Filed pursuant to Rule 424(b)(2)
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 3, 1996)
5,000,000 Preferred Securities
EQUITABLE OF IOWA COMPANIES CAPITAL TRUST
8.70% Trust Originated Preferred Securities SM (''TOPrS SM ")
(Liquidation amount $25 per Preferred Security)
Fully and Unconditionally Guaranteed by
EQUITABLE OF IOWA COMPANIES
____________________
The 8.70% Trust Originated Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided beneficial
interests in the assets of Equitable of Iowa Companies Capital Trust, a
statutory business trust formed under the laws of the State of Delaware
(the "Equitable Trust"). Equitable of Iowa Companies, an Iowa corporation
(the "Company"), will directly or indirectly own all the common securities
(the "Common Securities" and, together with the Preferred Securities, the
"Trust Securities") representing undivided beneficial interests in the assets
of Equitable Trust. Equitable Trust exists for the sole purpose of
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD
AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE
PREFERRED SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing, subject to
official notice of issuance, on the New York Stock Exchange, Inc. (the "New
York Stock Exchange"). Trading of the Preferred Securities on the New York
Stock Exchange is expected to commence within a 30-day period after the
initial delivery of the Preferred Securities. See "Underwriting."
____________________
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 OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________________________________________________________________
Initial Public Underwriting Proceeds to
Offering Commission(2) Equitable
Price(1) Trust(3)(4)
____________________________________________________________________________
Per Preferred $25.00 (3) $25.00
Security
____________________________________________________________________________
Total $125,000,000 (3) $125,000,000
============================================================================
(1) Plus accrued distributions, if any, from July 23, 1996.
(2) Equitable Trust and the Company have each agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Subordinated Debentures, the Company has
agreed to pay to the Underwriters as compensation ("Underwriters' Compen-
sation") for their arranging the investment therein of such proceeds
$0.7875 per Preferred Security (or $3,937,500 in the aggregate). See
"Underwriting."
(4) Expenses of the offering, which are payable by the Company, are estimated
to be $325,000.
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company, on or about
July 23, 1996.
Merrill Lynch & Co.
Dain Bosworth Incorporated
Dean Witter Reynolds Inc.
Goldman, Sachs & Co.
The Robinson-Humphrey Company, Inc.
The date of this Prospectus Supplement is July 18, 1996.
SM "Trust Originated Preferred Securities" and "TOPrS" are service marks of
Merrill Lynch & Co., Inc.
(continued from previous page)
issuing the Preferred Securities and Common Securities and investing the
proceeds thereof in an equivalent amount of 8.70% Subordinated Deferrable
Interest Debentures due July 30, 2026 ("Subordinated Debentures") of the
Company. Upon a Declaration Event of Default (as defined herein), the holders
of the Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative
cash distributions at an annual rate of 8.70% of the liquidation amount of
$25 per Preferred Security, accruing from the date of original issuance and
payable quarterly in arrears on March 31, June 30, September 30 and December
31 of each year, commencing September 30, 1996 ("distributions"). The
distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and
other payment dates on the Subordinated Debentures, which will be the sole
assets of Equitable Trust. As a result, if principal or interest is not paid
on the Subordinated Debentures, no amounts will be paid on the Preferred
Securities. The payment of distributions out of moneys held by Equitable
Trust and payments on liquidation of Equitable Trust or the redemption of
Preferred Securities, as set forth below, are guaranteed by the Company (the
"Trust Guarantee") if and to the extent Equitable Trust has funds available
therefor. The Company's obligations under the Trust Guarantee, taken together
with its back-up undertakings, consisting of obligations of the Company as set
forth in the Declaration of Trust of Equitable Trust (including the obligation
to pay expenses of Equitable Trust), the Indenture and any applicable supple-
mental indentures thereto, and the Subordinated Debentures issued to Equitable
Trust, provide a full and unconditional guarantee by the Company of payments
due on the Preferred Securities. See "Effect of Obligations Under the Subor-
dinated Debentures and the Trust Guarantee" herein and "Description of Trust
Guarantee" in the accompanying prospectus (the "Prospectus"). If the Company
does not make principal or interest payments on the Subordinated Debentures,
including as a result of the Company's election to extend the interest payment
period on the Subordinated Debentures as described below, Equitable Trust will
not have sufficient funds to make distributions on the Preferred Securities,
in which event, the Trust Guarantee will not apply to such distributions until
the Company has made such principal or interest payments. The obligations of
the Company under the Subordinated Debentures are unsecured and will be
subordinate and junior in right of payment, to the extent set forth herein,
to all existing and future Senior Indebtedness (as defined herein) of the
Company and will be effectively subordinated to all existing and future
liabilities and obligations of the Company's subsidiaries. At March 31, 1996,
the aggregate amount of SeniorIndebtedness and liabilities and obligations of
the Company's subsidiaries that would have effectively ranked senior to the
Subordinated Debentures was approximately $9.2 billion.
The Company has the right to defer payments of interest on the
Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures at any time for up to 20 consecutive quarters (each,
an "Extension Period") provided that no Extension Period may extend beyond
the Maturity Date (as defined herein). If interest payments are so deferred,
distributions on the Preferred Securities will also be deferred. During such
Extension Period, distributions will continue to accrue with interest thereon
(to the extent permitted by applicable law) at an annual rate of 8.70% per
annum compounded quarterly, and during any Extension Period, holders of
Preferred Securities will be required to include deferred interest income in
their gross income for United States federal income tax purposes in advance of
receipt of the cash distributions with respect to such deferred interest
payments. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debentures. See "Risk Factors --
Option to Extend Interest Payment Period or Change Maturity Date," "Risk
Factors -- Tax Consequences of Extension of Interest Payment Period,"
"Description of the Subordinated Debentures -- Option to Extend Interest
Payment Period," and "United States Federal Income Taxation -- Original Issue
Discount."
The Subordinated Debentures are redeemable prior to maturity at the
option of the Company (i) in whole or in part, from time to time, on or
after July 30, 2001, or (ii) at any time in whole (but not in part) upon the
occurrence and continuation of a Special Event (as defined herein). If the
Company redeems Subordinated Debentures, Equitable Trust must redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
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principal amount of the Subordinated Debentures so redeemed at $25 per
Trust Security plus accrued and unpaid distributions thereon to the date
fixed for redemption (the "Redemption Price"). See "Description of the
Preferred Securities -- Mandatory Redemption." The outstanding Preferred
Securities will be redeemed upon maturity of the Subordinated Debentures.
The Subordinated Debentures mature on July 30,2026, which date may be
extended at any time at the election of the Company for one or more periods,
but in no event to a date later than the earlier of (i) July 30,2045 or (ii)
the "Interest Deduction Date" (as hereinafter defined under "Description
of the Subordinated Debentures -- Option to Change Scheduled Maturity Date"),
provided certain financial conditions are met, and may be shortened to a date
not earlier than July 30, 2001 if the Company exercises its right to liquidate
Equitable Trust and distribute the Subordinated Debentures. See "Description
of the Subordinated Debentures -- Option to Change Scheduled Maturity Date."
At any time, the Company will have the right to liquidate Equitable
Trust and cause the Subordinated Debentures to be distributed to the holders of
the Trust Securities in liquidation of Equitable Trust. If the Company elects
to liquidate Equitable Trust and thereby causes the Subordinated Debentures to
be distributed to holders of the Trust Securities in liquidation of Equitable
Trust, the Company shall have the right to shorten the maturity of such
Subordinated Debentures, to a date not earlier than July 30, 2001, or extend the
maturity of such Subordinated Debentures to a date not later than the earlier of
(i) July 30, 2045 or (ii) the Interest Deduction Date, provided that it can
extend the maturity only if certain conditions are met. If the Subordinated
Debentures are distributed to the holders of the Preferred Securities, the
Company will use its best efforts to have the Subordinated Debentures listed on
the New York Stock Exchange or on such other exchange as the Preferred
Securities are then listed. See "Description of the Preferred Securities --
Distribution of the Subordinated Debentures."
In the event of the involuntary or voluntary liquidation, dissolution,
winding up or termination of Equitable Trust, the holders of the Preferred
Securities will be entitled to receive for each Preferred Security a
liquidation amount of $25 plus accrued and unpaid distributions thereon
(including interest thereon) to the date of payment, unless, in connection
with such dissolution, the Subordinated Debentures are distributed to the
holders of the Preferred Securities. See "Description of the Preferred
Securities -- Liquidation Distribution Upon Dissolution."
____________________
FOR NORTH CAROLINA RESIDENTS: THESE SECURITIES HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH
CAROLINA (THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH
CAROLINA INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW
YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
The following information concerning the Company, Equitable Trust, the
Preferred Securities, the Trust Guarantee and the Subordinated Debentures
supplements, and should be read in conjunction with, the information
contained in the accompanying Prospectus. Capitalized terms used in this
Prospectus Supplement have the same meaning as in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review
the information contained in other sections of this Prospectus Supplement
and in the accompanying Prospectus and should in particular consider the
following matters.
Ranking of Subordinate Obligations Under the Trust Guarantee and Subordinated
Debentures
The Company's obligations under the Trust Guarantee are unsecured and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except those made pari passu or subordinate by
their terms, (ii) pari passu with the most senior preferred or preference
stock now or hereafter issued by the Company, and with any guarantee now or
hereafter issued by the Company in respect of any preferred stock or
preference stock of any affiliate of the Company, and (iii) senior to the
Company's common stock. The obligations of the Company under the
Subordinated Debentures are unsecured and will rank subordinate and junior in
right of payment, to the extent set forth herein, to all present and future
Senior Indebtedness of the Company and will be effectively subordinated to all
existing and future liabilities and obligations of the Company's subsidiaries.
At March 31, 1996, the aggregate amount of Senior Indebtedness and liabilities
and obligations of the Company's subsidiaries that would have effectively
ranked senior to the Subordinated Debentures was approximately $9.2 billion.
There are no terms in the Preferred Securities, the Subordinated Debentures or
the Trust Guarantee that limit the ability of the Company or any of its
subsidiaries to incur additional indebtedness, liabilities or obligations,
including indebtedness, liabilities or obligations that rank senior to the
Subordinated Debentures and the Trust Guarantee. See "Description of Trust
Guarantee -- Status of the Trust Guarantee" in the accompanying Prospectus, and
"Description of the Subordinated Debentures -- Subordination" herein.
Rights Under the Trust Guarantee
The Trust Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee (as defined herein) will act as
indenture trustee under the Trust Guarantee for the purposes of compliance
with the provisions of the Trust Indenture Act. The Preferred Securities
Guarantee Trustee (as defined herein) will hold the Trust Guarantee on
behalf of Equitable Trust for the benefit of the holders of the Preferred
Securities.
The Trust Guarantee guarantees to the holders of the Preferred
Securities the payment of (i) any accrued and unpaid distributions that are
required to be paid on the Preferred Securities, to the extent Equitable
Trust has funds available therefor, (ii) the Redemption Price, including
all accrued and unpaid distributions with respect to Preferred Securities
called for redemption by Equitable Trust, to the extent Equitable Trust
has funds available therefor, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of Equitable Trust (other than in
connection with the distribution of Subordinated Debentures to the holders
of Preferred Securities or a redemption of all the Preferred Securities),
the lesser of (a) the aggregate of the liquidation amount and all accrued
and unpaid distributions on the Preferred Securities to the date of the
payment to the extent Equitable Trust has funds available therefor, or (b)
the amount of assets of Equitable Trust remaining available for
distribution to holders of the Preferred Securities in liquidation of
Equitable Trust. The holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred
Securities Guarantee Trustee or to direct the exercise of any trust or
power conferred upon the Preferred Securities Guarantee Trustee under the
Trust Guarantee. If the Preferred Securities Guarantee Trustee fails to
enforce the Trust Guarantee, any record holder of Preferred Securities may
institute a legal proceeding directly against the Company to enforce the
S-4
Preferred Securities Guarantee Trustee's rights under the Trust Guarantee
without first instituting a legal proceeding against Equitable Trust, the
Preferred Securities Guarantee Trustee or any other person or entity.
Notwithstanding the foregoing, if the Company has failed to make a Guarantee
Payment, a record holder of Preferred Securities may directly institute a
proceeding against the Company for enforcement of the Trust Guarantee for such
payment to the record holder of the Preferred Securities of the principal of or
interest on the Subordinated Debentures on or after the respective due dates
specified in the Subordinated Debentures, and the amount of the payment will be
based on the holder's pro rata share of the amount due and owing on all of the
Preferred Securities. The Company has waived any right or remedy to require
that any action be brought first against Equitable Trust or any other person or
entity before proceeding directly against the Company. The record holder in
the case of the issuance of one or more global Preferred Securities certifi-
cates will be The Depository Trust Company acting at the direction of the
beneficial owners of the Preferred Securities. If the Company were to default
on its obligation to pay amounts payable on the Subordinated Debentures,
Equitable Trust would lack available funds for the payment of distributions or
amounts payable on redemption of the Preferred Securities or otherwise, and, in
such event, holders of the Preferred Securities would not be able to rely upon
the Trust Guarantee for payment of such amounts. Instead, holders of the
Preferred Securities would rely on the enforcement (i) by the Property Trustee
of its rights as registered holder of the Subordinated Debentures against the
Company pursuant to the terms of the Subordinated Debentures or (ii) by such
holder of the holder's rights against the Company to enforce the Subordinated
Debentures. See "Description of the Subordinated Debentures -- Indenture Events
of Default" and "Effect of Obligations Under the Subordinated Debentures and the
Trust Guarantee" and "Description of Trust Guarantee" in the accompanying
Prospectus. The Declaration provides that each holder of Preferred Securities,
by acceptance thereof, agrees to the provisions of the Trust Guarantee and the
Indenture.
Enforcement of Certain Rights by Holders of the Preferred Securities
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as a holder of the
Subordinated Debentures against the Company. The holders of a majority in
liquidation amount of the Preferred Securities will have the right to
direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee or to direct the exercise of any
trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Subordinated Debentures. If the Property
Trustee fails to enforce its rights with respect to the Subordinated Debentures
held by Equitable Trust, any record holder of Preferred Securities may institute
legal proceedings directly against the Company to enforce the Property Trustee's
rights under such Subordinated Debentures without first instituting any legal
proceedings against such Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default under the Declaration
has occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal on the Subordinated Debentures issued
to Equitable Trust on the date such interest or principal is otherwise payable,
then a record holder of Preferred Securities may institute a proceeding directly
against the Company for enforcement of payment to the record holder of the
Preferred Securities of the principal of or interest on the Subordinated
Debentures on or after the respective due dates specified in the Subordinated
Debentures, and the amount of the payment will be based on the holder's pro
rata share of the amount due and owing on all of the Preferred Securities. The
record holder in the case of the issuance of one or more global Preferred
Securities certificates will be The Depository Trust Company acting at the
direction of the beneficial owners of the Preferred Securities. The holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the Holders of the Subordinated Debentures unless the Property
Trustee fails to do so. See "Description of the Preferred Securities --
Declaration Events of Default" and "Description of the Subordinated Debentures
- -- Indenture Events of Default."
Equitable Trust Distributions Dependent On the Company's Payments On
Subordinated Debentures
Equitable Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company making interest and
other payments on the Subordinated Debentures. If the Company were not to make
S-5
payments on the Subordinated Debentures for any reason, including as a result
of the Company's election to defer the payment of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures or as a result of the Company's election to extend the maturity of
the Subordinated Debentures, Equitable Trust will not make payments on the
Trust Securities. In such an event, holders of the Preferred Securities would
not be able to rely on the Trust Guarantee since distributions and other
payments on the Preferred Securities are subject to such Trust Guarantee only
if and to the extent that Equitable Trust has funds available therefor. Holders
of the Preferred Securities have the right to proceed first and directly
against the Company to enforce the Company's obligations to make payments under
the Trust Guarantee. However, if Equitable Trust's failure to make distri-
butions on the Preferred Securities is a consequence of the Company's exercise
of its right to extend the interest payment period for the Subordinated
Debentures, the Trust Guarantee does not provide that any payment shall be
made on the Preferred Securities. See "Description of Trust Guarantee --
General" in the accompanying Prospectus.
Option to Extend Interest Payment Period or Change Maturity Date
The Company has the right under the Indenture to (a) defer payments of
interest on the Subordinated Debentures by extending the interest payment
period at any time, and from time to time, on the Subordinated Debentures
or (b) to extend the maturity date of the Subordinated Debentures. See
"Description of the Subordinated Debentures -- Option to Change Scheduled
Maturity Date" and "Description of the Subordinated Debentures -- Option to
Extend Interest Payment Period." As a consequence of an extension of the
interest payment period, quarterly distributions on the Preferred
Securities would be deferred (but despite such deferral, to the extent
permitted by law, would continue to accrue with interest thereon compounded
quarterly) by Equitable Trust during any such Extension Period. Such right
to extend the interest payment period for the Subordinated Debentures is
limited at any time to a period not exceeding 20 consecutive quarters,
provided that no Extension Period may extend beyond the Maturity Date (as
defined herein) of the Subordinated Debentures. In the event that the
Company exercises this right to defer interest payments, then, prior to the
payment of all accrued interest on outstanding Subordinated Debentures,
(a) the Company shall not declare or pay dividends on, or make a
distribution with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company that rank pari passu with or junior to the Subordinated Debentures
and (c) the Company shall not make guarantee payments with respect to the
foregoing (other than pursuant to the Trust Guarantee); provided, however,
that the restriction in clause (a) above does not apply to any stock
dividends paid by the Company where the dividend stock is the same stock as
that on which the dividend is being paid. Prior to the termination of any
such Extension Period, the Company may further extend the interest payment
period; provided that such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive
quarters or extend beyond the Maturity Date of the Subordinated Debentures.
Upon the termination of any Extension Period and the payment of all amounts
then due, the Company may commence a new Extension Period, subject to the
above requirements. Consequently, there could be multiple Extension
Periods of varying lengths prior to the Maturity Date of the Subordinated
Debentures. See "Description of the Preferred Securities -- Distributions"
and "Description of the Subordinated Debentures -- Option to Extend
Interest Payment Period."
Tax Consequences of Extension of Interest Payment Period
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as original issue discount ("OID")) in
respect of the deferred interest allocable to its Preferred Securities for
United States federal income tax purposes. Such income will be allocated
but not distributed to holders of the Preferred Securities. As a result,
each such holder of the Preferred Securities will recognize income for
United States federal income tax purposes in advance of the receipt of cash
and will not receive the cash from Equitable Trust related to such income
if such holder disposes of its Preferred Securities prior to the record
date for the date on which distributions of such amounts are made. The
Company has no current intention of exercising its right to defer payments of
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interest by extending the interest payment period on the Subordinated
Debentures. However, should the Company determine to exercise such right
in the future, the market price of the Preferred Securities is likely to be
adversely affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Preferred Securities.
In addition, as a result of the existence of the Company's right to defer
interest payments, the market price of the Preferred Securities (which
represent an undivided beneficial interest in the Subordinated Debentures)
may be more volatile than other securities on which OID accrues that do not
have such rights. See "United States Federal Income Taxation -- Original
Issue Discount."
Special Event Redemption
Upon the occurrence of a Special Event (as defined herein), the
Company shall have the right to redeem the Subordinated Debentures, in
whole (but not in part), in which event Equitable Trust will redeem the Trust
Securities on a pro rata basis to the same extent as the Subordinated
Debentures are redeemed by the Company. See "Description of the Preferred
Securities -- Special Event Redemption."
Distribution of the Subordinated Debentures
At any time, the Company will have the right to terminate Equitable
Trust and, after satisfaction of the liabilities of creditors of Equitable
Trust as provided by applicable law, cause the Subordinated Debentures to
be distributed to the holders of the Preferred Securities in liquidation of
Equitable Trust. Under current United States federal income tax law and
interpretation and assuming, as expected, Equitable Trust is treated as a
grantor trust, a distribution of the Subordinated Debentures should not be
a taxable event to holders of the Preferred Securities. Should there be a
change in law, a change in legal interpretation, a Special Event or other
circumstances, however, the distribution could be a taxable event to the
holders of the Preferred Securities. In addition, a dissolution of
Equitable Trust in which holders of the Preferred Securities receive cash
would be a taxable event to such holders. See "United States Federal
Income Taxation -- Receipt of Subordinated Debentures or Cash Upon
Liquidation of Equitable Trust."
If the Company elects to liquidate Equitable Trust and thereby causes
the Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of Equitable Trust, the Company shall have the
right to shorten the maturity of such Subordinated Debentures to a date not
earlier than July 30, 2001 or extend the maturity of such Subordinated
Debentures to a date which is not later than the earlier of (i) July 30, 2045 or
(ii) the Interest Deduction Date, provided that it can extend the maturity only
if certain conditions are met. See "Description of the Subordinated Debentures
- -- Option to Change Scheduled Maturity Date."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of
Equitable Trust were to occur. Accordingly, the Preferred Securities that
an investor may purchase, whether pursuant to the offer made hereby or in
the secondary market, or the Subordinated Debentures that a holder of
Preferred Securities may receive on dissolution and liquidation of
Equitable Trust, may trade at a discount to the price that the investor
paid to purchase the Preferred Securities offered hereby. In addition,
because the Company has the right to shorten or extend the maturity of the
Subordinated Debentures upon the termination of Equitable Trust and the
distribution of the Subordinated Debentures to the holders of the Preferred
Securities, there can be no assurance that the Company will not exercise
its option to change the maturity of the Subordinated Debentures upon such
an event. Because holders of Preferred Securities may receive Subordinated
Debentures upon any election by the Company to liquidate Equitable Trust and
cause the Subordinated Debentures to be distributed to the holders of the
Preferred Securities, prospective purchasers of Preferred Securities are also
making an investment decision with regard to the Subordinated Debentures and
should review carefully all the information regarding the Subordinated
Debentures and the Company contained herein and in the accompanying Prospectus.
See "Description of the Preferred Securities -- Distribution of the Subordi-
nated Debentures" and "Description of the Subordinated Debentures."
S-7
Proposed Tax Law Changes
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"),
the revenue portion of President Clinton's budget proposal, was released. The
Bill would, among other things, generally deny interest deductions for interest
on an instrument, issued by a corporation, that has a maximum weighted average
maturity of more than 40 years. The Bill would also generally deny interest
deductions for interest on an instrument, issued by a corporation, that has a
maximum term of more than 20 years and that is not shown as indebtedness on the
separate balance sheet of the issuer or, where the instrument is issued to a
related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness
on the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill were
proposed to be effective generally for instruments issued on or after December
7, 1995. However, on March 29, 1996, the Chairmen of the Senate Finance and
House Ways and Means Committees issued a joint statement to the effect that it
was their intention that the effective date of the President's legislative
proposals, if adopted, will be no earlier than the date of appropriate
Congressional action. Under current law, the Company will be able to deduct
interest on the Subordinated Debentures. The terms of the Subordinated
Debentures limit the right to extend the maturity of the Subordinated Debentures
to a date which is six months shorter than any legislative limit on the length
of debt securities for which interest is deductible. The Company believes this
will allow it an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, the Company will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no
assurance that current or future legislative proposals or final legislation will
not affect the ability of the Company to deduct interest on the Subordinated
Debentures, giving rise to a Tax Event (as defined below) which would permit
the Company to cause the redemption of the Preferred Securities prior to
July 30, 2001 (the first date on which the Company would otherwise be able to
cause a redemption of the Preferred Securities). See "Description of the
Preferred Securities -- Special Event Redemption" and "United States Federal
Income Taxation."
Prepayment Considerations; Option to Change Scheduled Maturity Date
At the option of the Company, the Subordinated Debentures may be redeemed,
in whole or in part, at any time on or after July 30, 2001, at a redemption
price equal to 100% of the principal amount to be redeemed plus any accrued
and unpaid interest to the redemption date. See "Description of the
Subordinated Debentures -- Optional Redemption." Investors in the Preferred
Securities should assume that the Company will exercise its redemption option
if the Company is able to refinance at a lower interest rate or it is otherwise
in the interest of the Company to redeem the Subordinated Debentures. If
Subordinated Debentures are redeemed, Equitable Trust must redeem Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of Subordinated Debentures so redeemed. See "Description of
the Preferred Securities -- Mandatory Redemption."
The Company also has the option to extend the maturity date of the
Subordinated Debentures for one or more periods, but in no event to a date
later than the earlier of (i) July 30, 2045 or (ii) the Interest Deduction Date,
provided certain financial conditions are met. See "Description of the
Subordinated Debentures -- Option to Change Scheduled Maturity Date." Investors
in the Preferred Securities should assume that the Company will exercise its
option to extend the term if the Company is unable to refinance at a lower
interest rate or it is otherwise in the interest of the Company to defer the
maturity of the Subordinated Debentures. The Preferred Securities will not be
redeemed until the Subordinated Debentures have been repaid or redeemed. See
"Description of the Preferred Securities -- Mandatory Redemption."
Limited Voting Rights
Holders of Preferred Securities will have only limited voting rights
primarily in connection with directing the activities of the Property Trustee
as the holder of the Subordinated Debentures. Such holders will not be
S-8
entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Equitable Trustees (as defined herein), which voting rights are
vested exclusively in the holder of the Common Securities. See "Description
of Preferred Securities -- Voting Rights."
Trading Price
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of Preferred Securities between
record dates for payments of distributions thereon will be required to include
as ordinary income OID on the Subordinated Debentures accrued through the date
of disposition, and to add such amount to its adjusted tax basis in its pro
rata share of the underlying Subordinated Debentures deemed disposed of. To
the extent the selling price is less than the holder's adjusted tax basis
(which will include, in the form of OID, all accrued but unpaid interest), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes. See "United States Federal Income Taxation --
Original Issue Discount" and "United States Federal Income Taxation -- Sales
of Preferred Securities."
EQUITABLE TRUST
Equitable Trust is a statutory business trust formed under Delaware
law pursuant to (i) a declaration of trust, executed by the Company, as
sponsor (the "Sponsor"), and the trustees of Equitable Trust (the
"Equitable Trustees"), as amended (the "Declaration") and (ii) the filing
of a certificate of trust with the Secretary of State of the State of
Delaware on March 19, 1996. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the Company
will directly or indirectly acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of Equitable Trust and
will own all of the issued and outstanding Common Securities. Equitable
Trust exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust,
(ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto. The Trust has a term of 55 years, but may
be terminated earlier as provided in the Declaration.
Pursuant to the Declaration, the number of Equitable Trustees will
initially be five. Three of the Equitable Trustees (the "Regular
Trustees") will be persons who are employees or officers of or who are
affiliated with the Company. The fourth trustee will be a financial
institution unaffiliated with the Company that will serve as property
trustee under the Declaration and as indenture trustee for the purposes of
the Trust Indenture Act (the "Property Trustee"). The fifth trustee will
be a natural person who is a resident of the State of Delaware or a legal
entity which maintains its principal place of business in the State of
Delaware (the "Delaware Trustee"). The First National Bank of Chicago
will act as the Property Trustee and First Chicago Delaware, Inc., an
affiliate of the Property Trustee, will act as the Delaware Trustee, in
each case until removed or replaced by the holder of the Common Securities.
The First National Bank of Chicago will also act as indenture trustee under
the Trust Guarantee (the "Preferred Securities Guarantee Trustee"). See
"Description of Trust Guarantee" in the accompanying Prospectus.
The Property Trustee will hold title to the Subordinated Debentures
for the benefit of the Trust and the holders of the Trust Securities and,
so long as the Subordinated Debentures are held by Equitable Trust, the
Property Trustee will have the power to exercise all rights, powers, and
privileges of a holder of Subordinated Debentures under the Indenture (as
defined in "Description of the Subordinated Debentures" herein). In addition,
the Property Trustee will maintain exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all
payments made in respect of the Subordinated Debentures for the benefit of
the holders of the Trust Securities. The Property Trustee will make
payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds from the
Property Account. The Preferred Securities Guarantee Trustee will hold the
Trust Guarantee for the benefit of the holders of the Preferred Securities.
S-9
The Company, as the direct or indirect holder of all the Common Securities,
will have the right to appoint, remove or replace any Equitable Trustee
(subject to the limitations set forth in the Declaration) and to increase
or decrease the number of Equitable Trustees. The Company will pay all
fees, expenses, debts and obligations (other than with respect to the Trust
Securities) related to Equitable Trust and the offering of the Trust
Securities. See "Description of the Preferred Securities."
The rights of the holders of the Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in
the Declaration, the Delaware Business Trust Act, as amended (the "Trust
Act"), the Indenture and the Trust Indenture Act. See "Description of the
Preferred Securities."
THE COMPANY
Equitable of Iowa Companies (the "Company"), a Des Moines, Iowa based
insurance holding company, is a provider of individual annuity and life
insurance products, targeting middle-income individuals and small businesses
throughout the United States. Through its primary insurance subsidiaries,
Equitable Life Insurance Company of Iowa ("Equitable Life") and USG Annuity &
Life Company ("USG"), the Company offers its products in 49 states and the
District of Columbia. Equitable Life was founded in 1867 and is the oldest
life insurance company west of the Mississippi River. The Company began
actively marketing annuity products in 1988, principally through USG. The
Company has had a rapid rate of growth in assets over the past few years,
primarily as a result of increased demand for its annuity products.
The Company believes that, because of its diversified portfolio of
annuity and life insurance products, it is well-positioned to take
advantage of certain demographic and economic trends that are expected to
increase demand for these types of products. These trends include: an
aging "baby boomer" segment of the population that is increasingly
concerned about retirement and estate planning; an increase in the number
of families that are concerned about maintaining their standard of living
at retirement; and lower public confidence that government and employer-
provided benefits at retirement will be sufficient.
The Company offers, through its insurance subsidiaries, a portfolio of
life insurance and annuity products designed to meet the needs of its
customers for supplemental retirement income, estate planning and protection
from unexpected death. The Company requires that each of its products be
priced to earn an adequate margin between the interest credited to the
policyholder and the return earned by the Company on its investments.
Annuities. Annuities are long-term savings vehicles that are
particularly attractive to customers over the age of 50 who are planning
for retirement and seeking secure, tax-deferred savings products. The
individual annuity business is a growing segment of the savings and
retirement market, and among the fastest growing segments of the life
insurance industry. Annuity products currently enjoy an advantage over
certain other retirement savings products, because the payment of federal
income taxes on interest credited on annuity policies is deferred during
the investment accumulation period.
The Company offers a variety of annuity products. Single premium
deferred annuities ("SPDAs"), in general, are savings vehicles in which the
policyholder, or annuitant, makes a single premium payment to an insurance
company. The insurance company credits the account of the annuitant with
earnings at an interest rate (the "crediting rate"), which is declared by
the insurance company from time to time and may exceed, but may not be
lower than, any contractually guaranteed minimum crediting rate. The
Company also offers flexible premium deferred annuities ("FPDAs"). FPDAs
are deferred annuities in which the policyholder may elect to make more
than one premium payment.
The Company's annuity products incorporate a number of features
designed to reduce the early withdrawal or surrender of the policies and to
partially compensate the Company for its costs if policies are withdrawn
early. Under the terms of the Company's policies, the policyholder is
permitted to withdraw all or part of the premium paid plus the amount
credited to his or her account, less a surrender charge for withdrawals.
S-10
Certain of the Company's deferred annuity contracts provide for penalty-
free partial withdrawals, typically up to 10% of the accumulation value
annually. Surrender charge periods on annuity policies currently typically
range from five years to the term of the policy, with the majority of such
policies currently being issued with a surrender charge period of seven
years or more. The initial surrender charge on annuity policies generally
ranges from 5% to 20% of the premium and decreases over the surrender
charge period. In 1992, the Company introduced a number of annuity
products in which a "market value adjustment" is applied to adjust the
applicable surrender charge during the surrender charge period. More than
half of the Company's new annuity sales currently incorporate a market
value adjustment. The withdrawal rates of policyholder funds may be
affected to some degree, however, by changes in interest rates.
In the fourth quarter of 1994, the Company introduced a variable
annuity product. On May 3, 1996, the Company announced the agreement to
purchase Golden American Life Insurance Company which will significantly
increase the Company's presence in the variable annuity business. See
"Recent Developments" and "Use of Proceeds." A variable annuity involves
maintaining the policyholder premiums in a separate account. Policyholders
have discretion to allocate their premiums among several available fund
options. The cash surrender value of a variable annuity policy depends on
the performance of these underlying funds, which the policyholder may
reallocate from time to time. Similarly, during the variable annuity's
payout period, the payments distributed to the annuitant fluctuate with the
performance of the underlying funds selected by the annuitant. Variable
annuities provide the Company with fee-based revenue in the form of
management and administration fees charged to the policyholder's account.
Life Insurance Products. The Company offers a variety of traditional,
universal and term life insurance products. Traditional life insurance
policies incorporate a fixed premium schedule and combine guaranteed
insurance protection with a savings feature. Traditional life polices cost
more than comparable term life insurance coverage when the policyholder is
younger, but less as the policyholder grows older. The policyholder may
borrow against the accumulated cash value, with policy loans typically
available at a rate of interest lower than that available from other
lending sources. The policyholder may also choose to surrender the policy
at any time and receive the accumulated cash value, less any applicable
withdrawal charge, rather than continuing the insurance protection. The
Company currently offers fixed premium current interest and other
traditional life insurance products, and its insurance in force also
includes participating policies.
Universal life insurance products provide whole life insurance and
adjustable rates of return related to current interest rates. Policyholders
may vary the frequency and size of their premium payments, although policy
benefits may also fluctuate according to such payments.
Term life insurance policies provide insurance protection for unexpected
death during the period in which the policy is in force, generally one, five,
ten or twenty years. These products are designed to meet the customers'
shorter-term needs because the policies do not have an investment feature and
no cash value is built up. Term life premiums are accordingly lower than
premiums of certain of the Company's other products. The Company's current
term life products include annually renewable term and five-year, ten-year and
fifteen-year renewable and convertible term policies.
In order to discourage early policy withdrawals and to partially
compensate the Company for its costs if policies are terminated, all of the
Company's universal life and interest-sensitive policies issued since 1986
have incorporated withdrawal charges or similar provisions for periods
ranging from 14 to 19 years.
Distribution. The Company maintains a diverse distribution network
that seeks to provide high quality service to its customers, including the
Company's policyholders, agents, brokers and other producers, while
controlling costs. The Company markets its products through a variable
cost distribution network of over 53,000 licensed independent brokerage and
career agents as well as through financial institutions, such as banks and
thrifts. The Company competes with other life insurance companies and
distributors of retirement savings products.
S-11
SUMMARY FINANCIAL INFORMATION
The summary financial data for the five-year period ended December 31,
1995 and the quarters ended March 31, 1996 and 1995 are derived in their
entirety from the Company's consolidated financial statements. The summary
financial data are qualified in their entirety by, and should be read in
conjunction with, the financial statements and notes thereto in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 and the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996,
which are incorporated by reference herein. See "Incorporation of Certain
Documents By Reference" in the accompanying Prospectus. The summary financial
data for the quarters ended March 31, 1996 and 1995 are derived from financial
statements that are unaudited, but which, in the opinion of management,
include all adjustments necessary for a fair presentation of the financial
position and results of operations of the Company for those periods.
<TABLE>
<CAPTION>
Quarter Ended
March 31, Year Ended December 31,
_______________________________________________________________
1996 1995 1995 1994 1993 1992 1991
____ ____ ____ ____ ____ ____ ____
(unaudited) (In millions)
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue:
Premiums and
Product Charges $ 24.9 $ 23.8 $ 94.9 $ 90.0 $ 81.1 $ 73.4 $ 80.1
Net Investment
Income 171.2 148.3 641.1 524.4 434.1 362.4 311.8
Realized Gains
on Investments 5.2 0.1 9.5 19.7 42.0 8.2 (5.2)
Other 4.3 6.5 19.4 17.5 15.8 14.4 13.6
------ ------ ------ ------ ------ ------ ------
Total Revenue 205.6 178.7 764.9 651.6 573.0 458.4 400.3
Benefit and Insurance
Expenses 151.9 137.9 613.9 482.5 420.5 354.4 339.6
Interest Expense 3.3 2.0 13.8 7.9 9.5 9.8 9.6
Other Expense 3.6 2.1 8.7 10.0 8.0 10.5 8.0
------ ------ ------ ------ ------ ------ ------
Total Benefits and
Expenses 158.8 142.0 636.4 500.4 438.0 374.7 357.2
Income Before Federal
Income Taxes 46.8 36.7 128.5 151.2 135.0 83.7 43.1
Net Income $ 30.2 $ 23.8 $ 84.9 $ 98.3 $ 87.2 $ 54.5 $ 40.5
</TABLE>
<TABLE>
<CAPTION>
As of March 31, As of December 31,
_______________________________________________________________
1996 1995 1995 1994 1993 1992 1991
____ ____ ____ ____ ____ ____ ____
(unaudited) (In millions)
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Investments:
Fixed Maturities--
Available for
Sale $ 7,279.7 $1,206.1 $7,352.2 $ 778.5 --- --- ---
Fixed Maturities--
Held to
Maturity --- 5,351.3 --- 5,393.8 $5,078.2 $3,967.1 $3,107.3
Equity
Securities 58.1 23.7 50.6 23.0 0.1 0.1 8.8
Mortgage
Loans 1,344.8 691.1 1,169.4 613.2 346.8 249.6 221.8
Real Estate 14.1 15.2 14.0 15.7 20.8 14.6 16.2
Policy Loans 183.3 178.1 182.4 176.4 176.9 176.7 181.8
Cash and
Short-Term
Investments 26.3 36.7 50.0 63.6 72.8 61.1 24.6
--------- -------- -------- ------- ------- ------- -------
Total Cash and
Investments 8,906.3 7,502.2 8,818.6 7,064.2 5,695.6 4,469.2 3,560.5
Total Assets $10,018.4 $8,439.9 $9,780.4 $7,965.6 $6,431.5 $5,066.9 $4,231.4
Policyholder
Liabilities 8,498.6 7,401.1 8,255.3 7,062.1 5,624.2 4,445.8 3,543.3
Commercial
Paper 158.0 72.2 58.1 90.5 34.0 28.8 34.8
Long-Term Debt 100.0 100.0 100.0 --- 50.2 60.7 60.8
Total
Liabilities $ 9,236.5 $7,806.4 $8,886.5 $7,378.3 $5,903.5 $4,693.1 $3,908.6
Total
Shareholders'
Equity $ 781.9 $ 633.5 $ 893.9 $ 587.3 $ 528.0 $ 373.8 $ 322.8
</TABLE>
S-12
Recent Financial Results - 1995 and 1994
Total revenues increased $113,202,000, or 17.4%, to $764,862,000 in 1995
compared to $651,660,000 in 1994. Net investment income increased
$116,683,000, or 22.3%, to $641,094,000 in 1995 compared to $524,411,000 in
1994 due primarily to an 18.3% increase in the amortized cost basis of cash
and invested assets. Realized gains decreased $10,173,000, or 51.7%, to
$9,524,000 in 1995 compared to $19,697,000 in 1994.
Revenues on a GAAP basis do not include premiums for deferred annuities,
immediate annuities, variable annuities, interest sensitive life insurance and
universal life-type products. Total annuity sales, as measured by first year
and single premiums, decreased $170,677,000, or 10.8%, to $1,414,061,000 in
1995 compared to record sales of $1,584,738,000 in 1994 due to a more challeng-
ing sales environment in 1995. First year and single life insurance premiums,
including traditional and universal life insurance policies increased
$14,281,000, or 55.4%, to $40,082,000 in 1995 compared to $25,801,000 in 1994.
The average annualized yield on assets supporting interest sensitive
products, including annuities, universal life-type policies and participating
life policies, was 8.60% in 1995 compared to 8.62% in 1994. The average
annualized interest rate (excluding first year interest bonuses) credited to
policy accounts for interest sensitive products was 5.71% in 1995 compared to
5.80% in 1994.
Operating income increased $12,535,000, or 14.2%, to $100,747,000 in 1995
compared to $88,212,000 in 1994. Operating income is defined as income, ex-
cluding, net of related income tax, prepayment gains on mortgages and mortgage-
backed securities, realized gains or losses, related amortization of deferred
policy acquisition costs and the 1995 special reserve accrual for future
guaranty fund assessments. Return on equity, based on operating earnings and
excluding the effects of Statement of Financial Accounting Standards ("SFAS")
No. 115, was 15.5% in 1995 and 1994. Realized and prepayment gains were
$7,543,000 in 1995, after related amortization of deferred policy acquisition
costs and income taxes, compared to $10,072,000 in 1994. Net income was
$84,890,000 in 1995 compared to $98,284,000 in 1994. Net income for 1995
includes a $23,400,000 charge, net of related income taxes, for the special
reserve accrual for future guaranty fund assessments. Return on assets, based
on operating income and excluding the effects of SFAS No. 115, was 1.2% in 1995
and 1994.
Total assets grew $1,814,823,000, or 22.8%, to $9,780,416,000 at December
31, 1995. The financial statement carrying value of the Company's investment
portfolio grew 25.8% to $8,629,293,000 at December 31, 1995. The amortized
cost basis, which excludes unrealized gains and losses, of the Company's
investment portfolio grew 18.3% to $8,161,114,000 at December 31, 1995. At
December 31, 1995, the Company estimated that its investment portfolio had a
market value equal to 106.7% of amortized cost value. At December 31, 1995,
0.01% of the Company's investment portfolio was in default.
The Company's outstanding debt at December 31, 1995, was $158,100,000
comprised of commercial paper notes totalling $58,100,000 and $100,000,000
of 8.5% notes maturing on February 15, 2005.
Recent Financial Results - First Quarter 1996 and 1995
Total revenues increased $26,878,000, or 15.0%, to $205,576,000 in the first
three months of 1996 compared to $178,698,000 in the first three months of
1995. Net investment income increased $22,966,000, or 15.5%, to $171,212,000
in the first three months of 1996 compared to $148,246,000 in the first three
months of 1995. Realized gains increased $5,037,000 to $5,150,000 in the first
three months of 1996 compared to $113,000 in the first three months of 1995.
Revenues on a GAAP basis do not include premiums for deferred annuities,
immediate annuities, variable annuities, interest sensitive life insurance
and universal life-type products. Fixed annuity sales, as measured by first
year and single premiums, decreased $86,270,000, or 22.3%, to $301,257,000 in
the first three months of 1996 compared to $387,527,000 in the first three
months of 1995. Variable annuity sales increased $25,690,000, or 306.7%, to
$34,083,000 in the first three months of 1996 compared to $8,393,000 in the
first three months of 1995. First year and single life insurance premiums,
including traditional and universal life insurance policies decreased
$1,629,000, or 16.4%, to $8,288,000 in the first three months of 1996 compared
to $9,917,000 in the first three months of 1995.
S-13
The average annualized yield on assets supporting interest sensitive
products, including annuities, universal life-type policies and
participating life policies, was 8.53% in the first three months of 1996
compared to 8.63% in the first three months of 1995. The average
annualized interest rate (excluding first year interest bonuses) credited
to policy accounts for interest sensitive products was 5.60% in the first
three months of 1996 compared to 5.76% in the first three months of 1995.
Operating income increased $4,288,000, or 18.3%, to $27,675,000 in the
first three months of 1996 compared to $23,387,000 in the first three
months of 1995. Return on equity, based on operating earnings and
excluding the effects of SFAS No. 115, was 15.9% in the first three months
of 1996 compared to 15.0% in the first three months of 1995. Realized and
prepayment gains were $2,530,000 in the first three months of 1996, after
related amortization of deferred policy acquisition costs and income taxes,
compared to $407,000 in the first three months of 1995. Net income was
$30,205,000 in the first three months of 1996 compared to $23,794,000 in
the first three months of 1995. Return on assets, based on operating
income and excluding the effects of SFAS No. 115, was 1.1% in first three
months of 1996 and 1995.
At March 31, 1996, the Company had total assets of $10,018,398,000, an
increase of 2.4% over total assets at December 31, 1995. The financial
statement carrying value of the Company's investment portfolio grew 0.7% to
$8,690,713,000 in the first three months of 1996. The amortized cost
basis, which excludes unrealized gains and losses, of the Company's
investment portfolio grew 4.6% to $8,533,253,000 during the same period.
At March 31, 1996, the Company estimated that its investment portfolio had
a market value equal to 102.2% of amortized cost value. At March 31, 1996,
0.01% of the Company's investment portfolio was in default.
The Company's outstanding debt at March 31, 1996, was $258,000,000, an
increase of $99,900,000 during the first three months of 1996. $96,354,000
of this increase resulted from the issuance of commercial paper notes to fund
short-term timing differences in investment related cash receipts and
disbursements. The Company currently has $300 million in lines of credit
to enhance short-term liquidity and back up its outstanding commercial paper.
No indebtedness was outstanding under its lines of credit as of March 31, 1996.
RECENT DEVELOPMENTS
On May 3, 1996, the Company agreed to purchase all of the outstanding stock
of BT Variable, Inc., a Delaware corporation, including its wholly-owned
subsidiary, Golden American Life Insurance Company ("Golden American"), a
Delaware domiciled life insurance company specializing in the issuance of
variable annuities. The purchase price is $144 million in cash, including the
repayment of $51 million in debt. Closing is subject to regulatory approvals
and other customary closing conditions and is anticipated to occur in the
third quarter of 1996. The acquisition will significantly increase the
Company's presence in the variable annuity business and add variable life
insurance products to the Company's product portfolio. The transaction also
expands the Company's distribution channels to include national and regional
brokerage firms. Golden American and the Company had assets as of the year
ended December 31, 1995 of $1.2 billion and $9.8 billion, respectively.
Golden American's 1995 variable annuity premium was $108 million compared to
$66 million for the Company. Golden American has an internal sales team of
fourteen wholesalers and a network of 140 broker-dealers with more than 6,000
registered representatives currently appointed to sell its products,
compared to approximately 53,000 career and brokerage agents, 3,700 registered
representatives and 230 broker-dealers for the Company.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
for the Company and its subsidiaries on a consolidated basis. The ratio of
consolidated earnings to fixed charges is calculated by dividing consolidated
earnings (income from continuing operations before income taxes plus fixed
charges) by fixed charges (interest expense on debt and a portion of rental
expense).
<TABLE>
<CAPTION>
Three
Months
Ended
March 31, 1996 Year Ended December 31
-------------- --------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of Consolidated
Earnings to Fixed Charges 14.4 10.0 17.8 12.3 8.0 4.9
==== ==== ==== ==== === ===
</TABLE>
S-14
CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited consolidated capitalization
of the Company at March 31, 1996, and as adjusted to reflect the sale of the
Preferred Securities and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." The table should be read in conjunction
with the Company's consolidated financial statements and notes thereto included
in the documents incorporated by reference herein. See "Incorporation of
Certain Documents by Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
At
March 31, 1996
----------------------------
As
Actual Adjusted
------ ---------
(Dollars in Thousands)
<S> <C> <C>
Commercial Paper $158,000 $158,000
Long-Term Debt 100,000 100,000
Company-obligated mandatorily-redeemable
Preferred Securities of the Company's
subsidiary, Equitable Trust, holding
solely Subordinated Debentures of the
Company (2) --- 125,000 (1)
Total Shareholders' Equity 781,890 781,890
---------- ----------
Total capitalization $1,039,890 $1,164,890
========== ==========
<FN>
(1) One hundred percent of the assets of Equitable Trust will consist of
approximately $128.75 million in principal amount of the Subordinated
Debentures of the Company with an interest rate of 8.70% and maturity date
of July 30, 2026.
(2) Accounting Treatment -- The financial statements of Equitable Trust will
be reflected in the Company's consolidated financial statements with the
Preferred Securities shown as Company-obligated mandatorily-redeemable
Preferred Securities of the Company's subsidiary, Equitable of Iowa
Companies Capital Trust, holding solely Subordinated Debentures of the
Company with a footnote indicating that Equitable Trust is wholly owned by
the Company, the sole asset of Equitable Trust is the Subordinated
Debentures (indicating the principal amount, interest rate and maturity
date thereof) and considered together, the Trust Guarantee and the
Company's other obligations described herein, constitute a full and
unconditional guarantee by the Company of Equitable Trust's obligations
under the Preferred Securities.
</TABLE>
USE OF PROCEEDS
The proceeds from the sale of the Preferred Securities will be invested
by Equitable Trust in Subordinated Debentures of the Company issued pursuant
to the Indenture described herein. The Company will use the net proceeds
from the Subordinated Debentures to fund in part the purchase of BT Variable,
Inc. and its subsidiary, Golden American Life Insurance Company. See "Recent
Developments." Pending closing of such acquisition, anticipated in the third
quarter of 1996, the net proceeds from the Subordinated Debentures will be
invested in investment grade short-term marketable securities or used to
reduce short-term borrowings of the Company. The balance of the purchase
price for the purchase of BT Variable, Inc. in excess of the net proceeds
from the sale of the Subordinated Debentures will be funded by reducing short-
term investments of the Company's subsidiaries and selling fixed maturity
securities of the Company's subsidiaries. Funds generated by the Company's
subsidiaries for this purpose will be passed on to the Company in the form of
dividends.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the
Trust Indenture Act. The Property Trustee, The First National Bank of
Chicago, will act as the indenture trustee for purposes of compliance with
the provisions of the Trust Indenture Act. The terms of the Preferred
Securities will include those stated in the Declaration, including those
required to be made part of the Declaration by the Trust Indenture Act.
The following summary of the principal terms and provisions of the Preferred
Securities does not purport to be complete and is subject to, and qualified
in its entirety by reference to, the Declaration, a copy of which is filed as
an exhibit to the Registration Statement of which this Prospectus Supplement
is a part, the Trust Act and the Trust Indenture Act.
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General
The Declaration authorizes the Regular Trustees to issue, on behalf of
Equitable Trust, the Trust Securities, which represent undivided beneficial
interests in the assets of Equitable Trust. All of the Common Securities will
be owned by the Company. The Common Securities will have equivalent terms to
and will rank pari passu, and payments will be made thereon on a pro rata
basis, with the Preferred Securities, except that upon the occurrence and
during the continuance of a Declaration Event of Default (as defined herein),
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
In addition, holders of the Common Securities have the exclusive right (subject
to the terms of the Declaration) to appoint, replace or remove the Equitable
Trustees and to increase or decrease the number of Equitable Trustees. The
Declaration does not permit the issuance by Equitable Trust of any securities
other than the Trust Securities or the incurrence of any indebtedness by Equit-
able Trust. Pursuant to the Declaration, the Property Trustee will hold the
Subordinated Debentures purchased by Equitable Trust for the benefit of the
holders of the Trust Securities. The payment of distributions out of money
held by Equitable Trust, and payments upon redemption of the Preferred Securi-
ties or liquidation of Equitable Trust, are guaranteed by the Company to the
extent described under "Description of Trust Guarantee" in the accompanying
Prospectus. The Trust Guarantee, when taken together with the back-up under-
takings, consisting of obligations of the Company as set forth in the Declara-
tion of Trust of Equitable Trust (including the obligation to pay expenses of
Equitable Trust), the Indenture and any applicable supplemental indentures
thereto, and the Subordinated Debentures issued to Equitable Trust, provide a
full and unconditional guarantee by the Company of the Preferred Securities.
The Trust Guarantee will be held by The First National Bank of Chicago, the
Preferred Securities Guarantee Trustee, for the benefit of the holders of the
Preferred Securities. The Trust Guarantee only covers payment of distributions
when the Company has made the corresponding payment of interest or principal on
the Subordinated Debentures held by Equitable Trust. In the absence of such
payment of interest or principal, the remedy of a holder of Preferred Securi-
ties is to direct the Property Trustee to enforce the Property Trustee's rights
as the holder of the Subordinated Debentures except in the limited circum-
stances where the holder may take direct action against the Company. See --
"Declaration Events of Default."
Distributions
Distributions on the Preferred Securities will be fixed at a rate per
annum of 8.70% of the stated liquidation amount of $25 per Preferred Security.
Distributions in arrears for more than one quarter will (to the extent permitted
by applicable law) bear interest thereon from and including the last day of such
quarter at the rate per annum of 8.70% thereof compounded quarterly. The term
"distributions" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months, and for any
period shorter than a full quarter, on the basis of the actual number of days
elapsed in such 90-day quarter.
Distributions on the Preferred Securities will be cumulative, will
accrue from July 23, 1996 and will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing
September 30, 1996, when, as and if available for payment by the Property
Trustee, except as otherwise described below.
The Company has the right under the Indenture to defer payments of
interest on the Subordinated Debentures by extending the interest payment
period from time to time on the Subordinated Debentures, which, if
exercised, would defer quarterly distributions on the Preferred Securities
(although to the extent permitted by law, such distributions would continue
to accrue with interest since interest would continue to accrue on the
Subordinated Debentures) during any such Extension Period. Such right to
extend the interest payment period for the Subordinated Debentures is
limited to a period not exceeding 20 consecutive quarters or extending
beyond the Maturity Date of the Subordinated Debentures. In the event that
the Company exercises this right, then during any Extension Period (a) the
Company shall not declare or pay dividends on, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock, (b) the Company shall not make any payment of
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interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to the
Subordinated Debentures and (c) the Company shall not make guarantee
payments with respect to the foregoing (other than pursuant to the Trust
Guarantee); provided, however, that the restriction in clause (a) above
does not apply to any stock dividends paid by the Company where the
dividend stock is the same stock as that on which the dividend is being
paid. Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period; provided that such Extension
Period, together with all such previous and further extensions thereof, may
not exceed 20 consecutive quarters and may not extend beyond the Maturity Date
of the Subordinated Debentures. Upon the termination of any Extension Period
and the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the above requirements. See "Description of the
Subordinated Debentures -- Interest" and "Description of the Subordinated
Debentures -- Option to Extend Interest Payment Period." If distributions are
deferred, the deferred distributions and accrued interest thereon shall be
paid to holders of record of the Preferred Securities as they appear on the
books and records of Equitable Trust on the record date for distributions due
at the end of such deferral period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that Equitable Trust has funds available for the payment of such
distributions in the Property Account. Equitable Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company under the Subordinated Debentures. See
"Description of the Subordinated Debentures." The payment of distributions
out of moneys held by Equitable Trust is guaranteed by the Company to the
extent set forth under "Description of Trust Guarantee" in the accompanying
Prospectus. The Trust Guarantee, when taken together with the back-up
undertakings, consisting of obligations of the Company as set forth in the
Declaration of Trust of Equitable Trust (including the obligation to pay
expenses of Equitable Trust), the Indenture and any applicable supplemental
indentures thereto, and the Subordinated Debentures issued to Equitable Trust,
provide a full and unconditional guarantee by the Company of the Preferred
Securities.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of Equitable Trust on the
relevant record dates, which, as long as the Preferred Securities remain in
global form, will be one Business Day (as defined below) prior to the relevant
payment dates. Such distributions will be paid through the Property Trustee,
who will hold amounts received in respect of the Subordinated Debentures in the
Property Account for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment will be made as described under "-- Book-Entry
Issuance -- The Depository Trust Company" below. In the event that the
Preferred Securities do not continue to remain in global form, the relevant
record dates for the Preferred Securities shall conform to the rules of any
securities exchange on which the Preferred Securities are listed and, if none,
shall be selected by the Regular Trustees, which dates shall be at least one
Business Day but less than 60 Business Days prior to the relevant payment
dates. Distributions payable on any Preferred Securities that are not
punctually paid on any distribution payment date will cease to be payable to
the person in whose name such Preferred Securities are registered on the
relevant record date, and such defaulted distribution will instead be payable
to the person in whose name such Preferred Securities are registered on the
special record date or other specified date determined in accordance with the
Indenture. In the event that any date on which distributions are to be made
on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such record
date. A "Business Day" shall mean any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
Mandatory Redemption
Upon the repayment of the Subordinated Debentures, whether at maturity
or upon redemption, the proceeds from such repayment or redemption shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so repaid or redeemed at the Redemption Price;
S-17
provided that, holders of Trust Securities shall be given not less than 30
nor more than 60 days notice of such redemption. The Subordinated
Debentures will mature on July 30, 2026 unless the maturity date is changed
at the option of the Company (provided in the case of an extension of the
maturity date that certain financial conditions are met), and may be
redeemed, in whole or in part, at any time on or after July 30, 2001 or at
any time, in whole (but not in part) upon the occurrence of a Special Event.
See "Description of the Subordinated Debentures -- Optional Redemption." In
the event that fewer than all of the outstanding Trust Securities are to be
redeemed, the Trust Securities will be redeemed pro rata to each holder
according to the aggregate liquidation amount of Trust Securities held by the
relevant holder in relation to the aggregate liquidation amount of all Trust
Securities outstanding. See "-- Book-Entry Issuance -- The Depository
Trust Company" below for a description of DTC's (as hereinafter defined)
procedures in the event of redemption.
Special Event Redemption
"Tax Event" means that the Regular Trustees shall have received an
opinion of an independent tax counsel experienced in such matters to the
effect that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority
thereof or therein or (b) any official administrative pronouncement or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is
announced on or after the date of original issuance of the Preferred
Securities there is more than an insubstantial risk that (i) Equitable
Trust is, or will be within 90 days after the date thereof, subject to
United States federal income tax with respect to interest accrued or
received on the Subordinated Debentures, (ii) Equitable Trust is, or will
be within 90 days after the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges, or (iii) interest
payable to Equitable Trust on the Subordinated Debentures is not, or within
90 days of the date thereof, will not be deductible, in whole or in part,
by the Company for United States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of an independent counsel experienced in practice under
the Investment Company Act of 1940, as amended (the "1940 Act"), to the
effect that, as a result of the occurrence of a change in law or regulation
or a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law"), there is more than insubstantial risk that Equitable
Trust is or will be considered an "investment company" which is required to be
registered under the 1940 Act, which Change in 1940 Act Law becomes effective
on or after the date of original issuance of the Preferred Securities.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Company
shall have the right, upon not less than 30 nor more than 60 days notice, to
redeem the Subordinated Debentures, in whole (but not in part), for cash within
90 days following the occurrence of such Special Event, and, following such
redemption, Trust Securities with an aggregate liquidation amount equal to the
aggregate principal amount of the Subordinated Debentures so redeemed shall
be redeemed by Equitable Trust at the Redemption Price on a pro rata basis.
Distribution of the Subordinated Debentures
At any time, the Company will have the right to terminate Equitable Trust
and, after satisfaction of the liabilities of creditors of Equitable Trust as
provided by applicable law, cause the Subordinated Debentures to be distributed
to the holders of the Trust Securities in liquidation of Equitable Trust.
Under current United States federal income tax law and interpretation and
assuming, as expected, Equitable Trust is treated as a grantor trust, a
distribution of the Subordinated Debentures should not be a taxable event to
holders of the Preferred Securities. Should there be a change in law, a change
in legal interpretation, a Special Event or other circumstances, however, the
distribution could be a taxable event to the holders of the Preferred
Securities. In addition, a dissolution of Equitable Trust in which holders
of the Preferred Securities receive cash would be a taxable event to such
holders. See "United States Federal Income Taxation -- Receipt of Subordinated
Debentures or Cash Upon Liquidation of Equitable Trust."
S-18
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to cause the
Subordinated Debentures to be listed on the New York Stock Exchange or on
such other exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debentures upon
dissolution of Equitable Trust, (i) the Preferred Securities will no longer
be deemed to be outstanding and (ii) the record holders of the Preferred
Securities will receive a registered global certificate or certificates
representing the Subordinated Debentures to be delivered upon such
distribution in exchange for the Preferred Securities held by such holders.
If the Company elects to liquidate Equitable Trust and thereby causes
the Subordinated Debentures to be distributed to holders of the Preferred
Securities in liquidation of Equitable Trust, the Company shall have the
right to shorten the maturity of such Subordinated Debentures to a date not
earlier than July 30, 2001 or extend the maturity of such Subordinated
Debentures to a date not later than the earlier of (a) July 30, 2045 or (b)
the Interest Deduction Date (as defined herein), provided that it can
extend the maturity only if certain conditions are met. See "Description
of the Subordinated Debentures -- Option to Change Scheduled Maturity Date."
There can be no assurance as to the market prices for either the
Preferred Securities or the Subordinated Debentures that may be distributed
in exchange for the Preferred Securities if a dissolution and liquidation
of Equitable Trust were to occur. Accordingly, the Preferred Securities
that an investor may purchase, whether pursuant to the offer made hereby or
in the secondary market, or the Subordinated Debentures that an investor
may receive if a dissolution and liquidation of Equitable Trust were to
occur, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
On March 19, 1996, the Revenue Reconciliation Bill of 1996, the revenue
portion of President Clinton's budget proposal was released. The Bill
would, among other things, generally deny interest deductions for interest
on an instrument, issued by a corporation, that has a maximum weighted
average maturity of more than 40 years. The Bill would also generally deny
interest deductions for interest on an instrument, issued by a corporation,
that has a maximum term of more than 20 years and that is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where
the holder or some other related party issues a related instrument that is
not shown as indebtedness on the issuer's consolidated balance sheet. For
purposes of determining the weighted average maturity or the term of an
instrument, any right to extend would be treated as exercised. The above-
described provisions of the Bill were proposed to be effective generally
for instruments issued on or after December 7, 1995. However, on March 29,
1996, the Chairmen of the Senate Finance and House Ways and Means
Committees issued a joint statement to the effect that it was their
intention that the effective date of President's legislative proposals, if
adopted, will be no earlier than the date of appropriate Congressional
action. Under current law, the Company will be able to deduct interest on
the Subordinated Debentures. The terms of the Subordinated Debentures limit
the right to extend the maturity of the Subordinated Debentures to a date which
is six months shorter than any legislative limit on the length of debt
securities for which interest is deductible. The Company believes this will
allow it an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, the Company will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no
assurance that current or future legislative proposals or final legislation will
not affect the ability of the Company to deduct interest on the Subordinated
Debentures, giving rise to a Tax Event which would permit the Company to cause
the redemption of the Preferred Securities prior to July 30, 2001 (the first
date on which the Company would otherwise be able to cause a redemption of the
Preferred Securities). See "United States Federal Income Taxation."
Redemption Procedures
Equitable Trust may not redeem fewer than all of the outstanding
Preferred Securities unless all accrued and unpaid distributions have been
paid on all Preferred Securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
S-19
If Equitable Trust gives a notice of redemption in respect of Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New
York City time, on the redemption date, provided that the Company has paid
to the Property Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Subordinated Debentures, Equitable
Trust will irrevocably deposit with the depository funds sufficient to pay
the applicable Redemption Price and will give the depository irrevocable
instructions to pay the Redemption Price to the holders of the Preferred
Securities. If notice of redemption shall have been given and funds
deposited as required, then immediately prior to the close of business on
the date of such deposit, distributions will cease to accrue and all rights
of holders of such Preferred Securities so called for redemption will
cease, except the right of the holders of such Preferred Securities to
receive the Redemption Price, but without interest on such Redemption
Price. In the event that any date fixed for redemption of Preferred
Securities is not a Business Day, then payment of the Redemption Price
payable on such date will be made on the next succeeding day that is a
Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In
the event that the Company fails to repay the Subordinated Debentures on
maturity or payment of the Redemption Price in respect of Preferred Securities
is improperly withheld or refused and not paid either by Equitable Trust or
by the Company pursuant to the Trust Guarantee, distributions on such
Preferred Securities will continue to accrue at the then applicable rate from
the original redemption date to the actual date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities
are to be redeemed, the Preferred Securities will be redeemed as described
below under "-- Book-Entry Issuance -- The Depository Trust Company."
If a partial redemption of the Preferred Securities would result in the
delisting of the Preferred Securities by a national securities exchange or
other organization on which the Preferred Securities are then listed, the
Company pursuant to the Indenture will only redeem the Subordinated
Debentures in whole and, as a result, Equitable Trust may only redeem the
Preferred Securities in whole.
Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Company or its
subsidiaries may at any time, and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of Equitable Trust (each a "Liquidation"), the then
holders of the Preferred Securities will be entitled to receive on a pro rata
basis solely out of the assets of Equitable Trust, after satisfaction of
liabilities to creditors, distributions in an amount equal to the aggregate
of the stated liquidation amount of $25 per Preferred Security plus accrued
and unpaid distributions thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such Liquidation, Subordinated
Debentures in an aggregate stated principal amount equal to the aggregate
stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Preferred Securities have been distributed on a
pro rata basis to the holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because Equitable Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by Equitable Trust on the Preferred Securities shall be paid on a
pro rata basis. The holders of the Common Securities will be entitled to
receive distributions upon any such dissolution pro rata with the holders of
the Preferred Securities, except that if a Declaration Event of Default has
occurred and is continuing, the Preferred Securities shall have a preference
over the Common Securities with regard to such distributions.
S-20
The Trust Guarantee, when taken together with the back-up undertakings,
consisting of obligations of the Company as set forth in the Declaration of
Trust of Equitable Trust (including the obligation to pay expenses of Equitable
Trust), the Indenture and any applicable supplemental indentures thereto, and
the Subordinated Debentures issued to Equitable Trust, provide a full and
unconditional guarantee by the Company of the Preferred Securities.
Termination
Pursuant to the Declaration, Equitable Trust shall terminate upon the
earliest of (i) July 23, 2051, (ii) the bankruptcy of the Company, (iii)
the filing of a certificate of dissolution or its equivalent with respect
to the Company, the filing of a certificate of cancellation with respect to
Equitable Trust, or the revocation of the charter of the Company and the
expiration of 90 days after the date of revocation without a reinstatement
thereof, (iv) the distribution of the Subordinated Debentures from
Equitable Trust, (v) the entry of a decree of a judicial dissolution of the
Company or Equitable Trust, or (vi) the redemption of all the Trust
Securities.
Declaration Events of Default
An Event of Default under the Indenture (an "Indenture Event of
Default") constitutes an event of default under the Declaration with
respect to the Trust Securities (a "Declaration Event of Default"),
provided that pursuant to the Declaration, the holder of the Common
Securities will be deemed to have waived any Declaration Event of Default
with respect to the Common Securities until all Declaration Events of
Default with respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until such Declaration Event of Default with respect
to the Preferred Securities has been so cured, waived, or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the holders of the Preferred Securities and only the holders of
the Preferred Securities will have the right to direct the Property Trustee
with respect to certain matters under the Declaration, and therefore the
Indenture.
Upon the occurrence of a Declaration Event of Default, the Indenture
Trustee (as defined herein) or the Property Trustee as the holder of the
Subordinated Debentures will have the right under the Indenture to declare
the principal of and interest on the Subordinated Debentures to be
immediately due and payable. The Company and Equitable Trust are each
required to file annually with the Property Trustee an officer's
certificate as to its compliance with all conditions and covenants under
the Declaration.
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by Equitable Trust, any record holder of Preferred
Securities may institute legal proceedings directly against the Company to
enforce the Property Trustee's rights under such Subordinated Debentures without
first instituting any legal proceedings against such Property Trustee or any
other person or entity. Notwithstanding the foregoing, if an Event of Default
under the Declaration has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Subordinated Debentures issued to Equitable Trust on the date such interest or
principal is otherwise payable, then a record holder of Preferred Securities
may institute a proceeding directly against the Company for enforcement of
payment to the record holder of the Preferred Securities of the principal of or
interest on the Subordinated Debentures on or after the respective due dates
specified in the Subordinated Debentures, and the amount of the payment will be
based on the holder's pro rata share of the amount due and owing on all of the
Preferred Securities. The record holder in the case of the issuance of one or
more global Preferred Securities certificates will be the Depository Trust
Company acting at the direction of the beneficial owners of the Preferred
Securities. The record holder in the case of the issuance of one or more
global Preferred Securities certificates will be The Depository Trust Company
acting at the direction of the beneficial owners of the Preferred Securities.
Voting Rights
Except as described herein, under the Trust Act, the Trust Indenture
Act and under "Description of the Trust Guarantee -- Modification of the
Trust Guarantee; Assignment" in the accompanying Prospectus, and as
otherwise required by law and the Declaration, the holders of the Preferred
Securities will have no voting rights.
S-21
Subject to the requirement of the Property Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Property Trustee,
or direct the exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct the Property
Trustee, as holder of the Subordinated Debentures, to (i) exercise the
remedies available under the Indenture with respect to the Subordinated
Debentures, (ii) waive any past Indenture Event of Default that is waivable
under the Indenture (as defined herein), or (iii) exercise any right to
rescind or annul a declaration that the principal of all the Subordinated
Debentures shall be due and payable, or consent to any amendment,
modification or termination of the Indenture or the Subordinated
Debentures, where such consent should be required; provided, however, that,
where a consent or action under the Indenture would require the consent or
act of the holders of greater than a majority in principal amount of Subor-
dinated Debentures affected thereby (a "Super-Majority"), the Property Trustee
may only give such consent or take such action at the written direction of the
holders of at least the proportion in liquidation amount of the Preferred
Securities which the relevant Super-Majority represents of the aggregate
principal amount of the Subordinated Debentures outstanding. The Property
Trustee shall notify all holders of the Preferred Securities of any notice of
default received from the Indenture Trustee with respect to the Subordinated
Debentures. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Property Trustee shall not take any
of the actions described in clauses (i), (ii) or (iii) above unless the
Property Trustee has obtained an opinion of tax counsel to the effect that, as
a result of such action, Equitable Trust will not be classified as other than
a grantor trust for United States federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, the Property Trustee shall request the direction of the holders
of the Trust Securities with respect to such amendment, modification or
termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where a
consent under the Indenture would require the consent of a Super-Majority, the
Property Trustee may only give such consent at the direction of the holders of
at least the proportion in liquidation amount of the Trust Securities which
the relevant Super-Majority represents of the aggregate principal amount of
the Subordinated Debentures outstanding. The Property Trustee shall not take
any such action in accordance with the directions of the holders of the Trust
Securities unless the Property Trustee has obtained an opinion of tax counsel
to the effect that Equitable Trust will not be classified as other than a
grantor trust for United States federal income tax purposes on account of
such action.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may
be given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth the following information:
(i) the date of such meeting or the date by which such action is to be taken;
(ii) a description of any resolution proposed for adoption at such meeting on
which such holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of proxies or
consents. No vote or consent of the holders of Preferred Securities will be
required for Equitable Trust to redeem and cancel Preferred Securities or
distribute Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned at such time by the Company or any
entity directly or indirectly controlling or controlled by, or under direct
or indirect common control with, the Company, shall not be entitled to vote
or consent and shall, for purposes of such vote or consent, be treated as
if such Preferred Securities were not outstanding.
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The procedures by which holders of Preferred Securities may exercise
their voting rights are described below. See "--Book-Entry Issuance -- The
Depository Trust Company" below.
Holders of the Preferred Securities will have no rights to appoint or
remove the Equitable Trustees, who may be appointed, removed or replaced
solely by the Company as the indirect or direct holder of all of the Common
Securities.
Modification of the Declaration
The Declaration may be modified and amended if approved by a majority
of the Regular Trustees (and in certain circumstances the Property
Trustee), provided that, if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or
(ii) the dissolution, winding-up or termination of Equitable Trust other
than pursuant to the terms of the Declaration, then the holders of the
Trust Securities voting together as a single class will be entitled to vote
on such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of at least a majority in liquidation
amount of the Trust Securities affected thereby; provided that, if any
amendment or proposal referred to in clause (i) above would adversely
affect only the Preferred Securities or the Common Securities, then only
the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the
approval of a majority in liquidation amount of such class of Trust
Securities.
Notwithstanding the foregoing, no amendment or modification may be made
to the Declaration if such amendment or modification would (i) cause
Equitable Trust to be classified as other than a grantor trust for United
States federal income tax purposes, (ii) reduce or otherwise adversely
affect the powers of the Property Trustee or (iii) cause Equitable Trust to
be deemed an "investment company" which is required to be registered under
the 1940 Act.
Mergers, Consolidations or Amalgamations
Equitable Trust may not consolidate, amalgamate, merge with or into or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. Equitable Trust may, with the consent of a majority of
the Regular Trustees and without the consent of the holders of the Trust
Securities, the Property Trustee or the Delaware Trustee, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided that, (i) such successor entity
either (x) expressly assumes all of the obligations of Equitable Trust
under the Trust Securities or (y) substitutes for the Trust Securities
other securities having substantially the same terms as the Trust
Securities (the "Successor Securities"), so long as the Successor
Securities rank the same as the Trust Securities rank with respect to
distributions and payments upon liquidation, redemption and otherwise,
(ii) the Company expressly acknowledges a trustee of such successor entity
possessing the same powers and duties as the Property Trustee as the holder
of the Subordinated Debentures, (iii) the Preferred Securities or any
Successor Securities with respect to the Preferred Securities are listed,
or any such Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization
on which the Preferred Securities are then listed or quoted, (iv) such
merger, consolidation, amalgamation or replacement does not cause the
Preferred Securities (including any Successor Securities with respect to
the Preferred Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation
or replacement does not adversely affect the rights, preferences and privileges
of the holders of the Trust Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of the holders'
interest in the new entity), (vi) such successor entity has a purpose identical
to that of Equitable Trust, (vii) prior to such merger, consolidation, amalga-
mation or replacement, the Company has received an opinion of an independent
counsel to Equitable Trust experienced in such matters to the effect that, (A)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
S-23
than with respect to any dilution of the holders' interest in the new entity),
(B) following such merger, consolidation, amalgamation or replacement, neither
Equitable Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (C) Equitable Trust will continue to
be classified as a grantor trust for federal income tax purposes, and (viii)
the Company guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Trust Guarantee.
Notwithstanding the foregoing, Equitable Trust shall not, except with the
consent of holders of 100% in liquidation amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by any other entity
or permit any other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or replacement would
cause Equitable Trust or the Successor Entity to be classified as other than a
grantor trust for United States federal income tax purposes and each holder of
the Trust Securities not to be treated as owning an undivided interest in the
Subordinated Debentures.
Expenses and Taxes
In the Declaration, the Company has agreed to pay all debts and other
obligations (other than with respect to the Trust Securities) and all costs
and expenses of Equitable Trust (including costs and expenses relating to
the organization of Equitable Trust, the fees and expenses of the Trustees
and the costs and expenses relating to the operation of Equitable Trust)
and to pay any and all taxes and all costs and expenses with respect
thereto (other than United States withholding taxes) to which Equitable
Trust might become subject. The foregoing obligations of the Company under
the Declaration are for the benefit of, and shall be enforceable by, any
person to whom any such debts, obligations, costs, expenses and taxes are
owed (a "Creditor") whether or not such Creditor has received notice
thereof. Any such Creditor may enforce such obligations of the Company
directly against the Company, and the Company has irrevocably waived any
right or remedy to require that any such Creditor take any action against
Equitable Trust or any other person before proceeding against the Company.
The Company has also agreed in the Declaration to execute such additional
agreements as may be necessary or desirable to give full effect to the
foregoing.
Book-Entry Issuance -- The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities depository
for the Preferred Securities. The Preferred Securities initially will be
issued only as fully-registered securities registered in the name of Cede &
Co. (DTC's nominee). One or more fully-registered global Preferred
Securities certificates, representing the total aggregate number of
Preferred Securities, will be issued and will be delivered to DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in the global
Preferred Securities as represented by a global certificate.
DTC has advised the Company and Equitable Trust that DTC is a limited-
purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others, such as securities
brokers and dealers, banks and trust companies that clear transactions through
or maintain a direct or indirect custodial relationship with a Direct
Participant ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
S-24
Purchases of Preferred Securities within the DTC system must be made by
or through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Preferred Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the
amount of the interest of each Direct Participant in such Preferred
Securities to be redeemed in accordance with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will
itself consent or vote with respect to Preferred Securities. Under its
usual procedures, DTC would mail an Omnibus Proxy to Equitable Trust as
soon as possible after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Preferred Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy). The Company and
Equitable Trust believe that the arrangements among DTC, Direct and
Indirect Participants, and Beneficial Owners will enable the Beneficial
Owners to exercise rights equivalent in substance to the rights that can be
directly exercised by a holder of a beneficial interest in Equitable Trust.
Distribution payments on the Preferred Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to Beneficial Owners will
be governed by standing instructions and customary practices, as is the
case with securities held for the account of customers in bearer form or
registered in "street name," and such payments will be the responsibility
of such Participant and not of DTC, Equitable Trust or the Company, subject
to any statutory or regulatory requirements that may be in effect from time
to time. Payment of distributions to DTC is the responsibility of
Equitable Trust, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical delivery of
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Preferred Securities.
S-25
DTC may discontinue providing its services as securities depository
with respect to the Preferred Securities at any time by giving reasonable
notice to Equitable Trust. Under such circumstances, in the event that a
successor securities depository is not obtained, Preferred Securities
certificates are required to be printed and delivered. Additionally, the
Regular Trustees (with the consent of the Company) may decide to discontinue
use of the system of book-entry transfers through DTC (or any successor
depository) with respect to the Preferred Securities. In that event,
certificates for the Preferred Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Company and Equitable Trust
believe to be reliable, but neither the Company nor Equitable Trust takes
responsibility for the accuracy thereof.
Information Concerning the Property Trustee
The Property Trustee, prior to the occurrence of a default with respect
to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration, in the terms of the Trust
Securities or in the Trust Indenture Act and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the
Property Trustee is under no obligation to exercise any of the powers
vested in it by the Declaration at the request of any holder of Preferred
Securities, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The
holders of Preferred Securities will not be required to offer such
indemnity in the event such holders, by exercising their voting rights,
direct the Property Trustee to take any action following a Declaration
Event of Default. The Property Trustee also serves as Preferred Securities
Guarantee Trustee.
Paying Agent
In the event that the Preferred Securities do not remain in book-entry
form, the following provisions would apply:
The Property Trustee will act as paying agent, and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of Equitable Trust, but upon payment (with
the giving of such indemnity as Equitable Trust or the Company may require)
in respect of any tax or other government charges that may be imposed in
relation to it.
Equitable Trust will not be required to register or cause to be
registered the transfer of Preferred Securities after such Preferred
Securities have been called for redemption.
Governing Law
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
Miscellaneous
The Regular Trustees are authorized and directed to operate Equitable
Trust in such a way so that Equitable Trust will not be required to
register as an "investment company" under the 1940 Act or be characterized
as other than a grantor trust for United States federal income tax
purposes. The Company is authorized and directed to conduct its affairs so
that the Subordinated Debentures will be treated as indebtedness of the
Company for United States federal income tax purposes. In this connection,
the Company and the Regular Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of Equitable
Trust or the certificate of incorporation of the Company, that each of the
Company and the Regular Trustees determines in their discretion to be
necessary or desirable to achieve such end, as long as such action does not
adversely affect the interests of the holders of the Preferred Securities
or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
S-26
DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Subordinated
Debentures in which Equitable Trust will invest the proceeds from the issuance
and sale of the Trust Securities. This description supplements the description
of the general terms and provisions of the Subordinated Debentures set forth in
the accompanying Prospectus under the caption "Description of Debt Securities."
The following description does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the description in the
accompanying Prospectus and the Indenture, dated as of January 17, 1995 (the
"Base Indenture"), between the Company and The First National Bank of Chicago,
as Trustee (the "Indenture Trustee"), as supplemented by a First Supplemental
Indenture, to be dated as of July 18, 1996 (the Base Indenture, as so
supplemented, is hereinafter referred to as the "Indenture"), the forms of
which are filed as Exhibits to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form a part, and the
Trust Indenture Act. Certain capitalized terms used herein are defined in the
Indenture.
At any time, the Company will have the right to liquidate Equitable
Trust and cause Subordinated Debentures to be distributed to the holders of
the Trust Securities in liquidation of Equitable Trust. See "Description
of the Preferred Securities -- Distribution of the Subordinated
Debentures."
If the Subordinated Debentures are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debentures listed on the New York Stock Exchange or on such
other exchange on which the Preferred Securities are then listed.
General
The Subordinated Debentures will be issued as unsecured subordinated
debt securities under the Indenture. The Subordinated Debentures will be
limited in aggregate principal amount to approximately $128.75 million,
such amount being the sum of the aggregate stated liquidation amount of the
Preferred Securities and the capital contributed by the Company in exchange
for the Common Securities (the "Company Payment").
The Subordinated Debentures are not subject to a sinking fund
provision. The entire principal of the Subordinated Debentures will mature
and become due and payable, together with any accrued and unpaid interest
thereon including Compounded Interest (as hereinafter defined), if any, on
July 30, 2026, subject to the election of the Company to shorten or extend
the scheduled maturity date of the Subordinated Debentures, which election
in the case of an extension of the scheduled maturity date is subject to
the Company's satisfying certain financial conditions. See "-- Option to
Change Scheduled Maturity Date."
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in Equitable Trust, it
is presently anticipated that such Subordinated Debentures will initially
be issued in the form of one or more Global Securities (as defined below).
As described herein, under certain limited circumstances, Subordinated
Debentures may be issued in definitive certificated form in exchange for a
Global Security. See "-- Book-Entry and Settlement" below. In the event
that Subordinated Debentures are issued in definitive certificated form,
such Subordinated Debentures will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices
described below. Payments on Subordinated Debentures issued as a Global
Security will be made to DTC or its nominee, a successor depository or its
nominee. In the event Subordinated Debentures are issued in definitive
certificated form, principal and interest will be payable, the transfer of
the Subordinated Debentures will be registrable and Subordinated Debentures
will be exchangeable for Subordinated Debentures of other denominations of
a like aggregate principal amount at the corporate trust offices of the
Indenture Trustee in Chicago, Illinois and New York, New York; provided
that payment of interest may be made at the option of the Company by check
mailed to the address of the persons entitled thereto.
The Indenture does not contain provisions that afford the holders of
the Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company or other similar transaction that may
adversely affect such holders.
S-27
Subordination
The Indenture provides that the Subordinated Debentures are subordinated
and junior in right of payment to the prior payment in full of all Senior
Indebtedness of the Company whether now existing or hereafter incurred. In
the event and during the continuation of any default by the Company in the
payment of principal, premium, interest or any other payment due on any Senior
Indebtedness of the Company, or in the event that the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default, then
in either case, no payment will be made by the Company with respect to the
principal (including redemption payments) of or interest on the Subordinated
Debentures. Upon any distribution of assets of the Company to creditors upon
any dissolution, winding-up, liquidation or reorganization, whether voluntary
or involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all principal, premium, if any, and interest due or to become
due on all Senior Indebtedness of the Company must be paid in full before the
holders of Subordinated Debentures are entitled to receive or retain any
payment. In the event that the Subordinated Debentures are declared due and
payable before the Maturity Date, then all amounts due or to become due on
all Senior Indebtedness shall have been paid in full before holders of the
Subordinated Debentures are entitled to receive or retain any payment. Upon
satisfaction of all claims of all Senior Indebtedness then outstanding, the
rights of the holders of the Subordinated Debentures will be subrogated to
the rights of the holders of Senior Indebtedness of the Company to receive
payments or distributions applicable to Senior Indebtedness until all amounts
owing on the Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means all indebtedness of the Company,
whether now existing or hereafter created, but excluding trade accounts
payable arising in the ordinary course of business. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall include (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of
the Company for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments issued by the Company ; (ii)
all capital lease obligations of the Company; (iii) all obligations of the
Company issued or assumed as the deferred purchase price of property, all
conditional sale obligations of the Company and all obligations of the
Company under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
the Company for the reimbursement on any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction; (v) all obligations
of the type referred to in clauses (i) through (iv) above of other persons for
the payment of which the Company is responsible or liable as obligor, guarantor
or otherwise, including under all support agreements or guarantees by the
Company of debentures, notes and other securities issued by its subsidiaries;
and (vi) all obligations of the type referred to in clauses (i) through (v)
above of other persons secured by any lien on any property or asset of the
Company (whether or not such obligation is assumed by the Company); except in
each case for (1) any such indebtedness that is by its terms subordinated to or
pari passu with the Subordinated Debentures, and (2) any indebtedness between
or among the Company and its affiliates. Such Senior Indebtedness shall
continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. As of March 31, 1996 the aggregate amount
of Senior Indebtedness and liabilities and obligations of the Company's
subsidiaries that would have effectively ranked senior to the Subordinated
Debentures was approximately $9.2 billion.
Optional Redemption
The Company shall have the right to redeem the Subordinated Debentures,
(i) at any time, in whole or in part, from time to time, on or after July 30,
2001 or (ii) at any time in whole (but not in part) upon the occurrence of a
Special Event as described under "Description of the Preferred Securities --
Special Event Redemption", upon not less than 30 nor more than 60 days notice,
at a redemption price equal to 100% of the principal amount to be redeemed plus
any accrued and unpaid interest to the redemption date. If a partial redemption
of the Preferred Securities resulting from a partial redemption of the
Subordinated Debentures would result in the delisting of the Preferred
S-28
Securities, the Company may only redeem the Subordinated Debentures in whole.
The Company may not redeem fewer than all outstanding Subordinated Debentures
unless there was no accrued and unpaid interest on the Subordinated Debentures
as of the Interest Payment Date (as defined below) next preceding the
redemption date.
Interest
Each Subordinated Debenture shall bear interest at the rate of 8.70%
per annum from the original date of issuance, or from the most recent
interest payment date to which interest has been paid or provided for,
payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each an "Interest Payment Date"), commencing
September 30, 1996, to the person in whose name such Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. In the event the
Subordinated Debentures shall not continue to remain in book-entry form, the
Company shall have the right to select record dates, which shall be more than
one Business Day but less than 60 Business Days prior to the Interest Payment
Date. Any installment of interest not punctually paid will cease to be payable
to the holders of the Subordinated Debentures on the regular record date and
may be paid to the person in whose name the Subordinated Debentures are regis-
tered at the close of business on a special record date to be fixed by the
Indentrue Trustee for the payment of such defaulted interest, notice of which
shall be given to the holders of the Subordinated Debentures not less than 10
days prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange,
interdealer quotation system or other organization on which the Subordinated
Debentures may be listed, and upon such notice as may be required by such
exchange, system or organization.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
will be computed on the basis of the actual number of days elapsed in such 90
day quarter. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
Option to Change Scheduled Maturity Date
The "Scheduled Maturity Date" of the Subordinated Debentures is July 30,
2026. The Company, however, may, extend such maturity date (July 30, 2026 or
the maturity date then in effect, as the case may be, is hereinafter referred
to as the "Maturity Date") for one or more periods, but in no event later than
the earlier of (i) July 30, 2045 or (ii) the "Interest Deduction Date". The
"Interest Deduction Date" shall mean the date which is six months earlier than
the ending date of the maximum term (beginning on the date of issue of the
Subordinated Debentures and including any extensions thereof), as determined
under any federal statute applicable by its terms to the Subordinated Deben-
tures which is enacted at any time after the issuance of the Subordinated
Debentures (including, but not limited to, at any time after an extension of
the Maturity Date), of a debt instrument for which interest is deductible for
federal income tax purposes. In no event shall the extended Maturity Date be
later than the Interest Deduction Date even if the Maturity Date has previously
been extended to a date beyond the Interest Deduction Date. The Company must
exercise its right to extend the term at least 90 days prior to the Maturity
Date then in effect and must satisfy the following conditions on the date the
Company exercises such right and on the Maturity Date then in effect prior to
such proposed extension: (a) the Company is not in bankruptcy or otherwise
insolvent, (b) the Company is not in default on any Subordinated Debenture
issued to Equitable Trust or to any trustee of Equitable Trust in connection
with an issuance of Trust Securities by Equitable Trust, (c) the Company has
made timely payments on the Subordinated Debentures for the immediately
preceding six quarters without deferrals, (d) Equitable Trust is not in arrears
on payments of distributions on the Trust Securities, (e) the Subordinated
Debentures or Preferred Securities are rated investment grade by any one of
Standard & Poor's Corporation, Moody's Investors Service, Inc., Fitch Investor
S-29
Services, Duff & Phelps Credit Rating Company or any other nationally recog-
nized statistical rating organization, and (f) the final maturity of such
Subordinated Debentures is not later than the 49th anniversary of the issuance
of the Preferred Securities. Pursuant to the Declaration, the Regular Trustees
are required to give notice of the Company's election to change the Maturity
Date to the holders of the Preferred Securities.
In addition, if the Company exercises its right to liquidate Equitable
Trust and distribute the Subordinated Debentures as discussed above under
"Description of the Preferred Securities -- Distribution of the
Subordinated Debentures," effective upon such exercise the Maturity Date of
the Subordinated Debentures may be changed to (i) any date elected by the
Company that is no earlier than July 30, 2001 and (ii) any date elected by
the Company which is not later than the earlier of (a) July 30, 2045 or (b) the
"Interest Deduction Date"; provided that on the date the Company exercises
such right and on the Maturity Date in effect prior to such proposed extension
the conditions specified in the previous paragraph are satisfied.
Option to Extend Interest Payment Period
The Company has the right at any time, and from time to time, during
the term of the Subordinated Debentures to defer payments of interest by
extending the interest payment period for a period not exceeding 20
consecutive quarters, at the end of which Extension Period, the Company
shall pay all interest then accrued and unpaid, together with interest
thereon compounded quarterly at the rate specified for the Subordinated
Debentures to the extent permitted by applicable law ("Compounded
Interest"); provided that no Extension Period shall extend beyond the
Maturity Date; and provided further that, during any such Extension Period,
(a) the Company shall not declare or pay any dividends on, make any
distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the
Company that rank pari passu with or junior to the Subordinated Debentures
and (c) the Company shall not make guarantee payments with respect to the
foregoing (other than pursuant to the Trust Guarantee); provided, however,
that, the restriction in clause (a) above does not apply to any stock
dividends paid by the Company where the dividend stock is the same as that
on which the dividend is paid. Prior to the termination of any such
Extension Period, the Company may further defer payments of interest by
extending the interest payment period; provided, however, that such
Extension Period, including all such previous and further extensions, may
not exceed 20 consecutive quarters or extend beyond the Maturity Date.
Upon the termination of any Extension Period and the payment of all amounts
then due, the Company may commence a new Extension Period, subject to the
terms set forth in this section. No interest during an Extension Period,
except at the end thereof, shall be due and payable. The Company has no
present intention of exercising its right to defer payments of interest by
extending the interest payment period on the Subordinated Debentures. If
the Property Trustee shall be the sole holder of the Subordinated
Debentures, the Company shall give the Regular Trustees and the Property
Trustee notice of its selection of such Extension Period one Business Day
prior to the earlier of (i) the date distributions on the Preferred
Securities are payable or (ii) the date the Regular Trustees are required
to give notice to the New York Stock Exchange (or other applicable self-
regulatory organization) or to holders of the Preferred Securities of the
record date or the date such distribution is payable. The Regular Trustees
shall give notice of the Company's selection of such Extension Period to
the holders of the Preferred Securities. If the Property Trustee shall not
be the sole holder of the Subordinated Debentures, the Company shall give
the holders of the Subordinated Debentures notice of its selection of such
Extension Period ten Business Days prior to the earlier of (i) the applicable
Interest Payment Date or (ii) the date upon which the Company is required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Subordinated Debentures of the record or
payment date of such related interest payment.
Indenture Events of Default
In addition to the Events of Default described in the Prospectus, an Event
of Default for purposes of the Subordinated Debentures shall include the
voluntary or involuntary dissolution or winding up of the business of Equitable
Trust or other termination of the existence of Equitable Trust, other than in
connection with (i) the distribution of the Subordinated Debentures to holders
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of the Trust Securities in liquidation of their interests in Equitable Trust,
(ii) the redemption of all of the outstanding Trust Securities, or (iii)
certain mergers, consolidations or amalgamations of Equitable Trust, each as
permitted by the Declaration.
If any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Subordinated Debentures, will have
the right to declare the principal of and the interest on the Subordinated
Debentures (including any Compounded Interest and any other amounts payable
under the Indenture) to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Subordinated Debentures
subject to the subordination provisions in the Indenture. See "Description
of the Debt Securities -- Events of Default" in the accompanying Prospectus
for a description of the Indenture Events of Default. An Indenture Event
of Default also constitutes a Declaration Event of Default. If the Property
Trustee fails to enforce its rights with respect to the Subordinated Debentures
held by Equitable Trust, any record holder of Preferred Securities may
institute legal proceedings directly against the Company to enforce the
Property Trustee's rights under such Subordinated Debentures without first
instituting any legal proceedings against such Property Trustee or any other
person or entity. Notwithstanding the foregoing, if an Event of Default under
the Declaration has occurred and is continuing and such event is attributable
to the failure of the Company to pay interest or principal on the Subordinated
Debentures issued to Equitable Trust on the date such interest or principal is
otherwise payable, then a record holder of Preferred Securities may institute
a proceeding directly against the Company for enforcement of payment to the
record holder of the Preferred Securities of the principal of or interest on
the Subordinated Debentures on or after the respective due dates specified in
the Subordinated Debentures, and the amount of the payment will be based on
the holder's pro rata share of the amount due and owing on all of the
Preferred Securities. The record holder in the case of the issuance of one
or more global Preferred Securities certificates will be The Depository Trust
Company acting at the direction of the beneficial owners of the Preferred
Securities. The holders of Preferred Securities in certain circumstances have
the right to direct the Property Trustee to exercise its rights, with respect
to other than principal and interest payments on the Subordinated Debentures,
as the holder of the Subordinated Debentures. See "Description of the Pre-
ferred Securities -- Declaration Events of Default" and "Description of the
Preferred Securities -- Voting Rights."
Additional Covenants
In addition to the covenants contained in the Base Indenture described
under "Description of Debt Securities -- Covenants" in the accompanying
Prospectus, but subject to the exceptions described below in this paragraph,
the Company has also covenanted, with respect to the Subordinated Debentures,
that for so long as the Preferred Securities and the Common Securities remain
outstanding the Company will (i) maintain 100% direct or indirect ownership of
the Common Securities, provided, however, that any permitted successor of the
Company under the Indenture may succeed to the Company's ownership of the
Common Securities, (ii) not voluntarily dissolve, wind-up or terminate Equi-
table Trust, except in connection with the distribution of Subordinated
Debentures or certain mergers, consolidations or amalgamations, each as per-
mitted by the Declaration, (iii) timely perform its duties as sponsor of
Equitable Trust, (iv) use its reasonable efforts to cause Equitable Trust
(a) to remain a business trust, except in connection with a distribution of
the Subordinated Debentures, the redemption of all of the Preferred Securities
and Common Securities of Equitable Trust or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (b) otherwise continue
not to be treated as an association taxable as a corporation or partnership for
United States federal income tax purposes, and (v) to use its reasonable
efforts to cause each holder of Preferred Securities and Common Securities
to be treated as owning an individual beneficial interest in the Subordinated
Debentures. The covenants in the Base Indenture relating to limitations on
liens on stock of Restricted Subsidiaries and limitations on issuance or
disposition of stock of Restricted Subsidiaries do not apply to the
Subordinated Debentures. See "Description of Debt Securities -- Covenants"
in the accompanying Prospectus. Further, the defeasance provisions of the
Base Indenture do not apply to the Subordinated Debentures. See "Description
of Debt Securities -- Defeasance and Discharge" in the accompanying Prospectus.
Book-Entry and Settlement
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Equitable
Trust, it is presently anticipated that the Subordinated Debentures will be
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issued in the form of one or more global certificates (each a "Global
Security") registered in the name of a securities depository or its nominee.
Except under the limited circumstances described below, Subordinated Debentures
represented by the Global Security will not be exchangeable for, and will
not otherwise be issuable as, Subordinated Debentures in definitive form.
The Global Securities described above may not be transferred except by the
depository to a nominee of the depository or by a nominee of the depository
to the depository or another nominee of the depository or to a successor
depository or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debentures in definitive form and will not be considered the Holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debentures shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the depository or its nominee or to a successor
depository or its nominee. Accordingly, each beneficial owner must rely on
the procedures of the depository or if such person is not a Participant, on
the procedures of the Participant through which such person owns its interest
to exercise any rights of a Holder under the Indenture.
The Depository
If Subordinated Debentures are distributed to holders of Preferred
Securities in liquidation of such holders' interests in Equitable Trust,
DTC will act as securities depository for the Subordinated Debentures. For
a description of DTC and the specific terms of the depository arrangements,
see "Description of the Preferred Securities -- Book-Entry Issuance -- The
Depository Trust Company." As of the date of this Prospectus Supplement,
the description therein of DTC's book-entry system and DTC's practices as
they relate to purchases, transfers, notices and payments with respect to
the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depository in the
event DTC or such successor depository is unable or unwilling to continue
as the depository for the Global Securities.
None of the Company, Equitable Trust, the Indenture Trustee, any paying
agent and any other agent of the Company or the Indenture Trustee will have
any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a Global
Security for such Subordinated Debentures or for maintaining, supervising
or reviewing any records relating to such beneficial ownership interests.
Discontinuance of the Depository's Services
A Global Security shall be exchangeable for Subordinated Debentures in
definitive certificated form registered in the names of persons other than
the depository or its nominee only if (i) the depository notifies the
Company that it is unwilling or unable to continue as a depository for such
Global Security and no successor depository shall have been appointed, (ii)
the depository, at any time, ceases to be a clearing agency registered
under the Exchange Act at which time the depository is required to be so
registered to act as such depository and no successor depository shall have
been appointed, or (iii) the Company, in its sole discretion, determines
that such Global Security shall be so exchangeable. Any Global Security
that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Subordinated Debentures registered in such names as the
depository shall direct. It is expected that such instructions will be
based upon directions received by the depository from its Participants with
respect to ownership of beneficial interests in such Global Security.
Miscellaneous
The Indenture will provide that the Company will pay all fees and
expenses related to (i) the offering of the Trust Securities and the
Subordinated Debentures, (ii) the organization, maintenance and dissolution
of Equitable Trust, (iii) the retention of the Equitable Trustees and (iv)
the enforcement by the Property Trustee of the rights of the holders of the
Preferred Securities.
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EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED
DEBENTURES AND THE TRUST GUARANTEE
As set forth in the Declaration, the sole purpose of Equitable Trust is
to (i) issue the Trust Securities evidencing undivided beneficial interests
in the assets of Equitable Trust, (ii) invest the proceeds from such
issuance and sale in the Subordinated Debentures and (iii) engage in only
those other activities necessary or incidental thereto.
As long as payments of interest and other payments are made when due on
the Subordinated Debentures, such payments will be sufficient to cover dis-
tributions and payments due on the Trust Securities because: (i) the aggregate
principal amount of Subordinated Debentures will be equal to the sum of the
aggregate stated liquidation amount of the Trust Securities; (ii) the interest
rate and the interest and other payment dates on the Subordinated Debentures
will match the distribution rate and distribution and other payment dates for
the Preferred Securities; (iii) the Company shall pay all, and Equitable Trust
shall not be obligated to pay, directly or indirectly, any, costs, expenses,
debts and obligations (other than with respect to the Trust Securities) related
to Equitable Trust; and (iv) the Declaration provides that the Equitable
Trustees shall not cause or permit Equitable Trust to, among other things,
engage in any activity that is not consistent with the purposes of Equitable
Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "Description of Trust Guarantee" in the accompanying Prospectus. If
the Company does not make interest and/or principal payments on the Subor-
dinated Debentures purchased by Equitable Trust, Equitable Trust will not have
sufficient funds to pay distributions on the Preferred Securities. The Trust
Guarantee will not apply to the payment of distributions and other payments on
the Preferred Securities when Equitable Trust does not have sufficient funds
to make such distributions or other payments.
The Trust Guarantee will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company except those made pari passu or subordinate by
their terms, (ii) pari passu with the most senior preferred or preference
stock now or hereafter issued by the Company and with any guarantee now or
hereafter entered into by the Company in respect of any preferred or preference
stock of any affiliate of the Company, and (iii) senior to the Company's
common stock.
The Trust Guarantee, when taken together with the back-up undertakings,
consisting of obligations of the Company as set forth in the Declaration of
Trust of Equitable Trust (including the obligation to pay expenses of Equitable
Trust), the Indenture and any applicable supplemental indentures thereto, and
the Subordinated Debentures issued to Equitable Trust, provide a full and
unconditional guarantee by the Company of the Preferred Securities. If the
Preferred Securities Guarantee Trustee fails to enforce the Trust Guarantee,
any record holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Preferred Securities Guarantee
Trustee's rights under the Trust Guarantee without first instituting a legal
proceeding against Equitable Trust, the Preferred Securities Guarantee Trustee
or any other person or entity. Notwithstanding the foregoing, if the Company
has failed to make a Guarantee Payment, a record holder of Preferred Securities
may directly institute a proceeding against the Company for enforcement of the
Trust Guarantee for such payment to the record holder of the Preferred
Securities of the principal of or interest on the Subordinated Debentures on
or after the respective due dates specified in the Subordinated Debentures,
and the amount of the payment will be based on the holder's pro rata share of
the amount due and owing on all of the Preferred Securities. The Company has
waived any right or remedy to require that any action be brought first against
Equitable Trust or any other person or entity before proceeding directly
against the Company. The record holder in the case of the issuance of one or
more global Preferred Securities certificates will be The Depository Trust
Company acting at the direction of the beneficial owners of the Preferred
Securities.
If the Property Trustee fails to enforce its rights with respect to the
Subordinated Debentures held by Equitable Trust, any record holder of Preferred
Securities may institute legal proceedings directly against the Company to
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enforce the Property Trustee's rights under such Subordinated Debentures
without first instituting any legal proceedings against such Property Trustee
or any other person or entity. Notwithstanding the foregoing, if an Event of
Default under the Declaration has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Subordinated Debentures issued to Equitable Trust on the date such interest or
principal is otherwise payable, then a record holder of Preferred Securities
may institute a proceeding directly against the Company for enforcement of
payment to the record holder of the Preferred Securities of the principal of
or interest on the Subordinated Debentures on or after the respective due
dates specified in the Subordinated Debentures, and the amount of the payment
will be based on the holder's pro rata share of the amount due and owing on
all of the Preferred Securities. The record holder in the case of the issuance
of one or more global Preferred Securities certificates will be The Depository
Trust Company acting at the direction of the beneficial owners of the Preferred
Securities. If another Indenture Event of Default occurs and is continuing,
the Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities -- Voting Rights," may direct the Property Trustee to enforce its
rights under the Subordinated Debentures.
UNITED STATES FEDERAL INCOME TAXATION
General
The following is a summary of certain of the material United States
federal income tax consequences of the purchase, ownership and disposition
of Preferred Securities. Unless otherwise stated, this summary deals only
with Preferred Securities held as capital assets by holders who purchase the
Preferred Securities upon original issuance ("Initial Holders"). It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that
will hold the Preferred Securities as a position in a "straddle," as part of
a "synthetic security" or "hedge," as part of a "conversion transaction" or
other integrated investment, or as other than a capital asset. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. dollar or the tax consequences to shareholders,
partners or beneficiaries of a holder of Preferred Securities. Further, it
does not include any description of any alternative minimum tax consequences
or the tax laws of any state or local government or of any foreign government
that may be applicable to the Preferred Securities. This summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), U.S. Treasury
regulations thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis. Any such changes may be applied retroactively in a manner
that could cause the tax consequences to vary substantially from the
consequences described below, possibly adversely affecting a beneficial owner
of the Preferred Securities. In particular, legislation has been proposed
that could adversely affect the Company's ability to deduct interest on the
Subordinated Debentures, which may in turn permit the Company to cause a
redemption of the Preferred Securities prior to 2001. See "-- Proposed Tax
Law Changes."
Classification of the Subordinated Debentures and Equitable Trust
In connection with the issuance of the Subordinated Debentures,
Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, P.C., Des
Moines, Iowa (the "Nyemaster Firm"), legal counsel for the Company and
Equitable Trust, will render its opinion generally to the effect that,
under then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), the Subordinated Debentures will
be classified for United States federal income tax purposes as indebtedness
of the Company.
In connection with the issuance of the Preferred Securities, the
Nyemaster Firm will render its opinion generally to the effect that, under
then current law and assuming full compliance with the terms of the
Declaration, Equitable Trust will be classified for United States federal
income tax purposes as a grantor trust and not as an association taxable as
a corporation. Accordingly, for United States federal income tax purposes,
each holder of Preferred Securities generally will be considered the owner
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of an undivided interest in the Subordinated Debentures. Each holder will
be required to include in its gross income its allocable share of income
accrued on the Subordinated Debentures.
Investors should be aware that these tax opinions do not address any
other issue and are not binding on the Internal Revenue Service or the courts.
Original Issue Discount
The Subordinated Debentures will be treated as issued with original
issue discount. Holders of debt instruments issued with OID must include
the OID in income on an economic accrual basis regardless of their method
of tax accounting and regardless of the timing of the receipt of cash
attributable to the OID. Generally, all of a holder's taxable interest
income with respect to the Subordinated Debentures will be accounted for as
OID, and actual payments and distributions of stated interest will not be
separately reported as taxable income. The amount of OID that accrues in
any quarter will equal approximately the amount of the interest that accrues
on the Subordinated Debentures in that quarter at the stated interest rate.
In the event that the interest payment period is extended, holders will
continue to accrue OID approximately equal to the amount of the interest
payment due at the end of the extended interest payment period on an economic
accrual basis over the length of the extended interest period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
Market Discount and Bond Premium
Holders of Preferred Securities other than Initial Holders may be
considered to have acquired their undivided interests in the Subordinated
Debentures with "market discount" or "acquisition premium" as such phrases
are defined for United States federal income tax purposes. Such holders
are advised to consult their tax advisors as to the income tax consequences
of the acquisition, ownership and disposition of the Preferred Securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of Equitable Trust
As described under the caption "Description of the Preferred Securities
- -- Distribution of the Subordinated Debentures," Subordinated Debentures may
be distributed to holders in exchange for the Preferred Securities and in
liquidation of Equitable Trust. Under current law, such a distribution, for
United States federal income tax purposes, would be treated as a non-taxable
event to each holder, and each holder would receive an aggregate tax basis in
the Subordinated Debentures equal to such holder's aggregate tax basis in its
Preferred Securities. A holder's holding period in the Subordinated Debentures
so received in liquidation of Equitable Trust would include the period during
which the Preferred Securities were held by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities -- Special Event Redemption"), the Subordinated Debentures
may be redeemed for cash and the proceeds of such redemption distributed to
holders in redemption of their Preferred Securities. Under current law, such
a redemption would, for United States federal income tax purposes, constitute
a taxable disposition of the redeemed Preferred Securities, and a holder
could recognize gain or loss as if it sold such redeemed Preferred Securities
for cash. See "--Sales of Preferred Securities."
Sales of Preferred Securities
A holder that sells Preferred Securities will recognize gain or loss
equal to the difference between its adjusted tax basis in the Preferred
Securities and the amount realized on the sale of such Preferred
Securities. A holder's adjusted tax basis in the Preferred Securities
generally will be its initial purchase price increased by OID previously
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includable in such holder's gross income to the date of disposition and
decreased by payments received on the Preferred Securities. Subject to the
market discount rules described above, such gain or loss generally will be
a capital gain or loss and generally will be a long-term capital gain or
loss if the Preferred Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the
underlying Subordinated Debentures. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will
be required to include in ordinary income OID on the Subordinated
Debentures accrued through the date of disposition, and to add such amount
to its adjusted tax basis in its pro rata share of the underlying Subordinated
Debentures deemed disposed of. To the extent the selling price is less than
the holder's adjusted tax basis (which will include, in the form of OID, all
accrued but unpaid interest) a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the
United States, a foreign corporation, a non-resident alien individual, a
foreign partnership, or a non-resident fiduciary of a foreign estate or
trust.
Under present United States federal income tax law: (i) payments by
Equitable Trust or any of its paying agents to any holder of a Preferred
Security who or which is a United States Alien Holder will not be subject
to United States federal withholding tax; provided that, (a) the beneficial
owner of the Preferred Security does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (b) the beneficial owner of the Preferred
Security is not a controlled foreign corporation that is related to the
Company through stock ownership, and (c) either (A) the beneficial owner of
the Preferred Security certifies to Equitable Trust or its agent, under
penalties of perjury, that it is not a United States holder and provides
its name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institution"), and
holds the Preferred Security in such capacity, certifies to Equitable Trust
or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution
between it and the beneficial owner and furnishes Equitable Trust or its
agent with a copy thereof; and (ii) a United States Alien Holder of a
Preferred Security will not be subject to United States federal withholding
tax on any gain realized upon the sale or other disposition of a Preferred
Security.
Information Reporting to Holders
Income on the Preferred Securities will be reported to holders on Forms
1099, which forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
Backup Withholding
Payments made on, and proceeds from the sale of, the Preferred
Securities may be subject to a "backup" withholding tax of 31% unless the
holder complies with certain identification requirements. Any withheld
amounts will be allowed as a credit against the holder's federal income
tax, provided the required information is provided to the Internal Revenue
Service.
Proposed Tax Law Changes
On March 19, 1996, the Revenue Reconciliation Bill of 1996, the revenue
portion of President Clinton's budget proposal was released. The Bill
would, among other things, generally deny interest deductions for interest
on an instrument, issued by a corporation, that has a maximum weighted
average maturity of more than 40 years. The Bill would also generally deny
interest deductions for interest on an instrument, issued by a corporation,
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that has a maximum term of more than 20 years and that is not shown as
indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where
the holder or some other related party issues a related instrument that is
not shown as indebtedness on the issuer's consolidated balance sheet. For
purposes of determining the weighted average maturity or the term of an
instrument, any right to extend would be treated as exercised. The above-
described provisions of the Bill were proposed to be effective generally
for instruments issued on or after December 7, 1995. However, on March 29,
1996, the Chairmen of the Senate Finance and House Ways and Means Commit
tees issued a joint statement to the effect that it was their intention
that the effective date of the President's legislative proposals, if
adopted, will be no earlier than the date of appropriate Congressional
action. Under current law, the Company will be able to deduct interest on
the Subordinated Debentures. The terms of the Subordinated Debentures limit
the right to extend the maturity of the Subordinated Debentures to a date
which is six months shorter than any legislative limit on the length of debt
securities for which interest is deductible. The Company believes this will
allow it an interest deduction if the 40-year weighted average maturity
component of the Bill is enacted. However, if the provision of the Bill
regarding a 20-year term is enacted with retroactive effect with regard to the
Subordinated Debentures, the Company will not be entitled to an interest
deduction with respect to the Subordinated Debentures. There can be no
assurance that current or future legislative proposals or final legislation
will not affect the ability of the Company to deduct interest on the
Subordinated Debentures, giving rise to a Tax Event which would permit the
Company to cause the redemption of the Preferred Securities prior to July 30,
2001 (the first date on which the Company would otherwise be able to cause a
redemption of Preferred Securities) as described more fully under "Description
of Preferred Securities -- Special Event Redemption."
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING
UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
S-37
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement (the "Underwriting Agreement"), Equitable Trust has agreed to
sell to each of the Underwriters named herein, and each of the
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Dain Bosworth Incorporated, Dean Witter Reynolds Inc., Goldman, Sachs & Co.
and The Robinson-Humphrey Company, Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all the Preferred Securities offered hereby if any
of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters
may be increased or the Underwriting Agreement may be terminated.
Number of
Underwriter Preferred Securities
Merrill Lynch, Pierce, Fenner & Smith Incorporated 870,000
Dain Bosworth Incorporated 870,000
Dean Witter Reynolds Inc. 870,000
Goldman, Sachs & Co. 870,000
The Robinson-Humphrey Company, Inc. 870,000
D.M. Kelly & Company 50,000
Alex. Brown & Sons Incorporated 50,000
Cowen & Company 50,000
A.G. Edwards & Sons, Inc. 50,000
EVEREN Securities, Inc. 50,000
Legg Mason Wood Walker, Incorporated 50,000
McDonald & Company Securities, Inc. 50,000
Piper Jaffray Inc. 50,000
Principal Financial Securities, Inc. 50,000
Prudential Securities Incorporated 50,000
Raymond James & Associates, Inc. 50,000
Tucker Anthony Incorporated 50,000
Wheat, First Securities, Inc. 50,000
_________
Total 5,000,000
=========
The Underwriters propose to offer the Preferred Securities in part
directly to the public at the initial public offering price, as set forth
on the cover page of this Prospectus Supplement, and in part to certain
securities dealers at such price less a concession not in excess of $.50 per
Preferred Security. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $.35 per Preferred Security to certain
brokers and dealers. After the Preferred Securities are released for sale
to the public, the offering price and other selling terms may from time to
time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debentures of the
Company, the Underwriting Agreement provides that the Company will agree to
pay as compensation ("Underwriters' Compensation") for the Underwriters'
arranging the investment therein of such proceeds, an amount of $.7875 per
Preferred Security (or $3,937,500 in the aggregate) for the accounts of the
several Underwriters.
During a period of 90 days from the date of this Prospectus Supplement,
neither Equitable Trust nor the Company will, without the prior written
consent of the Representatives, directly or indirectly, sell, offer to
sell, grant any option for the sale of, or otherwise dispose of, any
Preferred Securities, any security convertible into or exchangeable into or
exercisable for Preferred Securities or any equity securities substantially
similar to the Preferred Securities (except for the Subordinated Debentures
and the Preferred Securities offered hereby).
The Preferred Securities have been approved for listing, subject to
official notice of issuance, on the New York Stock Exchange. Trading of
the Preferred Securities on the New York Stock Exchange is expected to
S-38
commence within a 30-day period after the initial delivery of the Preferred
Securities. The Representatives have advised Equitable Trust that they
intend to make a market in the Preferred Securities prior to the commencement
of trading on the New York Stock Exchange. The Representatives have no
obligation to make a market in the Preferred Securities, however, and may
cease market making activities, if commenced, at any time.
Prior to this offering, there has been no public market for the
Preferred Securities. In order to meet one of the requirements for listing
the Preferred Securities on the New York Stock Exchange, the Underwriters
will undertake to sell lots of 100 or more Preferred Securities to a
minimum of 400 beneficial holders.
The Company and Equitable Trust have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to
make in respect of, certain liabilities, including liabilities under the
Securities Act.
Certain of the Underwriters engage in transactions with, and, from time
to time, have performed services for, the Company and its subsidiaries in
the ordinary course of business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the
Preferred Securities will be passed upon on behalf of Equitable Trust by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to Equitable Trust. The validity of the Subordinated Debentures,
the Trust Guarantee and certain matters relating thereto, including United
States federal income tax matters, will be passed upon on behalf of the
Company and Equitable Trust by Nyemaster, Goode, McLaughlin, Voigts, West,
Hansell & O'Brien, P.C., Des Moines, Iowa. Certain legal matters will be
passed upon for the Underwriters by LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
a limited liability partnership including professional corporations, New
York, New York.
S-39
[THIS PAGE INTENTIONALLY LEFT BLANK]
PROSPECTUS
$300,000,000
EQUITABLE OF IOWA COMPANIES
Debt Securities, Preferred Stock, Common Stock and Warrants
EQUITABLE OF IOWA COMPANIES CAPITAL TRUST
Preferred Securities Fully and Unconditionally Guaranteed
by Equitable of Iowa Companies
Equitable of Iowa Companies (the "Company") may from time to time offer,
together or separately, (i) its unsecured debt securities (the "Debt
Securities"), (ii) shares of its serial preferred stock, without par value
(the "Preferred Stock"), (iii) shares of its common stock, without par
value (the "Common Stock") and (iv) warrants to purchase Debt Securities,
Preferred Stock or Common Stock or any combination thereof, as shall be
designated by the Company at the time of the offering (the "Warrants") in
amounts, at prices and on terms to be determined at the time of the offering.
Equitable of Iowa Companies Capital Trust, a statutory business trust formed
under the laws of the State of Delaware ("Equitable Trust"), may offer
preferred securities, representing undivided beneficial interests in the assets
of Equitable Trust ("Preferred Securities"). The payment of periodic cash
distributions ("Distributions") with respect to Preferred Securities out of
moneys held by Equitable Trust, and payments on liquidation, redemption or
otherwise with respect to such Preferred Securities, will be guaranteed by the
Company to the extent described herein (a "Trust Guarantee"). The Trust
Guarantee, when taken together with the back-up undertakings, consisting of
obligations of the Company as set forth in the Declaration of Trust of
Equitable Trust (including the obligation to pay expenses of Equitable Trust),
the Indenture and any applicable supplemental indentures thereto, and the Debt
Securities issued to Equitable Trust, provide a full and unconditional
guarantee by the Company of the amounts due on the Preferred Securities. See
"Description of Preferred Securities of Equitable Trust" and "Description of
Trust Guarantee." The Company's obligations under the Trust Guarantee will
rank junior and subordinate in right of payment to all other liabilities of
the Company and pari passu with its obligations under the senior most preferred
or preference stock of the Company. See "Description of Trust Guarantee -
Status of the Trust Guarantee." Debt Securities may be issued and sold by the
Company to Equitable Trust or a trustee of Equitable Trust in connection with
the investment of the proceeds from the offering of Preferred Securities and
Common Securities (as defined herein). The Debt Securities purchased by
Equitable Trust may be subsequently distributed pro rata to holders of
Preferred Securities and Common Securities in connection with the dissolution
of Equitable Trust. The Debt Securities, Preferred Stock, Common Stock,
Warrants and Preferred Securities are collectively called the "Securities".
(continued on next page)
The Company's Common Stock is listed on the New York Stock Exchange under the
trading symbol "EIC." Any Common Stock sold pursuant to a Prospectus Supple-
ment will be listed on such exchange, subject to official notice of issuance.
The Securities may be sold by the Company or Equitable Trust directly, or
to or through underwriters or through dealers or agents. See "Plan of
Distribution." The names of any underwriters, dealers or agents involved
in the sale of the Securities in respect of which this Prospectus is being
delivered and any applicable fee, commission or discount arrangements with
them will be set forth in the applicable Prospectus Supplement. See "Plan
of Distribution" for possible indemnification arrangements for dealers,
underwriters and agents.
This Prospectus may not be used to consummate sales of
Securities unless accompanied by a Prospectus Supplement.
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.
The date of this Prospectus is July 3, 1996.
(continued from previous page)
The Securities may be offered as separate series or issuances at an aggregate
initial public offering price not to exceed $300,000,000 or, if applicable, the
equivalent thereof in one or more foreign currencies, currency units, composite
currencies or in amounts determined by reference to an index as shall be
designated by the Company or Equitable Trust, in amounts, at prices and on
terms to be determined in light of market conditions at the time of sale and
set forth in the applicable Prospectus Supplement.
Certain specific terms of the particular Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying supplement
to this Prospectus (the "Prospectus Supplement") which will describe, without
limitation and where applicable, (i) in the case of Debt Securities, the
specific designation, aggregate principal amount, ranking as senior or
subordinated debt securities, denominations, maturity, any interest rate
(which may be fixed or variable) and time and method of calculating payment of
any interest, any premium, dates on which any premium or any interest are
payable, any terms for redemption, any terms for sinking fund payments, any
terms for conversion or exchange into other securities, any right of the
Company to defer payment of interest on the Debt Securities, and the maximum
length of such deferral period, subordination terms, currency or currencies of
denomination and payment, if other than U.S. dollars, the purchase price, any
listing on a securities exchange and any other terms in connection with the
offering and sale of the Debt Securities in respect of which this Prospectus is
delivered; (ii) in the case of Preferred Stock, the specific designation,
stated value and liquidation preference per share and number of shares offered,
any dividend rate (including the method of calculating payment of dividends),
place or places where dividends on such Preferred Stock will be payable, dates
on which such dividends will be payable and dates from which such dividends
shall accrue, seniority, redemption, voting and other rights, any terms for any
conversion or exchange into other securities, the purchase price, any listing
on a securities exchange, and any other terms; (iii) in the case of Common
Stock, the number of shares of Common Stock, dividend information and the terms
of offering thereof; (iv) in the case of Warrants, the specific designation,
the number, the purchase price, the exercise price, any listing of the
Warrants or the underlying securities on a securities exchange and any other
terms in connection with the offering, sale and exercise of the Warrants; and
(v) in the case of Preferred Securities, the specific designation, number of
securities, liquidation preference per security, the purchase price, any
listing on a securities exchange, distribution rate (or method of calculation
thereof), dates on which distributions shall be payable and dates from which
distributions shall accrue, any voting rights, terms for any conversion or
exchange into other securities, any redemption, exchange or sinking fund
provisions, any other rights, preferences, privileges, limitations or
restrictions relating to the Preferred Securities and the terms upon which the
proceeds of the sale of the Preferred Securities shall be used to purchase a
specific series of Debt Securities of the Company. The Debt Securities may be
issued in registered or bearer form, or both. If so specified in the appli-
cable Prospectus Supplement, Securities may be issued in whole or in part in
the form of one or more temporary or permanent global securities.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED
INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS
NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR EQUITABLE TRUST OR BY ANY AGENT, DEALER OR
UNDERWRITER. THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT DO
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT
ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices located at Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60601, and 13th Floor,
Seven World Trade Center, New York, New York 10048. Copies of such
reports, proxy statements and other information can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Copies of such
reports, proxy statements and other information may also be inspected and
copied at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company and Equitable Trust have filed with the Commission a
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, with respect to the Securities. This Prospectus does not contain
all of the information set forth in the Registration Statement and the
exhibits thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. Statements contained in this
Prospectus or in any Prospectus Supplement as to the contents of any
document are not necessarily complete and, in each instance, are qualified
in all respects by reference to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the
Commission for a complete version of the provisions thereof.
No separate financial statements of Equitable Trust have been included or
incorporated by reference herein. The Company does not consider that such
financial statements would be material to holders of the Preferred Securities
because (i) all of the voting securities of Equitable Trust will be owned,
directly or indirectly, by the Company, a reporting company under the Exchange
Act, (ii) Equitable Trust has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in
its assets and investing the proceeds thereof in Debt Securities issued by the
Company, and (iii) the Company's obligations described herein and any prospectus
supplement, under the Declaration (including the obligation to pay expenses of
Equitable Trust), the Indenture and any supplemental indentures thereto, the
Debt Securities issued to Equitable Trust and the Trust Guarantee, taken
together, constitute a full and unconditional guarantee by the Company of
payments due on the Preferred Securities. See "Description of Preferred
Securities of Equitable Trust" and "Description of Trust Guarantee."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act (File No. 0-8590) are incorporated by reference into
this Prospectus and made a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December
31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996.
3. The Company Report on Form 8-K filed on May 3, 1996.
4. The Company's Report on Form 8-K filed July 3, 1996.
5. The descriptions of the Company's Common Stock, without par value,
and its Shareholder Rights Agreement, as amended, contained in separate Form
8-A Registration Statements filed with the Commission on August 27, 1993
pursuant to Section 12 of the Exchange Act and any amendment or report filed
for the purpose of updating those descriptions.
6. All other documents filed by the Company with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of the
Securities shall be deemed to be incorporated herein by reference and to be
a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein or in the accompanying Prospectus Supplement
or contained herein or in the accompanying Prospectus Supplement shall be
deemed to be supplemented, modified or superseded for purposes of this
Prospectus or such Prospectus Supplement to the extent that a statement
3
contained herein or therein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein or therein
supplements, modifies or supersedes such statement. Any such statement so
supplemented, modified or superseded shall not be deemed, except as so
supplemented, modified or superseded, to constitute a part of this Prospectus
or any Prospectus Supplement.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all of the foregoing documents
incorporated herein by reference. Such requests should be directed to
Equitable of Iowa Companies, 604 Locust Street, P.O. Box 1635, Des Moines,
Iowa 50306-1635, Attention: Secretary, telephone: (515) 245-6799.
THE COMPANY
Equitable of Iowa Companies, a Des Moines, Iowa based insurance holding
company, is a provider of individual annuity and life insurance products,
targeting middle-income individuals and small businesses throughout the
United States. Through its primary insurance subsidiaries, Equitable Life
Insurance Company of Iowa ("Equitable Life") and USG Annuity & Life Company
("USG"), the Company offers its products in 49 states and the District of
Columbia. Equitable Life was founded in 1867 and is the oldest life
insurance company west of the Mississippi River. The Company began
actively marketing annuity products in 1988, principally through USG. The
Company has had a rapid rate of growth in assets over the past few years,
primarily as a result of increased demand for its annuity products.
The Company believes that, because of its diversified portfolio of
annuity and life insurance products, it is well-positioned to take
advantage of certain demographic and economic trends that are expected to
increase demand for these types of products. These trends include: an
aging "baby boomer" segment of the population that is increasingly
concerned about retirement and estate planning; an increase in the number
of families that are concerned about maintaining their standard of living
at retirement; and lower public confidence that government and employer-
provided benefits at retirement will be sufficient.
The Company offers, through its insurance subsidiaries, a portfolio of
life insurance and annuity products designed to meet the needs of its
customers for supplemental retirement income, estate planning and
protection from unexpected death. The Company requires that each of its
products be priced to earn an adequate margin between the interest credited
to the policyholder and the return earned by the Company on its investments.
Annuities. Annuities are long-term savings vehicles that are particularly
attractive to customers over the age of 50 who are planning for retirement and
seeking secure, tax-deferred savings products. The individual annuity business
is a growing segment of the savings and retirement market, and among the
fastest growing segments of the life insurance industry. Annuity products
currently enjoy an advantage over certain other retirement savings products,
because the payment of federal income taxes on interest credited on annuity
policies is deferred during the investment accumulation period.
The Company offers a variety of annuity products. Single premium
deferred annuities ("SPDAs"), in general, are savings vehicles in which the
policyholder, or annuitant, makes a single premium payment to an insurance
company. The insurance company credits the account of the annuitant with
earnings at an interest rate (the "crediting rate"), which is declared by
the insurance company from time to time and may exceed, but may not be
lower than, any contractually guaranteed minimum crediting rate. The
Company also offers flexible premium deferred annuities ("FPDAs"). FPDAs
are deferred annuities in which the policyholder may elect to make more
than one premium payment.
The Company's annuity products incorporate a number of features designed
to reduce the early withdrawal or surrender of the policies and to partially
compensate the Company for its costs if policies are withdrawn early. Under
the terms of the Company's policies, the policyholder is permitted to withdraw
all or part of the premium paid plus the amount credited to his or her account,
less a surrender charge for withdrawals. Certain of the Company's deferred
4
annuity contracts provide for penalty-free partial withdrawals, typically up
to 10% of the accumulation value annually. Surrender charge periods on
annuity policies currently typically range from five years to the term of the
policy, with the majority of such policies currently being issued with a
surrender charge period of seven years or more. The initial surrender charge
on annuity policies generally ranges from 5% to 20% of the premium and
decreases over the surrender charge period. In 1992, the Company introduced
a number of annuity products in which a "market value adjustment" is applied
to adjust the applicable surrender charge during the surrender charge period.
More than half of the Company's new annuity sales currently incorporate a
market value adjustment. The withdrawal rates of policyholder funds may be
affected to some degree, however, by changes in interest rates.
In the fourth quarter of 1994, the Company introduced a variable annuity
product. A variable annuity involves maintaining the policyholder premiums
in a separate account. Policyholders have discretion to allocate their
premiums among several available fund options. The cash surrender value of
a variable annuity policy depends on the performance of these underlying
funds, which the policyholder may reallocate from time to time. Similarly,
during the variable annuity's payout period, the payments distributed to
the annuitant fluctuate with the performance of the underlying funds
selected by the annuitant. Variable annuities provide the Company with fee-
based revenue in the form of management and administration fees charged to
the policyholder's account.
Life Insurance Products. The Company offers a variety of traditional,
universal and term life insurance products. Traditional life insurance
policies incorporate a fixed premium schedule and combine guaranteed insurance
protection with a savings feature. Traditional life polices cost more than
comparable term life insurance coverage when the policyholder is younger, but
less as the policyholder grows older. The policyholder may borrow against the
accumulated cash value, with policy loans typically available at a rate of
interest lower than that available from other lending sources. The
policyholder may also choose to surrender the policy at any time and receive
the accumulated cash value, less any applicable withdrawal charge, rather than
continuing the insurance protection. The Company currently offers fixed
premium current interest and other traditional life insurance products, and its
insurance in force also includes participating policies.
Universal life insurance products provide whole life insurance and
adjustable rates of return related to current interest rates.
Policyholders may vary the frequency and size of their premium payments,
although policy benefits may also fluctuate according to such payments.
Term life insurance policies provide insurance protection for unexpected
death during the period in which the policy is in force, generally one, five,
ten or twenty years. These products are designed to meet the customers'
shorter-term needs because the policies do not have an investment feature and
no cash value is built up. Term life premiums are accordingly lower than
premiums of certain of the Company's other products. The Company's current
term life products include annually renewable term and five-year, ten-year and
fifteen-year renewable and convertible term policies.
In order to discourage early policy withdrawals and to partially compensate
the Company for its costs if policies are terminated, all of the Company's
universal life and interest-sensitive policies issued since 1986 have
incorporated withdrawal charges or similar provisions for periods ranging from
14 to 19 years.
Distribution. The Company maintains a diverse distribution network that
seeks to provide high quality service to its customers, including the
Company's policyholders, agents, brokers and other producers, while
controlling costs. The Company markets its products through a variable
cost distribution network of over 53,000 licensed independent brokerage and
career agents as well as through financial institutions, such as banks and
thrifts. The Company competes with other life insurance companies and
distributors of retirement savings products.
As a holding company, the Company's principal source of liquidity to meet
its obligations (including any dividends, interest, principal and redemption
payments with respect to the Securities) is distributions from its
subsidiaries. The rights of the Company to participate in any distribution
of earnings or assets of any of its subsidiaries (and thus the ability of the
Company to use earnings and assets of its subsidiaries to pay its obligations
5
under the Securities) are subject to state insurance regulatory and other
statutory restrictions, including limitations on the amount of dividends that
may be paid by the Company's insurance subsidiaries in any year without the
prior approval of the state regulatory authorities, as more fully described
in the notes to the Company's financial statements. Any such distributions
are also subject to the prior claims of creditors of that subsidiary, including
claims for policy benefits, debt obligations and other liabilities incurred in
the ordinary course of business, except to the extent that the claims, if any,
of the Company as a creditor of such subsidiary may be recognized.
The mailing address of the principal executive office of the Company is
604 Locust Street, P.O. Box 1635, Des Moines, Iowa 50306-1635 and the
telephone number is 515-245-6911.
EQUITABLE TRUST
Equitable Trust is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, as amended, (the "Declaration")
executed by the Company as sponsor for such trust (the "Sponsor"), and the
Equitable Trustees (as defined herein) of such trust and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware
on March 19, 1996. Equitable Trust exists for the exclusive purposes of
(i) issuing and selling the Preferred Securities and common securities
representing undivided beneficial interests in the assets of Equitable Trust
(the "Common Securities" and, together with the Preferred Securities, the
"Trust Securities"), (ii) using the gross proceeds from the sale of the Trust
Securities to acquire the Debt Securities and (iii) engaging in only those
other activities necessary, appropriate, convenient or incidental thereto.
All of the Common Securities will be directly or indirectly owned by the
Company. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Preferred Securities, except that, if an event
of default under the Declaration has occurred and is continuing, the rights of
the holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. The Company will directly
or indirectly acquire Common Securities, in an aggregate liquidation amount
equal to at least 3% of the total capital of Equitable Trust.
Equitable Trust has a term of approximately 55 years but may terminate
earlier, as provided in the Declaration. Equitable Trust's business and
affairs will be conducted by the trustees (the "Equitable Trustees") appointed
by the Company as the direct or indirect holder of all of the Common Securi-
ties. The holder of the Common Securities will be entitled to appoint, remove
or replace any of, or increase or reduce the number of, the Equitable Trustees
of Equitable Trust. The duties and obligations of the Equitable Trustees shall
be governed by the Declaration. Equitable Trust will have three Equitable
Trustees (the "Regular Trustees") who are employees or officers of or who are
affiliated with the Company. One Equitable Trustee of Equitable Trust will be
a financial institution that is not affiliated with the Company and has a
minimum amount of combined capital and surplus of not less than $50,000,000,
which shall act as property trustee and as indenture trustee for the purposes
of compliance with the provisions of Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), pursuant to the terms set forth in the applicable
Prospectus Supplement (the "Property Trustee"). In addition, unless the
Property Trustee maintains a principal place of business in the State of
Delaware and otherwise meets the requirements of applicable law, one Equitable
Trustee of Equitable Trust will be an entity having a principal place of
business in, or a natural person resident of, the State of Delaware (the
"Delaware Trustee"). The Company will pay all fees and expenses related to
Equitable Trust and the offering of the Trust Securities.
The Property Trustee for Equitable Trust is The First National Bank of
Chicago and its corporate trust office is at One First National Plaza, Suite
0126, Chicago, Illinois 60670-0126 Attention: Corporate Trust Services
Division. The Delaware Trustee for Equitable Trust is First Chicago Delaware,
Inc. and its address in the State of Delaware is c/o FCC National Bank, 300
King Street, Wilmington, Delaware 19801. The Delaware Trustee is an affiliate
of the Property Trustee. The Property Trustee also serves as Trustee under the
Indenture of the Company dated as of January 17, 1995, pursuant to which the
Company has issued $100,000,000 of its 8 1/2% Notes due 2005 and will issue any
Debt Securities to Equitable Trust in connection with the issuance of Preferred
6
Securities. See "Description of Debt Securities -- Concerning the Trustee --
Relationships with the Company." The address for Equitable Trust is c/o
Equitable of Iowa Companies, the Sponsor of Equitable Trust, at the Company's
corporate headquarters located at 604 Locust Street, Des Moines, Iowa
50309-3705, telephone 515-245-6911.
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement, the
net proceeds received by the Company from the sale of any Debt Securities,
Common Stock, Preferred Stock or Warrants offered hereby are expected to be
used for general corporate purposes. The proceeds from the sale of
Preferred Securities by Equitable Trust will be invested in the Debt
Securities of the Company. Except as may otherwise be described in the
Prospectus Supplement relating to such Preferred Securities, the Company
expects to use the net proceeds from the sale of such Debt Securities to
Equitable Trust for general corporate purposes. Until the net proceeds are
used for these purposes, the Company may deposit them in interest-bearing
accounts or invest them in short-term marketable securities. The specific
allocations, if any, of the proceeds of any of the Securities will be
described in the Prospectus Supplement relating thereto.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the Company and its subsidiaries on a consolidated basis for
each of the years ended December 31, 1991 through 1995. The ratio of
consolidated earnings to fixed charges is calculated by dividing
consolidated earnings (income from continuing operations before income
taxes plus fixed charges) by fixed charges (interest expense on debt and a
portion of rental expense).
<TABLE>
<CAPTION>
Year Ended
December 31
________________________________________
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Ratio of earnings to fixed charges 10.0 17.8 12.3 8.0 4.9
</TABLE>
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 and the extent, if any, to
which such general provisions may apply or do not apply to such Debt
Securities, will be described in the Prospectus Supplement relating to such
Debt Securities.
Unless otherwise indicated in an accompanying Prospectus Supplement, the Debt
Securities will be issued in one or more series under an Indenture dated as of
January 17, 1995 (as amended or supplemented from time to time, the "Indenture")
between the Company and The First National Bank of Chicago, as Trustee (together
with any successor thereto, the "Trustee"). The following summaries of certain
provisions of the Indenture and the Debt Securities do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture, a copy of which is incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part. Certain terms defined in the Indenture are capitalized in this
Prospectus. The parenthetical section references below are to the Indenture.
General
The Debt Securities will be unsecured obligations of the Company. The
Indenture does not limit the aggregate principal amount of Debt Securities
which may be issued thereunder. The Indenture provides that Debt
Securities may be issued thereunder from time to time in one or more
series, with different maturity dates, interest rates and other terms, and
may be denominated and payable in United States dollars or in foreign
currencies or units based on or relating to foreign currencies, in each
case as authorized from time to time by the Company. Unless otherwise
indicated in the applicable Prospectus Supplement, the Indenture also
permits the Company to increase the principal amount of any series of Debt
Securities previously issued and to issue additional securities of such
series in such increased principal amount. (Section 2.3)
7
Reference is made to the applicable Prospectus Supplement which will
accompany this Prospectus and which will set forth the following terms
relating to the Debt Securities, to the extent applicable thereto: (1) the
specific designation of the Debt Securities and authorized denominations
thereof; (2) any limit on the aggregate principal amount of the Debt
Securities; (3) the percentage of the principal amount representing the
price for which the Debt Securities will be issued; (4) the date or dates,
or method of determining the same, on which the principal of and premium,
if any, on the Debt Securities will mature; (5) the rate or rates per annum
(which may be fixed or variable) at which the Debt Securities will bear
interest, if any, or the method by which such rate or rates will be determined,
the date or dates from which any such interest will accrue or the method by
which such date or dates will be determined, and the date or dates on which
any such interest will be payable and (in the case of Debt Securities in
registered form) the Record Dates for any interest payable on the Debt
Securities or the method by which such dates will be determined; (6) any
index used to determine the amount of principal, premium or interest payable
on the Debt Securities; (7) any subordination of the Debt Securities to other
indebtedness of the Company (including to any other series of Debt Securities)
and the right of the Company, if any, to defer payment of interest on
Debt Securities and the maximum length of any such deferral period; (8) any
mandatory or optional redemption, repayment or sinking fund or analogous
provisions, including the period or periods within or the date upon which, the
price or prices at which, the currency or units based on or relating to foreign
currencies in which and the terms and conditions upon which the Debt Securities
may be redeemed or purchased, in whole or in part, at the option of the
Company, at the option of the Holder thereof or otherwise; (9) whether the Debt
Securities will be issuable in registered form or bearer form or both, and, if
issuable in bearer form, the restrictions as to the offer, sale, delivery,
transfer and exchange of the Debt Securities in bearer form or the payment of
interest thereon and the terms of exchanges between registered and bearer form;
(10) whether the Debt Securities will be issuable in whole or in part in the
form of one or more temporary or permanent Registered Global Securities and, if
so, the identity of the Depository for such Registered Global Securities and
the terms and conditions, if any, upon which such Registered Global Security or
Securities may be exchanged in whole or in part for other definitive
securities; (11) each office or agency where the principal of and premium and
interest, if any, on the Debt Securities will be payable, and each office or
agency where the Debt Securities may be presented for registration of transfer
or exchange and where notices may be served upon the Company; (12) if other
than in United States dollars, the foreign currency or the units based on or
relating to foreign currencies in which the Debt Securities are denominated
and/or in which the payment of the principal of and premium and interest, if
any, on the Debt Securities will or may be payable; (13) any right of the
Company to require a Holder to accept, or of a Holder to elect to receive,
payment of the Debt Securities in a currency other than that in which they are
denominated or stated to be payable; (14) if other than the stated principal
amount thereof, the portion of the principal amount of the Debt Securities
payable upon declaration of acceleration of the maturity of the Debt Securities
and/or the method by which such amount shall be determined; (15) any variation
to the provisions of the Indenture with respect to the satisfaction and
discharge of the Company's indebtedness and obligations, or termination of
certain of its covenants and Events of Default under the Indenture, with
respect to the Debt Securities by deposit of money or Government Obligations;
(16) any additions to or deletions from the Events of Default or covenants of
the Company contained in the Indenture with respect to the Debt Securities;
(17) any trustee (other than The First National Bank of Chicago), depository,
currency determination agent, authenticating or paying agent, transfer agent,
registrar or other agent with respect to the Debt Securities; (18) the person
to whom any interest on any such Debt Security shall be payable if other than
the person in whose name such Debt Security is registered on the applicable
Record Date; (19) any United States federal income tax considerations
applicable to holders of the Debt Securities; (20) any terms for conversion or
exchange of the Debt Securities into other securities of the Company; and (21)
any other terms of the Debt Securities which shall not adversely affect the
interests of any Holders of any Debt Securities then outstanding. (Section 2.3)
Debt Securities may be issued bearing no interest or interest at a rate below
the prevailing market rate at the time of issuance and may be offered and sold
at a substantial discount below their stated principal amount. Certain United
States federal income tax consequences and other special considerations
applicable to any such discounted Debt Securities or to other Debt Securities
offered and sold at par which are treated as having been issued at a discount
for United States federal income tax purposes will be described in the
8
Prospectus Supplement relating thereto. Certain United States federal income
tax considerations and other information applicable to any Debt Securities
denominated in or having principal, any premium or any interest payable in
foreign currencies or in units based on or relating to foreign currencies will
be described in the Prospectus Supplement relating thereto.
Unless the Prospectus Supplement relating thereto specifies otherwise, Debt
Securities denominated in U.S. dollars will be issued only in denominations of
$1,000 or any integral multiple thereof. (Section 2.7) The Prospectus
Supplement relating to a series of Debt Securities denominated in a foreign
currency or currency unit will specify the denominations thereof.
Unless the Prospectus Supplement relating thereto specifies otherwise, the
Debt Securities will be issued only in fully registered form without coupons.
Debt Securities of a series may be issuable in whole or in part in the form of
one or more Registered Global Securities, as described below under "Registered
Global Securities." In such case, one or more Registered Global Securities
will be issued in a denomination or aggregate denominations equal to the
aggregate principal amount of Outstanding Securities of the series to be
represented by such Registered Global Security or Securities. (Section 2.4)
The Debt Securities will be unsecured and, unless otherwise described in the
Prospectus Supplement relating thereto, will rank on a parity with all other
unsecured and unsubordinated indebtedness of the Company. (Section 2.3)
Except as described below under "Description of Debt Securities -- Covenants --
Limitation on Liens on Stock of Restricted Subsidiaries", there is no
restriction in the Indenture against the Company or subsidiaries of the Company
incurring secured or unsecured indebtedness or issuing secured or unsecured
securities. The Company has from time to time entered into, and will in the
future enter into, credit agreements to fund its operations. Such credit
agreements may be secured by the assets of the Company, secured by the assets
of the Company's subsidiaries or guaranteed by the Company's subsidiaries.
To the extent that such credit agreements are so secured or guaranteed, the
lenders under such credit agreements will have priority over the Holders of the
Debt Securities with respect to the assets of the Company or its subsidiaries.
Except as described below under "Description of Debt Securities --
Covenants," the Indenture does not contain covenants or other provisions de-
signed to afford Holders of Debt Securities protection in the event of a change
in capital structure, reorganization, dividend or distribution in respect of
Capital Stock, change in credit rating, incurrence of indebtedness or similar
obligations that would have priority over or be on a parity with the Debt
Securities or other similar occurrence. Holders of the Debt Securities will
not have the right to accelerate the Debt Securities in the event of material
adverse changes in the financial condition or results of operations of the
Company or of its subsidiaries or other events which may adversely affect the
creditworthiness of the Company. Therefore, the financial condition and
results of operations of the Company, and not the covenants and other provi-
sions of the Indenture, should be the primary factor in an evaluation of
whether the Company will be able to satisfy its obligations under the Debt
Securities.
Exchange and Transfer
At the option of the Holder upon request confirmed in writing, and subject to
the terms of the Indenture, Debt Securities of any series (other than Regis-
tered Global Securities) will be exchangeable into an equal aggregate principal
amount of Debt Securities of the same series (with the same interest rate,
maturity date and other terms) of different authorized denominations except
that Debt Securities of any series issued in registered form may not be ex-
changed for Debt Securities of the same series issued in bearer form unless the
applicable Prospectus Supplement shall provide to the contrary. (Section 2.8)
Unless otherwise provided in the applicable Prospectus Supplement, the Debt
Securities may be presented for exchange, and registered Debt Securities
(other than a Registered Global Security) may be presented for registration
of transfer, at the offices or agency of the Security Registrar in New York,
New York. No service charge will be made for any transfer or exchange, but
the Company may require payment of any taxes or other governmental charges
due in connection therewith, subject to any applicable limitations or
conditions contained in the Indenture. Such transfer or exchange will be
effected by the Security Registrar upon its being satisfied with the
9
documents of title and the identity of the person making the request. The
Company has appointed the Trustee as Security Registrar. Debt Securities in
bearer form and the related coupons, if any, will be transferable by delivery.
(Sections 2.8 and 3.2)
Payment
Unless otherwise provided in the applicable Prospectus Supplement,
payment of principal of and premium, if any, on the Debt Securities will be
made at the office of the Trustee in New York, New York. Unless otherwise
provided in the applicable Prospectus Supplement, payment of any
installment of interest, if any, on a Debt Security will be made at the
office or agency of the Trustee in New York, New York, except that, at the
option of the Company, payment of any interest on Debt Securities in
registered form may be made (i) by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security
Register or (ii) by wire transfer to an account maintained by the Person
entitled thereto as specified in the Security Register. (Sections 3.1 and
3.2) Unless otherwise provided in the applicable Prospectus Supplement,
payment of any interest due on Debt Securities in registered form will be
made to the Persons in whose name such Debt Securities are registered at the
close of business on the Record Date for such interest payments; provided,
however, that any interest that is payable at maturity will be payable to the
person to whom principal payable at maturity shall be payable. (Section 2.7)
Principal and premium and interest, if any, shall be considered paid on the
due date if on such date the Trustee or the paying agent holds money sufficient
to pay all such amounts then due and the Trustee or the paying agent, as the
case may be, is not prohibited under the terms of the Indenture from paying
such money to the Holders of the Debt Securities on that date. (Section 3.1)
Registered Global Securities
The registered Debt Securities of a particular series may be issued in whole
or in part in the form of one or more Registered Global Securities, which will
be deposited with or on behalf of a depository located in the United States
(the "Depository") that will be identified in the Prospectus Supplement
relating to such series, and registered in the name of the Depository or its
nominee. (Section 2.4) Unless and until exchanged, in whole or in part, for
other Debt Securities of such series in definitive form, a Registered Global
Security may not be transferred except as a whole by the Depository for such
Registered Global Security to a nominee of such Depository, by a nominee of
such Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor of such Depository or a
nominee of such successor, and except in the circumstances described in the
applicable Prospectus Supplement. (Section 2.8)
The specific terms of the depository arrangement with respect to any portion
of a particular series of Debt Securities to be represented by a Registered
Global Security will be described in the Prospectus Supplement relating to
such series. The Company anticipates that the following provisions will
apply to all depository arrangements.
Upon the issuance of a Registered Global Security, the Depository therefor
or its nominee will credit, on its book-entry registration and transfer
system, the respective principal amounts of the Debt Securities represented
by such Registered Global Security to the accounts of such persons having
accounts with such Depository ("participants") as shall be designated by the
dealers, underwriters or agents participating in the distribution of such
Debt Securities or by the Company if such Debt Securities are offered and
sold directly by the Company. Ownership of beneficial interests in a
Registered Global Security will be limited to participants or persons that
may hold interests through participants; however, the Company will have no
obligations to participants or any persons that hold interests through
participants. Ownership of beneficial interests in a Registered Global
Security will be shown on, and the transfer of such beneficial interests will
be effected only through, records maintained by the Depository therefor or
its nominee (with respect to interests of participants) or by participants or
persons that hold through participants (with respect to interests of persons
other than participants). The laws of some states require certain purchasers
of securities to take physical delivery thereof in definitive form. The
depository arrangements described above and such laws may impair the ability
to own or transfer beneficial interests in a Registered Global Security.
10
So long as the Depository for a Registered Global Security, or its nominee,
is the registered owner thereof, such Depository or such nominee, as the case
may be, will be considered the sole owner or Holder of the Debt Securities
represented by such Registered Global Security for all purposes under the
Indenture. Unless otherwise specified in the applicable Prospectus Supplement
and except as provided below, owners of beneficial interests in a Registered
Global Security will not be entitled to have Debt Securities of the series
represented by such Registered Global Security registered in their names, will
not receive or be entitled to receive physical delivery of Debt Securities of
such series in definitive form and will not be considered the owners or Holders
thereof for any purposes under the Indenture. (Section 7.3) Accordingly, each
person owning a beneficial interest in such Registered Global Security must
rely on the procedures of the Depository and, if such person is not a partici-
pant, on the procedures of the participant through which such person owns its
interest, to exercise any rights of a holder under the Indenture. The
Depository may grant proxies 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, if the Company
requests any action of Holders or if any owner of a beneficial interest in
such Registered Global Security desires to give any notice or take any
action which a Holder is entitled to give or take under the Indenture, the
Depository would authorize the participants to give such notice or take
such action, and such participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of and premium and interest payments, if any, on Debt Securities
represented by a Registered Global Security registered in the name of a
Depository or its nominee will be made to such Depository or nominee, as the
case may be, as the registered owner of such Registered Global Security. The
Company expects that the Depository for a Registered Global Security or its
nominee, upon receipt of any payment of principal or premium or interest, if
any, in respect thereof, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amounts of such Registered Global Security as shown on the
records of such Depository. The Company also expects that payments by
participants to owners of beneficial interests in such Registered Global
Security held through such participants will be governed by standing customer
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
responsibility of such participants. Neither the Company, the Trustee nor
any paying agent or Security Registrar for Debt Securities of the series
represented by such Registered Global Security will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial interests in such Registered Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests. (Section 7.3)
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depository for a Registered Global Security representing Debt Securities or a
particular series of Debt Securities is at any time unwilling or unable to
continue as Depository or ceases to be a clearing agency registered under the
Exchange Act and any other applicable statute or regulation and a successor
Depository is not appointed by the Company within ninety (90) days, the
Company will issue Debt Securities of such series in definitive form in
exchange for all of the Registered Global Securities representing Debt
Securities of such series. In addition, the Company may at any time and in
its sole discretion determine to no longer have the Debt Securities of a
particular series represented by one or more Registered Global Securities
and, in such event, will issue Debt Securities of such series in definitive
form in exchange for all of the Registered Global Securities representing
Debt Securities of such series. (Section 2.8)
Within seven days after the occurrence of an Event of Default concerning
nonpayment of interest, principal or any sinking fund or analogous payment
with respect to any series of Debt Securities that is, in whole or in part,
represented by a Registered Global Security, the Company will execute, and
the Trustee will authenticate and deliver, Debt Securities of such series
in definitive registered form, in any authorized denominations and in an
aggregate principal amount equal to the principal amount of the Registered
Global Security in exchange for such Registered Global Security. (Section 2.8)
11
Debt Securities in definitive registered form issued in exchange for a
Registered Global Security shall be registered in such names and in such
authorized denominations as the Depository for such Registered Global Security,
pursuant to instructions from the participants or persons that hold interests
through such participants, shall instruct the Trustee. The Trustee will
deliver Debt Securities in definitive registered form to or as directed by the
persons in whose names such Debt Securities are so registered. (Section 2.8)
Covenants
General. Unless otherwise specified in the applicable Prospectus
Supplement, the Indenture requires the Company to covenant to the following
with respect to each series of Debt Securities: (i) to duly and punctually
pay the principal of and premium and interest, if any, on such series of
Debt Securities (together with any additional amounts payable pursuant to
the terms thereof) and comply with all other terms, agreements and
conditions contained therein or made in the Indenture for the benefit of
the Debt Securities of such series; (ii) to maintain an office or agency
where Debt Securities of such series may be presented, surrendered for
payment, transferred or exchanged and where notices to the Company may be
served; (iii) if the Company shall act as its own paying agent for any
series of Debt Securities, to segregate and hold in trust for the benefit
of the persons entitled thereto a sum sufficient to pay the principal of
and premium or interest, if any, so becoming due; (iv) to appoint a
successor trustee whenever necessary to avoid or fill a vacancy in the
office of trustee, and (v) to preserve its corporate existence (Article 3).
The Indenture also requires the Company to deliver to the Trustee, within
120 days after the end of each fiscal year, a written statement as to
whether, to the best knowledge of the officer signing the statement, the
Company is in compliance with the terms of the Indenture and, if not, the
nature and status of such non-compliance. (Section 4.3)
Limitation on Liens on Stock of Restricted Subsidiaries. Unless otherwise
specified in the applicable Prospectus Supplement, the Company will not, nor
will it permit any Restricted Subsidiary to, issue, assume or guarantee any
indebtedness for borrowed money (hereinafter referred to as "Debt") secured
by a security interest, pledge, lien or other encumbrance upon any shares of
Capital Stock of any Restricted Subsidiary without effectively providing that
the Debt Securities (together with, if the Company shall so determine, any
other indebtedness of or guarantee by the Company or any Restricted
Subsidiary ranking senior to or equally with the Debt Securities and then
existing or thereafter created) shall be secured equally and ratably with
such Debt. (Section 3.6).
For purposes of the Indenture, "Restricted Subsidiary" means each of
Equitable Life and USG, in each case, so long as it remains a subsidiary of
the Company, as well as any subsidiary of the Company that is a successor
to all or a principal part of the business of any such subsidiary and
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock. (Section 1.1). The Restricted
Subsidiaries accounted for substantially all of the consolidated revenues
of the Company during the year ended December 31, 1995 and the consolidated
assets of the Company at December 31, 1995.
Limitation on Issuance or Disposition of Stock of Restricted Subsidiaries.
Unless otherwise specified in the applicable Prospectus Supplement, the
Company will not, nor will it permit any Restricted Subsidiary to, issue,
sell, assign, transfer or otherwise dispose of, directly or indirectly, any
Capital Stock (other than nonvoting preferred stock) of any Restricted
Subsidiary, except for (i) the purpose of qualifying directors; (ii) sales
or other dispositions to the Company or one or more Restricted Subsidiaries;
(iii) the disposition of all or any part of the Capital Stock of any
Restricted Subsidiary for consideration which is at least equal to the fair
value of such Capital Stock as determined by the Company's Board of Directors
(acting in good faith); or (iv) an issuance, sale, assignment, transfer or
other disposition required to comply with an order of a court or regulatory
authority of competent jurisdiction, other than an order issued at the
request of the Company or any Restricted Subsidiary. (Section 3.7)
Consolidation, Merger and Transfer of Assets. Unless otherwise specified
in the applicable Prospectus Supplement, the Company has agreed that it
will not consolidate or merge with or into, or transfer, sell, convey or
12
lease its properties or assets as, or substantially as, an entirety unless
(i) either the Company is the continuing entity or the successor (if other
than the Company) is a domestic corporation or other domestic entity which
expressly assumes the Company's obligations for each series of Debt
Securities and under the Indenture, (ii) immediately after giving effect to
such transaction, no Event of Default, and no event that, after notice or
lapse of time, or both, would become an Event of Default, shall have
occurred and be continuing, and (iii) the Company delivers to the Trustee
an officer's certificate and opinion of counsel stating that such
consolidation, merger, transfer, sale, conveyance or lease complies with
the Indenture. (Article 9)
Events of Default
The occurrence of any of the following events with respect to the Debt
Securities of any series will, unless otherwise specified in the applicable
Prospectus Supplement, constitute an "Event of Default" with respect to the
Debt Securities of such series: (a) default for thirty (30) days in the
payment of any installment of interest on any of the Debt Securities of such
series; (b) default in the payment of any of the principal of or the premium,
if any, on any of the Debt Securities of such series when due, whether at
maturity, upon redemption, by declaration of acceleration or otherwise; (c)
default in the deposit when due of any sinking fund payment or analogous
obligation in respect of any of the Debt Securities of such series; (d)
default for sixty (60) days by the Company in the observance or performance
of any other covenant or agreement contained in the Debt Securities of such
series or the Indenture (other than a covenant or agreement default which is
specifically designated as having a different time period) for the benefit of
the Debt Securities of such series after written notice thereof as provided
in the Indenture; (e) (i) an event of default occurs under any instrument
(including the Indenture) under which there is at the time outstanding, or
by which there may be secured or evidenced, any indebtedness of the Company
or any of its Restricted Subsidiaries for money borrowed by the Company or
any of its Restricted Subsidiaries (other than non-recourse indebtedness)
which results in acceleration or nonpayment at maturity (after giving effect
to any applicable grace period) of such indebtedness in an aggregate amount
exceeding $15,000,000; or any such indebtedness exceeding $15,000,000 shall
otherwise be declared to be due and payable, or required to be prepaid (other
than by a regularly scheduled prepayment or exercise of an optional prepayment
right), prior to the stated maturity thereof; or any failure by the Company
or any Restricted Subsidiary to make any payment under a guarantee in respect
of any indebtedness (except up to $26,311,000 aggregate principal amount of
8.70% Guaranteed Notes issued by Walnut Mall Limited Partnership, due August
19, 1996 and any accrued interest or premium with respect thereto, which
indebtedness is more fully described in the notes to the Company's financial
statements), in each case in an amount of at least $15,000,000, on the date
such payment is due (or within any grace period specified in the agreement or
other instrument governing such indebtedness); in which case the Company
shall immediately give notice to the Trustee of such acceleration or
non-payment, and (ii) there shall have been a failure to cure such default or
to pay or discharge such defaulted indebtedness within ten (10) days after
written notice thereof as provided in the Indenture; (f) any final
non-appealable judgment or order for the payment of money in excess of
$15,000,000 is rendered against the Company or any Restricted Subsidiary,
such judgment or order is not satisfied by payment or bonded and either
enforcement proceedings have been commenced by the judgment creditor or there
has been a period of 30 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise, shall
not have been in effect; provided, however, that a judgment or order fully
covered by insurance (or a judgment or order for the payment of money covered
by insurance to the extent of all payments in excess of $15,000,000), which
coverage has not been disputed by the insurer, shall not be considered a
default or an Event of Default; or (g) certain events of bankruptcy,
insolvency or reorganization relating to the Company. (Section 5.1)
Different or additional Events of Default may be prescribed for the benefit
of the Holders of a particular series of Debt Securities and will be
described in the Prospectus Supplement relating thereto. (Sections 2.3 and
5.1) No Event of Default with respect to a particular series of Debt
Securities issued under the Indenture will necessarily constitute an Event of
Default with respect to any other series of Debt Securities issued thereunder.
If an Event of Default shall have occurred and be continuing with respect
to any series of the Debt Securities unless the principal of all of the Debt
Securities of such series shall have already become due and payable, either
the Trustee or the Holders of not less than 25% in aggregate principal amount
13
of the Debt Securities of such series then Outstanding may declare the
principal of all Debt Securities of such series then Outstanding and the
interest, if any, accrued thereon to be due and payable immediately. If an
Event of Default due to certain events of bankruptcy, insolvency or
reorganization of the Company shall have occurred and be continuing, the
principal and interest on all the Debt Securities then Outstanding shall
thereby become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holders of Debt Securities. Upon
certain conditions, any such declaration of acceleration with respect to Debt
Securities of any series may be rescinded and annulled if all Events of
Default, other than the nonpayment of accelerated principal and premium, if
any, with respect to the Debt Securities of such series shall have been cured,
waived or otherwise remedied as provided in the Indenture by the Holders of a
majority in aggregate principal amount of the Debt Securities of such series
then Outstanding. Reference is made to the Prospectus Supplement relating to
any series of Original Issue Discount Securities for the particular provisions
relating to the acceleration of a portion of the principal thereof upon the
occurrence and continuance of an Event of Default with respect thereto.
(Section 5.1)
Holders of Debt Securities may not enforce the Indenture or the Debt
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Debt
Securities. (Sections 5.6 and 6.2) Subject to such provisions for
indemnity and certain other limitations contained in the Indenture, the
Holders of a majority in aggregate principal amount of the Debt Securities
of any series then Outstanding will have the right to direct the Trustee in
the conduct of any proceeding for any remedy or the exercise of any trust or
power with respect to such series, except that the Trustee may decline to
follow such directions if it in good faith determines that the actions or
proceedings so directed would unduly prejudice the rights of Holders of
Securities of other affected series not joining in the giving of such
directions. (Section 5.9) Holders and beneficial owners of the Debt
Securities have no recourse under the Indenture, any Debt Security or the
indebtedness evidenced thereby against any incorporator, officer, director,
employee, stockholder or partner, as such, of the Company. (Section 11.1)
The Indenture provides that the Trustee may withhold notice to the
Holders of the Debt Securities of any series of any continuing default
affecting such series (except a default in payment) if it considers such
withholding to be in the interests of the Holders of the Debt Securities of
such series. (Section 5.11)
Modification and Waiver
The Indenture permits the Company and the Trustee to enter into supplemental
indentures without the consent of the Holders of the Debt Securities to: (a)
pledge collateral as security for the Debt Securities of one or more series,
(b) add guarantees with respect to the Debt Securities of one or more series,
(c) evidence the assumption by a successor entity of the obligations of the
Company under the Indenture and with regard to the Debt Securities then
Outstanding, (d) add covenants for the protection of the Holders of the Debt
Securities of one or more series, including any different grace periods or
remedies for breach thereof otherwise than as provided in the Indenture, (e)
cure any ambiguity or correct or supplement any provision that may be defective
or inconsistent with any other provisions contained in the Indenture or make or
add such other provisions as the Company may deem necessary or desirable,
provided that no such action adversely affects the interests of the Debt
Securities of any series, (f) establish the form and terms of the Debt
Securities of any series, (g) evidence the acceptance of appointment by a
successor Trustee with respect to the Debt Securities of one or more series and
certain related matters, (h) subject to compliance with certain requirements of
the Indenture, provide for uncertificated Debt Securities in addition to or in
place of certificated Debt Securities, (i) comply with any requirements of the
Securities and Exchange Commission in connection with qualifying the Indenture
under the Trust Indenture Act of 1939, as amended, or to comply with any
amendments thereto, (j) comply with any requirements related to the listing of
the Debt Securities of any series for trading on a securities exchange or
through an interdealer quotation system, and (k) add to or change or eliminate
any provision of the Indenture if such change or elimination is applicable only
to Debt Securities of any series that are first issued after the effective date
thereof. (Section 8.1)
The Indenture also permits the Company and the Trustee, with the consent
of the Holders of not less than a majority in aggregate principal amount of
the Debt Securities of any series then Outstanding and affected thereby, to
14
execute supplemental indentures adding any provisions to, or changing in
any manner or eliminating any of the provisions of, the Indenture or any
supplemental indenture or modifying in any manner the rights of the Holders
of the Debt Securities of any such affected series; provided, however, that
without the consent of the Holder of each Debt Security of any such series
then Outstanding and affected thereby, no such supplemental indenture may:
(a) extend the time of payment of the principal (or any installment thereof)
of, or premium on any Debt Securities, or reduce the amount thereof, or
reduce the rate, alter the method of computation of the rate or extend the
time of payment of interest thereon, reduce any amount payable on the
redemption thereof, reduce the amount of, or postpone the date fixed for, any
sinking fund payment or analogous obligation, or change the currency or
currency unit in which the principal thereof or the premium or interest
thereon is payable, or reduce the amount payable on any Original Issue
Discount Security upon acceleration or provable in bankruptcy, or change the
place of payment specified for such Debt Securities, or alter certain
provisions of the Indenture relating to Debt Securities not denominated in
United States dollars, or impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Securities when due
or, if such Debt Security shall so provide, any right of repayment at the
option of the Holder thereof; or (b) reduce the percentage in principal
amount of the Debt Securities of such series, the consent of whose Holders
is required for any modification or amendment of the Indenture or for any
waiver provided for in the Indenture; or (c) modify any of the foregoing
provisions, except to increase any such percentage or to provide that certain
other provisions of the Indenture cannot be modified or waived without the
consent of the Holders of each Outstanding Debt Security so affected.
(Section 8.2)
The Holders of a majority in aggregate principal amount of the Debt
Securities of any series then Outstanding may on behalf of the Holders of
all Debt Securities of that series waive, insofar as that series is
concerned, compliance by the Company with any covenant or provision of the
Indenture applicable to that series, except for any covenant or provision
which cannot be modified or amended without the consent of the Holder of
each Debt Security of such affected series. (Section 11.13) Prior to the
declaration of acceleration of the maturity of Debt Securities of any
series then Outstanding, the Holders of a majority in aggregate principal
amount of the Debt Securities of such series then Outstanding with respect
to which a default or an Event of Default shall have occurred and is
continuing may, on behalf of the Holders of all Debt Securities of such
series, waive any past default or Event of Default and its consequences,
except a default or an Event of Default in respect of a covenant or
provision of the Indenture or of any Debt Securities of such series which
cannot be modified or amended without the consent of each of the Holders of
the Debt Securities of such series. (Section 5.10)
Defeasance and Discharge
Unless otherwise specified in the applicable Prospectus Supplement, the
Company may elect either (a) to defease and be discharged from any and all
obligations in respect of all outstanding Debt Securities of any particular
series (defeasance and discharge), or (b) to be released from its obligations
with respect to certain covenants of the Indenture and certain Events of
Default applicable to such series, all of which shall be specified in the
applicable Prospectus Supplement (covenant defeasance), in each case if the
Company irrevocably deposits in trust with the Trustee for the benefit of the
Holders of the Debt Securities of such series funds and/or securities that
are direct full faith and credit obligations of, or obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of and
the payment of which is unconditionally guaranteed by the full faith and
credit of, the government which issued the currency in which the Debt
Securities of such series are payable or certain depository receipts therefor
("Government Obligations") which, through the payment of the principal
thereof and the interest thereon in accordance with their terms, will provide
funds in an amount sufficient to pay all the principal of and premium and
interest, if any, on the Debt Securities of such series (including any
mandatory sinking fund or analogous payments) as they shall become due from
time to time in accordance with the terms thereof. To effect a defeasance
and discharge with respect to Debt Securities of a series that will not be
fully paid (upon maturity or redemption) within one year or to effect a
covenant defeasance, the Company is required, among other things, to deliver
to the Trustee an opinion of counsel to the effect that the Holders of the Debt
Securities of such series would not recognize income, gain or loss for United
States federal income tax purposes as a result of such defeasance and
discharge or such covenant defeasance, as the case may be, and that such
15
Holders will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance had not occurred, and in the case of such a defeasance and
discharge such opinion shall additionally state that either (A) there has
been a change in the applicable United States federal income tax law to the
foregoing effect or (B) the Company has received a private letter ruling
from the Internal Revenue Service or there has been published a revenue
ruling to the foregoing effect. Neither a defeasance and discharge with
respect to Debt Securities of a series that will not be fully paid (upon
maturity or redemption) within one year nor a covenant defeasance will be
made with respect to any Debt Securities of a series then listed on any
national securities exchange if such defeasance and discharge or covenant
defeasance would cause Debt Securities of such series to be delisted. Upon
defeasance and discharge, the Indenture will cease to be of further effect
with respect to the Debt Securities of such series and the Holders of such
Debt Securities shall look only to the deposited funds or Government
Obligations for payment. Upon covenant defeasance, however, the Company
will not be relieved of its obligation to pay when due principal of and
premium and interest, if any, on the Debt Securities of such series if not
otherwise paid from such deposited funds or Government Obligations.
Notwithstanding the foregoing, certain obligations and rights under the
Indenture with respect to the obligations of the Trustee, compensation,
reimbursement and indemnification of the Trustee, rights of the Holders of
Debt Securities of a series to receive payments from the funds and Government
Obligations deposited with the Trustee for such series, registration of
transfer and exchange of the Debt Securities of such series, replacement of
mutilated, defaced, destroyed, lost or stolen Debt Securities and certain other
administrative provisions will survive defeasance and discharge. (Section 10.1)
In the event the Company exercises its option to effect a covenant
defeasance 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 still applicable to such series, the
amount of money and Government Obligations on deposit with the Trustee 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. (Section 10.1)
If the Trustee or paying agent is unable to apply any funds or Government
Obligations deposited with respect to a series of Debt Securities in
accordance with the foregoing provisions by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under the Indenture and the Debt Securities of such
series shall be revived and reinstated as though no deposit had occurred
pursuant to such provisions until such time as the Trustee or paying agent
is permitted to apply all such funds or Government Obligations in accordance
therewith; provided, however, that, if the Company has made any payment of
premium or interest on or principal of any Debt Securities of such series
because of the reinstatement of its obligations, the Company shall be
entitled, at its election, (a) to receive from the Trustee or paying agent,
as applicable, that portion of such money or Government Obligations equal to
the amount of such payment or (b) to be subrogated to the rights of the
Holders of the Debt Securities of such series to receive such payment from
the funds or Government Obligations held by the Trustee or paying agent.
(Section 10.6)
Governing Law
The Indenture and the Debt Securities issued thereunder will be governed
by the laws of the State of New York. (Section 11.8)
Concerning the Trustee -- Relationships with the Company
The First National Bank of Chicago, the Trustee under the Indenture, is
one of a number of banks with which the Company and its subsidiaries has
and in the future may have banking relationships in the ordinary course of
business, including, in certain cases, credit facilities. The First National
Bank of Chicago is presently a participant to the extent of its $33 million
commitment in the Company's existing $300 million credit facility, but it is
not an agent bank with respect to such facility. The First National Bank of
16
Chicago is also the Property Trustee of Equitable Trust, the Preferred
Securities Guarantee Trustee (as defined herein) and an affiliate of the
Delaware Trustee of Equitable Trust.
The Trustee, prior to the occurrence of an Event of Default under the
Indenture, undertakes to perform only such duties as are specifically set forth
in the Indenture and, after an Event of Default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
Holder of Debt Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
DESCRIPTION OF CAPITAL STOCK
The following summary of certain provisions of the Company's Restated
Articles of Incorporation, as amended (the "Articles"), Amended and
Restated Bylaws (the "Bylaws"), and Shareholder Rights Agreement, effective
as of April 30, 1992, as amended, does not purport to be complete and is
subject to and qualified in its entirety by reference to such documents,
copies of which are incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part.
Under the Articles, the authorized capital stock of the Company consists
of 70,000,000 shares of common stock, without par value ("Common Stock"),
and 2,500,000 shares of serial preferred stock, without par value ("Preferred
Stock"). As of April 30, 1996, (a) 31,884,496 shares of Common Stock and
(b) no shares of Preferred Stock were outstanding.
DESCRIPTION OF COMMON STOCK
General
All shares of Common Stock offered hereby, or issuable upon conversion,
exchange or exercise of Securities, will be fully paid and non-assessable.
Holders of shares of Common Stock do not have any preemptive rights to
subscribe for or purchase any additional securities of the Company. The
Common Stock is listed on the New York Stock Exchange. The registrar and
transfer agent for the Common Stock is currently Boatmen's Trust Company,
510 Locust Street, P.O. Box 14737, St. Louis, Missouri 63178-4737.
Dividends
Subject to the rights of the holders of any shares of Preferred Stock,
holders of Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors of the Company (the
"Board" or the "Board of Directors") out of funds legally available therefor.
Liquidation Rights
Holders of Common Stock are entitled to receive, upon any liquidation of
the Company, all remaining assets available for distribution to shareholders
after satisfaction of the Company's liabilities and the preferential rights
of any Preferred Stock that may then be issued and outstanding.
Voting Rights
The Articles and the Bylaws provide that each outstanding share of Common
Stock is entitled to one vote on each matter to be voted on at a stockholder
meeting, except that the holders of Common Stock have cumulative voting
rights with respect to the election of directors. Cumulative voting permits
17
holders of shares of Common Stock to cast, for any one or more nominees for
election to the Board of Directors, the number of votes equal to the product
of the number of shares such shareholder owns and the number of nominees
proposed for election to the Board. A shareholder may cast all of such votes
for a single director or may distribute such votes among any number of nominees
proposed for election.
The affirmative vote of two-thirds of the votes entitled to be cast at a
meeting of the Company's stockholders is required to remove directors for
cause and to effect certain amendments to the Articles.
Shareholder Rights Plan
The Board adopted the Shareholder Rights Agreement (the "Rights Plan"),
effective as of April 30, 1992. In connection with the effectiveness of
the Rights Plan, the Board declared a dividend distribution of one right (a
"Right") for each outstanding share of Common Stock. Each Right, when
exercisable, entitles the registered holder to purchase from the Company
one or more shares of Common Stock (or in some instances an equivalent security
equal in value to a share of Common Stock) at an exercise price of $100.00 per
Right, subject to adjustment.
Initially the Rights are not exercisable. They will trade with, and
cannot be separated from, the outstanding shares of Common Stock. The
Rights become exercisable (i) ten (10) days following a public announcement
that a person or group of affiliated or associated persons, with the
exception of certain Company related entities (an "Acquiring Person"), has
acquired, or obtained the right to acquire, beneficial ownership of 25% or
more of the Common Stock or (ii) ten (10) days following the commencement
of (or a public announcement of an intention to make) a tender offer or
exchange offer which would result in any person or group of related persons
acquiring beneficial ownership of 25% or more of the Common Stock (the
earlier of such dates being called the "Distribution Date").
The Rights will expire on the earlier of April 30, 2002 or redemption of
the Rights by the Company. The Rights are redeemable at a price of
one-quarter of one cent ($.0025) per Right at any time before a person
becomes an Acquiring Person, or at any time before the Distribution Date.
DESCRIPTION OF PREFERRED STOCK
The following summary contains a description of certain general terms of
the Preferred Stock to which any Prospectus Supplement may relate. Certain
terms of any series of Preferred Stock offered by any Prospectus Supplement
will be described in the Prospectus Supplement relating thereto. If so
specified in the Prospectus Supplement, the terms of any series may differ
from the terms set forth below. The description of certain provisions of
the Preferred Stock does not purport to be complete and is subject to and
qualified in its entirety by reference to the provisions of the Articles
and the amendment thereto relating to each particular series of Preferred
Stock (the "Series Amendment") which will be filed or incorporated by
reference, as the case may be, as an exhibit to the Registration Statement
of which this Prospectus is a part at or prior to the time of the issuance
of such Preferred Stock.
General
Under the Articles, the Board of Directors is authorized, without further
stockholder action, to provide for the issuance of up to 2,500,000 shares
of Preferred Stock. As of the date hereof, no shares of Preferred Stock
were outstanding. The Board of Directors may from time to time authorize
the issuance of shares of Preferred Stock in series, and each such series
shall have such dividend and liquidation preferences, redemption prices,
conversion rights, and other terms and provisions as may be contained in the
resolutions of the Board of Directors providing for their issuance. All shares
of Preferred Stock offered hereby, or issuable upon conversion, exchange or
exercise of Securities, will be, when issued, fully paid and non-assessable and
holders thereof will have no preemptive rights in connection therewith.
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Rank
Any series of Preferred Stock will, with respect to rights on liquidation,
winding up and dissolution, rank (i) senior to all classes of Common Stock and
to all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank junior to such series of
Preferred Stock; (ii) on a parity with all equity securities issued by the
Company, the terms of which specifically provide that such equity securities
will rank on a parity with such series of Preferred Stock; and (iii) junior to
all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank senior to such series of
Preferred Stock. In addition, any series of Preferred Stock will, with respect
to dividend rights, rank (i) senior to all equity securities issued by the
Company, the terms of which specifically provide that such equity securities
will rank junior to such series of Preferred Stock and, to the extent provided
in the applicable Series Amendment, to Common Stock, (ii) on a parity with all
equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank on a parity with such series of
Preferred Stock and, to the extent provided in the applicable Series Amendment,
to Common Stock, and (iii) junior to all equity securities issued by the
Company, the terms of which specifically provide that such equity securities
will rank senior to such series of Preferred Stock. As used in any Series
Amendment for these purposes, the term "equity securities" will not include
debt securities convertible into or exchangeable for equity securities.
Dividends
Holders of each series of Preferred Stock will be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefor, cash dividends at such rates and on such dates as are
set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Such rate may be fixed or variable or both. Dividends will be
payable to holders of record of Preferred Stock as they appear on the books
of the Company on such record dates as shall be fixed by the Board of
Directors. Dividends on any series of Preferred Stock may be cumulative or
noncumulative.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any series of Preferred Stock unless dividends shall have been
paid or funds set apart for such payment on the equity securities ranking on a
parity or senior with respect to dividends with such series of Preferred Stock.
If full dividends are not so paid, such series of Preferred Stock shall share
dividends pro rata with such other equity securities ranking on a parity with
such series of Preferred Stock with respect to dividends after payments of any
dividends on equity securities ranking senior to such series of Preferred Stock
with respect to dividends.
Conversion and Exchange
The Prospectus Supplement for any series of Preferred Stock will state
the terms, if any, on which shares of that series are convertible into
shares of another series of Preferred Stock or Common Stock or exchangeable
for another series of Preferred Stock, Common Stock or Debt Securities of
the Company. The Common Stock of the Company is described under
"Description of Common Stock".
Redemption
A series of Preferred Stock may be redeemable at any time, in whole or in
part, at the option of the Company or the holder thereof and may be subject
to mandatory redemption pursuant to a sinking fund or otherwise upon terms
and at the redemption prices set forth in the Prospectus Supplement
relating to such series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be
determined by lot or pro rata, as may be determined by the Board of
Directors, or by any other method determined to be equitable by the Board
of Directors.
On and after a redemption date, unless the Company defaults in the
payment of the redemption price, dividends will cease to accrue on shares
of Preferred Stock called for redemption and all rights of holders of such
shares will terminate except for the right to receive the redemption price.
19
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Company, holders of each series of Preferred Stock will be entitled
to receive out of assets of the Company available for distribution to
shareholders, before any distribution is made on any securities ranking
junior with respect to liquidation, including Common Stock, distributions
upon liquidation in the amount set forth in the Prospectus Supplement
relating to such series of Preferred Stock, plus an amount equal to any
accrued and unpaid dividends. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable
with respect to the Preferred Stock of any series and any other securities
of the Company ranking on a parity with respect to liquidation rights are
not paid in full, the holders of the Preferred Stock of such series and
such other securities will share ratably in any such distribution of assets
of the Company in proportion to the full liquidation preferences to which
each is entitled. After payment of the full amount of the liquidation
preference to which they are entitled, the holders of Preferred Stock will
not be entitled to any further participation in any distribution of assets
of the Company.
Voting Rights
Except as set forth in the Prospectus Supplement relating to a particular
series of Preferred Stock or except as expressly required by applicable
law, the holders of shares of Preferred Stock will have no voting rights.
Transfer Agent and Registrar
The transfer agent and registrar for each series of Preferred Stock will
be described in the applicable Prospectus Supplement.
LIMITATIONS ON CHANGE IN CONTROL
The purpose of the Rights Plan and certain provisions of the Articles and
the Bylaws are to discourage certain types of transactions that may involve
an actual or threatened change of control of the Company. The Company
believes that the Rights Plan and these provisions are designed to reduce
the vulnerability of the Company to an unsolicited proposal for a takeover
of the Company that does not have the effect of maximizing long-term
stockholder value or is otherwise unfair to stockholders of the Company.
However, the Rights Plan and these provisions, individually and collectively,
make more difficult, and may discourage certain types of potential acquirers
from proposing, a merger, tender offer or proxy contest, even if such
transaction or occurrence may be favorable to the interest of the
stockholders, and may delay or frustrate the assumption of control by a
holder of a large block of Common Stock and the removal of incumbent
management, even if such removal might be beneficial to stockholders. By
discouraging takeover attempts, these provisions might have the incidental
effect of inhibiting certain changes in management and the temporary
fluctuations in the market price of the shares that often result from actual
or considered takeover attempts.
Classified Board of Directors. The Articles provide for the classification
of the Board of Directors into three classes of directors serving staggered
three-year terms, with the classes to be as nearly equal in number as possible.
One class of directors stands for election at each annual meeting of
stockholders. Therefore, at least two stockholder meetings will generally be
required to effect a change in control of the Board.
Cumulative Voting. As discussed above, cumulative voting permits a
shareholder to distribute votes to one or any number of nominees proposed
for election. As a result, a minority shareholder may be able to prevent
an attempt to gain full control over the Board.
Preferred Stock. Preferred Stock can be issued in one or more series by
the Board of Directors without further stockholder approval. The Board of
Directors has the power to determine the designations, preferences and
rights of each such series. Because the Board of Directors has substantial
discretion in setting the terms of the Preferred Stock, such stock may act
as a defensive measure.
20
Advance Notice for Stockholder Business Proposals. The Bylaws provide
for an orderly procedure for the notification of the Board of Directors of
business which is to be presented by a stockholder at stockholder meetings.
The procedure is designed to enable the Board to plan such meetings and
also, to the extent it deems necessary or desirable, to inform the stock
holders, prior to the meeting, of any new business that will be presented
at the meeting.
This procedure precludes the conducting of business at a particular
meeting if the proper notice procedures have not been followed. Nothing
precludes discussion by any stockholder of any business properly brought
before the annual meeting of stockholders of the Company.
Advance Notice for Stockholder Nomination Proposals. The Bylaws provide that
only persons who are nominated in accordance with the procedures specified
therein are eligible for election as directors. Such nominations may be made
by the Board of Directors, by any committee appointed by the Board or by any
stockholder of the Company entitled to vote for the election of directors at
the meeting, provided that any stockholder seeking to nominate a person for
election as a director of the Company has complied with the notice procedures.
Written notice of a stockholder nomination must be made to the Secretary of the
Company not later than, with respect to an annual meeting, 120 days in advance
of the date on which the Company's proxy statement for the preceding year's
annual meeting of stockholders was released. With respect to an election to be
held at a special meeting of stockholders, notice by the stockholder must be
delivered or received not later than the close of business on the tenth day
following the date on which notice of such meeting is first given to
stockholders. This notice must set forth the name and address of the
stockholder who intends to make the nomination and the name and address of the
person being nominated, together with certain other accompanying information.
Independence Policy. Since 1980, the Board has had an internal
"Continuation Policy" which recognizes the Board's adherence to management
policies designed to enhance the long-term value of the Company. In 1991,
the Board of Directors adopted an Independence Policy which reaffirms its
adherence to such management policies and acknowledges the importance of
the Company's continued independence to the achievement of such policies.
The Independence Policy also indicates that the Board may consider the
interests of the Company's other constituents, such as its employees and
policyholders, as well as the interests of the Company's stockholders, in
evaluating any offer for control of the Company. Under Iowa law, the
consideration by the Board of the interests of such non-stockholder
constituencies is consistent with its fiduciary duties.
Removal of Directors Solely for Cause. The Articles provide that the
directors of the Company may be removed from office by the stockholders
only for cause. Cause is defined as the conviction of a director of a
felony or an adjudication by a court of competent jurisdiction that a
director was liable for negligence or misconduct in the performance of a
director's duty to the Company. This provision makes it more difficult for
the Company's stockholders to remove a director and, thereby, may
discourage outsiders from seeking to acquire control of the Company because
they could be delayed in making changes in existing management.
Employee Benefit Plans. The Company presently has four executive
compensation plans that contain provisions which entitle participants to
certain benefits in the event of a change in control. Under the Company's
Amended and Restated Key Employee Incentive Plan (a cash bonus plan), in
the event of a change in control, any awards that are outstanding become
immediately vested, any performance standards related to the awards are
deemed achieved at target levels and applicable restrictions lapse.
Similarly, under the Company's 1982 Stock Incentive Plan, outstanding
options become exercisable, restrictions on stock awards lapse and any
performance standards are deemed achieved in the event of a change of
control. Under the Company's Restated and Amended 1992 Stock Incentive
Plan, in the event of a change in control, the Compensation Committee of
the Company's Board of Directors may, in its discretion, either at or after
the time an award is made (i) provide for the vesting of any award, (ii)
provide for the Company's purchase of any award upon the participant's
request, (iii) make adjustments to the award to reflect the change in
control, (iv) determine that any performance goals required to be met are
deemed to have been achieved and provide for the acceleration of such an
award, or (v) cause the award to be assumed by the surviving company.
Finally, under the Company's Executive Severance Pay Plan, each eligible
21
employee terminated subsequent to a change in control is entitled to
receive a maximum severance benefit equal to one year's base salary even
though the full vesting period may not have expired. These measures
individually and in the aggregate may have an anti-takeover effect.
State Insurance Laws. The insurance laws and regulations of the
jurisdictions in which the Company or its insurance subsidiaries do
business may impede or delay a business combination involving the Company.
INDEMNIFICATION
The Articles provide that directors shall not be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, to the fullest extent permitted by the Iowa Business Corporation
Act (the "IBCA"). The IBCA provides in such case that a director shall not
be liable for monetary damages for breach of fiduciary duty as a director,
except for (i) a breach of the duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, (iii) transactions from
which the director derives improper personal benefit, or (iv) liability for
an unlawful distribution under the IBCA.
The Articles and Bylaws provide that the Company shall indemnify its
directors, officers, employees and agents to the fullest extent permitted by
the IBCA. The IBCA provides that a company may indemnify its officers and
directors if (i) the person acted in good faith and (ii) the person reasonably
believed, in the case of conduct in the person's official capacity with the
company, that the conduct was in the company's best interests, and in all other
cases, that the person's conduct was at least not opposed to the company's best
interests and (iii) in the case of any criminal proceeding, the person had no
reasonable cause to believe the person's conduct was unlawful. The Company is
required to indemnify officers and directors against reasonable expenses
incurred in connection with any proceeding in which they are wholly successful,
on the merits or otherwise, to which the person may be a party because of the
person's position with the Company. If the proceeding is by or in the right of
the Company, indemnification may be made only for reasonable expenses and may
not be made in respect of any proceeding in which the person shall have been
adjudged liable to the Company. Further, any such person may not be
indemnified in respect of any proceeding that charges improper personal
benefit to the person, in which the person shall have been adjudged to be
liable.
The Company maintains directors' and officers' liability insurance, which
indemnifies directors and officers of the Company against certain damages
and expenses relating to certain claims against them caused by negligent
acts, errors or omissions.
DESCRIPTION OF WARRANTS
The Company may issue Warrants, including Warrants to purchase Debt
Securities, Preferred Stock, Common Stock , or any combination thereof.
Warrants may be issued independently or together with any such Securities
and may be attached to or separate from such Securities. The Warrants are
to be issued under warrant agreements (each a "Warrant Agreement") to be
entered into between the Company and a bank or trust company, as warrant
agent (the "Warrant Agent"), all as shall be set forth in the applicable
Prospectus Supplement. No warrants may be issued to purchase Preferred
Securities or Common Securities issued by Equitable Trust.
The applicable Prospectus Supplement will describe the terms of any
Warrants in respect of which this Prospectus is being delivered, including
the following: (i) the title of such Warrants; (ii) the aggregate number
of such Warrants; (iii) the price or prices at which such Warrants will be
issued; (iv) the currency or currencies, including composite currencies, in
which the price of such Warrants may be payable; (v) the designation, amount
and terms of the Securities (other than Preferred Securities and Common
Securities) purchasable upon exercise of such Warrants; (vi) the price at
which and the currency or currencies, including composite currencies, in which
22
the Securities (other than Preferred Securities and Common Securities)
purchasable upon exercise of such Warrants may be purchased; (vii) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (viii) whether such Warrants will be issued in
registered form or bearer form; (ix) if applicable, the minimum or maximum
amount of such Warrants which may be exercised at any one time; (x) if
applicable, the designation and terms of the Securities (other than Preferred
Securities and Common Securities) with which such Warrants are issued and the
number of such Warrants issued with each such Security; (xi) if applicable, the
date on and after which such Warrants and the related Securities (other than
Preferred Securities and Common Securities) will be separately transferable;
(xii) information with respect to book-entry procedures, if any; (xiii) if
applicable, a discussion of certain United States federal income tax
considerations; and (xiv) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF PREFERRED SECURITIES OF EQUITABLE TRUST
The following summary of certain provisions of the Declaration of Trust
of Equitable Trust, as amended, (the "Declaration") does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Declaration, a copy of which is included as an exhibit to the Registration
Statement of which this Prospectus is a part.
General
Equitable Trust may issue a series of Preferred Securities having terms de-
scribed in the Prospectus Supplement relating thereto. The Declaration author-
izes the Regular Trustees of Equitable Trust to issue on behalf of Equitable
Trust one series of Preferred Securities. The Declaration will be qualified
as an indenture under the Trust Indenture Act. The Property Trustee, an
independent trustee, will act as indenture trustee for the Preferred Securities
for purposes of compliance with the provisions of the Trust Indenture Act. The
Preferred Securities will have such terms, including distributions, redemption,
voting, liquidation rights and such other preferred, deferred or other special
rights or such restrictions as shall be established by the Regular Trustees in
accordance with the Declaration or as shall be set forth in the Declaration or
made part of the Declaration by the Trust Indenture Act. Reference is made to
any Prospectus Supplement relating to the Preferred Securities of Equitable
Trust for specific terms of the Preferred Securities, including, to the extent
applicable, (i) the distinctive designation of such Preferred Securities, (ii)
the number of Preferred Securities issued by Equitable Trust, (iii) the annual
distribution rate (or method of determining such rate) for Preferred Securities
issued by Equitable Trust and the date or dates upon which such distributions
shall be payable (provided, however, that distributions on such Preferred
Securities shall, subject to any deferral provisions, and any provisions for
payment of defaulted distributions, be payable on a quarterly basis to Holders
of such Preferred Securities as of a record date in each quarter during which
such Preferred Securities are outstanding), (iv) any right of Equitable Trust
to defer quarterly distributions on the Preferred Securities as a result of an
interest deferral right exercised by the Company on the Debt Securities held by
Equitable Trust; (v) whether distributions on Preferred Securities shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities shall be cumulative,
(vi) the amount or amounts which shall be paid out of the assets of Equitable
Trust to the Holders of Preferred Securities upon voluntary or involuntary
dissolution, winding-up or termination of Equitable Trust, (vii) the obligation
or option, if any, of Equitable Trust to purchase or redeem Preferred Securi-
ties and the price or prices at which, the period or periods within which and
the terms and conditions upon which Preferred Securities shall be purchased or
redeemed, in whole or in part, pursuant to such obligation or option with such
redemption price to be specified in the applicable Prospectus Supplement),
(viii) the voting rights, if any, of Preferred Securities in addition to those
required by law, including the number of votes per Preferred Security and any
requirement for the approval by the Holders of Preferred Securities as a
condition to specified action or amendments to the Declaration, (ix) the terms
and conditions, if any, upon which Debt Securities held by Equitable Trust may
be distributed to holders of Preferred Securities, and (x) any other relevant
23
rights, preferences, privileges, limitations or restrictions of Preferred
Securities consistent with the Declaration or with applicable law. All Pre-
ferred Securities offered hereby will be guaranteed by the Company to the
extent set forth below under "Description of Trust Guarantee." The Trust
Guarantee, when taken together with the Company's back-up undertakings,
consisting of its obligations under the Declaration (including the obligation
to pay expenses of Equitable Trust), the Indenture and any applicable
supplemental indentures thereto and the Debt Securities issued to Equitable
Trust will provide a full and unconditional guarantee by the Company of the
Preferred Securities. Certain United States federal income tax considerations
applicable to any offering of Preferred Securities will be described in the
Prospectus Supplement relating thereto and certain proposed tax law changes are
described below. See "Description of Preferred Securities -- Proposed Tax Law
Changes." The payment terms of the Preferred Securities will be the same as
the Debt Securities issued to Equitable Trust by the Company.
An Event of Default under the Declaration will be deemed to have occurred
whenever an event of default (as defined in the Indenture) shall have occurred
with respect to the Debt Securities held by Equitable Trust. If the Property
Trustee fails to enforce its rights with respect to the Debt Securities held
by Equitable Trust, any record holder of Preferred Securities may institute
legal proceedings directly against the Company to enforce the Property
Trustee's rights under such Debt Securities without first instituting any legal
proceedings against such Property Trustee or any other person or entity.
Notwithstanding the foregoing, if an Event of Default under the Declaration
has occurred and is continuing and such event is attributable to the failure
of the Company to pay interest or principal on the Debt Securities issued to
Equitable Trust on the date such interest or principal is otherwise payable,
then a record holder of Preferred Securities may institute a proceeding
directly against the Company for enforcement of payment to the record holder of
the Preferred Securities of the principal of or interest on the Debt Securities
on or after the respective due dates specified in the Debt Securities, and the
amount of the payment will be based on the holder's pro rata share of the
amount due and owing on all of the Preferred Securities. The record holder in
the case of the issuance of one or more global Preferred Securities certifi-
cates will be The Depository Trust Company acting at the direction of the
beneficial owners of the Preferred Securities.
The Declaration authorizes the Regular Trustees to issue on behalf of
Equitable Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions
as shall be established by the Regular Trustees in accordance with the
Declaration or as shall otherwise be set forth therein. The terms of the
Common Securities issued by Equitable Trust will be substantially identical
to the terms of the Preferred Securities issued by Equitable Trust, and the
Common Securities will rank pari passu, and payments will be made thereon
pro rata, with the Preferred Securities except that, if an event of default
under the Declaration has occurred and is continuing, the rights of the
holders of the Common Securities to payment in respect of distributions and
payments upon liquidation, redemption and otherwise will be subordinated to
the rights of the holders of the Preferred Securities. Except in certain
limited circumstances, the Common Securities will also carry the right to vote
and to appoint, remove or replace any of the Equitable Trustees of Equitable
Trust. All of the Common Securities of Equitable Trust will be directly or
indirectly owned by the Company.
The financial statements of Equitable Trust will be reflected in the Company's
consolidated financial statements with the Preferred Securities shown as
Company-obligated mandatorily-redeemable preferred securities of its subsidiary,
Equitable of Iowa Companies Capital Trust, holding solely Debt Securities of
the Company and indicating the principal amount, interest rate and maturity
date thereof. In a footnote to the Company's audited financial statements
there will be included statements that Equitable Trust is wholly-owned by the
Company and that, considered together, the Trust Guarantee and the back-up
undertakings of the Company constitute a full and unconditional guarantee by
the Company of the Preferred Securities.
Proposed Tax Law Changes
On March 19, 1996, the Revenue Reconciliation Bill of 1996 (the "Bill"),
the revenue portion of President Clinton's budget proposal, was released. The
Bill would, among other things, generally deny interest deductions for interest
on an instrument, issued by a corporation, that has a maximum weighted average
24
maturity of more than 40 years. The Bill would also generally deny interest
deductions for interest on an instrument, issued by a corporation, that has a
maximum term of more than 20 years and that is not shown as indebtedness on the
separate balance sheet of the issuer or, where the instrument is issued to a
related party (other than a corporation), where the holder or some other
related party issues a related instrument that is not shown as indebtedness
on the issuer's consolidated balance sheet. For purposes of determining the
weighted average maturity or the term of an instrument, any right to extend
would be treated as exercised. The above-described provisions of the Bill
were proposed to be effective generally for instruments issued on or after
December 7, 1995. However, on March 29, 1996, the Chairmen of the Senate
Finance and House Ways and Means Committees issued a joint statement to the
effect that it was their intention that the effective date of the President's
legislative proposals, if adopted, will be no earlier than the date of
appropriate Congressional action. If either of the provisions of the Bill
described above were to apply to the Debt Securities held by Equitable Trust,
the Company would be unable to deduct interest on the Debt Securities held by
Equitable Trust. There can be no assurance that current or future legislative
proposals or final legislation will not affect the ability of the Company to
deduct interest on the Debt Securities held by Equitable Trust. The Prospectus
Supplement relating to any offering of Preferred Securities will describe any
additional material developments with respect to the Bill and will further
describe whether the inability of the Company to deduct interest on the Debt
Securities will give rise to a right on the part of the Company to redeem the
Debt Securities.
DESCRIPTION OF TRUST GUARANTEE
Set forth below is a summary of information concerning the Trust Guarantee
that will be executed and delivered by the Company for the benefit of the
holders, from time to time, of Preferred Securities. The Trust Guarantee will
be qualified as an indenture under the Trust Indenture Act. The First National
Bank of Chicago will act as independent indenture trustee for Trust Indenture
Act purposes under the Trust Guarantee (the "Preferred Securities Guarantee
Trustee"). The terms of the Trust Guarantee will be those set forth in such
Trust Guarantee and those made part of such Trust Guarantee by the Trust
Indenture Act. The summary of certain provisions of the Trust Guarantee does
not purport to be complete and is subject to and qualified in its entirety by
reference to the provisions of the form of Trust Guarantee, a copy of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part, and the Trust Indenture Act. The Trust Guarantee will be held by
the Preferred Securities Guarantee Trustee for the benefit of the holders of
the Preferred Securities of Equitable Trust.
General
Pursuant to the Trust Guarantee, the Company will agree, to the extent set
forth therein, to pay in full to the holders of the Preferred Securities, the
Trust Guarantee Payments (as defined below) (except to the extent paid by
Equitable Trust), as and when due, regardless of any defense, right of set-off
or counterclaim which Equitable Trust may have or assert. The following
payments or distributions with respect to the Preferred Securities (the "Trust
Guarantee Payments"), to the extent not paid by Equitable Trust, will be
subject to the Trust Guarantee (without duplication): (i) any accrued and
unpaid distributions that are required to be paid on such Preferred Securities,
to the extent Equitable Trust shall have funds available therefor, (ii) the
redemption price, including all accrued and unpaid distributions to the date of
redemption (the "Redemption Price"), to the extent Equitable Trust has funds
available therefor, with respect to any Preferred Securities called for
redemption by Equitable Trust and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of Equitable Trust (other than in
connection with the distribution of Debt Securities to the holders of Preferred
Securities or the redemption of all of the Preferred Securities upon maturity
or redemption of the Debt Securities) the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such Preferred
Securities to the date of payment, to the extent Equitable Trust has funds
available therefor or (b) the amount of assets of Equitable Trust remaining for
distribution to holders of such Preferred Securities in liquidation of
Equitable Trust. The Company's obligation to make a Trust Guarantee Payment
may be satisfied by direct payment of the required amounts by the Company to
25
the holders of Preferred Securities or by causing Equitable Trust to pay such
amounts to such holders.
The Trust Guarantee will not apply to any payment of distributions except to
the extent Equitable Trust shall have funds available therefor. If the Company
does not make interest or principal payments on the Debt Securities purchased
by Equitable Trust, Equitable Trust will not pay distributions on the Preferred
Securities issued by Equitable Trust and will not have funds available therefor.
The Company has also agreed to guarantee the obligations of Equitable Trust
with respect to the Common Securities (the "Trust Common Guarantee") to the
same extent as the Trust Guarantee, except that, if an Event of Default under
the Indenture has occurred and is continuing, holders of Preferred Securities
under the Trust Guarantee shall have priority over holders of the Common
Securities under the Trust Common Guarantee with respect to distributions and
payments on liquidation, redemption or otherwise.
Certain Covenants of the Company
In the Trust Guarantee, the Company will covenant that, so long as any
Preferred Securities remain outstanding, if there shall have occurred any event
of default under the Trust Guarantee or under the Declaration, then (a) the
Company will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock; (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees) issued by the Company which
rank pari passu with or junior to the Debt Securities issued to Equitable Trust
and (c) the Company shall not make any guarantee payments with respect to the
foregoing (other than pursuant to the Trust Guarantee); provided, however, that
the Company may declare and pay a stock dividend where the dividend stock is
the same stock as that on which the dividend is being paid.
Modification of the Trust Guarantees; Assignment
Except with respect to any changes that do not adversely affect the rights of
holders of Preferred Securities (in which case no consent of such holders will
be required), the Trust Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of such Preferred Securities will be set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in the Trust
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities then outstanding.
Events of Default
An event of default under the Trust Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Preferred Securities Guarantee Trustee in
respect of the Trust Guarantee or to direct the exercise of any trust or power
conferred upon the Preferred Securities Guarantee Trustee under the Trust
Guarantee.
If the Preferred Securities Guarantee Trustee fails to enforce the Trust
Guarantee, any record holder of Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Preferred Securities
Guarantee Trustee's rights under the Trust Guarantee without first instituting
26
a legal proceeding against Equitable Trust, the Preferred Securities Guarantee
Trustee or any other person or entity. Notwithstanding the foregoing, if the
Company has failed to make a Guarantee Payment, a record holder of Preferred
Securities may directly institute a proceeding against the Company for
enforcement of the Trust Guarantee for such payment to the record holder of the
Preferred Securities of the principal of or interest on the Debt Securities on
or after the respective due dates specified in the Debt Securities, and the
amount of the payment will be based on the holder's pro rata share of the
amount due and owing on all of the Preferred Securities. The Company has
waived any right or remedy to require that any action be brought first against
Equitable Trust or any other person or entity before proceeding directly
against the Company. The record holder in the case of the issuance of one or
more global Preferred Securities certificates will be The Depository Trust
Company acting at the direction of the beneficial owners of the Preferred
Securities.
The Company will be required to provide annually to the Preferred
Securities Guarantee Trustee a statement as to the performance by the
Company of certain of its obligations under the Trust Guarantee and as to
any default in such performance.
Information Concerning the Preferred Securities Guarantee Trustee
The Preferred Securities Guarantee Trustee, prior to the occurrence of a
default, undertakes to perform only such duties as are specifically set forth
in the Trust Guarantee and, after default with respect to the Trust Guarantee,
shall exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provision, the
Preferred Securities Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by the Trust Guarantee at the request of any holder
of Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
Termination of the Trust Guarantee
The Trust Guarantee will terminate as to the Preferred Securities upon
full payment of the Redemption Price of all Preferred Securities, upon
distribution of the Debt Securities held by Equitable Trust to the holders
of all of the Preferred Securities or upon full payment of the amounts
payable in accordance with the Declaration upon liquidation of Equitable
Trust. The Trust Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Preferred
Securities must restore payment of any sums paid under such Preferred
Securities or the Trust Guarantee.
Status of the Trust Guarantee
The Trust Guarantee will constitute an unsecured obligation of the
Company and will rank (i) subordinate and junior in right of payment to all
other liabilities of the Company, including the Debt Securities, except
those liabilities of the Company made pari passu or subordinate by their
terms, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by the Company and with any guarantee now or
hereafter entered into by the Company in respect of any preferred or
preference stock of any affiliate of the Company and (iii) senior to the
Company's Common Stock. The terms of the Preferred Securities provide that
each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal proceeding
directly against the Company to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
Governing Law
The Trust Guarantee will be governed by and construed in accordance with
the law of the State of Iowa.
27
PLAN OF DISTRIBUTION
The Company and Equitable Trust may offer and sell Securities in any of
the following ways: (i) directly to purchasers, (ii) through agents, (iii)
through underwriters, (iv) through dealers or (v) through a combination of
any such methods. The Prospectus Supplement with respect to an offering of
Securities will set forth the terms of such offering, including, to the
extent applicable, the name or names of any underwriters (and any managing
underwriters), the names of any dealers or agents, the purchase price of
the Securities and the proceeds to the Company or Equitable Trust from such
sale, any underwriting discounts and commissions or agency fees and other
items constituting underwriters' or agents' compensation, any initial
public offering price and any discounts or concessions allowed or reallowed
or paid to dealers and any securities exchanges or interdealer quotation
system on which such Securities are expected to be listed. Any initial
public offering price and any discounts or concessions allowed or reallowed
or paid to dealers may be changed from time to time.
Securities may be offered and sold, and offers to purchase such
securities may be solicited, by agents designated by the Company or
Equitable Trust from time to time. Any such agent involved in the offer or
sale of the Securities in respect of which this Prospectus is delivered
will be named, and the terms of such agency (including any commissions
payable by the Company or Equitable Trust to such agent) will be set forth,
in the applicable Prospectus Supplement. Unless otherwise indicated in
such Prospectus Supplement, any such agent will be acting on a best efforts
basis for the period of its appointment.
If an underwriter or underwriters are utilized in the sale of Securities,
the Company or Equitable Trust will execute an underwriting agreement with
such underwriter or underwriters at the time an agreement for such sale is
reached, and the names of the managing underwriter or managing underwriters,
as well as any other underwriters, and the terms of the transaction, including
commissions, discounts and other compensation of the underwriters and dealers,
if any, will be set forth in the Prospectus Supplement, which will be used by
the underwriters to make resales of the Securities in respect of which such
Prospectus Supplement is delivered to the public. If underwriters are used
in the sale, such underwriters will acquire Securities for their own account
and may resell such Securities from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at
varying prices determined by the underwriter at the time of sale. Securities
may be offered to the public either through underwriting syndicates
represented by managing underwriters, or directly by underwriters without a
syndicate. Only underwriters named in the Prospectus Supplement are deemed
to be underwriters in connection with the Securities offered thereby. If any
underwriters are utilized in the sale of the Securities, unless otherwise set
forth in the Prospectus Supplement relating thereto the underwriting agreement
will provide that the obligations of the underwriters are subject to certain
conditions precedent and that the underwriters with respect to a sale of
Securities will be obligated to purchase all such Securities, if any are
purchased.
If a dealer is utilized in the sale of the Securities, the Company or
Equitable Trust will sell such Securities to the dealer, as principal. The
dealer may then resell such Securities to the public at varying prices to
be determined by such dealer at the time of resale. The name of the dealer
and the terms of the transaction will be set forth in the Prospectus
Supplement relating thereto.
Agents, underwriters and dealers may be entitled under agreements that
may be entered into with the Company or Equitable Trust to indemnification
by the Company or Equitable Trust against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or to
contribution with respect to payments which the agents, underwriters or
dealers may be required to make in respect thereof. Agents, underwriters
and dealers may be customers of, engage in transactions with, or perform
services for the Company and affiliates of the Company. Any agents,
dealers or underwriters participating in the offering of Securities may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended, of the Securities so offered.
Offers to purchase Securities may be solicited directly by the Company or
Equitable Trust and sales thereof may be made by the Company or Equitable
Trust directly to institutional investors or others, who may be deemed to
be underwriters within the meaning of the Securities Act with respect to
any resale thereof. The terms of any such sales, including the terms of
any bidding or auction process, if utilized, will be described in the
Prospectus Supplement relating thereto.
28
Each series of Securities (other than Common Stock) will be a new issue
of securities and may have no established trading market. Agents and
underwriters may from time to time purchase and sell Securities in the
secondary market or may make a market in the Securities, but are not
obligated to do so, and there can be no assurance that there will be a
secondary market for the Securities or liquidity in the secondary market
if one develops.
If so indicated in the applicable Prospectus Supplement, the Company or
Equitable Trust will authorize agents, underwriters or dealers to solicit
offers by certain institutions to purchase Securities from the Company or
Equitable Trust at the public offering price set forth in the applicable
Prospectus Supplement pursuant to Delayed Delivery Contracts ("Contracts")
providing for payment and delivery on a specified date in the future. A
commission indicated in the applicable Prospectus Supplement will be paid to
underwriters, dealers or agents soliciting purchases of Securities pursuant
to Contracts accepted by the Company or Equitable Trust. The Contracts will
be subject to the conditions set forth in the applicable Prospectus Supplement.
As one of the means of direct issuances of Securities, the Company or
Equitable Trust may utilize the services of an entity through which it may
conduct an electronic "dutch auction" or similar offering of the Securities
among potential purchasers who are eligible to participate in the auction or
offering of such Securities, if so described in the applicable Prospectus
Supplement.
The anticipated place and time of delivery for the Securities in respect
of which this Prospectus is delivered will be set forth in the applicable
Prospectus Supplement.
LEGAL MATTERS
The validity of the Securities offered hereby other than the Preferred
Securities will be passed upon for the Company and Equitable Trust by
Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, P.C., 1900
Hub Tower, Des Moines, Iowa 50309. Certain United States federal income
taxation matters also will be passed upon for the Company and Equitable
Trust by Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien,
P.C. Attorneys in such law firm hold shares of Common Stock. Certain matters
of Delaware law relating to the validity of the Preferred Securities will be
passed upon for Equitable Trust by Richards, Layton & Finger, P.A., One Rodney
Square, Wilmington, Delaware 19899, special Delaware counsel to Equitable
Trust. Certain legal matters in connection with the Securities will be passed
upon for the underwriter(s), dealer(s) or agent(s) by LeBoeuf, Lamb, Greene &
MacRae, L.L.P., a limited liability partnership including professional
corporations, 125 West 55th Street, New York, New York 10019-5389. As to
certain matters of Iowa law, LeBoeuf, Lamb, Greene & MacRae, L.L.P. may rely
upon the opinions of Nyemaster, Goode, McLaughlin, Voigts, West, Hansell &
O'Brien, P.C.
EXPERTS
The consolidated financial statements and schedules of the Company
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 incorporated by reference in this Prospectus, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedules are, and audited financial
statements and schedules to be included in subsequently filed documents
will be, incorporated herein in reliance upon the reports of Ernst & Young
LLP pertaining to such financial statements (to the extent covered by
consents filed with the Securities and Exchange Commission) given upon the
authority of such firm as experts in accounting and auditing.
29
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[BACK PAGE]
NO PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTA-
TIONS, OTHER THAN THOSE CONTAINED
OR INCORPORATED BY REFERENCE IN 5,000,000
THIS PROSPECTUS SUPPLEMENT AND THE Preferred Securities
PROSPECTUS, IN CONNECTION WITH THE
OFFER CONTAINED HEREIN, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMA-
TION OR REPRESENTATIONS MUST NOT BE EQUITABLE OF IOWA
RELIED UPON AS HAVING BEEN AUTHO- COMPANIES
RIZED BY THE COMPANY, EQUITABLE CAPITAL TRUST
TRUST OR THE UNDERWRITERS. NEITHER
THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR 8.70% Trust Originated
ANY SALE MADE HEREUNDER SHALL, Preferred Securities
UNDER ANY CIRCUMSTANCES, CREATE ANY ("TOPrS SM")
IMPLICATION THAT THERE HAS BEEN NO Fully and Unconditionally
CHANGE IN THE AFFAIRS OF THE Guaranteed by
COMPANY SINCE THE DATE AS OF WHICH
INFORMATION IS GIVEN IN THIS PRO-
SPECTUS SUPPLEMENT AND THE PROSPEC- -------------------------
TUS. THIS PROSPECTUS SUPPLEMENT Prospectus Supplement
AND PROSPECTUS DO NOT CONSTITUTE AN -------------------------
OFFER OR SOLICITATION BY ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON Merrill Lynch & Co.
MAKING SUCH OFFER OR SOLICITATION
IS NOT QUALIFIED TO DO SO OR TO ANY Dain Bosworth
PERSON TO WHOM IT IS UNLAWFUL TO Incorporated
MAKE SUCH OFFER OR SOLICITATION.
__________ Dean Witter Reynolds Inc.
TABLE OF CONTENTS Goldman, Sachs & Co.
Page
Prospectus Supplement The Robinson-Humphrey
Company, Inc.
Risk Factors S- 4
Equitable Trust S- 9
The Company S-10
Summary Financial Information S-12
Recent Developments S-14 July 18, 1996
Ratio of Earnings to Fixed
Charges S-14
Capitalization of the Company S-15
Use of Proceeds S-15
Description of the Preferred
Securities S-15
Description of the Subordinated
Debentures S-27
Effect of Obligations Under
the Subordinated Debentures
and the Trust Guarantee S-33
United States Federal Income
Taxation S-34
Underwriting S-38
Legal Matters S-39
Prospectus
Available Information 3
Incorporation of Certain
Documents by Reference 3
The Company 4
Equitable Trust 6
Use of Proceeds 7
Ratio of Earnings to Fixed
Charges 7
Description of Debt Securities 7
Description of Capital Stock 17
Description of Common Stock 17
Description of Preferred Stock 18
Limitations on Change in Control 20
Indemnification 22
Description of Warrants 22
Description of Preferred
Securities of Equitable Trust 23
Description of Trust Guarantee 25
Plan of Distribution 28
Legal Matters 29
Experts 29
