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Rule No. 424(b)(2)
Registration No. 33-49719
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JANUARY 12, 1994
$400,000,000
LOGO OF CAPITAL HOLDING CORPORATION
CAPITAL HOLDING CORPORATION
MEDIUM-TERM NOTES, SERIES D
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
---------------
The Company may offer from time to time its Medium-Term Notes, Series D (the
"Notes"), due 9 months or more from the date of issue, as selected by the
purchaser and agreed to by the Company, at an aggregate initial public
offering price not to exceed $400,000,000 or its equivalent in another
currency or composite currency.
The Notes may be denominated in U.S. dollars or in such foreign currencies
or composite currencies as the Company may designate at the time of offering.
The Company will set forth the specific currency or composite currency,
interest rate (if any), issue price, and maturity date of any Note in the
applicable Pricing Supplement to this Prospectus Supplement. Unless otherwise
specified in the applicable Pricing Supplement, Agents will not sell Notes
denominated in other than U.S. dollars or ECUs in, or to residents of, the
country issuing the Specified Currency. See "Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each September 15 and March 15 and at
maturity. Interest on the Floating Rate Notes will be payable on the dates
specified therein and in the applicable Pricing Supplement. Floating Rate
Notes will bear interest at a rate determined by reference to the Commercial
Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate or the
Federal Funds Rate, as adjusted by a Spread or Spread Multiplier, if any,
applicable to such Notes. Indexed Notes may be issued with the principal
amount payable at maturity, or the amount of interest payable on any Interest
Payment Date, to be determined by reference to a currency exchange rate,
composite currency, commodity price or other financial or non-financial Index
to be set forth in the applicable Pricing Supplement. Zero Coupon Notes will
not bear interest.
Unless the Company specifies a Redemption Commencement Date in the
applicable Pricing Supplement, the Notes will not be redeemable prior to their
Stated Maturity. If a Redemption Commencement Date is so specified, the Notes
will be redeemable at the option of the Company, as described herein.
The Company will issue the Notes offered hereby in permanent global or
definitive certificated form, as specified in the applicable Pricing
Supplement. A permanent global Note representing Book-Entry Notes will be
registered in the name of, or a nominee of, The Depository Trust Company,
which will act as Depositary. Beneficial interests in Book-Entry Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to Participants' interests) and its
participants. Except as described herein under "Description of Notes--Book-
Entry Notes," owners of beneficial interests in a permanent global Note will
not be considered the Holders thereof and will not be entitled to receive
physical delivery of Notes in definitive form, and no global Note will be
exchangeable except for another global Note of like denomination and terms to
be registered in the name of the Depositary or its nominee. The Notes offered
hereby will be issued in registered form in a minimum denomination of $100,000
or the approximate equivalent in the Specified Currency. See "Description of
Notes."
---------------
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 SUPPLEMENT,
ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
------------ ------------------- -------------------------
<S> <C> <C> <C>
Per Note............ 100% .125%-.750% 99.250%-99.875%
Total(4)............ $400,000,000 $500,000-$3,000,000 $397,000,000-$399,500,000
</TABLE>
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(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from .125% to .750%,
depending on maturity, of the principal amount of any Notes sold through
them as agents (or sold to such Agents as principal in circumstances in
which no other discount is agreed). Unless otherwise specified in the
applicable Pricing Supplement, any Note sold to an Agent as principal will
be purchased by such Agent at a price equal to 100% of the principal
amount thereof less a percentage equal to the commission applicable to an
agency sale of a Note of identical maturity, and may be resold by such
Agent to investors at varying prices related to prevailing market prices
at the time of resale to be determined by such Agent. The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Securities Act of 1933.
(3) Before deducting estimated expenses of U.S. $683,000 payable by the
Company, including expenses of the Agents to be reimbursed by the Company.
(4) Or its equivalent in any other currency or composite currency.
---------------
Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents on their own behalf at negotiated discounts. The Company reserves
the right to sell Notes directly on its own behalf. The Company also reserves
the right to withdraw, cancel, or modify the offering contemplated hereby
without notice. The Company has not established a termination date for the
offering of the Notes. The Company or the Agents may reject any order as a
whole or in part. See "Supplemental Plan of Distribution."
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
---------------
The date of this Prospectus Supplement is January 14, 1994.
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IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
(referred to in the Prospectus as "Offered Debt Securities") supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of Debt Securities set forth in the Prospectus, to which
description reference is hereby made. Capitalized terms not defined herein have
the meanings assigned to such terms in the Prospectus. Terms of the Notes may
be varied in the related supplement to this Prospectus Supplement (a "Pricing
Supplement").
GENERAL
The Notes constitute a single series for purposes of the Indenture, dated as
of January 1, 1994 (the "Indenture"), between the Company and Morgan Guaranty
Trust Company of New York ("Morgan Guaranty"), as trustee (the "Trustee"), and
are limited in amount as set forth on the cover page of this Prospectus
Supplement. For a description of the rights attaching to different series of
Debt Securities under the Indenture, see "Description of Debt Securities" in
the Prospectus.
The Company will at all times have appointed and maintain a Paying Agent
(which may be the Trustee) authorized to pay the principal of (and premium, if
any) or interest on any Notes on the Company's behalf and having an office or
agency (the "Paying Agent Office") in the Borough of Manhattan, The City of New
York, where the Notes may be presented or surrendered for payment and notices,
designations, or requests in respect of payments with respect to Notes may be
served. The Company has initially appointed Morgan Guaranty as the Paying
Agent, with its Paying Agent Office at 60 Wall Street, New York, New York,
Attention: Corporate Trust Operations.
Unless previously redeemed, a Note will mature on the date ("Stated
Maturity") 9 months or more from its date of issue that is specified on its
face and in the applicable Pricing Supplement or, if such Note is a Floating
Rate Note and such specified date is not a Market Day for such Note, the next
succeeding Market Day (or, for a LIBOR Note, if such next succeeding Market Day
falls in the next calendar month, the next preceding Market Day). The
"maturity" of any Note refers herein to the date on which its principal becomes
due and payable, whether at Stated Maturity, upon redemption, or otherwise.
Each Note will be denominated in a currency or composite currency ("Specified
Currency") as specified on its face and in the applicable Pricing Supplement,
which may include U.S. dollars, Australian dollars, New Zealand dollars,
Canadian dollars, Danish kroner, Italian lire, European Currency Units (ECUs),
or any other currency set forth in the applicable Pricing Supplement.
Purchasers of the Notes are required to pay for them by delivery of the
requisite amount of the Specified Currency to an Agent, unless other
arrangements have been made. Unless otherwise specified in the applicable
Pricing Supplement, payments on the Notes will be made in the applicable
Specified Currency in the country issuing the Specified Currency (or, for ECUs,
Brussels), provided that, at the election of the Note Holder and in certain
circumstances at the Company's option, payments on Notes denominated in other
than U.S. dollars may be made in U.S. dollars. See "Payment of Principal and
Interest."
Each Note will be represented by either a permanent global Note registered in
the name of, or a nominee of, the Depositary (each such Note represented by a
permanent global Note being referred to
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herein as a "Book-Entry Note") or a certificate issued in definitive registered
form, without coupons, as set forth in the applicable Pricing Supplement.
Except as set forth under "Book-Entry Notes" below, Book-Entry Notes will not
be issuable in certificated form. So long as the Depositary or its nominee is
the registered holder of any permanent global Note, the Depositary or its
nominee, as the case may be, will be considered the sole Holder of the Book-
Entry Note or Notes represented by such permanent global Note for all purposes
under the Indenture and the Notes. For a further description of the respective
forms, denominations, and transfer and exchange procedures for any such
permanent global Note and the Book-Entry Notes, refer to "Book-Entry Notes"
below and to the applicable Pricing Supplement. The authorized denominations of
any Note denominated in U.S. dollars will be $100,000 and integral multiples of
$1,000 in excess thereof. The authorized denominations of any Note denominated
in other than U.S. dollars will be the amount of the Specified Currency for
such Note equivalent, at the noon buying rate in The City of New York for cable
transfers for such Specified Currency (the "Exchange Rate") on the sixth
Business Day in The City of New York and in the country issuing such currency
(or, for ECUs, Brussels) next preceding the date of issue of such Note, to U.S.
$100,000 (rounded down to an integral multiple of 10,000 units of such
Specified Currency) and any greater amount that is an integral multiple of
10,000 units of such Specified Currency.
Notes will be sold in individual issues of Notes having such interest rate or
interest rate formula, if any, Stated Maturity, and date of original issuance
as shall be selected by the initial purchasers and agreed to by the Company.
Unless otherwise indicated in the applicable Pricing Supplement, each Note,
except any Zero Coupon Note, will bear interest at a fixed rate or a rate
determined by reference to the Commercial Paper Rate, the Prime Rate, LIBOR,
the Treasury Rate, the CD Rate, or the Federal Funds Rate, as adjusted by the
Spread and/or Spread Multiplier, if any, applicable to such Note. See "Interest
Rate." Zero Coupon Notes will be issued at a discount from the principal amount
payable at maturity thereof, but holders of Zero Coupon Notes will not receive
periodic payments of interest thereon.
The Notes may be issued as Original Issue Discount Notes ("OID Notes"). An
OID Note is a Note, including any Zero Coupon Note, that is issued at a price
lower than the principal amount thereof and that may provide that upon
redemption or acceleration of the maturity thereof an amount less than the
principal amount thereof shall become due and payable. In the event of
redemption or acceleration of the maturity of an OID Note, the amount payable
to the Holder of such OID Note upon such redemption or acceleration will be
determined in accordance with the terms of the OID Note, but will be an amount
less than the amount payable at the maturity of such OID Note. In addition, a
Note issued at a discount may, for United States federal income tax purposes,
be considered a Discount Debt Security (as defined in the accompanying
Prospectus), regardless of the amount payable upon redemption or acceleration
of maturity of such Note. See "United States Taxation--Original Issue Discount"
in the accompanying Prospectus.
The Notes will not be subject to any sinking fund and, unless the Company
specifies an initial date on which a Note may be redeemed by the Company (a
"Redemption Commencement Date") in the applicable Pricing Supplement, will not
be redeemable before their maturity. If the Company does specify a Redemption
Commencement Date for any Note, the applicable Pricing Supplement will also
specify one or more redemption prices (expressed as a percentage of the
principal amount of such Note ("Redemption Prices") and the redemption period
or periods ("Redemption Periods") during which such Redemption Prices shall
apply. Unless otherwise specified in the Pricing Supplement, any such Note
shall be redeemable at the Company's option at any time on or after such
specified Redemption Commencement Date at the specified Redemption Price
applicable to the Redemption Period during which such Note is to be redeemed,
together with interest accrued to the redemption date.
The Notes (other than Book-Entry Notes) may be presented for registration of
transfer or exchange at the Paying Agent Office in The City of New York. With
respect to transfers of Book-Entry Notes and
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exchanges of permanent global Notes representing Book-Entry Notes, see
"Description of Notes--Book-Entry Notes."
The Indenture provisions relating to defeasance and covenant defeasance which
are described in the accompanying Prospectus under "Description of Debt
Securities--Defeasance and Covenant Defeasance" will apply to the Notes.
INTEREST RATE
Each Note, other than a Zero Coupon Note, will bear interest from its date of
issue or from the most recent Interest Payment Date (or, if such Note is a
Floating Rate Note and the Interest Reset Dates are weekly, from the day
following the most recent Regular Record Date) to which interest on such Note
has been paid or duly provided for at the fixed rate per annum, or at the rate
per annum determined pursuant to the interest rate formula, stated therein and
in the applicable Pricing Supplement until the principal thereof is paid or
made available for payment. Interest will be payable on each Interest Payment
Date and at maturity as specified below under "Payment of Principal and
Interest."
Each Note, other than a Zero Coupon Note, will bear interest at either:
(a) a fixed rate (a "Fixed Rate Note"); or
(b) a variable rate determined by reference to an interest rate formula
(a "Floating Rate Note"), which may be adjusted by adding or subtracting
the Spread or multiplying by the Spread Multiplier (each term as defined
below).
A Floating Rate Note may also have either or both:
(a) a maximum, or ceiling, on the rate of interest that may accrue during
any interest period (a "Maximum Rate"); and
(b) a minimum, or floor, on the rate of interest that may accrue during
any interest period (a "Minimum Rate").
The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as applying to the Interest Rate Basis (as defined below)
for such Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as applying to the Interest Rate Basis for such
Note.
"Market Day" means:
(a) for any Note other than a LIBOR Note, any Business Day in The City of
New York; and
(b) for a LIBOR Note, any such Business Day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market.
"Index Maturity" means, for a Floating Rate Note, the period to maturity of
the interest or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement. Unless otherwise provided in
the applicable Pricing Supplement, Morgan Guaranty will be the calculation
agent (the "Calculation Agent") for Floating Rate Notes.
The applicable Pricing Supplement relating to a Fixed Rate Note will
designate a fixed rate of interest per annum payable on such Fixed Rate Note.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate an interest rate basis (the "Interest Rate Basis") for such Floating
Rate Note. The Interest Rate Basis for each Floating Rate Note will be:
(a) the Commercial Paper Rate for "Commercial Paper Rate Notes";
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(b) the Prime Rate for "Prime Rate Notes";
(c) LIBOR for "LIBOR Notes";
(d) the Treasury Rate for "Treasury Rate Notes";
(e) the CD Rate for "CD Rate Notes";
(f) the Federal Funds Rate for "Federal Funds Rate Notes"; or
(g) such other interest rate formula as such Pricing Supplement sets
forth.
The applicable Pricing Supplement for a Floating Rate Note will specify the
Interest Rate Basis and, if applicable, the Calculation Agent, the Index
Maturity, the Spread and/or Spread Multiplier, the Maximum Rate, the Minimum
Rate, the Initial Interest Rate, the Interest Payment Dates, the Regular Record
Dates, the Calculation Date, the Interest Determination Date, and the Interest
Reset Date for such Note.
The interest rate on each Floating Rate Note will be reset weekly, monthly,
quarterly, semi-annually, annually, or otherwise (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. The Interest Reset
Date will be:
(a) for Floating Rate Notes (other than Treasury Rate Notes) that reset
weekly, the Wednesday of each week;
(b) for Treasury Rate Notes that reset weekly, the Tuesday of each week;
(c) for Floating Rate Notes that reset monthly, the third Wednesday of
each month;
(d) for Floating Rate Notes that reset quarterly, the third Wednesday of
March, June, September, and December;
(e) for Floating Rate Notes that reset semi-annually, the third Wednesday
of two months of each year as specified in the applicable Pricing
Supplement;
(f) for Floating Rate Notes that reset annually, the third Wednesday of
one month of each year as specified in the applicable Pricing Supplement;
and
(g) for Floating Rate Notes that reset at intervals other than those
described above, the days specified in the applicable Pricing Supplement;
provided, however, that:
(1) the interest rate in effect from the date of issue to the first
Interest Reset Date for a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement); and
(2) the interest rate in effect for the ten calendar days immediately
before maturity or earlier redemption date of a Note will be that in
effect on the tenth calendar day preceding such maturity or redemption
date.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Market Day for such Floating Rate Note, the Interest Reset Date
for such Floating Rate Note shall be postponed to the next day that is a Market
Day for such Floating Rate Note (except that for a LIBOR Note, if such Market
Day is in the next succeeding calendar month, such Interest Reset Date shall be
the immediately preceding Market Day).
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"),
for a LIBOR Note (the "LIBOR Interest Determination Date"), for a CD Rate Note
(the "CD Rate Interest Determination Date"), and for a Federal Funds Rate Note
(the
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"Federal Funds Rate Interest Determination Date") will be the second Market Day
preceding such Interest Reset Date. The Interest Determination Date pertaining
to an Interest Reset Date for a Treasury Rate Note (the "Treasury Interest
Determination Date") will be the day of the week in which such Interest Reset
Date falls on which Treasury bills would normally be auctioned. Treasury bills
are usually sold at auction on the Monday of each week, unless that day is a
legal holiday, in which case the auction is usually held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Interest Determination Date pertaining to the
Interest Reset Date occurring in the next succeeding week. If an auction date
shall fall on any Interest Reset Date for a Treasury Rate Note, then such
Interest Reset Date shall instead be the first Market Day immediately following
such auction date.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point (e.g., 9.876541% (or .09876541)
being rounded to 9.87655% (or .0987655)), and all U.S. dollar amounts used in
or resulting from such calculations will be rounded to the nearest cent (with
one-half cent being rounded upwards).
In addition to any maximum interest rate that may apply to a Floating Rate
Note under the above provisions, the interest rate on the Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application. Under
present New York law the maximum rate of interest is 25% per annum on a simple
interest basis, with certain exceptions. The limit may not apply to Floating
Rate Notes in which U.S. $2,500,000 or more has been invested.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate that will become effective on the next Interest Reset Date for
such Floating Rate Note. The Calculation Agent's determination of any interest
rate will be final and binding in the absence of manifest error.
COMMERCIAL PAPER RATE NOTES
Commercial Paper Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any), and will be payable on the dates, specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement. Unless otherwise indicated in the applicable Pricing Supplement,
the "Calculation Date" pertaining to a Commercial Paper Interest Determination
Date will be the tenth day after such Commercial Paper Interest Determination
Date or, if any such day is not a Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, for any Interest Reset Date, the Money Market Yield
(calculated as described below) of the per annum rate (quoted on a bank
discount basis) for the relevant Commercial Paper Interest Determination Date
for commercial paper having the specified Index Maturity as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)") under the heading
"Commercial Paper." If such rate is not published before 3:00 p.m., New York
City time, on the relevant Calculation Date, then the Commercial Paper Rate for
such Interest Reset Date shall be the Money Market Yield of such rate on such
Commercial Paper Interest Determination Date for commercial paper having the
specified Index Maturity as published by the Federal Reserve Bank of New York
in its daily statistical release, "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or any successor publication published by the Federal
Reserve Bank of New York
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("Composite Quotations") under the heading "Commercial Paper." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H.15(519) or Composite Quotations, the Commercial Paper Rate for such
Interest Reset Date shall be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered per annum rates
(quoted on a bank discount basis), as of 11:00 a.m., New York City time, on
such Commercial Paper Interest Determination Date, of three leading dealers of
commercial paper in The City of New York (which may include one or more of the
Agents) selected by the Calculation Agent for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bond rating is "AA," or
the equivalent, from a nationally recognized rating agency; provided, however,
that if fewer than three dealers selected by the Calculation Agent are quoting
as mentioned in this sentence, the Commercial Paper Rate for such Interest
Reset Date will be the Commercial Paper Rate in effect on such Commercial Paper
Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
360 X D
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Money Market Yield = 100 X 360-(D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal and "M" refers to the actual number
of days in the period from the Interest Reset Date to but excluding the day
that numerically corresponds to such Interest Rate Date (or, if there is not
any such numerically corresponding day, the last day) in the calendar month
that is the number of months corresponding to the specified Index Maturity
after the month in which such Interest Reset Date falls.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any),
and will be payable on the dates, specified on their faces and in the
applicable Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, the "Calculation Date" pertaining to a Prime Rate Interest
Determination Date will be the tenth day after such Prime Rate Interest
Determination Date or, if any such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, for any Interest Reset Date, the rate set forth for the relevant Prime
Rate Interest Determination Date in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published before 9:00 a.m., New York City time, on
the relevant Calculation Date, then the Prime Rate for such Interest Reset Date
will be the arithmetic mean of the rates of interest publicly announced by each
bank that appears on the display designated as page "NYMF" on the Reuter
Monitor Money Rates Service (or such other page as may replace the NYMF page on
that service for the purpose of displaying prime rates or base lending rates of
major United States banks) ("Reuters Screen NYMF Page") as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date as quoted on the Reuters Screen NYMF Page on such Prime Rate
Interest Determination Date. If fewer than four such rates appear on the
Reuters Screen NYMF Page on such Prime Rate Interest Determination Date, the
Prime Rate for such Interest Reset Date will be the arithmetic mean of the
prime rates or base lending rates (quoted on the basis of the actual number of
days in the year divided by a 360-day year) as of the close of business on such
Prime Rate Interest Determination Date by three major banks in The City of New
York selected by the Calculation Agent, provided, however, that if fewer than
three banks selected as provided above by the Calculation Agent are quoting as
mentioned in this sentence, the Prime Rate for such Interest Reset Date will be
the Prime Rate in effect on such Prime Rate Interest Determination Date.
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LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any), and will
be payable on the dates, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR for
any Interest Reset Date will be determined by the Calculation Agent in
accordance with the following provisions:
(a) On the relevant LIBOR Interest Determination Date, LIBOR will be
determined on the basis of the offered rates for deposits of not less than
U.S. $1,000,000 having the specified Index Maturity, commencing on the
second Market Day immediately following such LIBOR Interest Determination
Date, that appear on the display designated as page "LIBO" on the Reuter
Monitor Money Rates Service (or such other page as may replace the LIBO
page on that service for the purpose of displaying London interbank offered
rates of major banks) (or if such display is not available at any time, a
comparable display, as determined in the sole discretion of, and selected
by, the Calculation Agent, of London interbank offered rates of major
banks, as may be available from a similar service) ("Reuters Screen LIBO
Page") as of 11:00 a.m., London time, on such LIBOR Interest Determination
Date. If at least two such offered rates appear on the Reuters Screen LIBO
Page, LIBOR for such Interest Reset Date will be the arithmetic mean of
such offered rates as determined by the Calculation Agent. If fewer than
two offered rates appear, LIBOR for such Interest Reset Date will be
determined as described in (b) below.
(b) For a LIBOR Interest Determination Date on which fewer than two
offered rates for the applicable Index Maturity appear on the Reuters
Screen LIBO Page as described in (a) above, LIBOR will be determined on the
basis of the rates at approximately 11:00 a.m., London time, on such LIBOR
Interest Determination Date at which deposits in U.S. dollars having the
specified Index Maturity are offered to prime banks in the London interbank
market by four major banks in the London interbank market selected by the
Calculation Agent commencing on the second Market Day immediately following
such LIBOR Interest Determination Date and in a principal amount equal to
an amount of not less than U.S. $1,000,000 that in the Calculation Agent's
judgment is representative for a single transaction in such market at such
time (a "Representative Amount"). The Calculation Agent will request the
principal London office of each of such banks to provide a quotation of its
rate. If at least two such quotations are provided, LIBOR for such Interest
Reset Date will be the arithmetic mean of such quotations. If fewer than
two quotations are provided, LIBOR for such Interest Reset Date will be the
arithmetic mean of the rates quoted at approximately 11:00 a.m., New York
City time, on such LIBOR Interest Determination Date by three major banks
in The City of New York, selected by the Calculation Agent, for loans in
U.S. dollars to leading European banks having the specified Index Maturity
commencing on the Interest Reset Date and in a Representative Amount;
provided, however, that if fewer than three banks selected as provided
above by the Calculation Agent are quoting as mentioned in this sentence,
LIBOR for such Interest Reset Date will be the LIBOR in effect on such
LIBOR Interest Determination Date.
TREASURY RATE NOTES
Treasury Rate Notes will bear interest at the interest rates (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if
any), and will be payable on the dates, specified on the face of the Treasury
Rate Note and in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, the "Calculation Date" for a Treasury
Interest Determination Date will be the tenth day after such Treasury Interest
Determination Date or, if any such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, for any Interest Reset Date, the rate for the auction on the
relevant Treasury Interest Determination Date of
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direct obligations of the United States ("Treasury Bills") having the specified
Index Maturity as published in H.15(519) under the heading "U.S. Government
Securities/Treasury Bills/Auction Average (Investment)" or, if not so published
by 9:00 a.m., New York City time, on the relevant Calculation Date, the auction
average rate (expressed as a bond equivalent, on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) for such auction as
otherwise announced by the United States Department of the Treasury. If the
results of such auction of Treasury bills having the specified Index Maturity
are not published or reported as provided above by 3:00 p.m., New York City
time, on such Calculation Date, or if no such auction is held during such week,
then the Treasury Rate shall be the rate set forth in H.15(519) for the
relevant Treasury Interest Determination Date for the specified Index Maturity
under the heading "U.S. Government Securities/Treasury Bills/Secondary Market."
If such rate is not so published by 3:00 p.m., New York City time, on the
relevant Calculation Date, the Treasury Rate for such Interest Reset Date shall
be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates as of approximately 3:30 p.m., New York City time,
on such Treasury Interest Determination Date, of three primary United States
government securities dealers in The City of New York selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if fewer than
three dealers selected as provided above by the Calculation Agent are quoting
as mentioned in this sentence, the Treasury Rate for such Interest Reset Date
will be the Treasury Rate in effect on such Treasury Interest Determination
Date.
CD RATE NOTES
CD Rate Notes will bear interest at the interest rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any), and
will be payable on the dates, specified on the face of the CD Rate Note and in
the applicable Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, the "Calculation Date" pertaining to a CD Interest
Determination Date will be the tenth day after such CD Interest Determination
Date or, if such day is not a Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, for any Interest Reset Date, the rate for the relevant CD Interest
Determination Date for negotiable certificates of deposit having the specified
Index Maturity as published in H.15(519) under the heading "CDs (Secondary
Market)." If such rate is not published before 9:00 a.m., New York City time,
on the relevant Calculation Date, then the CD Rate for such Interest Reset Date
shall be the rate on such CD Rate Interest Determination Date for negotiable
certificates of deposit having the specified Index Maturity as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
p.m., New York City time, on such Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, the CD Rate for such Interest
Reset Date shall be calculated by the Calculation Agent and shall be the
arithmetic mean of the secondary market offered rates, as of 10:00 a.m., New
York City time, on such CD Rate Interest Determination Date, of three leading
nonbank dealers of negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money market banks with a remaining maturity
closest to the specified Index Maturity in a denomination of U.S. $5,000,000;
provided, however, that if fewer than three dealers selected as provided above
by the Calculation Agent are quoting as mentioned in this sentence, the CD Rate
for such Interest Reset Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rates Notes will bear interest at the interest rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any), and will be payable on the dates,
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specified on the face of the Federal Funds Rate Note and in the applicable
Pricing Supplement. Unless otherwise indicated in the applicable Pricing
Supplement, the "Calculation Date" pertaining to a Federal Funds Interest
Determination Date will be the tenth day after such Federal Funds Interest
Determination Date or, if such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, for any Interest Reset Date, the rate on the relevant
Federal Funds Interest Determination Date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." If such rate is not
published before 9:00 a.m., New York City time, on the relevant Calculation
Date, then the Federal Funds Rate for such Interest Reset Date will be the rate
on such Federal Funds Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not published in
either H.15(519) or Composite Quotations, the Federal Funds Rate for such
Interest Reset Date shall be calculated by the Calculation Agent and shall be
the arithmetic mean of the rates, as of 9:00 a.m., New York City time, on such
Federal Funds Interest Determination Date, for the last transaction in
overnight Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if fewer than three brokers selected by the Calculation
Agent are quoting as mentioned in this sentence, the Federal Funds Rate for
such Interest Reset Date will be the Federal Funds Rate in effect on such
Federal Funds Interest Determination Date.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, payments of
principal of (and premium, if any) and interest on all Notes will be made in
the applicable Specified Currency; provided, however, that payments of
principal (and premium, if any) and interest on Notes denominated in other than
U.S. dollars will nevertheless be made in U.S. dollars:
(a) at the option of the Holders of such Notes under the procedures
described in the two following paragraphs; and
(b) at the Company's option in the case of imposition of exchange
controls or other circumstances beyond the Company's control as described
in the last paragraph under this heading.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of interest and principal (and
premium, if any) for any Note denominated in other than U.S. dollars will be
made in U.S. dollars if the registered Holder of such Note on the relevant
Regular Record Date, or at maturity, as the case may be, has transmitted a
written request for such payment in U.S. dollars to the Paying Agent at the
Paying Agent Office in The City of New York on or before such Regular Record
Date, or the date 15 days before maturity, as the case may be. Such request may
be in writing (mailed or hand delivered) or by cable, telex, or other form of
facsimile transmission. Any such request made for any Note by a registered
Holder will remain in effect for any further payments of interest and principal
(and premium, if any) on such Note payable to such Holder, unless such request
is revoked on or before the relevant Regular Record Date or the date 15 days
before maturity, as the case may be. Holders of Notes denominated in other than
U.S. dollars whose Notes are registered in the name of a broker or nominee
should contact such broker or nominee to determine whether and how to elect to
receive payments in U.S. dollars.
The U.S. dollar amount to be received by a Holder of a Note denominated in
other than U.S. dollars who elects to receive payment in U.S. dollars will be
based on the highest bid quotation in The City of New York received by the
Exchange Rate Agent (as defined below) as of 11:00 a.m., New York City time, on
the second Business Day next preceding the applicable payment date from three
recognized foreign exchange dealers (one of which may be the Exchange Rate
Agent) for the purchase by the
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quoting dealer of the Specified Currency for U.S. dollars for settlement on
such payment date in the aggregate amount of the Specified Currency payable to
all Holders of Notes electing to receive U.S. dollar payments and at which the
applicable dealer commits to execute a contract. If three such bid quotations
are not available on the second Business Day preceding the date of payment of
principal (and premium, if any) or interest for any Note, such payment will be
made in the Specified Currency. All currency exchange costs associated with any
payment in U.S. dollars on any such Note will be borne by the Holder thereof by
deductions from such payment. The Exchange Rate Agent (the "Exchange Rate
Agent") with respect to any Notes denominated in other than U.S. dollars will
be specified in the applicable Pricing Supplement.
Interest will be payable to the person in whose name a Note is registered
(which for a permanent global Note representing Book-Entry Notes will be the
Depositary or a nominee of the Depositary) at the close of business on the
Regular Record Date next preceding each Interest Payment Date, provided,
however, that interest payable at maturity will be payable to the person to
whom principal shall be payable (which for permanent global Notes representing
Book-Entry Notes, will be the Depositary or a nominee of the Depositary). The
first payment of interest on any Note originally issued between a Regular
Record Date and an Interest Payment Date will be made on the second such
Interest Payment Date next succeeding its date of issue to the registered owner
on the Regular Record Date relating to such second Interest Payment Date.
Unless otherwise indicated in the applicable Pricing Supplement, the "Regular
Record Date" for any Floating Rate Note shall be the date 15 calendar days
before each Interest Payment Date, whether or not such date shall be a Business
Day, and the "Regular Record Date" for any Fixed Rate Note shall be the
September 1 and March 1 next preceding the September 15 and March 15 Interest
Payment Dates.
Unless otherwise indicated in the applicable Pricing Supplement and except as
provided below, interest will be payable:
(a) for Floating Rate Notes that reset weekly, on the third Wednesday of
March, June, September, and December of each year;
(b) for Floating Rate Notes that reset monthly, on the third Wednesday of
each month or on the third Wednesday of March, June, September, and
December of each year (as indicated in the applicable Pricing Supplement);
(c) for Floating Rate Notes that reset quarterly, on the third Wednesday
of March, June, September, and December of each year;
(d) for Floating Rate Notes that reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable
Pricing Supplement;
(e) for Floating Rate Notes that reset annually, on the third Wednesday
of the month specified in the applicable Pricing Supplement; and
(f) for Floating Rate Notes that reset at intervals other than those
described above, on the days specified in the applicable Pricing
Supplement,
each an "Interest Payment Date," and in each case, at maturity. If an Interest
Payment Date for any Floating Rate Note would otherwise fall on a day that is
not a Market Day for such Note, such Interest Payment Date will be the next
succeeding Market Day (or, for a LIBOR Note, if such day falls in the next
calendar month, the next preceding Market Day).
Payments of interest on any Fixed Rate Note or Floating Rate Note for any
Interest Payment Date will include interest accrued to but excluding such
Interest Payment Date; provided, however, that if the Interest Reset Dates for
any Floating Rate Note are weekly, interest payable on such Note on any
Interest Payment Date, other than interest payable on the date on which
principal on any such Note is
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payable, will include interest accrued to but excluding the day following the
next preceding Regular Record Date.
For a Floating Rate Note, accrued interest from (and including) the date of
issue or from (and including) the last date to which interest has been paid is
calculated by multiplying the face amount of such Floating Rate Note by an
accrued interest factor. Such accrued interest factor is computed by adding the
interest factor calculated for each day from (and including) the date of issue,
or from (and including) the last date to which interest has been paid, but
excluding the date for which accrued interest is being calculated. The interest
factor (expressed as a decimal) for each such day is computed by dividing the
interest rate (expressed as a decimal) applicable to such date by 360 for
Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes, or
Federal Funds Rate Notes, or by the actual number of days in the year for
Treasury Rate Notes. Interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
A payment on any Note due on any day that is not a Business Day in The City
of New York (and, for any Note denominated in other than U.S. dollars, in the
country issuing the Specified Currency (or, for ECUs, Brussels)) need not be
made on such day, but may be made on the next succeeding Business Day with the
same force and effect as if made on the due date, and no interest shall accrue
for the period from and after such date. "Business Day," as used herein for any
particular location, means each Monday, Tuesday, Wednesday, Thursday, and
Friday that is not a day on which banking institutions in such location are
authorized or obligated by law or executive order to close.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Note (other than a Book-Entry Note) at maturity to be made in
U.S. dollars will be made in immediately available funds upon surrender of such
Note at the Paying Agent Office in The City of New York, provided that the Note
is presented to the Paying Agent in time for the Paying Agent to make such
payments in such funds in accordance with its normal procedures. Payments of
interest on any Note (other than any Book-Entry Note) to be made in U.S.
dollars other than at maturity will be made by check mailed to the address of
the Person (which, in the case of a permanent global Note representing Book-
Entry Notes, shall be the Depositary) entitled thereto as it appears in the
Security Register or by wire transfer to such account as may have been
appropriately designated by such Person. Payments in respect of Book-Entry
Notes are further discussed below under "Book-Entry Notes."
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and principal (and premium, if any) with respect to any Note to be
made in a Specified Currency other than U.S. dollars will be made by wire
transfer to such account with a bank located in the country issuing the
Specified Currency (or, for Notes denominated in ECUs, Brussels) or other
jurisdiction acceptable to the Company and the Paying Agent as shall have been
designated at least five days before the Interest Payment Date or maturity, as
the case may be, by the registered Holder of such Note on the relevant Regular
Record Date or at maturity, provided that, in the case of payment of principal
of (and premium, if any) and any interest due at maturity, the Note is
presented to the Paying Agent in time for the Paying Agent to make such
payments in such funds in accordance with its normal procedures. Such
designation shall be made by filing the appropriate information with the Paying
Agent at the Paying Agent Office in The City of New York, and, unless revoked,
any such designation made for any Note by a registered Holder will remain in
effect for any further payments with respect to such Note payable to such
Holder. If a payment with respect to any such Note cannot be made by wire
transfer because the required designation has not been received by the Paying
Agent on or before the requisite date or for any other reason, a notice will be
mailed to the Holder at its registered address requesting a designation
pursuant to which such wire transfer can be made and, upon the Paying Agent's
receipt of such a designation, such payment will be made within five days of
such receipt. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer, but any tax, assessment, or
governmental charge imposed upon payments will be borne by the Holders of the
Notes in respect of which payments are made.
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If the principal of (and premium, if any) or interest on any Note is payable
in other than U.S. dollars and such Specified Currency is not available due to
the imposition of exchange controls or other circumstances beyond the control
of the Company, the Company will be entitled to satisfy its obligations to
Holders of the Notes by making such payment in U.S. dollars on the basis of the
most recently available Exchange Rate. Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default under the Indenture.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same date of
issue will be represented by a single permanent global Note. Each permanent
global Note representing Book-Entry Notes will be deposited with, or on behalf
of, The Depository Trust Company, as U.S. Depositary (the "Depositary"),
located in the Borough of Manhattan, The City of New York, and will be
registered in the name of the Depositary or a nominee of the Depositary.
Currently, the Depositary will accept the deposit of only permanent global
Notes denominated in U.S. dollars.
Ownership of beneficial interests in a permanent global Note representing
Book-Entry Notes will be limited to institutions that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. In addition, ownership of beneficial interests by
participants in such a permanent global Note will be shown on, and the transfer
of that ownership interest will be effected only through, records maintained by
the Depositary or its nominee for such permanent global Note. Ownership of
beneficial interests in such a permanent global Note by persons that hold
through participants will be evidenced only by, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in such a permanent global Note.
Upon the issuance of a permanent global Note representing Book-Entry Notes,
and the deposit of such permanent global Note with the Depositary, the
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Book-Entry Notes represented by such
permanent global Note to the accounts of participants. The accounts to be
credited shall be designated by the soliciting Agent or, to the extent that the
Book-Entry Notes are offered and sold directly, by the Company.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any permanent global Note registered in the name of or held by
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner and Holder of the permanent global
Note representing such Book-Entry Notes. Neither the Company, the Trustee, nor
any agent of the Company or the Trustee will have any responsibility or
liability for any aspect of the Depositary's records or any participant's
records relating to or payments made on account of beneficial ownership
interests in a permanent global Note representing such Book-Entry Notes or for
maintaining, supervising or reviewing any of the Depositary's records or any
participant's records relating to such beneficial ownership interests.
The practice of the Depositary is to credit accounts of participants on the
Interest Payment Date with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such permanent
global Note as shown on the records of the Depositary unless the Depositary has
reason to believe that it will not receive payment on the Interest Payment
Date. Payments by participants to owners of beneficial interests in a permanent
global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
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No permanent global Note described above may be transferred except as a whole
by the Depositary for such permanent global Note to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary.
A permanent global Note representing Book-Entry Notes is exchangeable for
definitive Notes registered in the name of, and a transfer of a permanent
global Note may be registered to, any Person other than the Depositary or its
nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such permanent global Note or if at any time the
Depositary ceases to be a clearing agency registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Company in its sole discretion determines that such permanent
global Note shall be exchangeable for definitive Notes in registered form;
or
(c) any event shall have happened and be continuing that constitutes or,
after notice or lapse of time, or both, would constitute an Event of
Default with respect to the Notes.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence shall be exchangeable in whole for definitive Notes in registered
form, of like tenor and of an equal aggregate principal amount, in
denominations of U.S. $100,000 and integral multiples of U.S. $1,000 in excess
thereof. Such definitive Notes shall be registered in the name or names of such
person or persons as the Depositary shall instruct the Trustee. It is expected
that such instructions may be based upon directions received by the Depositary
from its participants with respect to ownership of beneficial interests in such
permanent global Note.
Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the Holders thereof for any purpose
under the Indenture, and no permanent global Note representing Book-Entry Notes
shall be exchangeable, except for another permanent global Note of like
denomination and tenor to be registered in the name of the Depositary or its
nominee. Accordingly, each person owning a beneficial interest in such
permanent global Note must rely on the procedures of the Depositary and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a Holder under
the Indenture.
The Indenture provides that the Depositary, as a Holder, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a
Holder is entitled to give or take under the Indenture. The Company understands
that, under existing industry practices, in the event that the Company requests
any action of Holders or an owner of a beneficial interest in such permanent
global Note desires to give or take any action that a Holder is entitled to
give or take under the Indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations,
and certain other organizations, some of whom (or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial
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relationship with a participant, either directly or indirectly. The Rules
applicable to the Depositary and its participants are on file with the
Securities and Exchange Commission.
REGARDING THE PAYING AGENT AND TRUSTEE
Morgan Guaranty Trust Company of New York, the Paying Agent and the Trustee
under the Indenture, participates with other banks under a Revolving Credit
Facility Agreement dated as of June 19, 1992 with the Company, under which the
Company can borrow up to $300 million. On the date hereof, no borrowings were
outstanding under the Revolving Credit Facility Agreement.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms of the Distribution Agreement, dated January 14, 1994
(the "Distribution Agreement"), the Notes are being offered on a continuing
basis by the Company through Goldman, Sachs & Co. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Agents"), who have
agreed to use reasonable efforts to solicit purchases of the Notes. The Company
will have the sole right to accept offers to purchase Notes and may reject any
proposed purchase of Notes in whole or in part. The Agents shall have the
right, in their discretion reasonably exercised, to reject any offer to
purchase Notes, in whole or in part. The Company will pay the Agents a
commission of from .125% to .750% of the principal amount of Notes, depending
upon maturity, for sales made through them as Agents.
The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page of this Prospectus Supplement in the case of any
such principal transaction in which no other discount is agreed. Such Notes may
be resold at prevailing market prices, or at prices related thereto, at the
time of such resale, as determined by the Agents. The Company reserves the
right to sell Notes directly on its own behalf. No commission will be payable
on any Notes sold directly by the Company.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer may include all or part of the discount to be received
from the Company. Unless otherwise indicated in the applicable Pricing
Supplement, any Note sold to an Agent as principal will be purchased by such
Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Act. The Company has agreed to reimburse the Agents for
certain expenses.
The Agents may sell Notes to or through dealers who may resell to investors,
and the Agents may reallow all or part of their discount or commission to such
dealers. Such dealers may be deemed to be "underwriters" within the meaning of
the Act. Unless otherwise indicated in the applicable Pricing Supplement,
payment of the purchase price of Notes will be required to be made in
immediately available funds in The City of New York.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
John L. Weinberg is a director of the Company and also serves as a member of
the Asset/Liability Committee and the Human Resources Committee of the
Company's Board of Directors. He was Senior
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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 Goldman Sachs Group, L.P. In July 1991, he became
Senior Chairman of Goldman, Sachs & Co. In addition, certain of the
underwriters or agents and their associates may be customers of, engage in
transactions with, and perform services for the Company in the ordinary course
of business.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Stites &
Harbison, Louisville, Kentucky, and for the Agents by Sullivan & Cromwell, New
York, New York. In giving their opinion, Stites & Harbison will rely on
Sullivan & Cromwell as to matters of New York law. The opinions of Stites &
Harbison and Sullivan & Cromwell will be conditioned upon, and subject to,
certain assumptions as to future actions required to be taken in connection
with the issuance and sale of the Notes and as to other events that may affect
the validity of the Notes but which cannot be ascertained on the date of such
opinions.
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$400,000,000
LOGO OF CAPITAL HOLDING
DEBT SECURITIES
----------------
The Company may from time to time offer Debt Securities consisting of
debentures, notes, and/or other unsecured evidences of indebtedness in one or
more series at an aggregate initial public offering price not to exceed
$400,000,000 or its equivalent in any other currency or composite currency. The
Debt Securities may be offered as separate series in amounts, at prices, and on
terms to be determined at the time of sale. The accompanying Prospectus
Supplement sets forth with regard to the series of Debt Securities in respect
of which this Prospectus is being delivered the title, aggregate principal
amount, denominations (which may be in United States dollars, in any other
currency, or in a composite currency), maturity, rate, if any (which may be
fixed or variable), time of payment of any interest, any terms for redemption
at the option of the Company or the holder, any terms for sinking fund
payments, any listing on a securities exchange, the initial public offering
price, and any other terms in connection with the offering and sale of such
series of Debt Securities. All or a portion of the Debt Securities of a series
may be issuable in permanent global form which will be exchangeable, subject to
certain restrictions set forth herein, into definitive Debt Securities.
The Company may sell Debt Securities to or through underwriters, and also may
sell Debt Securities directly to other purchasers or through agents. Such
underwriters may include Goldman, Sachs & Co. or may be a group of underwriters
represented by firms which may include Goldman, Sachs & Co. Goldman, Sachs &
Co. and other persons may also act as agents. The accompanying Prospectus
Supplement sets forth the names of any underwriters or agents involved in the
sale of the series of Debt Securities in respect of which this Prospectus is
being delivered, the principal amounts, if any, to be purchased by
underwriters, and the compensation, if any, of such underwriters or agents.
----------------
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.
----------------
GOLDMAN, SACHS & CO.
----------------
The date of this Prospectus is January 12, 1994.
<PAGE>
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 has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Debt Securities. 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 and the Debt Securities.
The Company 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 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 the Company 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.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the SEC (File No. 1-6701)
under the Exchange Act, are incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1992, as amended by Form 10-K/A-1 (which incorporates by reference
certain portions of the 1992 Annual Report to Shareholders and the Proxy
Statement for the Annual Meeting of Shareholders held on May 5, 1993);
(b) the Company's Current Report on Form 8-K dated February 17, 1993;
(c) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1993, as amended by Form 10-Q/A filed on June 22, 1993 and Form
10-Q/A-2 filed on June 24, 1993;
(d) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993;
(e) the Company's Current Report on Form 8-K dated July 1, 1993;
(f) the Company's Current Report on Form 8-K dated August 31, 1993; and
(g) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
All documents filed by the Company 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.
The Company 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.
2
<PAGE>
CAPITAL HOLDING CORPORATION
Capital Holding Corporation (the "Company") is a diversified insurance and
financial services holding company. The Company provides its subsidiaries with
general management support, including data processing, legal, and financial
services. The Company 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 Company 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 the Company 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 (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. Such
representatives receive compensation from sales commissions, and from renewal
and service commissions. The compensation arrangement is designed to reward
representatives who not only sell new policies, but who also effectively
maintain and service in-force business to meet Company sales and persistency
objectives.
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 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 and its related companies, which were
acquired in January 1993, market products to service personnel on military
bases through 700 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 the Company'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 the
3
<PAGE>
Company'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 index-guaranteed investment contracts (GICs) and funding
agreements. Fixed and variable annuity contracts, individual retirement
accounts and immediate life annuities (including structured settlements) are
distributed to retail markets through financial planners, securities brokerage
firms, 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.
In the course of its management of the insurance-related investment
portfolios, Accumulation and Investment Group engages in commercial mortgage
lending. The commercial mortgage lending practice is that substantially all
originations are first mortgage loans with maximum loan-to-value ratios of 75%.
The Company requires a minimum debt service coverage against existing cash
flows of 1.2 times. At the time of the origination of a mortgage loan, a
personal inspection of the collateral and research concerning the borrower and
the market are undertaken. In addition, new mortgage loans require engineering
and environmental studies. Currently, multi-family apartments, credit-anchored
shopping centers and industrial facilities are preferred as projects for
mortgage loans. Mortgage loans are not presently offered on projects secured by
hotels, farms, raw land, unanchored shopping centers and special purpose type
properties.
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
and insurance premium financing loans. Deposit products include retail and
institutional certificates of deposit, money market deposit accounts, and
individual retirement accounts (IRAs).
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 derogatory credit remarks; (iii) necessary income
qualification; and (iv) no rapid increase in outstanding debt or credit
availability.
Banking Group, as part of the asset/liability management process of its
business, monitors and projects changes in the level of assets due to customer
activity on outstanding and newly issued lines of credit or other loan
products. Projected changes in asset levels are monitored on a daily and weekly
basis and are used to determine the level of funding required during a
particular period. Banking Group has a policy of monitoring and managing the
amount of funding that matures during a particular period (weekly or monthly),
as well as managing the level of individual customer concentrations in the
portfolio.
4
<PAGE>
Banking Group accesses funds from a variety of sources with varying rate
structures and terms. This diversification of sources allows flexibility in
managing and ensures continuity of funding. Banking Group structures deposit
maturities (i) to fund current assets, and (ii) in the event of securitization
of assets, to comply with growth restrictions imposed by the banking laws. A
significant portion of Banking Group's deposits are short-term, which increases
the importance of monitoring and maintaining liquidity.
Banking Group analyzes the amount of current and future liquidity needs in
order to support its deposit portfolio and asset growth. To provide liquidity
for its existing deposit base as well as to satisfy short-term funding
requirements, Banking Group maintains committed lines of credit.
Corporate and Other
Corporate and Other includes activities of a general corporate nature, the
group and credit life and health and real estate results of Durham Corporation,
the operations of real estate development subsidiaries, debt service, realized
investment gains and losses net of related deferred acquisition cost
amortization, insurance subsidiaries' net investment income on equity in excess
of that which is needed to support their operations, a charge through net
investment income for 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, 1992 and 1991.
REVENUES
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31
----------------------
SEGMENT 1992 1991
- ------- ---------- ----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Agency Group:(1)
Life (includes premium equivalents)................... $ 637,521 $ 542,962
Health................................................ 74,095 69,337
Other product lines................................... 68,986 56,199
---------- ----------
Subtotal............................................ 780,602 668,498
Life premium equivalents.............................. (53,593) (45,161)
---------- ----------
Total Agency Group.................................. 727,009 623,337
Direct Response Group:
Life.................................................. 273,969 260,464
Health................................................ 197,790 209,655
Property and casualty................................. 158,603 160,652
Other product lines................................... 20,489 20,023
---------- ----------
Total Direct Response Group......................... 650,851 650,794
Banking Group........................................... 506,691 450,956
Accumulation and Investment Group....................... 852,550 913,532
Corporate and Other:(2)
Other................................................. 109,714 50,817
Realized investment gain (loss)....................... 6,477 (18,780)
---------- ----------
Total Corporate and Other........................... 116,191 32,037
---------- ----------
Consolidated...................................... $2,853,292 $2,670,656
========== ==========
</TABLE>
- --------
(1) Includes the operations of Durham Corporation, other than the group and
credit life and health and real estate results of Durham Life Insurance
Company, from the date of acquisition (November 14, 1991).
(2) Includes group and credit life and health and real estate results of Durham
Life Insurance Company from the date of acquisition (November 14, 1991).
The credit life and health operations of Durham Life Insurance Company were
sold in July 1992.
5
<PAGE>
INCOME BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------
SEGMENT 1992 1991
- ------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Agency Group:(1)
Life............................................... $ 183,112 $ 168,350
Health............................................. 2,579 1,232
Other product lines................................ 4,521 3,370
----------- -----------
Total Agency Group............................... 190,212 172,952
Direct Response Group:
Life............................................... 40,384 38,409
Health............................................. 43,183 35,329
Property and casualty.............................. 6,608 1,244
Other product lines................................ (5,673) (4,262)
----------- -----------
Total Direct Response Group...................... 84,502 70,720
Banking Group........................................ 93,502 73,231
Accumulation and Investment Group.................... 120,142 112,242
Corporate and Other:(2)
Other.............................................. (32,493) (56,334)
Realized investment loss, net of related amortiza-
tion.............................................. (3,838) (26,875)
----------- -----------
Total Corporate and Other........................ (36,331) (83,209)
----------- -----------
Consolidated................................... $452,027 $345,936
=========== ===========
</TABLE>
- --------
(1) Includes the operations of Durham Corporation, other than the group and
credit life and health and real estate results of Durham Life Insurance
Company, from the date of acquisition (November 14, 1991).
(2) Includes group and credit life and health and real estate results of Durham
Life Insurance Company from the date of acquisition (November 14, 1991).
The credit life and health operations of Durham Life Insurance Company were
sold in July 1992.
REGULATORY ENVIRONMENT
The business of the Company'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.
6
<PAGE>
"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 the Company'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 the Company'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.
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 the Company's insurance subsidiaries. Additionally, life insurance
companies face increasing competition from banks, mutual funds and other
financial entities for attracting investment funds.
The Company'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. Recently, other credit card issuers
have 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, FDNB and FDNCCB have generally retained the right to alter (i)
the periodic finance charge; (ii) the fees and other charges which will be
applicable from time to time to their respective unsecured credit accounts;
(iii) the minimum monthly payment required under the unsecured credit accounts;
and (iv) various other terms with respect to the unsecured credit accounts.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Debt
Securities offered hereby for general corporate purposes.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data presents the consolidated
results of operations of the Company 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." The Summary
Consolidated Financial Data for the nine-month periods ended September 30,
1993 and 1992, are unaudited and reflect all adjustments which are, in the
opinion of management, necessary to a fair presentation for the interim
periods. All such adjustments are of a normal recurring nature. The results of
operations for the nine-month period ended September 30, 1993 are not
necessarily indicative of the results to be expected for the full year ending
December 31, 1993.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ --------------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER COMMON AND COMMON EQUIVALENT SHARE AND RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CAPITAL HOLDING
CORPORATION
SUMMARY OF STATEMENTS OF
INCOME:
Premiums and Other
Income, Net........... $ 1,081,840 $ 1,038,211 $ 1,393,273 $ 1,209,572 $ 1,299,169 $ 1,083,018 $ 1,001,664
Net Investment Income.. 1,099,250 1,089,585 1,453,542 1,479,864 1,400,939 1,292,829 1,018,892
Realized Investment
Gain (Loss)........... (24,576) 6,632 6,477 (18,780) (122,799) 124,269 25,310
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenues......... 2,156,514 2,134,428 2,853,292 2,670,656 2,577,309 2,500,116 2,045,866
Total Benefits and
Expenses.............. 1,803,478 1,810,034 2,401,265 2,324,720 2,352,597 2,115,589 1,786,687
Federal Income Tax (1). 121,907 92,245 129,531 95,704 58,519 108,819 69,315
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before
Cumulative Effect of
Change in Accounting
Principle............. 231,129 232,149 322,496 250,232 166,193 275,708 189,864
Cumulative Effect of
Change in Accounting
Principle (2)......... -- -- -- -- -- (56,021) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income............. $ 231,129 $ 232,149 $ 322,496 $ 250,232 $ 166,193 $ 219,687 $ 189,864
=========== =========== =========== =========== =========== =========== ===========
SELECTED PER COMMON AND
COMMON EQUIVALENT SHARE
DATA: (3)
Income before
Cumulative Effect of
Change in Accounting
Principle............. $ 2.24 $ 2.26 $ 3.14 $ 2.66 $ 1.70 $ 2.93 $ 2.00
Cumulative Effect of
Change in Accounting
Principle (2)......... -- -- -- -- -- (0.62) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income............. $ 2.24 $ 2.26 $ 3.14 $ 2.66 $ 1.70 $ 2.31 $ 2.00
----------- ----------- ----------- ----------- ----------- ----------- -----------
SELECTED DATA FROM
STATEMENTS OF FINANCIAL
CONDITION:
Cash and Investments... $18,462,960 $16,395,135 $16,791,345 $15,661,663 $13,922,117 $12,628,998 $10,922,041
Total Assets........... 23,227,943 19,988,238 20,588,264 18,873,028 16,668,545 14,970,015 12,963,268
Total Policy
Liabilities........... 15,241,595 13,674,344 13,928,769 12,877,486 11,965,244 10,486,216 8,931,730
Long-Term Debt......... 589,268 589,320 589,320 611,245 386,247 330,299 262,574
Shareholders' Equity... 2,430,581 2,073,070 2,185,927 1,930,924 1,552,515 1,516,269 1,257,549
RATIO OF EARNINGS TO
FIXED CHARGES (4)...... 6.7 5.8 6.0 4.7 4.3 7.5 5.9
RATIO OF EARNINGS TO
FIXED CHARGES,
INCLUDING INTEREST ON
BANKING DEPOSITS (5)... 4.5 3.7 3.9 2.9 2.4 3.2 3.1
RATIO OF EARNINGS TO
FIXED CHARGES,
INCLUDING INTEREST ON
BANKING DEPOSITS,
ANNUITIES AND OTHER
FINANCIAL PRODUCTS (6). 1.6 1.5 1.5 1.4 1.3 1.5 1.5
</TABLE>
- -------
(1) During the third quarter of 1993, the Company revised its estimated annual
effective tax rate from 29.5 percent to 30.5 percent to reflect a change
in the federal statutory income tax rate from 34 percent to 35 percent.
This change was a result of the Omnibus Budget Reconciliation Act of 1993,
enacted on August 10, 1993 and retroactive to January 1, 1993. The effect
of this change was to increase income tax expense for the nine-month
period ended September 30, 1993 by $15.5 million.
(2) Effective January 1, 1989, the Company changed its method of accounting
for postemployment life and health benefits from the "pay-as-you-go"
method of 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 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,
earnings have been calculated by adding to pretax income from continuing
operations the amount of fixed charges reduced for capitalized interest
and increased for amortization of previously capitalized interest. Fixed
charges consists of interest on debt and a portion of net rental expense,
approximately one-third, deemed to represent interest.
1990, 1989 and 1988 ratios of earnings to fixed charges have been restated
from ratios presented in previous registration statements of the Company to
reflect a reclassification of interest expense to conform to 1992
presentation. These reclassifications and restatements had no effect on
previously reported net income.
(5) Computation of this ratio is the same as described in note (4) above
except that fixed charges also includes interest on banking deposits.
(6) Computation of this ratio is the same as described in note (4) above
except that fixed charges also includes interest on banking deposits,
annuities and other financial products.
8
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in that Prospectus Supplement. The term
"Debt Securities," as used in this caption, refers to all Securities issued
under the Indenture (as defined below) and includes any Offered Debt
Securities.
The Offered Debt Securities are to be issued under an Indenture dated as of
January 1, 1994 (the "Indenture"), between the Company and Morgan Guaranty
Trust Company of New York, as Trustee (the "Trustee"), a copy of which is filed
as an exhibit to the Registration Statement. The following summaries of certain
provisions of the Debt Securities and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture, including the definitions therein of
certain terms. Wherever particular provisions or defined terms of the Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference. Section or Article references are to the Indenture. Capitalized
terms not otherwise defined herein shall have the meaning given them in the
Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company and will
rank equally and ratably with other unsecured and unsubordinated indebtedness
of the Company. The Indenture does not limit the amount of debentures, notes,
or other evidences of indebtedness that may be issued under it. Debt Securities
may be issued from time to time in one or more series up to the aggregate
amount authorized by the Company.
Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms and
additional provisions, where applicable, of the Offered Debt Securities: (1)
the title of the Offered Debt Securities; (2) any limit on their aggregate
principal amount; (3) the Person to whom any interest on any Offered Debt
Security shall be payable if other than to the Person in whose name the Offered
Debt Security is registered at the Regular Record Date; (4) the price(s)
(expressed as a percentage of the aggregate principal amount thereof) at which
they will be issued; (5) the date(s), or the methods by which to determine such
date(s), on which the principal of the Offered Debt Securities will be payable;
(6) the rate(s) (which may be fixed or variable) at which they will bear
interest, if any, and the date from which such interest will accrue and the
dates on which such interest will be payable and the Regular Record Dates for
such Interest Payment Dates; (7) the Place(s) of Payment for the principal,
premium, if any, and interest on the Offered Debt Securities; (8) any mandatory
or optional sinking fund or analogous provisions; (9) any index used to
determine the amount of payments of principal of and premium, if any, and
interest; (10) the date, if any, after which, the terms upon which and the
price(s) at which the Company may redeem them at its option; (11) the currency
or currencies (including composite currencies) of payment of principal of and
premium, if any, and interest thereon if other than U.S. dollars; (12) whether
the Indenture provisions relating to defeasance and/or covenant defeasance will
apply to them; (13) whether they are to be issuable in the form of one or more
Global Securities; (14) the denominations of the Offered Debt Securities, if
other than in denominations of $1,000 and any integral multiple thereof; (15)
the portion of
the principal (if other than all principal Outstanding) due upon a declaration
of acceleration of the Offered Debt Security; and (16) any other terms.
9
<PAGE>
Unless otherwise indicated in the Prospectus Supplement, principal (and
premium, if any) and interest, if any, on the Offered Debt Securities will be
payable, and transfers of the Offered Debt Securities will be registrable, at
the Corporate Trust Office of the Trustee; provided that, at the Company's
option, interest may be paid by (i) check mailed to the address of the Person
entitled thereto as it appears in the Security Register or (ii) wire transfer
to an account maintained by such Person located in the United States. (Sections
301, 305, 307, 308 and 1002) Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any interest due on any Offered Debt Security
will be payable to the Person in whose name such Offered Debt Security is
registered at the close of business on the Regular Record Date for such
interest. (Sections 307 and 308)
Unless the Prospectus Supplement otherwise indicates, the Offered Debt
Securities will be issued in registered form without coupons in denominations
of $1,000 and any integral multiple thereof. (Section 302) No service charge
will be made for any registration of transfer or exchange of Offered Debt
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge imposed in connection therewith, other
than for certain exchanges not involving any transfer. (Section 305) The
Indenture provides that Debt Securities may be issuable in the form of one or
more Global Securities. (Sections 205, 301 and 305) See "Global Securities."
Debt Securities may be issued as Original Issue Discount Securities to be
offered and sold at a substantial discount from their stated principal amount.
Special United States federal income tax and other considerations applicable to
Offered Debt Securities issued at an original issue discount, including
Original Issue Discount Securities, and special United States federal income
tax considerations applicable to any Offered Debt Securities that are
denominated in other than U.S. dollars are described under "United States
Taxation."
GLOBAL SECURITIES
If any Offered Debt Securities are issuable in the form of one or more Global
Securities, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
Offered Debt Security issuable in the form of one or more Global Securities may
exchange such interests for Offered Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. (Sections
101, 301 and 305) Principal of and any premium and interest on Offered Debt
Securities issuable in the form of one or more Global Securities will be
payable in the manner described in the applicable Prospectus Supplement.
RESTRICTIVE COVENANTS
Limitations on Liens on Restricted Subsidiaries' Capital Stock
The Company will not, and it will not permit any Restricted Subsidiary at any
time directly or indirectly to, create, assume, incur, or permit to exist any
indebtedness secured by a pledge, lien, or other encumbrance on the capital
stock of any Restricted Subsidiary without making effective provision whereby
the Debt Securities then outstanding (and, if the Company so elects, any other
indebtedness ranking on a parity with the Debt Securities) shall be equally and
ratably secured with such secured indebtedness so long as such other
indebtedness shall be secured; provided, however, that this covenant shall not
be applicable to liens (as defined in Section 1007) of (i) taxes or assessments
or governmental charges or levies not then due and delinquent or the validity
of which is being contested in good faith or which is less than $5,000,000,
(ii) liens created by or resulting from any litigation or legal proceeding
being contested in good faith or involving claims of less than $5,000,000, or
(iii) deposits to secure (or in lieu of) surety, stay, appeals or custom bonds.
(Section 1007)
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Limitations on Sales of Restricted Subsidiaries' Capital Stock
The Company is restricted from disposing of in any way any shares of capital
stock of a Restricted Subsidiary (other than for directors' qualifying shares
or dispositions to a Subsidiary), and Restricted Subsidiaries are restricted
from disposing of in any way any shares of capital stock of any other
Restricted Subsidiary (other than for directors' qualifying shares or
dispositions to the Company or to a Subsidiary), except the entire capital
stock of such Restricted Subsidiary owned by the Company for a consideration
which, in the opinion of the Board of Directors, is at least equal to the fair
value thereof. (Section 1008) Unless otherwise specified in the Prospectus
Supplement, the term "Restricted Subsidiary" means any Subsidiary of the
Company with assets greater than or equal to 5% of all assets of the Company
and its Subsidiaries (excluding the assets of First Deposit Corporation and its
subsidiaries), computed and consolidated in accordance with generally accepted
accounting principles. The term "Restricted Subsidiary" does not include First
Deposit Corporation (a subsidiary of the Company) or any of its subsidiaries.
(Section 101)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Indenture, that the
Company may elect either:
(a) to defease and be discharged from any and all obligations with
respect to Outstanding Debt Securities of such series (except for the
obligations to register the transfer or exchange of such Debt Securities;
to replace temporary or mutilated, destroyed, lost, or stolen Debt
Securities; to maintain an office or agency in respect of the Debt
Securities; and to hold moneys for payment in trust) ("defeasance"); or
(b)(1) to be released from its obligations with respect to the
Outstanding Debt Securities of such series under Sections 801(3)
(limitation on creation of liens in connection with mergers or
consolidations of the Company, etc.), 1006 (payment of taxes and other
claims), 1007 (limitation on creation of liens on capital stock of
Restricted Subsidiaries), and 1008 (limitation on sales of capital stock of
Restricted Subsidiaries) of the Indenture; and (2) that the occurrence of
an event specified in Section 501(4) (with respect to Sections 801(3),
1007, and 1008) or Section 501(5), as described in clauses (d) and (e)
under "Events of Default," shall not be deemed to be an Event of Default
under the Indenture with respect to such Debt Securities ("covenant
defeasance"),
upon the irrevocable deposit with the Trustee (or other qualifying trustee), in
trust for such purpose, of money and/or U.S. Government Obligations (as
defined) that through the payment of principal and interest in accordance with
their terms will provide money in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of (and premium, if any) and interest on such series of Debt
Securities, and any mandatory sinking funds or analogous payments thereon, on
the scheduled due dates therefor.
Such a trust may be established only if, among other things, the Company has
delivered to the Trustee an opinion of counsel (as specified in the Indenture)
to the effect that the Holders of such series of Debt Securities will not
recognize income, gain, or loss for federal income tax purposes as a result of
the deposit, defeasance (and discharge of such series of Debt Securities) or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner, and at the same times as would have been the case
if such deposit, defeasance (and discharge of such series of Debt Securities)
or covenant defeasance had not occurred. Such opinion, in the case of
defeasance under clause (a) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable federal income tax law
occurring after the date of the Indenture. The Prospectus Supplement may
further describe the provisions, if any, permitting such defeasance and/or
covenant defeasance with respect to the Debt Securities of a particular series.
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In the event the Company exercises its option to omit compliance with certain
covenants of the Indenture with respect to any series of Debt Securities and
the Debt Securities of such series are declared due and payable because of the
occurrence of any Event of Default, the amount of money and U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts due
on the Debt Securities of such series at the time of their Stated Maturity but
may not be sufficient to pay amounts due on the Debt Securities of such series
at the time of the acceleration resulting from such Event of Default. However,
the Company shall remain liable for such payments.
The Prospectus Supplement will state if the defeasance and/or the covenant
defeasance provisions will apply to the Offered Debt Securities. (Article
Thirteen)
EVENTS OF DEFAULT
The following are Events of Default with respect to Debt Securities of any
series: (a) failure to pay any interest on any Debt Security of that series
when due, continued for 30 days; (b) failure to pay any principal of or
premium, if any, on any Debt Security of that series when due; (c) failure to
deposit any sinking fund payment, when due, in respect of any Debt Security of
that series; (d) default in the performance, or breach, of any other covenant
or warranty of the Company in the Indenture (other than a covenant or warranty
included solely for the benefit of any series of Debt Securities other than
that series), continued for 60 days after written notice as provided in the
Indenture; (e) default in and acceleration of any indebtedness for money
borrowed by the Company or any Restricted Subsidiary in excess of an aggregate
principal amount of $10,000,000 under the terms of the instrument under which
such indebtedness is issued or secured, if such acceleration is not rescinded
or annulled within 10 days after written notice as provided in the Indenture;
(f) certain events in bankruptcy, insolvency, or reorganization; and (g) any
other Event of Default provided with respect to Debt Securities of that series.
(Section 501)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in principal amount of the Outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Debt
Securities of that series to be due and payable immediately. At any time after
a declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained by the Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502)
The Trustee will be under no obligation, subject to the provisions of the
Indenture relating to the duties of the Trustee in the case an Event of Default
shall occur and be continuing, to exercise any of its rights or powers under
the Indenture at the request or direction of any of the Holders of the Debt
Securities, unless such Holder shall have offered to the Trustee reasonable
indemnity. (Sections 601 and 603) Subject to such indemnification provisions,
the Holders of a majority in principal amount of the Outstanding Debt
Securities of any series affected will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512)
No Holder of any Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written notice of
a continuing Event of Default with respect to Debt Securities of that series
and unless also the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the
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Holders of a majority in aggregate principal amount of the Outstanding Debt
Securities of that series a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days. (Section 507) However,
the Holder of any Debt Security will have an absolute and unconditional right
to receive payment of the principal of (and premium, if any) and interest on
such Debt Security on or after the due dates expressed in such Debt Security
and to institute suit for the enforcement of any such payment. (Section 508)
The Company will be required to furnish to the Trustee within 120 days after
the end of each fiscal year of the Company a statement as to any default in the
performance and observance of any of the terms, provisions and conditions of
the Indenture or any Board Resolution adopted with respect to the issuance of
any series of Debt Securities under Section 301 of the Indenture. (Section
1004)
MODIFICATION AND WAIVER
The Company and the Trustee may modify or amend the Indenture with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of each series affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder of each affected Outstanding Debt Security
affected thereby: (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debt Security; (b) reduce the
principal amount of, or the premium (if any) or interest payable upon the
redemption of any Debt Security; (c) change the Place of Payment where, or the
coin or currency in which, any Debt Security or the premium (if any) or
interest thereon is payable; (d) reduce the amount of principal of an Original
Issue Discount Debt Security payable upon acceleration of the Maturity thereof;
(e) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security on or after the Stated Maturity or Redemption
Date thereof; or (f) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of whose Holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Section
902)
The Company may omit in any particular instance to comply with certain
restrictive provisions set forth in the Indenture (Sections 1004 to 1008,
inclusive) with respect to the Debt Securities of any series if before the time
for such compliance the Holders of at least a majority in principal amount of
the Outstanding Debt Securities of such series shall by the Act of such Holders
either expressly waive such compliance in such instance or generally waive
compliance with such term, provision, covenant or condition. (Section 1009) The
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
that series waive any past default under the Indenture with respect to that
series, except a default in the payment of the principal of (or premium, if
any) or interest on any Debt Security of that series or in respect of a
provision that under the Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series
affected. (Section 513)
The Indenture provides that, in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver
thereunder: (a) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof to such date; and (b) the principal amount
of a Debt Security denominated in other than U.S. dollars shall be the U.S.
dollar equivalent, determined in the manner contemplated by Section 301 of the
Indenture on the date of original issuance of such Debt Security, of the
principal amount of such Debt Security (or, in the case of an Original Issue
Discount Debt Security, the U.S. dollar equivalent on the date of original
issuance of such Debt Security of that amount determined as provided in clause
(a) above of such Debt Security). (Section 101)
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CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Indenture provides that the Company, without the consent of any Holders
of Outstanding Debt Securities, may (i) consolidate or merge with or into any
Person, or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, or permit any Person to consolidate with or merge
into the Company, or (ii) permit any Person to convey, transfer or lease its
properties and assets substantially as an entirety to the Company
(collectively, the "Transactions"), provided that in any such case: (a) the
successor Person, in connection with any Transaction, is organized under the
laws of any United States jurisdiction and assumes the Company's obligations on
the Debt Securities and under the Indenture; (b) after giving effect to a
Transaction, no Event of Default (and no event which, after notice or lapse of
time or both, would become an Event of Default) shall have happened and be
continuing; (c) if, as a result of any Transaction, properties or assets of the
Company would become subject to a mortgage, pledge, lien, security interest or
other encumbrance which would not be permitted by the Indenture, the Company or
such successor Person, as the case may be, shall take steps as shall be
necessary effectively to secure the Debt Securities equally and ratably with
(or prior to) all indebtedness secured thereby; and (d) certain other
conditions, with respect to the Transactions described in clause (i) of this
paragraph, are met. (Article Eight)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEE
Under the Indenture, Morgan Guaranty Trust Company of New York, as Trustee,
any successor Trustee thereto under the Indenture, or any other Trustee under
the Indenture, is required to satisfy certain continuing eligibility criteria,
including the maintenance of certain ratings assigned to the long-term debt of
any such Trustee (or the long-term debt of the holding company of which such
Trustee is a subsidiary if no such ratings for such Trustee are available), in
order to be and remain a trustee under the Indenture. (Section 609) No
resignation or removal of the Trustee and appointment of a successor Trustee
will be effective until the acceptance of appointment by a successor Trustee
pursuant to the provisions of the Indenture. (Sections 610 and 611)
On January 4, 1994, J. P. Morgan & Co. Incorporated, the parent company of
Morgan Guaranty Trust Company of New York, announced that it had reached an
agreement in principle to sell substantially all of the assets and liabilities
of its U.S. domestic corporate trust business to First Bank, N.A. ("First
Bank"), a unit of First Bank System, Inc. in Minneapolis, Minnesota. The sale
is expected to close in the second quarter of 1994, subject to regulatory
approvals. First Bank satisfies the eligibility criteria, described above, in
order to become the successor Trustee to Morgan Guaranty Trust Company of New
York. If and when the agreement in principle is successfully consummated, it is
anticipated that First Bank will become the successor Trustee so long as it
continues to satisfy such eligibility criteria.
Morgan Guaranty Trust Company of New York, the Trustee under the Indenture,
participates with other banks under a Revolving Credit Facility Agreement (the
"Revolving Credit Facility") dated as of June 19, 1992 with the Company, under
which the Company can borrow up to $300,000,000. On the date hereof, no
borrowings were outstanding under the Revolving Credit Facility.
UNITED STATES TAXATION
The following is a summary of the principal United States federal income tax
consequences of the ownership of Debt Securities. It deals only with Debt
Securities held as capital assets within the meaning of the Internal Revenue
Code of 1986, as amended (the "Code") by initial purchasers, other than special
classes of holders such as dealers in securities or currencies, life insurance
companies, persons holding Debt Securities 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. This summary does not discuss all of the tax
consequences that may be relevant to purchasers of Debt Securities.
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The discussion of original issue discount is based in part on regulations,
which are not yet effective (the "Proposed Regulations"), issued under the
Code. While the Proposed Regulations are proposed to be effective for debt
instruments issued on or after sixty days after final regulations are adopted,
the Proposed Regulations are currently the best indication of the views of the
Internal Revenue Service (the "Service") with respect to the federal income tax
treatment of debt instruments having original issue discount.
Prospective purchasers of Debt Securities should consult their own tax
advisors concerning the effective date of the Proposed Regulations, the extent
to which the Proposed Regulations may be relied upon before they become
effective, and the general consequences, in their particular circumstances, of
the ownership of Debt Securities under the Code and the laws of any other
taxing jurisdiction.
PAYMENTS OF INTEREST
Interest on a Debt Security, whether payable in U.S. dollars or a foreign
currency, other than interest on a Discount Debt Security (as defined below
under "Original Issue Discount") that is not, under the Code, "fixed periodic
interest" or, under the Proposed Regulations, "qualified stated interest" (each
as defined below under "Original Issue Discount--General"), will be taxable to
a beneficial owner who or which is (i) a citizen or resident of the United
States, (ii) a domestic corporation or (iii) a person otherwise subject to
United States federal income taxation on a net income basis in respect of the
Debt Security (a "United States Holder") as ordinary income at the time it is
received or accrued, depending on the holder's method of accounting for tax
purposes.
If an interest payment is denominated in or determined by reference to a
foreign currency, the amount of income recognized by a cash basis United States
Holder will be the U.S. dollar value of the interest payment, based on the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars. Accrual basis United States
Holders may determine the amount of income recognized with respect to such
interest payments in accordance with either of two methods.
Under the first method, the amount of income recognized will be based on the
average exchange rate in effect during the interest accrual period (or, with
respect to an accrual period that spans two taxable years, the partial period
within the taxable year). Upon receipt of an interest payment (including a
payment attributable to accrued but unpaid interest upon the sale or retirement
of a Debt Security) determined by reference to a foreign currency, an accrual
basis United States Holder will recognize ordinary income or loss measured by
the difference between such average exchange rate and the exchange rate in
effect on the date of receipt, regardless of whether the payment is in fact
converted into U.S. dollars. Under the second method, an accrual basis United
States Holder may elect to translate interest income into U.S. dollars at the
exchange rate in effect on the last day of the accrual period or, in the case
of an accrual period that spans two taxable years, at the exchange rate in
effect on the last day of the partial period within the taxable year.
Additionally, if receipt or payment of interest occurs within 5 business days
of the last day of the accrual period or, in the case of a partial accrual
period, the last day of the taxable year, an electing accrual basis United
States Holder may instead translate such accrued interest into U.S. dollars at
the exchange rate in effect on the day of actual receipt or payment. Any such
election will apply to all foreign currency debt instruments held by the United
States Holder at the beginning of the first taxable year to which the election
applies or thereafter acquired by the United States Holder, and will be
irrevocable without the consent of the Service.
ORIGINAL ISSUE DISCOUNT
General. A Debt Security will be treated as issued at an original issue
discount (a "Discount Debt Security") if the excess of the Debt Security's
"stated redemption price at maturity" over its issue price equals or exceeds
1/4 of one percent of such Debt Security's stated redemption price at maturity
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multiplied by the number of complete years to its maturity from the issue date.
Generally, the issue price of a Debt Security will be the first price at which
a substantial amount of the Debt Securities are sold to the public. Under the
Code, the "stated redemption price at maturity" of a Debt Security is the total
of all payments provided by the Debt Security other than payments of interest
based on a fixed rate unconditionally payable at fixed periodic intervals of
one year or less during the entire term of the Debt Security ("fixed periodic
interest"). Under the Proposed Regulations, the "stated redemption price at
maturity" of a Debt Security is the total of all payments provided by the Debt
Security that are not payments of "qualified stated interest". Under the
Proposed Regulations, "qualified stated interest" is generally stated interest
that is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate and, for
this purpose, interest is considered payable at a single fixed rate only if the
rate appropriately takes into account the length of the interval between stated
interest payments. The Proposed Regulations provide special rules for Variable
Rate Debt Securities which are described below under "Original Issue Discount--
Variable Rate Debt Securities".
If any excess of a Debt Security's stated redemption price at maturity over
its issue price is not sufficient to cause the Debt Security to be a Discount
Debt Security under the rules described above, then such excess constitutes "de
minimis original issue discount". Under the Proposed Regulations, unless the
election described below under "Election to Treat All Interest as Original
Issue Discount" is made, a United States Holder of a Debt Security with de
minimis original issue discount must include such de minimis original issue
discount in income as stated principal payments on the Debt Security are made.
The includible amount with respect to each such principal payment equals the
product of the total amount of the Debt Security's de minimis original issue
discount and a fraction, the numerator of which is the amount of the principal
payment made and the denominator of which is the stated principal amount of the
Debt Security.
The Code provides rules that require United States Holders of Discount Debt
Securities having a maturity of more than one year from their date of issue to
include original issue discount in income before the receipt of cash
attributable to such income. The amount of original issue discount includible
in income by a United States Holder of a Discount Debt Security is the sum of
the "daily portions" of original issue discount with respect to the Discount
Debt Security for each day during the taxable year in which the United States
Holder holds such Discount Debt Security ("accrued original issue discount").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the original issue discount allocable to that
accrual period. Under the Code, until final or temporary regulations become
effective, an accrual period is any six-month period (or shorter period from
the issue date of such Debt Security) which ends on a day in the calendar year
corresponding to the maturity date of the Debt Security or the date six months
before such date. The Proposed Regulations would allow the accrual periods with
respect to a Debt Security to be any set of periods (which may be of varying
lengths) selected by the United States Holder as long as (i) no accrual period
is longer than one year and (ii) each scheduled payment of interest or
principal on the Debt Security occurs at the end of an accrual period. The
amount of original issue discount allocable to an accrual period equals the
excess of (a) the product of the Discount Debt Security's adjusted issue price
at the beginning of the accrual period and the Discount Debt Security's yield
to maturity (determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the accrual period) over
(b) the sum of any payments of fixed periodic interest made on the Debt
Security during (or under the Proposed Regulations, of qualified stated
interest on the Discount Debt Security allocable to) the accrual period. Under
the Code, the "adjusted issue price" of a Discount Debt Security at the
beginning or an accrual period is the sum of the issue price of the Discount
Debt Security plus the adjustments prescribed by the Code for all periods
before the first day of such accrual period (e.g., increased by the amount of
original issue discount allocable to prior accrual periods and decreased by the
amount of all payments in prior accrual periods which were not fixed periodic
interest payments). The Proposed Regulations provide that the "adjusted issue
price" of the Discount Debt Security at the
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beginning of any accrual period is (x) the sum of the issue price of such
Discount Debt Security, the accrued original issue discount for each prior
accrual period, and the amount of any qualified stated interest on the Debt
Security that has accrued prior to the beginning of the accrual period but is
not payable until a later date, less (y) any prior payments on the Discount
Debt Security that were not qualified stated interest payments. The Proposed
Regulations clarify that, for purposes of determining the amount of original
issue discount allocable to an accrual period, if an interval between payments
of qualified stated interest on a Debt Security contains more than one accrual
period, then the amount of qualified stated interest payable at the end of such
interval shall be allocated pro rata (on the basis of their relative lengths)
between the accrual periods contained in the interval.
The Code provides no specific guidance on the method to be used in
determining the amount of original issue discount allocable to a short initial
accrual period. The Proposed Regulations contain certain special rules that
generally allow any reasonable method to be used in determining the amount of
original issue discount allocable to a short initial accrual period (if all
other accrual periods are of equal length) and require that the amount of
original issue discount allocable to the final accrual period equal the excess
of the amount payable at the maturity of the Debt Security (other than any
payment of qualified stated interest) over the Debt Security's adjusted issue
price as of the beginning of such accrual period.
Under the Code and the Proposed Regulations, United States Holders generally
will have to include in income increasingly greater amounts of original issue
discount over the life of the Debt Security.
Acquisition Premium. Under the Proposed Regulations, a United States Holder
that purchases a Debt Security, including a purchase at its original issuance,
for an amount in excess of its adjusted issued price (any such excess being
"acquisition premium") and that does not make the election described below
under "Election to Treat All Interest as Original Issue Discount" is permitted
to reduce the daily portions of original issue discount by a fraction, the
numerator of which is the excess of the United States Holder's adjusted basis
in the Debt Security immediately after its purchase over the adjusted issue
price of the Debt Security, and the denominator of which is the excess of the
sum of all amounts payable on the Debt Security after the purchase date, other
than payments of qualified stated interest, over the Debt Security's adjusted
issue price.
Market Discount. Under the Code, a Debt Security, other than a Debt Security
that matures one year or less from the date of its issuance, will be treated as
issued at a market discount (a "Market Discount Debt Security") if (i) the
amount for which a United States Holder purchased the Debt Security is less
than the Debt Security's issue price (as determined above under "Original Issue
Discount--General") and (ii) the Debt Security's stated redemption price at
maturity or, in the case of a Discount Debt Security, the Debt Security's
"revised issue price", exceeds the basis of such Debt Security immediately
after the United States Holder purchased the Debt Security by at least 1/4 of
one percent of such Debt Security's stated redemption price at maturity or
revised issue price, as the case may be, multiplied by the number of complete
years to the Debt Security's maturity. If the excess, if any, referred to in
the preceding sentence is not sufficient to cause the Debt Security to be a
Market Discount Debt Security, then such excess constitutes "de minimis market
discount". For these purposes, the revised issue price of a Debt Security
equals its issue price, increased by the amount of any original issue discount
that has accrued on the Debt Security.
Any gain recognized on the maturity or disposition of a Market Discount Debt
Security will be treated as ordinary income to the extent that such gain does
not exceed the accrued market discount on such Debt Security. Alternatively, a
United States Holder of a Market Discount Debt Security may elect to include
market discount in income currently over the life of the Debt Security. Such an
election shall apply to all debt instruments with market discount acquired by
the electing United States Holder on or after the first day of the first
taxable year to which the election applies. This election shall apply,
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in addition to the taxable year for which it is made, to all subsequent taxable
years. This election may not be revoked without the consent of the Service.
Market discount on a Market Discount Debt Security will accrue on a straight-
line basis unless the United States Holder elects to accrue such market
discount on a constant yield to maturity basis. Such an election shall apply
only to the Debt Security with respect to which it is made and may not be
revoked without the consent of the Service. A United States Holder of a Market
Discount Debt Security who does not elect to include market discount in income
currently generally will be required to defer deductions for interest on
borrowings allocable to such Debt Security in an amount not exceeding the
accrued market discount on such Debt Security until the maturity or disposition
of such Debt Security.
Pre-Issuance Accrued Interest. The Proposed Regulations provide that if (i) a
portion of the initial purchase price of a Debt Security is attributable to
pre-issuance accrued interest, (ii) the first stated interest payment on the
Debt Security is to be made within one year of the Debt Security's issue date
and (iii) such payment will equal or exceed the amount of pre-issuance accrued
interest, then the United States Holder may elect to decrease the issue price
of the Debt Security by the amount of pre-issuance accrued interest, in which
case a portion of the first stated interest payment will be treated as a return
of the excluded pre-issuance accrued interest and not as an amount payable on
the Debt Security.
Optional Redemption. Under the Proposed Regulations, if the Company has an
option to redeem a Debt Security, or the Holder has an option to cause a Debt
Security to be repurchased, prior to the Debt Security's stated maturity, such
option will be presumed to be exercised if, by utilizing any date on which such
Debt Security may be redeemed or repurchased as the maturity date and the
amount payable on such date in accordance with the terms of such Debt Security
(the "redemption price") as the principal amount payable at maturity, the yield
on the Debt Security would be (i) in the case of an option of the Company,
lower than its yield to stated maturity, or (ii) in the case of an option of
the Holder, higher than its yield to stated maturity. If such option is not in
fact exercised when presumed to be exercised, the Debt Security would be
treated solely for original issue discount purposes as if it were redeemed or
repurchased, and a new Debt Security were issued, on the presumed exercise date
for an amount equal to the Debt Security's adjusted issue price on that date.
Election to Treat All Interest as Original Issue Discount. Under the Proposed
Regulations, an accrual basis United States Holder may elect to include in
gross income all interest that accrues on a Debt Security using the constant
yield method described above under the heading "Original Issue Discount--
General," with the modifications described below. For purposes of this
election, interest includes stated interest, acquisition discount, original
issue discount, de minimis original issue discount, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium (described below under "Debt Securities Purchased at a Premium") or
acquisition premium.
In applying the constant yield method to a Debt Security with respect to
which this election has been made, the issue price of the Debt Security will
equal the electing United States Holder's adjusted basis in the Debt Security
immediately after its acquisition, the issue date of the Debt Security will be
the date of its acquisition by the electing United States Holder, and no
payments on the Debt Security will be treated as payments of qualified stated
interest. This election will generally apply only to the Debt Security with
respect to which it is made and may not be revoked without the consent of the
Service. If this election is made with respect to a Debt Security with
amortizable bond premium, then the electing United States Holder will be deemed
to have elected to apply amortizable bond premium against interest with respect
to all debt instruments with amortizable bond premium (other than debt
instruments the interest on which is excludible from gross income) held by such
electing United States Holder as of the beginning of the taxable year in which
the Debt Security with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Service.
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If the election to apply the constant yield method to all interest on a Debt
Security is made with respect to a Market Discount Debt Security, then the
electing United States Holder will be treated as having made the election
discussed above under "Original Issue Discount--Market Discount" to include
market discount in income currently over the life of all debt instruments held
or thereafter acquired by such United States Holder.
Variable Rate Debt Securities. Under the Proposed Regulations, a Variable
Rate Debt Security is a Debt Security which provides for total noncontingent
principal payments which equal or exceed its issue price and stated interest,
compounded or paid at least annually, at (i) a single qualified floating rate,
(ii) a single qualified floating rate followed by another qualified floating
rate, (iii) a single fixed rate followed by a single qualified floating rate,
or (iv) a single objective rate, where any such qualified floating or objective
rate in effect during an accrual period will be set at a current value of such
rate. A floating rate is a "qualified floating rate" if variations in such rate
can reasonably be expected to measure contemporaneous fluctuations in the cost
of newly borrowed funds. An objective rate is a rate (other than a qualified
floating rate) the formula for which is fixed throughout the term of the Debt
Security and which is based on the price of actively traded property (other
than nonfunctional currency), an index of the price of such property, or one or
more qualified floating rates.
Under the Proposed Regulations, if stated interest on a Variable Rate Debt
Security is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually, such stated interest will be
"qualified stated interest" that is not included in the "stated redemption
price at maturity" for the purpose of determining original issue discount.
Where a Variable Rate Debt Security provides for a fixed rate followed by a
qualified floating rate or a qualified floating rate followed by another
qualified floating rate and the fair market value of the Debt Security would
not be approximately equal to its current fair market value if the latter rate
were substituted for the initial rate and were in effect throughout the term of
the Debt Security, then some portion of the interest on the Debt Security will
be treated as either accelerated or deferred interest, and such accelerated or
deferred interest will not be treated as qualified stated interest. If the
substitution described in the preceding sentence would decrease the fair market
value of the Debt Security, then the stated interest accruing in the interval
in which the initial rate is in effect that is attributable to the number of
percentage points that must be subtracted from the initial rate in order to
cause the substitution to have approximately no effect on the fair market value
of the Debt Security will be accelerated interest. If the substitution would
increase the fair market value of the Debt Security, then the stated interest
accruing in the interval in which the latter rate is in effect that is
attributable to the number of percentage points that must be subtracted from
the latter rate in order to cause the substitution to have approximately no
effect on the fair market value of the Debt Security will be deferred interest.
Under the Proposed Regulations, the original issue discount for an accrual
period on a Variable Rate Debt Security that arises from stated interest that
is not unconditionally payable at least annually (other than accelerated or
deferred interest) is the amount of stated interest that actually accrues under
the terms of the Debt Security during the accrual period. The original issue
discount on a Variable Rate Debt Security that arises from (i) an excess of the
Debt Security's stated principal amount over its issue price ("true discount"),
and (ii) accelerated interest, or (iii) deferred interest must be allocated to
an accrual period in accordance with a reasonable application of the constant
yield method described above under "Original Issue Discount--General."
The Code delegates to the Treasury Department the authority to prescribe
special rules relating to the tax treatment, under the original issue discount
provisions of the Code, of Debt Securities that satisfy the definition of
Variable Rate Debt Securities. Because the Proposed Regulations are not yet
effective, United States Holders should discuss with their tax advisors the
treatment of such Debt Securities under the Code and, if applicable, the
proposed regulations that describe the application of the original issue
discount provisions of the Code to debt instruments with contingent payments.
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Short-Term Debt Securities. Under the Code, special rules apply with respect
to original issue discount on Debt Securities that mature one year or less from
the date of its issuance ("short-term Debt Securities"). In general, an
individual or other cash basis United States Holder of a short-term Debt
Security is not required to accrue original issue discount for United States
federal income tax purposes unless it elects to do so. Accrual basis United
States Holders and certain other United States Holders, including banks,
regulated investment companies, dealers in securities and cash basis United
States Holders who so elect, are required to accrue original issue discount on
short-term Debt Securities on either a straight-line basis or under the
constant yield method (based on daily compounding), at the election of the
United States Holder. In the case of a United States Holder not required and
not electing to include original issue discount in income currently, any gain
realized on the sale or retirement of the short-term Debt Security will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis (unless an election is made to accrue the original issue
discount under the constant yield method) through the date of sale or
retirement. United States Holders who are not required and do not elect to
accrue original issue discount on short-term Debt Securities will be required
to defer deductions for interest on borrowings allocable to short-term Debt
Securities in an amount not exceeding the deferred interest income until such
deferred interest income is realized.
For purposes of determining the amount of original issue discount subject to
these rules, the Proposed Regulations provide that all interest payments on a
short-term Debt Security, including qualified stated interest, are included in
the short-term Debt Security's stated redemption price at maturity.
Foreign Currency Discount Debt Securities. Original issue discount for any
accrual period on a Discount Debt Security that is denominated in a foreign
currency will be determined in the foreign currency and then translated into
U.S. dollars in the same manner as stated interest accrued by an accrual basis
United States Holder, as described under "Payments of Interest." Upon receipt
of an amount attributable to original issue discount (whether in connection
with a payment of interest or the sale or retirement of a Debt Security), a
United States Holder may recognize ordinary income or loss.
DEBT SECURITIES PURCHASED AT A PREMIUM
Under the Code, a United States Holder that purchases a Debt Security for an
amount in excess of its principal amount may elect to treat such excess as
"amortizable bond premium", in which case the amount required to be included in
the United States Holder's income each year with respect to interest on the
Debt Security will be reduced by the amount of amortizable bond premium
allocable (based on the Debt Security's yield to maturity) to such year. In the
case of a Debt Security that is denominated in a foreign currency, bond premium
will be computed in units of foreign currency, and amortizable bond premium
will reduce interest income in units of the foreign currency. At the time
amortized bond premium offsets interest income, a United States Holder may
realize exchange gain or loss (taxable as ordinary income or loss, but
generally not as interest income or expense), measured by the difference
between exchange rates at that time and at the time of the acquisition of the
Debt Securities. Any election to amortize bond premium shall apply to all bonds
(other than bonds the interest on which is excludible from gross income) held
by the United States Holder at the beginning of the first taxable year to which
the election applies or thereafter acquired by the United States Holder, and is
irrevocable without the consent of the Service. See also "Original Issue
Discount--Election to Treat All Interest as Original Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE DEBT SECURITIES
A United States Holder's tax basis in a Debt Security will generally be its
U.S. dollar cost (which, in the case of a Debt Security purchased with a
foreign currency, will be the U.S. dollar value of the purchase price on the
date of purchase), increased by the amount of any original issue discount or
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market discount included in the United States Holder's gross income with
respect to the Debt Security and, under the Proposed Regulations, the amount,
if any, of income attributable to de minimis original issue discount included
in the United States Holder's gross income with respect to the Debt Security,
and reduced by the sum of (i) under the Code, the amount of any payments other
than payments of fixed periodic interest or, under the Proposed Regulations,
the amount of any payments that are not qualified stated interest payments, and
(ii) the amount of any amortizable bond premium applied to reduce interest on
the Debt Security. A United States Holder generally will recognize gain or loss
on the sale or retirement of a Debt Security equal to the difference between
the amount realized on the sale or retirement and the tax basis of the Debt
Security. The amount realized on a sale or retirement for an amount in foreign
currency will be the U.S. dollar value of such amount on the date of sale or
retirement. Except to the extent described above under "Original Issue
Discount--Short Term Debt Securities" or "Original Issue Discount--Market
Discount" or in the next succeeding paragraph, and except to the extent
attributable to accrued but unpaid interest, gain or loss recognized on the
sale or retirement of a Debt Security will be capital gain or loss and will be
long-term capital gain or loss if the Debt Security was held for more than one
year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Debt Security that is attributable to changes in exchange rates will be
treated as ordinary income or loss. However, exchange gain or loss is taken
into account only to the extent of total gain or loss realized on the
transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Debt Security or on the sale or
retirement of a Debt Security will have a tax basis equal to its U.S. dollar
value at the time such interest is received or at the time of such sale or
retirement. Foreign currency that is purchased will generally have a tax basis
equal to the U.S. dollar value of the foreign currency on the date of purchase.
Any gain or loss recognized on a sale or other disposition of a foreign
currency (including its use to purchase Debt Securities or upon exchange for
U.S. dollars) will be ordinary income or loss.
INDEXED DEBT SECURITIES
The applicable Prospectus Supplement will contain a discussion of any special
United States federal income tax rules with respect to Debt Securities payments
on which are determined by reference to any index.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
principal, any premium and interest made on a Debt Security and the proceeds of
the sale of a Debt Security before maturity within the United States to, and to
the accrual of original issue discount on a Discount Debt Security with respect
to, non-corporate United States Holders, and "backup withholding" at a rate of
31% will apply to such payments and to payments of original issue discount if
the United States Holder fails to provide an accurate taxpayer identification
number, fails to report all interest and dividends required to be shown on its
federal income tax returns or, under certain circumstances, fails to certify
under penalties of perjury that it is not subject to backup withholding for
failure to report interest and dividend payments.
FOREIGN CURRENCY RISKS
GENERAL
Exchange Rates and Exchange Controls. An investment in Debt Securities
denominated in other than U.S. dollars entails significant risks that are not
associated with a similar investment in a security denominated in U.S. dollars.
Such risks include, without limitation, the possibility of significant changes
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in rates of exchange between the U.S. dollar and the various foreign currencies
or composite currencies, and the possibility of the imposition or modification
of foreign exchange controls by either the U.S. or foreign governments. Such
risks generally depend on economic and political events over which the Company
has no control. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been highly volatile, and such volatility may
be expected to continue in the future. Fluctuations in any particular exchange
rate that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Debt Security.
Depreciation of the Specified Currency other than U.S. dollars against the U.S.
dollar would result in a decrease in the effective yield of such Debt Security
below its coupon rate, and in certain circumstances could result in a loss to
the investor on a U.S. dollar basis.
Governments have imposed from time to time and may in the future impose
exchange controls that could effect exchange rates as well as the availability
of a specified foreign currency at a Debt Security's maturity. Even if there
are no actual exchange controls, it is possible that the Specified Currency for
any particular Debt Security would not be available at such Debt Security's
maturity. In that event, the Company will repay in U.S. dollars on the basis of
the most recently available Exchange Rate.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. Accordingly, payments
on Debt Securities made in a Specified Currency other than U.S. dollars will be
made from an account with a bank located in the country issuing the Specified
Currency (or, for Debt Securities denominated in ECUs, Brussels).
THIS PROSPECTUS DOES NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN DEBT
SECURITIES DENOMINATED IN OTHER THAN U.S. DOLLARS. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN DEBT SECURITIES DENOMINATED IN OTHER THAN U.S. DOLLARS. DEBT
SECURITIES DENOMINATED IN OTHER THAN U.S. DOLLARS ARE NOT AN APPROPRIATE
INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED ABOUT FOREIGN CURRENCY
TRANSACTIONS.
UNLESS OTHERWISE SPECIFIED IN THE PROSPECTUS SUPPLEMENT, DEBT SECURITIES
DENOMINATED IN OTHER THAN U.S. DOLLARS OR ECUS WILL NOT BE SOLD IN, OR TO
RESIDENTS OF, THE COUNTRY ISSUING THE SPECIFIED CURRENCY IN WHICH PARTICULAR
DEBT SECURITIES ARE DENOMINATED. THE INFORMATION SET FORTH IN THIS PROSPECTUS
IS DIRECTED TO PROSPECTIVE PURCHASERS WHO ARE UNITED STATES RESIDENTS, AND THE
COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE PROSPECTIVE PURCHASERS WHO ARE
RESIDENTS OF COUNTRIES OTHER THAN THE UNITED STATES AS TO ANY MATTERS THAT MAY
AFFECT THE PURCHASE, HOLDING, OR RECEIPT OF PAYMENTS OF PRINCIPAL OF AND
INTEREST ON THE DEBT SECURITIES. SUCH PERSONS SHOULD CONSULT THEIR OWN
FINANCIAL AND LEGAL ADVISORS WITH REGARD TO SUCH MATTERS.
Governing Law and Judgments. The Debt Securities will be governed by and
construed in accordance with the laws of the State of New York. Courts in the
United States generally would grant judgment relating to an action based on the
Foreign Currency Debt Securities only in U.S. dollars, and the date used to
determine the rate of conversion of foreign currencies into U.S. dollars will
depend on various factors, including which court rendered judgment. Section 27
of the Judiciary Law of the State of New York provides that a New York State
court would be required to enter judgment in the Specified Currency; such
judgment would then be converted into U.S. dollars at the rate of exchange
prevailing on the date judgment was rendered. Other United States courts,
however, in granting such judgment, might determine the rate of conversion into
U.S. dollars with reference to the date of default, the date judgment is
rendered, or some other date.
EXCHANGE RATE AND CONTROLS FOR SPECIFIED CURRENCIES
For any Debt Security denominated in other than U.S. dollars, a Currency
Supplement with respect to the applicable Specified Currency (which supplement
shall include information about any applicable current foreign exchange
controls) shall be attached to the related Prospectus Supplement. The
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information concerning exchange rates is furnished as a matter of information
only and should not be regarded as indicative of the rate of or trends in
future fluctuations in currency exchange rates.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters and also may
sell Debt Securities directly to other purchasers or through agents. Such
underwriters or agents may include Goldman, Sachs & Co. or a group of
underwriters represented by firms including Goldman, Sachs & Co., and will be
named in the Prospectus Supplement. Goldman, Sachs & Co. may also act as
agents.
The distribution of the Debt Securities may be affected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities, for whom
they may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions, or commissions
from the underwriters and/or commissions from the purchasers for whom they act
as agents. Underwriters, dealers, and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions they receive from the Company, and any profit on the
resale of Debt Securities they realize may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement.
Each series of Offered Debt Securities will be a new issue with no
established trading market. The Company may elect to list any series of Offered
Debt Securities on an exchange, but is not obligated to do so. It is possible
that one or more underwriters may make a market in a series of Offered Debt
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market for the Debt Securities.
Under agreements the Company may enter into, underwriters, dealers, and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
John L. Weinberg is a director of the Company and also serves as a member of
the Asset/Liability Committee and the Human Resources Committee of the
Company'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 or agents and their
associates may be customers of, engage in transactions with, and perform
services for the Company in the ordinary course of business.
VALIDITY OF DEBT SECURITIES
Unless otherwise specified in the Prospectus Supplement with respect to the
Offered Debt Securities, the validity of the Debt Securities will be passed
upon for the Company by Stites & Harbison, Louisville, Kentucky, and if sold to
or through underwriters or agents, by Sullivan & Cromwell, New York, New York.
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EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1992, 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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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN ANY PRICING
SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE NOTES DESCRIBED IN THIS PROSPECTUS SUPPLE-
MENT. ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
NOTES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Description of Notes....................................................... S-2
Supplemental Plan of Distribution.......................................... S-15
Validity of Notes.......................................................... S-16
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Capital Holding Corporation................................................ 3
Use of Proceeds............................................................ 7
Summary Consolidated Financial Data........................................ 8
Description of Debt Securities............................................. 9
United States Taxation..................................................... 14
Foreign Currency Risks..................................................... 21
Plan of Distribution....................................................... 23
Validity of Debt Securities................................................ 23
Experts.................................................................... 24
</TABLE>
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$400,000,000
CAPITAL HOLDING
CORPORATION
MEDIUM-TERM NOTES,
SERIES D
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LOGO OF
CAPITAL HOLDING CORPORATION
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
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