Filed pursuant to Rule 424(b)(3) of the Securities Act of 1933
Registration Nos. 333-25913,333-25913-01
PROSPECTUS
__________
EQUITABLE OF IOWA COMPANIES
CAPITAL TRUST II
OFFER TO EXCHANGE ITS 8.424% SERIES B CAPITAL SECURITIES
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING
8.424% SERIES A CAPITAL SECURITIES
(Liquidation Amount $1,000 per Capital Security)
fully and unconditionally guaranteed, as described herein, by
EQUITABLE OF IOWA COMPANIES
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON JUNE 6, 1997, UNLESS EXTENDED.
Equitable of Iowa Companies Capital Trust II, a statutory trust created
under the laws of the State of Delaware (the "Trust"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus (as the
same may be amended or supplemented from time to time, the "Prospectus") and
in the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange up to $50,000,000 aggregate Liquidation Amount
of its 8.424% Series B Capital Securities (the "New Capital Securities")
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement (as defined herein)
of which this Prospectus constitutes a part, for a like aggregate Liquidation
Amount of its outstanding 8.424% Series A Capital Securities (the "Old
Capital Securities"), of which $50,000,000 aggregate Liquidation Amount is
outstanding. Pursuant to the Exchange Offer, Equitable of Iowa Companies, an
Iowa corporation (the "Company"), will exchange (i) its guarantee of the
payment of Distributions (as defined herein) and payments on liquidation or
redemption of the Old Capital Securities (the "Old Guarantee") for a like
guarantee of the New Capital Securities (the "New Guarantee"); and (ii) all
of its 8.424% Series A Subordinated Deferrable Interest Debentures (the "Old
Subordinated Debentures"), of which $51,550,000 aggregate principal amount is
outstanding, for a like aggregate principal amount of its 8.424% Series B
Subordinated Deferrable Interest Debentures (the "New Subordinated
Debentures"), which New Guarantee and New Subordinated Debentures also have
been registered under the Securities Act. The Old Capital Securities, the Old
Guarantee and the Old Subordinated Debentures are collectively referred to
herein as the "Old Securities" and the New Capital Securities, the New
Guarantee and the New Subordinated Debentures are collectively referred to
herein as the "New Securities."
The forms and terms of the New Securities are identical in all material
respects to the respective forms and terms of the Old Securities, except that
(i) the New Capital Securities have been registered under the Securities Act
and therefore will not be subject to certain restrictions on transfer
applicable to the Old Capital Securities or the $100,000 minimum Liquidation
Amount transfer restriction, (ii) the New Capital Securities will not provide
for any increase in the Distribution rate thereon, (iii) the New Subordinated
Debentures have been registered under the Securities Act and therefore will
not be subject to certain restrictions on transfer applicable to the Old
Subordinated Debentures or the $100,000 minimum aggregate principal amount
transfer restriction, and (iv) the New Subordinated Debentures will not
provide for any increase in the interest rate thereon. See "Description of
the Capital Securities" and "Description of the Old Securities." The New
Capital Securities are being offered for exchange, and the New Guarantee and
New Subordinated Debentures will be exchanged, in order to satisfy certain
obligations of the Company and the Trust under the Registration Rights
Agreement, dated as of April 3, 1997 (the "Registration Rights Agreement"),
among the Company, the Trust and the Initial Purchaser (as defined herein).
In the event that the Exchange Offer is consummated, any Old Capital
Securities that remain outstanding and the New Capital Securities issued in
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding
Liquidation Amount thereof have taken certain actions or exercised certain
rights under the Declaration (as defined herein). In the event the Exchange
Offer is consummated, (i) the New Guarantee will apply to any New Capital
Securities issued in the Exchange Offer, (ii) the Old Guarantee will continue
to apply to any Old Capital Securities that remain outstanding, (iii) the Old
Subordinated Debentures will be retired and cancelled and (iv) the New
Subordinated Debentures will be issued to The First National Bank of Chicago,
as Property Trustee under the Trust.
SEE "RISK FACTORS" COMMENCING ON PAGE 13 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER OLD CAPITAL SECURITIES IN THE
EXCHANGE OFFER.
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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 May 7, 1997.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on June 6, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company and the Trust (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Old Capital Securities may be withdrawn at any time on
or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum Liquidation Amount of Old Capital Securities being tendered for
exchange. However, the Exchange Offer is subject to certain conditions which
may be waived by the Company and the Trust in their reasonable discretion and
to the terms and provisions of the Registration Rights Agreement. Old
Capital Securities may be tendered for exchange in whole or in part in
denominations of $1,000 in Liquidation Amount or integral multiples of $1,000
in excess thereof. The Company has agreed to pay all expenses of the Trust,
including expenses related to the Exchange Offer. See "The Exchange Offer --
Fees and Expenses." Each New Capital Security will accumulate Distributions
from the most recent Distribution Date (as defined in "Description of the
Capital Securities -- Distributions") on the Old Capital Securities surrendered
in exchange for such New Capital Securities or, if no Distributions
have been paid or provided for on such Old Capital Securities, from April 3,
1997. As a result, holders of Old Capital Securities that are accepted for
exchange will not receive accumulated Distributions on such Old Capital
Securities for any period from and after the most recent Distribution Date on
such Old Capital Securities or, if no Distributions have been paid or
provided for on such Old Capital Securities, from and after April 3, 1997,
and such holders will be deemed to have waived the right to receive any
Distributions on such Old Capital Securities. This Prospectus, together with
the Letter of Transmittal, is being sent to all registered holders of Old
Capital Securities as of May 7, 1997.
Neither the Company nor the Trust will receive any cash or other proceeds
from the issuance of the New Capital Securities offered hereby. No dealer-
manager is being used in connection with this Exchange Offer. See "Use of
Proceeds From Sale of the Old Capital Securities" and "Plan of Distribution."
As the context may require, unless expressly stated otherwise, (i) "Capital
Securities" means the Old Capital Securities and, in the event the Exchange
Offer is consummated, the New Capital Securities, (ii) "Subordinated
Debentures" means the Old Subordinated Debentures and, in the event the
Exchange Offer is consummated, the New Subordinated Debentures, (iii)
"Guarantee" means the Old Guarantee and, in the event the Exchange Offer is
consummated, the New Guarantee and (iv) "Securities" means the Old Securities
and, in the event the Exchange Offer is consummated, the New Securities. In
addition, as used herein, (i) the "Indenture" means the Indenture dated as of
March 31, 1997, as amended and supplemented from time to time, between the
Company and The First National Bank of Chicago, as trustee (the "Debenture
Trustee"), (ii) the "Declaration" means the Amended and Restated Declaration
of Trust dated as of March 31, 1997 relating to the Trust among the Company,
as Sponsor, The First National Bank of Chicago, as Property Trustee (the
"Property Trustee"), First Chicago Delaware Inc., as Delaware Trustee (the
"Delaware Trustee"), the Administrative Trustees named therein (the
"Administrative Trustees" and, collectively with the Property Trustee and
Delaware Trustee, the "Issuer Trustees") and the holders, from time to time,
of the Capital Securities, and (iii) the "Guarantee Agreement" means the
Series A Capital Securities Guarantee Agreement dated as of April 3, 1997
(the "Old Guarantee Agreement") between the Company and The First National
Bank of Chicago, as trustee (the "Guarantee Trustee"), and, in the event the
Exchange Offer is consummated, the Series B Capital Securities Guarantee
Agreement to be entered into between the Company and the Guarantee Trustee
(the "New Guarantee Agreement") relating to the Old Guarantee and the New
Guarantee, respectively.
The Capital Securities represent undivided beneficial interests in the
assets of the Trust. The Company is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities" and, collectively with the Capital Securities, the "Trust
Securities"). The First National Bank of Chicago is the Property Trustee.
The Trust exists for the purpose of issuing the Trust Securities and
investing the proceeds thereof in the Subordinated Debentures. The
Subordinated Debentures mature on April 1, 2027 (the "Stated Maturity Date").
The Capital Securities have a preference under certain circumstances with
respect to cash distributions and amounts payable on liquidation, redemption
or otherwise over the Common Securities. See "Description of the Capital
Securities--Subordination of Common Securities."
Holders of the Trust Securities are entitled to receive cumulative cash
distributions ("istributions" accumulating from April 3, 1997 and payable
semi-annually in arrears on April 1 and October 1 of each year, commencing
October 1, 1997, at the annual rate of 8.424% of the liquidation amount of
$1,000 per Trust Security (the "Liquidation Amount". So long as no
Debenture Event of Default (as defined herein - see "Description of the
Subordinated Debentures - Debenture Events of Default") has occurred and is
continuing, the Company has the right to defer payments of interest on the
Subordinated Debentures at any time and from time to time for a period not
exceeding 10 consecutive semi-annual periods (each, an "Extension Period"),
provided that no Extension Period may extend beyond the Stated Maturity Date.
Upon the termination of any such Extension Period and the payment of all
amounts then due, the Company may elect to begin a new Extension Period,
subject to the requirements set forth herein. If and for so long as interest
payments on the Subordinated Debentures are so deferred, Distributions on the
Trust Securities will also be deferred and the Company will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to the Company's capital stock (which includes
common, preferred and preference stock) or to make any payment with respect
to debt securities of the Company that rank pari passu with or junior to the
Subordinated Debentures. During an Extension Period, interest on the
Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Securities are entitled will
continue to accumulate) at the rate of 8.424% per annum, compounded semi-
annually, and holders of Trust Securities will be required to accrue interest
income for United States federal income tax purposes prior to receipt of cash
payments attributable to such interest income. See "Description of the
Subordinated Debentures - Option to Extend Interest Payment Date" and
"Certain Federal Income Tax Considerations - Interest Income and Original
Issue Discount."
The Company has, through the Guarantee, the Common Guarantee (as defined
herein), the Declaration, the Subordinated Debentures and the Indenture,
taken together, fully, irrevocably and unconditionally guaranteed all of the
Trust's obligations under the Trust Securities. See "Relationship Among the
Capital Securities, the Subordinated Debentures and the Guarantee - Full and
Unconditional Guarantee. " The Guarantee and the Common Guarantee guarantee
payments of Distributions and payments on liquidation or redemption of the
Trust Securities, but in each case only to the extent that the Trust has
funds legally available therefor and has failed to make such payments, as
described herein. See "Description of the Guarantee. " If the Company fails
to make a required payment on the Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions,
on the Trust Securities. The Guarantee and the Common Guarantee will not
cover any such payment when the Trust does not have sufficient funds legally
available therefor. In such event, a holder of Capital Securities may
institute a legal proceeding directly against the Company to enforce payment
to such holder of accrued but unpaid interest on Subordinated Debentures with
a principal amount equal to the Liquidation Amount of the Capital Securities
held by such holder. See "Description of the Subordinated Deben
tures - Enforcement of Certain Rights by Holders of Capital Securities". The
obligations of the Company under the Guarantee, the Common Guarantee and the
Subordinated Debentures are unsecured and subordinate and rank junior in
right of payment to all existing and future Senior Indebtedness of the
Company (as defined herein) to the extent and in the manner set forth in the
Indenture, the Guarantee and the Common Guarantee, respectively (as described
in "Description of the Subordinated Debentures - Subordination"), and are
effectively subordinated to all existing and future liabilities and obliga
tions of the Company's subsidiaries. As of December 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
Guarantee, the Common Guarantee and the Subordinated Debentures was
approximately $11.5 billion.
The Trust Securities are subject to mandatory redemption in a Like Amount
(as defined herein), in whole but not in part, (i) on the Stated Maturity
Date upon repayment of the Subordinated Debentures at a redemption price
equal to the principal amount of, plus accrued and unpaid interest on, the
Subordinated Debentures (the "Maturity Redemption Price") and (ii) at any
time before the Stated Maturity Date contemporaneously with the optional
prepayment of the Subordinated Debentures, upon the occurrence and
continuation of a Special Event (as defined herein) at a redemption price
equal to the Special Event Prepayment Price (as defined herein) (the
"Special Event Redemption Price"). Either of the Maturity Redemption Price
or the Special Event Redemption Price may be referred to herein as the
"Redemption Price". See "Description of the Capital
Securities - Redemption".
The Subordinated Debentures are prepayable prior to the Stated Maturity
Date at the option of the Company in whole but not in part, upon the
occurrence and continuation of a Special Event, at a prepayment price (the
"Special Event Prepayment Price") equal to the greater of (a) 100% of the
principal amount thereof or (b) the sum, as determined by a Quotation Agent
(as defined herein), of the present values of the principal amount of such
Subordinated Debentures, together with scheduled payments of interest from
the prepayment date to the Stated Maturity Date, in each case discounted to
the prepayment date on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months) at the Adjusted Treasury Rate (as defined
herein) plus, in either case, accrued and unpaid interest thereon to the date
of prepayment. See "Description of the Subordinated Debentures - Special Event
Prepayment".
The Company, as the holder of the outstanding Common Securities, has the
right at any time to terminate the Trust and cause a Like Amount of the
Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust, subject to the Company having
received an opinion of counsel to the effect that such distribution will not
be a taxable event to holders of the Capital Securities. Unless the
Subordinated Debentures are distributed to the holders of the Trust
Securities, in the event of a liquidation of the Trust as described herein,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, the holders of the Capital Securities generally are entitled
to receive a Liquidation Amount of $1,000 per Capital Security plus
accumulated and unpaid Distributions thereon to the date of payment. See
"Description of the Capital Securities - Liquidation of the Trust and
Distribution of Subordinated Debentures" and "Certain Federal Income Tax
Considerations - Receipt of Subordinated Debentures or Cash Upon Liquidation
of the Trust".
The Trust is making the Exchange Offer for the Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other
transactions. However, neither the Company nor the Trust has sought its own
interpretive letter and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such
interpretative letters to third parties. Based on these interpretations by
the staff of the Division of Corporation Finance, and subject to the
conditions described herein, the Company and the Trust believe that a holder
of Old Capital Securities (other than a holder who is (a) a broker-dealer who
purchased the Old Capital Securities directly from the Trust to resell
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (b) a person participating in
the distribution of the Old Capital Securities or (c) a person who is an
"affiliate" of the Company or the Trust) who exchanges Old Capital Securities
in the Exchange Offer for New Capital Securities and then resells such New
Capital Securities will be viewed by the staff no differently than a
non-affiliated purchaser of registered securities who purchases such
securities in a registered primary offering of securities and, after
completion of such registered offering, may resell the New Capital Securities
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Capital Securities
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the
Securities Act) of such New Capital Securities. Subject to the conditions
described herein, the Company and the Trust also believe that a broker-dealer
may participate in the Exchange Offer with respect to Old Capital Securities
acquired for its own account as a result of market-making activities or other
trading activities, provided that in connection with any resales of New
Capital Securities received in exchange for such Old Capital Securities, such
broker-dealer delivers a prospectus meeting the requirements of the
Securities Act, which may be this Prospectus. See "Exchange Offer - Resales
of New Capital Securities" and "Plan of Distribution."
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital
Securities will be a new issue of securities for which there currently is no
market. Although Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, the initial purchaser of the Old Capital Securities (the
"Initial Purchaser"), has advised the Company and the Trust that it currently
intends to make a market in the New Capital Securities, the Initial Purchaser
is not obligated to do so, and any market-making activity with respect to the
New Capital Securities may be interrupted or discontinued at any time without
notice. Accordingly, no assurance can be given that an active public or
other market will develop for the New Capital Securities or as to the
liquidity of or the trading market for the New Capital Securities. The
Company and the Trust do not intend to apply for listing of the New Capital
Securities on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to the same rights and will be
subject to the same limitations applicable thereto under the Declaration
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of any Old
Capital Securities that remain outstanding will continue to be subject to all
of the existing restrictions upon transfer thereof and neither the Company
nor the Trust will have any further obligation to such holders (other than
under certain limited circumstances) to provide for registration under the
Securities Act of the Old Capital Securities held by them. To the extent
that Old Capital Securities are tendered and accepted in the Exchange Offer,
a holder's ability to sell untendered Old Capital Securities could be
adversely affected. See "Risk Factors - Consequences of a Failure to Exchange
Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
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FOR NORTH CAROLINA INVESTORS: 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.
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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 and other information with the Commission. Such
reports and other information concerning the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such material can be obtained from
the Public Reference Room of the Commission at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, at prescribed rates. The Commission maintains
a Web site that contains reports, proxy and information statements and other
materials that are filed through the Commission's Electronic Data Gathering
Analysis and Retrieval System. The Web site can be accessed at
http://www.sec.gov. In addition, similar information concerning the Company
can be inspected at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York., New York 10005.
No separate financial statements of the Trust have been included herein.
The Company does not consider that such financial statements would be
material to holders of the Capital Securities because (i) all of the voting
securities of the Trust are owned, directly or indirectly, by the Company, a
reporting company under the Exchange Act, (ii) the Trust has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in Subordinated Debentures issued by the Company, and (iii)
the Company's obligations described herein to provide certain indemnities in
respect of, and be responsible for, certain costs, expenses, debts and
liabilities of the Trust under the Indenture and any supplemental indenture
thereto and pursuant to the Declaration, the Guarantee, the Subordinated
Debentures purchased by the Trust and the related Indenture, taken together,
constitute a full and unconditional guarantee of payments due on the Capital
Securities. See "Description of the Subordinated Debentures" and
"Description of the Guarantee". In addition, the Company does not expect
that the Trust will file reports, proxy statements or other information under
the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4,
as amended (the "Registration Statement") filed by the Company and the Trust
with the Commission under the Securities Act. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of
the Commission, and reference is hereby made to the Registration Statement
and to the exhibits relating thereto for further information with respect to
the Company, the Trust and the New Securities. Any statements contained
herein concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously or concurrently filed by the Company
with the Commission (File No. 0-8590) are incorporated herein by reference
and made a part hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Current Report on Form 8-K dated April 4, 1997;
(c) 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; and
(d) All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior
to the termination of the offering made hereby shall be incorporated by
reference into this Prospectus and shall be deemed to be a part of this
Prospectus from the date of filing of such documents. See "Available
Information".
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded to the extent that a statement
contained in this Prospectus or any supplement hereto or in any other
subsequently filed incorporated document, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified
from time to time. Statements contained in this Prospectus as to the contents
of any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. The Company will provide, upon written or oral
request, without charge, to each person to whom a copy of this Prospectus has
been delivered, a copy of any or all of these documents, other than certain
exhibits to such documents. Requests for such copies 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. In order to
ensure timely delivery of the documents, any request should be made by
May 30, 1997.
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus.
The Company
Equitable of Iowa Companies, a Des Moines, Iowa based insurance holding
company organized in 1977, is a provider of individual annuity and life
insurance products, targeting individuals and families throughout the United
States. Through its insurance subsidiaries, Equitable Life Insurance Company
of Iowa ("Equitable Life"), Golden American Life Insurance Company
("Golden American") 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, which was acquired by the Company in 1988.
Golden American, which offers variable insurance products, was acquired by
the Company on August 13, 1996.
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 of Iowa Companies Capital Trust II
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration executed by the Company, as Sponsor, The First
National Bank of Chicago, as Property Trustee and First Chicago Delaware
Inc., as Delaware Trustee and the individual Administrative Trustees named
therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on March 7, 1997. The Trust's business and affairs are
conducted by the Issuer Trustees consisting of the Property Trustee, the
Delaware Trustee and the three individual Administrative Trustees who are
employees or officers of or affiliated with the Company. The Trust exists
for the exclusive purposes of (i) issuing and selling the Trust Securities,
(ii) using the proceeds from the sale of the Common Securities and Old
Capital Securities to acquire the Old Subordinated Debentures issued by the
Company, (iii) exchanging the Old Subordinated Debentures for New
Subordinated Debentures in the Exchange Offer pursuant to the Indenture and
(iv) engaging in only those other activities necessary, advisable or
incidental thereto (such as registering the transfer of Capital Securities).
Accordingly, the Subordinated Debentures are the sole assets of the Trust,
and payments under the Subordinated Debentures are the sole revenue of the
Trust. All of the Common Securities are owned by the Company.
The Exchange Offer
The Exchange Offer Up to $50,000,000 aggregate Liquidation Amount of
New Capital Securities are being offered in exchange
for a like aggregate Liquidation Amount of Old
Capital Securities. Old Capital Securities may be
tendered for exchange in whole or in part in
denominations of $1,000 in Liquidation Amount or
integral multiples of $1,000 in excess thereof.
The Company and the Trust are making the Exchange
Offer in order to satisfy their obligations
under the Registration Rights Agreement relating to
the Old Securities. For a description of the
procedures for tendering Old Capital Securities, see
"The Exchange Offer - Procedures for Tendering Old
Capital Securities."
Expiration Date 5:00 p.m., New York City time, on June 6, 1997 (such
time on such date being hereinafter called the
"Expiration Date") unless the Exchange Offer is
extended by the Company and the Trust (in which case
the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended).
See "The Exchange Offer - Expiration Date; Extensions;
Amendments."
Conditions to the
Exchange Offer The Exchange Offer is subject to certain conditions
which may be waived by the Company and the Trust in
their reasonable discretion and to the terms and
conditions of the Registration Rights Agreement. The
Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being
tendered for exchange. See "The Exchange
Offer - Conditions to the Exchange Offer."
The Company and the Trust expressly reserve the right,
subject to applicable law, at any time and from time
to time, (i) to delay the acceptance of the Old
Capital Securities for exchange, (ii) to terminate
the Exchange Offer (whether or not any Old Capital
Securities have been accepted for exchange) if the
Company or the Trust determines, in its reasonable
discretion, that any of the conditions referred to
under "The Exchange Offer - Conditions to the Exchange
Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date and
retain all Old Capital Securities tendered pursuant
to the Exchange Offer, subject, however, to the right
of holders of Old Capital Securities to withdraw
their tendered Old Capital Securities, and (iv) to
waive any condition or otherwise amend the terms of
the Exchange Offer in any respect. See "The Exchange
Offer - Expiration Date; Extensions; Amendments."
Procedures for
Tendering Old
Capital Securities Brokers, dealers, commercial banks, trust companies
and other nominees who hold Old Capital Securities
through The Depository Trust Company ("DTC") may
effect tenders by book-entry transfer in accordance
with DTC's Automated Tender Offer Program ("ATOP").
Holders of such Old Capital Securities registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee are urged to contact such
person promptly if they wish to tender Old Capital
Securities. In order for Old Capital Securities to
be tendered by a means other than by book-entry
transfer, a Letter of Transmittal must be completed
and signed in accordance with the instructions
contained therein. The Letter of Transmittal and any
other documents required by the Letter of Transmittal
must be delivered to The First National Bank of
Chicago (the "Exchange Agent") by mail, facsimile,
hand delivery or overnight courier and either such
Old Capital Securities must be delivered to the
Exchange Agent or specified procedures for guaranteed
delivery must be complied with. See "The Exchange
Offer - Procedures for Tendering Old Capital
Securities."
Letters of Transmittal, certificates for Old Capital
Securities and any other documents required by the
Letter of Transmittal should not be delivered to the
Company or the Trust. Such documents should only be
delivered to the Exchange Agent. Questions regarding
how to tender and requests for information should be
directed to the Exchange Agent. See "The Exchange
Offer - Exchange Agent."
Withdrawal Rights Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to the
Exchange Agent in conformity with certain procedures
set forth below under "The Exchange Offer - Withdrawal
Rights."
Resales of New Capital
Securities The Company and the Trust are making the Exchange
Offer in reliance on the position of the staff of the
Division of Corporation Finance of the Commission as
set forth in certain interpretative letters addressed
to third parties in other transactions. However,
neither the Company nor the Trust has sought its own
interpretative letter and there can be no assurance
that the staff of the Division of Corporation Finance
of the Commission would make a similar determination
with respect to the Exchange Offer as it has in such
interpretative letters to third parties. Based on
certain interpretations by the staff of the Division
of Corporation Finance of the Commission, and subject
to the conditions described herein, the Company and
the Trust believe that a holder of Old Capital
Securities (other than a holder who is (a) a broker-
dealer who purchased the Old Capital Securities
directly from the Trust to resell pursuant to Rule
144A or any other available exemption under the
Securities Act, (b) a person participating in the
distribution of the Old Capital Securities or (c) a
person who is an "affiliate" of the Company or the
Trust) who exchanges Old Capital Securities in the
Exchange Offer for New Capital Securities and then
resells such New Capital Securities will be viewed by
the staff no differently than a non-affiliated
purchaser of registered securities who purchases such
securities in a registered primary offering of
securities and, after completion of such registered
offering, may resell the New Capital Securities
without further compliance with the registration and
prospectus delivery requirements of the Securities
Act, provided that such New Capital Securities are
acquired in the ordinary course of such holder's
business and that such holder is not participating,
and has no arrangement or understanding with any
person to participate, in a distribution (within the
meaning of the Securities Act) of such New Capital
Securities. Any holder of Old Capital Securities who
uses the Exchange Offer to participate in a
distribution of the New Capital Securities to be
acquired in the Exchange Offer, any broker-dealer who
receives New Capital Securities in exchange for Old
Capital Securities that were purchased directly from
the Trust to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, any
person participating in the distribution of the Old
Capital Securities who receives New Capital Securities
in the Exchange Offer and any "affiliate" of the
Company or the Trust who receives New Capital
Securities in the Exchange Offer (a) will not be able
to rely on the interpretations of the staff of the
Division of Corporation Finance set forth in the
above-described interpretive letters and (b) must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
any sale or other transfer of such New Capital
Securities, unless such sale is made pursuant to an
exemption from such requirements. Any such resale
transaction must be made by delivery of a prospectus
containing the selling securityholder information
required by the rules of the Commission under the
Securities Act. See "The Exchange Offer - Resales of
the New Capital Securities."
Each holder (including any broker-dealer) of Old
Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange
Offer will be required to represent that (i) it is
not an "affiliate" of the Company or the Trust, (ii)
any New Capital Securities to be received by it are
being acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with any
person to participate in a distribution (within the
meaning of the Securities Act) of such New Capital
Securities, and (iv) such holder is not engaged in,
and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such New
Capital Securities. The Letter of Transmittal
contains the foregoing representations.
A broker-dealer who holds Old Capital Securities for
its own account as a result of market-making
activities or other trading activities and who
receives New Capital Securities in exchange for such
Old Capital Securities pursuant to the Exchange Offer
may be deemed to be an "underwriter" within the
meaning of the Securities Act and will be required
to deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of
such New Capital Securities. Based upon the position
taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters
referred to above, the Company and the Trust believe
that a broker-dealer may participate in the Exchange
Offer with respect to Old Capital Securities acquired
for its own account as a result of market-making
activities or other trading activities (a
"Participating Broker-Dealer"), provided that in
connection with any resales of New Capital Securities
received in exchange for such Old Capital Securities,
such broker-dealer delivers a prospectus meeting the
requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as
it contains a description of the plan of distribution
with respect to the resale of such New Capital
Securities. Accordingly, the Company and the Trust
will require each broker-dealer who tenders, pursuant
to the Exchange Offer, Old Capital Securities that
were acquired for its own account as the result of
market-making activities or other trading activities
to acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of New Capital Securities
received in exchange for such Old Capital Securities
pursuant to the Exchange Offer. The Letter of
Transmittal contains the foregoing acknowledgment.
The Letter of Transmittal states that, by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities
Act. A Participating Broker-Dealer may fulfill its
prospectus delivery requirement in connection with
resales of New Capital Securities received in exchange
for Old Capital Securities that were acquired by such
Participating Broker-Dealer for its own account as a
result of market-making activities or other trading
activities with this Prospectus, as it may be amended
or supplemented from time to time, during the 90-day
period referred to below. Subject to certain
provisions set forth in the Registration Rights
Agreement and to the limitations described under "The
Exchange Offer - Resale of New Capital Securities,"
the Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-
Dealer in connection with resales of such New Capital
Securities for a period ending 90 days after the
Expiration Date or, if earlier, when all such New
Capital Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution" and "The Exchange Offer - Resales of
New Capital Securities."
In that regard, each Participating Broker-Dealer who
surrenders Old Capital Securities pursuant to the
Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of
an Agent's Message (as defined under "The Exchange
Offer - Acceptance for Exchange and Issuance of New
Capital Securities") in lieu thereof, that, upon
receipt of notice from the Company or the Trust of
the occurrence of any event or the discovery of any
fact which makes any statement contained or
incorporated by reference in this Prospectus untrue
in any material respect or which causes this
Prospectus to omit to state a material fact necessary
in order to make the statements contained or
incorporated by reference herein, in light of the
circumstances under which they were made, not
misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement,
such Participating Broker-Dealer will suspend the
sale of New Capital Securities (or the New Guarantee
or the New Subordinated Debentures, as applicable)
pursuant to this Prospectus until the Company or the
Trust has amended or supplemented this Prospectus to
correct such misstatement or omission and has
furnished copies of the amended or supplemented
Prospectus to such Participating Broker-Dealer or the
Company or the Trust has given notice that the sale
of the New Capital Securities (or the New Guarantee
or the New Subordinated Debentures, as applicable)
may be resumed, as the case may be. See "The
Exchange Offer - Resales of New Capital Securities."
Exchange Agent The Exchange Agent is The First National Bank of
Chicago. The addresses and telephone and facsimile
numbers of the Exchange Agent are set forth in "The
Exchange Offer - Exchange Agent" and in the Letter of
Transmittal.
Use of Proceeds Neither the Company nor the Trust will receive any
cash or other proceeds from the issuance of the New
Capital Securities offered hereby. See "Use of
Proceeds From Sale of the Old Capital Securities."
Certain Federal Income
Tax Considerations;
ERISA Considerations Holders of Old Capital Securities should review the
information set forth under "Certain Federal Income
Tax Considerations" and "ERISA Considerations" prior
to tendering Old Capital Securities in the Exchange
Offer.
The Capital Securities
Securities Offered Up to $50,000,000 aggregate Liquidation Amount of
the Trust's 8.424% Series B Capital Securities which
have been registered under the Securities Act
(Liquidation Amount $1,000 per Capital Security). The
New Capital Securities will be issued, and the Old
Capital Securities were issued, under the Declaration.
The New Capital Securities and any Old Capital
Securities that remain outstanding after consummation
of the Exchange Offer will constitute a single series
of Capital Securities under the Declaration and,
accordingly, will vote together as a single class for
purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised
certain rights under the Declaration. See "Description
of the Capital Securities - General." The forms and
terms of the New Securities are identical in all
material respects to the respective forms and terms
of the Old Securities, except that (i) the New
Capital Securities have been registered under the
Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the
Old Capital Securities or the $100,000 minimum
Liquidation Amount transfer restriction, (ii) the New
Capital Securities will not provide for any increase
in the Distribution rate thereon , (iii) the New
Subordinated Debentures have been registered under the
Securities Act and therefore are not subject to
certain restrictions on transfer applicable to the Old
Subordinated Debentures or the $100,000 minimum
aggregate principal amount transfer restriction, and
(iv) the New Subordinated Debentures will not provide
for any increase in the interest rate thereon. See
"The Exchange Offer - Purpose of the Exchange Offer,"
"Description of the Capital Securities" and
"Description of the Old Securities."
Distribution Dates April 1 and October 1 of each year, commencing
October 1, 1997.
Extension Periods So long as no Debenture Event of Default has
occurred and is continuing, Distributions on the
Trust Securities may be deferred for the duration of
any Extension Period elected by the Company with
respect to the payment of interest on the
Subordinated Debentures. No Extension Period will
exceed 10 consecutive semi-annual periods or extend
beyond the Stated Maturity Date. See "Description of
the Subordinated Debentures - Option to Extend
Interest Payment Date" and "Certain Federal Income
Tax Considerations - Interest Income and Original
Issue Discount".
Ranking The Capital Securities rank pari passu, and payments
thereon are made pro rata, with the Common Securities
except as described under "Description of the Capital
Securities - Subordination of Common Securities".
The Subordinated Debentures are unsecured and
subordinate and rank junior in right of payment to
all Senior Indebtedness to the extent and in the
manner set forth in the Indenture. See "Description
of the Subordinated Debentures". The Guarantee
constitutes an unsecured obligation of the Company
and is subordinate and ranks junior in right of
payment to all Senior Indebtedness to the extent and
in the manner set forth in the Guarantee Agreement.
See "Description of the Guarantee". In addition,
the obligations of the Company under the Subordinated
Debentures and the Guarantee are effectively
subordinated to all existing and future liabilities
and obligations of the Company's subsidiaries.
Redemption The Capital Securities are subject to mandatory
redemption in a Like Amount, in whole but not in part,
(i) on the Stated Maturity Date upon repayment of the
Subordinated Debentures and (ii) at any time before
the Stated Maturity Date contemporaneously with the
optional prepayment of the Subordinated Debentures by
the Company upon the occurrence and continuation of a
Special Event, in each case at the applicable
Redemption Price. See "Description of the Capital
Securities - Redemption".
Voting Rights Holders of Capital Securities have limited voting
rights and, so long as no Debenture Event of Default
has occurred and is continuing, are not entitled to
vote to appoint, remove or replace, or to increase or
decrease the number of Issuer Trustees, which voting
rights are vested exclusively in the holder of the
Common Securities. See "Description of the Capital
Securities - Voting Rights".
Absence of Market for
the Capital
Securities The New Capital Securities will be a new issue of
securities for which there currently is no market.
Although the Initial Purchaser has informed the Trust
and the Company that it currently intends to make a
market in the New Capital Securities, the Initial
Purchaser is not obligated to do so, and any such
market-making activity with respect to the New
Capital Securities may be interrupted or discontinued
at any time without notice. Accordingly, no assurance
can be given that an active public or other market
will develop for the New Capital Securities or as to
the liquidity of or the trading market for the New
Capital Securities. The Trust and the Company will
not apply for listing of the New Capital Securities
on any securities exchange or for quotation through
the National Association of Securities Dealers
Automated Quotation System.
RISK FACTORS
Holders tendering Old Capital Securities in the Exchange Offer should
carefully review the information contained elsewhere in this Prospectus and
should particularly consider the following matters.
Ranking of Subordinate Obligations Under the Guarantee and Subordinated
Debentures
The obligations of the Company under the Guarantee and under the
Subordinated Debentures are unsecured and subordinate and rank junior in
right of payment to all present and future Senior Indebtedness of the Company
to the extent and in the manner set forth in the Indenture and the Guarantee,
respectively. No payment may be made of the principal of, or premium, if
any, or interest on the Subordinated Debentures, or in respect of any
redemption, retirement, purchase or other acquisition of any of the
Subordinated Debentures, at any time when (i) there shall have occurred and
be continuing a default in any payment in respect of any Senior Indebtedness,
or there has been an acceleration of the maturity thereof because of a
default or (ii) in the event of the acceleration of the maturity of the
Subordinated Debentures until payment has been made on all Senior
Indebtedness. In addition, the obligations of the Company under the
Guarantee and the Subordinated Debentures are effectively subordinated to all
existing and future liabilities and obligations of the Company's
subsidiaries. As of December 31, 1996, the aggregate amount of Senior
Indebtedness of the Company and liabilities and obligations of the Company's
subsidiaries that would have effectively ranked senior to the Guarantee and
the Subordinated Debentures was approximately $11.5 billion. There are no
terms in the Capital Securities, the Subordinated Debentures or the Guarantee
that limit the Company's ability to incur additional indebtedness, including
indebtedness which ranks senior to the Subordinated Debentures and the
Guarantee. See "Description of the Guarantee - Status" and "Description of
the Subordinated Debentures - Subordination".
Holding Company Structure; Structural Subordination and Leverage
The Trust's ability to make Distributions and other payments on the Capital
Securities is solely dependent upon the Company's making interest and other
payments on the Subordinated Debentures. The Company is a holding company
and its assets consist almost entirely of investments in its subsidiaries.
In addition, because the Company is a holding company, the Subordinated
Debentures are effectively subordinated to all existing and future
liabilities and obligations of the Company's subsidiaries. A substantial
portion of the consolidated liabilities have been incurred by its
subsidiaries. Therefore, the Company's rights and the rights of its
creditors, including holders of Subordinated Debentures, to participate in
the distribution of assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to prior claims of the subsidiary's creditors,
including policyholders and trade creditors, except to the extent that the
Company may itself be a creditor with recognized claims against the
subsidiary (in which case the claims of the Company would still be subject to
the prior claims of any secured creditor of such subsidiary and of any holder
of indebtedness of such subsidiary that is senior to that held by the
Company). Accordingly, the holders of Subordinated Debentures may be
effectively subordinated to such claims. At December 31, 1996, the
subsidiaries of the Company had total liabilities of approximately $11.3
billion.
The Company's ability to service its indebtedness, including the
Subordinated Debentures, and to perform under the Guarantee, is dependent
upon the earnings of the Company's subsidiaries and the distribution or other
payment of such earnings to the Company in the form of dividends and other
distributions and payments. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to pay any amounts
due pursuant to the Subordinated Debentures or the Guarantee or to make any
funds available therefor, whether by dividends, loans or other payments. The
payment of dividends or other distributions and payments by its subsidiaries
are contingent upon the earnings of those subsidiaries and are subject to
various business considerations. In addition, payments of dividends to the
Company or its affiliates by the Company's subsidiaries are subject to
various insurance statutory and regulatory restrictions as more fully
described in the notes to the Company's financial statements.
The Indenture does not contain provisions that afford holders of the
Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving the Company that may adversely affect such holders. See
"Description of the Subordinated Debentures - General".
Option to Extend Interest Payment Period; Tax Considerations
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company has the right under the Indenture to defer payments
of interest on the Subordinated Debentures at any time or from time to time
for a period not exceeding 10 consecutive semi-annual periods, provided that
no Extension Period may extend beyond the Stated Maturity Date. Upon any such
deferral, semi-annual Distributions on the Trust Securities by the Trust will
be deferred (and the amount of Distributions to which holders of the Trust
Securities are entitled will accumulate Distributions thereon at the rate of
8.424% per annum, compounded semi-annually) from the relevant payment date
for such Distributions during any such Extension Period.
The Company may extend any existing Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive semi-
annual periods or to extend beyond the Stated Maturity Date. Upon the
expiration of any Extension Period and the payment of all interest then
accrued and unpaid on the Subordinated Debentures (together with interest
thereon at the annual rate of 8.424%, compounded semi-annually, to the extent
permitted by applicable law), the Company may elect to begin a new Extension
Period, subject to the above requirements. There is no limitation on the
number of times that the Company may elect to begin an Extension Period. See
"Description of the Capital Securities - Distributions" and "Description of
the Subordinated Debentures - Option to Extend Interest Payment Date".
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Capital Securities will
be required to accrue income (as original issue discount ("OID")), in
respect of the deferred stated interest allocable to its Capital Securities
for United States federal income tax purposes, which will be allocated but
not distributed to holders of record of Capital Securities. As a result, each
such holder of Capital 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 the Trust related to such income if such holder
disposes of its Capital 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 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 Capital Securities is likely to be affected. A holder that disposes of
its Capital Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to hold
its Capital Securities. In addition, as a result of the existence of the
Company's right to defer interest payments, the market price of the Capital
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 "Certain Federal Income Tax
Considerations - Sales of Capital Securities".
Proposed Tax Legislation
On February 6, 1997, President Clinton proposed certain tax law changes
(the "Proposed Legislation") that would, among other things, generally deny
corporate issuers a deduction for interest in respect of certain debt
obligations, such as the Subordinated Debentures, issued on or after the date
of first committee action if such debt obligations have a maximum term in
excess of fifteen years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. The Proposed Legislation is similar to
legislation proposed by President Clinton in 1996. The Proposed Legislation
contains an effective date provision making it applicable to debentures
issued prior to the first date of any committee action. The Subordinated
Debentures should be considered as having been issued on April 3, 1997, at
which time neither of the tax-writing committees of Congress had acted upon
the Proposed Legislation. Thus, if the Proposed Legislation were enacted with
the proposed effective date, such legislation would not apply to the
Subordinated Debentures. There can be no assurance, however, that such
effective date will be incorporated into the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of the Company to deduct the
interest payable on the Subordinated Debentures, which could give rise to a
Tax Event, thereby permitting the Company to cause a redemption of the
Subordinated Debentures, as described more fully under "Description of the
Subordinated Debentures - Special Event Prepayment".
Redemption or Distribution
Upon the occurrence and continuation of a Special Event (including a Tax
Event or an Investment Company Event, in each case, as defined under
"Description of the Subordinated Debentures - Special Event Prepayment"), the
Company will have the right to prepay the Subordinated Debentures in whole
(but not in part) at the Special Event Prepayment Price within 90 days
following the occurrence of such Special Event and therefore cause a
mandatory redemption of the Capital Securities at the Special Event
Redemption Price. See "Description of the Capital Securities - Redemption"
and "- Liquidation of the Trust and Distribution of Subordinated
Debentures".
The Company has the right at any time to terminate the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. Such right is subject to the Company
having received an opinion of counsel to the effect that such distribution
will not be a taxable event to holders of Capital Securities. Under current
United States federal income tax law, a distribution of Subordinated
Debentures upon the dissolution of the Trust would not be a taxable event to
holders of the Capital Securities. If, however, the Trust is characterized
for United States federal income tax purposes as an association taxable as a
corporation at the time of dissolution of the Trust, the distribution of the
Subordinated Debentures may constitute a taxable event to holders of Capital
Securities. Moreover, upon the occurrence of a Special Event, a dissolution
of the Trust in which holders of the Capital Securities receive cash would be
a taxable event to such holders. See "Certain Federal Income Tax
Considerations - Receipt of Subordinated Debentures or Cash Upon Liquidation
of the Trust".
Possible Adverse Effect on Market Prices
There can be no assurance as to the market prices for the Capital
Securities or the Subordinated Debentures that may be distributed in exchange
for Capital Securities if a dissolution or liquidation of the Trust were to
occur. Accordingly, the Capital Securities or the Subordinated Debentures
may trade at a discount to the price that the investor initially paid to
purchase the Old Capital Securities. Because holders tendering Old Capital
Securities in the Exchange Offer may receive Subordinated Debentures, such
holders should carefully review all the information regarding the
Subordinated Debentures contained herein. See "Description of the Capital
Securities - Redemption, " "- Liquidation of the Trust and Distribution of
Subordinated Debentures" and "Description of the Subordinated Debentures".
Rights Under the Guarantee
The First National Bank of Chicago acts as Guarantee Trustee and holds the
Guarantee for the benefit of the holders of Capital Securities. The First
National Bank of Chicago also acts as Property Trustee under the Declaration
and as Debenture Trustee under the Indenture. First Chicago Delaware Inc.
acts as Delaware Trustee under the Declaration. The Guarantee guarantees to
the holders of the Capital Securities the following payments, to the extent
not paid by the Trust: (i) any accumulated and unpaid Distributions that are
required to be paid on the Capital Securities, to the extent the Trust has
funds legally available therefor, (ii) the Redemption Price, including all
accumulated and unpaid Distributions with respect to Capital Securities
called for redemption by the Trust, to the extent the Trust has funds legally
available therefor, and (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (other than in connection with the distribution of
Subordinated Debentures to the holders of Capital Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions on the Capital Securities to the date of the payment, to the
extent the Trust has funds legally available therefor, and (b) the amount of
assets of the Trust remaining available for distribution to holders of the
Capital Securities in liquidation of the Trust. Subject to certain limited
exceptions, the holders of a majority in Liquidation Amount of the Capital
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee or to direct
the exercise of any trust or power conferred upon the Guarantee Trustee under
the Guarantee. Notwithstanding the foregoing, if the Guarantee Trustee fails
to enforce the Guarantee, any holder of Capital Securities may institute a
legal proceeding directly against the Company to enforce such holders' rights
under the Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. If the Company
were to default on its obligation to pay amounts payable on the Subordinated
Debentures or otherwise, the Trust would lack available funds for the payment
of distributions or amounts payable on redemption of the Capital Securities
or otherwise, and, in such event, holders of the Capital Securities would not
be able to rely upon the Guarantee for payment of such amounts. Instead,
holders of the Capital 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 its right against the Company to enforce
payments on the Subordinated Debentures. See "Description of the Guarantee"
and "Description of the Subordinated Debentures". The Guarantee constitutes
an unsecured obligation of the Company and ranks subordinate and junior in
right of payment to (i) all Senior Indebtedness in the same manner as the
Subordinated Debentures and (ii) all other liabilities of the Company except
those liabilities of the Company made pari passu or subordinate by their
terms. See "Description of the Guarantee - Status". The Declaration provides
that each holder of Capital Securities, by acceptance thereof, agrees to the
provisions of the Guarantee, including the subordination provisions thereof,
and the Indenture.
Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default occurs and is continuing, then the holders
of Capital Securities would rely on the enforcement by the Property Trustee
of its rights as a holder of the Subordinated Debentures against the Company.
In addition, the holders of a majority in liquidation amount of the Capital
Securities 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 under the
Subordinated Debentures, a holder of Capital Securities may, to the fullest
extent permitted by applicable law, institute a legal proceeding directly
against the Company to enforce the Property Trustee's rights under the
Subordinated Debentures without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding
the foregoing, if a Debenture Event of Default 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 on the date such
interest or principal is otherwise payable (or in the case of Redemption, on
the Redemption Date), then a holder of Capital Securities may directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Subordinated Debentures having a principal
amount equal to the aggregate liquidation amount of the Capital Securities of
such holder (a "Direct Action") on or after the respective due date
specified in the Subordinated Debentures. In connection with such Direct
Action, the rights of the Company, as holder of the Common Securities, are
subrogated to the rights of such holder of Capital Securities under the
Declaration to the extent of any payment made by the Company to such holder
of Capital Securities in such Direct Action. The holders of Capital
Securities are not able to exercise directly any other remedy available to
the holders of the Subordinated Debentures. See "Description of the Capital
Securities - Events of Default; Notice".
Limited Voting Rights
Holders of Capital Securities have limited voting rights and, so long as no
Debenture Event of Default has occurred and is continuing, are not entitled
to vote to appoint, remove or replace, or to increase or decrease the number
of, Issuer Trustees, which voting rights are vested exclusively in the holder
of the Common Securities. See "Description of the Capital Securities - Voting
Rights".
Consequences of a Failure to Exchange Old Capital Securities
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant
to an exemption therefrom or in a transaction not subject thereto, and in
each case in compliance with certain other conditions and restrictions. Old
Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of
Old Capital Securities which remain outstanding will not be entitled to any
rights to have such Old Capital Securities registered under the Securities
Act or to any similar rights under the Registration Rights Agreement (subject
to certain limited exceptions). The Company and the Trust do not intend to
register under the Securities Act any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer (subject to such limited
exceptions, if applicable). To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will constitute a single
series of Capital Securities under the Declaration and, accordingly, will
vote together as a single class for purposes of determining whether holders
of the requisite percentage in outstanding Liquidation Amount thereof have
taken certain actions or exercised certain rights under the Declaration.
The Old Capital Securities provide that, if the Exchange Offer is not
consummated by June 21, 1997, the Distribution rate borne by the Old
Capital Securities will increase by 0.25% per annum commencing on June 22,
1997, until the Exchange Offer is consummated. See "Description of the Old
Securities." Following consummation of the Exchange Offer, neither the Old
Capital Securities nor the New Capital Securities will be entitled to any
increase in the Distribution rate thereon.
Absence of Public Market
The Old Capital Securities were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The Old
Capital Securities have not been registered under the Securities Act and will
continue to be subject to restrictions on transferability to the extent that
they are not exchanged for New Capital Securities. Although the New Capital
Securities will generally be permitted to be resold or otherwise transferred
by the holders (who are not affiliates of the Company or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading market.
The Company and the Trust have been advised by the Initial Purchaser that the
Initial Purchaser currently intends to make a market in the New Capital
Securities. However, the Initial Purchaser is not obligated to do so and any
market-making activity with respect to the New Capital Securities may be
interrupted or discontinued at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the
Securities Act and the Exchange Act and may be limited during the Exchange
Offer. Accordingly, no assurance can be given that an active public or other
market will develop for the New Capital Securities or the Old Capital
Securities or as to the liquidity of or the trading market for the New
Capital Securities or the Old Capital Securities. If an active public market
does not develop, the market price and liquidity of the New Capital
Securities may be adversely affected.
If a public trading market develops for the New Capital Securities, future
trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, results of operations and the
market for similar securities. Depending on prevailing interest rates, the
market for similar securities and other factors, including the financial
condition of the Company, the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of
the Securities Act) of the Company or the Trust may publicly offer for sale
or resell the New Capital Securities only in compliance with the provisions
of Rule 144 under the Securities Act or pursuant to another effective
registration statement.
Each broker-dealer that receives New Capital Securities for its own account
in exchange for Old Capital Securities, where such Old Capital Securities
were acquired by such broker-dealer as a result of market-making activities
or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. See
"Plan of Distribution."
Exchange Offer Procedures
Subject to the conditions set forth under "The Exchange Offer--Conditions
to the Exchange Offer," delivery of New Capital Securities in exchange for
Old Capital Securities tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent
of (i) certificates for Old Capital Securities or a book-entry confirmation
of a book-entry transfer of Old Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message (as defined under "The Exchange
Offer--Acceptance for Exchange and Issuance of New Capital Securities") if
the tendering holder does not deliver a Letter of Transmittal, (ii) a
completed and signed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal, and (iii) any other
documents required by the Letter of Transmittal. Therefore, holders of Old
Capital Securities desiring to tender such Old Capital Securities in exchange
for New Capital Securities should allow sufficient time to ensure timely
delivery. Neither the Company nor the Trust is under a duty to give
notification of defects or irregularities with respect to the tenders of Old
Capital Securities for exchange.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration, and (ii) the filing of a certificate of trust with
the Secretary of State of the State of Delaware on March 7, 1997. The Trust
exists for the exclusive purposes of (i) issuing and selling the Trust
Securities, which represent undivided beneficial interests in the assets of
the Trust, (ii) investing the gross proceeds from the sale of the Common
Securities and Old Capital Securities in the Old Subordinated Debentures,
(iii) exchanging the Old Subordinated Debentures for New Subordinated
Debentures in the Exchange Offer pursuant to the Indenture and (iv) engaging
in only those other activities necessary, advisable or incidental thereto
(such as registering the transfer of Capital Securities). Accordingly, the
Subordinated Debentures are the sole assets of the Trust and payments under
the Subordinated Debentures are the sole revenues of the Trust. All of the
Common Securities are owned directly by the Company. The Common Securities
rank pari passu, and any payments made thereon pro rata, with the Capital
Securities, except that upon the occurrence and during the continuance of a
Debenture Event of Default, the rights of the Company as holder of the Common
Securities to payments in respect of Distributions and payments upon
liquidation, redemption or otherwise are subordinated and rank junior to the
rights of the holders of the Capital Securities. See "Description of the
Capital Securities - Subordination of Common Securities". The Company
acquired the Common Securities in a Liquidation Amount equal to 3% of the
total capital of the Trust. The Trust has a term of 31 years, but may
terminate earlier as provided in the Declaration. The Trust's business and
affairs are conducted by the Issuer Trustees appointed by the Company as the
direct holder of the Common Securities. The initial Issuer Trustees are The
First National Bank of Chicago as the Property Trustee, First Chicago
Delaware Inc. as the Delaware Trustee, and three individual trustees who are
employees or officers or otherwise affiliated with the Company. The First
National Bank of Chicago, as Property Trustee, acts as sole indenture trustee
under the Declaration. The First National Bank of Chicago also acts as
indenture trustee under the Guarantee and the Indenture. See "Description of
the Guarantee" and "Description of the Subordinated Debentures". The
holder of the Common Securities or, if a Debenture Event of Default has
occurred and is continuing, the holders of a majority in Liquidation Amount
of the Capital Securities, are entitled to appoint, remove or replace the
Property Trustee and/or the Delaware Trustee. In no event do the holders of
the Capital Securities have the right to vote to appoint, remove or replace
the Administrative Trustees; such voting rights are vested exclusively in the
holder of the Common Securities. The duties and obligations of each Issuer
Trustee are governed by the Declaration. The Company will pay directly all
fees, reasonable expenses, disbursements and advancements (other than with
respect to the Trust Securities) related to the Trust and the Exchange Offer.
The principal place of business of the Trust is c/o Equitable of Iowa
Companies, 604 Locust Street, P.O. Box 1635, Des Moines, Iowa 50309-1635,
telephone number (515) 245-6911.
THE COMPANY
Equitable of Iowa Companies, a Des Moines, Iowa based insurance holding
company organized in 1977, is a provider of individual annuity and life
insurance products, targeting individuals and families throughout the United
States. Through its insurance subsidiaries, Equitable Life, Golden American
and USG, the Company offers its products in 49 states and the District of
Columbia. First Golden American Life Insurance Company of New York ("First
Golden"), a wholly-owned subsidiary of Golden American, was incorporated on
May 24, 1996 and was capitalized in December 1996. First Golden's primary
purpose will be to offer insurance products in the State of New York, which
is the only state where the Company's insurance subsidiaries are not
currently licensed. On January 2, 1997, First Golden became licensed as a
life insurance company in the State of New York and has recently received
product regulatory approvals with respect to its initial product. 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, which was acquired by the Company in 1988.
Golden American, which offers variable insurance products, was acquired by
the Company on August 13, 1996.
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.
Additional information concerning the Company is included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996 and other
documents incorporated by reference in this Prospectus. See "Available
Information'' and ''Incorporation of Certain Documents by Reference".
USE OF PROCEEDS FROM SALE OF THE OLD CAPITAL SECURITIES
Neither the Company nor the Trust will receive any cash or other proceeds
from the issuance of the New Capital Securities offered hereby. In
consideration for issuing the New Capital Securities in exchange for Old
Capital Securities as described in this Prospectus, the Trust will receive
Old Capital Securities in like Liquidation Amount. The Old Capital
Securities surrendered in exchange for the New Capital Securities will be
retired and cancelled.
The proceeds to the Trust from the offering of the Old Capital Securities
were approximately $50,000,000. All of the proceeds from the sale of the Old
Capital Securities were invested by the Trust in the Old Subordinated
Debentures. It is anticipated that the Company will use the proceeds from
the sale of the Old Subordinated Debentures to the Trust for general
corporate purposes, including, but not limited to, investments in its
subsidiaries.
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).
Year Ended December 31,
_______________________
1996 1995 1994 1993 1992
____ ____ ____ ____ ____
Ratio of Consolidated Earnings
to Fixed Charges 13.8x* 10.0x 17.8x 12.3x 8.0x
* In 1996 $125 million of Company-obligated, mandatorily-redeemable 8.70%
preferred securities were issued by a Company subsidiary, Equitable of
Iowa Companies Capital Trust. If distributions on such preferred
securities are included to reduce pretax income and as a fixed charge,
the ratio of earnings to combined fixed charges and preferred stock
dividends for the Company and its subsidiaries on a consolidated basis
for the year ended December 31, 1996 is 10.5x. No other preferred
security distributions were paid during the periods presented above.
CAPITALIZATION OF THE COMPANY
The following table sets forth the consolidated capitalization of the
Company at December 31, 1996, and as adjusted to reflect the sale of the Old
Capital Securities and the application of the estimated net proceeds
therefrom. See "Use of Proceeds From Sale of the Old Capital Securities".
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.''
<TABLE>
<CAPTION>
At December 31, 1996
__________________________
Actual As Adjusted
____________ ____________
(Dollars in Thousands)
<S> <C> <C>
Commercial Paper $104,600 $104,600
Long-Term Debt 100,000 100,000
Company-obligated, mandatorily-redeemable 8.70%
preferred securities, due 2026, of the Company's
subsidiary, Equitable of Iowa Companies Capital
Trust, holding solely debt securities of the
Company(1) 125,000 125,000
Company-obligated, mandatorily-redeemable 8.424%
capital securities, due 2027, of the Company's
subsidiary, Equitable of Iowa Companies Capital
Trust II, holding solely Subordinated Debentures
of the Company(2), (3) -- 50,000
Total Stockholders' Equity 895,799 895,799
____________ ____________
Total Capitalization $1,225,399 $1,275,399
<FN>
(1) The assets of Equitable of Iowa Companies Capital Trust consist solely
of $128.866 million aggregate principal amount of subordinated deferrable
interest debentures of the Company with an interest rate of 8.70% and a
maturity date of July 30, 2026.
(2) The assets of the Trust consist of $51,550,000 aggregate principal amount
of the Subordinated Debentures of the Company with an interest rate of
8.424% and maturity date of April 1, 2027.
(3) Accounting Treatment - The financial statements of the Trust will be
reflected in the Company's consolidated financial statements with the
Capital Securities shown as Company-obligated, mandatorily-redeemable
Capital Securities of subsidiary trust with a footnote indicating that
the Trust is wholly owned by the Company, the sole asset of the Trust is
the Subordinated Debentures (indicating the principal amount, interest
rate and maturity date thereof) and considered together, the Guarantee
and the Company's other obligations described herein, constitute a full
and unconditional guarantee by the Company of the Trust's obligations
under the Capital Securities.
</TABLE>
SUMMARY FINANCIAL INFORMATION
The summary financial data for the five-year period ended December 31,
1996 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, 1996, which are incorporated by reference herein. See
"Incorporation of Certain Documents by Reference".
<TABLE>
<CAPTION>
Year Ended December 31,
_________________________________________________
1996 1995 1994 1993 1992
_________ _________ _________ _________ _________
(In millions)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue:
Premiums and Product
Charges $111.0 $94.9 $90.0 $81.1 $73.4
Net Investment Income 715.6 641.1 524.4 434.1 362.4
Realized Gains on
Investments 16.2 9.5 19.7 42.0 8.2
Other 25.9 19.4 17.5 15.8 14.4
_________ _________ _________ _________ _________
Total Revenue 868.7 764.9 651.6 573.0 458.4
Benefit and Insurance
Expenses 638.2 613.9 482.5 420.5 354.4
Interest Expense 14.1 13.8 7.9 9.5 9.8
Other Expense 21.4 8.7 10.0 8.0 10.5
_________ _________ _________ _________ _________
Total Benefits and
Expenses 673.7 636.4 500.4 438.0 374.7
Income Before Federal
Income Taxes 195.0 128.5 151.2 135.0 83.7
Net Income $123.2 $84.9 $98.3 $87.2 $54.5
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
______________________________________________________
1996 1995 1994 1993 1992
_________ _________ ________ _________ _________
(In millions)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Investments:
Fixed Maturities -
Available for Sale $7,732.0 $7,352.2 $778.5 -- --
Fixed Maturities -
Held to Maturity -- -- 5,393.8 $5,078.2 $3,967.1
Equity Securities 77.2 50.6 23.0 0.1 0.1
Mortgage Loans 1,720.1 1,169.4 613.2 346.8 249.6
Real Estate 8.6 14.0 15.7 20.8 14.6
Policy Loans 190.5 182.4 176.4 176.9 176.7
Cash and Short-Term
Investments 56.1 50.0 63.6 72.8 61.1
__________ __________ __________ __________ __________
Total Cash and
Investments 9,784.5 8,818.6 7,064.2 5,695.6 4,469.2
Total Assets $12,569.7 $9,772.8 $7,965.6 $6,431.5 $5,066.9
Policyholder
Liabilities 9,428.8 8,255.3 7,062.1 5,624.2 4,445.8
Commercial Paper 104.6 58.1 90.5 34.0 28.8
Long-Term Debt 100.0 100.0 -- 50.2 60.7
Total Liabilities $11,548.9 $8,878.9 $7,378.3 $5,903.5 $4,693.1
Company-obligated,
mandatorily-redeemable
8.70% preferred
securities, due 2026,
of its subsidiary,
Equitable of Iowa
Companies Capital
Trust, holding solely
debt securities of
the Company $125.0 -- -- -- --
Total Stockholders'
Equity $895.8 $893.9 $587.3 $528.0 $373.8
</TABLE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the sale of the Old Capital Securities, the Company
and the Trust entered into the Registration Rights Agreement with the Initial
Purchaser, pursuant to which the Company and the Trust agreed to file and to
use their reasonable best efforts to cause to become effective with the
Commission a registration statement with respect to the exchange of the Old
Capital Securities for capital securities with terms identical in all
material respects to the terms of the Old Capital Securities. A copy of the
Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations
of the Company and the Trust under the Registration Rights Agreement. The
forms and terms of the New Capital Securities are identical in all material
respect to the forms and terms of the Old Capital Securities, except that the
New Capital Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Old Capital Securities or the $100,000 minimum Liquidation Amount
transfer restriction and will not provide for any increase in the
Distribution rate thereon. In that regard, the Old Capital Securities
provide, among other things, that, if the Exchange Offer is not consummated
by June 21, 1997, the Distribution rate borne by the Old Capital Securities
commencing on June 22, 1997, will increase by 0.25% per annum until the
Exchange Offer is consummated. Upon consummation of the Exchange Offer,
holders of Old Capital Securities will not be entitled to any increase in the
Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of the Old Securities."
The Exchange Offer is not being made to, nor will the Trust or the
Company accept tenders for exchange from, holders of Old Capital Securities
in any jurisdiction in which the Exchange Offer or the acceptance thereof
would not be in compliance with the securities or blue sky laws of such
jurisdiction.
Unless the context requires otherwise, the term "holder" with respect
to the Exchange Offer means any person in whose name the Old Capital
Securities are registered on the books of the Company or any other person who
has obtained a properly completed bond power from the registered holder, or
any person who beneficially owns Old Capital Securities which are held of
record by DTC who desires to deliver such Old Capital Securities by
book-entry transfer into the Exchange Agent's account at DTC, or any person
who beneficially owns Old Capital Securities which are held of record by a
nominee other than DTC (or its nominee).
Pursuant to the Exchange Offer, the Company will exchange as soon as
practicable after the date hereof, the Old Guarantee for the New Guarantee
and all of the Old Subordinated Debentures, of which $51,550,000 aggregate
principal amount is outstanding, for a like aggregate principal amount of the
New Subordinated Debentures. The New Guarantee and New Subordinated
Debentures have been registered under the Securities Act.
Terms of the Exchange
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $50,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Trust will
issue, promptly after the Expiration Date, an aggregate Liquidation Amount of
up to $50,000,000 of New Capital Securities in exchange for a like aggregate
Liquidation Amount of outstanding Old Capital Securities tendered and
accepted in connection with the Exchange Offer. Holders may tender their Old
Capital Securities for exchange in whole or in part in denominations of
$1,000 in Liquidation Amount or integral multiples of $1,000 in excess
thereof.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
$50,000,000 aggregate Liquidation Amount of Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which
are not tendered for or are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and remain entitled to the benefits of
the Declaration, but will not be entitled to any further registration rights
under the Registration Rights Agreement, except under limited circumstances.
See "Risk Factors--Consequences of a Failure to Exchange Old Capital
Securities" and "Description of the Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set
forth herein or otherwise, certificates for any such unaccepted Old Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date. Holders who tender Old Capital Securities
in connection with the Exchange Offer will not be required to pay brokerage
commissions or fees or transfer taxes with respect to the exchange of Old
Capital Securities in connection with the Exchange Offer, except under those
circumstances described in the Letter of Transmittal. The Company will pay
all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "- Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE TRUSTEES OF THE TRUST
MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL SECURITIES AS TO WHETHER
TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD CAPITAL
SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN
AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL SECURITIES
MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER
AND, IF SO, THE AGGREGATE LIQUIDATION AMOUNT OF OLD CAPITAL SECURITIES TO
TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
Expiration Date; Extensions; Amendments
The term "Expiration Date" means 5:00 p.m., New York City time, on June 6,
1997 unless the Exchange Offer is extended by the Company and the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right, subject to
applicable law, at any time and from time to time, (i) to delay the
acceptance of the Old Capital Securities for exchange, (ii) to terminate the
Exchange Offer (whether or not any Old Capital Securities have been accepted
for exchange) if the Company or the Trust determines, in its reasonable
discretion, that any of the conditions referred to under "- Conditions to the
Exchange Offer" have occurred or exist or have not been satisfied, (iii) to
extend the Expiration Date and retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Old Capital Securities to withdraw their tendered Old Capital Securities as
described under "- Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the
Exchange Offer is amended in a manner determined by the Company and the Trust
to constitute a material change, or if the Company and the Trust waive a
material condition of the Exchange Offer, the Company and the Trust will
promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders of the Old Capital Securities,
and the Company and the Trust will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act. If the Company or the Trust
becomes aware of any material information with respect to the Exchange Offer,
including the plan of distribution, not previously disclosed in this
Prospectus or any material change to such information in this Prospectus, the
Company and the Trust will promptly file a post-effective amendment to the
Registration Statement. In such event, the Company and the Trust will extend
the Exchange Offer to the extent required by Rule 14e-1 under the Exchange
Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and
by making a public announcement thereof, and such announcement in the case of
an extension will be made no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the Company and the Trust may choose to make any
public announcement and subject to applicable law, the Company and the Trust
shall have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by issuing a release to an appropriate
news agency.
Acceptance for Exchange and Issuance of New Capital Securities
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange New Capital Securities for Old Capital Securities validly
tendered and not withdrawn (pursuant to the withdrawal rights described under
"- Withdrawal Rights") promptly after the Expiration Date.
Subject to the conditions set forth under "- Conditions to the Exchange
Offer," delivery of New Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i)
certificates for Old Capital Securities or a book-entry confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) any other documents required by the Letter
of Transmittal. Accordingly, the delivery of New Capital Securities might not
be made to all tendering holders at the same time, and will depend upon when
certificates for Old Capital Securities, book-entry confirmations with
respect to Old Capital Securities and other required documents are received
by the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities into the Exchange Agent's account at
DTC. See "- Procedures for Tendering Old Capital Securities--Book-Entry
Transfer." The term "Agent's Message" means a message, transmitted by DTC to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal
and that the Trust and the Company may enforce such Letter of Transmittal
against such participant.
Subject to the terms and conditions of the Exchange Offer, the Company and
the Trust will be deemed to have accepted for exchange, and thereby
exchanged, Old Capital Securities validly tendered and not withdrawn as, if
and when the Trust gives oral or written notice to the Exchange Agent of the
Company's and the Trust's acceptance of such Old Capital Securities for
exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent
for the Company and the Trust for the purpose of receiving tenders of Old
Capital Securities, Letters of Transmittal and related documents, and as
agent for tendering holders for the purpose of receiving Old Capital
Securities, Letters of Transmittal and related documents and transmitting New
Capital Securities which will not be held in global form by DTC or a nominee
of DTC to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for
exchange or the exchange of any Old Capital Securities tendered pursuant to
the Exchange Offer is delayed (whether before or after the Company's and the
Trust's acceptance for exchange of Old Capital Securities) or the Company and
the Trust extend the Exchange Offer or are unable to accept for exchange or
exchange Old Capital Securities tendered pursuant to the Exchange Offer,
then, without prejudice to the Company's and the Trust's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Company and
the Trust and subject to Rule 14e-1(c) under the Exchange Act, retain
tendered Old Capital Securities and such Old Capital Securities may not be
withdrawn except to the extent tendering holders are entitled to withdrawal
rights as described under "- Withdrawal Rights."
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of Old
Capital Securities will represent, warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Trust will acquire good,
marketable and unencumbered title to the tendered Old Capital Securities,
free and clear of all liens, restrictions, charges and encumbrances, and the
Old Capital Securities tendered for exchange are not subject to any adverse
claims or proxies. The holder also will warrant and agree that it will, upon
request, execute and deliver any additional documents deemed by the Trust or
the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Old Capital Securities tendered
pursuant to the Exchange Offer.
Procedures for Tendering Old Capital Securities
Valid Tender
Except as set forth below, in order for Old Capital Securities to be
validly tendered by book-entry transfer, an Agent's Message or a completed
and signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and in either case any other documents required by the
Letter of Transmittal, must be delivered to the Exchange Agent by mail,
facsimile, hand delivery or overnight courier at one of the Exchange Agent's
addresses set forth under "--Exchange Agent" on or prior to the Expiration
Date and either (i) such Old Capital Securities must be tendered pursuant to
the procedures for book-entry transfer set forth below or (ii) the guaranteed
delivery procedures set forth below must be complied with.
Except as set forth below, in order for Old Capital Securities to be
validly tendered by a means other than by book-entry transfer, a completed
and signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal, must be delivered to the Exchange Agent by mail, facsimile, hand
delivery or overnight courier at one of the Exchange Agent's addresses set
forth under "-- Exchange Agent" on or prior to the Expiration Date and either
(i) such Old Capital Securities must be delivered to the Exchange Agent on or
prior to the Expiration Date or (ii) the guaranteed delivery procedures set
forth below must be complied with.
If less than all Old Capital Securities are tendered, a tendering holder
should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of Old
Capital Securities delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS TO BE BY MAIL, THE USE OF REGISTERED MAIL,
RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE
IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY.
Book-Entry Transfer
The Exchange Agent and DTC have confirmed that any Participant (as defined
in "Description of the Capital Securities--Form, Denomination, Book-Entry
Procedures and Transfer--Depositary Procedures") in DTC's book-entry transfer
facility system may utilize DTC's ATOP procedures to tender Old Capital
Securities. The Exchange Agent will establish an account with respect to the
Old Capital Securities at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus. Any Participant may make a
book-entry delivery of the Old Capital Securities by causing DTC to transfer
such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's ATOP procedures for transfer. However, although
delivery of Old Capital Securities may be effected through book-entry
transfer into the Exchange Agent's account at DTC, an Agent's Message or a
completed and signed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other documents required by the Letter
of Transmittal, must in any case be delivered to and received by the Exchange
Agent at one of its addresses set forth under "--Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedure set forth below
must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees
Certificates for Old Capital Securities need not be endorsed and signature
guarantees on a Letter of Transmittal are unnecessary unless (a) a
certificate for the Old Capital Securities is registered in a name other than
that of the person surrendering the certificate or (b) such registered holder
completes the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" in the Letter of Transmittal. In the case of (a) or
(b) above, such certificates for Old Capital Securities must be duly endorsed
or accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv)
a national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association (an "Eligible Institution"), unless surrendered on
behalf of such Eligible Institution. See Instructions 4 and 7 to the Letter
of Transmittal.
Guaranteed Delivery
If a holder desires to tender Old Capital Securities pursuant to the
Exchange Offer and the certificates for such Old Capital Securities are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or before the Expiration Date, or the procedures for
book-entry transfer cannot be completed on a timely basis, such Old Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of
Transmittal, is delivered to the Exchange Agent, as provided below,
on or prior to the Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer,
together with acompleted and signed Letter of Transmittal (or
facsimile thereof) or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal, with any
required signature guarantees and any other documents required by
the Letter of Transmittal, are received by the Exchange Agent within
five New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
The Company's and the Trust's acceptance for exchange of Old Capital
Securities tendered pursuant to any of the procedures described above will
constitute a binding agreement between the tendering holder, the Company and
the Trust upon the terms and subject to the conditions of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Old Capital
Securities will be determined by the Company and the Trust, in their sole
discretion, whose determination shall be final and binding on all parties.
The Company and the Trust reserve the absolute right, in their sole and
absolute discretion, to reject any and all tenders determined by them not to
be in proper form or the acceptance of which, or exchange for, may, in the
view of counsel to the Company and the Trust, be unlawful. The Company and
the Trust also reserve the right, in their reasonable discretion and subject
to applicable law, to waive any of the conditions of the Exchange Offer as
set forth under "--Conditions to the Exchange Offer" or any condition, defect
or irregularity in any tender of Old Capital Securities of any particular
holder whether or not similar conditions, defects or irregularities are
waived in the case of other holders.
The Company's and the Trust's interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding on all parties. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company,
the Trust, any affiliates or assigns of the Company or the Trust, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and, unless waived by the Company
and the Trust, proper evidence satisfactory to the Company and the Trust, in
their sole discretion, of such person's authority to so act must be
submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
Resales of New Capital Securities
The Trust is making the Exchange Offer for the Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Commission as set forth in certain interpretive letters addressed to
third parties in other transactions. However, neither the Company nor the
Trust sought its own interpretive letter and there can be no assurance that
the staff of the Division of Corporation Finance of the Commission would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance, and subject to the conditions
described below, the Company and the Trust believe that a holder of Old
Capital Securities (other than a holder who is (a) a broker-dealer who
purchased the Old Capital Securities directly from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, (b) a person participating in the distribution of the Old Capital
Securities or (c) a person who is an "affiliate" of the Company or the Trust)
who exchanges Old Capital Securities in the Exchange Offer for New Capital
Securities and then resells such New Capital Securities will be viewed by the
staff no differently than a non-affiliated purchaser of registered securities
who purchases such securities in a registered primary offering of securities
and, after completion of such registered offering, may resell the New Capital
Securities without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such New Capital Securities. Any holder of
Old Capital Securities who uses the Exchange Offer to participate in a
distribution of the New Capital Securities to be acquired in the Exchange
Offer, any broker-dealer who receives New Capital Securities in exchange for
Old Capital Securities that were purchased directly from the Trust to resell
pursuant to Rule 144A or any other available exemption under the Securities
Act, any person participating in the distribution of the Old Capital
Securities who receives New Capital Securities in the Exchange Offer and any
"affiliate" of the Company or the Trust who receives New Capital Securities
in the Exchange Offer (a) will not be able to rely on the interpretations of
the staff of the Division of Corporation Finance set forth in the
above-described interpretive letters and (b) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such New Capital Securities,
unless such sale is made pursuant to an exemption from such requirements. Any
such resale transaction must be made by delivery of a prospectus containing
the selling securityholder information required by the rules of the
Commission under the Securities Act.
Each holder (including any broker-dealer) of Old Capital Securities who
wishes to exchange Old Capital Securities for New Capital Securities in the
Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company or the Trust, (ii) any New Capital Securities to
be received by it are being acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with any person to participate
in a distribution (within the meaning of the Securities Act) of such New
Capital Securities, and (iv) such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities
Act) of such New Capital Securities. The Letter of Transmittal contains the
foregoing representations. In addition, the Company and the Trust may require
a holder, as a condition to such holder's eligibility to participate in the
Exchange Offer, to furnish to the Company and the Trust (or an agent thereof)
in writing information as to the number of "beneficial owners" (within the
meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such holder
holds the Capital Securities to be exchanged in the Exchange Offer.
A broker-dealer who holds Old Capital Securities for its own account as a
result of market-making activities or other trading activities and who
receives New Capital Securities in exchange for such Old Capital Securities
pursuant to the Exchange Offer may be deemed to be an "underwriter" within
the meaning of the Securities Act and will be required to deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Capital Securities. Based upon the position taken by
the staff of the Division of Corporation Finance of the Commission in the
interpretive letters referred to above, the Company and the Trust believe
that a broker-dealer may participate in the Exchange Offer with respect to
Old Capital Securities acquired for its own account as a result of market-
making activities or other trading activities (a "Participating Broker-
Dealer"), provided that in connection with any resales of New Capital
Securities received in exchange for such Old Capital Securities, such broker-
dealer delivers a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale
of such New Capital Securities. Accordingly, the Company and the Trust will
require each broker-dealer who tenders, pursuant to the Exchange Offer, Old
Capital Securities that were acquired for its own account as the result of
market-making activities or other trading activities to acknowledge that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of New Capital Securities received in exchange for
such Old Capital Securities pursuant to the Exchange Offer. The Letter of
Transmittal contains the foregoing acknowledgment. However, the Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Also based upon the position taken by the
staff of the Division of Corporation Finance of the Commission in the
interpretive letters referred to above, the Company and the Trust believe
that a Participating Broker-Dealer may fulfill its prospectus delivery
requirement in connection with resales of New Capital Securities received in
exchange for Old Capital Securities that were acquired by such Participating
Broker-Dealer for its own account as a result of market-making activities or
other trading activities with this Prospectus, as it may be amended or
supplemented from time to time, during the 90-day period referred to below.
Subject to certain provisions set forth in the Registration Rights Agreement
and to the limitations described herein, the Company and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period ending 90 days after the
Expiration Date or, if earlier, when all such New Capital Securities have
been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution."
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message in
lieu thereof, that, upon receipt of notice from the Company or the Trust of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of New Capital Securities (or the New Guarantee
or the New Subordinated Debentures, as applicable) pursuant to this
Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies
of the amended or supplemented Prospectus to such Participating Broker-Dealer
or the Company or the Trust has given notice that the sale of the New Capital
Securities (or the New Guarantee or the New Subordinated Debentures, as
applicable) may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities (or the
New Guarantee or the New Subordinated Debentures, as applicable), it shall
extend the 90-day period referred to above during which the Participating
Broker-Dealers are entitled to use this Prospectus in connection with the
resale of New Capital Securities by the number of days during the period from
and including the date of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the amended or
supplemented Prospectus necessary to permit resales of the New Capital
Securities or to and including the date on which the Company or the Trust has
given notice that the sale of New Capital Securities (or the New Guarantee or
the New Subordinated Debentures, as applicable) may be resumed, as the case
may be.
Withdrawal Rights
As set forth below, tenders of Old Capital Securities may be withdrawn at
any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written or facsimile
transmission of such notice of withdrawal must be received by the Exchange
Agent at one of its addresses set forth under "--Exchange Agent" on or prior
to the Expiration Date. Any such notice of withdrawal must specify the name
of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate Liquidation Amount of Old Capital Securities to be withdrawn, and
(if certificates for such Old Capital Securities have been tendered) the name
of the registered holder of the Old Capital Securities as set forth on the
certificate for the Old Capital Securities, if different from that of the
person who tendered such Old Capital Securities. If certificates for the Old
Capital Securities have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such certificates for
the Old Capital Securities, the tendering holder must submit the serial
numbers shown on the particular certificates for the Old Capital Securities
to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Capital
Securities tendered for the account of an Eligible Institution. If Old
Capital Securities have been tendered pursuant to the procedures for
book-entry transfer set forth in "- Procedures for Tendering Old Capital
Securities," the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Old Capital Securities.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time
on or prior to the Expiration Date by following any of the procedures
described above under "- Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and
binding on all parties. Neither the Company, the Trust, any affiliates or
assigns of the Company or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities which have been tendered but which
are withdrawn will be returned to the holder thereof promptly after
withdrawal.
Distributions on New Capital Securities
Each New Capital Security will accumulate Distributions from the most
recent Distribution Date on the Old Capital Securities surrendered in
exchange for such New Capital Securities or, if no Distributions have been
paid or provided for on such Old Capital Securities, from April 3, 1997. As a
result, holders of Old Capital Securities that are accepted for exchange will
not receive accumulated Distributions on such Old Capital Securities for any
period from and after the most recent Distribution Date on such Old Capital
Securities or, if no Distributions have been paid or provided for on such Old
Capital Securities, from and after April 3, 1997, and such holders will be
deemed to have waived the right to receive any Distributions on such Old
Capital Securities.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company and the Trust will not be
required to accept any Old Capital Securities for exchange or to exchange any
New Capital Securities for any Old Capital Securities, and, as described
below, may terminate the Exchange Offer (whether or not any Old Capital
Securities have been accepted for exchange) or may waive any conditions to or
amend the Exchange Offer, if any of the following conditions have occurred or
exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by the staff
of the Commission which permits the New Capital Securities issued pursuant to
the Exchange Offer in exchange for Old Capital Securities to be offered for
resale, resold and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an "affiliate" of the Company or
the Trust within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such New Capital Securities are acquired in the
ordinary course of such holders' business and such holders have no
arrangement or understanding with any person to participate in the
distribution of such New Capital Securities;
(b) any action or proceeding shall have been instituted or threatened in
any court or by or before any governmental agency or body with respect to the
Exchange Offer which, in the Company's and the Trust's judgment, would
reasonably be expected to impair the ability of the Company or the Trust to
proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's and the Trust's judgment, would reasonably be
expected to impair the ability of the Company or the Trust to proceed with
the Exchange Offer;
(d) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority which, in the Company's and
the Trust's judgment, would reasonably be expected to impair the ability of
the Company or the Trust to proceed with the Exchange Offer;
(e) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose, or any governmental
approval has not been obtained, which approval the Company and the Trust
shall, in their reasonable discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby; or
(f) any change, or any development involving a prospective change, in the
business or financial affairs of the Company or any of its subsidiaries has
occurred which, in the reasonable judgment of the Company and the Trust,
might materially impair the ability of the Company or the Trust to proceed
with the Exchange Offer.
If the Company and the Trust determine in their reasonable discretion that
any of the foregoing events or conditions has occurred or exists or has not
been satisfied, the Company and the Trust may, subject to applicable law,
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) or may waive any such condition or
otherwise amend the terms of the Exchange Offer in any respect. If such
waiver or amendment constitutes a material change to the Exchange Offer, the
Company and the Trust will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders of
the Old Capital Securities, and the Company and the Trust will extend the
Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act.
Exchange Agent
The First National Bank of Chicago has been appointed as Exchange Agent for
the Exchange Offer. Delivery of a Letter of Transmittal and any other
documents required by the Letter of Transmittal, questions, requests for
assistance, and requests for additional copies of this Prospectus or of a
Letter of Transmittal should be directed to the Exchange Agent as follows:
By Registered or By Facsimile:
Certified Mail: (For Eligible Institutions Only)
The First National Bank The First National Bank
of Chicago of Chicago
One First National Plaza - Suite 0124 Attn: Corporate Trust
Chicago, Illinois 60670-0124 Services Division
Attn: Corporate Trust Services Div. (312) 407-4653
By Hand/Overnight Courier:
The First National Bank
of Chicago
One First National Plaza - Suite 0124
Chicago, Illinois 60670-0124
Attn: Corporate Trust Services Div.
Confirm by Telephone
(312) 407-3344
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
Fees and Expenses
The Company has agreed to pay all expenses of the Trust, including expenses
related to the Exchange Offer. The Company has agreed to pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it
for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Prospectus and related documents to the beneficial
owners of Old Capital Securities, and in handling or tendering for their
customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Capital Securities in connection with the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or others soliciting acceptances of the Exchange Offer.
DESCRIPTION OF THE CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Trust has issued Old Capital
Securities and Common Securities and, in the event the Exchange Offer is
consummated, will issue New Capital Securities. The New Capital Securities
will represent preferred undivided beneficial interests in the assets of the
Trust. The Declaration has been qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The Declaration incorporates
certain provisions of the Trust Indenture Act, and, upon consummation of the
Exchange Offer, the Declaration will be subject to and governed by the Trust
Indenture Act. The forms and terms of the New Capital Securities are
identical in all material respects to the forms and terms of the Old Capital
Securities, except that the New Capital Securities have been registered under
the Securities Act and therefore are not subject to certain restrictions on
transfer applicable to the Old Capital Securities or the $100,000 minimum
Liquidation Amount transfer restriction (see "- Restrictions on Transfer and
Removal of Restrictions") and will not provide for any increase in the
Distribution rate thereon. Accordingly, as the context may require, unless
expressly stated otherwise, "Capital Securities" means the Old Capital
Securities and, in the event the Exchange Offer is consummated, the New
Capital Securities. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Declaration, the Delaware Business Trust Act and the Trust Indenture Act.
Certain capitalized terms used herein are defined in the Declaration.
General
The Capital Securities (including the Old Capital Securities and the New
Capital Securities) are limited to $50 million aggregate Liquidation Amount
at any one time outstanding. The Capital Securities rank pari passu, and
payments are made thereon pro rata, with the Common Securities except as
described under "- Subordination of Common Securities" below. The New
Capital Securities and any Old Capital Securities that remain outstanding
after consummation of the Exchange Offer will constitute a single series of
Capital Securities under the Declaration and, accordingly, will vote together
as a single class for purposes of determining whether holders of the
requisite percentage in outstanding Liquidation Amount thereof have taken
certain actions or exercised certain rights under the Declaration. Legal
title to the Old Subordinated Debentures is (and legal title to the New
Subordinated Debentures will be) held by the Property Trustee in trust for
the benefit of the Trust and the holders of the Capital Securities and the
Common Securities. The payment of Distributions out of money held by the
Trust, and payments upon redemption of the Capital Securities or liquidation
of the Trust, are guaranteed by the Company to the extent described under
"Description of the Guarantee". The Guarantee, when taken together with the
Company's obligations under the Subordinated Debentures, the Declaration and
the Indenture, including its obligation to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts due on the Capital
Securities. The Guarantee does not guarantee payment of Distributions or
amounts payable on redemption of the Capital Securities or liquidation of the
Trust when the Trust does not have sufficient funds legally available for
such payments. In such event, the remedy of a holder of Capital Securities is
to vote to direct the Property Trustee to enforce its rights under the
Subordinated Debentures except in the limited circumstances in which such
holder may take Direct Action (as defined herein). See "Description of the
Guarantee" and "Description of the Capital Securities - Voting Rights".
Distributions
Distributions on the Capital Securities are cumulative, accumulate from
April 3, 1997 and are payable semi-annually in arrears on April 1 and October
1 of each year, commencing October 1, 1997, at the annual rate of 8.424% of
the Liquidation Amount to the holders of the Capital Securities on the
relevant record dates. The record dates are the fifteenth day of the month
preceding the month in which the relevant Distribution Date (as defined
herein) falls. The amount of Distributions payable for any period are
computed on the basis of a 360-day year of twelve 30-day months and, for any
period of less than a full calendar month, the actual number of days elapsed
in such month. In the event that any date on which Distributions are payable
on the Capital Securities is not a Business Day (as defined herein), payment
of the Distributions 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 falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day, in each case, with the same force and effect as if made on the
date such payment was originally payable (each date on which Distributions
are payable in accordance with the foregoing, a "Distribution Date"). A
"Business Day" shall mean any day other than a Saturday or a Sunday, or a
day on which banking institutions in New York, New York are authorized or
required by law or executive order to close.
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture to elect to defer the payment
of interest on the Subordinated Debentures at any time and from time to time
for a period not exceeding 10 consecutive semi-annual periods, provided that
no Extension Period may extend beyond the Stated Maturity Date. Upon any such
election, semi-annual Distributions on the Capital Securities will be
deferred by the Trust during such Extension Period. Distributions to which
holders of the Capital Securities are entitled during any such Extension
Period will accumulate interest thereon at the rate per annum of 8.424%
thereof, compounded semi-annually, to the extent permitted by applicable law
from the relevant Distribution Date. The term "Distributions," as used
herein, shall include any such additional interest.
During any such Extension Period, pursuant to the Indenture, the Company
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common, preferred and preference
stock), (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company (including
any Other Debentures (as defined in the Indenture to include all subordinated
debentures issued or to be issued by the Company to trusts established by the
Company and similar to the Trust, including, without limitation, the 8.70%
Subordinated Deferrable Interest Debentures due July 30, 2026 in the
principal amount of $128,866,000 issued by the Company to Equitable of Iowa
Companies Capital Trust)) that rank pari passu with or junior in right of
payment to the Subordinated Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Company of any securities of any
subsidiary of the Company (including Other Guarantees (as defined in the
Indenture to include all guarantees issued or to be issued by the Company
with respect to securities similar to the Capital Securities issued by trusts
established by the Company and similar to the Trust, including, without
limitation, the Preferred Securities Guarantee Agreement with respect to
$125,000,000 of 8.70% Preferred Securities due July 30, 2026 issued by
Equitable of Iowa Companies Capital Trust)) if such guarantee ranks pari
passu with or junior in right of payment to the Subordinated Debentures
(other than (a) dividends or distributions in shares of or options, warrants
or rights to subscribe for or purchase shares of, common stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a direct
result of, and only to the extent required in order to avoid the issuance of
fractional shares of capital stock following, a reclassification of the
Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or pursuant to an acquisition in which fractional shares of the
Company's capital stock would otherwise be issued, (e) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (f) purchases of common stock related to the
issuance of common stock or rights under any benefit plan for directors,
officers, agents or employees of the Company or its subsidiaries or any of
the Company's dividend reinvestment or director, officer, agent or employee
stock purchase plans).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or
to extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period, subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election of any Extension Period (or an extension thereof) at
least five Business Days prior to the earlier of (i) the date the
Distributions on the Trust Securities would have been payable except for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities
exchange or to holders of Capital Securities of the record date or the date
such Distributions are payable, but in any event not less than five Business
Days prior to such record date. The Debenture Trustee shall give notice of
the Company's election to begin or extend a new Extension Period to the
holders of the Capital Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period. If
Distributions are deferred, the deferred Distributions and accrued interest
thereon shall be paid to the holders of record of the Capital Securities as
they appear on the books and records of the Trust on the record date next
following the termination of such deferral period.
Although the Company may in the future exercise its option to defer
payments of interest on the Subordinated Debentures, the Company has no such
current intention.
The revenue of the Trust available for distribution to holders of the
Capital Securities is limited to payments under the Subordinated Debentures
held by the Trust. See "Description of the Subordinated Debentures -
General". If the Company does not make interest payments on the Subordinated
Debentures, the Property Trustee will not have funds available to pay
Distributions on the Capital Securities. The payment of Distributions (if
and to the extent the Trust has funds legally available for the payment of
such Distributions) is guaranteed by the Company to the extent described
herein under "Description of the Guarantee".
Redemption
Upon the repayment of the Subordinated Debentures on the Stated Maturity
Date or the prepayment of the Subordinated Debentures upon the occurrence and
continuation of a Special Event, the proceeds from such repayment or
prepayment shall be applied by the Property Trustee to redeem a Like Amount
(as defined below) of the Trust Securities, upon not less than 30 nor more
than 60 days' notice of a date of redemption (the "Redemption Date") at the
applicable Redemption Price, which shall be equal to (i) in the case of the
repayment of the Subordinated Debentures on the Stated Maturity Date, the
Maturity Redemption Price (equal to the principal of and accrued and unpaid
interest on the Subordinated Debentures) and (ii) in the case of the
occurrence and continuation of a Special Event, the Special Event Redemption
Price (equal to the Special Event Prepayment Price in respect of the
Subordinated Debentures). See "Description of the Subordinated
Debentures - Special Event Prepayment".
The Company has the option to prepay the Subordinated Debentures, in whole
but not in part, upon the occurrence and continuation of a Special Event, at
the Special Event Prepayment Price.
Liquidation of the Trust and Distribution of Subordinated Debentures
The Company has the right at any time to terminate the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. Such right is subject to the Company
having received an opinion of counsel to the effect that such distribution
will not be a taxable event to holders of Capital Securities.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company; (ii)
the distribution of a Like Amount of the Subordinated Debentures to the
holders of all of the Trust Securities, if the Company, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Company, as Sponsor); (iii) redemption of all of the Trust
Securities as described under ''- Redemption'' above; (iv) expiration of the
term of the Trust; (v) upon repayment of the Subordinated Debentures or at
such time as no Subordinated Debentures are outstanding; or (vi) the entry of
an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a termination occurs as described in clause (i), (ii), or (vi) of the
preceding paragraph, the Trust shall be liquidated by the Administrative
Trustees as expeditiously as the Administrative Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, to the holders of the Trust
Securities a Like Amount of the Subordinated Debentures on a pro rata basis,
unless such distribution is determined by the Property Trustee not to be
practicable. Upon such determination or upon any other voluntary or
involuntary termination or liquidation of the Trust in which the Debentures
are not distributed, the holders of the Trust Securities are entitled to
receive out of the assets of the Trust legally available for distribution to
holders, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, an amount equal to the aggregate of the
Liquidation Amount plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets legally available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on
the Capital Securities and the Common Securities shall be paid on a pro rata
basis, except that if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities. See "- Subordination of Common Securities" below.
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Subordinated
Debentures upon the liquidation of the Trust, Subordinated Debentures having
a principal amount equal to the Liquidation Amount of the Trust Securities of
the holder to whom such Subordinated Debentures are distributed.
After the liquidation date is fixed for any distribution of Subordinated
Debentures to holders of the Trust Securities, (i) the Trust Securities will
no longer be deemed to be outstanding, (ii) each registered global
certificate, if any, representing Trust Securities and held by DTC or its
nominee will receive a registered global certificate or certificates
representing the Subordinated Debentures to be delivered upon such
distribution and (iii) any certificates representing Trust Securities not
held by DTC or its nominee will be deemed to represent Subordinated
Debentures having a principal amount equal to the Liquidation Amount of such
Trust Securities, and bearing accrued and unpaid interest in an amount equal
to the accumulated and unpaid Distributions on such Trust Securities until
such certificates are presented to the Administrative Trustees or their agent
for cancellation, whereupon the Company will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such
Subordinated Debentures.
There can be no assurance as to the market prices for the Capital
Securities or the Subordinated Debentures that may be distributed in exchange
for the Trust Securities if a dissolution and liquidation of the Trust were
to occur. Accordingly, the Capital Securities or the Subordinated Debentures
that the investor may receive on dissolution and liquidation of the Trust,
may trade at a discount to the price that the investor paid to purchase the
Old Capital Securities.
Redemption Procedures
If redeemed, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment of the
Subordinated Debentures. Any redemption of Trust Securities shall be made and
the applicable Redemption Price shall be payable on the Redemption Date only
to the extent that the Trust has funds legally available for the payment of
such applicable Redemption Price. See also "- Subordination of Common
Securities" below.
If the Trust gives a notice of redemption in respect of the Capital
Securities then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are legally available with respect to the Capital
Securities held by DTC or its nominees, the Property Trustee will pay or
cause the Paying Agent to pay the applicable Redemption Price to DTC. See
"- Form, Denomination, Book-Entry Procedures and Transfer" below. With
respect to the Capital Securities held in certificated form, the Property
Trustee, to the extent funds are legally available, will give irrevocable
instructions and authority to the Paying Agent and will irrevocably deposit
with the Paying Agent for the Capital Securities funds sufficient to pay or
cause the Paying Agent to pay the applicable Redemption Price to the holders
thereof upon surrender of their certificates evidencing the Capital
Securities. See "- Payment and Paying Agent" below. Distributions payable on
or prior to the Redemption Date shall be payable to the holders of such
Capital Securities on the relevant record dates for the related Distribution
Dates occurring on or prior to such Redemption Date. If notice of redemption
shall have been given and funds deposited with the Property Trustee to pay
the Redemption Price for the Capital Securities called for redemption, then
all rights of the holders of such Capital Securities will cease, except the
right of the holders of such Capital Securities to receive the applicable
Redemption Price, but without interest on such Redemption Price, and such
Capital Securities will cease to be outstanding. In the event that any
Redemption Date is not a Business Day, then the applicable Redemption Price
payable on such date will be paid 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 falls in the next calendar
year, such payment will be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date fixed for
redemption. In the event that payment of the applicable Redemption Price is
improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Guarantee as described under "Description of the
Guarantee," (i) Distributions on Capital Securities called for redemption
will accumulate on the applicable Redemption Price at the then applicable
rate, from the Redemption Date originally established by the Trust to the
date such applicable Redemption Price is actually paid, and (ii) the actual
payment date will be the Redemption Date for purposes of calculating the
applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law) the Company or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at
its registered address. Unless the Company defaults in payment of the Special
Event Prepayment Price on, or in the repayment of, the Subordinated
Debentures, on and after the Redemption Date, Distributions will cease to
accrue on the Trust Securities called for redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and the Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of the Capital Securities and Common
Securities; provided however, that if any Debenture Event of Default shall
have occurred and be continuing, no payments in respect of any Distribution
on, or payments upon liquidation, redemption, repurchase or otherwise with
respect to, the Common Securities, shall be made until the holders of the
Capital Securities shall be paid in full in cash all accumulated and unpaid
Distributions on all of the outstanding Capital Securities for all
Distribution periods terminating on or prior thereto or, in the case of
Capital Securities called for redemption on a Redemption Date on or prior
thereto, the full amount of the Redemption Price therefor, or in the case of
a liquidation, the Liquidation Distribution shall have been made or provided
for, and all funds available to the Property Trustee shall first be applied
to the payment in full of all Distributions on, Redemption Price of, or
Liquidation Distribution for the Capital Securities then due and payable.
In the case of any Debenture Event of Default, the Company as holder of the
Common Securities will be deemed to have waived any right to act with respect
to such Debenture Event of Default until the effect of such Debenture Event
of Default shall have been cured, waived or otherwise eliminated. Until any
such Debenture Event of Default has been so cured, waived or otherwise
eliminated, the Property Trustee shall act solely on behalf of the holders of
the Capital Securities and not on behalf of the Company as holder of the
Common Securities, and only the holders of the Capital Securities will have
the right to direct the Property Trustee to act on their behalf. If a
Debenture Event of Default with respect to the Capital Securities is waived
by the holders of the Capital Securities, such waiver will also constitute a
waiver of such Debenture Event of Default with respect to the Common
Securities for all purposes under the Declaration, without any further act,
vote or consent of the holders of the Common Securities.
Events of Default; Notice
The occurrence of a Debenture Event of Default (see "Description of the
Subordinated Debentures - Debenture Events of Default") constitutes an
"Event of Default" under the Declaration.
Within five Business Days after the occurrence of any Debenture Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Debenture Event of Default to the holders of the
Capital Securities, the Administrative Trustees and the Company, as Sponsor,
unless such Debenture Event of Default shall have been cured or waived. The
Company, as Sponsor, and the Administrative Trustees are required to file
annually with the Property Trustee a certificate as to whether or not they
are in compliance with all the conditions and covenants applicable to them
under the Declaration.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
under "- Liquidation of the Trust and Distribution of Subordinated
Debentures" and "- Subordination of Common Securities" above.
Removal of Issuer Trustees
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing,
the Property Trustee and the Delaware Trustee may be removed at such time by
the holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event do the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees,
which voting rights are vested exclusively in the Company as the holder of
the Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor Issuer Trustee in accordance with the provisions
of the Declaration.
Merger or Consolidation of Issuer Trustees
Any corporation into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person may be merged or
converted or with which it may be consolidated, or any corporation or Person
resulting from any merger, conversion or consolidation to which such Issuer
Trustee shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of such Issuer Trustee, shall
be the successor of such Issuer Trustee under the Declaration, provided such
corporation or Person shall be otherwise qualified and eligible.
Mergers, Conversions, Consolidations, Amalgamations or Replacements of the
Trust
The Trust may not merge or convert with or into, consolidate, amalgamate,
or be replaced by or convey, transfer or lease its properties and assets as
an entirety or substantially as an entirety to any corporation or other
Person, except as described below. The Trust may, at the request of the
Company, as Sponsor, with the consent of the Administrative Trustees but
without the consent of the holders of the Capital Securities, the Property
Trustee or the Delaware Trustee, merge or convert with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to a trust organized as
such under the laws of any State; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect
to the Trust Securities or (b) 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 in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee with respect to the Subordinated
Debentures, (iii) the Successor Securities that are issued in place of the
Capital Securities are listed, or any such Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Capital Securities are then listed or quoted,
if any, (iv) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor Securities) in any
material respect (other than any dilution of such holders' interests in the
new entity), (vi) such successor entity has a purpose identical to that of
the Trust, (vii) prior to such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Company has
received an opinion from independent counsel to the Trust experienced in such
matters to the effect that (a) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Capital
Securities (including any Successor Securities) in any material respect
(other than any dilution of such holders' interests in the new entity), (b)
following such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust nor such successor entity
will be required to register as an investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and (c)
following such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease the Trust (or the successor entity) will
continue to be classified as a grantor trust for United States federal income
tax purposes, and (viii) the Company or any permitted successor or assignee
owns all of the common securities of such successor entity and guarantees the
obligations of such successor entity under the Successor Securities at least
to the extent provided by the Guarantee. Notwithstanding the foregoing, the
Trust shall not, except with the consent of holders of 100% in Liquidation
Amount of the Trust Securities, consolidate, amalgamate, merge or convert
with or into, or be replaced by or convey, transfer or lease its properties
and assets as an entirety or substantially as an entirety to any other entity
or permit any other entity to consolidate, amalgamate, merge or convert with
or into, or replace it if such consolidation, amalgamation, merger,
conversion, replacement, conveyance, transfer or lease would cause the Trust
or the successor entity not to be classified as a grantor trust for United
States federal income tax purposes. The foregoing conditions also generally
apply to the Common Securities.
Voting Rights
Except as provided below and under "- Mergers, Conversions, Consolidations,
Amalgamations or Replacements of the Trust" above and "Description of the
Guarantee - Amendments and Assignment" and as otherwise required by law and
the Declaration, the holders of the Capital Securities have no voting rights.
The Declaration may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities to (i) cure any ambiguity, correct or
supplement any provisions in the Declaration that may be inconsistent with
any other provision, or to make any other provisions with respect to matters
or questions arising under the Declaration, which shall not be inconsistent
with the other provisions of the Declaration, (ii) modify, eliminate or add
to any provisions of the Declaration to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as
an "investment company" under the Investment Company Act or (iii) add
covenants, restrictions or obligations of the Company; provided, however,
that such action shall not adversely affect in any material respect the
interests of the holders of the Trust Securities. Any amendment of the
Declaration pursuant to the foregoing shall become effective when notice
thereof is given to the holders of the Trust Securities. The Declaration may
be amended by the Issuer Trustees and the Company (i) with the consent of
holders representing a majority in Liquidation Amount of the outstanding
Trust Securities and (ii) upon receipt by the Issuer Trustee of an opinion of
counsel to the effect that such amendment or the exercise of any power
granted to the Issuer Trustees in accordance with such amendment will not
affect the Trust's status as a grantor trust for United States federal income
tax purposes or the Trust's exemption from status as an "investment
company" under the Investment Company Act, provided that, (a) without the
consent of each holder of Trust Securities, the Declaration may not be
amended to (i) change the amount or timing of any Distribution or other
payment on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of
a specified date or (ii) restrict the right of a holder of Trust Securities
to institute suit for the enforcement of any such payment on or after such
date and (b) without the consent of each holder of Capital Securities, the
Declaration may not be amended to restrict the right of a holder of Capital
Securities to bring a Direct Action.
So long as any Subordinated Debentures are held by the Property Trustee,
the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee,
or executing any trust or power conferred on the Debenture Trustee with
respect to the Subordinated Debentures, (ii) waive certain past defaults
under the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Subordinated Debentures, where such
consent shall be required to be made by the holders of a majority in
aggregate principal amount of the Subordinated Debentures then outstanding,
without, in each case, obtaining the prior approval of the holders of a
majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Subordinated Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior approval of
each holder of Capital Securities. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. In addition to
obtaining the foregoing approvals of such holders of the Capital Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall
obtain an opinion of counsel experienced in such matters to the effect that
the Trust will not be classified as an association taxable as a corporation
for United States federal income tax purposes on account of such action. The
Property Trustee shall in general notify each holder of Capital Securities of
any notice of default actually known to the Property Trustee with respect to
the Subordinated Debentures.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. An Administrative Trustee will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
given to each holder of record of Capital Securities in the manner set forth
in the Declaration.
No vote or consent of the holders of Capital Securities is required for the
Trust to redeem and cancel the Capital Securities or to distribute the
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company or any affiliate of the Company
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
In the event that New Capital Securities are issued in certificated form,
such New Capital Securities may be transferred or exchanged in the manner and
at the offices described below.
In the event that New Capital Securities are issued in registered, global
form (collectively, the "Global Capital Securities"), the Global Capital
Securities will be deposited upon issuance with the Property Trustee as
custodian for DTC, in New York, New York, and registered in the name of DTC
or its nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for New Capital Securities in certificated
forms except in the limited circumstances described under "- Exchange of Book-
Entry New Capital Securities for Certificated New Capital Securities" below.
In addition, transfer of beneficial interests in the Global Capital
Securities will be subject to the applicable rules and procedures of DTC and
its direct or indirect participants, which may change from time to time.
Depositary Procedures
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of the Participants. The
Participants include securities brokers and dealers (including the Initial
Purchaser), banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchase of each security
held by or on behalf of DTC are recorded on the records of the Participants
and Indirect Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC
will credit the accounts of Participants designated by the Initial Purchaser
with portions of the Liquidation Amount of the Global Capital Securities and
(ii) ownership of such interests in the Global Capital Securities will be
shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners
of beneficial interests in the Global Capital Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants in such systems, or indirectly
through organizations which are Participants in such system. All interests in
a Global Capital Security may be subject to the procedures and requirements
of DTC. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Capital Security to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and
certain banks, the ability of a person having beneficial interests in a
Global Capital Security to pledge such interest to persons or entities that
do not participate in the DTC system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical certificate
evidencing such interests. For certain other restrictions on the
transferability of the Capital Securities, see "- Exchange of Book-Entry New
Capital Securities for Certificated New Capital Securities".
Except as described below, owners of interests in the Global Capital
Securities will not have New Capital Securities registered in their name,
will not receive physical delivery of New Capital Securities in certificated
form and will not be considered the registered owners or holders thereof
under the Declaration for any purpose.
Payments in respect of the Global Capital Security registered in the name
of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Declaration. Under the terms of
the Declaration, the Property Trustee will treat the persons in whose names
the New Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Capital Securities, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in the Global Capital Securities or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the Trust and the Company that its
current practice, upon receipt of any payment in respect of securities such
as the New Capital Securities, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate
to their respective holdings in Liquidation Amount of beneficial interests in
the relevant security as shown on the records of DTC unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of New
Capital Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Company. Neither the Trust nor the Company or the Property
Trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the New Capital Securities, and the
Trust or the Company and the Property Trustee may conclusively rely on and
will be protected in relying on instructions from DTC or its nominee for all
purposes.
DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of New Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in
the Global Capital Securities are credited and only in respect of such
portion of the Liquidation Amount of the New Capital Securities as to which
such Participant or Participants has or have given such direction. However,
if there is an Event of Default under the Declaration, DTC reserves the right
to exchange the Global Capital Securities for legended New Capital Securities
in certificated form and to distribute such New Capital Securities to its
Participants.
Although voting with respect to the Capital Securities is limited, in those
cases where a vote is required, DTC, itself, will not consent or vote with
respect to Capital Securities. Under its usual procedures, DTC would mail an
Omnibus Proxy to the Trust as soon as possible after the record date. The
Omnibus Proxy assigns DTC's consenting or voting rights to those Direct
Participants to whose accounts the Capital Securities are credited on the
record date (identified in a listing attached to the Omnibus Proxy). The
Company and the 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 the Trust.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof. Neither the Trust nor the Company or the Property Trustee
will have any responsibility for the performance by DTC or its Participants
or Indirect Participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Book-Entry New Capital Securities for Certificated New Capital
Securities
A Global Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC notifies the Trust that it is
unwilling or unable to continue as clearing agency for the Global Capital
Security or has ceased to be a clearing agency registered under the Exchange
Act and the Company thereupon fails to appoint a successor clearing agency
within 90 days, (ii) the Trust in its sole discretion elects to cause the
issuance of definitive certificated New Capital Securities or (iii) there has
occurred and is continuing an Event of Default under the Declaration or any
event which after notice or lapse of time or both would be an Event of
Default under the Declaration. In addition, beneficial interests in a Global
Capital Security may be exchanged for certificated New Capital Securities
upon request but only upon at least 20 days' prior written notice given to
the Property Trustee by or on behalf of DTC in accordance with customary
procedures. In all cases, certificated New Capital Securities delivered in
exchange for any Global Capital Security or beneficial interests therein will
be registered in the names, and issued in any approved denominations,
requested by or on behalf of the clearing agency (in accordance with its
customary procedures).
Payment and Paying Agent
Payments in respect of the Global Capital Securities shall be made to DTC,
which shall credit the relevant accounts at DTC on the applicable
Distribution Dates or in respect of the New Capital Securities that are not
held by DTC, such payments shall be made by check mailed to the address of
the holder entitled thereto as such address shall appear on the register. The
paying agent (the "Paying Agent") shall initially be the Property Trustee.
The Trust may appoint one or more additional paying agents chosen by the
Property Trustee and acceptable to the Administrative Trustees and the
Company. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Administrative Trustees. In the event that the
Property Trustee shall no longer be the Paying Agent, the Trust shall appoint
a successor (which shall be acceptable to the Administrative Trustees and the
Company) to act as Paying Agent. In the event that the Capital Securities do
not remain in book-entry only form, the Property Trustee will act as Paying
Agent and may designate an additional or substitute Paying Agent at any time.
Restrictions on Transfer and Removal of Restrictions
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant
to an exemption therefrom or in a transaction not subject thereto, and in
each case in compliance with certain other conditions and restrictions. Old
Capital Securities which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. The Old Capital Securities also may be transferred only in blocks
having a Liquidation Amount of not less than $100,000 (100 Capital
Securities). New Capital Securities acquired in accordance with the Exchange
Offer will not bear a legend reflecting such restrictions on transfer and
will not be restricted to transfer in blocks having a Liquidation Amount of
not less than $100,000 (100 Capital Securities).
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the New
Capital Securities. The Property Trustee also acts as registrar and transfer
agent for the Old Capital Securities.
Registration of transfers of Capital Securities will be effected without
charge by or on behalf of the Trust, but upon payment (with the giving of
such indemnity as the Administrative Trustees may require) in respect of any
tax or other government charges which may be imposed in relation to it. The
Trust will not be required to register or cause to be registered the transfer
of Capital Securities after such Capital Securities have been called for
redemption.
Information Concerning the Property Trustee
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set
forth in the Declaration and, after an Event of Default thereunder, shall
exercise such rights and powers vested in it by the Declaration and use the
same degree of care and skill as a prudent person would exercise under the
circumstances 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
Capital Securities, unless offered reasonable indemnity by such holder
against the costs, expenses and liabilities which might be incurred thereby.
The holders of Capital Securities are not required to offer such indemnity in
the event such holders, by exercising their voting rights, direct the
Property Trustee to take any action it is empowered to take under the
Declaration following an Event of Default thereunder. The Property Trustee
also serves as trustee under the Guarantee and the Indenture. The Company and
certain of its subsidiaries may, from time to time, conduct certain banking
transactions with the Property Trustee in the ordinary course of their
business.
Governing Law
The Declaration and the Capital Securities are governed by, and construed
in accordance with, the internal laws of the State of Delaware.
Miscellaneous
The Administrative Trustees are authorized and directed to operate the
Trust in such a way so that the Trust will not be required to register as an
"investment company" under the Investment Company Act or 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 Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust of the Trust or
the certificate of incorporation of the Company, that each of the Company and
the Administrative Trustees determine 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 Capital Securities or vary the
terms thereof.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
The Old Subordinated Debentures were issued and the New Subordinated
Debentures will be issued as a separate series under the Indenture. The
Indenture has been qualified under the Trust Indenture Act. In the event the
Exchange Offer is consummated, the Company will exchange the New Subordinated
Debentures for the Old Subordinated Debentures. The form and terms of the
New Subordinated Debentures are identical in all material respects to the
form and terms of the Old Subordinated Debentures, except that the New
Subordinated Debentures have been registered under the Securities Act and
therefore are not subject to certain restrictions on transfer applicable to
the Old Subordinated Debentures or the $100,000 minimum aggregate principal
amount transfer restriction and will not provide for any increase in the
interest rate thereon. Accordingly, as the context may require, unless
expressly stated otherwise, "Subordinated Debentures" means the Old
Subordinated Debentures and, in the event the Exchange Offer is consummated,
the New Subordinated Debentures. By its terms, the Indenture incorporates
certain provisions of the Trust Indenture Act, and, upon consummation of the
Exchange Offer, the Indenture will be subject to and governed by the Trust
Indenture Act. This summary of certain terms and provisions of the
Subordinated Debentures and the Indenture does not purport to be complete
and, where reference is made to particular provisions of the Indenture, such
provisions, including the definitions of certain terms, some of which are not
otherwise defined herein, are qualified in their entirety by reference to all
of the provisions of the Indenture and the Trust Indenture Act. Certain
capitalized terms used herein are defined in the Indenture.
General
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Old Subordinated Debentures issued
by the Company. Pursuant to the Exchange Offer, the Company will exchange
the Old Subordinated Debentures as soon as practicable after the consummation
of the Exchange Offer and the Old Subordinated Debentures will be retired and
cancelled.
The Subordinated Debentures bear interest at the annual rate of 8.424% of
the principal amount thereof, payable semi-annually in arrears on April 1 and
October 1 of each year (each, an "Interest Payment Date"), commencing
October 1, 1997, to the person in whose name each Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
fifteenth day of the month preceding the month in which the relevant payment
date falls. It is anticipated that, until the liquidation, if any, of the
Trust, each Subordinated Debenture will be held in the name of the Property
Trustee in trust for the benefit of the holders of the Trust Securities. The
amount of interest payable for any semi-annual period is computed on the
basis of a 360-day year of twelve 30-day months and, for any period of less
than a full calendar month, the number of days elapsed in such month. 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 falls in the next calendar year, such payment will
be made on the immediately preceding Business Day, in each case, with the
same force and effect as if made on the date such payment was originally
payable. Accrued interest that is not paid on the applicable Interest Payment
Date will bear additional interest on the amount thereof (to the extent
permitted by law) at the rate per annum of 8.424% thereof, compounded semi-
annually. The term "interest," as used herein, shall include semi-annual
interest payments, interest on semi-annual interest payments not paid on the
applicable Interest Payment Date and Additional Sums (as defined herein), as
applicable.
The Subordinated Debentures mature on April 1, 2027.
The Subordinated Debentures rank pari passu with all Other Debentures and
are unsecured and subordinate and rank junior in right of payment to the
extent and in the manner set forth in the Indenture to all Senior
Indebtedness of the Company. See "- Subordination" below. The Company is a
non-operating holding company and all of the operating assets of the Company
and its consolidated subsidiaries are owned by such subsidiaries. The Company
relies primarily on dividends from such subsidiaries to meet its obligations.
The ability of the Company's insurance subsidiaries to provide dividends to
the Company and the Company's other holding Company subsidiaries is
restricted by state insurance law and may require prior approval of state
insurance regulators. Because the Company is a holding company, the right of
the Company to participate in any distribution of assets of any subsidiary
upon such subsidiary's liquidation or reorganization or otherwise is subject
to the prior claims of creditors of the subsidiary, except to the extent the
Company may itself be recognized as a creditor of that subsidiary.
Accordingly, the Subordinated Debentures are effectively subordinated to all
existing and future liabilities of the Company's subsidiaries, including
policyholder liabilities, and holders of Subordinated Debentures should look
only to the assets of the Company for payments on the Subordinated
Debentures. The Indenture does not limit the incurrence or issuance of other
secured or unsecured debt of the Company, including Senior Indebtedness. See
"- Subordination" below and "Risk Factors - Holding Company Structure;
Structural Subordination and Leverage".
Form, Registration and Transfer
If the New Subordinated Debentures are distributed to the holders of the
Trust Securities, the New Subordinated Debentures may be represented by one
or more global certificates registered in the name of Cede & Co. as the
nominee of DTC. The depositary arrangements for such New Subordinated
Debentures are expected to be substantially similar to those in effect for
the New Capital Securities. For a description of DTC and the terms of the
depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Description of the
Capital Securities - Form, Denomination, Book-Entry Procedures and Transfer".
Payment and Paying Agents
Payment of principal of and premium, if any, and any interest on
Subordinated Debentures is made at the office of the Debenture Trustee in The
City of New York or at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made (i) by check mailed to the
address of the Person entitled thereto as such address shall appear in the
register for Subordinated Debentures or (ii) by transfer to an account
maintained by the Person entitled thereto as specified in such register,
provided that proper transfer instructions have been received by the relevant
record date. Payment of any interest on any Subordinated Debenture is made to
the Person in whose name such Subordinated Debenture is registered at the
close of business on the record date for such interest, except in the case of
defaulted interest and except for interest payable on the Stated Maturity
Date which shall be payable to the Person to whom principal payable at the
Stated Maturity Date shall be payable. The Company may at any time designate
additional Paying Agents or rescind the designation of any Paying Agent;
however, the Company will at all times be required to maintain a Paying Agent
in each place of payment for the Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Company in trust, for the payment of the principal of and
premium, if any, or interest on any Subordinated Debenture and remaining
unclaimed for two years after such principal and premium, if any, or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such Subordinated Debenture shall thereafter
look, as a general unsecured creditor, only to the Company for payment
thereof.
The New Subordinated Debentures will be represented by one certificate
registered in the name of The First National Bank of Chicago as Property
Trustee of the Trust.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is continuing,
the Company has the right under the Indenture at any time during the term of
the Subordinated Debentures to defer the payment of interest at any time or
from time to time for a period not exceeding 10 consecutive semi-annual
periods, provided that no Extension Period may extend beyond the Stated
Maturity Date. At the end of an Extension Period, the Company must pay all
interest then accrued and unpaid (together with interest thereon accrued at
the annual rate of 8.424%, compounded semi-annually, to the extent permitted
by applicable law). During an Extension Period, interest will continue to
accrue and, if the Subordinated Debentures have been distributed to holders
of the Trust Securities, holders of Subordinated Debentures (or holders of
the Trust Securities while Trust Securities are outstanding) will be required
to accrue interest income for United States federal income tax purposes prior
to the receipt of cash attributable to such income. See "Certain Federal
Income Tax Considerations - Interest Income and Original Issue Discount".
During any such Extension Period, pursuant to the Indenture, the Company
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (which includes common, preferred and preference
stock), (ii) make any payment of principal, interest or premium, if any, on
or repay, repurchase or redeem any debt securities of the Company (including
any Other Debentures) that rank pari passu with or junior in right of payment
to the Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of any securities of any subsidiary
of the Company (including Other Guarantees) if such guarantee ranks pari
passu with or junior in right of payment to the Subordinated Debentures
(other than (a) dividends or distributions in shares of or options, warrants
or rights to subscribe for or purchase shares of, common stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a direct
result of, and only to the extent required in order to avoid the issuance of
fractional shares of capital stock following, a reclassification of the
Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or pursuant to an acquisition in which fractional shares of the
Company's capital stock would otherwise be issued, (e) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (f) purchases of common stock related to the
issuance of common stock or rights under any benefit plan for directors,
officers, agents or employees of the Company or its subsidiaries or any of
the Company's dividend reinvestment or director, officer, agent or employee
stock purchase plans).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause the Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period, subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election of any Extension Period (or an extension thereof) at
least five Business Days prior to the earlier of (i) the date the
Distributions on the Trust Securities would have been payable except for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities
exchange or to holders of Capital Securities of the record date or the date
such Distributions are payable, but in any event not less than five Business
Days prior to such record date. The Debenture Trustee shall give notice of
the Company's election to begin or extend a new Extension Period to the
holders of the Capital Securities. There is no limitation on the number of
times that the Company may elect to begin an Extension Period.
Special Event Prepayment
If a Special Event (as defined herein) shall occur and be continuing, the
Company may, at its option, prepay the Subordinated Debentures in whole (but
not in part) within 90 days of the occurrence of such Special Event, at a
prepayment price (the "Special Event Prepayment Price") equal to the
greater of (i) 100% of the principal amount of such Subordinated Debentures
or (ii) the sum, as determined by a Quotation Agent, of the present values of
the principal amount of such Subordinated Debentures, together with scheduled
payments of interest from the prepayment date to the Stated Maturity Date, in
each case discounted to the prepayment date on a semi-annual basis (assuming
a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury
Rate, plus, in each case, accrued interest thereon to the date of prepayment.
A "Special Event" means a Tax Event or an Investment Company Event (each
as defined herein), as the case may be.
A "Tax Event" means that the Administrative Trustees shall have received
an opinion of 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 March 31, 1997, there is more than an insubstantial risk that (i) the
Trust is, or as a result of the issuance of the Exchange Securities would be
or will be within 90 days of the date of such opinion, subject to United
States federal income tax with respect to income received or accrued on the
Subordinated Debentures or any of the Exchange Securities, (ii) interest
payable by the Company on the Subordinated Debentures or any of the Exchange
Securities is not, or within 90 days of the date of such opinion will not be,
deductible by the Company, in whole or in part, for United States federal
income tax purposes, or (iii) the Trust is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
An "Investment Company Event" means that the Administrative Trustees
shall have received an opinion from counsel to the Company experienced in
such matters to the effect that, as a result of the occurrence of a change in
law or regulation or a written change (including any announced prospective
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 an insubstantial risk that
the Trust is or will be considered an "investment company" which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes or would become effective on or after March 31, 1997.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Federal Reserve Board and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Stated Maturity Date (if
no maturity is within three months before or after the Stated Maturity Date,
yields for the two published maturities most closely corresponding to the
Stated Maturity Date shall be interpolated and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding to the nearest month) or (ii) if such release (or any
successor release) is not published during the week preceding the calculation
date or does not contain such yields, the rate per annum equal to the semi-
annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Comparable Treasury Price
for such prepayment date, in each case calculated on the third Business Day
preceding the prepayment date, plus in each case (a) 1.05% if such prepayment
date occurs on or prior to April 2, 1998 and (b) .50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Stated
Maturity Date of the Subordinated Debentures to be prepaid that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity with the Stated Maturity Date of the Subordinated Debentures. If no
United States Treasury security has a maturity which is within a period from
three months before to three months after the Stated Maturity Date, the two
most closely corresponding United States Treasury securities shall be used as
the Comparable Treasury Issue, and the Adjusted Treasury Rate shall be
interpolated or extrapolated on a straight-line basis, rounding to the
nearest month using such securities.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company. "Reference Treasury Dealer" means: (i) Merrill Lynch Government
Securities, Inc. and their respective successors; provided, however, that if
the foregoing shall cease to be a primary U.S. Government securities dealer
in New York City (a "Primary Treasury Dealer"), the Company shall
substitute therefor another Primary Treasury Dealer; and (ii) any other
Primary Treasury Dealer selected by the Debenture Trustee after consultation
with the Company.
"Comparable Treasury Price" means, with respect to any prepayment date,
(i) the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor
release) is not published or does not contain such prices on such Business
Day, (a) the average of the five Reference Treasury Dealer Quotations for
such prepayment date, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (b) if the Debenture Trustee obtains
fewer than three such Reference Treasury Dealer Quotations, the average of
all such quotations.
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on
the outstanding Capital Securities and Common Securities shall not be reduced
as a result of any additional taxes, duties and other governmental charges to
which the Trust has become subject as a result of a Tax Event. If the Trust
is required to pay any additional taxes, duties or other governmental charges
as a result of a Tax Event, the Company will pay as additional amounts on the
Subordinated Debentures the Additional Sums.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined
by the Debenture Trustee, of the bid and asked prices for the Comparable
Treasury Issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Debenture Trustee by such Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third Business Day preceding
such prepayment date.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the prepayment date to each holder of Subordinated Debentures
to be prepaid at its registered address. Unless the Company defaults in
payment of the prepayment price, on and after the prepayment date interest
ceases to accrue on such Subordinated Debentures called for prepayment.
Certain Covenants of the Company
The Company covenanted that it will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common,
preferred and preference stock), (ii) make any payment of principal, interest
or premium, if any, on or repay, repurchase or redeem any debt securities of
the Company (including any Other Debentures) that rank pari passu with or
junior in right of payment to the Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by the Company of any
securities of any subsidiary of the Company (including Other Guarantees) if
such guarantee ranks pari passu with or junior in right of payment to the
Subordinated Debentures (other than (a) dividends or distributions in shares
of or options, warrants or rights to subscribe for or purchase shares of,
common stock of the Company, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights plan, or the issuance of
stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto, (c) payments under the Guarantee, (d) as a
direct result of, and only to the extent required in order to avoid the
issuance of fractional shares of capital stock following, a reclassification
of the Company's capital stock or the exchange or conversion of one class or
series of the Company's capital stock for another class or series of the
Company's capital stock or pursuant to an acquisition in which fractional
shares of the Company's capital stock would otherwise be issued, (e) the
purchase of fractional interests in shares of the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, and (f) purchases of common stock
related to the issuance of common stock or rights under any benefit plan for
directors, officers, agents or employees of the Company or its subsidiaries
or any of the Company's dividend reinvestment or director, officer, agent or
employee stock purchase plans) if at such time (1) a Debenture Event of
Default shall have occurred and be continuing, or would occur upon the taking
of any action specified in clauses (i) through (iii) above, (2) there shall
have occurred any event of which the Company has actual knowledge that (a)
with the giving of notice or the lapse of time, or both, would constitute a
Debenture Event of Default and (b) in respect of which the Company shall not
have taken reasonable steps to cure, (3) the Company shall be in default with
respect to its payment of any obligations under the Guarantee or (4) the
Company shall have given notice of its election of an Extension Period or any
extension thereof, as provided in the Indenture or an extension period with
respect to any Other Debentures, and shall not have rescinded such notice,
and such Extension Period, or any extension thereof, or extension period with
respect to Other Debentures, shall be continuing.
The Company also covenanted (i) to directly maintain 100 percent ownership
of the Common Securities of the Trust; provided, however, that any permitted
successor of the Company under the Indenture may succeed to the Company's
ownership of the Common Securities, (ii) to use its reasonable efforts to
cause the Trust (a) to remain a statutory business trust, except in
connection with the distribution of Subordinated Debentures to the holders of
Trust Securities in liquidation of the Trust, the redemption of all of the
Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of the Trust, and (b) to
otherwise continue to be treated as a grantor trust and not to be treated as
an association taxable as a corporation or a partnership for United States
federal income tax purposes and (iii) to use its reasonable efforts to cause
each holder of Trust Securities to be treated as owning an undivided
beneficial interest in the Subordinated Debentures.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Subordinated Debentures constitutes a "Debenture
Event of Default" (whatever the reason for such Debenture Event of Default
and whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental body):
(i) failure for 30 days to pay any interest on the Subordinated Debentures
or any Other Debentures, when due (subject to the deferral of any due date in
the case of an Extension Period or an extension period with respect to Other
Debentures); or
(ii) failure to pay any principal or premium, if any, on the Subordinated
Debentures or any Other Debentures when due whether at maturity, upon
redemption, by declaration of acceleration of maturity or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Subordinated Debentures may
declare the principal due and payable immediately upon a Debenture Event of
Default. The holders of a majority in aggregate outstanding principal amount
of the Subordinated Debentures may annul such declaration and waive the
default if the default (other than the nonpayment of the principal of the
Subordinated Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest
and principal due otherwise than by acceleration has been deposited with the
Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debentures affected thereby may, on behalf of the holders of all
the Subordinated Debentures, waive any past default except a default in the
payment of principal of or premium, if any, or interest on the Subordinated
Debentures (unless such default has been cured and a sum sufficient to pay
all matured installments of interest and premium, if any, and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee)
or a default in respect of a covenant or provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Subordinated Debenture.
The Indenture requires the annual filing by the Company with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of a
Debenture Event of Default from the holders of the Subordinated Debentures
(except a Debenture Event of Default in payment of principal of, or of
interest or premium on, the Subordinated Debentures) if the Debenture Trustee
considers it in the interest of the holders to do so.
Enforcement of Certain Rights by Holders of Capital Securities
Pursuant to the Declaration, if a Debenture Event of Default shall have
occurred and be continuing and shall be attributable to the failure of the
Company to pay interest or premium, if any, on or principal of the
Subordinated Debentures on the due date, a holder of Capital Securities may
institute a Direct Action. The Company may not amend the Indenture to remove
the foregoing right to bring a Direct Action without the prior written
consent of the holders of all of the Capital Securities. Notwithstanding any
payments made to a holder of Capital Securities by the Company in connection
with a Direct Action, the Company shall remain obligated to pay the principal
of or premium, if any, or interest on the Subordinated Debentures, and the
Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent
of any payments made by the Company to such holder in any Direct Action.
The holders of the Capital Securities are not able to exercise directly any
remedies, other than those set forth in the preceding paragraph, available to
the holders of the Subordinated Debentures. See "Description of the Capital
Securities - Events of Default; Notice".
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Company shall not consolidate with or merge
with or into any other Person or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as
an entirety to any Person, unless: (i) the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition is a
corporation, trust or partnership organized under the laws of the United
States or any State or the District of Columbia, and such successor expressly
assumes the Company's obligations on the Subordinated Debentures; (ii)
immediately before and immediately after giving effect thereto, no Debenture
Event of Default, and no event which, after notice or lapse of time or both,
would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met. This provision shall only apply to a merger or consolidation in
which the Company is not the surviving corporation and to conveyances, leases
and transfers by the Company as transferor or lessor of all or substantially
all of the properties and assets of the Company to any Person.
Upon any consolidation by the Company with or merger by the Company into
any other corporation or any sale, assignment, conveyance, transfer,
disposition or lease of all or substantially all of the properties and assets
of the Company as an entirety to any Person in accordance with the conditions
listed in the immediately preceding paragraph, the successor Person formed by
such consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the
Indenture, and in the event of any such conveyance or transfer, the Company,
except in the case of a lease, shall be discharged of all obligations and
covenants under the Indenture and the Subordinated Debentures and may be
dissolved and liquidated.
The general provisions of the Indenture do not afford holders of the
Subordinated Debentures protection in the event of a highly leveraged or
other transaction involving the Company that may adversely affect holders of
the Subordinated Debentures.
Additionally, state insurance holding company statutes applicable to the
Company due to its insurance company subsidiaries generally provide that no
person may acquire control of the Company, and thus indirect control of its
insurance subsidiaries, without prior approval of the appropriate insurance
regulators. Generally, any person who acquires beneficial ownership of 10% or
more of the outstanding shares of the Company's Common Stock would be
presumed to have acquired such control, unless the appropriate insurance
regulators upon application determine otherwise.
Modification of the Indenture
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Subordinated Debentures, amend, waive or supplement
the Indenture for specified purposes, including, among other things, curing
ambiguities, defects or inconsistencies (provided that any such action does
not materially adversely affect the interest of the holders of Subordinated
Debentures). The Indenture contains provisions permitting the Company and the
Debenture Trustee, with the consent of the holders of a majority in principal
amount of the Subordinated Debentures, to modify the Indenture in a manner
affecting the rights of the holders of Subordinated Debentures; provided that
no such modification may, without the consent of the holders of each
outstanding Subordinated Debenture so affected, (i) change the Stated
Maturity Date, reduce the principal amount of the Subordinated Debentures or
reduce the rate or extend the time of payment of interest thereon or (ii)
reduce the percentage of principal amount of Subordinated Debentures the
holders of which are required to consent to any such modification of the
Indenture.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Subordinated
Debentures not previously delivered to the Debenture Trustee for cancellation
(i) have become due and payable or (ii) will become due and payable at
maturity or upon redemption within one year, and the Company deposits or
causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation, for the principal and premium, if any,
and interest to the date of the deposit or to the Stated Maturity Date, as
the case may be, then the Indenture will cease to be of further effect
(except as to the Company's obligations to pay all other sums due pursuant to
the Indenture and to provide the officers' certificates and opinions of
counsel described therein), and the Company will be deemed to have satisfied
and discharged the Indenture.
Subordination
In the Indenture, the Company has covenanted and agreed that any
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, or
similar proceedings, the holders of Senior Indebtedness will first be
entitled to receive payment in full in cash or other satisfactory
consideration of all amounts due or to become due on or in respect of such
Senior Indebtedness before the holders of Subordinated Debentures will be
entitled to receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full in cash
or other satisfactory consideration of all such Senior Indebtedness before
the holders of Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Subordinated Debentures.
No payments on account of principal or premium, if any, or interest, if
any, in respect of the Subordinated Debentures may be made if there shall
have occurred and be continuing a default in any payment with respect to
Senior Indebtedness, or in the event the acceleration of the maturity thereof
has been or would be permitted with notice or the passage of time, or if any
judicial proceeding shall be pending with respect to any such default until
all amounts due or to become due on the Senior Indebtedness are paid in full
in cash or other satisfactory consideration.
"Indebtedness" shall mean (i) any obligation of, or any obligation
guaranteed by, the Company for which the Company is responsible or liable as
obligor or otherwise including principal, premium, and interest (whether
accruing before or after filing of any petition in bankruptcy or any similar
proceedings by or against the Company and whether or not allowed as a claim
in bankruptcy or similar proceedings) for (A) indebtedness of the Company for
money borrowed, (B) indebtedness evidenced by securities, bonds, debentures,
notes or other similar written instruments, (C) any deferred obligation for
the payment of the purchase price or conditional sale obligation of property
or assets acquired other than in the ordinary course of business, (D) all
obligations of the Company for the reimbursement of any letter of credit,
banker's acceptance, security purchase facility or similar credit
transaction, (E) all obligations of the Company under "keep-well"
agreements required by insurance regulators or (F) any obligation referred to
in (A) through (E) above of other persons secured by any lien on any property
or asset of the Company and (ii) all indebtedness of the Company for
obligations of the Company to make payment in respect of derivative products
such as interest and foreign exchange rate contracts, commodity contracts
(including future or options contracts), swap agreements, cap agreements,
repurchase and reverse repurchase agreements and similar arrangements,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred.
"Indebtedness Ranking on a Parity with the Subordinated Debentures" shall
mean (i) Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which specifically by
its terms ranks equally with and not prior to the Subordinated Debentures in
the right of payment upon the happening of the dissolution or winding-up or
liquidation or reorganization of the Company and (ii) Indebtedness
represented by the Other Debentures (see "Description of the Capital
Securities - Distributions" for definition of Other Debentures). The securing
of any Indebtedness, otherwise constituting Indebtedness Ranking on a Parity
with the Subordinated Debentures, shall not be deemed to prevent such
Indebtedness from constituting Indebtedness Ranking on a Parity with the
Subordinated Debentures.
"Indebtedness Ranking Junior to the Subordinated Debentures shall mean
any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which specifically by
its terms ranks junior to and not equally with or prior to the Subordinated
Debentures (and any other Indebtedness Ranking on a Parity with the
Subordinated Debentures) in right of payment upon the happening of the
dissolution or winding-up or liquidation or reorganization of the Company.
The securing of any Indebtedness, otherwise constituting Indebtedness Ranking
Junior to the Subordinated Debentures, shall not be deemed to prevent such
Indebtedness from constituting Indebtedness Ranking Junior to the
Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding on
the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Subordinated
Debentures or Indebtedness Ranking Junior to the Subordinated Debentures, and
any deferrals, renewals or extension of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued or entered into by the Company. As of December 31, 1996,
Senior Indebtedness of the Company aggregated approximately $204.6 million.
In addition, because the Company is a holding company, the Subordinated
Debentures are effectively subordinated to all existing and future
liabilities of the Company's subsidiaries which as of December 31, 1996 were
approximately $11.3 billion. See "Risk Factors - Holding Company Structure;
Structural Subordination and Leverage".
Restrictions on Transfer
The Old Subordinated Debentures are transferable only in blocks having an
aggregate principal amount of not less than $100,000. Transferability of the
New Subordinated Debentures acquired in accordance with the Exchange Offer
will not be so restricted.
Governing Law
The Indenture and the Subordinated Debentures are governed by, and
construed in accordance with, the internal laws of the State of New York.
Information Concerning the Debenture Trustee
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the
Trust Indenture Act. Subject to such provisions, the Debenture Trustee is
under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Subordinated Debentures, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debenture Trustee is not
required to expend or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the Debenture Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
DESCRIPTION OF THE GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Capital Securities for the benefit of
the holders from time to time of the Old Capital Securities. In the event the
Exchange Offer is consummated, the Company will exchange the New Guarantee
for the Old Guarantee. The New Guarantee Agreement has been qualified under
the Trust Indenture Act. The form and terms of the New Guarantee are
identical in all material respects to the form and terms of the Old
Guarantee, except that the New Guarantee has been registered under the
Securities Act. Accordingly, as the context may require, unless expressly
stated otherwise, "Guarantee" means the Old Guarantee and, in the event the
Exchange Offer is consummated, the New Guarantee. The First National Bank of
Chicago acts as Guarantee Trustee. This summary of certain provisions of the
Old Guarantee and the New Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the
provisions of the Old Guarantee and the New Guarantee, including the
definitions therein of certain terms, and the Trust Indenture Act. The
Guarantee Trustee will hold the New Guarantee for the benefit of the holders
of the New Capital Securities.
General
Under the New Guarantee the Company will irrevocably agree (and under the
Old Guarantee has agreed) to pay in full on a subordinated basis, to the
extent set forth herein, the Guarantee Payments (as defined below) to the
holders of the Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
Capital Securities, to the extent not paid by or on behalf of the Trust (the
''Guarantee Payments''), will be subject to the Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on Capital
Securities, to the extent the Trust has funds legally available therefor,
(ii) the Redemption Price with respect to any Capital Securities called for
redemption, to the extent that the Trust has funds legally available
therefor, or (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (unless the Subordinated Debentures are distributed
to holders of the Capital Securities), the lesser of (a) the aggregate
Liquidation Amount and all accumulated and unpaid Distributions on the
Capital Securities to the date of payment, to the extent that the Trust has
funds legally available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to holders of Capital Securities. The
Company's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Company to the holders of the Capital
Securities or by causing the Trust to pay such amounts to such holders.
The Guarantee ranks subordinate and junior in right of payment to all
Senior Indebtedness to the extent provided therein. See "- Status" below.
Because the Company is a holding company, the right of the Company to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that subsidiary, except to the extent the
Company may itself be recognized as a creditor of that subsidiary.
Accordingly, the Company's obligations under the Guarantee are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries, including policyholder liabilities, and claimants should look
only to the assets of the Company for payments thereunder. See "Description
of the Subordinated Debentures - General". The Guarantee does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Indebtedness, whether under the Indenture, any other
indenture that the Company may enter into in the future or otherwise.
The Company has, through the Guarantee, the Declaration, the Subordinated
Debentures and the Indenture, taken together, fully, irrevocably and
unconditionally guaranteed all of the Trust's obligations under the Capital
Securities. No single document standing alone or operating in conjunction
with fewer than all of the other documents constitutes such guarantee. It is
only the combined operation of these documents that has the effect of
providing a full, irrevocable and unconditional guarantee of the Trust's
obligations under the Capital Securities. See "Relationship Among the
Capital Securities, the Subordinated Debentures and the Guarantee".
Status
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior in right of payment to all Senior Indebtedness and
all other liabilities of the Company 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 Other Guarantees and 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 New Guarantee will rank pari passu with the Old Guarantee.
The Guarantee constitutes a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against
the Company to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will not be discharged except (i) by payment of the Guarantee
Payments in full to the extent not paid by the Trust or (ii) upon
distribution to the holders of the Trust Securities of the Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company. The
Company expects from time to time to incur additional indebtedness
constituting Senior Indebtedness.
Events of Default
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder.
Subject to certain limited exceptions, the holders of a majority in
Liquidation Amount of the Capital Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of
Capital Securities may institute a legal proceeding directly against the
Company to enforce the Guarantee Trustee's rights and the obligations of the
Company under the Guarantee, without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other person or entity.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with
all the conditions and covenants applicable to it under the Guarantee.
Certain Covenants of the Company
In the Guarantee, the Company covenanted that, so long as any Capital
Securities remain outstanding, if (a)(i) a Debenture Event of Default shall
have occurred and be continuing, or would occur upon the taking of any action
specified in clauses (x) through (z) below or (ii) there shall have occurred
any event of which the Company has actual knowledge that (A) is, or with the
giving of notice or the lapse of time, or both, would be, a Debenture Event
of Default and (B) in respect of which the Company shall not have taken
reasonable steps to cure, (b) the Company shall be in default with respect to
its payment of any obligations under the Guarantee or (c) the Company shall
have elected to exercise its right to extend the interest payment period
under the Indenture or with respect to any Other Debentures and such
extension shall be continuing, then the Company shall not (x) declare or pay
any dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock
(which includes common and preferred stock), (y) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company (including any Other Debentures) that rank
pari passu with or junior in right of payment to the Subordinated Debentures
or (z) make any guarantee payments with respect to any guarantee by the
Company of any securities of any subsidiary of the Company (including Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Subordinated Debentures (other than (a) dividends or
distributions in shares of or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholder's rights
plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (c) payments
under the Guarantee, (d) as a direct result of, and only to the extent
required in order to avoid the issuance of fractional shares of capital stock
following, a reclassification of the Company's capital stock or the exchange
or conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock or pursuant to an
acquisition in which fractional shares of the Company's capital stock would
otherwise be issued, (e) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged, and (f)
purchases of common stock related to the issuance of common stock or rights
under any of the Company's benefit plans for directors, officers, agents or
employees of the Company or its subsidiaries or any of the Company's dividend
reinvestment or director, officer, agent or employee stock purchase plans).
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Capital Securities (in which case no consent
will be required), the Guarantee may not be amended without the prior
approval of the holders of a majority of the Liquidation Amount of such
outstanding Capital Securities. The manner of obtaining any such approval
will be as set forth under "Description of Capital Securities - Voting Rights;
Amendment of the Declaration". All guarantees and agreements contained in
the Guarantee Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Capital Securities then outstanding.
Termination
The Guarantee will terminate (a) upon full payment of the applicable
Redemption Price of the Capital Securities or (b) upon liquidation of the
Trust, the full payment of amounts payable in accordance with the Declaration
or distribution of the Subordinated Debentures to the holders of the Trust
Securities. Notwithstanding the foregoing, the Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any
holder of Capital Securities issued by the Trust must restore payment of any
sums paid under such Capital Securities or the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of a default and after the
curing or waiving of all defaults that may have occurred with respect to the
Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee 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 Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Capital Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby.
The Company and certain of its subsidiaries may, from time to time, conduct
certain banking transactions with the Guarantee Trustee in the ordinary
course of business.
Governing Law
The Guarantee is governed by and construed in accordance with the internal
laws of the State of Iowa.
DESCRIPTION OF THE OLD SECURITIES
The forms and terms of the Old Securities are identical in all material
respects to the forms and terms of the New Securities, except that (i) the
Old Securities have not been registered under the Securities Act, are subject
to certain restrictions on transfer and are entitled to certain rights under
the Registration Rights Agreement (which rights will terminate upon
consummation of the Exchange Offer, except under limited circumstances); (ii)
the New Capital Securities will not contain the $100,000 minimum Liquidation
Amount transfer restriction or provide for any increase in the Distribution
rate thereon; and (iii) the New Subordinated Debentures will not contain the
$100,000 minimum aggregate principal amount transfer restriction or provide
for any increase in the interest rate thereon. The Old Securities provide
that, in the event that the Exchange Offer is not consummated on or prior to
June 21, 1997, or, in certain limited circumstances, in the event a shelf
registration statement (the "Shelf Registration Statement") with respect to
the resale of the Old Capital Securities is not declared effective on or prior
to September 30, 1997, then interest will accrue (in addition to the stated
interest rate on the Subordinated Debentures) at the rate of 0.25% per annum
on the principal amount of the Subordinated Debentures and Distributions will
accumulate (in addition to the stated Distribution rate on the Capital
Securities) at the rate of 0.25% per annum on the Liquidation Amount of the
Capital Securities, for the period from the occurrence of such event until such
time as the Exchange Offer is consummated or any required Shelf Registration
Statement is effective. The New Securities are not, and upon consummation of
the Exchange Offer the Old Securities will not be, entitled to any such
additional interest or Distributions. Accordingly, holders of Old Capital
Securities should review the information set forth under "Risk Factors -
Certain Consequences of a Failure to Exchange Old Capital Securities" and
"Description of the Capital Securities."
RELATIONSHIP AMONG THE CAPITAL SECURITIES, THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
Full and Unconditional Guarantee
Payments of Distributions and other amounts due on the Capital Securities
(to the extent the Trust has funds legally available for the payment of such
Distributions) are and will continue to be irrevocably guaranteed by the
Company as and to the extent set forth under "Description of the
Guarantee". Taken together, the Company's obligations under the Subordinated
Debentures, the Indenture, the Declaration and the Guarantee provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payments of
Distributions and other amounts due on the Capital Securities. No single
document standing alone or operating in conjunction with fewer than all of
the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Capital Securities. If and to the extent that the Company does not make the
required payments on the Subordinated Debentures, the Trust will not have
sufficient funds to make the related payments, including Distributions, on
the Capital Securities. The Guarantee will not cover any such payment when
the Trust does not have sufficient funds legally available therefor. In such
event, the remedy of a holder of Capital Securities is to institute a Direct
Action.
The Guarantee constitutes an unsecured obligation of the Company and ranks
(i) subordinate and junior in right of payment to all Senior Indebtedness and
all other liabilities of the Company 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 Other Guarantees and 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.
Sufficiency of Payments
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Capital Securities, primarily
because: (i) the aggregate principal amount or Special Event Prepayment Price
of the Subordinated Debentures equals the sum of the Liquidation Amount or
Redemption Price, as applicable, of the Capital Securities and Common
Securities; (ii) the interest rate and interest and other payment dates on
the Subordinated Debentures matches the Distribution rate and Distribution
and other payment dates for the Trust Securities; (iii) the Company shall pay
for all and any costs, expenses and liabilities of the Trust except the
Trust's obligations to holders of Trust Securities under such Trust
Securities; and (iv) the Declaration provides that the Trust is not
authorized to engage in any activity that is not consistent with the limited
purposes thereof.
Enforcement of Rights of Holders of Capital Securities
If the Guarantee Trustee fails to enforce the Guarantee, a holder of any
Capital Security may institute a legal proceeding against the Company to
enforce its rights under the Guarantee without first instituting a legal
proceeding against the Guarantee Trustee, the Trust or any other person or
entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture provide that no payments may be
made in respect of the Subordinated Debentures until such Senior Indebtedness
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on Subordinated Debentures
constitutes an Event of Default under the Declaration.
Limited Purpose of the Trust
The Capital Securities represent preferred beneficial interests in the
Trust, and the Trust exists for the sole purpose of issuing and selling the
Trust Securities, using the proceeds from the sale of the Common Securities
and the Old Capital Securities to acquire the Old Subordinated Debentures and
exchanging the Old Subordinated Debentures for New Subordinated Debentures in
the Exchange Offer pursuant to the Indenture, and engaging in only those
activities necessary, advisable or incidental thereto (such as registering
the transfer of Capital Securities).
Rights Upon Termination
Unless the Subordinated Debentures are distributed to holders of the Trust
Securities, upon any voluntary or involuntary termination and liquidation of
the Trust, the holders of the Trust Securities are entitled to receive, out
of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of the Capital Securities - Liquidation of the Trust and
Distribution of Subordinated Debentures". Upon any voluntary or involuntary
liquidation or bankruptcy of the Company, the Property Trustee, as holder of
the Subordinated Debentures, would be a subordinated creditor of the Company,
subordinated in right of payment to all Senior Indebtedness as set forth in
the Indenture. Since the Company is the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Trust (other
than the Trust's obligations to the holders of its Trust Securities), the
positions of a holder of Capital Securities and a holder of Subordinated
Debentures relative to other creditors and to stockholders of the Company in
the event of liquidation or bankruptcy of the Company are expected to be
substantially the same.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
General
In the opinion of Nyemaster, Goode, McLaughlin, Voigts, West, Hansell &
O'Brien, P.C., Des Moines, Iowa, special counsel to the Company and the Trust
("Tax Counsel"), the following is a summary of certain of the material
United States federal income tax consequences of the purchase, ownership and
disposition of Capital Securities held as capital assets by a holder who
purchased Old Capital Securities upon initial issuance. 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
Capital Securities as a position in a "straddle," as part of a "synthetic
security," "hedge," "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 Capital 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 Capital Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), 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. The opinion of Tax Counsel is based on current law, certain
assumptions set forth therein, certain representations from the Company and
certain other information, data, documentation and materials Tax Counsel
deems necessary. An opinion of counsel is not binding on the Internal Revenue
Service (the "IRS") and, therefore, no assurance can be given that such an
opinion will not be challenged by the IRS or would be sustained by a court if
challenged.
Classification of the Subordinated Debentures
In connection with the issuance of the Old Subordinated Debentures, Tax
Counsel has rendered (and in connection with the issuance of the New
Subordinated Debentures 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), and based on certain facts and
assumptions contained in such opinion, the Old Subordinated Debentures were
and the New Subordinated Debentures will be classified for United States
federal income tax purposes as indebtedness of the Company.
Classification of the Trust
In connection with the issuance of the Old Capital Securities, Tax Counsel
has rendered (and in connection with the issuance of the New Capital
Securities will render) its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Declaration
and the Indenture (and certain other documents), and based on certain facts
and assumptions contained in such opinion, the Trust is and will continue to
be classified for United States federal income tax purposes as a grantor
trust and not as a partnership or an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Capital Securities generally is and will continue to be considered the owner
of an undivided interest in the Subordinated Debentures, and each holder is
and will continue to be required to include in its gross income any interest
(or OID accrued) with respect to its allocable share of those Subordinated
Debentures.
Exchange of Capital Securities
The exchange of Old Capital Securities for New Capital Securities should
not be a taxable event to holders for federal income tax purposes. The
exchange of Old Capital Securities for New Capital Securities pursuant to the
Exchange Offer should not be treated as an "exchange" for federal income tax
purposes because the New Capital Securities should not be considered to
differ materially in kind or extent from the Old Capital Securities and
because the exchange will occur by operation of the terms of the Old Capital
Securities and the Registration Rights Agreement. If, however, the exchange
of the Old Capital Securities for the New Capital Securities were treated as
an exchange for federal income tax purposes, such exchange should constitute
a non-taxable recapitalization for federal income tax purposes. Accordingly,
the New Capital Securities should have the same issue price as the Old
Capital Securities, and a holder should have the same adjusted tax basis and
holding period in the New Capital Securities as the holder had in the Old
Capital Securities immediately before the exchange. In addition, the holders
of Capital Securities will not recognize taxable gain or loss as a result of
the exchange of the Old Subordinated Debentures for the New Subordinated
Debentures or the exchange of the Old Guarantee for the New Guarantee.
Interest Income and Original Issue Discount
Under recently issued Treasury regulations (the "Regulations") applicable
to debt instruments issued on or after August 13, 1996, a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Company
believes that the likelihood of its exercising its option to defer payments
of interest is "remote" since, among other things, exercising that option
would prevent the Company from declaring dividends on any class of its equity
securities. Accordingly, the Company intends to take the position, based on
the advice of Tax Counsel, that the Subordinated Debentures will not be
considered to be issued with OID and, accordingly, stated interest on the
Subordinated Debentures generally will be taxable to a holder as ordinary
income at the time it is paid or accrued in accordance with such holder's
method of accounting.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest, the Subordinated Debentures would at that time be
treated as issued with OID, and all stated interest on the Subordinated
Debentures would thereafter be treated as OID as long as the Subordinated
Debentures remain outstanding. In such event, all of a holder's taxable
interest income with respect to the Subordinated Debentures would thereafter
be accounted for on an economic accrual basis regardless of such holder's
method of tax accounting, and actual distributions of stated interest would
not be reported as taxable income. The amount of OID that accrues in any
month will approximately equal the amount of interest that accrues in that
month at the stated interest rate. Consequently, a holder of Capital
Securities would be required to include in gross income OID even though the
Company would not make actual cash payments during an Extension Period.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities constitutes interest or OID,
corporate holders of the Capital Securities are not entitled to a dividends-
received deduction with respect to any income recognized with respect to the
Capital Securities.
Market Discount and Premium
Holders that did not acquire their interest in the Capital Securities
pursuant to an acquisition of Old Capital Securities on their original issue
at their original offering price or pursuant to an exchange of such Old
Capital Securities for New Capital Securities pursuant to the Exchange Offer
may be considered to have acquired their undivided interest in the
Subordinated Debentures with market discount, amortizable bond premium or
acquisition premium as such terms 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 Capital Securities.
Receipt of Subordinated Debentures or Cash Upon Liquidation of the Trust
The Company has the right at any time to liquidate the Trust and cause the
Subordinated Debentures to be distributed to the holders of the Trust
Securities. Under current law, such a distribution, for United States federal
income tax purposes, would be treated as a nontaxable 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 Capital
Securities. A holder's holding period in the Subordinated Debentures so
received in liquidation of the Trust would include the period during which
the Capital Securities were held by such holder. If, however, the Trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of its dissolution, the distribution of
the Subordinated Debentures may constitute a taxable event to holders of
Capital Securities.
Under certain circumstances described herein (see "Description of the
Capital Securities"), the Subordinated Debentures may be redeemed for cash
and the proceeds of such redemption distributed to holders in redemption of
their Capital Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition
of the redeemed Capital Securities, and a holder could recognize gain or loss
as if it sold such redeemed Capital Securities for cash. See "- Sales of
Capital Securities" below.
Sales of Capital Securities
A holder that sells Capital Securities (including a redemption of Capital
Securities either on the Stated Maturity Date or upon the occurrence of a
Special Event) will recognize gain or loss equal to the difference between
its adjusted tax basis in the Capital Securities and the amount realized on
the sale of such Capital Securities (for these purposes, the amount realized
on the sale of a Capital Security does not include any amount attributable to
accrued interest, which will be taxable as such unless previously taken into
account). A holder's adjusted tax basis in the Capital Securities generally
will be its initial purchase price increased by OID (if any) previously
includable in such holder's gross income to the date of disposition and
decreased by payments (other than stated interest that constitutes ordinary
income at the time it is paid or accrued) received on the Capital Securities.
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 Capital Securities have been held
for more than one year. 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 treated as a
foreign corporation, a non-resident alien individual, a foreign partnership,
or a non-resident fiduciary of a foreign estate or a foreign trust under
United States federal income tax rules.
Under present United States federal income tax law: (i) payments by the
Trust or any of its Paying Agents to any holder of a Capital 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
Capital Security does not actually or constructively own 10 percent 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 Capital Security is not a
controlled foreign corporation that is related to the Company through stock
ownership, within the meaning of the Code, and (c) either (A) the beneficial
owner of the Capital Security certifies to the 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 Capital
Security in such capacity, certifies to the 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 the Trust or its agent with a copy thereof;
and (ii) a United States Alien Holder of a Capital Security generally will
not be subject to United States federal withholding tax on any gain realized
upon the sale or other disposition of a Capital Security.
Proposed Tax Legislation
On February 6, 1997, the Proposed Legislation was released. The Proposed
Legislation would, among other things, generally deny corporate issuers a
deduction for interest in respect of certain debt obligations, such as the
Subordinated Debentures, issued on or after the date of first committee
action if such debt obligations have a maximum term in excess of fifteen
years and are not shown as indebtedness on the issuer's applicable
consolidated balance sheet. The Proposed Legislation is similar to
legislation proposed by President Clinton in 1996. The Proposed Legislation
contains an effective date provision making it applicable to debentures
issued prior to the first date of any committee action. The Subordinated
Debentures should be considered as having been issued on April 3, 1997, at
which time neither of the tax-writing committees of Congress had acted upon
the Proposed Legislation. Thus, if the Proposed Legislation were enacted with
the proposed effective date, such legislation would not apply to the
Subordinated Debentures. There can be no assurance, however, that such
effective date will be incorporated into the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of the Company to deduct the interest
payable on the Subordinated Debentures, which could give rise to a Tax Event,
thereby permitting the Company to cause a redemption of the Subordinated
Debentures or a distribution of the Subordinated Debentures in liquidation of
the Trust as described more fully under ''Description of the Subordinated
Debentures - Special Event Prepayment.''
Information Reporting to Holders
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
Additional Interest
The Company does not anticipate that Additional Interest or Additional
Distributions will be paid. However, if Additional Interest or Additional
Distributions are paid, they will be taxable to the holder as ordinary income
(possibly as interest income) in accordance with the holder's method of
accounting for tax purposes. At such time, there may be a deemed reissuance
of Subordinated Debentures for federal income tax purposes which deemed
reissuance may result in OID with respect to the Subordinated Debentures.
Backup Withholding
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
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 CAPITAL 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.
ERISA CONSIDERATIONS
The Company, the obligor with respect to the Subordinated Debentures held
by the Trust, and its affiliates and the Property Trustee may be considered a
"party in interest" (within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many
employee benefit plans ("Plans") that are subject to ERISA. The purchase
and/or holding of Capital Securities by a Plan that is subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975 of the Code (including individual retirement
arrangements and other plans described in Section 4975(e)(1) of the Code) and
with respect to which the Company, the Property Trustee or any affiliate is a
service provider (or otherwise is a party in interest or a disqualified
person) may constitute or result in a prohibited transaction under ERISA or
Section 4975 of the Code, unless such Capital Securities are acquired
pursuant to and in accordance with an applicable exemption, such as
Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for
certain transactions determined by an independent qualified professional
asset manager), PTCE 91-38 (an exemption for certain transactions involving
bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance companies pooled separate accounts), PTCE 95-
60 (an exemption for transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exemption for certain transactions determined by
an in-house asset manager). In addition, a Plan fiduciary considering the
purchase of Capital Securities should be aware that the assets of the Trust
may be considered "plan assets" for ERISA purposes. In such event, service
providers with respect to the assets of the Trust may become parties in
interest or disqualified persons with respect to investing Plans, and any
discretionary authority exercised with respect to the Subordinated Debentures
by such persons could be deemed to constitute a prohibited transaction under
ERISA or the Code. In order to avoid such prohibited transactions, each
investing Plan, by purchasing the Capital Securities, will be deemed to have
directed the Trust to invest in the Subordinated Debentures and to have
appointed the Property Trustee.
Holders of the Old Capital Securities who acquired the Old Capital
Securities with assets of any Plan should consult with their ERISA counsel
prior to tendering Old Capital Securities in the Exchange Offer.
PLAN OF DISTRIBUTION
The Company and the Trust will require each broker-dealer who tenders,
pursuant to the Exchange Offer, Old Capital Securities that were acquired for
its own account as the result of market-making activities or other trading
activities to acknowledge that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of New
Capital Securities received in exchange for such Old Capital Securities
pursuant to the Exchange Offer. The Company and the Trust believe that
Participating Broker-Dealers may fulfill their prospectus delivery
requirement in connection with resales of New Capital Securities received in
exchange for Old Capital Securities that were acquired by any such
Participating Broker-Dealer for its own account as a result of market-making
activities or other trading activities with this Prospectus, as it may be
amended or supplemented from time to time, during the 90-day period referred
to below. The Company has agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-
Dealer in connection with resales of such New Capital Securities for a period
ending 90 days after the Expiration Date (subject to extension under certain
limited circumstances described herein) or, if earlier, when all such New
Capital Securities have been disposed of by such Participating Broker-Dealer.
See "The Exchange Offer - Resales of New Capital Securities."
The Company will not receive any cash or other proceeds from the issuance
of the New Capital Securities offered hereby. New Capital Securities received
by broker-dealers for their own accounts in connection with the Exchange
Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at negotiated prices. Any such resale may
be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Capital Securities.
Any broker-dealer that resells New Capital Securities that were received by
it for its own account in connection with the Exchange Offer and any broker
or dealer that participates in a distribution of such New Capital Securities
may be deemed to be an "underwriter" within the meaning of the Securities
Act, and any profit on any such resale of New Capital Securities and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the New Capital
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, P.A., Wilmington, Delaware, special Delaware counsel to the Company.
The validity of the New Subordinated Debentures, the New Guarantee and
certain matters relating thereto, including United States federal income tax
matters, will be passed upon on behalf of the Company and the Trust by
Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, P.C., Des
Moines, Iowa.
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, 1996 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.
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No dealer, salesperson or other individual has been authorized to give any
information or make any representations, other than those contained or
incorporated by reference in this Prospectus in connection with the offer
made by this Prospectus and, if given or made, such other information or
representations must not be relied upon as having been authorized by
Equitable of Iowa Companies, Equitable of Iowa Companies Capital Trust II or
the Initial Purchaser. Neither the delivery of this Prospectus nor any sale
made hereunder and thereunder shall under any circumstances create an
implication that there has been no change in the affairs of Equitable of Iowa
Companies or Equitable of Iowa Companies Capital Trust II since the date
hereof. This Prospectus does not constitute an offer or solicitation by
anyone in any state in which such offer or solicitation is not authorized or
in which the person making such offer or solicitation is not qualified to do
so or to anyone to whom it is unlawful to make such offer or solicitation.
___________________
TABLE OF CONTENTS
Available Information EQUITABLE OF IOWA
Incorporation of Certain COMPANIES
Documents by Reference CAPITAL TRUST II
Summary
Risk Factors
The Trust OFFER TO EXCHANGE ITS
The Company 8.424% SERIES B CAPITAL
Use of Proceeds from Sale of SECURITIES WHICH HAVE BEEN
the Old Capital Securities REGISTERED UNDER THE
Ratio of Earnings to Fixed SECURITIES ACT OF 1933 FOR
Charges ANY AND ALL OF ITS OUTSTANDING
Capitalization of the Company 8.424% SERIES A CAPITAL SECURITIES
Summary Financial Information
The Exchange Offer (Liquidation Amount $1,000
Description of the Capital per Capital Security)
Securities fully and unconditionally guaranteed,
Description of the Subordinated as described herein, by
Debentures
Description of the Guarantee
Description of the Old EQUITABLE OF IOWA
Securities COMPANIES
Relationship Among the Capital _________
Securities, the Subordinated
Debentures and the Guarantee PROSPECTUS
Certain Federal Income Tax __________
Considerations
ERIS Considerations May 7, 1997
Plan of Distribution
Legal Matters
Experts
UNTIL SEPTEMBER 4, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENT OR SUBSCRIPTIONS.
