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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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Date of Report (Date of earliest event reported):
May 12, 1994
PROVIDIAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-6701 51-0108922
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
400 West Market Street, Louisville, Kentucky 40202
(Address of principal executive offices) (Zip Code)
(502) 560-2000
(Registrant's telephone number, including area code)
Capital Holding Corporation
(Former name or former address, if changed since last report)
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ITEM 5. Other Events. On May 12, 1994, Capital Holding LLC, a special
purpose subsidiary of Providian Corporation (formerly Capital Holding
Corporation), issued 4,000,000 shares of 8-7/8% Cumulative Monthly Income
Preferred Stock ("MIPS") at $25 per share. Also on such date, Capital Holding
LLC loaned the net proceeds of the issuance of the MIPS to Providian Corporation
to provide permanent funding for the redemption of Providian's Adjustable Rate
Preferred Stock, Series F, which was redeemed on March 2, 1994.
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ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits.
The following exhibits relating to Capital Holding LLC's 8-7/8% Cumulative
Monthly Income Preferred Stock ("MIPS"), are filed herewith:
(4.1) Payment and Guarantee Agreement, dated as of May 12, 1994, between
Capital Holding LLC and Providian Corporation.
(4.2) Terms of the 8-7/8% Cumulative Monthly Income Preferred Stock dated
as of May 5, 1994.
(99.1) Loan Agreement, dated as of May 12, 1994 between Capital Holding LLC
and Providian Corporation.
(99.2) Expenses and Liabilities Agreement dated as of May 12, 1994 between
Capital Holding LLC and Providian Corporation.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 25, 1994
PROVIDIAN CORPORATION
By: /s/ R. Michael Slaven
_____________________
R. Michael Slaven
Assistant General Counsel
and Secretary
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NUMBER EXHIBIT INDEX
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(4.1) Payment and Guarantee Agreement, dated as of May 12, 1994,
between Capital Holding LLC and Providian Corporation.
(4.2) Terms of the 8 7/8% Cumulative Monthly Income Preferred
Stock dated as of May 5, 1994.
(99.1) Loan Agreement, dated as of May 12, 1994 between Capital
Holding LLC and Providian Corporation.
(99.2) Expenses and Liabilities Agreement dated as of May 12, 1994
between Capital Holding LLC and Providian Corporation.
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EXHIBIT 4.1
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as
of May 12, 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 8 7/8% Cumulative Monthly Income Preferred Shares (the "Preferred Shares"),
the terms of which are designated in the Terms of the 8 7/8% Cumulative Monthly
Income Preferred Shares, certified by the Manager (as defined therein) as of the
5th day of May, 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
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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
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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
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SECTION 2.01. (a) The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the
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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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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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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
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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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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
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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
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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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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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THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
CAPITAL HOLDING CORPORATION
By /s/ Gregory P. Givan
_________________________
Name: Gregory P. Givan
Title: Second Vice President-
Corporate Finance
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EXHIBIT 4.2
TERMS OF THE 8 7/8% 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 May 5, 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 "8 7/8% 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
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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 8 7/8% 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 May 31, 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 May 31, 1994 shall be payable on May 31, 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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(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 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 (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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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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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,
in whole or in part from time to time, on or after May 31, 1999, upon not
less than 30 nor more than 60 days' notice, at the Redemption Price. 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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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 forty-ninth
anniversary of the issuance of the Preferred Shares. No Loan may mature more
than 49 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 May 12, 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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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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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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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 directly against Capital Holding, 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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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. Notwithstanding the appointment of any such trustee, Capital
Holding and the Company retain all rights under the Loan Agreement, including
the right to extend the interest payment period for up to 60 months, as provided
under the Loan Agreement. During any such extension, dividends on the Preferred
Shares will be deferred, but holders will be required to include interest from
the Loans in income for federal income tax purposes.
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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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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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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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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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 5th day of May, 1994.
CAPITAL HOLDING LLC
By CAPITAL HOLDING CORPORATION,
as Manager
By: /s/ Gregory P. Givan
--------------------------------
Name: Gregory P. Givan
Title: Second Vice President --
Corporate Finance
Attest:
/s/ R. Michael Slaven
- ----------------------------
R. Michael Slaven
Secretary and Assistant
General Counsel
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EXHIBIT 99.1
LOAN AGREEMENT
LOAN AGREEMENT, dated as of May 12, 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 8-7/8% 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 May 12, 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 $126,600,000
<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 May 31, 2024
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 May 31, 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 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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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.
ARTICLE II
INTEREST
Section 2.01. Interest on the Loans. The Loans shall bear interest at an
annual rate equal to 8 7/8% 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 May 31, 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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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 60
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 60 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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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
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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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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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<PAGE>
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 May 12, 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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<PAGE>
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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<PAGE>
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: /s/ Gregory P. Givan
______________________
Name: Gregory P. Givan
Title: Second Vice President-
Corporate Finance
CAPITAL HOLDING LLC
By: Capital Holding Corporation,
as Manager
By: /s/ R. Michael Slaven
______________________
Name: R. Michael Slaven
Title: Secretary and Assistant
General Counsel
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<PAGE>
EXHIBIT 99.2
EXPENSES AND LIABILITIES AGREEMENT
THIS EXPENSES AND LIABILITIES AGREEMENT ("Agreement") dated as of May
12, 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 8 7/8% 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
<PAGE>
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 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
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<PAGE>
(e) the settlement or compromise of any Obligation guaranteed
hereby or any obligation hereby incurred.
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
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<PAGE>
If to CHC, to:
Capital Holding Corporation
Capital Holding Center
400 West Market Street
Louisville, Kentucky 40202
Facsimile: (502) 560-2746
Attention: Treasurer
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: /s/ Gregory P. Givan
-----------------------
Name: Gregory P. Givan
Title: Second Vice President -
Corporate Finance
CAPITAL HOLDING LLC
By: Capital Holding Corporation,
as Manager
By: /s/ R. Michael Slaven
------------------------
Name: R. Michael Slaven
Title: Secretary and Assistant
General Counsel
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