<PAGE>
As filed with the Securities and Exchange Commission on March 30, 1994
Registration No. 33-52785
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Amendment No. 1
To
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------
CAPITAL HOLDING LLC CAPITAL HOLDING CORPORATION
(Exact name of Registrant as (Exact name of Guarantor as
specified in its charter) specified in its charter)
Turks and Caicos Islands Delaware
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
Applied for 51-0108922
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
c/o Gregory P. Givan Robert L. Walker
Second Vice President- Senior Vice President-Finance
Corporate Finance and Chief Financial Officer
Capital Holding Corporation Capital Holding Corporation
Capital Holding Center Capital Holding Center
400 West Market Street 400 West Market Street
Louisville, Kentucky 40202 Louisville, Kentucky 40202
(502) 560-2000 (502) 560-2000
(Address, including zip code, and (Address, including zip code, and
telephone number, including area telephone number, including area
code, of Registrant's principal code, of Guarantor's principal
executive offices and agent for executive offices and agent for
service) service)
----------
Copies to:
C. Craig Bradley, Jr., Esq. Robert M. Thomas, Jr., Esq.
Stites & Harbison Sullivan & Cromwell
400 West Market Street 125 Broad Street
Louisville, Kentucky 40202 New York, New York 10004
----------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [_]
----------
THE REGISTRANT AND THE GUARANTOR HEREBY AMEND THIS REGISTRATION STATEMENT ON
SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT AND THE GUARANTOR 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.
==============================================================================
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<PAGE>
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.
SUBJECT TO COMPLETION, DATED ____________________, 1994
4,000,000 SHARES
CAPITAL HOLDING LLC
___% CUMULATIVE MONTHLY INCOME PREFERRED SHARES ("MIPS"*)
(LIQUIDATION PREFERENCE $25 PER SHARE)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
CAPITAL HOLDING CORPORATION
______________
The ___% Cumulative Monthly Income Preferred Shares (the "MIPS"* or the
"Preferred Shares"), liquidation preference $25 per share, offered hereby
are being issued by Capital Holding LLC, a limited life company organized
under the laws of the Turks and Caicos Islands (the "Company"). The
Company is a wholly owned subsidiary of Capital Holding Corporation, a
Delaware corporation ("Capital Holding").
The payment of dividends, if and to the extent declared out of moneys
held by the Company and legally available therefor, and payments on
liquidation or redemption with respect to the Preferred Shares, are
guaranteed by Capital Holding to the extent described herein. The Preferred
Shares will entitle holders to receive cumulative preferential cash
dividends, at an annual rate of ___% of the liquidation preference of $25
per share, accruing from the date of original issuance and payable, in
United States dollars, monthly in arrears on the last day of each calendar
month of each year, commencing _____________, 1994. No portion of the
dividends received by a holder of the Preferred Shares will be eligible for
the dividends received deduction for United States federal income tax
purposes. See "Taxation-United States."
The Preferred Shares are redeemable, at the option of the Company (with
Capital Holding's consent) in whole or in part from time to time, at $25
per share on or after ______________, 1999, plus in each case accumulated
and unpaid dividends to the date fixed for redemption, and will be
redeemed, under certain other circumstances, including from the proceeds of
any prepayment and repayment of the loan to Capital Holding of the proceeds
from the sale of the Preferred Shares. The Preferred Shares are also
redeemable in whole at the option of the Company (with Capital Holding's
consent) at any time after _____________, 1994 in the event of a change in
tax laws or regulations affecting the taxation or deductibility of interest
payments on such loan. In addition, if at any time the Company or Capital
Holding is or would be required to pay certain additional amounts or to
withhold or deduct certain amounts, the Preferred Shares are redeemable at
the option of the Company (with Capital Holding's consent), from time to
time, at $25 per share plus accumulated and unpaid dividends to the date
fixed for redemption. See "Description of Preferred Shares-Optional
Redemption."
In the event of liquidation of the Company, holders of the Preferred
Shares will be entitled to receive for each Preferred Share a liquidation
preference of $25 plus accumulated and unpaid dividends to the date of
payment, subject to certain limitations. See "Description of Preferred
Shares-Liquidation Distribution."
See "Capital Holding LLC," "Description of Preferred Shares-Mandatory
Redemption," "Description of the Guarantee" and "Description of the
Loans" herein for descriptions of various contractual backup undertakings of
Capital Holding relating to the Preferred Shares.
Application has been made for listing of the Preferred Shares on the New
York Stock Exchange.
______________
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.
______________
<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to
Offering Price Commissions (1) Company (2)(3)
-------------- --------------- ---------------
<S> <C> <C> <C>
Per Share.. $ (2) $
Total...... $ (2) $
-------------- -- -----------
</TABLE>
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED
SHARES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK
EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
____________
FOR NORTH CAROLINA RESIDENTS ONLY: The Commissioner of Insurance of the State
of North Carolina has not approved or disapproved the offering, nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus.
____________
AVAILABLE INFORMATION
The Company and Capital Holding have filed with the Securities and Exchange
Commission (the "SEC") a joint Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Preferred
Shares. This Prospectus does not contain all information set forth in the
Registration Statement; certain parts are omitted in accordance with SEC
regulations. Reference is hereby made to such Registration Statement and the
exhibits filed as a part of it for further information on the Company, Capital
Holding and the Preferred Shares.
Capital Holding is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and files
reports, proxy statements, and other information under the Exchange Act with
the SEC. Such reports, proxy statements, and other information can be
inspected and copied at the SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at its regional offices at 7 World Trade Center,
Suite 1300, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies may also be
obtained from the SEC's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Copies of such material and other
information about Capital Holding can also be inspected at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005; and
the Pacific Stock Exchange, 301 Pine Street, San Francisco, California.
No separate financial statements of the Company have been included herein.
The Company and Capital Holding do not consider that such financial statements
would be material to holders of the Preferred Shares because the Company is a
newly organized special purpose entity, has no operating history and no
independent operations and is not engaged in any activity other than the
issuance of the Preferred Shares and its common shares, and the lending of the
proceeds thereof to Capital Holding. See "Capital Holding LLC." The Company
is a limited life company organized under the laws of the Turks and Caicos
Islands
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and will be managed by Capital Holding, which directly or indirectly owns all
of the Company's common shares, which are nontransferable. The Company has no
physical assets located within the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon the Company or to enforce against it in the United States courts
judgments obtained in such courts predicated upon civil liability provisions
of the federal securities laws of the United States. The Company has been
advised by its Turks and Caicos Islands legal counsel, Misick and Stanbrook,
that there may be doubt as to the enforceability, in the Turks and Caicos
Islands in original actions or in actions for enforcement of judgments of
United States courts, of liabilities predicated solely upon the federal
securities laws of the United States.
____________
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document, filed by Capital Holding with the SEC (File No. 1-
6701) under the Exchange Act, is incorporated herein by reference:
Capital Holding's Annual Report on Form 10-K for the year ended December
31, 1993 (which incorporates by reference certain portions of the 1993 Annual
Report to Shareholders and the Proxy Statement for the Annual Meeting of
Shareholders to be held on May 11, 1994).
All documents filed by Capital Holding under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Prospectus and before the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part of it from the respective dates such
documents are filed. Any statement contained in a document all or a portion of
which is incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for the purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statements so modified shall not be deemed to be a part of this Prospectus,
except as so modified, and any statement so superseded shall not be deemed to
constitute part of this Prospectus.
Capital Holding will provide without charge to each person to whom this
Prospectus is delivered (including any beneficial owner), on written or oral
request, a copy of any or all of the documents incorporated in this Prospectus
by reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
made to Capital Holding Corporation, P.O. Box 32830, Louisville, Kentucky
40232, Attention: Office of the Secretary, Telephone: (502) 560-2000.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements included elsewhere in this
Prospectus or incorporated herein by reference.
THE COMPANY AND CAPITAL HOLDING
Capital Holding LLC (the "Company"), a wholly owned special purpose
subsidiary of Capital Holding Corporation ("Capital Holding"), is a Turks and
Caicos Islands limited life company formed solely for the purpose of issuing
common and preferred shares, including the Preferred Shares, and lending the
proceeds thereof to Capital Holding.
Capital Holding is a diversified insurance and financial services holding
company. Capital Holding provides its subsidiaries with general management
support, including data processing, legal, and financial services. Capital
Holding markets products and services through its subsidiaries, one or more of
which is licensed to do business in all 50 states, in Puerto Rico, and in the
District of Columbia.
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Shares Offered........................ 4,000,000 shares of _____% Cumulative
Monthly Income Preferred Shares.
Issuer................................ Capital Holding LLC, a special
purpose Turks and Caicos Islands
limited life company wholly owned by
Capital Holding Corporation.
Guarantor............................. Capital Holding Corporation.
Liquidation Preference................ $25 per share, plus accumulated and
unpaid dividends.
Dividends............................. Cumulative at the annual rate of
_____% of the stated liquidation
preference per share, payable monthly
in arrears on the last day of each
calendar month, commencing
________________, 1994.
Redemption............................ Not redeemable prior to ____________,
1999 (except in the event certain
withholding taxes are imposed or in
other limited circumstances described
herein under "Description of the
Preferred Shares-Optional
Redemption"). Thereafter, redeemable
at the option of the Company, subject
to the prior consent of Capital
Holding, in whole or in part, at any
time and from
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
time to time, or mandatorily in the
event of a prepayment by Capital Holding
of the Loans under the Loan Agreement
(each as defined below), at $25 per
share plus accumulated and unpaid
dividends. Redeemable in whole at any
time after ________, 1994 at the option
of the Company (with Capital Holding's
consent) in the event of a change in tax
laws or regulations affecting the
taxation or deductibility of interest
payments on the Loans (as defined
below).
Merger, Consolidation or
Replacement of the Company.......... The Company may not consolidate or
merge with, or be replaced by or be
continued as, or transfer its properties
and assets substantially as an entirety
to, any corporation or other body,
except under certain circumstances. See
"Description of Preferred Shares--
Merger, Consolidation or Replacement of
the Company."
Listing............................... New York Stock Exchange (Symbol:
________).
Use of Proceeds....................... All proceeds will be lent (the
"Loans") by the Company to Capital
Holding under a Loan Agreement (the
"Loan Agreement") to repay certain
short-term indebtedness incurred by
Capital Holding to redeem its
Adjustable Rate Preferred Stock,
Series F, par value $5 per share.
Backup Undertakings of Capital
Holding:
Payment and Guarantee Agreement
Obligations....................... Capital Holding irrevocably and
unconditionally guarantees (the
"Guarantee") the Company's payment
of: (i) all legally declared and
unpaid dividends, (ii) all redemption
payments to the extent of funds
legally available therefor and (iii)
in the event of liquidation, the
lesser of (a) the liquidation
preference plus accumulated and
unpaid dividends and (b) assets of
the Company legally available in
liquidation to holders of Preferred
Shares. The Guarantee is directly
enforceable by holders of Preferred
Shares and is subordinate to all
liabilities of Capital Holding.
Loan Agreement Obligations........... Under the Loan Agreement, Capital
Holding is obligated to pay (i)
interest at _____% per annum, and, in
certain circumstances to pay
Additional Interest (as hereinafter
defined), in order to allow full
payment of all dividends on Preferred
Shares (see "Description of the
Loans-Interest") (subject to certain
rights of extension described under
"Description of the
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Loans-Extended Interest Payment
Period"), (ii) principal in an amount
equal to all amounts payable by the
Company to holders of Preferred
Shares on account of mandatory or
optional redemptions of Preferred
Shares, and (iii) the entire
principal amount upon the
dissolution, wind-up or liquidation
of the Company or Capital Holding.
The obligations of Capital Holding
under the Loan Agreement are directly
enforceable by holders of Preferred
Shares, and are subordinate to the
extent described herein.
Related Guarantee and Loan Agreement
Covenants........................... Under the Payment and Guarantee
Agreement and the Loan Agreement,
Capital Holding covenants, among
other things, (i) to maintain
ownership of all capital stock of the
Company other than Preferred Shares,
(ii) not to voluntarily dissolve,
wind-up or liquidate the Company so
long as the Loans (and any Preferred
Shares) are outstanding and (iii) to
remain as Manager (as defined herein) of
the Company and timely perform its
duties as Manager (including the duty to
declare and pay dividends on the
Preferred Shares).
Certain Investment Considerations.... Prospective purchasers of Preferred
Shares should carefully review the
information contained elsewhere in
this Prospectus and should
particularly consider the following
matters:
Capital Holding's obligations under
the Guarantee are subordinate and
junior in right of payment to all
other liabilities of Capital Holding,
and its obligations under the Loan
Agreement are subordinate and junior
in right of payment to all Senior
Indebtedness of Capital Holding (as
defined under
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
"Description of Loans-Subordination")
of Capital Holding.
The Company is a newly-formed,
limited life subsidiary of Capital
Holding organized under the laws of
the Turks and Caicos Islands with no
physical assets located in the United
States. As a result it may not be
possible for purchasers of the
Preferred Shares to effect service of
process within the United States upon
the Company or to enforce civil
judgments against the Company in
United States courts based upon
federal securities laws of the United
States. In addition, there may be
doubt as to the enforceability of
actions based upon the federal
securities laws of the United States
in the Turks and Caicos Islands
courts.
Capital Holding has the right under
the Loan Agreement to extend interest
payment periods for up to 18 months,
and, as a consequence, monthly
dividends on the Preferred Shares can
be deferred (but will continue to
accumulate) by the Company during any
such extended interest payment
period. In the event that Capital
Holding exercises this right, Capital
Holding may not declare dividends on
any share of its preferred or common
stock, and therefore, the extension
of a payment period is, in the view
of the Company and Capital Holding,
remote. See "Description of the
Loans-Interest".
Should an extended interest payment
period occur, the Company will
continue to accrue income for U.S.
federal income tax purposes which
will be allocated, but not
distributed, to record holders of
Preferred Shares. As a result, such
holders will include interest in
gross income for U.S. federal income
tax purposes in advance of the
receipt of cash, and any such holders
who dispose of Preferred
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Shares prior to the record date for
payment of dividends following such
period will also include interest in
gross income but will not receive
cash related thereto. See
"Taxation-United States-Potential
Extension of Interest Payment Period".
</TABLE>
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<PAGE>
RECENT DEVELOPMENT
On February 16, 1994, the Capital Holding Board of Directors approved a
recommendation that shareholders approve an amendment to Capital Holding's
Certificate of Incorporation which would change the name of the corporation
from Capital Holding Corporation to Providian Corporation. Shareholders will
vote on this recommendation at Capital Holding's annual meeting on May 11,
1994.
CAPITAL HOLDING LLC
The Company, a wholly owned subsidiary of Capital Holding, is a limited
life company organized under the laws of the Turks and Caicos Islands. The
Company was organized on March 18, 1994, and will have a life of 150 years
from the date of its organization. The Company's registered offices are
located at MacLaw House, P.O. Box 103, Duke Street, Grand Turk, Turks and
Caicos Islands, British West Indies, telephone: (809) 946-2476. Capital
Holding owns directly or indirectly all of the common shares of the Company,
which shares are nontransferable. The Company exists solely for the purpose of
issuing preferred and common shares and lending the proceeds thereof to
Capital Holding to finance Capital Holding's business operations.
CAPITAL HOLDING CORPORATION
Capital Holding is a diversified insurance and financial services holding
company. Capital Holding provides its subsidiaries with general management
support, including data processing, legal, and financial services. Capital
Holding markets products and services through its subsidiaries, one or more of
which is licensed to do business in all 50 states, in Puerto Rico, and in the
District of Columbia.
Capital Holding is incorporated under the laws of the State of Delaware.
Its principal executive offices are located in the Capital Holding Center, 400
West Market Street, Louisville, Kentucky 40202, and its telephone number is
(502) 560-2000.
BUSINESS SEGMENTS
The operations of Capital Holding and its subsidiaries have been classified
into five business segments: Agency Group, Direct Response Group, Accumulation
and Investment Group, Banking Group, and Corporate and Other.
Agency Group
Agency Group markets a full range of traditional and interest-sensitive
life and health insurance products through home service representatives and in
partnership with third-party insurance and marketing organizations. Agency
Group's business is conducted through four subsidiaries: Commonwealth Life
Insurance Company, based in Louisville, Kentucky; Peoples Security Life
Insurance Company, based in Durham, North Carolina; Capital Security Life
Insurance Company
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<PAGE>
(previously Public Savings Life Insurance Company), based in Durham, North
Carolina; and Durham Life Insurance Company, based in Durham, North Carolina.
Substantially all of the home service representatives are employees of these
subsidiaries and do not represent other insurers.
Direct Response Group
Direct Response Group markets life, health, and personal lines property and
casualty insurance primarily through television and print media solicitation,
direct mail, telephone and third-party programs. Life, health and property and
casualty insurance products are issued or underwritten by subsidiaries of
National Liberty Corporation, Capital Enterprises Insurance Company and
Worldwide Underwriters Insurance Company and their respective subsidiaries.
Through its third-party marketing programs, National Liberty Corporation sells
life and health insurance to customers of banks, department stores, oil
companies and other businesses with large customer bases. Academy Life
Insurance Company and its related companies, which were acquired in January
1993, market products to service personnel on military bases through 611
independent counsellors. Property and casualty products are also marketed
through a portion of the home service agents of Agency Group.
Accumulation and Investment Group
Accumulation and Investment Group is responsible for the marketing and
management of accumulation (investment-type) products issued or underwritten
by certain of Capital Holding's life insurance affiliates-Commonwealth Life
Insurance Company, Peoples Security Life Insurance Company, and National Home
Life Assurance Company-as well as for the management of Capital Holding's
insurance-related investment portfolios. This business is principally
concerned with asset/liability spread management. Accumulation and Investment
Group serves two principal accumulation product markets: institutional and
retail. Accumulation and Investment Group targets institutional customers,
such as banks, mutual funds, pension funds and other financial organizations,
primarily with fixed rate and indexed-guaranteed investment contracts (GICs).
Fixed and variable annuity contracts, individual retirement annuities and
immediate life annuities (primarily structured settlements) are distributed to
retail markets through financial planners, securities brokerage firms,
specialized consultants, savings and loan associations, banks and other
financial institutions.
The asset/liability management process of Accumulation and Investment Group
monitors product and asset characteristics on both the individual product and
Company aggregate levels. Each major product category is supported by a
separate asset portfolio, which is managed in accordance with a pre-
established baseline asset strategy. This strategy represents a pairing of a
product's assets and liabilities, taking into account asset and liability
risks, maturity and liquidity risks, as well as asset diversification and
quality considerations. The baselines are developed and updated through
financial modeling.
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Banking Group
Banking Group, which consists of First Deposit Corporation and its
subsidiaries, markets consumer loans and deposit products nationwide using
direct mail and telemarketing channels and other direct response methods.
Banking Group's loan products consist primarily of unsecured consumer credit
card loans, a revolving cash loan product without a credit card, and a home
equity-secured loan product. Banking Group also offers a secured credit card,
insurance premium financing loans and fee-based products designed to suspend
certain customer payment obligations in situations such as loss of income due
to unemployment or disability. Deposit products include retail and
institutional certificates of deposit and money market deposit accounts. To
comply with growth restrictions imposed by banking laws, Banking Group has
securitized certain of its consumer loans/credit card receivables for which it
provides servicing.
Banking Group's loan products are issued primarily through two wholly-owned
subsidiaries of First Deposit Corporation, First Deposit National Bank
("FDNB") and First Deposit National Credit Card Bank ("FDNCCB"). FDNB is a
commercial banking institution headquartered in Tilton, New Hampshire. FDNCCB
is a credit card bank headquartered in Tilton, New Hampshire, and is
authorized to engage only in credit card operations pursuant to the Bank
Holding Company Act of 1956, as amended.
Banking Group's unsecured consumer loans are principally generated through
direct mail solicitations sent to a prescreened list of prospective
accountholders, followed by credit verification. Four principles guide
development of specific underwriting criteria for each mailing: (i) sufficient
credit history; (ii) no unacceptable derogatory credit remarks; (iii)
necessary income qualification; and (iv) no rapid increase in outstanding debt
or credit availability.
Corporate and Other
Corporate and Other includes activities of a general corporate nature, the
group and credit life and health (through 1992) and real estate results of
Durham, real estate development activities, debt service, realized investment
gains and losses, an allocation of net investment income for the capital
allocated to business segments, and intersegment eliminations.
The following summary of operations by business segment sets forth amounts
for the years ended December 31, 1993 and 1992:
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<PAGE>
<TABLE>
<CAPTION>
REVENUES
YEARS ENDED DECEMBER 31
-----------------------
1993 1992
---------- ----------
<S> <C> <C>
SEGMENT (DOLLARS IN THOUSANDS)
- --------
Agency Group:
Life (includes premium equivalents). $ 653,646 $ 637,521
Health.............................. 74,646 74,095
Other product lines................. 64,049 68,986
---------- ----------
Subtotal.......................... 792,341 780,602
Life premium equivalents............ (58,864) (53,593)
---------- ----------
Total Agency Group................ 733,477 727,009
Direct Response Group:
Life................................ 362,571 273,969
Health.............................. 212,074 197,790
Property and casualty............... 162,382 158,603
Other product lines................. 21,489 20,489
---------- ----------
Total Direct Response Group....... 758,516 650,851
Banking Group......................... 545,070 506,691
Accumulation and Investment Group..... 832,768 852,550
Corporate and Other:(1)
Other............................... 34,488 109,714
Realized investment gain (loss)..... (20,155) 6,477
---------- ----------
Total Corporate and Other......... 14,333 116,191
---------- ----------
Consolidated.................... $2,884,164 $2,853,292
========== ==========
- ---------------
</TABLE>
(1) Reflects the sale of Durham Life Insurance Company credit business in July
1992, and Durham Life group business reinsurance effective January 1,
1993.
INCOME BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
1993 1992
---------- -----------
SEGMENT (DOLLARS IN THOUSANDS)
- -------
<S> <C> <C>
Agency Group:
Life............................ $185,644 $183,112
Health.......................... 3,936 2,579
Other product lines............. 4,083 4,521
-------- --------
Total Agency Group............ 193,663 190,212
Direct Response Group:
Life............................ 56,494 40,384
Health.......................... 45,783 43,183
Property and casualty........... 8,202 6,608
Other product lines............. (12,621) (5,673)
-------- --------
Total Direct Response Group... 97,858 84,502
Banking Group..................... 117,720 93,502
Accumulation and Investment Group. 134,085 120,142
Corporate and Other:(1)
Other........................... (34,375) (32,493)
Realized investment loss, net of
related amortization............ (21,893) (3,838)
-------- --------
Total Corporate and Other..... (56,268) (36,331)
-------- --------
Consolidated................ $487,058 $452,027
======== ========
- ---------------
</TABLE>
(1) Reflects the sale of Durham Life Insurance Company credit business in July
1992, and Durham Life group business reinsurance effective January 1,
1993.
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<PAGE>
REGULATORY ENVIRONMENT
The business of Capital Holding's insurance subsidiaries is subject to
regulation and supervision by the insurance regulatory authority of each state
in which the subsidiaries are licensed to do business. Such regulators grant
licenses to transact business; regulate trade practices; approve policy forms;
license agents; establish reserve requirements; review form and content of
required financial statements; and assure that capital, surplus and solvency
requirements are met.
The National Association of Insurance Commissioners (the "NAIC"), a self-
regulatory organization of state insurance commissioners, adopted, in December
of 1992, a "Risk Based Capital for Life and/or Health Insurers Model Act" (the
"Model Act") which was designed to identify inadequately capitalized life and
health insurers. The Model Act defines two key measures: (i) Adjusted Capital,
which equals an insurer's statutory capital and surplus plus its Asset
Valuation Reserve, plus half its liability for policyholder dividends, and
(ii) Risk Based Capital. Risk Based Capital is determined by a complex formula
which is intended to take into account the various risks assumed by an
insurer. Should an insurer's Adjusted Capital fall below certain prescribed
levels (defined in terms of its Risk Based Capital), the Model Act provides
for four different levels of regulatory attention:
"Plan Level": Triggered if an insurer's Adjusted Capital is less than 100%
but greater than or equal to 75% of its Risk Based Capital; requires the
insurer to submit a plan to the appropriate regulatory authority that
discusses proposed corrective action.
"Action Level": Triggered if an insurer's Adjusted Capital is less than 75%
but greater than or equal to 50% of its Risk Based Capital; authorizes the
regulatory authority to perform a special examination of the insurer and to
issue an order specifying corrective actions.
"Authorized Control Level": Triggered if an insurer's Adjusted Capital is
less than 50% but greater than or equal to 35% of its Risk Based Capital;
authorizes the regulatory authority to take whatever action it deems
necessary.
"Mandatory Control Level": Triggered if an insurer's Adjusted Capital falls
below 35% of its Risk Based Capital; requires the regulatory authority to
place the insurer under its control.
Since the Adjusted Capital levels of Capital Holding's insurance
subsidiaries currently exceed all of the regulatory action levels as defined
by the NAIC's Model Act, the Model Act currently has no impact on Capital
Holding's operations or financial condition.
First Deposit Corporation's consumer banking subsidiaries are subject to
state and federal regulation with respect to lending and investment practices,
capital requirements, and financial reporting. The primary regulator for these
consumer banking subsidiaries is the Office of the Comptroller of the
Currency.
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<PAGE>
COMPETITION
Insurance
The insurance industry is highly competitive with over 2,000 life insurance
companies competing with each other in the United States, some of which have
substantially greater financial resources, broader product lines and larger
staffs than Capital Holding's insurance subsidiaries. Additionally, life
insurance companies face increasing competition from banks, mutual funds and
other financial entities for attracting investment funds.
Capital Holding's insurance subsidiaries differentiate themselves through
progressive marketing techniques, product features, price, customer service,
stability and reputation, as well as competitive credit ratings. The insurance
segment maintains its competitive position by its focus on low risk/high
return markets and efficient cost structure. Other competitive strengths
include integrated asset/liability management, risk management and innovative
product engineering.
Banking
The credit card and consumer revolving loan industry business in which
Banking Group is engaged is highly competitive. The industry has recently
experienced consolidation, lower growth and rising charge-offs.
Competitors are increasing their use of advertising, target marketing,
pricing competition and incentive programs and have also announced changes in
the terms of certain credit cards, including lowering the fixed annual
percentage rate charged on balances or converting the annual percentage rate
charged on balances from a fixed per annum rate to a variable rate. In
addition, other credit card issuers have announced "tiered" or "risk-adjusted"
rates under which the annual percentage rate for the issuer's most
creditworthy customers is lowered.
In response to the competitive environment, FDNB and FDNCCB have
implemented a variety of new programs to attract and retain customers,
including reducing interest rates on selected accounts. FDNB and FDNCCB have
generally retained the right to alter various charges, fees and other terms
with respect to consumer credit accounts. In addition, Banking Group has
experienced steady growth in its secured loan products and is increasing its
efforts to offer its products to underserved markets.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Shares offered hereby
will be lent by the Company to Capital Holding to repay certain short-term
indebtedness incurred by Capital Holding to redeem its Adjustable Rate
Preferred Stock, Series F, par value $5 per share. Pursuant to the
Underwriting Agreement, Capital Holding has agreed to
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<PAGE>
pay Underwriters' Compensation to the Underwriters, as well as the expenses
related to the organization of the Company and the offering, as set forth in
Notes (2) and (3), respectively, on the cover page of this Prospectus.
-15-
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Capital Holding at
December 31, 1993, and as adjusted to give effect to the sale by the Company
of the Preferred Shares pursuant to this offering and the application of the
proceeds therefrom as described under "Use of Proceeds" herein.
<TABLE>
<CAPTION>
December 31, 1993
------------------------
Actual As Adjusted
------ -----------
(Dollars in Thousands)
<S> <C> <C>
Long-term Debt.................................. $ 589,268 $ 589,268
---------- ----------
Preferred Stock of Subsidiary................... 0 100,000
---------- ----------
Shareholders' Equity
Preferred stock:
6,000,000 shares authorized for
issuance in series: Series F,
Adjustable Rate Cumulative,
$100 face value; Issued and
outstanding - 1,000,000 shares............... 100,000 0
Common stock, $1 par:
300,000,000 shares authorized;
Issued - 115,325,000 shares.................. 115,325 115,325
Additional paid-in capital...................... 57,053 57,053
Net unrealized investment gain.................. 17,204 17,204
Retained earnings............................... 2,295,974 2,295,974
Common stock held in treasury - at cost;
13,899,000 shares............................. (89,289) (89,289)
Unearned restricted stock....................... (3,376) (3,376)
---------- ----------
Total Shareholders' Equity...................... 2,492,891 2,392,891
---------- ----------
Total Capitalization............................ $3,082,159 $3,082,159
========== ==========
</TABLE>
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<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data presents the consolidated
results of operations of Capital Holding and its subsidiaries. This summary
information should be read in conjunction with and is qualified in its
entirety by the detailed information and financial statements, including the
notes thereto, contained in the documents incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ----------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER COMMON AND COMMON EQUIVALENT SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C>
CAPITAL HOLDING CORPORATION
SUMMARY OF STATEMENTS OF INCOME:
Premiums and Other Income, Net............... $ 1,442,873 $ 1,393,273 $ 1,209,572 $ 1,299,169 $ 1,083,018
Net Investment Income........................ 1,461,446 1,453,542 1,479,864 1,400,939 1,292,829
Realized Investment Gain (Loss).............. (20,155) 6,477 (18,780) (122,799) 124,269
----------- ----------- ----------- ----------- -----------
Total Revenues.............................. 2,884,164 2,853,292 2,670,656 2,577,309 2,500,116
Total Benefits and Expenses.................. 2,397,106 2,401,265 2,324,720 2,352,597 2,115,589
Federal Income Tax (1)....................... 164,393 129,531 95,704 58,519 108,819
----------- ----------- ----------- ----------- -----------
Income before Cumulative Effect of
Change in Accounting Principle.............. 322,665 322,496 250,232 166,193 275,708
Cumulative Effect of Change in
Accounting Principle (2).................... - - - - (56,021)
----------- ----------- ----------- ----------- -----------
Net Income................................... $ 322,665 $ 322,496 $ 250,232 $ 166,193 $ 219,687
=========== =========== =========== =========== ===========
SELECTED PER COMMON AND
COMMON EQUIVALENT SHARE
DATA: (3)
Income before Cumulative Effect of
Change in Accounting Principle.............. $ 3.12 $ 3.14 $ 2.66 $ 1.70 $ 2.93
Cumulative Effect of Change in
Accounting Principle (2).................... - -- -- -- (0.62)
----------- ----------- ----------- ----------- -----------
Net Income................................... $ 3.12 $ 3.14 $ 2.66 $ 1.70 $ 2.31
----------- ----------- ----------- ----------- -----------
SELECTED DATA FROM STATEMENTS OF
FINANCIAL CONDITION:
Cash and Investments......................... $18,152,445 $16,791,345 $15,661,663 $13,922,117 $12,628,998
Total Assets................................. 22,929,005 20,588,264 18,873,028 16,668,545 14,970,015
Total Policy Liabilities..................... 14,925,139 13,928,769 12,877,486 11,965,244 10,486,216
Long-Term Debt............................... 589,268 589,320 611,245 386,247 330,299
Shareholders' Equity......................... 2,492,891 2,185,927 1,930,924 1,552,515 1,516,269
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS (4)............ 6.1 5.1 4.1 3.6 6.0
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS,
INCLUDING INTEREST ON BANKING
DEPOSITS (5)................................. 4.2 3.5 2.7 2.2 3.0
RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS,
INCLUDING INTEREST ON BANKING
DEPOSITS, ANNUITIES AND OTHER
FINANCIAL PRODUCTS (6)....................... 1.6 1.5 1.3 1.2 1.5
</TABLE>
- ------------------
(1) As a result of the Omnibus Budget Reconciliation Act of 1993, enacted on
August 10, 1993, and made retroactive to January 1, 1993, the federal
statutory income tax rate increased to 35 percent from 34 percent. The
effect of the change in tax legislation increased income tax expense by
$16,771,000 for the year ended December 31, 1993, including a one-time
charge of $11,682,000 as a result of applying the newly enacted tax rate
to deferred tax balances as of August 10, 1993, and a $5,089,000 impact
on current taxes due to the change in the statutory tax rate.
(2) Effective January 1, 1989, Capital Holding changed its method of
accounting for postemployment life and health benefits from the "pay-as-
you-go" method for health benefits and a modified accrual basis for life
insurance and adopted the full accrual method of accounting for all
postemployment benefits and for life insurance benefits for active
employees. The $56,021,000 cumulative effect, net
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<PAGE>
of $25,928,000 of federal income tax benefit, is included in net income
of the first quarter of 1989.
(3) Per common and common equivalent share amounts have been retroactively
adjusted for a two-for-one stock split effected in the form of a stock
dividend, effective April 30, 1993.
(4) For the purpose of computing the ratio of earnings to fixed charges and
preferred stock dividends, earnings have been calculated by adding to
pretax income from continuing operations the amount of fixed charges
reduced for capitalized interest and preferred stock dividend
requirements and increased for amortization of previously capitalized
interest. Fixed charges consists of interest on debt, preferred stock
dividend requirements and a portion of net rental expense, approximately
one-third, deemed to represent interest.
(5) Computation of this ratio is the same as described in note (3) above
except that fixed charges also includes interest on banking deposits.
(6) Computation of this ratio is the same as described in note (3) above
except that fixed charges also includes interest on banking deposits,
annuities and other financial products.
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<PAGE>
DESCRIPTION OF PREFERRED SHARES
The following is a summary of certain terms and provisions of the Preferred
Shares offered hereby. The summary set forth below addresses the material
terms of the Preferred Shares but does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Memorandum of
Association of the Company (the "Memorandum"), the Articles of Association of
the Company (the "Articles") and the declaration (the "Declaration") adopted
by Capital Holding, as manager (the "Manager"), establishing the rights,
preferences, privileges, limitations and restrictions relating to the
Preferred Shares. Copies of the Memorandum, the Articles, and the form of the
Declaration (as defined below) have been filed as exhibits to the Registration
Statement of which this Prospectus is a part.
GENERAL
The Company is authorized to issue up to 4,000,000 preference shares (the
"Preferred Shares"), in one or more series or classes, with such dividend
rights, liquidation preferences per share, redemption provisions, voting
rights and other rights, preferences, privileges, limitations and restrictions
as the Manager may determine and declare. Pursuant to a declaration adopted by
the Manager (the "Declaration") on behalf of the Company, the Manager
authorized the issuance of 4,000,000 Preferred Shares having those
preferences, rights, powers, qualifications and limitations set forth in the
Declaration. The Company may from time to time by resolution increase its
authorized share capital and issue additional preference shares on terms to be
determined at the time by the Manager. Any and all such preference shares,
which may be issued in one or more additional series or classes, will rank
pari passu with each other and with the Preferred Shares with respect to
participation in profits and assets of the Company.
The Preferred Shares are issuable in registered form only without dividend
coupons. Registration of, and registration of transfers of, the Preferred
Shares are by book entry only as described below.
DIVIDENDS
Dividends on the Preferred Shares will be cumulative, will accrue from
__________, 1994 and will be payable in United States dollars monthly in
arrears on the last day of each calendar month of each year, commencing
__________, 1994, when, as and if declared by the Company, except as otherwise
described below.
The dividend payable on each Preferred Share will be fixed at a rate per
annum of _____% of the liquidation preference thereof ($25 per share). The
amount of dividends payable for any period will be computed on the basis of
twelve 30-day months and a 360-day year and, for any period shorter than a
full monthly dividend period, will be computed on
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<PAGE>
the basis of the actual number of days elapsed in such period. Payment of
dividends is limited in relation to the amount of funds held by the Company
and legally available therefor. See "Description of the Loans-Interest" and
"Description of the Guarantee-General" below.
Dividends declared on the Preferred Shares are payable to the record
holders thereof as they appear on the register for the Preferred Shares on the
relevant record dates, which will be one Business Day (as hereinafter defined)
prior to the relevant payment dates. Subject to applicable laws and
regulations, each such payment will be made as described under "Book-Entry-
Only Issuance; The Depository Trust Company" below. In the event that any
date on which dividends are payable on the Preferred Shares is not a Business
Day, then payment of the dividend payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other
than a day on which banking institutions in The City of New York are
authorized or required by law to close.
Dividends on the Preferred Shares must be declared by the Company by action
of Capital Holding, as Manager of the Company, in any calendar year or portion
thereof to the extent that the Manager reasonably anticipates that at the time
of payment the Company will have, and must be paid by the Company to the
extent that at the time of proposed payment the Company has, (x) funds legally
available for the payment of such dividends and (y) cash on hand sufficient to
permit such payments. It is anticipated that the Company's earnings will
result exclusively from payments under the Loans (as defined herein) of the
proceeds from the sale of the Preferred Shares and the issuance of the Common
Shares. See "Description of the Loans".
CERTAIN RESTRICTIONS ON THE COMPANY
If dividends have not been paid in full on the Preferred Shares, the
Company may not:
(i) pay, or declare and set aside for payment, any dividends on any
other preferred or preference stock of the Company ranking pari passu with
the Preferred Shares as regards participation in profits of the Company
("Company Dividend Parity Shares"), unless the amount of any dividends
declared on any Company Dividend Parity Shares is paid on the Company
Dividend Parity Shares and the Preferred Shares on a pro rata basis on the
date such dividends are paid on such Company Dividend Parity Shares, so
that
(x) (a) the aggregate amount of dividends paid on the Preferred
Shares bears to (b) the aggregate amount of dividends paid on such
Company Dividend Parity Shares the same ratio as
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<PAGE>
(y) (a) the aggregate of all accumulated arrears of unpaid dividends
in respect of the Preferred Shares bears to (b) the aggregate of all
accumulated arrears of unpaid dividends in respect of such Company
Dividend Parity Shares;
(ii) pay, or declare and set aside for payment, any dividends on any
shares of the Company ranking junior to the Preferred Shares as to
dividends ("Company Dividend Junior Shares"); or
(iii) redeem, purchase or otherwise acquire any Company Dividend Parity
Shares or Company Dividend Junior Shares or any Preferred Shares other than
the redemption of all outstanding Preferred Shares at the redemption price
of $25 per Preferred Share plus accumulated and unpaid dividends (whether
or not declared) to the date fixed for redemption (the "Redemption Price");
until, in each case, such time as all accumulated arrears of unpaid dividends
(whether or not declared) on the Preferred Shares shall have been paid in full
for all dividend periods terminating on or prior to, in the case of clauses
(i) and (ii), such payment, and in the case of clause (iii), the date of such
redemption, purchase or acquisition. As of the date of this Prospectus, there
are no Company Dividend Parity Shares outstanding, and the Company does not
have any current plans to issue Company Dividend Parity Shares.
MERGER, CONSOLIDATION OR REPLACEMENT OF THE COMPANY
The Company may not consolidate, amalgamate, merge with or into, be
replaced by or be continued as, or convey, transfer or lease its properties
and assets substantially as an entirety to, any corporation or other body,
except as described in this paragraph and subject to applicable law. For
purposes of applicable Turks and Caicos Islands law, each holder of Preferred
Shares is deemed to have authorized and consented to the Company
consolidating, amalgamating or merging with or into, being replaced by, or
continued as a limited liability company organized as such under the laws of
any state of the United States of America, or a limited partnership organized
under the Uniform Limited Partnership Act in any state of the United States of
America, or a trust organized under the laws of the State of Delaware (in each
case the "Successor"), and the Company may do so, provided, that (i) such
Successor either (x) expressly assumes all the terms and conditions of, and
obligations of the Company under, the Preferred Shares or (y) substitutes for
the Preferred Shares another security having substantially the same terms as
the Preferred Shares (the "Successor Security") so long as the Successor
Securities rank, with respect to participation in the profits or assets of the
Successor, at least as high as the Preferred Shares rank, with respect to
participation in the profits or assets of the Company, (ii) Capital Holding
expressly acknowledges the Successor as the lender under the Loans and
reaffirms its obligations to the Successor and to the holders of the Preferred
Shares or Successor Securities, as the case may be, under the Guarantee, (iii)
such merger, consolidation, amalgamation, replacement or continuation does not
cause the Preferred Shares or Successor Securities, as the case may be, to be
delisted by any national securities exchange or other organization on which
the Preferred Shares or Successor Securities, as the case may be, are listed,
(iv) the Successor receives a written opinion of counsel (such counsel being a
law firm of national standing), which counsel may be counsel to the Company or
Capital Holding, to the effect that
-21-
<PAGE>
such consolidation, amalgamation, merger, replacement or continuation will not
result in a taxable gain to the holders of the Preferred Shares or Successor
Securities, as the case may be, under Federal income tax law or cause the
Successor to be considered an "investment company" under the Investment
Company Act of 1940, as amended (the "1940 Act") and (v) such merger,
consolidation, amalgamation, replacement or continuation does not cause the
Preferred Shares or Successor Securities, as the case may be, to be downgraded
by any "nationally recognized statistical rating organization" as that term is
defined by the SEC for purposes of Rule 436(g)(2) under the Securities Act.
Capital Holding, as Manager, is authorized and directed to conduct its
affairs and to operate the Company in such a way that the Company would not be
deemed to be an "investment company" for purposes of the 1940 Act. In this
connection, Capital Holding, as Manager, is authorized to take any action not
inconsistent with applicable law or the Memorandum or Articles of the Company
which it determines in its discretion to be necessary or desirable for such
purposes.
MANDATORY REDEMPTION
If at any time Capital Holding repays the Loans when due or prepays the
Loans as described under "Description of the Loans-Optional Prepayment", the
proceeds from such prepayment or repayment of principal on the Loans to
Capital Holding of the proceeds from the issuance and sale of the Preferred
Shares and the Common Shares must be applied to redeem the Preferred Shares at
the Redemption Price, upon not less than 30 nor more than 60 days' notice;
provided that any such amounts may instead be lent to or relent to Capital
Holding and not used for such redemption if at the time of such new loan, and
as determined in the judgment of Capital Holding, as Manager, and the
Company's financial advisor (selected by Capital Holding, as Manager, and who
shall be unaffiliated with Capital Holding and shall be among the 30 largest
investment banking firms, measured by total capital, in the United States at
the time of the proposed new loan), (a) Capital Holding is not in bankruptcy,
(b) Capital Holding is not in default on any loan pertaining to the Preferred
Shares, (c) Capital Holding has made timely monthly payments on the repaid
loan for the immediately preceding 18 months, (d) the Company is not in
arrears on payments of dividends on the Preferred Shares, (e) Capital Holding
is expected to be able to make timely payment of principal and interest on
such new loan, (f) such new loan is being made on terms, and under
circumstances, that are consistent with those which a lender would require for
a loan to an unrelated party, (g) such loan is being made at a rate sufficient
to provide payments equal to or greater than the amount of dividend payments
that accrue on the Preferred Shares, (h) the senior unsecured long-term debt
of Capital Holding is rated among the four highest rating categories by a
nationally recognized statistical rating organization, (i) such loan is being
made for a term that is consistent with market circumstances and Capital
Holding's financial condition, and (j) such loan will have a final maturity no
later than the 100th anniversary of the issuance of the Preferred Shares.
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<PAGE>
OPTIONAL REDEMPTION
The Preferred Shares are redeemable, at the option of the Company and
subject to the prior consent of Capital Holding, (1) in whole or in part from
time to time, on or after __________, 1999, upon not less than 30 nor more
than 60 days' notice, at the Redemption Price or (2) in whole (and not in
part) if a Tax Event (as defined hereinafter) occurs and is continuing,
provided, that notice of redemption must occur within 90 days of the
occurrence of such Tax Event and the Preferred Shares must be redeemed upon
not less than 30 nor more than 60 days' notice at the Redemption Price. "Tax
Event" means that Capital Holding or the Company shall have obtained an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of any amendment to, or change in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or any
amendment to or change in an official interpretation or application of such
laws or regulations, which amendment or change is effective on or after
_____________, 1994, and which change cannot be avoided by the use of any
reasonable measures available to Capital Holding or the Company, it is
substantially more likely than it was on _____________, 1994 that (i) the
Company will be subject to federal income tax with respect to interest
received on the Loans or (ii) interest payable on the Loans will not be
deductible for Federal income tax purposes.
If a partial redemption would result in a delisting of the Preferred
Shares, the Company may only redeem the Preferred Shares in whole. In the
event that fewer than all the outstanding Preferred Shares are to be redeemed
(other than in a case where such partial redemption would result in delisting
as described in the following paragraph), the Preferred Shares to be redeemed
will be selected as described under "Book-Entry-Only Issuance; The Depository
Trust Company" below. The Company will not redeem fewer than all the
outstanding Preferred Shares unless all accumulated arrears of unpaid
dividends have been paid in full on all Preferred Shares for all monthly
dividend periods terminating on or prior to the date of redemption.
If at any time after the issuance of the Preferred Shares, the Company is
or would be required to pay any Additional Amounts (as defined herein) with
respect to the Preferred Shares or Capital Holding is or would be required to
withhold or deduct certain amounts as described under "Description of the
Guarantee-Additional Amounts" with respect to the Preferred Shares, then,
subject to the prior consent of Capital Holding, the Company may, at its
option, upon not less than 30 nor more than 60 days' notice to the holders of
the Preferred Shares, redeem the Preferred Shares in whole (or, if such
requirement relates to only certain of the Preferred Shares, the Preferred
Shares subject to such requirement may be redeemed in part) at the Redemption
Price, provided that, in the case of such a redemption of Preferred Shares in
part, the Company may (i) cause the global certificate representing all of the
Preferred Shares to be withdrawn from The Depository Trust Company or its
successor securities depository (see "Book-Entry-Only Issuance; The Depository
Trust Company"), (ii) issue share certificates in definitive form representing
the Preferred Shares, and (iii) redeem the Preferred Shares subject to such
requirement to withhold or deduct Additional Amounts; and provided further
that, if a partial redemption would result in a delisting of the Preferred
Shares from the New York Stock Exchange, the Company may only redeem the
Preferred Shares in whole.
If the Company gives a notice of redemption in respect of the Preferred
Shares, then, by 2:00 p.m., New York time, on the redemption date, the Company
will irrevocably initiate the transfer of funds for deposit with The
Depository Trust Company in an amount sufficient to pay the applicable
Redemption Price, and will give The Depository Trust Company irrevocable
instructions and authority to pay the Redemption Price to the holders thereof.
See "Book-Entry-Only Issuance; The Depository Trust Company." If notice of
redemption shall have been given and funds deposited as required, then upon
the date of such deposit, all rights of holders of the Preferred Shares so
called for redemption will cease, except the right of the holders of such
shares to receive the Redemption Price, but without interest, and such shares
will cease to be outstanding. In the event that any date on which any payment
in respect of the redemption of Preferred Shares is due is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next
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<PAGE>
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day. In the event that payment of the Redemption Price in
respect of the Preferred Shares is improperly withheld or refused and not paid
either by the Company or by Capital Holding pursuant to the Guarantee,
dividends on such shares will continue to accrue, at the then applicable rate,
from the original redemption date to the date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
Subject to the foregoing and applicable law (including, without limitation,
applicable United States federal and state securities laws), Capital Holding
or its subsidiaries may at any time and from time to time purchase outstanding
Preferred Shares by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of Preferred Shares at the time
outstanding will be entitled to receive out of the assets of the Company
legally available for distribution to shareholders, before any distribution of
assets is made to holders of Common Shares of the Company or any other class
of shares of the Company ranking junior to the Preferred Shares as regards
participation in assets of the Company, but together with the holders of every
other series of preferred or preference stock of the Company outstanding, if
any, ranking pari passu with the Preferred Shares as regards participation in
the assets of the Company ("Company Liquidation Parity Shares"), an amount
equal, in the case of the holders of the Preferred Shares, to the aggregate of
the liquidation preference of $25 per Preferred Share and all accumulated and
unpaid dividends (whether or not declared) to the date of payment (the
"Liquidation Distribution"). If, upon any such liquidation, the Liquidation
Distribution can be paid only in part because the Company has insufficient
assets available to pay in full the aggregate maximum Liquidation Distribution
and the aggregate maximum liquidation distributions on the Company Liquidation
Parity Shares, then the amounts payable directly by the Company on the
Preferred Shares and on such Company Liquidation Parity Shares will be paid on
a pro rata basis, so that
(i) (x) the aggregate amount paid in respect of the Liquidation
Distribution bears to (y) the aggregate amount paid as liquidation
distributions on the Company Liquidation Parity Shares the same ratio as
(ii) (x) the aggregate Liquidation Distribution bears to (y) the
aggregate maximum liquidation distributions on the Company Liquidation
Parity Shares.
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Pursuant to the Articles, the Company will automatically dissolve and be
liquidated (i) when the period fixed for the duration of the Company expires,
(ii) if the holders of the Common Shares pass a resolution requiring the
Company to be wound up and dissolved, (iii) upon the bankruptcy, resignation,
withdrawal, expulsion, termination, cessation or dissolution of the Manager
(provided that the merger of the Manager into a successor that succeeds to the
duties of the Manager shall not be a resignation, withdrawal, termination,
cessation or dissolution of the Manager), or (iv) if all of the Common Shares
are redeemed by the Company.
VOTING RIGHTS
Except as provided below and under "Description of the Guarantee-Amendments
and Assignment" and "Description of the Loans-Miscellaneous", the holders of
the Preferred Shares will have no voting rights.
If (i) the Company fails to pay dividends in full on the Preferred Shares
(whether or not there are funds legally available therefor) for 18 consecutive
monthly dividend periods, (ii) an Event of Default (as defined in the Loan
Agreement relating to the Loans) occurs and is continuing on the Loans (as
defined in "Description of the Loans"), or (iii) Capital Holding is in default
under any of its payment or other obligations under the Guarantee (as
described under "Description of the Guarantee-Certain Covenants of Capital
Holding"), then the holders of a majority in liquidation preference of the
outstanding Preferred Shares, together with the holders of any other shares of
preferred or preference stock of the Company having the right to vote for the
appointment of a trustee in such event, acting as a single class, will be
entitled to appoint and authorize a trustee to enforce the Company's rights as
a creditor under the Loans against Capital Holding (including the acceleration
of principal and accrued interest on the Loans) and to enforce the obligations
undertaken by Capital Holding under the Guarantee and the Expenses and
Liabilities Agreement (as defined herein) and declare and pay dividends on the
Preferred Shares. For purposes of determining whether the Company has failed
to pay dividends in full for 18 consecutive monthly dividend periods,
dividends shall be deemed to remain in arrears, notwithstanding any payments
in respect thereof, until full cumulative dividends have been or
contemporaneously are declared and paid with respect to all monthly dividend
periods terminating on or prior to the date of payment of such full cumulative
dividends. Not later than 30 days after such right to appoint a trustee
arises, the Manager will convene a separate general meeting for the above
purpose. If the Manager fails to convene such meeting within such 30-day
period, the holders of 10% in liquidation preference (plus all accumulated
arrears and accruals of dividends per share) of the outstanding Preferred
Shares and such other preferred or preference stock will be entitled to
convene such separate general meeting. The provisions of the Articles relating
to the convening and conduct of the general meetings of shareholders will
apply with respect to any such separate general meeting. Any trustee so
appointed shall vacate office
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immediately, subject to the terms of such other preferred or preference stock,
if the Company (or Capital Holding pursuant to the Guarantee) shall have paid
in full all accumulated and unpaid dividends on the Preferred Shares or such
default or breach by Capital Holding, as the case may be, shall have been
cured.
If any resolution is proposed for adoption by the shareholders of the
Company providing for, or the Manager otherwise proposes to effect (it being
understood that the automatic dissolution and liquidation events described in
(iii) and (iv) under "Liquidation Distribution" above and the events described
under "Merger, Consolidation or Replacement of the Company" above will not be
deemed to be a proposal by the Manager), (x) any variation or abrogation of
the rights, preferences and privileges of the Preferred Shares by way of
amendment of the Company's Articles, the Declaration or otherwise (including,
without limitation, the authorization or issuance of any shares of the Company
ranking, as to participation in the profits or assets of the Company, senior
to the Preferred Shares), (y) the liquidation, dissolution or winding up of
the Company, or (z) the modification of Regulation 16 of the Articles which
absolutely prohibits transfers of shares of the Company's Common Shares, then
the holders of the outstanding Preferred Shares (and, in the case of a
resolution described in clause (x) above which would equally adversely affect
the rights, preferences or privileges of any Company Dividend Parity Shares or
any Company Liquidation Parity Shares, such Company Dividend Parity Shares or
such Company Liquidation Parity Shares, as the case may be, or, in the case of
any resolution described in clause (y) or (z) above, all Company Liquidation
Parity Shares) will be entitled to vote together as a single class on such
resolution or action of the Manager (but not on any other resolution or
action), and such resolution or action shall not be effective except with the
approval of the holders of 66 2/3% in liquidation preference (plus all
accumulated and unpaid dividends) of such outstanding shares; provided,
however, that no such approval shall be required under clauses (x) and (y) if
the liquidation, dissolution and winding up of the Company is proposed or
initiated upon the initiation of proceedings, or after proceedings have been
initiated, for the liquidation, dissolution or winding up of Capital
Holding.
No vote or consent of the holders of the Preferred Shares will be required
for the Company to redeem and cancel Preferred Shares in accordance with the
Articles and the Declaration.
The rights attached to the Preferred Shares will be deemed not to be varied
by the creation or issue of, and no vote will be required for the creation of,
any further series of preference shares or any further shares of the Company
ranking as regards participation in the profits or assets of the Company pari
passu with or junior to the Preferred Shares.
Any required approval of holders of the Preferred Shares may be given at a
separate meeting of such holders convened for such purpose, at a general
meeting of shareholders of the Company or pursuant to written consent. The
Company will cause a notice of any meeting at which holders of the Preferred
Shares are entitled to vote, or of any matter upon which action by written
consent of such holders is to be taken, to be mailed to each holder of record
of the Preferred Shares. Each such
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notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought, and
(iii) instructions for the delivery of proxies or written consents.
Notwithstanding that holders of the Preferred Shares are entitled to vote
or consent under any of the circumstances described above, any of the
Preferred Shares and such other preference shares entitled to vote or consent
with such Preferred Shares as a single class outstanding at such time, that
are owned by Capital Holding or any entity owned 50% or more by Capital
Holding, either directly or indirectly, shall not be entitled to vote or
consent and shall, for the purposes of such vote or consent, be treated as if
they were not outstanding.
ADDITIONAL AMOUNTS
All payments in respect of the Preferred Shares by the Company will be made
without withholding or deduction for or on account of any present or future
taxes, duties, assessments or governmental charges of whatever nature imposed
or levied upon or as a result of such payment by or on behalf of the Turks and
Caicos Islands or any authority therein or thereof having power to tax, unless
the withholding or deduction of such taxes, duties, assessments or
governmental charges is required by law. In that event, the Company will pay
as a dividend such additional amounts as may be necessary in order that the
net amounts received by the holders of the Preferred Shares after such
withholding or deduction will equal the amount which would have been
receivable in respect of such Preferred Shares in the absence of such
withholding or deduction (such additional amounts being the "Additional
Amounts"), except that no such Additional Amounts will be payable to a holder
of Preferred Shares (or a third party on such holder's behalf) with respect to
the Preferred Shares:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of such Preferred Shares by reason of such
holder's having some connection with the Turks and Caicos Islands other
than being a holder of such Preferred Shares; or
(b) if the Company has notified such holder of the obligation to
withhold taxes and requested but not received from such holder a
declaration of nonresidence or other claim for exemption, and such
withholding or deduction would not have been required had such declaration
or other claim been received.
BOOK-ENTRY-ONLY ISSUANCE; THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC"), New York, New York, will act as
securities depository for the Preferred Shares. The Preferred Shares will be
issued only as fully-registered securities registered in the
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name of Cede & Co. (DTC's nominee). One or more fully-registered Preferred
Share certificates will be issued, representing in the aggregate the total
number of Preferred Shares, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks, and trust companies that clear through or maintain
a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Preferred Shares under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Shares on DTC's records. The ownership interest of each actual purchaser of
each Preferred Share ("Beneficial Owner") is in turn recorded on the Direct
and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchase, but Beneficial Owners are
expected to receive written confirmations providing details of their
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Shares. Transfers of ownership interests in the Preferred Shares
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Preferred Shares, except in the
event that use of the book-entry system for the Preferred Shares is
discontinued.
To facilitate subsequent transfers, all Preferred Shares deposited by
Participants with DTC are registered in the name of Cede & Co. The deposit of
Preferred Shares with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Preferred Shares; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Preferred Shares
are credited, which may or may not be the Beneficial Owners. The Participants
will remain responsible for keeping account of their holdings on behalf of
their customers.
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Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
Preferred Shares are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in the Preferred Shares to
be redeemed.
Although voting with respect to the Preferred Shares is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will consent or
vote with respect to the Preferred Shares. Under its usual procedures, DTC
mails an Omnibus Proxy to the Company as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Preferred Shares are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Dividend payments on the Preferred Shares will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payable
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payable date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, the Company or Capital
Holding, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of dividends to DTC is the responsibility
of the Company, disbursement of such payments to Direct Participants will be
the responsibility of DTC, and disbursement of such payments to the Beneficial
Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Shares at any time by giving reasonable notice to the
Company. Under such circumstances, in the event that a successor securities
depository is not obtained, Preferred Share certificates are required to be
printed and delivered. Additionally, in the event that the Company exercises
its option to redeem only a portion of the Preferred Shares because the
Company or Capital Holding is or would be required to withhold or deduct
Additional Amounts in regard to such Preferred Shares to be redeemed, the
Company may cause the global certificate or certificates representing all of
the Preferred Shares to be withdrawn from DTC (or its successor securities
depository) and may issue share certificates in definitive form representing
the Preferred Shares. Thereafter, the Preferred Shares subject to such
requirement to withhold or deduct Additional Amounts would be redeemed.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
neither the Company nor Capital Holding takes responsibility for the accuracy
thereof.
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REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Capital Holding will act as registrar, transfer agent and paying agent for
the Preferred Shares (the "Paying Agent").
Registration of transfers of the Preferred Shares will be effected without
charge by or on behalf of the Company, but upon payment (with the giving of
such indemnity as the Company or Capital Holding may require) in respect of
any tax or other governmental charges which may be imposed in relation to it.
The Company will not be required to register or cause to be registered the
transfer of Preferred Shares after such Preferred Shares have been called for
redemption.
MISCELLANEOUS
The Company is not subject to any mandatory redemption or sinking fund
provisions with respect to the Preferred Shares. Holders of the Preferred
Shares have no preemptive rights.
Capital Holding and the Company will enter into an agreement (the "Expenses
and Liabilities Agreement") pursuant to which Capital Holding will agree to
guarantee the payment of any liabilities incurred by the Company (other than
obligations to holders of the Preferred Shares, which will be separately
guaranteed to the extent set forth in the Guarantee; see "Description of the
Guarantee"). The Expenses and Liabilities Agreement will expressly provide
that such agreement is for the benefit of, and is enforceable by, third
parties to whom the Company owes such obligations. A copy of the form of the
Expenses and Liabilities Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the guarantee (the
"Guarantee") which will be executed and delivered by Capital Holding for the
benefit of the holders from time to time of the Preferred Shares. This
summary contains all material information concerning the Guarantee but does
not purport to be complete. References to provisions of the Guarantee are
qualified in their entirety by reference to the full text of the Payment and
Guarantee Agreement, the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
Capital Holding will irrevocably and unconditionally agree, to the extent
set forth herein, to pay in full, to the holders of the Preferred
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Shares, the Guarantee Payments (as defined below) (except to the extent paid
by the Company), as and when due, regardless of any defense, right of set-off
or counterclaim which the Company may have or assert. The following payments
constitute the Guarantee Payments for the Preferred Shares: (i) accumulated
and unpaid dividends which have been legally declared on the Preferred Shares,
(ii) the Redemption Price legally payable with respect to any Preferred Shares
called for redemption by the Company, (iii) in the event of liquidation of the
Company, the lesser of (a) the liquidation preference plus all accumulated and
unpaid dividends (whether or not declared) to the date of payment and (b) the
amount of assets of the Company legally available for distribution to holders
of the Preferred Shares, and (iv) any Additional Amounts payable by the
Company in respect of the Preferred Shares. Capital Holding's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by Capital Holding to the holders of the Preferred Shares or by
causing the Company to pay such amounts to such holders.
See "Prospectus Summary-The Offering" for a summary description of other
contractual backup undertakings of Capital Holding for the benefit of holders
of the Preferred Shares.
CERTAIN COVENANTS OF CAPITAL HOLDING
In the Guarantee, Capital Holding will covenant that, so long as any
Preferred Shares remain outstanding, neither Capital Holding nor any majority-
owned subsidiary of Capital Holding will declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
of its capital stock or make any guarantee payments with respect to the
foregoing (other than (i) payments under the Guarantee or under other guaranty
agreements made by Capital Holding in respect of additional preferred shares
that may be issued in one or more series or classes that rank pari passu with
each other and with the Preferred Shares with respect to participation in the
profits and assets of the Company, or (ii) dividends or guarantee payments to
Capital Holding by a majority-owned subsidiary), if at such time Capital
Holding is in default with respect to its payment or other obligations under
the Guarantee, or the Expenses and Liabilities Agreement or there shall have
occurred any event that, with the giving of notice or the lapse of time or
both, would constitute an Event of Default under the Loans.
In the Guarantee, Capital Holding will also covenant that, so long as any
Preferred Shares remain outstanding, it will (i) maintain direct or indirect
100% ownership of the Common Shares and any other shares of the Company other
than (x) the Preferred Shares or (y) any additional preferred shares that may
be issued in one or more series or classes, and that rank pari passu with each
other and with the Preferred Shares with respect to participation in profits
and assets of the Company, (ii) cause at least 21% of the total value of the
Company and at least 21% of all interests in the capital, income, gain, loss,
deduction and credit of the Company to be represented by Common Shares, (iii)
not voluntarily dissolve, wind-up or liquidate the Company, (iv) remain the
Manager of the Company and timely perform all of its duties as Manager of the
Company (including the duty to declare and pay dividends on the Preferred
Shares), provided that any permitted successor of Capital Holding under the
Loan Agreement may succeed to Capital Holding's duties as Manager, and (v) use
reasonable efforts to cause the Company to remain a limited life company and
otherwise continue to be treated as a partnership for United States federal
income tax purposes.
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ADDITIONAL AMOUNTS
All Guarantee Payments will be made without withholding or deduction for or
on account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such
payment by or on behalf of the United States, any state thereof or any other
jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is
required by law. In that event, Capital Holding will pay such additional
amounts as may be necessary in order that the net amounts received by the
holders of the Preferred Shares after such withholding or deduction will equal
the amount which would have been receivable in respect of the Preferred Shares
in the absence of such withholding or deduction, except that no such
additional amounts will be payable to a holder of the Preferred Shares (or a
third party on his behalf) with respect to any of the Preferred Shares:
(a) if such holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Preferred Shares by reason of
such holder's having some connection with the United States, any
state thereof or any other jurisdiction through which or from which
such payment is made, other than being a holder of the Preferred
Shares, or
(b) if the Company or Capital Holding has notified such holder of the
obligation to withhold taxes and requested but not received from
such holder a declaration of non-residence or other claim for
exemption, and such withholding or deduction would not have been
required had such declaration or other claim been received.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of the Preferred Shares (in which case no vote will be required),
the Guarantee may be changed only by a written instrument executed by Capital
Holding and with the prior approval of the holders of not less than 66 2/3% in
liquidation preference of all Preferred Shares then outstanding. The manner
of obtaining any such approval of holders of the Preferred Shares will be as
set forth under "Description of Preferred Shares-Voting Rights." All
guarantees and agreements contained in the Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of Capital
Holding and shall inure to the benefit of the holders of all Preferred Shares
then outstanding.
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TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect as to
the Preferred Shares upon full payment of the Redemption Price of all
outstanding Preferred Shares or upon full payment of the amounts payable to
holders of the Preferred Shares upon liquidation of the Company. The
Guarantee will continue to be effective or will be reinstated, however, as the
case may be, if at any time any holder of Preferred Shares must restore
payment of any sums paid under the Preferred Shares or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Capital Holding
and will rank (i) subordinate and junior in right of payment to all other
liabilities of Capital Holding and (ii) senior to the most senior preferred or
preference stock of any series now or hereafter issued by Capital Holding, and
(iii) senior to any guarantee now or hereafter entered into by Capital Holding
in respect of any preferred or preference stock of any affiliate of Capital
Holding, except for guarantees in respect of any further series of preference
shares or any further shares of the Company ranking as regards participation
in the profits or assets of the Company pari passu with the Preferred Shares.
At December 31, 1993, Capital Holding had total liabilities of approximately
$20.4 billion, all of which are senior to the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection.
A holder of Preferred Shares may enforce the Guarantee directly against
Capital Holding, and Capital Holding will waive any right or remedy to require
that any action be brought against the Company or any other person or entity
before proceeding against Capital Holding. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent
not paid by the Company and by complete performance of all obligations of
Capital Holding under the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New York.
DESCRIPTION OF THE LOANS
Set forth below is a summary of information concerning the loans (the
"Loans") which will be made by the Company to Capital Holding of the proceeds
from the issuance of (i) the Preferred Shares and (ii) the Company's Common
Shares and related capital contributions ("Common Share Payments"). This
summary contains all material information concerning the loan agreement (the
"Loan Agreement") but does not purport to be complete. References to
provisions of the Loan Agreement are qualified in their entirety by reference
to the full text of the Loan Agreement, the form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Capital Holding's obligations under the Loan Agreement will also be for the
benefit of the holders from time to time of the Preferred Shares, and such
holders will
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be entitled to enforce the Loan Agreement directly against Capital Holding.
GENERAL
Pursuant to the Loan Agreement, the Company will agree to make the Loans to
Capital Holding in an aggregate principal amount of $__________, such amount
being equal to the aggregate liquidation preference of the Preferred Shares
issued and sold by the Company of $__________ and the aggregate Common Share
Payments of $__________.
The entire principal amount of the Loans will become due and payable
(together with any accrued and unpaid interest thereon, including Additional
Interest (as hereinafter defined), if any) on the earliest of __________, 2044
or the date upon which Capital Holding or the Company shall be dissolved,
wound-up or liquidated.
MANDATORY PREPAYMENT
If the Company redeems the Preferred Shares in accordance with the terms
thereof, the Loans will become due and payable in a principal amount equal to
the aggregate Redemption Price of the Preferred Shares so redeemed, together
with any and all interest accrued thereon. Any payment pursuant to this
provision shall be made by wire transfer, which shall be initiated by 2:00
p.m., New York time, on the date of such redemption or at such other time or
such earlier date as the Company and Capital Holding shall agree.
OPTIONAL PREPAYMENT
Capital Holding will have the right to prepay the Loans, without premium or
penalty,
(i) in whole or in part (together with any accrued but unpaid interest,
including Additional Interest, if any, on the portion being
prepaid) at any time on or after __________, 1999; and
(ii) in whole (together with all accrued and unpaid interest, including
Additional Interest, if any, thereon) at any time if Capital
Holding is or would be required to pay any Additional Interest on
the entire amount of the Loans pursuant to the terms of the Loan
Agreement or if a Tax Event (as defined hereinafter) occurs and is
continuing, provided, that in the case of a Tax Event notice of
prepayment must occur within ninety days of the occurrence of such
Tax Event and the Loans must be prepaid in whole upon not less than
thirty nor more than sixty days' notice, or, if such requirement to
pay Additional Interest shall relate only to a portion of the
Loans, the portion of the Loans affected by any such requirement
(together with all accrued and unpaid interest, including
Additional Interest, on the portion being prepaid), provided that
if a partial prepayment would, through the corresponding partial
redemption of the Preferred Shares, result in a delisting of the
Preferred Shares from the New York Stock
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Exchange, Capital Holding may only prepay the Loans in full. In no
event, however, will Capital Holding have the right to prepay the
Loans, or a portion thereof, under this clause (ii) based on (a) a
technical obligation to pay Additional Interest because of a
withholding obligation to the extent Capital Holding would not
incur any penalties, interest or tax under the United States
Internal Revenue Code of 1986, as amended (the "Code") or other
applicable law if Capital Holding did not withhold, or (b) a de
minimis obligation to pay Additional Interest. For purposes of the
foregoing, in the event that Capital Holding is advised by
independent legal counsel that more than an insubstantial risk
exists that Capital Holding will incur penalties, interest or tax
under the Code or other applicable law if it does not withhold,
Capital Holding shall have the right to repay the Loans, or a
portion thereof, under this clause (ii) unless the obligation to
pay Additional Interest if Capital Holding does so withhold is a de
minimis obligation. For purposes of this clause (ii), "Tax Event"
means that Capital Holding or the Company shall have obtained an
opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that, as a result of
any amendment to, or change in, the laws (or any regulations
thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or any
amendment to or change in an official interpretation or
application of such laws or regulations, which amendment or
change is effective on or after ____ ________, 1994, and which
change cannot be avoided by the use of any reasonable measures
available to Capital Holding or the Company, it is substantially
more likely than it was on ___________, 1994 that (i) the Company
will be subject to Federal income tax with respect to interest
received on the Loans, or (ii) interest payable on the Loans will
not be deductible for Federal income tax purposes.
INTEREST
The Loans will bear interest at an annual rate equal to _____% from the
date they are made until maturity. Such interest shall be payable on the last
day of each calendar month of each year, commencing __________, 1994. In the
event that any date on which interest is payable on the Loans is not a
Business Day, then payment of the interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date, subject to certain rights of extension
described below.
EXTENDED INTEREST PAYMENT PERIOD
Capital Holding shall have the right at any time or times during the term
of the Loans, so long as Capital Holding is not in default in the payment of
interest on the Loans, to extend the interest payment period to up to 18
months; provided that at the end of such period Capital Holding shall pay all
interest then accrued and unpaid (together with interest thereon at the rate
specified for the Loans to the extent permitted by applicable law); and
provided further that, during any such extended interest payment period
neither Capital Holding nor any majority-owned subsidiary of Capital Holding
shall declare or pay any dividends on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its shares of common or preferred
stock or make any guarantee payments with respect to the foregoing (other than
(i) payments under the Guarantee or under other guaranty agreements made by
Capital Holding in respect of additional preferred shares that may be issued
in one or more series or classes that rank pari passu with each other and with
the Preferred Shares with respect to participation in the profits and assets
of the Company, or (ii) dividend or guarantee payments to Capital Holding).
Prior to the termination of any such extended interest payment period,
Capital Holding may further extend the interest
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payment period, provided that such extended interest payment period together
with all such further extensions thereof may not exceed 18 months. Capital
Holding shall give the Company notice of its selection of such extended
interest payment period one Business Day prior to the earlier of (i) the date
the Company declares the related dividend or (ii) the date the Company is
required to give notice of the record or payment date of such related dividend
to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Shares, but in any event not less
than two Business Days prior to such record date. Capital Holding shall cause
the Company to give such notice of Capital Holding's selection of such
extended interest payment period to the holders of the Preferred Shares.
ADDITIONAL INTEREST
If at any time following the date of the Loan Agreement (a) the Company
shall be required to pay any Additional Amounts in respect of the Preferred
Shares, pursuant to the terms thereof, (b) Capital Holding shall be required
to withhold or deduct any amounts, for or on account of any taxes, duties or
government charges of whatever nature imposed by the United States of America
(or any political subdivision thereof or therein), from the interest payments
to be made by Capital Holding on the Loans or (c) the Company shall be
required to pay, with respect to its income derived from the interest payments
on the Loans, any amounts for or on account of any taxes, duties or
governmental charges of whatever nature imposed by the Turks and Caicos
Islands (or any political subdivision thereof or therein), or any other taxing
authority, then, in any such case, Capital Holding will pay as interest such
additional amounts ("Additional Interest") as may be necessary in order that
the net amounts received and retained by the Company after paying such
Additional Amounts, or after such withholding or deduction or the payment of
such taxes, duties, assessments or governmental charges, as the case may be,
shall result in the Company's having such funds as it would have had in the
absence of the obligation to pay such Additional Amounts, or such withholding
or deduction or the payment of such taxes, duties, assessments or governmental
charges, as the case may be. The obligation to pay Additional Interest under
(b) above shall be reduced proportionately to the extent that (x) Capital
Holding or the Company has notified holders of Preferred Shares of the
obligation to withhold taxes and requested but not received from such holders
declarations of nonresidence or other claim for exemption and (y) such
withholding or deduction would not have been required had such declaration or
claim been received.
METHOD AND DATE OF PAYMENT
Each payment by Capital Holding of principal and interest (including
Additional Interest, if any) on the Loans shall be made to the Company in
lawful money of the United States, at such place and to such accounts as may
be designated by the Company.
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<PAGE>
SET-OFF
Notwithstanding anything to the contrary in the Loan Agreement, Capital
Holding shall have the right to set-off any payment it is otherwise required
to make thereunder with and to the extent Capital Holding has theretofore
made, or is concurrently on the date of such payment making, a payment under
the Guarantee.
SUBORDINATION
The Loan Agreement provides that Capital Holding and the Company covenant
that each of the Loans is subordinate and junior in right of payment to all
Senior Indebtedness as provided in the Loan Agreement. The term "Senior
Indebtedness" means the principal, premium, if any, and interest on (i) all
indebtedness of Capital Holding other than ordinary trade credit and other
accounts payable arising in the ordinary course of business, whether
outstanding on the date of the Loan Agreement or thereafter created, incurred
or assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business,
properties or assets, including securities, (ii) any indebtedness of others of
the kinds described in the preceding clause (i) for which Capital Holding is
responsible or liable (directly or indirectly, contingently or
noncontingently) as guarantor or otherwise and (iii) amendments, renewals,
extensions and refundings of any such indebtedness, unless in any instrument
or instruments evidencing or securing such indebtedness or pursuant to which
the same is outstanding, or in any such amendment, renewal, extension or
refunding, it is expressly provided that such indebtedness is not superior in
right of payment to the Loans. The Senior Indebtedness shall continue to be
Senior Indebtedness and entitled to the benefits of the subordination
provisions irrespective of any amendment, modification or waiver of any term
of the Senior Indebtedness or extension or renewal of the Senior Indebtedness.
Under the foregoing definition Senior Indebtedness does not include, without
limitation, ordinary trade credit and other accounts payable arising in the
ordinary course of Capital Holding's business and other liabilities of Capital
Holding which are not incurred for money borrowed or evidenced by notes or
similar instruments.
In the event that (i) Capital Holding shall default in the payment of any
principal, or premium, if any, or interest on any Senior Indebtedness when the
same becomes due and payable, whether at maturity or at a date fixed for
prepayment or declaration or otherwise or (ii) an event of default occurs with
respect to any Senior Indebtedness permitting the holders thereof to
accelerate the maturity thereof and written notice describing such event of
default and requesting commencement of payment blockage on transactions as
hereinafter described is given to Capital Holding by the holders of Senior
Indebtedness, then unless and until such default in payment or event of
default shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities, by set-off or
otherwise) shall be made or agreed to be made on account of the Loans
-37-
<PAGE>
or interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the Loans. Capital Holding will give prompt
written notice to the Company of any default in the payment of any Senior
Indebtedness and of any dissolution, winding up or reorganization of Capital
Holding.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to Capital Holding or its property or for the benefit of its creditors, (ii)
any proceeding for the liquidation, dissolution or other winding up of Capital
Holding, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by Capital Holding for the
benefit of creditors, or (iv) any other marshaling of the assets of Capital
Holding, all Senior Indebtedness shall first be paid in full before any
payment or distribution, whether in cash, securities or other property, may be
made by Capital Holding on account of the Loans. In any such event, any
payment or distribution, whether in cash, securities or other property (other
than securities of Capital Holding or any other corporation provided for by a
plan of reorganization or a readjustment, the payment of which is subordinate,
at least to the extent provided in the subordination provisions of the Loan
Agreement with respect to the indebtedness evidenced by the Loans, to the
payment of all Senior Indebtedness at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for the subordination provision) be
payable or deliverable in respect to the Loans shall be paid or delivered
directly to the holders of the Senior Indebtedness (or their representative or
trustee) in accordance with the priorities then existing among such holders
until all Senior Indebtedness shall have been paid in full. No present or
future holder of any Senior Indebtedness may be prejudiced in the right to
enforce subordination of the indebtedness constituting the Loans by any act or
failure to act on the part of Capital Holding.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property
equal to the amount of such Senior Indebtedness then outstanding. Upon the
payment in full of all Senior Indebtedness, the Company shall be subrogated to
all the rights of any holders of Senior Indebtedness to receive any further
payments or distributions applicable to the Senior Indebtedness until the
Loans shall have been paid in full, and such payments or distributions of
cash, securities or other property received by the Company, by reason of such
subrogation, which otherwise would be paid or distributed to the holders of
Senior Indebtedness, shall, as between Capital Holding and its creditors other
than the holders of Senior Indebtedness, on the one hand, and the Company, on
the other, be deemed to be a payment by Capital Holding on account of Senior
Indebtedness, and not on account of the Loans.
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<PAGE>
COVENANTS
Capital Holding will covenant that neither Capital Holding, nor any
majority-owned subsidiary of Capital Holding, will declare or pay any dividend
on, or redeem, purchase, acquire or make a liquidation payment with respect
to, any of Capital Holding's capital stock, or make any guarantee payments
with respect to the foregoing (other than (i) payments under the Guarantee or
under other guaranty agreements made by Capital Holding in respect of
additional preferred shares that may be issued in one or more series or
classes that rank pari passu with each other and with the Preferred Shares
with respect to participation in the profits and assets of the Company, or
(ii) dividends or guarantee payments to Capital Holding by a majority-owned
subsidiary), if at such time (x) there shall have occurred any event that,
with the giving of notice or the lapse of time or both, would constitute an
Event of Default under the Loan Agreement or (y) Capital Holding shall be in
default with respect to its payment or other obligations under the Guarantee
or the Expenses and Liabilities Agreement. Capital Holding will also covenant
(i) to maintain direct or indirect 100% ownership of the Common Shares and any
other shares of the Company other than (x) the Preferred Shares, and (y) any
additional preferred shares that may be issued in one or more series or
classes, and that rank pari passu with each other and with the Preferred
Shares with respect to participation in the profits and assets of the Company,
(ii) to cause at least 21% of the total value of the Company and at least 21%
of all interests in the capital, income, gain, loss, deduction and credit of
the Company to be represented by Common Shares, (iii) not to voluntarily
dissolve, wind-up or liquidate the Company, (iv) to remain the Manager of the
Company and to timely perform all of its duties as Manager (including the duty
to declare and pay dividends on the Preferred Shares as described in
"Description of the Preferred Shares-Dividends"); provided that any permitted
successor of Capital Holding under the Loan Agreement may succeed to Capital
Holding's duties as Manager, and (v) to use its reasonable efforts to cause
the Company to remain a limited life company and otherwise continue to be
treated as a partnership for United States federal income tax purposes.
The Company may not waive compliance or waive any default in compliance by
Capital Holding of any covenant or other term in the Loan Agreement without
the approval of the same percentage of Preferred Shareholders, obtained in the
same manner, as would be required for an amendment of the Loan Agreement to
the same effect.
EVENTS OF DEFAULT
If one or more of the following events (each an "Event of Default") shall
occur and be continuing:
(a) default in the payment of interest on the Loans, including any
Additional Interest in respect thereof, when due for 10 days
(whether by virtue of the provisions described above under "-
Subordination" or otherwise); provided that a valid extension of the
interest payment period by Capital Holding shall not constitute a
default in the payment of interest for this purpose (see "-
Interest");
(b) default in the payment of principal on the Loans when due (whether
by virtue of the provisions described above under "-Subordination"
or otherwise);
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<PAGE>
(c) the dissolution or winding-up or liquidation of the Company;
(d) the bankruptcy, insolvency or liquidation of Capital Holding; or
(e) breach by Capital Holding of any of its covenants under the Loan
Agreement continued for 30 days after notice to Capital Holding from
any holder of the Preferred Shares;
then, provided that the holders of a majority of liquidation preference of the
outstanding Preferred Shares are entitled to appoint a trustee (as described
under "Description of Preferred Shares-Voting Rights" above), the Company will
have the right to declare the principal of and the interest on the Loans
(including any Additional Interest and any interest subject to an extension
election) and all other amounts payable under the Loan Agreement to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Loans. Under the terms of the Preferred Shares, the holders of
outstanding Preferred Shares will have the rights referred to under
"Description of the Preferred Shares-Voting Rights", including the right to
appoint a trustee, which trustee will be authorized to exercise the Company's
right to accelerate the principal amount of the Loans and to enforce the
Company's other rights as a creditor under the Loans, and Capital Holding
agrees to cooperate with such trustee.
MISCELLANEOUS
Capital Holding will have the right at all times to assign any of its
rights or obligations under the Loan Agreement to a direct or indirect wholly
owned subsidiary of Capital Holding other than any subsidiary that is an
insurance company; provided that, in the event of any such assignment, Capital
Holding will remain jointly and severally liable for all such obligations.
The Company may not assign any of its rights under the Loan Agreement without
the prior written consent of Capital Holding. Subject to the foregoing, the
Loan Agreement will be binding upon and inure to the benefit of Capital
Holding and the Company and their respective successors and assigns. The Loan
Agreement provides that it may not otherwise be assigned by Capital Holding or
the Company.
The Loan Agreement will provide that Capital Holding may merge with or into
another entity or may permit another entity to merge with or into Capital
Holding, or may sell, transfer or lease all or substantially all of its assets
to another entity, only if (i) at such time no Event of Default has occurred
and is continuing, or would occur as a result of such merger, sale, transfer
or lease, and (ii) Capital Holding is the survivor of such merger or the
entity to which Capital Holding's assets are sold, transferred or leased is an
entity organized under the laws of the United States or any state thereof and
assumes all of Capital Holding's obligations under the Loan Agreement.
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<PAGE>
Except as to matters relating to the authorization, execution and delivery
of the Loan Agreement by the Company, which will be governed by the laws of
the Turks and Caicos Islands, the Loan Agreement will be governed by and
construed in accordance with the laws of the State of New York.
The Loan Agreement may be amended by mutual consent of the parties in the
manner the parties shall agree; provided that, so long as any of the Preferred
Shares remain outstanding, no such amendment shall be made that adversely
affects the holders of Preferred Shares, no termination of the Loan Agreement
shall occur and no Event of Default or compliance with any covenant under the
Loan Agreement may be waived by the Company, without the prior consent of at
least 66 2/3% of the outstanding Preferred Shares, in writing or at a duly
constituted meeting of such holders.
TAXATION
The following discussion summarizes the material federal income tax
considerations and Turks and Caicos Islands tax considerations that may be
relevant to prospective purchasers of the Preferred Shares.
PROSPECTIVE PURCHASERS OF THE PREFERRED SHARES ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE TURKS AND CAICOS ISLANDS, UNITED STATES OR OTHER
TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SHARES, INCLUDING THE EFFECT OF ANY STATE OR LOCAL TAX LAWS.
UNITED STATES
The following summary is based upon the opinion of King & Spalding, special
United States tax counsel to Capital Holding and the Company, insofar as it
relates to matters of law and legal conclusions. The discussion is intended
to address only those federal income tax considerations that are generally
applicable to all holders of the Preferred Shares ("Holders"). The specific
tax consequences will vary for the Holders because of their varying
circumstances. This section is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed
regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Subsequent changes may cause the tax
consequences to vary substantially from the consequences described below.
King & Spalding, special United States tax counsel to Capital Holding and
the Company, has reviewed the following discussion and is of the opinion that
(i) this discussion fairly summarizes the material federal income tax
considerations to the Holders and (ii) the descriptions of federal income tax
law set forth in this discussion are accurate in all material respects.
Because the particular circumstances of individual Holders may vary, the
following discussion is not exhaustive of all possible tax considerations.
The discussion deals
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<PAGE>
only with Preferred Shares held as capital assets by initial purchasers and
has only limited application to corporations, estates, trusts and non-resident
aliens. The discussion does not deal with special classes of Holders, such as
dealers in securities or currencies, life insurance companies, persons holding
Preferred Shares as a hedge or hedged against currency risks or as part of a
straddle, or persons whose functional currency is not the U.S. dollar.
INCOME FROM PREFERRED SHARES
In the opinion of King & Spalding, the Company will be treated as a
partnership for federal income tax purposes. Each Holder will be required to
include in gross income the Holder's distributive share of the Company's net
income. Such income should not exceed dividends received on a Preferred
Share, except in limited circumstances as described below under "Potential
Extension of Interest Payment Period". No portion of such income will be
eligible for the dividends received deduction.
DISPOSITION OF PREFERRED SHARES
Gain or loss will be recognized on a sale of Preferred Shares equal to the
difference between the amount realized and the Holder's tax basis for the
Preferred Shares sold. Depending on the particular circumstances of a Holder,
gain or loss recognized by a Holder on the sale or exchange of a Preferred
Share held for more than one year will be taxable as long-term capital gain or
loss.
COMPANY INFORMATION RETURNS
Capital Holding, as Manager of the Company, will furnish each Holder with a
Schedule K-1 setting forth each Holder's allocable share of income within 90
days after the close of the Company's taxable year and will serve as the "Tax
Matters Partner", as that term is defined in the Code.
Any person who holds Preferred Shares as a nominee for another person is
required to furnish to the Company (a) the name, address and taxpayer
identification number of the beneficial owners and the nominee; (b) whether
the beneficial owner is (i) a person that is not a United States person, (ii)
a foreign government, an international organization or any wholly owned agency
or instrumentality of either of the foregoing, or (iii) a tax-exempt entity;
(c) the amount and description of Preferred Shares held, acquired or
transferred for the beneficial owners; and (d) certain information including
the dates of acquisitions and transfers, means of acquisitions and transfers,
and acquisition cost for purchases, as well as the amount of net proceeds from
sales. Brokers and financial institutions are required to furnish additional
information, including whether they are a United States person and
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<PAGE>
certain information on Preferred Shares they acquire, hold or transfer for
their own account. A penalty of $50 per failure (up to a maximum of $100,000
per calendar year) is imposed by the Code for failure to report such
information to the Company.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Loans which will be made from the proceeds of
issuance of the Preferred Shares and the Common Share Payments, Capital
Holding will be permitted to extend the payment period up to 18 months. In
the event that Capital Holding exercises this right, Capital Holding may not
declare dividends on any share of its preferred or common stock, and
therefore, the extension of a payment period is, in the view of the Company
and Capital Holding, remote. In the event that the payment period is
extended, the Company will continue to accrue income, equal to the amount of
the interest payment due at the end of the extended payment period, over the
length of the extended payment period.
Accrued income will be allocated, but not distributed, to Holders of record
on the last day of each calendar month. As a result, Holders of record during
an extended interest payment period will include interest in gross income in
advance of the receipt of cash and any such holders who dispose of Preferred
Shares prior to the record date for the payment of dividends following such
extended interest payment period will include interest in gross income but
will not receive any cash related thereto. The tax basis of a Preferred Share
will be increased by the amount of any interest that is included in income
without a receipt of cash, and will be decreased again when such cash is
subsequently received from the Company.
NON-UNITED STATES HOLDERS
For purposes of this discussion, a "Non-United States Holder" is any Holder
who or which is (i) a nonresident alien individual or (ii) a foreign
corporation, partnership or estate or trust, in either case not subject to
United States federal income tax on a net income basis in respect of a
Preferred Share.
Under present United States federal income tax law, and assuming
satisfaction by Capital Holding of its withholding tax obligations, if any:
(i) payments by the Company or any of its paying agents to any Holder
who or which is a Non-United States Holder will not be subject to United
States federal withholding tax; provided that (a) the beneficial owner of
the Preferred Share does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of Capital
Holding entitled to vote, (b) the beneficial owner of the Preferred Share
is not a controlled foreign corporation that is related to Capital
Holding through
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<PAGE>
stock ownership; and (c) either (A) the beneficial owner of the Preferred
Share certifies to the Company or its agent, under penalties of perjury,
that it is not a United States Holder and provides its name and address
or (B) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") and holds the Preferred
Share certifies to the Company or its agent under penalties of perjury
that such statement has been received from the beneficial owner by it or
by a financial institution between it and the beneficial owner and
furnishes the payor with a copy thereof; and
(ii) a Non-United States Holder of a Preferred Share will not be
subject to United States federal withholding tax on any gain realized on
the sale or exchange of a Preferred Share.
Should any United States withholding tax be imposed on payments on the
Loans, the Guarantee or the Preferred Shares, Capital Holding is obligated,
except as described below, to pay those taxes (see "Description of the Loans-
Additional Interest" and "Description of the Guarantee-Additional Amounts",
above). However, in the case of withholding tax imposed on the Preferred
Shares, such shares may be subject to a call for redemption, or in the case of
withholding tax imposed on the Loans, Capital Holding may prepay all or a
portion of the Loans, resulting in the redemption of some or all of the
shares. In addition, with regard to payments on the Loans or the Preferred
Shares, Capital Holding is not obligated to pay U.S. withholding tax imposed
because of the Holder's failure to provide a declaration of non-residence or
other claim for exemption. With regard to the Guarantee, Capital Holding is
not obligated to pay withholding tax imposed because of a Holder's connection
with the United States, any State thereof or any other jurisdiction through
which or from which such payment is made or because of a Holder's failure to
provide a declaration of non-residence or other claim for exemption.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
the proceeds of the sale of Preferred Shares within the United States to
noncorporate United States Holders, and "backup withholding" at a rate of 31%
will apply to such payments if the United States Holder fails to provide an
accurate taxpayer identification number.
Payments of the proceeds from the sale by a Non-United States Holder of
Preferred Shares made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, except that, if the
broker is a United States person, a controlled foreign corporation for United
States tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payments. Payments
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<PAGE>
of the proceeds from the sale of Preferred Shares to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the Holder or beneficial owner certifies as to its non-
United States status or otherwise establishes an exemption from information
reporting and backup withholding.
TURKS AND CAICOS ISLANDS
The following discussion is a summary of material Turks and Caicos Islands
tax considerations that may be relevant to prospective purchasers of the
Preferred Shares and represents the opinion of Misick and Stanbrook, Turks and
Caicos Islands counsel to the Company, insofar as it relates to matters of law
and legal conclusions.
Payment of dividends on the Preferred Shares will not be subject to any
withholding under the tax laws of the Turks and Caicos Islands.
There are no taxes in the Turks and Caicos Islands on income, profits,
capital gains or turnover, nor are there any inheritance, estate, or gift
taxes or duties in the Turks and Caicos Islands. The Company is exempted from
the payment of stamp duty on the issuance of any shares, debentures or other
obligations of the Company. No stamp duty is payable on the transfer or
redemption of shares in the Company. The Company has been issued a
certificate by the Governor of the Turks and Caicos Islands stating that the
Company is exempt, for a period of twenty years from the date of its
organization, March 18, 1994, from the payment of any taxes or duties which
may be imposed in the future on profits, income, capital gains, assets or
appreciations and any such tax or duty or tax in the nature of estate duty or
inheritance tax payable on the shares, debentures or other obligations of the
Company.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of the Underwriters, for whom Goldman, Sachs & Co. are acting as
representatives, has severally agreed to purchase from the Company the
respective number of Preferred Shares set forth opposite its name below:
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<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
PREFERRED
UNDERWRITERS SHARES
- -------------------------------------- --------------------------------------
<S> <C>
Goldman, Sachs & Co..................
---------
Total............................. 4,000,000
- ---------- =========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Preferred Shares
offered hereby, if any are taken.
The Underwriters propose to offer the Preferred Shares in part directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus, and in part to certain securities dealers at such price less
a concession of $___ per Preferred Share ($___ per Preferred Share sold to
certain institutions). The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $___ per Preferred Share to certain
brokers and dealers. After the Preferred Shares are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the representatives.
In view of the fact that the proceeds from the sale of the Preferred Shares
will be loaned to Capital Holding, under the Underwriting Agreement Capital
Holding has agreed to pay to such Underwriters an amount in New York Clearing
House (next day) funds of $_____ per Preferred Share ($_____ per Preferred
Share sold to certain institutions) for the accounts of the several
Underwriters, as compensation for the services of the several Underwriters
under the Underwriting Agreement.
Prior to this offering, there has been no public market for the Preferred
Shares. In order to meet one of the requirements for listing the Preferred
Shares on the New York Stock Exchange, the Underwriters will undertake to sell
lots of 100 or more Preferred Shares to a minimum of 400 beneficial holders.
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<PAGE>
The Company and Capital Holding have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the United States
Securities Act of 1933, as amended.
John L. Weinberg is a director of Capital Holding and also serves as a
member of the Asset/Liability Committee and the Audit Committee of Capital
Holding's Board of Directors. He was Senior Partner of the Goldman Sachs
Group, L.P. and its principal affiliate, Goldman, Sachs & Co., until November
30, 1990, when he retired as a general partner and became Senior Chairman of
the Goldman Sachs Group, L.P. In July 1991 he became Senior Chairman of
Goldman, Sachs & Co. In addition, certain of the Underwriters and their
associates may be customers of, engage in transactions with, and perform
services for Capital Holding in the ordinary course of business.
LEGAL MATTERS
The validity of the Preferred Shares will be passed upon for the Company by
Misick and Stanbrook, Grand Turk, Turks and Caicos Islands. The validity of
the Backup Undertakings by Capital Holding will be passed upon for the Company
and Capital Holding by Misick and Stanbrook, Turks and Caicos Islands counsel
to the Company and Capital Holding, and by Stites & Harbison, Louisville,
Kentucky, and for the Underwriters by Sullivan & Cromwell, New York, New York.
King & Spalding, Atlanta, Georgia, will pass upon the United States federal
income tax matters, and Misick and Stanbrook will pass upon the Turks and
Caicos Islands tax matters, described under "Taxation" in this Prospectus.
Larry D. Thompson, a partner in King & Spalding, is a director of Capital
Holding and also serves as a member of the Asset/Liability Committee and the
Audit Committee of Capital Holding's Board of Directors.
EXPERTS
The consolidated financial statements of Capital Holding incorporated by
reference in Capital Holding's Annual Report on Form 10-K for the year ended
December 31, 1993, and the related schedules included therein, have been
audited by Ernst & Young, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such
consolidated financial statements and related schedules are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
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<PAGE>
===============================================================================
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus does not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which it relates or to an offer to sell or the solicitation of
an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that there
has been no change in the affairs of Capital Holding or the Company since the
date hereof or that information contained herein is correct as of any time
subsequent to its date.
-----------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Available Information...... 2
Incorporation of Certain
Documents by Reference.... 3
Prospectus Summary......... 4
Recent Development......... 9
Capital Holding LLC........ 9
Capital Holding
Corporation............... 9
Use of Proceeds............ 14
Capitalization............. 16
Summary Consolidated
Financial Data............ 17
Description of Preferred
Shares.................... 19
Description of the
Guarantee................. 30
Description of the
Loans..................... 33
Taxation................... 41
Underwriting............... 45
Legal Matters.............. 47
Experts.................... 47
</TABLE>
===============================================================================
4,000,000 Shares
Capital Holding LLC
Guaranteed to the extent set
forth herein by
Capital Holding Corporation
% Cumulative
------
Monthly Income Preferred Shares
--------------
[LOGO OF CHC]
--------------
Goldman, Sachs & Co.
<PAGE>
<TABLE>
<CAPTION>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<S> <C>
Registration Fee........................... $ 34,483
Listing Fees............................... 44,130
Printing and Engraving Expenses............ 125,000*
Rating Agency Fees......................... 40,000*
Accountants' Fees and Expenses............. 50,000*
Legal Fees and Expenses.................... 50,000*
Blue Sky Fees and Expenses................. 25,000*
Miscellaneous.............................. 11,387*
--------
Total................................. $380,000*
========
- -------------
*Estimated.
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Capital Holding Corporation is a Delaware corporation. Section 145 of the
Delaware General Corporation Law empowers a corporation, with limitations, to
indemnify its directors, officers, employees, and agents against expenses
(including attorneys' fees), judgments, fines, and certain settlements actually
and reasonably incurred by them in connection with any suit or proceeding to
which they are a party so long as they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation (and, with respect to a criminal action or proceeding, so long as
they had no reasonable cause to believe their conduct to have been unlawful).
Capital Holding Corporation has purchased insurance coverage for its
directors and officers with respect to certain liabilities incurred in their
capacities as such, and insuring Capital Holding against any payments which it
is obligated to make to such persons under the above indemnification provisions.
The Delaware General Corporation Law was amended in June 1986 to allow
Delaware corporations to amend their certificates of incorporation (a) to
eliminate or limit their directors' personal liability to the company and its
shareholders for monetary damages for violations of their fiduciary duty of care
in certain cases (including gross negligence) and (b) to enhance the scope of
authorized indemnification (including the advancing of litigation expenses) for
its directors, officers, employees, and agents. Under the amended statute, a
corporation can entitle an individual to an advance of expenses associated with
a legal proceeding before its conclusion, if that individual agrees to repay the
expenses advanced if it is ultimately determined that indemnification was not
warranted.
In May, 1987, the Certificate of Incorporation of Capital Holding Corporation
was amended to: (a) limit directors' liability in certain
II-1
<PAGE>
circumstances, (b) enhance indemnification rights for its directors, officers,
employees, and agents to the fullest extent permitted by Delaware law as amended
in June 1986 in the manner described above, and (c) entitle an individual to an
advance of expenses as described above. Section 6.1 of the By-Laws of Capital
Holding Corporation provides that its officers, directors, employees, and agents
shall have such rights to indemnification as are provided for in the company's
Certificate of Incorporation.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
1* - Form of Underwriting Agreement.
3.1** - Memorandum of Association of Capital Holding LLC.
3.2** - Articles of Association of Capital Holding LLC.
4.1* - Form of Payment and Guarantee Agreement between Capital Holding LLC and Capital Holding Corporation.
4.2* - Form of the Terms of the Cumulative Monthly Income Preferred Shares.
5.1* - Opinion of Misick and Stanbrook, Turks and Caicos Islands counsel to the Company and Capital Holding
Corporation, as to legality of the Cumulative Monthly Income Preferred Shares.
5.2* - Opinion of Stites & Harbison as to the legality of the Guarantee.
8.1* - Opinion of Misick and Stanbrook, Turks and Caicos Islands counsel to the Company and Capital Holding
Corporation, as to tax matters (included in Exhibit 5.1).
8.2 - Opinion of King & Spalding, as to United States tax matters.
12** - Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
23.1* - Consent of Ernst & Young.
23.2* - Consent of Misick and Stanbrook (included in Exhibit 5.1).
23.3* - Consent of Stites & Harbison (included in Exhibit 5.2).
23.4 - Consent of King & Spalding (included in Exhibit 8.2).
24.1** - Certified copy of resolution of the Board of Directors of Capital Holding Corporation authorizing the corporation
and its officers to name attorneys-in-fact to sign on their behalf the registration statement and any and all
amendments (including post-effective amendments) thereto .
24.2** - Power of attorney for certain directors and officers of Capital Holding Corporation authorizing the
attorneys-in-fact named therein to sign on their behalf the registration statement and any and all amendments
(including post-effective amendments) thereto.
99.1* - Form of Loan Agreement between Capital Holding LLC and Capital Holding Corporation.
99.2* - Form of Expenses and Liabilities Agreement between Capital Holding LLC and Capital Holding Corporation.
</TABLE>
- ---------------
*Filed herewith.
**Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
Each of the undersigned registrant and guarantor hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of Capital Holding Corporation's annual report pursuant to
Section 13(a) or 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 the time shall be deemed to be the initial bona
fide offering thereof.
(2) That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant and the guarantor pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(3) That, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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 under the Securities Act of 1933
may be permitted to directors, officers, and controlling persons of the
registrant or the guarantor under Item 15 above, or otherwise, the registrant
and the guarantor have been advised that in the opinion of the SEC 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 or the guarantor of
expenses incurred or paid by a director, officer, or controlling person of the
registrant or the guarantor in the successful defense of any action, suit, or
proceeding) is asserted against the registrant or the guarantor by such
director, officer, or controlling person in connection with the securities being
registered, the registrant and the guarantor will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
them is against public policy as expressed in the 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, CAPITAL HOLDING
LLC 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 AMENDMENT
NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF LOUISVILLE, COMMONWEALTH OF
KENTUCKY, ON THE 30TH DAY OF MARCH, 1994.
CAPITAL HOLDING LLC
(Registrant)
By: Capital Holding Corporation, as Manager
By: Robert L. Walker*
---------------------------------------
Robert L. Walker
Senior Vice President-Finance
and Chief Financial Officer
of Manager
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON THE 30TH DAY OF MARCH, 1994.
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
Robert L. Walker* Senior Vice President-Finance and
- ----------------------------- Chief Financial Officer of Manager
Robert L. Walker (Principal Executive Officer)
Steven T. Downey* Vice President and Controller
- ----------------------------- of Manager
Steven T. Downey (Principal Financial and
Accounting Officer)
/s/ R. Michael Slaven Authorized Representative of
- ----------------------------- Registrant in the United States
R. Michael Slaven
*By: /s/ R. Michael Slaven
-------------------------
R. Michael Slaven
Attorney-in-fact for the above
named officers
</TABLE>
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, CAPITAL HOLDING
CORPORATION 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
AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LOUISVILLE, COMMONWEALTH
OF KENTUCKY, ON THE 30TH DAY OF MARCH, 1994.
CAPITAL HOLDING CORPORATION
(Guarantor)
By: IRVING W. BAILEY II*
Chairman of the Board,
President, and Chief
Executive Officer
*By: /s/ R. Michael Slaven
----------------------------
R. Michael Slaven
Attorney-in-fact for
Irving W. Bailey II
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES INDICATED ON THE 30TH DAY OF MARCH, 1994.
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
Irving W. Bailey II* Chairman of the Board,
- ----------------------------- President, and Chief Executive Officer
Irving W. Bailey II (Principal Executive Officer)
Robert L. Walker* Senior Vice President--Finance
- ----------------------------- and Chief Financial Officer
Robert L. Walker (Principal Financial Officer)
Steven T. Downey* Vice President and Controller
- ----------------------------- (Principal Accounting Officer)
Steven T. Downey
John L. Clendenin* Director
- -----------------------------
John L. Clendenin
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLES
---------- ------
<S> <C>
- ----------------------- Director
John M. Cranor, III
Joseph F. Decosimo* Director
- -----------------------
Joseph F. Decosimo
Lyle Everingham* Director
- -----------------------
Lyle Everingham
Raymond V. Gilmartin* Director
- -----------------------
Raymond V. Gilmartin
J. David Grissom* Director
- -----------------------
J. David Grissom
Watts Hill, Jr.* Director
- -----------------------
Watts Hill, Jr.
F. Warren McFarlan* Director
- -----------------------
F. Warren McFarlan
Martha R. Seger* Director
- -----------------------
Martha R. Seger
- ----------------------- Director
Florence R. Skelly
Larry D. Thompson* Director
- -----------------------
Larry D. Thompson
- ----------------------- Director
John L. Weinberg
*By: /s/ R. Michael Slaven
----------------------
R. Michael Slaven
Attorney-in-fact
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
1* --Form of Underwriting Agreement.
3.1** --Memorandum of Association of Capital Holding LLC.
3.2** --Articles of Association of Capital Holding LLC.
4.1* --Form of Payment and Guarantee Agreement between Capital Holding
LLC and Capital Holding Corporation.
4.2* --Form of the Terms of the Cumulative Monthly Income Preferred
Shares.
5.1* --Opinion of Misick and Stanbrook, Turks and Caicos Islands
counsel to the Company and Capital Holding Corporation, as
to legality of the Cumulative Monthly Income Preferred
Shares.
5.2* --Opinion of Stites & Harbison as to the legality of the
Guarantee.
8.1* --Opinion of Misick and Stanbrook, Turks and Caicos Islands
counsel to the Company and Capital Holding Corporation,
as to tax matters (included in Exhibit 5.1).
8.2 --Opinion of King & Spalding, as to United States tax matters.
12** --Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.
23.1* --Consent of Ernst & Young.
23.2* --Consent of Misick and Stanbrook (included in Exhibit 5.1).
23.3* --Consent of Stites & Harbison (included in Exhibit 5.2).
23.4 --Consent of King & Spalding (included in Exhibit 8.2).
24.1** --Certified copy of resolution of the Board of Directors of Capital
Holding Corporation authorizing the corporation and its officers
to name attorneys-in-fact to sign on their behalf the
registration statement and any and all amendments
(including post-effective amendments) thereto.
24.2** --Power of attorney for certain directors and officers of Capital
Holding Corporation authorizing the attorneys-in-fact named
therein to sign on their behalf the registration statement and
any and all amendments (including post-effective amendments)
thereto.
99.1* --Form of Loan Agreement between Capital Holding LLC and Capital
Holding Corporation.
99.2* --Form of Expenses and Liabilities Agreement between Capital
Holding LLC and Capital Holding Corporation.
</TABLE>
- ---------------
*Filed herewith.
**Previously filed.
II-7
<PAGE>
EXHIBIT 1
Draft of March 16, 1994
CAPITAL HOLDING LLC
__% CUMULATIVE GUARANTEED MONTHLY
INCOME PREFERRED SHARES
(LIQUIDATION PREFERENCE $__ PER SHARE)
GUARANTEED BY
CAPITAL HOLDING CORPORATION
Underwriting Agreement
----------------------
________ __, 1994
Goldman, Sachs & Co.,
____________________,
____________________,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Dear Sirs:
Capital Holding LLC, a limited life company organized under the laws of
_________________ (the "Company"), and Capital Holding Corporation, a Delaware
corporation, as guarantor and provider of certain backup undertakings (the
"Guarantor" or "Capital Holding"), propose, subject to the terms and conditions
stated herein, that the Company issue and sell to the Underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of ____________ shares (the
"Shares") of __% Cumulative Guaranteed Monthly Income Preferred Shares
(liquidation preference $__ per share) of the Company guaranteed (the
"Guarantee") by the Guarantor as to the payment of dividends, as, if, and when
declared and as to payments on liquidation or redemption and entitled to the
benefits of certain backup undertakings described in the Prospectus (as defined
in Section 1(a) hereof) (the "Undertakings") provided by the Guarantor (the
Undertakings together with the Guarantee being referred to collectively as the
"Backup Undertakings") (the Shares, together with the related Backup
Undertakings, being referred to collectively as the "Securities").
1. Each of the Company and the Guarantor jointly and severally represents
and warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-3 (File No. 33-_____) in
respect of the Securities has been filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended
(the "Act"), and delivered to you; such registration statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; no other document with respect to such
registration statement or document incorporated by reference therein has
heretofore been filed, or transmitted for filing, with the Commission other
than the Guarantor's Current Report on Form 8-K, dated ___________, 1994;
and no stop order suspending the effectiveness of such registration
statement has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act, being hereinafter called a "Preliminary Prospectus"; the
various parts of such registration statement, including (i) all exhibits
thereto and including the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act
<PAGE>
in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the registration statement at the time it was
declared effective and (ii) the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, being hereinafter
called the "Registration Statement"; such final prospectus, in the form
first filed pursuant to Rule 424(b) under the Act, being hereinafter called
the "Prospectus"; any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
Act, as of the date of such Preliminary Prospectus or Prospectus, as the
case may be; and any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus
or Prospectus, as the case may be, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and incorporated by reference in
such Preliminary Prospectus or Prospectus, as the case may be; and any
reference to any amendment to the Registration Statement shall be deemed to
refer to and include any annual report of the Company filed pursuant to
Section 13(a) or 15(d) of the Exchange Act after the effective date of the
Registration Statement that is incorporated by reference in the
Registration Statement;
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and 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, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
you expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the Act or
the Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement to such
documents, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder and will 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; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company or the
Guarantor by an Underwriter through you expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary
2
<PAGE>
to make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through you expressly for use
therein;
(e) The Company has no subsidiaries. Neither the Company, the
Guarantor nor any of the Guarantor's Subsidiaries (as hereinafter defined)
has sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or long-term
debt of the Company or in the capital stock or long-term debt of the
Guarantor and its Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company or the
Guarantor and its Subsidiaries, otherwise than as set forth or contemplated
in the Prospectus (the term "Subsidiary" as used in this Agreement
referring respectively to Commonwealth Life Insurance Company, First
Deposit Corporation, Peoples Security Life Insurance Company, National
Liberty Corporation, Worldwide Underwriters Insurance Company, National
Home Life Assurance Company, Durham Corporation and any other subsidiary of
the Company that would constitute a "significant subsidiary" of the Company
under Rule 1.02(v) of Regulation S-X under the Act);
(f) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Turks and Caicos
Islands, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties, or conducts any business, so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction;
(g) The Guarantor has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and each
Subsidiary has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation with power and authority (corporate and all material other)
to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require qualification, or is subject to no material
liability or disability by reason of the failure to be so qualified in any
such jurisdiction;
(h) Each of the Company and the Guarantor has an authorized
capitalization as set forth in the Prospectus; since such date there has
been no change in the capitalization of the Company and no change in the
consolidated capitalization of the Guarantor and its subsidiaries; all of
the issued shares of capital stock of the Company and of the Guarantor
3
<PAGE>
have been duly and validly authorized and issued, are fully paid and non-
assessable and conform to the descriptions thereof contained in the
Prospectus; and all of the issued shares of capital stock of each
Subsidiary of the Guarantor have been duly and validly authorized and
issued, are fully paid and non-assessable and (except for directors'
qualifying shares) are owned directly or indirectly by the Guarantor, free
and clear of all liens, encumbrances, equities or claims;
(i) The Shares have been duly and validly authorized by the Company,
and, when issued and delivered against payment therefor as provided herein,
will be duly and validly issued and fully paid and non-assessable and will
conform to the descriptions thereof contained in the Prospectus;
(j) The Guarantee, the loan agreement, dated as of ____________, 1994
(the "Loan Agreement"), between the Company and the Guarantor relating to
the loans to the Guarantor by the Company of the proceeds of the issuance
of the Company's common shares, the Shares and the expense reimbursement
agreement, dated as of ___________, 1994 between the Company and the
Guarantor (the "Expense Agreement"; the Guarantee, Loan Agreement and
Expense Agreement being collectively referred to as "Guarantor Agreements")
have each been duly authorized and when validly executed and delivered by
the Guarantor and, to the extent relevant, by the Company, will constitute
legal, valid and binding obligations of the Guarantor, enforceable in
accordance with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Guarantor Agreements will conform to the
descriptions thereof in the Prospectus; and the Guarantor Agreements will
be the only instruments comprising the Backup Obligations relating to the
Shares other than the provisions relating to the Guarantor in the Company's
Memorandum of Association, Articles of Association and Special Resolutions
of the Company;
(k) All of the issued common shares of the Company are owned directly
or indirectly by the Guarantor, free and clear of all liens, encumbrances,
equities or claims; the Company is not a party to or otherwise bound by any
agreement other than those described in the Prospectus;
(l) The issue and sale of the Shares by the Company, the compliance by
the Company with all of the provisions of this Agreement, the execution,
delivery and performance by the Company of the Loan Agreement and Expense
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the Company is bound
or to which any of the property or assets of the Company is subject, nor
will such action result in any violation of the provisions of the
Memorandum of Association, Articles of Association or the Special
Resolutions of the Company or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over the
Company or any of its properties; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act of
the Securities, authorizations of the Permanent Secretary, Finance, Turks
and Caicos Islands and the Registrar of Companies of the Turks and Caicos
Islands, which authorizations have been obtained, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the
purchase of the Shares and the distribution of the Securities by the
Underwriters;
4
<PAGE>
(m) The issue and sale of the Shares by the Company, the compliance by
the Company and the Guarantor with all of the provisions of this Agreement,
the execution, delivery and performance by the Guarantor of the Guarantor
Agreements, the performance by the Guarantor of the other Backup
Undertakings and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Guarantor is a party or by which it is bound or to
which any of its property or assets is subject or any indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to
which any of the Guarantor's subsidiaries is a party or by which any of its
subsidiaries is bound or to which any of the property or assets of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or by-laws of the
Guarantor or the charter or by-laws of any of its subsidiaries or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Guarantor or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue of the
Backup Undertakings or the consummation by the Guarantor of the
transactions contemplated by this Agreement, except the registration under
the Act of the Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under state securities
or Blue Sky laws in connection with the purchase of the Shares and
distribution of the Securities by the Underwriters;
(n) There are no legal or governmental proceedings pending to which
the Company, the Guarantor or any of its Subsidiaries is a party or of
which any property of the Company, the Guarantor or any of its Subsidiaries
is the subject, other than as set forth in the Prospectus and other than
litigation incident to the kind of business conducted by the Company, the
Guarantor and its Subsidiaries which, in the judgment of the Guarantor,
would not individually or in the aggregate have a material adverse effect
on the financial position, shareholders' equity or results of operations of
the Company, the Guarantor and its Subsidiaries; to the best of the
Guarantor's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others; the amounts accrued
for taxes on the latest consolidated statement of financial condition of
the Company and its subsidiaries included or incorporated by reference in
the Prospectus are sufficient for the payment of all federal, state, county
and local taxes of the Company, the Guarantor and its Subsidiaries, whether
or not disputed, which are properly accruable; and all federal, state,
county and local taxes due and payable by the Company, the Guarantor and
any of its Subsidiaries or Capital Liberty, L.P. have been paid or adequate
provision has been made for such payment; and
(o) Ernst & Young, who have certified certain financial statements of
the Guarantor and its subsidiaries, are independent public accountants with
respect to the Guarantor as required by the Act and the rules and
regulations of the Commission thereunder; and
(p) There are no contracts, agreements or understandings between the
Company or the Guarantor and any person granting such person the right to
require the Company or the Guarantor to file a registration statement under
the Act with respect to any preferred stock of the Company or the Guarantor
owned or to be owned by such person or to require the Company or the
Guarantor to include such securities in the securities registered pursuant
to the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company or the
Guarantor under the Act.
2. Subject to the terms and conditions herein set forth, the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to
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purchase from the Company, at a purchase price per share of $_____, the number
of Shares set forth opposite the name of such Underwriter in Schedule I hereto.
The Guarantor agrees to issue the Backup Undertakings concurrently with the
issue and sale of Shares as contemplated herein.
The Guarantor hereby guarantees the timely performance by the Company of
its obligations under this Section 2. As compensation to the Underwriters for
their commitments hereunder, and in view of the fact that the proceeds of the
sale of the Shares will be loaned by the Company to the Guarantor, the Guarantor
hereby agrees to pay at the Time of Delivery (as defined in Section 4 hereof) to
Goldman, Sachs & Co., for the accounts of the several Underwriters, an amount
equal to $____ per share for the Shares to be delivered by the Company hereunder
at the Time of Delivery, provided, however, that such compensation will be an
amount equal to $_____ per share for Shares sold to certain institutions and to
be delivered by the Company hereunder at the Time of Delivery.
3. Upon the authorization by you of the release of the Shares, the several
Underwriters propose to offer the Shares for sale upon the terms and conditions
set forth in the Prospectus.
4. A certificate or certificates in definitive form for the Shares to be
purchased by each Underwriter hereunder, and in such denominations and
registered in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company, shall be delivered by or on
behalf of the Company to you for the account of such Underwriter, against
payment by such Underwriter or on its behalf of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Company
in _________ Clearing House funds at 9:00 a.m. New York time, on ____________,
1994, or at such other time and date as you and the Company may agree upon in
writing (the "Time of Delivery") at the offices of Sullivan & Cromwell, 125
Broad Street, New York, New York 10004.
At the Time of Delivery, the Guarantor will pay, or cause to be paid, the
compensation payable at the Time of Delivery to the Underwriters under Section 2
hereof by certified or official bank check or checks, payable to the order of
Goldman, Sachs & Co. in _________ New York Clearing House funds.
5. Each of the Company and the Guarantor jointly and severally agrees with
each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; in the case of the Guarantor, to
file promptly all reports and any definitive proxy or information
statements required to be filed with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
Prospectus and for so long as the delivery of a prospectus is required in
connection with the offering or sale of the Securities; and during such
same period to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed with the Commission, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any prospectus relating to the Securities, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such purpose, or
of any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus
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relating to the Securities or suspending any such qualification, to use
promptly its best efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities and insurance laws of such jurisdictions as you may request
and to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Securities, provided that in connection
therewith neither the Company nor the Guarantor shall be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issuance of the Prospectus in connection with
the offering or sale of the Securities and if at such time any event shall
have occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the
Prospectus or to file under the Exchange Act any document incorporated by
reference in the Prospectus in order to comply with the Act or the Exchange
Act, to notify you and upon your request to file such document and to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request
of an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in case
any Underwriter is required to deliver a prospectus in connection with the
distribution of any of the Securities at any time nine months or more after
the time of issuance of the Prospectus, upon your request but at the
expense of such Underwriter, to prepare and deliver to such Underwriter as
many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a) (3) of the Act;
(d) In the case of the Guarantor, to make generally available to its
securityholders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration Statement (as
defined in Rule 158(c)), an earning statement of the Guarantor and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations thereunder (including at the option
of the Guarantor Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the earlier of (i) the date, after the Time of Delivery, on
which the distribution of the Securities ceases, as determined by the
Underwriters, or (ii) the date which is 90 days after the Time of Delivery,
not to offer, sell, contract to sell or otherwise dispose of any
Securities, any preferred stock or any other securities (including any
backup undertakings) of the Company or the Guarantor which are
substantially similar to the Shares or related Backup Undertakings, or any
securities convertible into or exchangeable for Shares, related Backup
Undertakings, preferred stock or such substantially similar securities of
either the Company or the Guarantor without your prior written consent;
(f) To furnish to the holders of Shares as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flow of the Guarantor
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the first such fiscal
quarter
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ending after the effective date of the Registration Statement),
consolidated summary financial information of the Guarantor and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the date of this Agreement to
furnish to you copies of all reports or other communications (financial or
other) furnished to holders of common stock of the Guarantor, and deliver
to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company or the Guarantor are listed; and (ii) such additional information
concerning the business and financial condition of the Guarantor as you may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Guarantor and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission); and
(h) To use its best efforts to list, subject to notice of issuance,
the Shares on the New York Stock Exchange.
6. The Company and the Guarantor jointly and severally covenant and agree
with the several Underwriters that the Company and the Guarantor will pay or
cause to be paid the following: (i) the fees, disbursements and expenses of the
Company's and the Guarantor's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus, the Prospectus and any amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the reasonable cost of printing or producing any
Agreement among Underwriters, this Agreement, the Blue Sky and Legal Investment
Memoranda and any other documents in connection with the offering, purchase,
sale and delivery of the Securities; (iii) all expenses in connection with the
qualification of the Securities for offering and sale under state securities
laws as provided in Section 5(b) hereof, including the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky and legal investment surveyS;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the cost of preparing stock certificates; (vi) the cost and charges of any
transfer agent or registrar; (vii) the cost of qualifying the Securities with
The Depository Trust Company; (viii) the cost of listing the Shares on the New
York Stock Exchange; and (ix) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, Section 8 and Section 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and the Guarantor herein are, at and as of the Time of
Delivery, true and correct, the condition that the Company and the Guarantor
shall have performed all of their obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to your reasonable satisfaction;
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<PAGE>
(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated the Time of Delivery, with
respect to the incorporation of the Guarantor; insofar as the Federal laws
of the United States, the laws of the State of New York or the Delaware
General Corporation Law are concerned, the validity of the Shares and the
related Backup Undertakings; the Registration Statement and the Prospectus;
and other related matters as you may reasonably request; and such counsel
shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Stites & Harbison, counsel for the Guarantor, shall have furnished
to you their written opinion, dated the Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Guarantor has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) The Guarantor has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Guarantor have been duly and validly authorized and issued and are
fully paid and non-assessable and conform to the descriptions thereof
contained in the Prospectus; and all of the issued common shares of
the Company are owned directly or indirectly by the Guarantor, and,
except as disclosed in the Prospectus, are so owned free of all liens
and, to the knowledge of such counsel, encumbrances, equities or
claims;
(iii) The Guarantor Agreements have each been duly authorized,
executed and delivered by the Guarantor, and constitute legal, valid
and binding obligations of the Guarantor, enforceable in accordance
with their respective terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles; the Guarantor Agreements conform to the
descriptions thereof in the Prospectus; and the Guarantor Agreements
are the only instruments comprising the Backup Undertakings relating
to the Shares;
(iv) Each of the Company and the Guarantor has been duly qualified
as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to require
such qualification, or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction (such counsel being entitled to rely in respect of the
opinion in this clause (iv) upon opinions of local counsel and in
respect of matters of fact upon certificates of public officials or
officers of the Guarantor, provided that such counsel shall state that
he believes that he is justified in so relying upon such opinions and
certificates);
(v) Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification; each Subsidiary has all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from all
governmental regulatory officials and bodies (including, without
limitation, each insurance commission having jurisdiction over any
insurance Subsidiary of the Guarantor) to own or lease its properties
and to conduct its
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<PAGE>
business as described in the Prospectus; and all of the issued shares
of capital stock of each Subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and (except
for directors' qualifying shares) are owned directly or indirectly by
the Guarantor, free and clear of all liens, encumbrances, equities or
claims (such counsel being entitled to rely in respect of the opinion
in this clause upon opinions of local counsel and in respect of
matters of fact upon certificates of public officials or officers of
the Guarantor or its subsidiaries, provided that such counsel shall
state that he believes that both you and he are justified in so
relying upon such opinions and certificates);
(vi) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending to which the Company, the
Guarantor or any of the Guarantor's Subsidiaries is a party or of
which any property of the Company, the Guarantor or any of the
Guarantor's Subsidiaries is the subject, other than as set forth in
the Prospectus as amended or supplemented and other than litigation
incident to the kind of business conducted by the Company, the
Guarantor and the Guarantor's Subsidiaries, which, in the opinion of
such counsel, individually and in the aggregate is not material to the
Company, the Guarantor and the Guarantor's Subsidiaries; to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others; and,
to the best of such counsel's knowledge, and, in the opinion of such
counsel, the Company, the Guarantor, the Guarantor's Subsidiaries and
Capital Liberty, L.P. are in substantial compliance with all
applicable federal and state tax statutes, regulations and official
rulings and interpretations;
(vii) This Agreement has been duly authorized, executed and
delivered by each of the Company and the Guarantor;
(viii) The issue and sale by the Company of the Shares, the
compliance by the Company and the Guarantor with all of the provisions
of this Agreement, the execution, delivery and performance by the
Guarantor of the Guarantor Agreements, the performance by the
Guarantor of the other Backup Undertakings and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Guarantor or any of the Guarantor's subsidiaries is a
party or by which the Guarantor or any of the Guarantor's subsidiaries
is bound or to which any of the property or assets of the Guarantor or
any of the Guarantor's subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or by-laws of the Guarantor, any U.S. Federal statute,
the Delaware General Corporation Law or, to the knowledge of such
counsel, any other statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Guarantor or any of the Guarantor's subsidiaries
or any of their properties;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares, the issuance and
performance of the Backup Undertakings (including the execution,
delivery and performance of the Guarantor Agreements), or the
consummation by the Company and the Guarantor of the transactions
contemplated herein and therein, except as have been obtained under
the Act, and such consents, approvals, authorizations, registrations
or qualifications as may be
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<PAGE>
required under state securities or Blue Sky laws in connection with
the purchase of the Shares and distribution of the Securities by the
Underwriters;
(x) The documents incorporated by reference in the Prospectus or
any further amendment or supplement thereto made by the Company prior
to the Time of Delivery (other than the financial statements and
related schedules and reports of experts pertaining to natural
resource reserves therein, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder; and nothing has come to the attention of such counsel that
has caused such counsel to believe that any of such documents, when
such documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact, or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or, in the
case of other documents which were filed under the Exchange Act with
the Commission, an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made
when such documents were so filed, not misleading;
(xi) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company or the
Guarantor prior to the Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) comply as to form in all material respects
with the requirements of the Act and the rules and regulations
thereunder; nothing has come to the attention of such counsel that has
caused such counsel to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the
Company or the Guarantor prior to the Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company or the Guarantor
prior to the Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading or
that, as of the Time of Delivery, either the Registration Statement or
the Prospectus or any further amendment or supplement thereto made by
the Company or the Guarantor prior to the Time of Delivery (other than
the financial statements and related schedules therein, as to which
such counsel need express no opinion) contains an untrue statement of
a material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by reference
into the Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or incorporated by
reference or described as required; and
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In rendering his opinion, such counsel may rely, as to all matters
of Turks and Caicos Islands law, upon the opinion of Misick &
Stanbrook, dated the Time of Delivery and delivered pursuant to such
section (e) hereof;
(d) Robert L. Walker, General Counsel of the Guarantor, shall have
furnished to you his written opinion, dated the Time of Delivery for such
Shares, in form and substance satisfactory to you, to the effect that the
issue and sale of the Shares and the compliance by the Company and the
Guarantor with all of the provisions of this Agreement and the execution,
delivery and performance by the Guarantor of the Guarantor Agreements, the
performance by the Guarantor of the other Backup undertakings and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument known to him to
which any of the Subsidiaries of the Guarantor is a party or by which any
of the Subsidiaries of the Guarantor is bound (such counsel being entitled
to rely in respect of any matters of fact upon certificates of officers of
the Subsidiaries and of public officials, provided that such counsel shall
state that he believes that both you and he are justified in relying upon
such certificates);
(e) Misick & Stanbrook, Turks & Caicos Islands counsel for the
Company and the Guarantor, shall have furnished to you their written
opinion, limited to the laws of Turks and Caicos Islands and dated the Time
of Delivery, in form and substance satisfactory to you,to the effect that:
(i) The Company has been duly organized and is validly existing
as a limited life company and in good standing under the laws of Turks
and Caicos Islands, with all necessary corporate power and authority
to own its properties and conduct its business as described in the
Prospectus;
(ii) The Company's authorized capitalization, as set forth in the
Prospectus, consists of common shares, of US$_____ per share, and the
Shares; all of the issued common shares of the Company have been duly
and validly authorized and issued, are fully paid and non-assessable,
conform to the description thereof contained in the Prospectus, and
are owned directly or indirectly by the Guarantor; no Shares have been
previously issued;
(iii) The Shares being delivered have been duly and validly
authorized and issued and are fully paid and non-assessable; and such
Shares conform to the description of the Shares contained in the
Prospectus;
(iv) The provisions of the Company's Memorandum of Association,
Articles of Association and Special Resolutions of the Company are
valid and will be given effect in accordance with their terms;
(v) The Company has no subsidiaries;
(vi) The Loan Agreement and the Expense Agreement have been duly
authorized, executed and delivered by the Manager on behalf of the
Company, and such agreements and the other Guarantor Agreements
constitute legal, valid and binding obligations of the Guarantor,
enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and the
Guarantor Agreements conform to the descriptions thereof in the
Prospectus;
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(vii) This Agreement has been duly authorized, executed and
delivered by the Manager on behalf of the Company;
(viii) The issue and sale by the Company of the Shares, the
compliance by the Company and the Guarantor with all of the provisions
of this Agreement, the execution, delivery and performance by the
Guarantor of the Guarantor Agreements, the performance by the
Guarantor of the other Backup Undertakings, the execution, delivery
and performance by the Company of the Loan Agreement and the Expense
Agreement, and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the Company is
a party or by which the Company is bound or subject, nor will such
action result in any violation of the provisions of the Memorandum of
Association, Articles of Association and Special Resolutions of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company;
(ix) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares, the execution,
delivery and performance by the Guarantor of the Guarantor Agreements,
the performance by the Guarantor of the other Backup Undertakings, the
execution, delivery and performance by the Company of the Loan
Agreement and the Expense Agreement, or the consummation by the
Company and the Guarantor of the transactions contemplated herein or
therein, except the authorizations, which have been obtained, from the
Permanent Secretary, Finance, Turks and Caicos Islands and the
Registrar of Companies of the Turks and Caicos Islands; and
(x) Such counsel confirms its opinion as set forth under
"Taxation -- Turks and Caicos Islands" in the Prospectus;
(f) King & Spaulding, special tax counsel for the Guarantor and
Company, shall have furnished to you their written opinion, dated the Time
of Delivery, in form and substance satisfactory to you, confirming their
opinion as set forth under "Taxation -- United States" in the Prospectus;
(g) On the date of this Agreement and also at the Time of Delivery,
Ernst & Young shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, in form and substance satisfactory to
you, to the effect set forth in Annex I hereto;
(h) (i) None of the Company, the Guarantor or any of the Guarantor's
Subsidiaries shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock or long-term debt of
the Company, the Guarantor or any of the Guarantor's subsidiaries or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity
or results of operations of the Company, the Guarantor or the Guarantor's
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause (i)
or (ii), is in your judgment so material and adverse as to make it
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<PAGE>
impracticable or inadvisable to proceed with the public offering of the
Securities or the delivery of the Shares on the terms and in the manner
contemplated in the Prospectus;
(i) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Shares or any of the Guarantor's debt
securities or preferred stock (including the Guarantee or any other Backup
Undertakings in respect of the Shares) by any "nationally recognized
statistical rating organization," as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization
shall have publicly announced that it has under surveillance or review,
with possible negative implications, its rating of the Securities or any of
the Guarantor's debt securities or preferred stock (including the Guarantee
or any other Backup Undertakings in respect of the Shares);
(j) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities in New York declared by either
Federal or New York State authorities; or (iii) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war if the effect of any such event
specified in this Clause (iii) in your judgment makes it impracticable or
inadvisable to proceed with the public offering of the Securities or the
delivery of the Shares on the terms and in the manner contemplated by the
Prospectus as amended and supplemented;
(k) The Shares to be sold by the Company at the Time of Delivery
shall have been duly listed, subject to notice of issuance, on the New York
Stock Exchange; and
(l) The Guarantor shall have furnished or caused to be furnished to
you at the Time of Delivery certificates of officers of the Guarantor
satisfactory to you, as to the accuracy of the representations and
warranties of the Company and the Guarantor herein at and as of the Time of
Delivery, as to the performance by the Company and the Guarantor of all of
their obligations hereunder to be performed at or prior to the Time of
Delivery, as to the matters set forth in subsections (a) and (g) of this
Section and as to such other matters as you may reasonably request.
8. (a) The Company and the Guarantor will jointly and severally indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that neither
the Company nor the Guarantor shall be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company or the Guarantor by any Underwriter
through you expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Guarantor against any losses, claims, damages or liabilities to which the
Company or the Guarantor may become subject, under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
14
<PAGE>
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any such amendment or supplement in reliance
upon and in conformity with written information furnished to the Company or the
Guarantor by such Underwriter through you expressly for use therein; and will
reimburse the Company and the Guarantor for any legal or other expenses
reasonably incurred by the Company or the Guarantor in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. The indemnifying party shall not be required to
indemnify the indemnified party for any amount paid or payable by the
indemnified party in the settlement of any action, proceeding or investigation
without the written consent of the indemnifying party, which consent shall not
be unreasonably withheld.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantor on the one hand and the Underwriters on the
other from the offering of the Securities. If, however, the allocation provided
by the immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company and the Guarantor on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Guarantor on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as (i) the total proceeds from the
offering (before deducting expenses) received by the Company less the total
underwriting compensation paid by the Guarantor bears to (ii) the total
underwriting compensation received by the Underwriters, in each case as set
forth in, or in footnotes to, the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company and the Guarantor on the one hand or the Underwriters on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent
15
<PAGE>
such statement or omission. The Company, the Guarantor and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) 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 referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include 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 subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Guarantor under this Section 8
shall be in addition to any liability which the Company and the Guarantor may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the Act; and
the obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company and the Guarantor and to each person, if any, who controls the Company
or the Guarantor within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, then the Company
and the Guarantor shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company and the Guarantor that you have so
arranged for the purchase of such Shares, or the Company or the Guarantor
notifies you that it has so arranged for the purchase of such Shares, you or the
Company and the Guarantor shall have the right to postpone such Time of Delivery
for a period of not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company and the Guarantor
agree to file promptly any amendments or supplements to the Registration
Statement or the Prospectus which in your opinion may thereby be made necessary.
The term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had originally
been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Guarantor as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares, then the Company and the Guarantor shall have the
right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
16
<PAGE>
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Guarantor as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares, or if the Company and the Guarantor shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter, the Company or the Guarantor, except for the expenses to be borne
by the Company, the Guarantor and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Guarantor and the several Underwriters,
as set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, the Guarantor or any officer or director or controlling person of the
Company or the Guarantor, and shall survive delivery of and payment for the
Shares.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (b), (c) and (d) of Section 2 hereof and any
representation or warranty as to the accuracy of the Registration Statement or
the Prospectus contained in any certificate furnished by the Company pursuant to
Section 7 hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by the Company of expenses incurred or paid in
the successful defense of any action, suit or proceeding) arising under the Act,
shall not extend to the extent of any interest therein of a controlling person
or partner of an Underwriter who is a director, officer or controlling person of
the Company when the Registration Statement has become effective, except in each
case to the extent that an interest of such character shall have been determined
by a court of appropriate jurisdiction as not against public policy as expressed
in the Act. Unless in the opinion of counsel for the Company the matter has
been settled by controlling precedent, the Company will, if a claim for such
indemnification is asserted, submit to a court of appropriate jurisdiction the
question whether such interest is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company and the Guarantor shall not then be under any liability to any
Underwriter except as provided in Section 6 and Section 8 hereof; but, if for
any other reason, any Shares are not delivered by or on behalf of the Company
(or the related Backup Undertakings issuable by the Guarantor are not
concurrently issued by the Guarantor) as provided herein, the Company and the
Guarantor will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Shares not so delivered (or Backup
Undertakings not so issued), but the Company and the Guarantor shall then be
under no further liability to any Underwriter except as provided in Section 6
and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004,
17
<PAGE>
Attention: Registration Department; and if to the Company or the Guarantor shall
be delivered or sent by mail to the address of the Guarantor set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company or the Guarantor by
you upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, the Guarantor and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Guarantor and each
person who controls the Company and the Guarantor or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us 12 counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters, on the one
hand, and the Company and the Guarantor, on the other hand. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company and the Guarantor for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Capital Holding LLC
By: Capital Holding Corporation, as Manager
------------------------------------------
Name:
Title:
Capital Holding Corporation
------------------------------------------
Name:
Title:
18
<PAGE>
Accepted as of the date hereof:
Goldman, Sachs & Co.
____________________
____________________
____________________
By: _____________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
19
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES TO BE
UNDERWRITER PURCHASED
----------- ---------------
<S> <C>
Goldman, Sachs & Co.
---------------
Total
===============
</TABLE>
20
<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the
Guarantor's independent certified public accountants shall furnish letters to
the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Guarantor and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii)(A) In their opinion, the financial statements and any
supplementary financial information and schedules examined by them and included
or incorporated by reference in the Registration Statement or the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the Act or the Exchange Act, as applicable, and the related
published rules and regulations thereunder; and, (B) if they have made a review
in accordance with standards established by the American Institute of Certified
Public Accountants of any consolidated interim financial statements, selected
financial data, pro forma financial information and/or condensed financial
statements derived from audited financial statements of the Guarantor included
or incorporated by reference in the Registration Statement or the Prospectus,
they have made such reviews in accordance with standards established by the
American Institute of Certified Public Accountants for the periods specified in
such letter as indicated in their reports thereon, copies of which have been
furnished to the representatives of the Underwriters (the "Representatives");
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the Guarantor
for the five most recent fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Guarantor's Annual Report on Form 10-
K for the most recent fiscal year agrees with the corresponding amounts (after
restatement where applicable) in the audited consolidated financial statements
for the five such fiscal years which were included or incorporated by reference
in the Guarantor's Annual Reports on Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited financial statements and other information
referred to below, a reading of the latest available interim financial
statements of the Guarantor and its subsidiaries,
<PAGE>
inspection of the minute books of the Guarantor, Commonwealth Life Insurance
Company, National Home Life Assurance Company and Peoples Security Life
Insurance Company since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus, inquiries of officials
of the Guarantor responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) the unaudited condensed consolidated statements of income,
consolidated statements of financial condition and consolidated statements
of cash flows included or incorporated by reference in the Guarantor's
Quarterly Reports on Form 10-Q incorporated by reference in the Prospectus
(i) do not comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act as it applies to Form 10-Q and
the related published rules and regulations thereunder or (ii) are not in
conformity with generally accepted accounting principles applied on a basis
substantially consistent with the basis for the audited consolidated
statements of income, consolidated statements of financial condition and
consolidated statements of cash flows included or incorporated by reference
in the Guarantor's Annual Report on Form 10-K for the most recent fiscal
year;
(B) if any other unaudited statement of income data and statement of
financial condition items are included in the Prospectus but are not
derived from the unaudited condensed consolidated financial statements
referred to in Clause (A), (i) such data and items do not agree with the
corresponding items in the unaudited consolidated financial statements from
which such data and items were derived, or (ii) such unaudited consolidated
financial statements were not determined on a basis substantially
consistent with the basis for the audited financial statements included or
incorporated by reference in the Guarantor's Annual Report on Form 10-K for
the most recent fiscal year;
(C) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the published rules and regulations thereunder
or the pro forma adjustments
-2-
<PAGE>
have not been properly applied to the historical amounts in the compilation
of those statements;
(D)(1) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the capital stock of
the Guarantor (other than issuances of capital stock upon exercise of
options which were outstanding on the date of the latest statement of
financial condition included or incorporated by reference in the
Prospectus) or any change in the consolidated capital stock (other than any
such issuances) or any increase in the consolidated long-term debt or
short-term debt of the Guarantor and its consolidated subsidiaries, or (2)
as of the date of the most recent consolidated financial statements
available for internal use or otherwise available on the date which is five
days prior to the date of such letter, there have been any decreases in
consolidated total assets, total cash and investments or shareholders'
equity, in each case as compared with amounts shown in the latest statement
of financial condition included or incorporated by reference in the
Prospectus, except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which are described
in such letter; and
(E) for the period from the date of the latest financial statements
included or incorporated by reference in the Prospectus to the date of the
most recent consolidated financial statements available for internal use or
otherwise available on the date which is five days prior to the date of
such letter, there were any decreases in the total or per share amounts of
consolidated income before federal income taxes, consolidated premiums and
other considerations or consolidated investment income, net of expenses, in
each case as compared with the comparable period of the preceding year,
except in each case for increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such letter;
(v) In addition to the examination referred to in their report(s) included
or incorporated by reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to in
paragraphs (iii) and (iv) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which
-3-
<PAGE>
are derived from the general accounting records of the Guarantor and its
subsidiaries, which appear in the Prospectus (excluding documents incorporated
by reference) or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the Representatives,
and have compared such amounts, percentages and financial information with the
accounting records of the Guarantor and its subsidiaries and have found them to
be in agreement except as indicated in such letter.
For purposes of this letter, all references in this Annex I to the
Prospectus shall be deemed to refer to the Prospectus in the form in which it is
proposed to be filed but otherwise as defined in the Underwriting Agreement
(including all documents incorporated by reference therein) as of the date of
the letter delivered on the date of the Underwriting Agreement and to the
Prospectus as defined in the Underwriting Agreement (including all documents
incorporated by reference therein), or, if the Prospectus has at such time been
further amended or supplemented, to the Prospectus as so further amended or
supplemented, as of the date of the letter delivered at the Time of Delivery.
-4-
<PAGE>
EXHIBIT 4.1
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as
of __________, 1994, is executed and delivered by Capital Holding Corporation, a
Delaware corporation (the "Guarantor"), for the benefit of the Holders (as
defined below) from time to time of the Preferred Shares (as defined below) of
Capital Holding LLC, a limited life company organized under the laws of the
Turks & Caicos Islands (the "Issuer").
WHEREAS, the Issuer is issuing on the date hereof 4,000,000 shares of
its __% Cumulative Monthly Income Preferred Shares (the "Preferred Shares"), the
terms of which are designated in the Terms of the ___% Monthly Income Preferred
Shares, certified by the Manager (as defined therein) as of the ___ day of ___,
1994, and the Guarantor desires to issue this Guarantee Agreement for the
benefit of the Holders, as provided herein;
WHEREAS, the Issuer pursuant to the Loan Agreement (as defined below)
will loan the proceeds from the issuance and sale of the Preferred Shares and
its common shares (the "Common Shares") to the Guarantor; and
WHEREAS, the Guarantor desires hereby irrevocably and unconditionally
to agree to the extent set forth herein to pay to the Holders the Guarantee
Payments (as defined below) and to make certain other payments relating to the
Preferred Shares on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Preferred Shares, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the
benefit of the Holders.
ARTICLE I
---------
As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
terms used but not otherwise defined herein shall have the meanings assigned to
such terms in the Articles of Association and the Memorandum of Association of
the Issuer, each adopted on March 18, 1994.
"Expenses and Liabilities Agreement" shall mean the Agreement as to
Expenses and Liabilities entered into between the Issuer and the Guarantor
pursuant to which the Guarantor has agreed to guarantee the payment of any
indebtedness or
<PAGE>
liabilities incurred by the Issuer (other than obligations to Holders of
Preferred Shares in such Holders' capacities as Holders of such Preferred
Shares).
"Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accumulated and
unpaid dividends which have been legally declared on the Preferred Shares, (ii)
the Redemption Price (as defined herein) legally payable with respect to any
Preferred Shares called for redemption by the Issuer, (iii) upon a liquidation
of the Issuer, the lesser of (a) the Liquidation Distribution (as defined
herein) and (b) the amount of assets of the Issuer legally available for
distribution to Holders in liquidation of the Issuer and (iv) any Additional
Amounts (as defined below) payable by the Issuer in respect of the Preferred
Shares.
"Holder" shall mean any holder from time to time of any Preferred
Shares of the Issuer; provided, however, that in determining whether the Holders
of the requisite percentage of Preferred Shares have given any request, notice,
consent or waiver hereunder, "Holder" shall not include the Guarantor or any
entity owned more than 50% by the Guarantor, either directly or indirectly.
"Liquidation Distribution" shall mean the aggregate of the liquidation
preference of $25 per Preferred Share plus all accumulated and unpaid dividends
(whether or not declared) to the date of payment.
"Loan Agreement" shall mean the agreement, dated the date hereof,
pursuant to which the Issuer will loan to the Guarantor the proceeds received by
the Issuer from the issuance and sale of the Preferred Shares and the Common
Shares.
"Loans" shall mean the loans from the Issuer to the Guarantor
pursuant to the Loan Agreement.
"Paying Agent" shall mean Capital Holding Corporation, as registrar,
transfer agent and paying agent.
"Redemption Price" shall mean $25 per Preferred Share plus accumulated
and unpaid dividends (whether or not declared) to the date fixed for redemption.
ARTICLE II
----------
SECTION 2.01. (a) The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the
-2-
<PAGE>
Guarantee Payments, as and when due (except to the extent paid by the Issuer),
regardless of any defense, right of set-off or counterclaim which the Issuer may
have or assert. This Guarantee is continuing, irrevocable, unconditional and
absolute. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders.
(b) All Guarantee Payments shall be made without withholding or
deduction for or on account of any present or future taxes, duties, assessments
or governmental charges of whatever nature imposed or levied upon or as a result
of such payment by or on behalf of the United States, any state thereof or any
other jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is required
by law. In that event, the Guarantor shall pay such additional amounts as may
be necessary in order that the net amounts received by the Holders after such
withholding or deduction will equal the amount which would have been receivable
in respect of the Preferred Shares in the absence of such withholding or
deduction ("Additional Amounts"), except that no such additional amounts will be
payable to any Holder (or a third party on his behalf) with respect to any of
the Preferred Shares:
(i) if such Holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Preferred Shares by reason of such
Holders' having some connection with the United States, any state thereof
or any other jurisdiction through which or from which such payment is made,
other than being a Holder, or
(ii) if the Issuer or the Guarantor has notified such Holder of the
obligation to withhold taxes and requested but not received from such
Holder a declaration of non-residence or other claim for exemption, and
such withholding or deduction would have not been required had such
declaration or claim been received.
SECTION 2.02. The Guarantor hereby waives notice of acceptance of
this Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.
SECTION 2.03. The obligation, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement
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<PAGE>
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred Shares to
be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the dividends, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Shares or the extension
of time for the performance of any other obligation under, arising out of,
or in connection with, the Preferred Shares;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Shares, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, any of the
Preferred Shares; or
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.04. This is a guarantee of payment and not of collection.
A Holder may enforce this Guarantee Agreement directly against the Guarantor,
and the Guarantor waives any right or remedy to require that any action be
brought against the Issuer or any other person or entity before proceeding
against the Guarantor. Subject to Section 2.05, all waivers herein contained
shall be without prejudice to the Holders' right at the Holders' option to
proceed against the Issuer, whether by separate action or by joinder. The
Guarantor agrees that this Guarantee Agreement
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<PAGE>
shall not be discharged except by payment of the Guarantee Payments in full
to the extent not paid by the Issuer and by complete performance of all
obligations of the Guarantor contained in this Guarantee Agreement.
SECTION 2.05. The Guarantor shall be subrogated to all (if any)
rights of the Holders against the Issuer in respect of any amounts paid to the
Holders by the Guarantor under this Guarantee Agreement and shall have the right
to waive payment of any amount of dividends in respect of which payment has been
made to the Holders by the Guarantor pursuant to Section 2.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) exercise any rights which it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of a payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to pay over such amount to the Holders.
SECTION 2.06 The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the Issuer with respect to the
Preferred Shares and that the Guarantor shall be liable as principal and sole
debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee Agreement notwithstanding the occurrence of any event referred to in
subsections (a) through (f), inclusive, of Section 2.03 hereof.
ARTICLE III
-----------
SECTION 3.01. So long as any Preferred Shares remain outstanding,
neither the Guarantor nor any majority-owned subsidiary of the Guarantor shall
declare or pay any dividend on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payments with respect to the foregoing (other than (i) payments under
this Guarantee Agreement or under other guarantee agreements made by the
Guarantor in respect of additional preferred shares that may be issued in one or
more series or classes that rank pari passu with each other and with the
Preferred Shares with respect to participation in the profits and assets of the
Company, or (ii) dividends or guarantee payments to the Guarantor by a majority-
owned subsidiary), if at such time the Guarantor shall be in default with
respect to its payment or other obligations hereunder or under the Expenses and
Liabilities Agreement or there shall have occurred any event that, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default under the Loan Agreement. The Guarantor shall take all actions necessary
to ensure the compliance of its subsidiaries with this Section 3.01.
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<PAGE>
SECTION 3.02. The Guarantor covenants, so long as any Preferred
Shares remain outstanding, to: (1) maintain direct or indirect 100% ownership
of the Common Shares and any other shares of the Issuer other than (x) the
Preferred Shares and (y) any additional preferred shares that may be issued in
one or more series or classes and that rank pari passu with each other and with
the Preferred Shares with respect to participation in profits and assets of the
Issuer; (ii) cause at least 21% of the total value of the Issuer and at least
21% of all interests in the capital, income, gain, loss, deduction and credit of
the Issuer to be represented by Common Shares; (iii) not voluntarily dissolve,
wind-up or liquidate the Issuer; (iv) remain the Manager of the Issuer and
timely perform all of its duties as Manager of the Issuer (including the duty to
declare and pay dividends on the Preferred Shares), provided that any permitted
successor of the Guarantor under the Loan Agreement may succeed to the
Guarantor's duties as Manager; and (v) use its reasonable efforts to cause the
Issuer to remain a limited life company and otherwise continue to be treated as
a partnership for United States federal income tax purposes.
SECTION 3.03. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor and (ii) senior to the most
senior preferred or preference stock of any series now or hereafter issued by
the Guarantor and (iii) senior to any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference stock of any affiliate
of the Guarantor except for guarantees in respect of any further series of
preference shares or any further shares of the Issuer ranking as regards to
participation in the profits or assets of the Issuer pari passu with Preferred
Shares.
ARTICLE IV
----------
This Guarantee Agreement shall terminate and be of no further force
and effect upon full payment of the Redemption Price of all Preferred Shares or
upon full payment of the amounts payable to the Holders upon liquidation of the
Issuer; provided, however, that this Guarantee Agreement shall continue to be
effective or shall be reinstated, as the case may be, if at any time any Holder
of Preferred Shares must restore payment of any sums paid under the Preferred
Shares or under this Guarantee Agreement for any reason whatsoever. The
Guarantor agrees to indemnify each Holder and hold it harmless against any
loss it may suffer in such circumstances.
ARTICLE V
---------
SECTION 5.01 All guarantees and agreements contained in this
Guarantee Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
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<PAGE>
then outstanding. The Guarantor shall not assign its obligations hereunder
without the prior approval of the Holders of not less than 66-2/3% in
liquidation preference of all Preferred Shares then outstanding.
SECTION 5.02. Except with respect to any changes which do not
adversely affect the rights of the Holders (in which case no vote will be
required), this Guarantee Agreement may only be amended by instrument in writing
signed by the Guarantor with the prior approval of the Holders of not less than
66-2/3% in liquidation preference of the Preferred Shares then outstanding.
SECTION 5.03. Any notice, request or other communication required or
permitted to be given hereunder to the Guarantor shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to the Guarantor, as follows (and if so
given, shall be deemed given when mailed or upon receipt of an answer-back, if
sent by telex), to it:
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Facsimile No.: (502) 560-2746
Attention: Treasurer
Any notice, request or other communication required or permitted to be
given hereunder to the Holders shall be given by the Guarantor in the same
manner as notices sent by the Issuer to the Holders.
SECTION 5.04. The masculine and neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 5.05. This Guarantee Agreement is solely for the benefit of
the Holders and is not separately transferable from the Preferred Shares.
SECTION 5.06. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
CAPITAL HOLDING CORPORATION
By_________________________
Name:
Title:
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<PAGE>
EXHIBIT 4.2
TERMS OF THE
__% CUMULATIVE MONTHLY INCOME PREFERRED SHARES
OF CAPITAL HOLDING LLC
_________ __, 1994
<PAGE>
TERMS OF THE __% CUMULATIVE
MONTHLY INCOME PREFERRED SHARES OF CAPITAL HOLDING LLC
The undersigned officer of Capital Holding Corporation, a Delaware
corporation ("Capital Holding" or the "Manager") which acts as Manager of
Capital Holding LLC, a limited life company organized under the laws of the
Turks and Caicos Islands (the "Company"), HEREBY CERTIFIES:
1. That by duly adopted resolutions of the holders of Common Stock of
the Company dated March 21, 1994, the Company authorized the creation of
4,000,000 Preferred Shares of U.S. $1.00 each with such rights and
restrictions as the Manager shall from time to time determine and declare;
and
2. That by duly adopted declaration of the Manager, on behalf of the
Company dated _____________, 1994, the Manager, pursuant to authority granted
to it in the Articles of Association of the Company (the "Articles of
Association"), authorized the issuance of 4,000,000 Preferred Shares having such
designations, stated value, rights, privileges, restrictions, preferences and
other terms and provisions as the Manager authorized or approved as set forth
below:
DECLARED, that pursuant to the Articles of Association, the Manager
hereby authorizes the issuance of 4,000,000 Preferred Shares, liquidation
preference $25 per Preferred Share, of the Company and hereby fixes the number,
voting powers, designation, preferences, participating, optional or other
special rights and the qualifications, limitations or restrictions of, and other
matters relating to, said shares as follows:
1. Designation. 4,000,000 shares of the Preferred Shares of the
Company, liquidation preference $25 per Preferred Share, are hereby designated
as "__% Cumulative Monthly Income Preferred Shares" (hereinafter called the
"Preferred Shares").
2. Ranking. The Preferred Shares shall, with respect to
participation in the profits or assets of the Company, rank prior to any other
equity securities of the Company, including the common shares of the Company
(the "Common Shares"), other than any additional preferred shares that may be
issued in one or more series or classes and that rank pari passu with each other
and with the Preferred Shares with respect to participation in the profits and
assets of the Company. So long as any Preferred Shares are outstanding, the
Company will not issue any shares of capital stock ranking, as to participation
in the profits or assets of the Company, senior to the Preferred Shares. The
issuance of any shares of capital stock ranking senior to the Preferred Shares
constitutes a variation or
<PAGE>
abrogation of the rights attached to the Preferred Shares under the Articles of
Association.
3. Dividends. (a) The holders of the Preferred Shares shall be
entitled to receive, when, as and if declared by the Company out of funds held
by the Company and legally available therefor, cumulative cash dividends at the
annual rate of __% of the stated liquidation preference of $25 per share,
calculated on the basis of a 360-day year consisting of 12 months of 30 days
each, and for any period shorter than a full monthly dividend period, dividends
will be computed on the basis of the actual number of days elapsed in such
period, and payable in United States dollars monthly in arrears on the last day
of each calendar month of each year, commencing _______ __, 1994. Such
dividends will accrue and be cumulative whether or not they have been declared
and whether or not there are profits, surplus or other funds of the Company
legally available for the payment of dividends. Dividends on the Preferred
Shares shall be cumulative from the date of original issue, and the cumulative
portion from such date to _______ __, 1994 shall be payable on _______ __, 1994.
(b) Dividends on the Preferred Shares must be declared by the Manager
of the Company in any calendar year or portion thereof to the extent that the
Manager reasonably anticipates that at the time of payment the Company will
have, and must be paid by the Company to the extent that at the time of proposed
payment it has, (x) funds legally available for the payment of such dividends
and (y) cash on hand sufficient to permit such payments. Dividends declared on
the Preferred Shares will be payable to the record holders thereof as they
appear on the register for the Preferred Shares on the relevant record dates,
which will be one Business Day prior to the relevant payment dates. In the
event that any date on which dividends are payable on the Preferred Shares is
not a Business Day, then payment of the dividend payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. A "Business Day" shall mean any day other than
a day on which banking institutions in The City of New York are authorized or
required by law to close.
(c) If dividends have not been paid in full on the Preferred
Shares, the Company shall not:
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<PAGE>
(i) pay, or declare and set aside for payment, any
dividends on any other preferred or preference stock of the Company
ranking pari passu with the Preferred Shares as regards participation
in profits of the Company ("Company Dividend Parity Shares"), unless
the amount of any dividends declared on any Company Dividend Parity
Shares is paid on the Company Dividend Parity Shares and the Preferred
Shares on a pro rata basis on the date such dividends are paid on such
Company Dividend Parity Shares, so that
(x) (a) the aggregate amount of dividends paid on the
Preferred Shares bears to (b) the aggregate amount of dividends
paid on such Company Dividend Parity Shares the same ratio as
(y) (a) the aggregate of all accumu-lated arrears of
unpaid dividends in respect of the Preferred Shares bears to (b)
the aggregate of all accumulated arrears of unpaid dividends in
respect of such Company Dividend Parity Shares;
(ii) pay, or declare and set aside for payment, any dividends on
any shares of the Company ranking junior to the Preferred Shares as to
dividends (the "Company Dividend Junior Shares"); or
(iii) redeem, purchase or otherwise acquire any Company Dividend
Parity Shares or Company Dividend Junior Shares or any Preferred Shares
other than the redemption of all outstanding Preferred Shares at the
redemption price of $25 per Share plus accumulated and unpaid dividends
(whether or not declared) to the date fixed for redemption (the "Redemption
Price");
until, in each case, such time as all accumulated arrears of unpaid dividends
(whether or not declared) on the Preferred Shares shall have been paid in full
for all dividend periods terminating on or prior to, in the case of clauses (i)
and (ii), such payment and, in the case of clause (iii) the date of such
redemption, purchase or acquisition.
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<PAGE>
3. Merger, Consolidation or Replacement of the Company. The Company may not
consolidate, amalgamate, merge with or into, be replaced by or be continued as
or convey, transfer or lease its properties and assets substantially as an
entirety to any corporation or other body, except as described in this paragraph
and subject to applicable law. For purposes of applicable Turks and Caicos
Islands law, each holder of Preferred Shares hereby authorizes and consents to
the Company consolidating, amalgamating, merging with or into, being replaced
by, or continued as a limited liability company organized as such under the laws
of any state of the United States of America, or a limited partnership organized
under the Uniform Limited Partnership Act in any state of the United States of
America, or a trust organized under the laws of the State of Delaware (in each
case the "Successor") and the Company may do so, provided, that (i) such
Successor either (x) expressly assumes all the terms and conditions of, and
obligations of the Company under, the Preferred Shares or (y) substitutes for
the Preferred Shares another security having substantially the same terms as the
Preferred Shares (the "Successor Security") so long as the Successor Securities
rank, with respect to participation in the profits or assets of the Successor,
at least as high as the Preferred Shares rank, with respect to participation in
the profits or assets of the Company, (ii) Capital Holding expressly
acknowledges the Successor as the lender under the Loans and reaffirms its
obligations to the Successor and to the holders of the Preferred Shares or
Successor Securities, as the case may be, under the Guarantee, (iii) such
merger, consolidation, amalgamation, replacement or continuation does not cause
the Preferred Shares or Successor Securities, as the case may be, to be delisted
by any national securities exchange or other organization on which the Preferred
Shares or Successor Securities, as the case may be, are listed, (iv) the
Successor receives a written opinion of counsel (such counsel being a law firm
of national standing), which counsel may be counsel to the Company or Capital
Holding, to the effect that such consolidation, amalgamation, merger,
replacement or continuation will not result in a taxable gain to the holders of
the Preferred Shares or Successor Securities, as the case may be, under Federal
income tax law or cause the Successor to be considered an "investment company"
under the Investment Company Act of 1940, as amended (the "1940 Act") and (v)
such merger, consolidation, amalgamation, replacement or continuation does not
cause the Preferred Shares or Successor Securities, as the case may be, to
be
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<PAGE>
downgraded by any "nationally recognized statistical rating organization" as
that term is defined by the SEC for purposes of Rule 436(g)(2) under the
Securities Act.
The Manager is authorized and directed to conduct its affairs and to
operate the Company in such a way that the Company would not be deemed to be an
"investment company" for purposes of the 1940 Act. In this connection, Capital
Holding, as manager, is authorized to take any action not inconsistent with
applicable law or the Memorandum of Association or the Articles of Association
of the Company which it determines in its discretion to be necessary or
desirable for such purposes.
4. Redemption. (a) The Preferred Shares are redeemable, at the
option of the Company and subject to the prior consent of Capital Holding, (1)
in whole or in part from time to time, on or after _______ __, 1999, upon not
less than 30 nor more than 60 days' notice, at the Redemption Price or (2) in
whole (and not in part) if a Tax Event (as defined hereinafter) occurs and is
continuing, provided, that notice of redemption must occur within 90 days of
the occurrence of such Tax Event and the Preferred Shares must be redeemed upon
not less than 30 nor more than 60 days' notice at the Redemption Price. "Tax
Event" means that Capital Holding or the Company shall have obtained an opinion
of nationally recognized independent tax counsel experienced in such matters to
the effect that, as a result of any amendment to, or change in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or any amendment to or
change in an official interpretation or application of such laws or regulations,
which amendment or change is effective on or after _______, 1994, and which
change cannot be avoided by the use of any reasonable measures available to
Capital Holding or the Company, it is substantially more likely than it was on
_______, 1994 that (i) the Company will be subject to federal income tax with
respect to interest received on the Loans or (ii) interest payable on the Loans
will not be deductible for Federal income tax purposes. If a partial redemption
would result in a delisting of the Preferred Shares, the Company may only redeem
the Preferred Shares in whole. The Company will not redeem fewer than all the
outstanding Preferred Shares unless all accumulated arrears of unpaid dividends
have been paid on all Preferred Shares for all monthly dividend periods
terminating on or prior to the date of redemption.
(b) Upon any repayment or prepayment of principal on the Loans to
Capital Holding of the proceeds from the issuance and sale of the Preferred
Shares and the Common
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<PAGE>
Shares (the "Loans"), the proceeds from such repayment of principal on the Loans
shall be applied to redeem the Preferred Shares at the Redemption Price, upon
not less than 30 nor more than 60 days' notice; provided that any such amounts
may be lent to or relent to Capital Holding, and not used for redemption, if at
the time of such new loan, and as determined in the judgment of Capital Holding,
as Manager, and its financial advisor (selected by Capital Holding, as Manager,
and who shall be unaffiliated with Capital Holding and shall be among the 30
largest investment banking firms, measured by total capital, in the United
States at the time of the proposed new loan), (a) Capital Holding is not in
bankruptcy, (b) Capital Holding is not in default on any loan pertaining to the
Preferred Shares, (c) Capital Holding has made timely payments on the repaid
loan for the immediately preceding 18 months, (d) the Company is not in arrears
on payments of dividends on the Preferred Shares, (e) Capital Holding is
expected to be able to make timely payment of principal and interest on such new
loan, (f) such new loan is being made on terms, and under circumstances, that
are consistent with those which a lender would require for a loan to an
unrelated party, (g) such loan is being made at a rate sufficient to provide
payments equal to or greater than the amount of dividend payments that accrue on
the Preferred Shares, (h) the senior unsecured long-term debt of Capital Holding
is rated among the four highest rating categories by a nationally recognized
statistical rating organization, (i) such loan is being made for a term that is
consistent with market circumstances and Capital Holding's financial condition
and (j) such loan will have a final maturity no later than the one hundredth
anniversary of the issuance of the Preferred Shares. No Loan may mature more
than 100 years from the date hereof.
(c) Notwithstanding subparagraph (a) above, if at any time after the
issuance of the Preferred Shares, the Company is or would be required to pay
Additional Amounts with respect to the Preferred Shares or Capital Holding is or
would be required to withhold or deduct certain amounts as described under
paragraph 8 hereof and under the Payment and Guarantee Agreement of Capital
Holding dated as of ______ __, 1994 (the "Guarantee Agreement"), then, subject
to the prior consent of Capital Holding, the Company may, at its option, upon
not less than 30 nor more than 60 days' notice to the holders of the Preferred
Shares (which notice shall be irrevocable), redeem the Preferred Shares in whole
or, if such requirement relates only to certain of the Preferred Shares, the
Preferred Shares subject to such requirement in each case may be redeemed in
part at the Redemption Price; provided that in the case of a partial redemption,
the Company shall cause all of the Preferred Shares to be issued in definitive
form, and provided,
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<PAGE>
further, that if a partial redemption would result in a delisting of the
Preferred Shares, the Company may only redeem the Preferred Shares in whole.
5. Redemption Procedure. (a) Notice of any redemption (a "Notice of
Redemption") of the Preferred Shares will be given by the Company by mail to
each record holder to be redeemed not fewer than 30 nor more than 60 days prior
to the date fixed for redemption thereof. For purposes of the calculation of
the date of redemption and the dates on which notices are given pursuant to this
paragraph 5(a), a Notice of Redemption shall be deemed to be given on the day
such notice is first mailed by first class mail, postage prepaid, to holders of
record of the Preferred Shares. Each Notice of Redemption shall be addressed to
the holder of record at the address of the holder appearing in the stock
register of the Company. No defect in the Notice of Redemption or in the
mailing thereof or publication of its contents shall affect the validity of the
redemption proceedings.
(b) In the event that fewer than all the outstanding Preferred
Shares are to be redeemed, the Preferred Shares to be redeemed (i) in the case
of a redemption pursuant to paragraph 4(a) hereof, will be selected in
accordance with paragraph 9 hereof and (ii) in the case of an optional
redemption pursuant to paragraph 4(c) will be such Preferred Shares as were
subject to additional amounts being paid, or amounts being withheld or deducted,
in respect thereof. The Company may not redeem fewer than all the outstanding
Preferred Shares unless all accumulated and unpaid dividends have been paid on
all Preferred Shares for all monthly dividend periods terminating on or prior to
the date of redemption.
(c) If the Company gives a notice of redemption in respect of
Preferred Shares, then, by 2:00 p.m., New York time, on the redemption date, the
Company will irrevocably initiate the transfer of funds for deposit with The
Depository Trust Company in an amount sufficient to pay the applicable
Redemption Price and will give The Depository Trust Company irrevocable
instructions and authority to pay the Redemption Price to the holders thereof.
If notice of redemption shall have been given and funds deposited as required,
then upon the date of such deposit, all rights of holders of such Preferred
Shares so called for redemption will cease, except the right of the holders of
such shares to receive the Redemption Price, but without interest, and such
shares will cease to be outstanding. In the event that any date on which any
payment in respect of the redemption of Preferred Shares is due is not a
Business Day, then payment of the Redemption Price payable on such date will be
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<PAGE>
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day. In the event that payment of the Redemption
Price in respect of Preferred Shares is improperly withheld or refused and not
paid either by the Company or by Capital Holding pursuant to the Guarantee
Agreement, dividends on such shares will continue to accrue, at the then
applicable rate, from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed for redemp-
tion for purposes of calculating the Redemption Price.
6. Liquidation Distribution. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the holders
of the Preferred Shares at the time outstanding will be entitled to receive out
of the assets of the Company legally available for distribution to shareholders,
before any distribution of assets is made to holders of Common Shares or any
other class of shares of the Company ranking junior to the Preferred Shares as
regards participation in assets of the Company, but together with the holders of
every other series of preferred or preference stock of the Company outstanding,
if any, ranking pari passu with the Preferred Shares as regards participation in
the assets of the Company ("Company Liquidation Parity Shares"), an amount equal
to the aggregate of the stated liquidation preference of $25 per share and all
accumulated and unpaid dividends (whether or not declared) to the date of
payment (the "Liquidation Distribution"). If, upon any such liquidation, the
Liquidation Distribution can be paid only in part because the Company has
insufficient assets available to pay in full the aggregate maximum Liquidation
Distribution and the aggregate maximum liquidation distributions on the Company
Liquidation Parity Shares, then the amounts payable directly by the Company on
the Preferred Shares and on such Company Liquidation Parity Shares shall be paid
on a pro rata basis, so that
(i) (x) the amount paid in respect of the Liquidation Distribution
bears to (y) the aggregate amount paid as liquidation distributions on the
Company Liquidation Parity Shares the same ratio as
(ii) (x) the aggregate Liquidation Distribution bears to (y) the
aggregate maximum liquidation distributions on the Company Liquidation
Parity Shares.
Pursuant to its Articles of Association, the Company shall automatically
dissolve and be liquidated: (i) when the period fixed for the duration of the
Company expires; (ii)
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<PAGE>
if Capital Holding by resolution requires the Company to be wound up and
dissolved; (iii) upon the bankruptcy, resignation, withdrawal, expulsion,
termination, cessation or dissolution of the Manager (provided that the merger
of the Manager into a successor that succeeds to the duties of the Manager shall
not be a resignation, withdrawal, termination, cessation or dissolution of the
Manager); or (iv) if all of the Common Shares are redeemed by the Company.
7. Voting Rights. If (i) the Company fails to pay dividends in full
on the Preferred Shares (whether or not there are funds legally available
therefor) for 18 consecutive monthly dividend periods; (ii) an Event of Default
under the Loans occurs and is continuing on the Loans; or (iii) Capital Holding
is in default under any of its payment or other obligations under the Guarantee
Agreement, then the holders of a majority in liquidation preference of the
outstanding Preferred Shares, together with the holders of any other shares of
preferred or preference stock of the Company having the right to vote for the
appointment of a trustee in such event, acting as a single class, will be
entitled to appoint and authorize a trustee to enforce the Company's rights as a
creditor under the Loans against Capital Holding (including the acceleration of
principal and accrued interest on the Loans), enforce the obligations undertaken
by Capital Holding under the Guarantee Agreement and the Expenses and
Liabilities Agreement pursuant to which Capital Holding will agree to guarantee
payment of any liabilities incurred by the Company (other than obligations to
holders of Preferred Shares in their capacities as holders) (the "Expenses and
Liabilities Agreement") and declare and pay dividends on the Preferred Shares.
For purposes of determining whether the Company has failed to pay dividends in
full for 18 consecutive monthly dividend periods, dividends shall be deemed to
remain in arrears, notwithstanding any payments in respect thereof, until full
cumulative dividends have been or contemporaneously are declared and paid with
respect to all monthly dividend periods terminating on or prior to the date of
payment of such full cumulative dividends. Not later than 30 days after such
right to appoint a trustee arises, the Manager will convene a general meeting
for the above purpose. If the Manager fails to convene such meeting within such
30-day period, the holders of 10% in liquidation preference (plus all
accumulated arrears and accruals of dividends per share) of the outstanding
Preferred Shares and such other preferred or preference stock will be entitled
to convene such meeting. The provisions of the Articles of Association relating
to the convening and conduct of the general meetings of shareholders will apply
with respect to any such meeting. Any trustee so appointed shall vacate
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<PAGE>
office immediately, subject to the terms of such other preferred or preference
stock, if the Company (or Capital Holding pursuant to the Guarantee Agreement)
shall have paid in full all accumulated and unpaid dividends on the Preferred
Shares or such default or breach by Capital Holding, as the case may be, shall
have been cured.
If any resolution is proposed for adoption by the shareholders of the
Company providing for, or the Manager otherwise proposes to effect (it being
understood that the automatic dissolution and liquidation events described in
Section 6 (iii) and (iv) above and the events described in Section 3 above will
not be deemed to be a proposal by the Manager), (x) any variation or abrogation
of the rights, preferences and privileges of the Preferred Shares by way of
amendment of the Company's Articles of Association, the Declaration or otherwise
(including, without limitation, the authorization or issuance of any shares of
the Company ranking, as to participation in the profits or assets of the
Company, senior to the Preferred Shares), (y) the liquidation, dissolution or
winding up of the Company or (z) the modification of Regulation 16 of the
Articles of Association, which absolutely prohibits transfers of the Company's
Common Shares, then the holders of the outstanding Preferred Shares (and, in the
case of a resolution described in clause (x) above which would equally adversely
affect the rights, preference or privileges of any Company Dividend Parity
Shares or any Company Liquidation Parity Shares, such Company Dividend Parity
Shares or such Company Liquidation Parity Shares, as the case may be, or, in the
case of any resolution described in clause (y) or (z) above, all Company
Liquidation Parity Shares) will be entitled to vote on such resolution or action
of the Manager (but not on any other resolution or action), and such resolution
or action shall not be effective except with the approval of the holders of 66-
2/3% in liquidation preference (plus all accumulated and unpaid dividends) of
the outstanding Preferred Shares; provided, however, that no such approval or
ratification shall be required under clauses (x) and (y) if the liquidation,
dissolution or winding up of the Company is proposed or initiated upon the
initiation of proceedings, or after proceedings have been initiated, for the
liquidation, dissolution or winding up of Capital Holding.
The rights attached to the Preferred Shares will be deemed not to be
varied by the creation or issue of, and no vote will be required for the
creation of, any further shares or any further series of preference shares of
the Company ranking as regards participation in the profits or assets of the
Company pari passu or junior to the Preferred Shares. Holders of Preferred
Shares have no preemptive rights.
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<PAGE>
Any required approval of holders of Preferred Shares may be given at a
separate meeting of such holders convened for such purpose, at a general meeting
of shareholders of the Company or pursuant to written consent. The Company will
cause a notice of any meeting at which holders of the Preferred Shares are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be mailed to each holder of record of Preferred
Shares. Each such notice will include a statement setting forth (i) the date of
such meeting or the date by which such action is to be taken, (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of the Preferred Shares will be
required for the Company to redeem and cancel Preferred Shares in accordance
with the Articles of Association and the Resolutions.
Notwithstanding that holders of Preferred Shares are entitled to vote
or consent under any of the circumstances described above, any of the Preferred
Shares that are owned by Capital Holding or any entity owned more than 50% or
more by Capital Holding, either directly or indirectly, shall not be entitled to
vote or consent and shall, for the purposes of such vote or consent, be treated
as if they were not outstanding.
8. Additional Amounts. All payments in respect of the Preferred
Shares by the Company will be made without withholding or deduction for or on
account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed or levied upon or as a result of such payment
by or on behalf of the Turks and Caicos Islands or any authority therein or
thereof having power to tax ("Taxes"), unless the withholding or deduction of
such taxes, duties, assessments or governmental charges is required by law. In
that event, the Company will pay as a dividend such additional amounts as may be
necessary in order that the net amounts received by the holders of the Preferred
Shares after such withholding or deduction will equal the amount which would
have been receivable in respect of such Preferred Shares in the absence of such
withholding or deduction ("Additional Amounts"), except that no such Additional
Amounts will be payable to a holder of Preferred Shares (or a third party on
such holder's behalf) with respect to Preferred Shares:
(a) if such holder is liable for such taxes, duties, assessments
or governmental
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<PAGE>
charges in respect of such Preferred Shares by reason of such holder's
having some connection with the Turks and Caicos Islands other than
being a holder of such Preferred Shares; or
(b) if the Company has notified such holder of the obligation to
withhold taxes and requested but not received from such holder a
declaration of non-residence or other claim for exemption, and such
withholding or deduction would not have been required had such
declaration or claim been received.
9. Book-Entry-Only Issuance; The Depository Trust Company. The
Depository Trust Company ("DTC") will act as securities depository for the
Preferred Shares. The Shares will be issued only in the form of one or more
fully-registered securities representing in the aggregate the total number of
Preferred Shares and registered in the name of Cede & Co. (DTC's nominee).
Redemption notices shall be sent to Cede & Co. If less than all of
the Preferred Shares are being redeemed, shares to be redeemed shall be
determined in accordance with DTC's practice which at the date hereof is to
determine by lot the amount of the interest of each direct participant in such
series to be redeemed.
DTC may discontinue providing its services as securities depository
with respect to the Preferred Shares at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that the Company exercises
its option to redeem only a portion of the Preferred Shares because a successor
securities depository is not obtained, Preferred Share certificates are required
to be printed and delivered. Additionally, in the event that the Company or
Capital Holding is or would be required to withhold or deduct Additional Amounts
in regard to only certain of the Preferred Shares, the Company may cause all of
the Preferred Shares to be issued in definitive form. Thereafter, upon
surrender of the global certificate or certificates, Preferred Shares will be
issued in definitive form, and the Preferred Shares to which the Additional
Amounts relate will be redeemed.
10. Guarantee of Liabilities. It shall be a condition precedent to
the issuance of the Preferred Shares that Capital Holding execute the Expenses
and Liabilities Agreement, pursuant to which Capital Holding shall guarantee
payment of all liabilities of the Company to the extent not
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<PAGE>
paid by the Company (other than obligations to holders of Preferred Shares,
which will be separately guaranteed to the extent set forth in the Guarantee
Agreement). The Expenses
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<PAGE>
and Liabilities Agreement shall be for the benefit of, and be enforceable by,
third parties to whom the Company owes such obligations.
IN WITNESS WHEREOF, CAPITAL HOLDING LLC has caused this Certificate to
be signed by one of the officers of its Manager, and to be attested to by the
Vice President and Secretary of the Manager, as of this __th day of _________,
1994.
CAPITAL HOLDING LLC
By CAPITAL HOLDING CORPORATION,
as Manager
By:_____________________________
Name:
Title:
Attest:
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<PAGE>
MISICK and STANBROOK EXHIBIT 5.1
P.O. Box 127
Town Centre Mall
Providenciales
Turks and Caicos Islands
British West Indies
March 29, 1994
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Capital Holding LLC
c/o Corporate Finance
Capital Holding Corporation
400 West Market Street
Louisville, Kentucky 40202
Gentlemen,
RE: CAPITAL HOLDING LLC
-------------------
We have acted as Turks and Caicos Islands counsel for Capital Holding
Corporation ("Capital") and Capital Holding LLC ("the Company") in connection
with the proposed issuance and sale by the Company of up to 4,000,000 of the
Company's Cumulative Monthly Income Preferred Shares and the Guarantees of such
Preferred Shares by Capital.
We have participated in the preparation of the Registration Statement on Form S-
3 with respect to said Preferred Shares and Guarantees filed with the Securities
and Exchange Commission.
Based on the foregoing, we are of the opinion that the Company has been duly
incorporated and is validly existing and in good standing under the laws of the
Turks and Caicos Islands. We are further of the opinion that, when the
Preferred Shares are issued by the Company and sold, said Preferred Shares will
be fully paid and non-assessable and will be legally issued, valid and binding
obligations of the Company.
We hereby confirm our opinion as set forth under the caption "TAXATION" in the
Prospectus constituting part of the Company's and Capital's Registration
Statement on Form S-3.
<PAGE>
Page 2
March 29, 1994
Capital Holding Corporation
and
Capital Holding LLC
c/o Capital Holding Corporation
We hereby consent to the use of our name, including under the captions
"TAXATION" and "LEGAL MATTERS", in the Prospectus constituting part of the Form
S-3 Registration Statement of the Company and Capital relating to the Preferred
Shares of the Company guaranteed to the extent set forth in the Prospectus by
Capital, and to the filing of this opinion as an exhibit thereto.
Yours sincerely,
MISICK AND STANBROOK
<PAGE>
STITES & HARBISON EXHIBIT 5.2
1800 Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202-3352
March 29, 1994
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Ladies and Gentlemen:
We have acted as counsel to Capital Holding Corporation ("Capital Holding")
in connection with the preparation and filing of a Registration Statement on
Form S-3 (the "Registration Statement") relating to the registration under the
Securities Act of 1933, as amended (the "Act"), of up to 4,000,000 shares of
cumulative monthly income preferred shares (the "Preferred Shares") to be issued
and sold by Capital Holding LLC (the "Company") and the related guarantees (the
"Guarantees") of such Preferred Shares by Capital Holding.
In connection with this opinion, we have considered such matters of law and
examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates and other
instruments as we have deemed necessary or advisable for purposes of this
opinion, including (a) the Certificate of Incorporation, as amended, and Bylaws
of Capital Holding, (b) resolutions adopted by the Board of Directors of Capital
Holding at a meeting held on February 16, 1994 (the "Authorizing Resolutions"),
and (c) the form of the Payment and Guarantee Agreement between Capital Holding
and the Company filed as an exhibit to the Registration Statement. With respect
to various factual matters material to our opinion, we have relied upon
certificates of public officials and certificates and other representations of
officers of Capital Holding.
Based upon and in reliance upon the foregoing, and subject to the
qualifications and assumptions set forth below, it is our opinion that, when, as
and if (a) the Registration Statement filed with the Securities and Exchange
Commission (the "Commission") on March 22, 1994 becomes effective pursuant to
the Act and the rules and regulations of the Commission thereunder, and subject
to compliance with all applicable state securities, blue sky and insurance laws;
(b) the Payment and Guarantee Agreement has been duly executed and delivered by
Capital Holding and the Company; and (c) the Preferred Shares have been duly and
<PAGE>
Capital Holding Corporation
March 29, 1994
Page 4
validly authorized and issued by the Company, all in the manner contemplated by
the Registration Statement and the Authorizing Resolutions, the Guarantees will
be valid and legally binding obligations of Capital Holding.
Our opinion is limited by and subject to the following:
(a) Enforceability of the Guarantees may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium, fraudulent
conveyance or other laws relating to or affecting the enforcement of creditors'
rights generally or by general principles of equity.
(b) In our examination of all documents, certificates and records, we have
assumed without investigation the authenticity and completeness of all documents
submitted to us as originals, the conformity to the originals of all documents
submitted to us as copies and the authenticity and completeness of the originals
of all documents submitted to us as copies. We have also assumed the
genuineness of all signatures and the legal capacity of all natural persons.
(c) Our opinion is based solely on and limited to the laws of the
Commonwealth of Kentucky, the Delaware General Corporation Law and the federal
laws of the United States of America. We express no opinion as to the laws of
any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the section
captioned "Legal Matters" in the prospectus included as a part of the
Registration Statement.
Very truly yours,
STITES & HARBISON
CCB/plh
<PAGE>
Capital Holding Corporation
March 29, 1994
Page 5
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the joint Registration Statement on Form S-3 (File No. 33-
52785) and related Prospectus of Capital Holding LLC and Capital Holding
Corporation for the registration of 4,000,000 shares of cumulative monthly
income preferred shares of Capital Holding LLC and the related backup
undertakings of Capital Holding Corporation, and to the incorporation by
reference therein of our report dated February 9, 1994, with respect to the
consolidated financial statements and related schedules of Capital Holding
Corporation included in or incorporated by reference in its Annual Report (Form
10-K) for the year ended December 31, 1993, filed with the Securities and
Exchange Commission.
ERNST & YOUNG
Louisville, Kentucky
March 22, 1994
<PAGE>
EXHIBIT 99.1
LOAN AGREEMENT
LOAN AGREEMENT, dated as of _______ ___, 1994, between Capital Holding
Corporation, a Delaware corporation ("CHC"), and Capital Holding LLC, a limited
life company organized under the laws of the Turks & Caicos Islands ("Capital").
WHEREAS, Capital intends to issue common shares (the "Common Shares")
to CHC, and receive related capital contributions, in an aggregate amount of
$26,600,000 (the "Common Share Payments") and to issue and sell up to 4,000,000
shares of its [ ]% Cumulative Monthly Income Preferred Shares (the "Preferred
Shares"), with a liquidation preference equal to $25 per Preferred Share (the
"Liquidation Preference");
WHEREAS, CHC is guaranteeing the payment of dividends on the Preferred
Shares if and when declared to the extent that there are sufficient funds
legally available therefor, the Redemption Price (as defined in the Guarantee
Agreement) and the Liquidation Distribution (as defined in the Guarantee
Agreement) on the Preferred Shares all to the extent set forth in the Payment
and Guarantee Agreement, dated as of ______ ___, 1994 (the "Guarantee
Agreement");
WHEREAS, the primary purpose for which Capital was formed is to
finance the business operations of CHC, and consistent therewith, CHC has asked
Capital to make a loan to CHC in an aggregate principal amount equal to the sum
of the aggregate Common Share Payments and the aggregate Liquidation Preference
of the Preferred Shares issued and sold by Capital; and
WHEREAS, Capital intends to make the aforementioned loans to CHC, on
the terms and conditions hereinafter stated.
NOW, THEREFORE, CHC and Capital hereby agree as follows:
ARTICLE I
THE LOANS
Section 1.01. The Loans. Subject to the terms and conditions herein,
Capital agrees to make loans to CHC on the date hereof in an aggregate principal
amount of $____
<PAGE>
in next day funds. Such loans shall be referred to herein as the "Loans".
Section 1.02. Term of the Loans; Mandatory Prepayment. (a) If
Capital redeems Preferred Shares in accordance with the terms thereof, the Loans
shall become due and payable in a principal amount equal to the aggregate
Redemption Price of the Preferred Shares so redeemed, together with any and all
accrued interest thereon. Any payment pursuant to this Section 1.02(a) shall be
made by wire transfer, which shall be initiated by 2:00 p.m., New York time, on
the date fixed for such redemption or at such other time on such earlier date as
Capital and CHC shall agree.
(b) The entire principal amount of the Loans shall become due and
payable, together with any accrued and unpaid interest thereon, including
Additional Interest as defined below, if any, on the earliest of _______, 2044
or the date upon which CHC is dissolved, wound-up or liquidated or the date upon
which Capital is dissolved, wound-up or liquidated.
Section 1.03. Optional Prepayment. CHC shall have the right to
prepay the Loans, without premium or penalty,
(i) in whole or in part (together with any accrued but unpaid interest,
including Additional Interest, if any, on the portion being prepaid) at any time
on or after _______________, 1999; and
(ii) in whole (together with all accrued and unpaid interest, including
Additional Interest, if any, thereon) at any time if CHC is or would be required
to pay any Additional Interest on the entire amount of the Loans or if a Tax
Event (as defined hereinafter) occurs and is continuing, provided, that in the
case of a Tax Event notice of prepayment must occur within ninety days of the
occurrence of such Tax Event and the Loans must be prepaid in whole upon not
less than thirty nor more than sixty days' notice, or in part (together with all
accrued and unpaid interest, including Additional Interest on the portion being
prepaid) at any time if CHC is or would be required to pay Additional Interest
with respect to only a portion of the Loans, provided that if a partial
prepayment would, through the corresponding partial redemption required under
the terms of the Preferred Shares, result in a delisting of the Preferred Shares
from the New York Stock Exchange, CHC may only prepay the Loans in whole. In no
event, however, shall CHC have the right to prepay the Loans, or a portion
thereof, under this clause (ii) based on (a) a technical obligation to pay
Additional Interest because of a withholding obligation to the extent CHC would
not incur any penalties, interest or tax under the United States Internal
Revenue Code of 1986, as amended or applicable law if CHC did not withhold, or
(b)
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<PAGE>
a de minimis obligation to pay Additional Interest. For purposes of the
foregoing, in the event that CHC is advised by independent legal counsel that
more than an insubstantial risk exists that CHC will incur penalties, interest
or tax under the Internal Revenue Code or other applicable law if it does not
withhold, CHC shall have the right to repay the Loans, or a portion thereof,
under this clause (ii) unless the obligation to pay Additional Interest if CHC
does so withhold is a de minimis obligation. For purposes of this clause (ii),
"Tax Event" means that CHC or Capital shall have obtained an opinion of
nationally recognized independent tax counsel experienced in such matters to the
effect that, as a result of any amendment to, or change in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or any amendment to or
change in an official interpretation or application of such laws or regulations,
which amendment or change is effective on or after , 1994, and which
change cannot be avoided by the use of any reasonable measures available to CHC
or Capital, it is substantially more likely than it was on , 1994 that
(i) Capital will be subject to Federal income tax with respect to interest
received on Loans, or (ii) interest payable on the Loans will not be deductible
for Federal income tax purposes.
ARTICLE II
INTEREST
Section 2.01. Interest on the Loans. The Loans shall bear interest at an
annual rate equal to [ ]% from the date they are made until maturity. Such
interest shall be payable on the last day of each calendar month of each year,
commencing ___________, 1994. In the event that any date on which interest is
payable on Loans is not a Business Day, then payment of the interest payable on
such date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date. A "Business Day" shall mean any
day other than a day on which banking institutions in The City of New York are
authorized or required by law to close.
Section 2.02. Additional Interest. If at any time (a) Capital shall be
required to pay any additional amounts ("Additional Amounts") in respect of the
Preferred Shares pursuant to the terms thereof, (b) CHC shall be required to
withhold or deduct any amounts, for or on account of any taxes, duties or
governmental charges of whatever nature imposed by the United States of America
(or any political subdivision thereof or therein), from the interest payments to
be made by CHC on the Loans or (c) Capital shall be required to pay, with
respect to its income derived from the interest payments on the Loans, any
amounts, for or on account of any taxes, duties or governmental charges of
whatever nature imposed by the Turks and Caicos Islands (or any political
subdivision thereof or therein), or any other taxing authority, then, in any
such case, CHC will pay as interest such additional amounts ("Additional
Interest") as may be necessary in order that the net amounts received and
retained by Capital after paying such Additional Amounts, or after such
withholding or
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<PAGE>
deduction or the payment of such taxes, duties, assessments or governmental
charges, as the case may be, shall result in Capital's having such funds as it
would have had in the absence of the obligation to pay such Additional Amounts,
or such withholding or deduction or the payment of such taxes, duties,
assessments or governmental charges, as the case may be. The obligation to pay
Additional Interest under (b) above shall be reduced proportionately to the
extent that (x) CHC or Capital has notified holders of Preferred Shares of the
obligation to withhold taxes and requested but not received from such holders
declarations of nonresidence or other claims for exemption and (y) such
withholding or deduction would not have been required had such declarations or
claims been received.
Section 2.03. Extension of Interest Payment Period. Notwithstanding the
provisions of Section 2.01 hereof, CHC shall have the right at any time or times
during the terms of the Loans, so long as CHC is not in default in the payment
of interest on the Loans, to extend the interest payment period to up to 18
months, at the end of which period CHC shall pay all interest which has accrued
and not been paid (together with interest thereon at the rate specified for
the Loans to the extent permitted by applicable law); and provided that, during
any such extended interest payment period neither CHC, nor any majority-owned
subsidiary of CHC, shall declare or pay any dividend on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
or make any guarantee payments with respect to the foregoing (other than (i)
payments under the Guarantee Agreement or under other guaranty agreements made
by CHC in respect of additional preferred shares that may be issued in one or
more series or classes that rank pari passu with each other and with the
Preferred Shares with respect to participation in the profits and assets of
Capital, or (ii) dividends or guarantee payments to CHC by a majority-owned
subsidiary). Prior to the termination of any such extended interest payment
period, CHC may further extend the interest payment period, provided that such
extended interest payment period together with all such further extensions
thereof may not exceed 18 months. CHC shall give Capital notice of its selection
of such extended interest payment period one Business Day prior to the earlier
of (i) the date Capital declares the related dividend or (ii) the date Capital
is required to give notice of the record or payment date of such related
dividend to the New York Stock Exchange or other applicable self-regulatory
organization or to holders of the Preferred Shares, but in any event not less
than two Business Days prior to such record date. CHC shall cause Capital to
give such notice of CHC's selection of such extended interest payment period to
the holders of the Preferred Shares.
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<PAGE>
ARTICLE III
PAYMENTS
Section 3.01. Method and Date of Payment. Each payment by CHC of
principal and interest (including Additional Interest, if any) on the Loans
shall be made to Capital in lawful money of the United States, in next-day funds
for principal payments and in same day funds for interest payments, at such
place and to such account as may be designated by Capital.
Section 3.02. Set-off. Notwithstanding anything to the contrary herein,
CHC shall have the right to set-off any payment it is otherwise required to make
hereunder with and to the extent CHC has theretofore made, or is concurrently on
the date of such payment making, a payment under the Guarantee Agreement.
ARTICLE IV
SUBORDINATION
Section 4.01. Subordination. CHC and Capital covenant and agree, that the
Loans are subordinate and junior in right of payment to all Senior Indebtedness
as provided herein. The term "Senior Indebtedness" shall mean the principal,
premium, if any, and interest on (i) all indebtedness of CHC other than ordinary
trade credit and other accounts payable arising in the ordinary course of
business, whether outstanding on the date hereof or hereafter created, incurred
or assumed, which is for money borrowed, or evidenced by a note or similar
instrument given in connection with the acquisition of any business, properties
or assets, including securities, (ii) any indebtedness of others of the kinds
described in the preceding clause (i) for which CHC is responsible or liable
(directly or indirectly, contingently or noncontingently) as guarantor or
otherwise and (iii) amendments, renewals, extensions and refundings of any such
indebtedness, unless in any instrument or instruments evidencing or securing
such indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to the Loans. Senior
Indebtedness shall continue to be Senior Indebtedness and entitled to the
benefits of these subordination provisions
-5-
<PAGE>
irrespective of any amendment, modification or waiver of any term of the Senior
Indebtedness or extension or renewal of the Senior Indebtedness.
In the event that (i) CHC shall default in the payment of any principal or
premium, if any, or interest on any Senior Indebtedness when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment or
declaration or otherwise or (ii) an event of default occurs with respect to any
Senior Indebtedness permitting the holders to accelerate the maturity thereof
and written notice describing such event of default and requesting commencement
of payment blockage on transactions as hereinafter described is given to CHC by
the holders of Senior Indebtedness, then unless and until such default in
payment or event of default shall have been cured or waived or shall have ceased
to exist, no direct or indirect payment (in cash, property, securities, by set-
off or otherwise) shall be made or agreed to be made on account of the Loans or
interest thereon or in respect of any repayment, redemption, retirement,
purchase or other acquisition of the Loans. CHC will give prompt written notice
to Capital of any default in the payment of any Senior Indebtedness and of any
dissolution, winding up or reorganization of CHC.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to CHC, its property or for the benefit of its creditors, (ii) any proceeding
for the liquidation, dissolution or other winding up of CHC, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by CHC for the benefit of creditors, or (iv) any other
marshalling of the assets of CHC, all Senior Indebtedness shall first be paid in
full before any payment or distribution, whether in cash, securities or other
property, shall be made on the Loans. In any such event, any payment or
distribution, whether in cash, securities or other property (other than
securities of CHC or any other corporation provided for by a plan of
reorganization or a readjustment, the payment of which is subordinate, at least
to the extent provided in these subordination provisions with respect to the
indebtedness evidenced by the Loans, to the payment of all Senior Indebtedness
at the time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment), which would otherwise (but for
these subordination provisions) be payable or deliverable in respect of the
Loans shall be paid or delivered directly to the holders of Senior Indebtedness
or to their representative, or to the trustee under the indenture or agreement
(if any) pursuant
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<PAGE>
to which such Senior Indebtedness may have been issued, in accordance with the
priorities then existing among such holders until all Senior Indebtedness shall
have been paid in full. No present or future holder of any Senior Indebtedness
shall be prejudiced in the right to enforce subordination of the indebtedness
constituting the Loans by any act or failure to act on the part of CHC.
Senior Indebtedness shall not be deemed to have been paid in full unless
the holders thereof shall have received cash, securities or other property equal
to the amount of such Senior Indebtedness then outstanding. Upon the payment in
full of all Senior Indebtedness, Capital shall be subrogated to all the rights
of any holders of Senior Indebtedness to receive any further payments or
distributions applicable to the Senior Indebtedness until the Loans shall have
been paid in full, and such payments or distributions of cash, securities or
other property received by Capital, by reason of such subrogation, which
otherwise would be paid or distributed to the holders of Senior Indebtedness,
shall, as between CHC and its creditors other than the holders of Senior
Indebtedness on the one hand, and Capital, on the other, be deemed to be a
payment by CHC on account of Senior Indebtedness, and not on account of the
Loans.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01. Representations and Warranties. CHC represents and warrants
to Capital that:
(a) Good Standing. CHC is a corporation duly incorporated and validly
existing under the laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and conduct its business as now
being conducted.
(b) Power and Authority. CHC has full power and authority to enter into
this agreement and to incur and perform the obligations provided for herein, all
of which have been duly authorized by all proper and necessary action.
(c) No Conflict. The execution and delivery of this Agreement and the
performance by CHC of all its obligations hereunder will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
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trust, loan agreement or other agreement or instrument to which CHC is a party
or by which CHC is bound or subject, nor will this Agreement result in a
violation of the provisions of CHC's Certificate of Incorporation or By-laws.
(d) Binding Agreement. This Agreement constitutes the valid and legally
binding obligation of CHC enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
ARTICLE VI
COVENANTS
Section 6.01. Covenants. (a) CHC agrees (i) that neither it, nor any of its
majority-owned subsidiaries, shall declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock, or make any guarantee payments with respect to the foregoing
(other than (i) payments under the Guarantee Agreement or under other guaranty
agreements made by CHC in respect of additional preferred shares that may be
issued in one or more series or classes that rank pari passu with each other and
with the Preferred Shares with respect to participation in the profits and
assets of Capital, or (ii) dividends or guarantee payments to CHC by a majority-
owned subsidiary) if at such time (x) there shall have occurred any event that,
with the giving of notice or the lapse of time or both, would constitute an
Event of Default hereunder or (y) CHC shall be in default with respect to its
payment or other obligations under the Guarantee Agreement or under the Expenses
and Liabilities Agreement dated as of ___________ __, 1994, between CHC and
Capital, (ii) to maintain direct or indirect 100% ownership of the Common Shares
and any other shares of Capital other than (x) the Preferred Shares and (y) any
additional preferred shares that may be issued in one or more series or classes,
and that rank pari passu with each other and with the Preferred Shares with
respect to participation in the profits and assets of Capital, (iii) to cause at
least 21% of the total value of Capital and at least 21% of all interest in the
capital, income, gain, loss, deduction and credit of Capital to be represented
by Common Shares, (iv) not to voluntarily dissolve, wind-up or liquidate
Capital, (v) to remain the Manager of Capital and to timely perform all of its
duties as Manager of Capital (including the duty to declare and pay dividends on
the Preferred Shares); provided that any permitted successor of CHC under this
Agreement may succeed to CHC's duties as Manager, and (vi) to use its reasonable
efforts to cause Capital to remain a limited life company and otherwise continue
to be treated as a partnership for United States federal income tax
purposes.
(b) CHC agrees that its obligations under this Agreement will also be for
the benefit of the holders from time to time of Preferred Shares, and CHC
acknowledges and
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agrees that such holder will be entitled to enforce this Agreement directly
against CHC.
(c) CHC agrees not to merge with or into another entity, or permit another
entity to merge with or into it, and agrees not to sell, transfer or lease all
or substantially all of its assets to another entity unless: (i) at such time
no Event of Default hereunder has occurred and is continuing, or would occur as
a result of such merger, sale, transfer or lease, and (ii) CHC is the survivor
of such merger or the entity to which CHC's assets are sold, transferred or
leased is an entity organized under the laws of the United States or any state
thereof and assumes all of CHC's obligations under this Agreement.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01. Events of Default. If one or more of the following events
(each an "Event of Default") shall occur and be continuing:
(a) default in the payment of any interest on the Loans, including
any Additional Interest in respect of the Loans, when due for ten days
(whether by virtue of the provisions described under Article IV hereof or
otherwise); provided that a valid extension of the interest payment period
by CHC pursuant to Section 2.03 hereof shall not constitute a default in
the payment of interest for this purpose;
(b) default in the payment of principal on the Loans when due
(whether by virtue of the provisions described under Article IV hereof or
otherwise);
(c) the dissolution, winding up or liquidation of Capital;
(d) the bankruptcy, insolvency or liquidation of CHC; or
(e) breach by CHC of any covenants contained herein continued for 30
days after notice to it from any holder of the Preferred Shares;
then, provided that the holders of a majority in liquidation preference of
outstanding Preferred Shares are entitled to appoint a trustee, then, in
every such event, and at any time thereafter during the continuance of such
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event, Capital will have the right to declare the principal of and the interest
on the Loans (including any Additional Interest and any interest subject to an
extension of the interest payment period) and any other amounts payable
hereunder to be forthwith due and payable, whereupon the same shall become and
be forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, anything in this
Agreement to the contrary notwithstanding. If an Event of Default specified in
subparagraph (c) or (d) above shall have occurred, the principal of and interest
on the Loans and any other amounts payable hereunder shall thereupon and
concurrently become due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything in
this Agreement to the contrary notwithstanding. CHC expressly acknowledges that
under the terms of the Preferred Shares, the holders of the outstanding
Preferred Shares shall have the right to appoint a trustee, which trustee shall
be authorized to exercise Capital's rights as a creditor under this Agreement,
and CHC agrees to cooperate with such trustee.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Notices. All notices hereunder shall be deemed given by a
party hereto if in writing and delivered personally or by telegram or facsimile
transmission or by registered or certified mail (return receipt requested) to
the other party at the following address for such party (or at such other
address as shall be specified by like notice):
If to Capital, to:
Capital Holding LLC
c/o Capital Holding Corporation, as Manager
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Fax No: (502) 560-2746
Attention: Treasurer
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<PAGE>
If to CHC, to:
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Fax No: (502) 560-2746
Attention: Treasurer
Any notice given by mail or telegram or facsimile transmission shall be
effective when received.
Section 8.02. Binding Effect. CHC shall have the right at all times to
assign any of its rights or obligations under this Agreement to a direct or
indirect wholly owned subsidiary of CHC other than any subsidiary that is an
insurance company; provided that, in the event of any such assignment, CHC shall
remain jointly and severally liable for all such obligations. Capital may not
assign any of its rights hereunder without the prior written consent of CHC.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of CHC and Capital and their respective successors and assigns. This
Agreement may not otherwise be assigned by CHC or Capital.
Section 8.03. Governing Law. EXCEPT AS TO MATTERS RELATING TO THE
AUTHORIZATION, EXECUTION AND DELIVERY OF THIS AGREEMENT BY CAPITAL, WHICH SHALL
BE GOVERNED BY THE LAWS OF THE TURKS & CAICOS ISLANDS, THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 8.04. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
Section 8.05. Amendments. This Agreement may be amended by mutual consent
of the parties in the manner the parties shall agree; provided that, so long as
any of the Preferred Shares remain outstanding, no such amendment shall be made
that adversely affects the holders of the Preferred Shares, no termination of
this Agreement shall occur, and no Event of Default or compliance with any
covenant under this Agreement may be waived by Capital, without the prior
approval of the holders of at least 66 2/3% of the outstanding Preferred Shares,
unless and until the Loans and all accrued and unpaid interest thereon
(including Additional Interest, if any) shall have been paid in full.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused THIS LOAN AGREEMENT to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
CAPITAL HOLDING CORPORATION
By: ______________________
Name:
Title:
CAPITAL HOLDING LLC
By: Capital Holding Corporation,
as Manager
By: ______________________
Name:
Title:
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<PAGE>
EXHIBIT 99.2
EXPENSES AND LIABILITIES AGREEMENT
THIS EXPENSES AND LIABILITIES AGREEMENT ("Agreement") dated as of
___________ __, 1994, between Capital Holding Corporation, a Delaware
corporation ("CHC"), and Capital Holding LLC, a limited life company organized
under the laws of the Turks & Caicos Islands ("Capital").
WHEREAS, Capital intends to issue and sell up to 4,000,000 shares of its
[ ]% Cumulative Monthly Income Preferred Shares (the "Preferred Shares") with a
liquidation preference of $25 per share (the "Liquidation Preference");
WHEREAS, CHC will directly or indirectly own all the common shares of
Capital (the "Common Shares");
WHEREAS, Capital will loan the proceeds from the issuance and sale of the
Preferred Shares and Common Shares to CHC.
NOW THEREFORE, in consideration of the fact that CHC will directly or
indirectly own all of the Common Shares, CHC and Capital hereby agree as
follows:
ARTICLE I
---------
Section 1.01. Guarantee by CHC. Subject to the terms and conditions
hereof, CHC hereby irrevocably and unconditionally guarantees to each person or
entity to whom Capital is now or hereafter becomes indebted or liable (other
than obligations to holders of the Preferred Shares; such obligations being
separately guaranteed to the extent set forth in the Payment and Guarantee
Agreement between CHC and Capital dated the date hereof) (the "Beneficiaries"),
the full payment, when and as due, regardless of any defense, right of set-off
or counterclaim which Capital may have or assert, of any and all indebtedness
and liabilities of Capital to such Beneficiaries (collectively, the
"Obligations"). This Agreement is intended to be for the benefit of, and to be
enforceable by, all such Beneficiaries, whether or not such Beneficiaries have
received notice hereof.
Section 1.02. Term of Agreement. This Agreement will remain in effect
until such time as all of the Preferred Shares issued by Capital shall have been
redeemed in accordance with their terms or shall have been purchased and
cancelled by Capital or CHC; provided, however, that at any time after the
Preferred Shares shall have been so redeemed or purchased and cancelled, CHC may
cancel this
<PAGE>
Agreement upon 30 days' notice in writing to Capital. Except as provided in the
preceding sentence, this Agreement is continuing, irrevocable, unconditional and
absolute.
Section 1.03. Waiver of Notice. CHC hereby waives notice of acceptance of
this Agreement and of any obligation to which it applies or may apply, and CHC
hereby waives presentment, demand for payment, protest, notice of nonpayment,
notice of dishonor, notice of redemption and all other notices and demands.
Section 1.04. Releases, Waivers, Etc. The obligations, covenants,
agreements and duties of CHC under this Agreement shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by Capital of any express or implied
agreement, covenant, term or condition relating to the
Obligations to be performed or observed by Capital;
(b) the extension of time for the payment by Capital of all or any
portion of the Obligations or for the performance of any other
obligation under, arising out of, or in connection with, the
Obligations;
(c) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Beneficiaries with
respect to the Obligations or any action on the part of Capital
granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar
proceedings affecting, Capital or any of the assets of Capital;
or
(e) the settlement or compromise of any Obligation guaranteed hereby
or any obligation hereby incurred.
<PAGE>
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, CHC with respect to the happening of any of the foregoing.
Section 1.05. Enforcement. A Beneficiary may enforce this Agreement
directly against CHC, and CHC waives any right or remedy to require that any
action be brought against Capital or any other person or entity before
proceeding against CHC.
ARTICLE II
----------
Section 2.01. Binding Effect. All guarantees and agreements
contained in this Agreement shall bind the successors, assigns, receivers,
trustees and representatives of CHC and shall inure to the benefit of the
Beneficiaries.
Section 2.02. Amendment. So long as there remains any Preferred
Shares outstanding, this Agreement shall not be modified or amended in any
manner adverse to the holders of the Preferred Shares.
Section 2.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder to CHC shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail) or telex, addressed to CHC, as follows (and if so given,
shall be deemed given when mailed or upon receipt of an answer-back, if sent by
telex), to it:
If to Capital, to:
Capital Holding LLC
c/o Capital Holding Corporation, as Manager
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Facsimile: (502) 560-2746
Attention: Treasurer
If to CHC, to:
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Facsimile: (502) 560-2746
Attention: Treasurer
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<PAGE>
Section 2.04. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THIS EXPENSES AND LIABILITIES AGREEMENT is executed as of the day and
year first above written.
CAPITAL HOLDING CORPORATION
By: ______________________
Name:
Title:
CAPITAL HOLDING LLC
By: Capital Holding Corporation,
as Manager
By: _________________
Name:
Title:
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