred with respect to such series, undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture. In case an Event of
Default with respect to the Securities of a series has occurred (which has not
been cured or waived) the Trustee shall exercise such of the rights and powers
vested in it by this Indenture with respect to such series, and use the same
degree of care and skill in their exercise, as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(a) prior to the occurrence of an Event of Default with respect to
the Securities of a series and after the curing or waiving of all Events
of Default with respect to such series which may have occurred:
(1) the duties and obligations of the Trustee with respect to
the Securities of a series shall be determined solely by the express
provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations as are
specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the
Trustee; and
<PAGE>
33
(2) in the absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth of the statements
and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or Officers of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(c) the Trustee shall not be liable with respect to any action
taken, omitted or suffered to be taken by it in good faith in accordance
with the direction of the holders of Securities of any series pursuant to
Section 6.07 relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture with
respect to Securities of such series.
None of the provisions of this Indenture shall be construed as
requiring the Trustee to expend or risk its own funds or otherwise to incur any
personal financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if there shall be reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
The provisions of this Section 7.01 are in furtherance of and
subject to Section 315 of the Trust Indenture Act of 1939.
Section 7.02. Reliance on Documents, Opinions, etc. In furtherance
of and subject to the Trust Indenture Act of 1939, and subject to the provisions
of Section 7.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an instrument signed in the name
of the Company by its President, its Chairman of the Board or any Vice
President and its
<PAGE>
34
Treasurer or its Controller (unless other evidence in respect thereof be
herein specifically prescribed); and any resolution of the Board of
Directors of the Company may be evidenced to the Trustee by a copy thereof
certified by the Secretary, an Assistant Secretary or an Attesting
Secretary of the Company;
(c) the Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken, omitted or suffered to be taken by it hereunder in good
faith and in accordance with such Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of
this Indenture, unless such Securityholders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred therein or thereby;
(e) the Trustee shall not be liable for any action taken, omitted or
suffered by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(f) the Trustee shall not be bound to make any inquiry or
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, note or other paper or document unless
requested in writing so to do by the holders of a majority in aggregate
principal amount of the Securities of any series affected then
Outstanding; provided, however, that if the payment within a reasonable
time to the Trustee of the costs and expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security
conferred upon it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such costs, expenses or liabilities as a
condition to so proceeding; and the reasonable expense of such
investigation shall be paid by the Company, or, if paid by the Trustee,
shall be repaid by the Company upon demand; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 7.03. No Responsibility for Recitals, etc. The recitals
contained herein and in the Securities shall be taken as the statements of the
Company (except in the Trustee's certificates of authentication), and the
Trustee assumes no
<PAGE>
35
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or the
Securities, provided that the Trustee shall not be relieved of its duty to
authenticate Securities only as authorized by this Indenture. The Trustee shall
not be accountable for the use or application by the Company or any of the
Securities or of the proceeds thereof.
Section 7.04. Ownership of Securities. The Trustee and any agent of
the Company or of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities with the same rights it would have if
it were not Trustee or such agent.
Section 7.05. Moneys to be Held in Trust. Subject to the provisions
of Sections 12.03 and 12.04 hereof, all moneys received by the Trustee or any
paying agent shall, until used or applied as herein provided, be held in trust
for the purposes for which they were received, but need not be segregated from
other funds except to the extent required by law. Neither the Trustee nor any
paying agent shall be under any liability for interest on any moneys received by
it hereunder except such as it may agree with the Company to pay thereon. So
long as no Event of Default shall have occurred and be continuing, all interest
allowed on any such moneys shall be paid from time to time upon the written
order of the Company, signed by its President, Chairman or any Vice Chairman of
the Board, or any Vice President, Treasurer or Comptroller.
Section 7.06. Compensation and Expenses of Trustee. The Company
covenants and agrees to pay to the Trustee from time to time, and the Trustee
shall be entitled to, reasonable compensation (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
and, except as otherwise expressly provided, the Company will pay or reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Indenture (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. If any property other than cash shall at any time
be subject to the lien of this Indenture, the Trustee, if and to the extent
authorized by a receivership or bankruptcy court of competent jurisdiction or by
the supplemental instrument subjecting such property to such lien, shall be
entitled to make advances for the purpose of preserving such property or of
discharging tax liens or other prior liens or encumbrances thereon. The Company
also covenants to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on the
part of the Trustee, arising out of or in connection with the acceptance or
administration of this trust and its duties hereunder, including the costs and
expenses of defending
<PAGE>
36
itself against any claim of liability in the premises. The obligations of the
Company under this Section 7.06 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder and shall survive the satisfaction
and discharge of this Indenture. Such additional indebtedness shall be secured
by a lien prior to that of the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the benefit of
the holders of particular Securities.
Section 7.07. Officers' Certificate as Evidence. Subject to the
provisions of Section 7.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking, omitting or suffering any action to be
taken hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers' Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, omitted or suffered by it under the
provisions of this Indenture upon the faith thereof.
Section 7.08. Indentures Not Creating Potential Conflicting
Interests for the Trustee. The following indentures are hereby specifically
described for the purposes of Section 310(b)(1) of the Trust Indenture Act of
1939: this Indenture with respect to the Securities of any other series.
Section 7.09. Eligibility of Trustee. The Trustee hereunder shall at
all times be a corporation organized and doing business under the laws of the
United States or any state, which (a) is authorized under such laws to exercise
corporate trust powers and (b) is subject to supervision or examination by
Federal or State authority and (c) shall have at all times a combined capital
and surplus of not less than fifty million dollars. If such corporation
publishes reports of condition at least annually, pursuant to law, or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 7.09, the combined capital and surplus of such
corporation at any time shall be deemed to be its combined capital and surplus
as set forth in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 7.09, the Trustee shall resign immediately in the manner and with
the effect specified in Section 7.10.
The provisions of this Section 7.09 are in furtherance of and
subject to Section 310(a) of the Trust Indenture Act of 1939.
<PAGE>
37
Section 7.10. Resignation or Removal of Trustee. (a) The Trustee, or
any trustee or trustees hereafter appointed, may at any time resign with respect
to any one or more or all series of Securities by giving written notice of
resignation to the Company and by mailing notice thereof to the holders of the
applicable series of Securities at their addresses as they shall appear on the
registry books of the Company. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor trustee or trustees with respect to
the applicable series by written instrument, in duplicate, executed by order of
the Board of Directors of the Company, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed with respect to any series and
have accepted appointment within 60 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Securityholder
who has been a bona fide holder of a Security or Securities of the applicable
series for at least six months may, subject to the provisions of Section 6.09,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur --
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act of 1939 with respect to
any series of Securities after written request therefor by the
Company or by any Securityholder who has been a bona fide holder of
a Security or Securities of such series for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 7.09 and Section 310(a) of the Trust
Indenture Act of 1939 with respect to any series of Securities and
shall fail to resign after written request therefor by the Company
or by any such Securityholder, or
(3) the Trustee shall become incapable of acting with respect
to any series of Securities, or shall be adjudged a bankrupt or
insolvent, or a receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation --
then, in any such case, the Company may remove the Trustee with respect to such
series and appoint a successor trustee with respect to such series by written
instrument, in duplicate,
<PAGE>
38
executed by order of the Board of Directors of the Company, one copy of which
instrument shall be delivered to the Trustee so removed and one copy to the
successor trustee, or, subject to the provisions of Section 315(e) of the Trust
Indenture Act of 1939, any Securityholder who has been a bona fide holder of a
Security or Securities of such series for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee with respect to such series. Such court may thereupon, after such
notice, if any, as it may deem proper and prescribe, remove the Trustee and
appoint a successor trustee with respect to such series.
(c) The holders of a majority in aggregate principal amount of the
Securities of one or more series (each series voting as a class) or all series
at the time Outstanding may at any time remove the Trustee with respect to the
applicable series or all series, as the case may be, and appoint with respect to
the applicable series or all series, as the case may be, a successor trustee by
written notice of such action to the Company, the Trustee and the successor
trustee.
(d) Any resignation or removal of the Trustee with respect to any
series and any appointment of a successor trustee with respect to such series
pursuant to any of the provisions of this Section 7.10 shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
7.11.
Section 7.11. Acceptance by Successor Trustee. Any successor trustee
appointed as provided in Section 7.10 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee with respect to any or all applicable series shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations with respect to such series of its predecessor hereunder, with like
effect as if originally named as trustee herein; but, nevertheless, on the
written request of the Company or of the successor trustee, the trustee ceasing
to act shall, upon payment (or due provision therefor) of any amounts then due
it pursuant to the provisions of Section 7.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers with respect to
such series of the trustee so ceasing to act. Upon request of any such successor
trustee, the Company shall execute any and all instruments in writing in order
more fully and certainly to vest in and confirm to such successor trustee all
such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a
lien upon all property or funds held or collected by such trustee to secure any
amounts then due it pursuant to the provisions of Section 7.06.
<PAGE>
39
In case of the appointment hereunder of a successor trustee with
respect to the Securities of one or more (but not all) series, the Company, the
predecessor trustee and each successor trustee with respect to the Securities of
any applicable series shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the predecessors
trustee with respect to the Securities of any series as to which the predecessor
trustee is not retiring shall continue to be vested in the predecessor trustee,
and shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such trustees co-trustees of the
same trust and that each such trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such trustee.
No successor trustee with respect to a series of Securities shall
accept appointment as provided in this Section 7.11 unless at the time of such
acceptance such successor trustee shall, with respect to such series, be
qualified under Section 310(b) of the Trust Indenture Act of 1939 and eligible
under the provisions of Section 7.09.
Upon acceptance of appointment by a successor trustee with respect
to any series as provided in this Section 7.11, the Company shall mail notice of
the succession of such trustee hereunder to the holders of Securities of such
series at their addresses as they shall appear on the registry books of the
Company. If the Company fails to mail such notice within ten days after the
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of the Company.
Section 7.12. Succession by Merger, etc. Any corporation into which
the Trustee may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trustee shall be a party, or any corporation succeeding to the corporate
trust business of the Trustee, shall be the successor to the Trustee hereunder,
provided such corporation shall be qualified under Section 310(b) of the Trust
Indenture Act of 1939 and eligible under the provisions of Section 7.09, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to
the trust created by this Indenture with respect to one or more series of
Securities, any of such Securities shall have been authenticated but not
delivered, any such successor to
<PAGE>
40
the Trustee by merger, conversion or consolidation may adopt the certificate of
authentication of any predecessor trustee, and deliver such Security so
authenticated; and in case at that time any of such Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of such successor to the Trustee or, if such
successor to the Trustee is a successor by merger, conversion or consolidation
the name of any predecessor hereunder; and in all such cases such certificate
shall have the full force which it is anywhere in such Securities or in this
Indenture provided that the certificate of the Trustee shall have.
Section 7.13. Other Matters Concerning the Trustee. The principal
corporate trust office of the Trustee at the date of this Indenture is located
at 4 Chase MetroTech Center, Brooklyn, New York, 11245 Attn: Institutional
Trust.
Section 7.14. Appointment of Authenticating Agent. The Trustee may
appoint an Authenticating Agent or Agents which shall be authorized to act on
behalf of the Trustee to authenticate Securities issued upon original issue and
upon exchange, registration of transfer, partial conversion or partial
redemption or pursuant to Section 2.07, and Securities so authenticated shall be
entitled to the benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a
<PAGE>
41
party, or any corporation succeeding to the corporate agency or corporate trust
business of an Authenticating Agent, shall continue to be an Authenticating
Agent, provided such corporation shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the Securities
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternative certificate of authentication in the following
form:
Dated:
This is one of the Securities described in the within-mentioned
Indenture.
The Chase Manhattan Bank, National Association,
As Trustee
By_____________________,
Authorized Signatory
By_____________________,
Authorized Signatory
<PAGE>
42
ARTICLE EIGHT
CONCERNING THE SECURITYHOLDERS
Section 8.01. Action by Securityholders. Whenever in this Indenture
it is provided that the holders of a specified percentage in aggregate principal
amount of the Securities of any or all series may take any action (including the
making of any demand or request, the giving of any notice, consent or waiver or
the taking of any other action) the fact that at the time of taking any such
action the holders of such specified percentage have joined therein may be
evidenced (a) by any instrument or any number of instruments of similar tenor
executed by such Securityholders in person or by agent or proxy appointed in
writing, or (b) by the record of such holders of Securities voting in favor
thereof at any meeting of such Securityholders duly called held in accordance
with the provisions of Article Nine, or (c) by a combination of such instrument
or instruments and any such record of such a meeting of such Securityholders.
Section 8.02. Proof of Execution by Securityholders. Subject to the
provisions of Section 7.01, 7.02 and 9.05, proof of the execution of any
instrument by a Securityholder or his agent or proxy shall be sufficient if made
in accordance with such reasonable rules and regulations as may be prescribed by
the Trustee or in such manner as shall be reasonably satisfactory to the
Trustee. The ownership of Securities shall be proved by the registry books of
the Company or by a certificate of the person designated by the Company to act
as repository in accordance with the provisions of Section 2.06.
The record of any Securityholders' meeting shall be proved in the
manner provided in Section 9.06.
The Company may set a record date for purposes of determining the
identity of holders of Securities of any series entitled to vote or consent to
any action referred to in Section 8.01, which record date may be set at any time
or from time to time by notice to the Trustee, for any date or dates (in the
case of any adjournment or reconsideration) not more than 60 days nor less than
five days prior to the proposed date of such vote or consent, and thereafter,
notwithstanding any other provisions hereof, with respect to Securities of any
series, only holders of Securities of such series of record on such record date
shall be entitled to so vote or give such consent or revoke such vote or
consent.
Section 8.03. Who Are Deemed Absolute Owners. The Company, the
Trustee and any agent of the Company or of the Trustee may deem the person in
whose name any Security shall be registered upon the books of the Company to be,
and may treat him as, the absolute owner of such Security (whether or not such
Security shall be overdue and notwithstanding any notation of ownership or other
writing thereon) for the purpose of receiving
<PAGE>
43
payment of or on account of the principal of, premium, if any, and interest, if
any, on such Security and for all other purposes; and neither the Company nor
the Trustee nor any agent of the Company or of the Trustee shall be affected by
any notice to the contrary. All such payments so made to any holder for the time
being, or upon his order, shall be valid, and, to the extent of the sum or sums
so paid, effectual to satisfy and discharge the liability for moneys payable
upon any such Security.
Section 8.04. Company-Owned Securities Disregarded. In determining
whether the holders of the requisite aggregate principal amount of Securities
have concurred in any demand, request, notice, direction, consent or waiver
under this Indenture, Securities which are owned by the Company or any other
obligor on the Securities with respect to which such determination is being made
or by any person directly or indirectly controlling or controlled by or under
direct or indirect common control with the Company or any other obligor on the
Securities with respect to which such determination is being made shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination; provided, that for the purposes of determining whether the
Trustee shall be protected in relying on any such demand, request, notice,
direction, consent or waiver only Securities which the Trustee knows are so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding for the purposes of this Section 8.04
if the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Securities and that the pledgee is not a person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
Section 8.05. Revocation of Consents; Future Holders Bound. At any
time prior to (but not after) the evidencing to the Trustee, as provided in
Section 8.01, of the taking of any action by the holders of the percentage in
aggregate principal amount of the Securities of any or all series, as the case
may be, specified in this Indenture in connection with such action, any holder
of a Security which is shown by the evidence to be included in the Securities
the holders of which have consented to such action may, by filing written notice
with the Trustee at its principal office and upon proof of holding as provided
in Section 8.02, revoke such action so far as concerns such Security. Except as
aforesaid any such action taken by the holder of any Security shall be
conclusive and binding upon such holder and upon all future holders of such
Security, irrespective of whether or not any notation in regard thereto is made
upon such Security or any Security issued in exchange or substitution therefor.
<PAGE>
44
ARTICLE NINE
SECURITYHOLDERS' MEETINGS
Section 9.01. Purposes of Meetings. A meeting of holders of
Securities of any or all series may be called at any time and from time to time
pursuant to the provisions of this Article Nine for any of the following
purposes:
(1) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Securityholders pursuant to any of the provisions of Article
Six;
(2) to remove the Trustee and nominate a successor trustee pursuant
to the provisions of Article Seven;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 10.02; or
(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the
Securities of any or all series, as the case may be, under any other
provision of this Indenture or under applicable law.
Section 9.02. Call of Meetings by Trustee. The Trustee may at any
time call a meeting of holders of Securities of any or all series to take any
action specified in Section 9.01, to be held at such time and at such place in
the Borough of Manhattan, The City of New York, as the Trustee shall determine.
Notice of every meeting of the holders of Securities of any or all series,
setting forth the time and the place of such meeting and in general terms the
action proposed to be taken at such meeting, shall be mailed to holders of
Securities of each series affected at their addresses as they shall appear on
the registry books of the Company. Such notice shall be mailed not less than 20
nor more than 90 days prior to the date fixed for the meeting.
Section 9.03. Call of Meetings by Company or Securityholders. In
case at any time the Company, pursuant to a resolution of its Board of
Directors, or the holders of at least ten percent in aggregate principal amount
of the Securities then Outstanding of any series that may be affected by the
action proposed to be taken at the meeting, shall have requested the Trustee to
call a meeting of the holders of Securities of all series that may be so
affected, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within 20 days after receipt of such request, then the
Company or such Securityholders, in the amount specified above,
<PAGE>
45
may determine the time and the place in said Borough of Manhattan for such
meeting and may call such meeting to take any action authorized in Section 9.01,
by mailing notice thereof as provided in Section 9.02.
Section 9.04. Qualifications for Voting. To be entitled to vote at
any meeting of Securityholders a person shall (a) be a holder of one or more
Securities with respect to which such meeting is being held or (b) be a person
appointed by an instrument in writing as proxy by a holder of one or more such
Securities. The only persons who shall be entitled to be present or to speak at
any meeting of Securityholders shall be the persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and its counsel.
Section 9.05. Regulations. Notwithstanding any other provisions of
this Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Securityholders, in regard to proof of the holder
of Securities and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, the submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders, as provided in Section 9.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each
holder of Securities with respect to which such meeting is being held or proxy
shall be entitled to one vote for each $1,000 principal amount (in the case of
Original Issue Discount Securities, such principal amount to be determined as
provided in the definition of "Security or Securities; Outstanding" in Section
1.01) of such Securities held or represented by him; provided, however, that no
vote shall be cast or counted at any meeting in respect of any such Security
challenged as not Outstanding and ruled by the chairman of the meeting to be not
Outstanding. The chairman of the meeting shall have no right to vote other than
by virtue of such Securities held by him or instruments in writing as aforesaid
duly designating him as the person to vote on behalf of other such
Securityholders. Any meeting of holders of Securities with respect to which a
meeting was duly called pursuant to the provisions of Section 9.02 or 9.03 may
be adjourned from time to time by a majority of those present, whether or not
constituting
<PAGE>
46
a quorum, and the meeting may be held as so adjourned without further notice.
Section 9.06. Voting. The vote upon any resolution submitted to any
meeting of holders of Securities with respect to which such meeting is being
held shall be by written ballots on which shall be subscribed the signatures of
such holders of Securities or of their representatives by proxy and the
principal amount (in the case of Original Issue Discount Securities, such
principal amount to be determined as provided in the definition of "Security or
Securities; Outstanding" in Section 1.01) and number or numbers of such
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Securityholders shall be prepared by the secretary of the meeting and
there shall be attached to said record the original reports of the inspectors of
votes on any vote by ballot taken thereat and affidavits by one or more persons
having knowledge of the facts setting forth a copy of the notice of the meeting
and showing that said notice was mailed as provided in Section 9.02. The record
shall show the principal amount of the Securities (in the case of Original Issue
Discount Securities, such principal amount to be determined as provided in the
definition of "Security or Securities; Outstanding" in Section 1.01) voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of
the matters therein stated.
Section 9.07. No Delay of Rights by Meeting. Nothing in this Article
Nine contained shall be deemed or construed to authorize or permit, by reason of
any call of a meeting of Securityholders of any or all series or any rights
expressly or impliedly conferred hereunder to make such call, any hindrance or
delay in the exercise of any right or rights conferred upon or reserved to the
Trustee or to the Securityholders of any or all such series under any of the
provisions of this Indenture or of the Securities.
ARTICLE TEN
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures without Consent of
Securityholders. The Company, when authorized by resolution
<PAGE>
47
of the Board of Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto for one or more of the
following purposes:
(a) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the successor
corporation of the covenants, agreements and obligations of the Company
pursuant to Article Eleven hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the holders of all or any
series of Securities (and if such covenants are to be for the benefit of
less than all series of Securities, stating that such covenants are
expressly being included for the benefit of such series) as the Board of
Directors of the Company and the Trustee shall consider to be for the
protection of the holders of such Securities, and to make the occurrence,
or the occurrence and continuance, of a default in any of such additional
covenants, restrictions or conditions a default or an Event of Default
permitting the enforcement of all or any of the several remedies provided
in this Indenture as herein set forth; provided, however, that in respect
of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the
case of other defaults) or may provide for an immediate enforcement upon
such default or may limit the remedies available to the Trustee upon such
default;
(c) to provide for the issuance under this Indenture of Securities
in coupon form (including Securities registrable as to principal only) and
to provide for exchangeability of such Securities with the Securities of
the same series issued hereunder in fully registered form and to make all
appropriate changes for such purpose;
(d) to establish the forms or terms of Securities of any series or
of the Coupons appertaining to such Securities as permitted by Sections
2.01 and 2.02;
(e) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective
or inconsistent with any other provision contained herein or in any
supplemental indenture, or to make such other provisions in regard to
matters or questions arising under this Indenture which shall not
adversely affect the interests of the holders of any Securities; and
(f) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee with respect to the Securities of one or
more series or to add to or change any of the provisions of this Indenture
as shall be necessary
<PAGE>
48
to provide for or facilitate the administration of the trusts hereunder by
more than one trustee, pursuant to the requirements of Section 7.11.
The Trustee is hereby authorized to join with the Company in the
execution of any such supplemental indenture, to make any further appropriate
agreements and stipulations which may be therein contained and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to, but may in its discretion, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section 10.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time Outstanding, notwithstanding
any of the provisions of Section 10.02.
Section 10.02. Supplemental Indentures with Consent of
Securityholders. With the consent (evidenced as provided in Section 8.01 and
8.02) of the holders of not less than 66-2/3% in the aggregate principal amount
of the Securities of each series (each series voting as a class) affected by
such supplemental indenture at the time Outstanding, the Company, when
authorized by resolution of the Board of Directors, and the Trustee may from
time to time and at any time enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or any supplemental
indenture or of modifying in any manner the rights of the holders of the
Securities or each such series of the Coupons appertaining to such Securities;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Security, or reduce the rate or extend the time of payment
of interest, if any, thereon, or reduce the principal amount or premium, if any,
thereof, or make the principal thereof or premium, if any, or interest, if any,
thereon payable in any coin or currency other than that provided in any Security
or Coupon, or impair the right of any holder of a Security to institute suit for
any such payment, or reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon an acceleration of the
maturity thereof pursuant to Section 6.01 or adversely affect the right of
repayment, if any, at the option of the holder, or extend the time, or reduce
the amount of any payment to any sinking fund or analogous obligation relating
to any Security, (ii) reduce the percentage in principal amount of Securities of
any series, the holders of which are required to consent to any such
supplemental indenture or any waiver of any past default or Event of Default
pursuant to Section 6.07(b), or (iii) modify any provision of Section 6.07(b) or
10.02 (except to increase any such percentage or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent of
the holder of each Security so affected), without,
<PAGE>
49
in the case of each of the foregoing clauses (i), (ii) and (iii), the consent of
the holder of each Security so affected. A supplemental indenture which changes
or eliminates any covenant or other provision of this Indenture which has
expressly been included solely for the benefit of one or more particular series
of Securities, or which modifies the rights of the holders of Securities of such
series with respect to such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the holders of Securities of any other
series.
Upon the request of the Company, accompanied by a copy of the
resolutions of the Board of Directors authorizing the execution and delivery of
any such supplemental indenture, and upon the filing with the Trustee of
evidence of the consent of Securityholders as aforesaid, the Trustee shall join
with the Company in the execution of such supplemental indenture unless such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Securityholders
under this Section 10.02 to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
Section 10.03. Compliance with Trust Indenture Act; Effect of
Supplemental Indentures. Any supplemental indenture executed pursuant to the
provisions of this Article Ten shall comply with the Trust Indenture Act of
1939, as then in effect. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article Ten, this Indenture shall be deemed
to be modified and amended in accordance therewith and the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Trustee, the Company and the holder of Securities shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 10.04. Notation on Securities. Securities authenticated and
delivered after the execution of any supplemental indenture pursuant to the
provisions of this Article Ten may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture. If the
Company or the Trustee shall so determine, new Securities of any series so
modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any modification of this Indenture contained in any such
supplemental indenture may be prepared and executed by the Company,
authenticated by the Trustee and
<PAGE>
50
delivered in exchange for the Securities of such series then Outstanding.
Section 10.05. Evidence of Compliance of Supplemental Indenture to
be Furnished Trustee. The Trustee, subject to the provisions of Sections 7.01
and 7.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Ten.
ARTICLE ELEVEN
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 11.01. Company May Not Consolidate, etc., Except Under
Certain Conditions. The Company covenants that it will not merge or consolidate
with any other Person or sell, convey, transfer or otherwise dispose of all or
substantially all of its assets to any other Person, unless (i) either the
Company shall be the continuing corporation, or the successor Person (if other
than the Company) shall be a corporation organized and existing under the laws
of the United States of America or a state thereof and such corporation shall
expressly assume the due and punctual payment of the principal of, and premium,
if any, and interest, if any, on all the Securities according to their tenor,
and the due and punctual performance and observance of all of the covenants and
conditions of this Indenture to be performed by the Company by supplemental
indenture satisfactory to the Trustee, executed and delivered to the Trustee by
such corporation, and (ii) the Company or such successor corporation, as the
case may be, shall not, immediately after such merger or consolidation, or such
sale, conveyance, transfer or other disposition, be in default in the
performance of any such covenant or condition. In the event of any such sale,
conveyance (other than by way of lease), transfer or other disposition, the
predecessor company may be dissolved, wound up and liquidated at any time
thereafter.
Section 11.02. Successor Corporation to be Substituted. In case of
any such consolidation, merger, sale, conveyance (other than by way of lease),
transfer or other disposition, and upon any such assumption by the successor
corporation, such successor corporation shall succeed to and be substituted for
the Company, with the same effect as if it had been named herein as the Company,
and the Company shall be relieved of any further obligation under this Indenture
and under the Securities. Such successor corporation thereupon may cause to be
signed, and may issue either in its own name or in the name of GE Financial
Assurance Holdings, Inc., any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of such successor corporation, instead of the
Company, and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
<PAGE>
51
Securities which previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication, and any Securities which such
successor corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Securities so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Securities
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Securities had been issued at the date of the execution
hereof.
In case of any such consolidation, merger, sale, conveyance,
transfer or other disposition, such changes in phraseology and form (but not in
substance) may be made in the Securities thereafter to be issued as may be
appropriate.
Section 11.03. Documents to be Given Trustee. The Trustee, subject
to the provisions of Sections 7.01 and 7.02, may receive an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale, conveyance, transfer or other disposition, and any
such assumption, comply with the provisions of this Article Eleven.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE
Section 12.01. Discharge of Indenture. When (a) the Company shall
deliver to the Trustee for cancellation all Securities theretofore authenticated
(other than any Securities which shall have been destroyed, lost or stolen or in
lieu of or in substitution for which other Securities shall have been
authenticated and delivered, or which shall have been paid, pursuant to the
provisions of Section 2.07) and not theretofore cancelled, or (b) all the
Securities not theretofore cancelled or delivered to the Trustee for
cancellation shall have become due and payable, or are by their terms to become
due and payable within one year or are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of notice of
redemption, and the Company shall deposit with the Trustee, in trust, funds
sufficient to pay at maturity or upon redemption all of the Securities (other
than any (i) Securities which shall have been mutilated, destroyed, lost or
stolen and in lieu of or in substitution for which other Securities shall have
been authenticated and delivered, or which shall have been paid, pursuant to the
provisions of Section 2.07 or (ii) Securities for whose payment money has
theretofore been deposited in trust and thereafter repaid to the Company as
provided in Section 12.04) not theretofore cancelled or delivered to the Trustee
for cancellation, including principal, premium, if any, and interest, if any,
due or to become due to such date of maturity or date fixed for redemption, as
the case may be, and if in either case the Company shall also pay or cause to be
paid all other sums payable hereunder by the Company, then this Indenture
<PAGE>
52
shall cease to be of further effect (except as to (i) rights of registration of
transfer and exchange of Securities, (ii) substitution of mutilated, defaced,
destroyed, lost or stolen Securities, (iii) rights of holders to receive
payments of principal thereof and interest thereon, and remaining rights of the
holders to receive mandatory sinking fund payments, if any, (iv) the rights,
obligations and immunities of the Trustee hereunder and (v) the rights of the
Securityholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them), and the Trustee, on
demand of the Company accompanied by an Officers' Certificate and an Opinion of
Counsel and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture, the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Securities.
Section 12.02. Deposited Moneys to be Held in Trust by Trustee. All
moneys deposited with the Trustee pursuant to the provisions of Section 12.01
shall be held in trust and applied by it to the payment, either directly or
through any paying agent (including the Company if acting as its own paying
agent), to the holders of the particular Securities for payment or redemption of
which such moneys have been deposited with the Trustee, of all sums due and to
become due thereon for principal, premium, if any, and interest, if any.
Section 12.03. Paying Agent to Repay Moneys Held. Upon the
satisfaction and discharge of this Indenture all moneys then held by any paying
agent of the Securities (other than the Trustee) shall, upon demand of the
Company, be repaid to it or paid to the Trustee, and thereupon such paying agent
shall be released from all further liability with respect to such moneys.
Section 12.04. Return of Unclaimed Moneys. Any moneys deposited with
or paid to the Trustee for payment of the principal of, premium, if any, or
interest, if any, on Securities of any series and not applied but remaining
unclaimed by the holders of Securities of that series for six years after the
date upon which the principal of, premium, if any, or interest, if any, on such
Securities, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on written demand; and the holder of any
such Securities shall thereafter look only to the Company for any payment which
such holder may be entitled to collect.
<PAGE>
53
ARTICLE THIRTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
Section 13.01. Indenture and Securities Solely Corporate
Obligations. No recourse for the payment of the principal of, premium, if any,
or interest, if any, on any Security, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any supplemental
indenture, or in any Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder, officer
or director, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issue of the Securities.
ARTICLE FOURTEEN
MISCELLANEOUS PROVISIONS
Section 14.01. Provisions Binding on Company's Successors. All the
covenants, stipulations, promises and agreements in this Indenture contained by
the Company shall bind its successors and assigns whether so expressed or not.
Section 14.02. Official Acts by Successor Corporation. Any act or
proceeding by any provision of this Indenture authorized or required to be done
or performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
Section 14.03. Addresses for Notices, etc. Any notice or demand
which by any provision of this Indenture is required or permitted to be given or
served by the Trustee or by the holders of Securities on the Company may be
given or served by being deposited postage prepaid by first class mail in a post
office letter box addressed (until another address in filed by the Company with
the Trustee) to GE Financial Assurance Holdings, Inc., 6604 West Broad Street,
Richmond, Virginia 23230. Any notice, direction, request or demand by any
Securityholder to or upon the Trustee shall be deemed to have been sufficiently
given or made, for all purposes, if given or made in writing at the principal
office of the Trustee, addressed to the attention of its corporate trust office
as specified in Section 7.13 hereof.
<PAGE>
54
Section 14.04. New York Contract. This Indenture and each Security
shall be deemed to be a contract made under the laws of the State of New York,
and for all purposes shall be construed in accordance with the laws of said
State.
Section 14.05. Evidence of Compliance with Conditions Precedent.
Upon any application or demand by the Company to the Trustee to take any action
under any of the provisions of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include: (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinion contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Section 14.06. Legal Holidays. In any case where the date of
maturity of interest, if any, on or principal of, or premium, if any, on the
Securities or the date fixed for redemption or repayment of any Security will be
in The City of New York, New York, a Saturday, a Sunday, a legal holiday or a
day on which banking institutions are authorized or required by law or executive
order to close or remain closed, then payment of such interest, if any, on or
principal of or premium, if any, on the Securities need not be made on such date
but may be made on the next succeeding day not in such city, a Saturday, a
Sunday, a legal holiday or a day on which banking institutions are authorized or
required by law or executive order to close or remain closed, with the same
force and effect as if made on the date of maturity or a date fixed for
redemption or repayment, and no interest shall accrue for the period from and
after such date.
Section 14.07. Securities in a Specified Currency other than
Dollars. Unless otherwise specified as contemplated by Section 2.02 with respect
to a particular series of Securities, whenever for purposes of this Indenture
any action may be taken by the holders of a specified percentage in aggregate
principal amount of Securities of all series or all series affected by a
particular action at the time Outstanding and, at such time, there are
Outstanding any Securities of any series which are
<PAGE>
55
denominated in a Specified Currency other than Dollars (including European
Currency Units ("ECU")), then the principal amount of Securities of such series
which shall be deemed to be Outstanding for the purpose of taking such action
shall be that amount of Dollars that could be obtained for such amount of such
Specified Currency at the Market Exchange Rate. For purposes of this Section
14.07, Market Exchange Rate shall mean the noon Dollar buying rate in New York
City for cable transfers of the Specified Currency published by the Federal
Reserve Bank of New York; provided, however, in the case of ECUs, Market
Exchange Rate shall mean the rate of exchange determined by the Commission of
the European Communities (or any successor thereto) as published in the Official
Journal of the European Communities (such publication or any successor
publication, the "Journal"). If such Market Exchange Rate is not available for
any reason with respect to such Specified Currency, the Trustee shall use, in
its sole discretion and without liability on its part, such quotation of the
Federal Reserve Bank of New York or, in the case of ECUs, the rate of exchange
from one or more major banks in The City of New York or in the country of issue
of the currency in question, which for purposes of the ECU shall be Brussels,
Belgium, or such other quotations or, in the case of ECU, rates of exchange as
the Trustee shall deem appropriate. The provisions of this paragraph shall apply
in determining the equivalent principal amount in respect of Securities of a
series denominated in a Specified Currency other than Dollars in connection with
any action taken by holders of Securities pursuant to the terms of this
Indenture, including, without limitation, any determination contemplated in
Section 6.01(d) or (e).
All decisions and determination of the Trustee regarding the Market
Exchange Rate or any alternative determination provided for in the preceding
paragraph shall be in its sole discretion and shall, in the absence of manifest
error, be conclusive to the extent permitted by law for all purposes and
irrevocably binding upon the Company and all Securityholders.
Section 14.08. Trust Indenture Act to Control. If and to the extent
that any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, Sections 310 to 318, inclusive, of
the Trust Indenture Act of 1939, such imposed duties or incorporated provision
shall control.
Section 14.09. Table of Contents, Headings, etc. The table of
contents and the titles and headings of the articles and sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof, and shall in no way modify or restrict any of the
terms or provisions hereof.
Section 14.10. Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of
<PAGE>
56
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
Section 14.11. Separability; Benefits. In case any provision in this
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Nothing in this Indenture or in the Securities, expressed or
implied, shall give to any person, other than the parties hereto and their
successors hereunder, and the holders of the Securities, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
<PAGE>
57
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of _________, 199__.
GE FINANCIAL ASSURANCE HOLDINGS, INC.
By________________________
[CORPORATE SEAL]
Attest:
By________________________
THE CHASE MANHATTAN BANK,
NATIONAL ASSOCIATION
By________________________
[CORPORATE SEAL]
Attest:
By________________________
<PAGE>
58
STATE OF )
) ss.:
COUNTY OF )
On this day of before me personally came to me
personally known, who, being by me duly sworn, did depose and say that he
resides at that he is a
of GE Financial Assurance Holdings, Inc., one of
the corporations described in and which executed the above instrument; that he
knows the corporate seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name thereto by
like authority.
[NOTARIAL SEAL]
-------------------------
Notary Public
<PAGE>
59
STATE OF )
) ss.:
COUNTY OF )
On this day of before me personally came
to me personally known, who, being by me duly sworn,
did depose and say that he resides at that he is a
of The Chase Manhattan Bank, National Association,
one of the corporations described in and which executed the above instrument;
that he knows the corporate seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
[NOTARIAL SEAL]
-------------------------
Notary Public
<PAGE>
EXHIBIT 5
[SIMPSON THACHER & BARTLETT LETTERHEAD]
November 13, 1997
GE Financial Assurance Holdings, Inc.
6604 West Broad Street
Richmond, Virginia 23230
Ladies and Gentlemen:
We have acted as counsel to GE Financial Assurance Holdings, Inc., a
Delaware corporation (the "Company"), in connection with the registration
statement on Form S-3 being filed by the Company under the Securities Act of
1933, as amended (the "Act") (the "Registration Statement"), relating to
senior, unsecured debt securities of the Company (the "Debt Securities").
The Debt Securities will be sold or delivered from time to time as set
forth in the Registration Statement, any amendment thereto, the prospectus
contained therein (the "Prospectus") and supplements to the Prospectus (the
"Prospectus Supplements"). The Debt Securities will be issued under an
Indenture to be executed by the Company and the Trustee (the "Indenture").
We have examined the Certificate of Incorporation and Bylaws of the
Company and the form of Indenture. In addition, we have examined, and have
relied as to matters of fact upon, originals or copies, certified or
otherwise identified to our satisfaction, of such corporate records,
agreements, documents and other instruments and such certificates or
comparable documents of public officials and of officers and representatives
of the Company, and have made such other and further investigations, as we
have deemed relevant and necessary as a basis for the opinions hereinafter
set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as
<PAGE>
GE Financial Assurance -2- November 13, 1997
Holdings, Inc.
certified or photostatic copies, and the authenticity of the originals of
such latter documents. In addition, we have assumed that (i) a Prospectus
Supplement will have been prepared and filed with the Securities and Exchange
Commission describing the Securities; (ii) all Securities issued will be
issued and sold in compliance with applicable federal and state securities
laws and solely in the manner stated in the Registration Statement and the
appropriate Prospectus Supplement; and (iii) a definitive purchase,
underwriting or similar agreement with respect to any Debt Securities will
have been duly authorized and validly executed and delivered by the
Company and the other parties thereto.
Based upon and subject to the foregoing, we are of the opinion that
with respect to the Debt Securities to be issued under the Indenture, when
(i) the Indenture has been duly authorized and validly executed and delivered
by the Company and the trustee thereunder, (ii) the Indenture has been duly
qualified under the Trust Indenture Act of 1939, as amended, (iii) the Board
of Directors of the Company has taken all necessary corporate action to
approve the issuance and terms of such Debt Securities, the terms of the
offering thereof and related matters, and (iv) such Debt Securities have been
duly executed, authenticated, issued and delivered in accordance with the
provisions of the Indenture and the definitive purchase, underwriting or
similar agreement approved by the Board of Directors of the Company upon
payment of the consideration therefor provided for therein, such Debt
Securities will be legally issued and will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms.
Our opinion set forth above is subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State
of New York, the federal law of the United States and the Delaware General
Corporation Law.
<PAGE>
GE Financial Assurance -3- November 13, 1997
Holdings, Inc.
This opinion letter is rendered to you in connection with the
above-described transactions. The opinion letter may not be relied upon by
you for any other purpose, or relied upon, or furnished to, any other person,
firm or corporation without our prior written consent; provided, however,
that we hereby consent to the filing of this opinion as an Exhibit 5 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s/ Simpson Thacher & Bartlett
------------------------------
SIMPSON THACHER & BARTLETT
<PAGE>
Exhibit 12
GE FINANCIAL ASSURANCE HOLDINGS, INC.
AND CONSOLIDATED AFFILIATES
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Nine Months
Ended Years Ended December 31, Six Months
December 31, ------------------------------------------------ Ended June 30,
1993 1994 1995 1996 1997
-------------- ------------- ------------- ------------- -------------
(Dollar amounts in millions)
<S> <C> <C> <C> <C> <C>
Net earnings ..................................... $ 35 $ 72 $ 101 $ 229 $ 203
Provision for income taxes ....................... 15 51 67 140 128
Minority interest in net earnings of
consolidated affiliates ......................... -- -- -- 1 --
----- ----- ----- ------ -----
Income before provision for income taxes
and minority interest ........................... 50 123 168 370 331
Fixed charges:
Interest ........................................ -- -- -- 1 6
One-third of rentals ............................ 1 3 3 5 4
----- ----- ----- ------ -----
Total fixed charges .............................. 1 3 3 6 10
Less interest capitalized, net of
amortization .................................... -- -- -- -- --
----- ----- ----- ------ -----
Earnings before provision for income taxes
and minority interest plus fixed charges ........ $ 51 $ 126 $ 171 $ 376 $ 341
===== ===== ===== ====== =====
Ratio of earnings to fixed charges ............... 51 42 57 63 34
===== ===== ===== ====== =====
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
GE Financial Assurance Holdings, Inc.
The Board of Directors
The Life Insurance Company of Virginia
We consent to the use of our reports incorporated herein by reference and to the
references to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
November 12, 1997
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-XXXXX) and related Prospectus of GE
Financial Assurance Holdings, Inc. for the registration of $1,000,000,000 of
debt securities and to the incorporation by reference therein from GE
Financial Assurance's Registration Statement on Form 10 of our report dated
December 15, 1995 on the financial statements of AMEX Life Assurance Company
at October 2, 1995, and for the period from January 1, 1995 to October 2,
1995, and our report dated February 8, 1996 on the financial statements of
Life Insurance Company of Virginia at December 31, 1995 and for the two years
then ended, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Los Angeles, California
November 11, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement
of GE Financial Assurance Holdings, Inc. on Form S-3, filed on November 13,
1997, of our report dated May 20, 1997, on our audits of the consolidated
financial statements First Colony Corporation and subsidiaries as of
November 30, 1996 and December 31, 1995, and for the period from January 1 to
November 30, 1996, and the years ended December 31, 1995 and 1994, and to the
reference to us under the heading "Experts" in the Prospectus which is part
of this Registration Statement.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Washington, D.C.
November 13, 1997
<PAGE>
Exhibit 25
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
GE Financial Assurance Holdings, Inc.
(Exact name of obligor as specified in its charter)
Delaware 54-1829180
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6604 West Broad Street
Richmond, Virginia 23230
(Address of principal executive offices) (Zip Code)
---------------------------------------------
Debt Securities
(Title of the indenture securities)
-------------------------------------------------------------------
<PAGE>
-2-
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
-3-
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 5th day of November, 1997.
THE CHASE MANHATTAN BANK
By /s/ James P. Freeman
----------------------------------
James P. Freeman
Assistant Vice President
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .............................................. $ 13,892
Interest-bearing balances ...................................... 4,282
Securities: .........................................................
Held to maturity securities........................................... 2,857
Available for sale securities......................................... 34,091
Federal Funds sold and securities purchased under
agreements to resell ........................................... 29,970
Loans and lease financing receivables:
Loans and leases, net of unearned income $124,827
Less: Allowance for loan and lease losses 2,753
Less: Allocated transfer risk reserve .... 13
--------
Loans and leases, net of unearned income,
allowance, and reserve ......................................... 122,061
Trading Assets ....................................................... 56,042
Premises and fixed assets (including capitalized
leases)......................................................... 2,904
Other real estate owned .............................................. 306
Investments in unconsolidated subsidiaries and
associated companies............................................ 232
Customers' liability to this bank on acceptances
outstanding .................................................... 2,092
Intangible assets .................................................... 1,532
Other assets ......................................................... 10,448
------
TOTAL ASSETS ......................................................... $280,709
========
- 4 -
<PAGE>
LIABILITIES
Deposits
In domestic offices ............................................ $ 91,249
Noninterest-bearing ....................... $38,157
Interest-bearing .......................... 53,092
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ...................................................... 70,192
Noninterest-bearing ............................. $ 3,712
Interest-bearing .......................... 66,480
Federal funds purchased and securities sold under
agreements to repurchase ............................................. 35,185
Demand notes issued to the U.S. Treasury ............................. 1,000
Trading liabilities .................................................. 42,307
Other Borrowed money (includes mortgage indebtedness and obligations
under calitalized leases):
With a remaining maturity of one year or less .................. 4,593
With a remaining maturity of more than one year
through three years...................................... 260
With a remaining maturity of more than three years.............. 146
Bank's liability on acceptances executed and outstanding 2,092
Subordinated notes and debentures .................................... 5,715
Other liabilities .................................................... 11,373
TOTAL LIABILITIES .................................................... 264,112
-------
EQUITY CAPITAL
Perpetual Preferred stock and related surplus......................... 0
Common stock ......................................................... 1,211
Surplus (exclude all surplus related to preferred stock)............. 10,283
Undivided profits and capital reserves ............................... 5,280
Net unrealized holding gains (Losses)
on available-for-sale securities ..................................... (193)
Cumulative foreign currency translation adjustments .................. 16
TOTAL EQUITY CAPITAL ................................................. 16,597
------
TOTAL LIABILITIES AND EQUITY CAPITAL ................................. $280,709
========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best
of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us,
and to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR.)
-5-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THE GE FINANCIAL ASSURANCE HOLDINGS, INC., AND SUBSIDIARIES CONSOLIDATED
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND
1996 AND THE SIX-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 JUN-30-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<DEBT-HELD-FOR-SALE> 31,502 32,501
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 494 387
<MORTGAGE> 2,426 2,477
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 35,810 36,737
<CASH> 50 43
<RECOVER-REINSURE> 1,674 1,696
<DEFERRED-ACQUISITION> 488 697
<TOTAL-ASSETS> 45,361 47,014
<POLICY-LOSSES> 33,449 34,075
<UNEARNED-PREMIUMS> 813 841
<POLICY-OTHER> 879 867
<POLICY-HOLDER-FUNDS> 352 450
<NOTES-PAYABLE> 175 175
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 5,721 6,093
<TOTAL-LIABILITY-AND-EQUITY> 45,361 47,014
1,386 1,013
<INVESTMENT-INCOME> 1,773 1,352
<INVESTMENT-GAINS> 15 28
<OTHER-INCOME> 192 212
<BENEFITS> 2,269 1,738
<UNDERWRITING-AMORTIZATION> 59 58
<UNDERWRITING-OTHER> 668 478
<INCOME-PRETAX> 370 335
<INCOME-TAX> 140 128
<INCOME-CONTINUING> 229 203
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 229 203
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0 0
<PROVISION-PRIOR> 0 0
<PAYMENTS-CURRENT> 0 0
<PAYMENTS-PRIOR> 0 0
<RESERVE-CLOSE> 0 0
<CUMULATIVE-DEFICIENCY> 0 0
</TABLE>
