<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1995
REGISTRATION NO. 33-59559
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
COUNTRYWIDE CREDIT INDUSTRIES, INC.
COUNTRYWIDE FUNDING CORPORATION
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
---------------
DELAWARE NEW YORK
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
13-2641992 13-2631719
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
155 NORTH LAKE AVENUE
PASADENA, CA 91101
(818) 304-8400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
DAVID S. LOEB
PRESIDENT AND CHAIRMAN OF THE BOARD
COUNTRYWIDE CREDIT INDUSTRIES, INC.
AND DIRECTOR
COUNTRYWIDE FUNDING CORPORATION
155 NORTH LAKE AVENUE
PASADENA, CA 91101
(818) 304-8400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
KENNETH R. BLACKMAN EDWARD J. FINE
FRIED, FRANK, HARRIS, SHRIVER & BROWN & WOOD
JACOBSON ONE WORLD TRADE CENTER
ONE NEW YORK PLAZA NEW YORK, NEW YORK 10048
NEW YORK, NEW YORK 10004 (212) 839-5300
(212) 859-8000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement, as
determined by market conditions.
---------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Amendment No. 2 to Registration Statement No. 33-59559 contains (1) a
preliminary prospectus supplement relating to shares of Common Stock of
Countrywide Credit Industries, Inc., (2) a preliminary prospectus supplement
relating to Medium-Term Notes, Series D of Countrywide Funding Corporation (the
"Medium-Term Notes"), (3) a preliminary base prospectus relating to the
securities registered, (4) a form of pricing supplement relating to Medium-Term
Notes that are Fixed Rate Notes, and (5) a form of pricing supplement relating
to Medium-Term Notes that are Floating Rate Notes.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS +
+SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY +
+NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 16, 1995
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED , 1995)
10,000,000 SHARES
LOGO COUNTRYWIDE (SM)
-----------------------
CREDIT INDUSTRIES, INC.
COMMON STOCK
-----------
The Company's Common Stock (the "Common Stock") is listed on the New York
Stock Exchange and the Pacific Stock Exchange under the trading symbol "CCR."
On June 15, 1995, the last reported sale price of the Common Stock on the New
York Stock Exchange was $21 per share.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------
THE ATTORNEY GENERAL OF THE STATE OF NEW
YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
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Total(3)................................ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $425,000.
(3) The Company has granted the several Underwriters an option to purchase up
to an additional 1,500,000 shares of Common Stock to cover over-allotments.
If all of such shares are purchased, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares
will be made in New York, New York on or about , 1995.
-----------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
-----------
The date of this Prospectus Supplement is , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC STOCK
EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSIONER OF
INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE COMMISSIONER OF
INSURANCE RULED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
----------------
S-2
<PAGE>
SUMMARY INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding the Company, has been selected from or is
based upon the detailed information appearing elsewhere or incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus, and is
qualified in its entirety by reference thereto, and, therefore, should be read
together therewith.
THE COMPANY
Countrywide Credit Industries, Inc. (the "Company" or "CCI") is a holding
company which through its principal subsidiary, Countrywide Funding Corporation
("CFC"), is engaged primarily in the mortgage banking business, and as such
originates, purchases, sells and services mortgage loans. The Company's
mortgage loans are principally first-lien mortgage loans secured by single-(one
to four) family residences. The Company also offers home equity loans both in
conjunction with newly produced first-lien mortgages and as a separate product.
During the years ended February 28, 1995 and 1994, the Company produced $27.9
billion and $52.5 billion of mortgage loans, respectively. The Company's
mortgage loan production during the months of March 1995 and April 1995 was
$2.1 billion and $2.1 billion, respectively, compared to $4.0 billion and $3.0
billion, respectively, during the months of March 1994 and April 1994. This
decrease in mortgage loan production was attributable principally to a higher
mortgage interest rate environment, resulting in a decrease of mortgage loan
activity. The Company services substantially all of the mortgage loans that it
originates or purchases. In addition, the Company purchases bulk servicing
contracts to service certain residential mortgage loans originated by other
lenders. The Company receives fee income for servicing mortgage loans.
Servicing mortgage loans includes collecting and remitting loan payments,
making advances when required, accounting for principal and interest, holding
custodial (impound) funds for payment of property taxes and hazard insurance,
making any physical inspections of the property, contacting delinquent
mortgagors, supervising foreclosures and property dispositions in the event of
unremedied defaults and generally administering the loans. At February 28, 1995
and 1994, the Company's servicing portfolio of mortgage loans aggregated
approximately $113.1 billion and $84.7 billion, respectively.
THE OFFERING
Unless otherwise indicated, the information in this Prospectus Supplement
assumes that the over-allotment option described in "Underwriting" is not
exercised.
Shares Offered...................... 10,000,000 shares of Common Stock.
Shares to be Outstanding After the
Offering (1)(2).................... 101,574,247 shares of Common Stock.
Use of Proceeds..................... The net proceeds from the sale of the
shares of Common Stock offered hereby
will be used for general corporate
purposes, which may include retirement of
indebtedness of the Company or CFC and
investment in servicing rights through
the current production of loans and the
bulk acquisition of contracts to service
loans. See "Use of Proceeds" herein.
New York Stock Exchange and Pacific
Stock Exchange Symbol.............. CCR
- --------
(1)Based on 91,574,247 shares outstanding as of June 14, 1995.
(2) Does not include 7,459,321 shares reserved for issuance upon exercise of
stock options of which options for 2,972,935 shares were exercisable as of
June 1, 1995.
S-3
<PAGE>
RECENT DEVELOPMENTS
UNAUDITED FIRST QUARTER EARNINGS
The Company's unaudited net earnings for the quarter ended May 31, 1995 were
$36.2 million, or $0.39 per fully diluted share. Net earnings for the quarter
ended May 31, 1994 were $33.7 million, or $0.37 per fully diluted share, while
net earnings for the quarter ended February 28, 1995 were $19.4 million, or
$0.21 per fully diluted share. As noted below, effective with the quarter ended
May 31, 1995 the Company has adopted Statement of Financial Accounting
Standards ("SFAS") No. 122, Accounting for Mortgage Servicing Rights. Since
SFAS No. 122 prohibits retroactive application, historical accounting results
have not been restated and, accordingly, the accounting results for the quarter
ended May 31, 1995 are not directly comparable to prior periods. Pre-tax
earnings from the Company's loan servicing activities amounted to $60.0 million
and $32.0 million for the quarters ended May 31, 1995 and 1994, respectively.
The increase of $28.0 million was principally due to an increase in the size of
the servicing portfolio, but was offset, in part, by a change of $10.0 million
in the Company's internal method of allocating overhead between its servicing
and production activities. For the quarter ended May 31, 1995, the pre-tax loss
from the Company's loan production activities was $1.5 million versus a pre-tax
profit of $20.9 million for the quarter ended May 31, 1994. The decrease of
$22.4 million was primarily attributed to lower loan production and increased
price competition caused by lower demand for mortgage loans, but was offset, in
part, by the effect of the adoption of SFAS No. 122 as discussed below and the
change in the Company's internal overhead allocation method discussed above.
IMPLEMENTATION OF NEW ACCOUNTING STANDARD
In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
which the Company adopted in the quarter ended May 31, 1995. SFAS No. 122
amended SFAS No. 65, Accounting for Certain Mortgage Banking Activities. The
overall impact on the Company's financial statements of adopting SFAS No. 122
was an increase in net earnings for the quarter ended May 31, 1995 of $8.9
million, or $0.10 per fully diluted share.
SFAS No. 122 requires the recognition of originated mortgage servicing rights
("OMSRs"), as well as purchased mortgage servicing rights ("PMSRs"), as assets
by allocating total costs incurred between the loan and the servicing rights
based on their relative fair values. Under SFAS No. 65, the cost of OMSRs was
not recognized as an asset and was charged to earnings when the related loan
was sold. The separate impact of recognizing OMSRs as assets in the Company's
financial statements in accordance with SFAS No. 122 for the quarter ended May
31, 1995 was an increase in net earnings of $18.6 million, or $0.20 per fully
diluted share.
With respect to PMSRs, SFAS No. 122 has a different cost allocation
methodology than SFAS No. 65. In contrast to a cost allocation based on
relative market value as set forth in SFAS No. 122, the prior requirement was
to allocate the costs incurred in excess of the market value of the loans
without the servicing rights to PMSRs. During the quarter ended May 31, 1995,
the separate impact of the application of SFAS No. 122 cost allocation method,
along with the effect of changes in market conditions, was to reduce PMSR
capitalization by $9.7 million, or $0.10 per fully diluted share.
SFAS No. 122 also requires that all capitalized mortgage servicing rights be
evaluated for impairment based on the excess of the carrying amount of the
mortgage servicing rights over their value. In addition to normal amortization
of the servicing assets amounting to $29.1 million, the Company reduced the
servicing assets by an additional $116.7 million of impairment during the
quarter ended May 31, 1995. The entire amount of such impairment was offset by
a net gain of $117.0 million in the Company's servicing hedge which is designed
to protect its servicing investment. The net gain includes unrealized gains of
$106.9 million and realized gains of $10.1 million from the sale of various
financial instruments that comprise the hedge. As a part of the adoption of
SFAS No. 122, the Company has revised its servicing hedge accounting policy,
effective with the quarter ended May 31, 1995, to adjust the basis of the
servicing assets for unrealized gains or losses in the derivative financial
instruments comprising the servicing hedge.
S-4
<PAGE>
OPERATING HIGHLIGHTS
The Company's loan servicing portfolio totaled $120.9 billion and $93.6
billion at May 31, 1995 and 1994, respectively. The Company's loan production
for the quarter ended May 31, 1995 was $6.8 billion compared to $9.4 billion
for the quarter ended May 31, 1994. The pipeline of loan applications in
process amounted to $4.3 billion at May 31, 1995 versus $4.4 billion at May 31,
1994.
RECENT INTEREST RATE DECLINES
Interest rates declined substantially during the month of May 1995. Average
daily applications increased 12% in May over the prior month to $172 million.
The pipeline of applications in process increased $226 million during the month
to $4.3 billion. However, lower interest rates may also contribute to increased
future prepayment activity in the Company's servicing portfolio. The decline in
interest rates also resulted in servicing hedge gains and higher future
prepayment estimates which contributed to the servicing asset impairment charge
described above.
AMENDMENT OF REVOLVING CREDIT FACILITY
In June 1995, the Company's mortgage banking subsidiary entered into an
amendment to its revolving credit facility. The borrowing limit under such
revolving credit facility was increased by $500 million to $3 billion and the
expiration date was extended from September 1997 to May 1998. In addition,
under the amendment, the aggregate amount of indebtedness that the subsidiary
is permitted to incur was increased from $3 billion to $4 billion.
USE OF PROCEEDS
The net proceeds to be received from the sale of shares of Common Stock
offered hereby are estimated to be approximately $ . The Company intends to
use such net proceeds for general corporate purposes, which may include
retirement of indebtedness of the Company or CFC and investment in servicing
rights through the current production of loans and the bulk acquisition of
contracts to service loans.
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
The Common Stock is listed on the New York Stock Exchange (the "NYSE") and
the Pacific Stock Exchange (Symbol: CCR). The following table sets forth on a
per share basis the high and low sales prices (as reported by the NYSE) for the
Common Stock, as adjusted to reflect stock dividends and stock splits:
<TABLE>
<CAPTION>
COMMON STOCK
-------------
HIGH LOW
------ ------
<S> <C> <C>
Year Ended February 28, 1994
First Quarter............................................. $23.25 $16.92
Second Quarter............................................ 22.17 17.25
Third Quarter............................................. 23.33 16.25
Fourth Quarter............................................ 19.08 15.25
Year Ended February 28, 1995
First Quarter............................................. $17.50 $13.33
Second Quarter............................................ 18.75 12.88
Third Quarter............................................. 15.38 13.63
Fourth Quarter............................................ 16.25 12.38
Current Fiscal Year Ending February 29, 1996
First Quarter............................................. $20.50 $15.50
Period June 1, 1995 through June 15, 1995................. 21.13 18.38
</TABLE>
On June 15, 1995, the last reported sale price of the Common Stock on the
NYSE was $21 per share.
The Company has declared and paid cash dividends on its Common Stock
quarterly since 1979, except that no cash dividend was declared in the fiscal
quarter ended February 28, 1982. For the fiscal years ended February 28, 1995
and 1994, the Company declared quarterly cash dividends, as adjusted for stock
dividends and stock splits, aggregating $0.32 per share and $0.29 per share,
respectively. On March 20, 1995, the Company declared a quarterly cash dividend
of $0.08 per share, paid April 17, 1995. On June 9, 1995, the Company declared
a quarterly cash dividend of $0.08 per share, payable July 17, 1995 to
shareholders of record on June 26, 1995.
S-5
<PAGE>
The ability of the Company to pay dividends in the future is limited by
various restrictive covenants in the debt agreements of the Company, the
earnings, cash position and capital needs of the Company, general business
conditions and other factors deemed relevant by the Company's Board of
Directors. The Company is prohibited under certain of its debt agreements,
including its guaranties of CFC's revolving credit facility, from paying
dividends on any capital stock (other than dividends payable in capital stock
or in stock rights), except that, so long as no event of default under such
agreements exists at the time, the Company may pay dividends in an aggregate
amount not to exceed the greater of: (i) the after-tax net income of the
Company, determined in accordance with generally accepted accounting
principles, for the fiscal year to the end of the quarter to which the
dividends relate and (ii) the aggregate amount of dividends paid on the Common
Stock during the immediately preceding year. The primary source of funds for
payments to stockholders by the Company is dividends received from its
subsidiaries. Accordingly, such payments by the Company in the future also
depend on various restrictive covenants in the debt obligations of its
subsidiaries, the earnings, cash position and capital needs of its
subsidiaries, as well as laws and regulations applicable to its subsidiaries.
Unless the Company and CFC each maintain specified minimum levels of net worth
and certain other financial ratios, dividends cannot be paid by the Company and
CFC, in compliance with certain of CFC's debt obligations (including CFC's
existing revolving credit facility). See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" in the accompanying Prospectus.
The Company has paid stock dividends and declared stock splits since 1978 as
follows: 50% in October 1978; 50% in July 1979; 15% in November 1979; 15% in
May 1980; 30% in November 1980; 30% in May 1981; 3% in February 1982; 2% in May
1982; 0.66% in April 1983; 1% in July 1983; 2% in April 1984; 2% in November
1984; 2% in June 1985; 2% in October 1985; 2% in March 1986; 3-for-2 split in
September 1986; 2% in April 1987; 2% in April 1988; 2% in October 1988; 2% in
November 1989; 3-for-2 split in July 1992; 5% in April 1993; and 3-for-2 split
in May 1994.
As of June 14, 1995, there were 2,572 shareholders of record of the Common
Stock.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of May
31, 1995 on an actual basis and as adjusted to give effect to the issuance of
the shares of Common Stock offered hereby:
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
-------------- -----------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Long-term debt................................ $ 1,450,780 $ 1,450,780
============== ==============
Preferred Stock--authorized, 1,500,000 shares
of $.05 par value; issued and outstanding,
none......................................... $ -- $ --
Common stockholders' equity
Common Stock--authorized, 240,000,000 shares
of $.05 par value; issued and outstanding,
91,561,027 and 103,061,027 shares (assuming
exercise of the Underwriters' over-allotment
option), as adjusted(1)..................... 4,578 5,153
Additional paid-in capital................... 609,971
Retained earnings............................ 358,562 358,562
-------------- --------------
Total common stockholders' equity.......... 973,111
-------------- --------------
Total Preferred Stock and common stockholders'
equity....................................... $ 973,111 $
============== ==============
</TABLE>
- --------
(1) Does not include 6,470,129 shares reserved for issuance upon exercise of
stock options of which options for 2,934,647 shares were exercisable as of
May 31, 1995.
S-6
<PAGE>
THE COMPANY
GENERAL
Countrywide Credit Industries, Inc. (the "Company" or "CCI") is a holding
company which through its principal subsidiary, Countrywide Funding Corporation
("CFC"), is engaged primarily in the mortgage banking business, and as such
originates, purchases, sells and services mortgage loans. The Company's
mortgage loans are principally first-lien mortgage loans secured by single-(one
to four) family residences. The Company also offers home equity loans both in
conjunction with newly produced first-lien mortgages and as a separate product.
The Company, through its other wholly owned subsidiaries, offers products and
services complementary to its mortgage banking business. A subsidiary of the
Company sells mortgage-backed securities, primarily on an odd-lot basis (i.e.,
in denominations between $25,000 and $1,000,000), to broker-dealers and also
sells subordinate interests in mortgage-backed securities evidencing interests
in whole mortgage loans to institutional investors. In addition, a subsidiary
of the Company receives fee income for managing the operations of CWM Mortgage
Holdings, Inc. ("CWM"), a real estate investment trust whose shares are traded
on the NYSE. CWM conducts real estate lending activities and has an affiliate
engaged in the operation of a jumbo and non-conforming mortgage loan conduit.
The Company also has a subsidiary which acts as an agent in the sale of
homeowners, fire, flood, earthquake, mortgage life and disability insurance to
CFC's mortgagors in connection with CFC's mortgage banking operations. Another
subsidiary of the Company earns fee income by brokering servicing contracts
owned by other mortgage lenders and loan servicers. The Company has recently
begun operating a title agent business through newly formed subsidiaries.
Unless the context otherwise requires, references to the "Company" herein shall
be deemed to refer to the Company and its consolidated subsidiaries.
MORTGAGE BANKING OPERATIONS
General
The principal sources of revenue from the Company's mortgage banking business
are (i) loan origination fees; (ii) gains from the sale of loans, if any; (iii)
interest earned on mortgage loans during the period that they are held by the
Company pending sale, net of interest paid on funds borrowed to finance such
mortgage loans; (iv) loan servicing fees; and (v) interest benefit derived from
the custodial balances associated with the Company's servicing portfolio.
Loan Production
The Company produces mortgage loans through three separate divisions. The
Company maintains a staff of central office quality control personnel that
performs audits of the loan production of the three divisions on a regular
basis. In addition, each division has implemented various procedures to control
the quality of loans produced, as described below. The Company believes that
its use of technology, benefits derived from economies of scale and a
noncommissioned sales force allow it to produce loans at a low cost relative to
its competition.
The Company's Consumer Markets Division (the "Consumer Markets Division")
originates loans through a nationwide network of retail branch offices and
direct contact with consumers. As of April 30, 1995, the Company had 196
Consumer Markets Division branch offices, 47 "lite" offices and three
processing support centers located in 41 states. The Company's branch offices
are each typically staffed by two to four employees and connected to the
Company's central office by a computer network. The Company's "lite" offices,
which are characterized by low operating costs, are each typically staffed by
two employees. Business is also solicited through telemarketing, advertising in
various forms of mass media, participation of branch
S-7
<PAGE>
management in local real estate-related business functions and extensive use of
direct mailings to real estate brokers and builders. Consumer Markets Division
personnel are not paid a commission on sales; however, they are paid a bonus
based on various factors, including branch profitability. The Company believes
that this approach allows it to originate loans at a comparatively low cost.
The Consumer Markets Division uses continuous quality control audits of loans
originated within each branch by branch management and quality control
personnel to monitor compliance with the Company's underwriting criteria.
During the year ended February 28, 1995, the Consumer Markets Division produced
an aggregate of $7.1 billion of mortgage loans.
Through its Wholesale Division (the "Wholesale Division"), the Company
originates loans through and purchases loans from mortgage loan brokers. As of
April 30, 1995, the Wholesale Division operated 56 branch offices and six
regional support centers in various parts of the country. Loans produced by the
Wholesale Division comply with the Company's general underwriting criteria for
loans originated through the Consumer Markets Division, and each such loan is
approved by one of the Company's loan underwriters. In addition, quality
control personnel review loans for compliance with the Company's underwriting
criteria. Approximately 8,700 mortgage brokers qualify to participate in this
program. Mortgage loan brokers qualify to participate in the Wholesale
Division's program only after a review by the Company's management of their
reputation and mortgage lending expertise, including a review of their
references and financial statements. During the year ended February 28, 1995,
the Wholesale Division produced an aggregate of $8.5 billion of mortgage loans.
Through its network of correspondent offices (the "Correspondent Division"),
the Company purchases loans primarily from other mortgage bankers, commercial
banks, savings and loan associations, credit unions and other financial
intermediaries. The Company's correspondent offices are located in Pasadena,
California, Plano, Texas and Pittsburgh, Pennsylvania. Over 1,500 financial
intermediaries serving all 50 states are eligible to participate in this
program. Loans purchased by the Company through the Correspondent Division
comply with the Company's general underwriting criteria for loans that it
originates through the Consumer Markets Division, and, except as described in
the next sentence, each loan is accepted only after review either by one of the
Company's loan underwriters or, in the case of Federal Housing Administration
("FHA") or Veterans Administration ("VA") loans, by a government-approved
underwriter. The Company accepts loans without such review from an institution
that has met the Company's standards for the granting of delegated underwriting
authority following a review by the Company of the institution's financial
strength, underwriting and quality control procedures, references and prior
experience with the Company. In addition, quality control personnel review
loans purchased from correspondents for compliance with the Company's
underwriting criteria. The purchase agreement used by the Correspondent
Division provides the Company with recourse to the seller in the event of such
occurrences as fraud or misrepresentation in the origination process or a
request by the investor who purchased an underlying mortgage loan that the
Company repurchase the loan due to the loan's failure to meet eligibility
requirements at the time the Company originally purchased the loan. Financial
intermediaries qualify to participate in the Correspondent Division's program
after a review by the Company's management of the reputation and mortgage
lending expertise of such institutions, including a review of their references
and financial statements. During the year ended February 28, 1995, the
Correspondent Division purchased an aggregate of $12.3 billion of mortgage
loans.
The Company originates and purchases conventional mortgage loans, mortgage
loans insured by the FHA, mortgage loans partially guaranteed by the VA and,
beginning in 1994, home equity loans. A majority of the conventional loans are
conforming loans which qualify for inclusion in guarantee programs sponsored by
the Federal National Mortgage Association ("Fannie Mae") or the Federal Home
Loan Mortgage Corporation ("Freddie Mac"). The remainder of the conventional
loans are non-conforming loans (i.e., jumbo loans with an original balance in
excess of $203,150 or other loans that do not meet Fannie Mae or Freddie Mac
guidelines). As part of its mortgage banking activities, the Company makes
conventional loans generally with original balances of up to $1 million.
S-8
<PAGE>
The following table sets forth the number and dollar amount of the Company's
mortgage and home equity loan production for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28(29),
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT AVERAGE LOAN AMOUNT)
<S> <C> <C> <C> <C> <C>
Conventional Loans
Number of Loans........ 175,823 315,699 192,385 63,919 23,130
Volume of Loans........ $ 20,959 $ 46,473 $ 28,670 $ 9,987 $ 3,141
Percent of Total Vol-
ume................... 75.2% 88.6% 88.5% 82.2% 68.6%
FHA/VA Loans
Number of Loans........ 72,365 67,154 42,022 24,329 17,328
Volume of Loans........ $ 6,808 $ 5,986 $ 3,718 $ 2,170 $ 1,436
Percent of Total Vol-
ume................... 24.4% 11.4% 11.5% 17.8% 31.4%
Home Equity Loans
Number of Loans........ 2,147 -- -- -- --
Volume of Loans........ $ 99.2 -- -- -- --
Percent of Total Vol-
ume................... 0.4% -- -- -- --
Total Loans
Number of Loans........ 250,335 382,853 234,407 88,248 40,458
Volume of Loans........ $ 27,866 $ 52,459 $ 32,388 $ 12,156 $ 4,577
Average Loan Amount.... $ 111,000 $ 137,000 $ 138,000 $ 138,000 $ 113,000
</TABLE>
The decrease in the number and dollar amount of conventional loans in the
year ended February 28, 1995 as compared to the year ended February 28, 1994
was attributable principally to the increasing mortgage interest rate
environment, resulting in a decrease in mortgage loan activity, particularly
refinancings. The increase in the number and dollar amount of FHA and VA loans
produced in the year ended February 28, 1995 from that produced in the years
ended February 28, 1994 and February 28, 1993 was attributable to the Company's
effort to expand its share of that market. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--Fiscal 1995 Compared with Fiscal 1994" in the accompanying
Prospectus.
For the years ended February 28, 1995, 1994 and 1993, jumbo loans represented
17%, 30% and 27%, respectively, of the Company's total volume of mortgage loans
produced. The decrease in the percentage of jumbo loans was primarily the
result of diversification of the Company's loan production out of states with
relatively higher housing costs (particularly California) and into states with
relatively lower housing costs. For the years ended February 28, 1995, 1994 and
1993, adjustable-rate mortgage loans ("ARMs") comprised approximately 34%, 19%
and 28%, respectively, of the Company's total volume of mortgage loans
produced. The increase in the Company's percentage of ARM production from 1994
to 1995 was primarily caused by consumer preference for adjustable-rate
mortgages due to the increasing mortgage interest rate environment that
prevailed through most of the year ended February 28, 1995. For the years ended
February 28, 1995, 1994 and 1993, refinancing activity represented 30%, 75% and
73%, respectively, of the Company's total volume of mortgage loans produced.
The decrease in the percentage of refinance loans was principally due to the
general increase in average mortgage interest rates which caused a decline in
the demand for refinance loans.
California mortgage loan production as a percentage of total mortgage loan
production (measured by principal balance) for the fiscal years ended February
28, 1995, 1994 and 1993 was 31%, 46% and 58%, respectively. Loan production
within California is geographically dispersed, which minimizes dependence on
any individual local economy. The continued decline in the percentage of the
Company's mortgage loan production in California is the result of implementing
the Company's strategy to expand production capacity and market share outside
of California and increased price competition in the California mortgage loan
market, particularly with respect to adjustable-rate mortgage products which,
as described above, are generally
S-9
<PAGE>
preferred by consumers in an increasing interest rate environment. In
California, the Company competes with savings and loans and other portfolio
lenders which offer aggressively-priced ARM products. At February 28, 1995 and
1994, 79% and 77%, respectively, of the Consumer Markets Division branch
offices and the Wholesale Division loan centers were located outside of
California.
Sale of Loans
As a mortgage banker, the Company customarily sells all loans that it
originates or purchases. The Company packages substantially all of its FHA-
insured and VA-guaranteed mortgage loans into pools of loans. It sells these
pools in the form of modified pass-through mortgage-backed securities ("MBS")
guaranteed by the Government National Mortgage Association ("GNMA") to national
or regional broker-dealers. With respect to loans securitized through GNMA
programs, the Company is insured against foreclosure loss by the FHA or
partially guaranteed against foreclosure loss by the VA (at present, generally
25% to 50% of the loan, up to a maximum amount ranging from $22,500 to $46,000,
depending upon the amount of the loan). Conforming conventional loans may be
pooled by the Company and exchanged for securities guaranteed by Fannie Mae or
Freddie Mac, which securities are then sold to national or regional broker-
dealers. Loans securitized through Fannie Mae or Freddie Mac are sold on a non-
recourse basis whereby foreclosure losses are generally the responsibility of
Fannie Mae and Freddie Mac, and not the Company. Alternatively, the Company may
sell FHA-insured and VA-guaranteed mortgage loans and conforming conventional
loans, and consistently sells its jumbo loan production, to large buyers in the
secondary market (which can include national or regional broker-dealers) on a
non-recourse basis. These loans can be sold either on a whole-loan basis or in
the form of pools backing securities which are not guaranteed by any
governmental instrumentality but which may have the benefit of some form of
external credit enhancement, such as insurance, letters of credit, payment
guarantees or senior/subordinated structures. Substantially all loans sold by
the Company are sold without recourse, subject, in the case of VA loans to the
limits of the VA guaranty described above. For the fiscal years ended February
28, 1995, 1994 and 1993, the aggregate loss experience of the Company on VA
loans in excess of the VA guaranty was approximately $2.6 million, $2.1 million
and $1.0 million, respectively. In the opinion of management, the losses
increased from the year ended February 28, 1994 to the year ended February 28,
1995 due to an increase in the size of the VA loan servicing portfolio.
CWM, a real estate investment trust managed by a subsidiary of the Company,
may purchase at market prices both conforming and non-conforming conventional
loans from the Company. During the years ended February 28, 1995, 1994 and
1993, CWM purchased $80.4 million, $300.5 million and $130.3 million,
respectively, of conventional non-conforming mortgage loans from the Company.
In order to offset the risk that a change in interest rates will result in a
decrease in the value of the Company's current mortgage loan inventory or its
commitments to purchase or originate mortgage loans ("Committed Pipeline"), the
Company enters into hedging transactions. The Company's hedging policies
generally require that substantially all of the Company's inventory of
conforming and government loans and the maximum portion of its Committed
Pipeline that the Company believes may close be hedged with forward contracts
for the delivery of MBS or options on MBS. The inventory is then used to form
the MBS that will fill the forward delivery contracts and options. The Company
hedges its inventory and Committed Pipeline of jumbo mortgage loans by using
whole-loan sale commitments to ultimate buyers or by using temporary "cross
hedges" with sales of MBS since such loans are ultimately sold based on a
market spread to MBS. As such, the Company is not exposed to significant risk
nor will it derive any significant benefit from changes in interest rates on
the price of the inventory net of gains or losses of associated hedge
positions. The correlation between the price performance of the hedge
instruments and the inventory being hedged is very high due to the similarity
of the asset and the related hedge instrument. The Company is exposed to
interest-rate risk to the extent that the portion of loans from the Committed
Pipeline that actually closes at the committed price is less than the portion
expected to close in the event of a decline in rates and such decline in
closings is not covered by forward contracts and options to purchase MBS needed
to replace the loans in process that do
S-10
<PAGE>
not close at their committed price. The Company determines the portion of its
Committed Pipeline that it will hedge based on numerous factors, including the
composition of the Committed Pipeline, the portion of such Committed Pipeline
likely to close, the timing of such closings and anticipated changes in
interest rates. See Note F to the Company's Consolidated Financial Statements
included in the accompanying Prospectus.
Loan Servicing
The Company services on a non-recourse basis substantially all of the
mortgage loans that it originates or purchases. In addition, the Company
purchases bulk servicing contracts, also on a non-recourse basis, to service
single-family residential mortgage loans originated by other lenders. Servicing
contracts acquired through bulk purchases accounted for 17% of the Company's
mortgage servicing portfolio as of February 28, 1995. Servicing mortgage loans
includes collecting and remitting loan payments, making advances when required,
accounting for principal and interest, holding custodial (impound) funds for
payment of property taxes and hazard insurance, making any physical inspections
of the property, contacting delinquent mortgagors, supervising foreclosures and
property dispositions in the event of unremedied defaults and generally
administering the loans. The Company receives a fee for servicing mortgage
loans ranging generally from 1/4% to 1/2% per annum on the declining principal
balances of the loans. The servicing fee is collected by the Company out of
monthly mortgage payments.
The Company's servicing portfolio is subject to reduction by scheduled
amortization or by prepayment or foreclosure of outstanding loans. In addition,
the Company has sold, and may sell in the future, a portion of its portfolio of
loan servicing rights to other mortgage servicers. In general, the decision to
sell servicing rights or newly originated loans on a servicing-released basis
is based upon management's assessment of the Company's cash requirements, the
Company's debt-to-equity ratio and other significant financial ratios, the
market value of servicing rights and the Company's current and future earnings
objectives.
It is the Company's strategy to build and retain its servicing portfolio.
Loans are serviced from two facilities, one in Simi Valley, California and one
in Plano, Texas. The Company has developed systems that enable it to service
mortgage loans efficiently and therefore enhance the returns it can earn from
its investments in servicing rights. For example, data elements pertaining to
loans originated or purchased by the Company are entered into the Company's
advanced automated loan system (EDGE) at the time of origination or purchase
and are transferred to the loan servicing system without manual re-entry.
Customer service representatives in both the California and Texas facilities
have access to on-line screens containing all pertinent data about a customer's
account, thus eliminating the need to refer to paper files and shortening the
average length of a customer call. The Company has a telephone system which
enables it to control the flow of calls to both locations. The Company's
payment processing equipment can process 10,000 checks per hour, which enables
the Company to deposit virtually all cash on the same day it is received. Many
tax and insurance remittances on behalf of borrowers are processed
electronically, thus eliminating the need for printed documentation and
shortening the processing time required.
The Company believes that loan production earnings will partially offset the
effect of interest rate fluctuations on the earnings from its servicing
portfolio. In general, the value of the Company's servicing portfolio and the
income generated therefrom improve as interest rates increase and decline when
interest rates fall. Generally, in an environment of increasing interest rates,
which prevailed through most of the Company's fiscal year ended February 28,
1995, the rate of current and projected future prepayments decreases, resulting
in a decreased rate of amortization of capitalized servicing fees receivable
and purchased servicing rights, and a decrease in income from servicing
portfolio hedging activities. Such amortization, net of servicing hedge gain,
is deducted from loan administration revenue. The increase in interest rates
also causes loan production (particularly refinancings) to decline. Generally,
in an environment of declining interest rates, which prevailed through most of
the Company's fiscal year ended February 28, 1994, the rate of current and
projected future prepayments increases, resulting in an increased rate of
amortization of capitalized servicing fees receivable and purchased servicing
rights. At the same time, the decline in interest rates contributes to high
levels of loan production (particularly refinancings).
S-11
<PAGE>
The following table sets forth certain information regarding the Company's
servicing portfolio of single-family mortgage loans, including loans held for
sale and loans subserviced for others, for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28(29),
---------------------------------------------
1995 1994 1993 1992 1991
-------- -------- ------- ------- -------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Composition of Servicing
Portfolio
at Period End:
FHA-Insured Mortgage Loans... $ 17,588 $ 9,794 $ 8,234 $ 6,271 $ 4,474
VA-Guaranteed Mortgage Loans. 7,454 3,916 3,307 2,438 1,910
Conventional Mortgage Loans.. 88,029 70,915 42,877 18,834 9,297
-------- -------- ------- ------- -------
Total Servicing Portfolio.. $113,071 $ 84,625 $54,418 $27,543 $15,681
======== ======== ======= ======= =======
Beginning Servicing Portfolio.. $ 84,625 $ 54,418 $27,543 $15,681 $12,512
Add:Loan Production............ 27,866 52,459 32,388 12,156 4,577
Bulk Servicing and
Subservicing Acquired...... 17,888 3,515 3,084 2,932 572
Less:Servicing Transferred(1).. (6,287) (8) (13) (269) (860)
Runoff(2)................... (11,021) (25,759) (8,584) (2,957) (1,120)
-------- -------- ------- ------- -------
Ending Servicing Portfolio..... $113,071 $ 84,625 $54,418 $27,543 $15,681
======== ======== ======= ======= =======
Delinquent Mortgage Loans and
Pending Foreclosures at Period
End(3):
30 days...................... 1.84% 1.89% 2.08% 2.46% 3.09%
60 days...................... 0.30 0.29 0.41 0.59 0.61
90 days or more.............. 0.44 0.40 0.60 0.80 0.76
-------- -------- ------- ------- -------
Total Delinquencies........ 2.58% 2.58% 3.09% 3.85% 4.46%
======== ======== ======= ======= =======
Foreclosures Pending........... 0.30% 0.30% 0.38% 0.46% 0.40%
======== ======== ======= ======= =======
</TABLE>
- --------
(1) Servicing rights sold are generally deleted from the servicing portfolio at
the time of sale. The Company generally subservices such loans from the
sales contract date to the transfer date.
(2) Runoff refers to scheduled principal repayments on loans and unscheduled
prepayments (partial prepayments or total prepayments due to refinancing,
modifications, sale, condemnation or foreclosure).
(3) As a percentage of the total number of loans serviced.
At February 28, 1995, the Company's servicing portfolio of single-family
mortgage loans was stratified by interest rate as follows:
<TABLE>
<CAPTION>
TOTAL PORTFOLIO AT FEBRUARY 28, 1995
----------------------------------------------
SERVICING
PRINCIPAL PERCENT WEIGHTED AVERAGE ASSETS
INTEREST RATE BALANCE OF TOTAL MATURITY (YEARS) BALANCE(1)
------------- --------- -------- ---------------- ----------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C>
7.00% and under.................. $ 38,293 33.9% 25.5 $ 603
7.01-8.00%....................... 45,013 39.8 25.7 694
8.01-9.00%....................... 21,313 18.8 26.6 366
9.01-10.00%...................... 7,165 6.3 26.5 115
over 10.00%...................... 1,287 1.2 23.4 19
-------- ----- ---- ------
$113,071 100.0% 25.8 $1,797
======== ===== ==== ======
</TABLE>
- --------
(1) Capitalized servicing fees receivable and purchased servicing rights.
S-12
<PAGE>
The weighted average interest rate of the single-family mortgage loans in the
Company's servicing portfolio at February 28, 1995 was 7.6% as compared with
7.2% at February 28, 1994. At February 28, 1995, 77% of the loans in the
servicing portfolio bore interest at fixed rates and 23% bore interest at
adjustable rates. The weighted average net servicing fee of the portfolio was
0.356% at February 28, 1995 and the weighted average interest rate of the
fixed-rate loans in the servicing portfolio was 7.8%.
Financing of Mortgage Banking Operations
The Company's principal financing needs are the financing of loan funding
activities and the investment in servicing rights. To meet these needs, the
Company currently relies on commercial paper backed by CFC's revolving credit
facility, medium-term note issuances, pre-sale funding facilities, mortgage-
backed securities and whole loan reverse-repurchase agreements, subordinated
notes and cash flows from operations. The Company estimates that it has
available committed and uncommitted credit facilities aggregating approximately
$5.6 billion at February 28, 1995. In addition, in the past the Company has
relied on direct borrowings from its revolving credit facility, servicing-
secured bank facilities, privately-placed financings and public offerings of
Preferred Stock and Common Stock. For further information on the material terms
of the borrowings utilized by the Company to finance its inventory of mortgage
loans and mortgage-backed securities and its investment in servicing rights,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in the accompanying Prospectus.
The Company continues to investigate and pursue alternative and supplementary
methods to finance its operations through the public and private capital
markets. These may include such methods as mortgage loan sale transactions
designed to expand the Company's financial capacity and reduce its cost of
capital and the securitization of servicing income cash flows.
COUNTRYWIDE ASSET MANAGEMENT CORPORATION
Through its subsidiary Countrywide Asset Management Corporation ("CAMC"), the
Company manages the investments and oversees the day-to-day operations of CWM
and its subsidiaries. For performing these services, CAMC receives a base
management fee of 1/8 of 1% per annum of CWM's average-invested mortgage-
related assets not pledged to secure collateralized mortgage obligations
("CMOs"). CAMC also receives a management fee equal to 0.2% per annum of the
average amounts outstanding under CWM's warehouse lines of credit. In addition,
CAMC receives incentive compensation equal to 25% of the amount by which the
CWM annualized return on equity exceeds the ten-year U.S. treasury rate plus
2%. In connection with a new business plan implemented by CWM in 1993, CAMC
waived all management fees for calendar year 1993 and 25% of the incentive
compensation earned in 1994. In addition, in 1993 CAMC absorbed $0.9 million of
operating expenses incurred in connection with the new business plan. In June
1993, CWM and its subsidiaries began reimbursing CAMC for all expenses of the
new operations. As of December 31, 1994, 1993 and 1992, the consolidated total
assets of CWM were $2.0 billion, $1.4 billion and $0.7 billion, respectively.
During the fiscal years ended February 28, 1995, 1994 and 1993, CAMC earned
$0.3 million, $0.1 million and $0.8 million, respectively, in management fees
from CWM and its subsidiaries. In addition, during the fiscal year ended
February 28, 1995, CAMC recorded $1.1 million in incentive compensation, net of
the amount waived as described above. At February 28, 1995, the Company and
CAMC owned 1,120,000 shares or approximately 2.77% of the common stock of CWM.
See Note K to the Company's Consolidated Financial Statements included in the
accompanying Prospectus.
OTHER OPERATIONS
Through various other subsidiaries, the Company conducts business in a number
of areas related to the mortgage banking business. The following is a brief
description of the activities of these subsidiaries.
The Company operates a securities broker-dealer, Countrywide Securities
Corporation ("CSC"), which is a member of the National Association of
Securities Dealers, Inc. and the Securities Investor Protection Corporation.
CSC sells mortgage-backed securities on an odd-lot basis, generally at prices
higher than those available in the wholesale, round-lot market and subordinate
structures of whole loan CMOs.
The Company's insurance agency subsidiary, Countrywide Agency, Inc., acts as
an agent for the sale of homeowners, fire, flood, earthquake, mortgage life and
disability insurance to mortgagors whose loans are serviced by CFC.
S-13
<PAGE>
Another subsidiary of the Company, CTC Foreclosure Services Corporation,
formerly Countrywide Title Corporation, serves as trustee under deeds of trust
in connection with the Company's mortgage loan production in California and
certain other states.
Countrywide Servicing Exchange ("CSE") is a national servicing brokerage and
consulting firm. CSE acts as an agent facilitating transactions between buyers
and sellers of bulk servicing contracts.
LandSafe, Inc. and its subsidiaries act as a provider of various title
insurance services in the capacity of an agent rather than an underwriter. The
Company offers title insurance commitments and policies, settlement services
and property profiles to realtors, builders, consumers, mortgage brokers and
other financial institutions.
The Company is no longer engaged in the business of originating mobile home
installment contracts. During the fiscal year ended February 28, 1995, the
Company sold three of its five mobile home parks located in Texas and Florida
and the mobile home coaches contained therein. Subsequent to February 28, 1995,
the Company sold its remaining two mobile home parks located in Texas and the
mobile home coaches contained therein for $7.2 million; at February 28, 1995,
the Company's investment in these two mobile home parks and the mobile home
coaches contained therein was approximately $9 million.
PROPRIETARY DATA PROCESSING SYSTEMS
The Company employs technology wherever applicable and continually searches
for new and better ways of both providing services to its customers and
maximizing the efficiency of its operations. Proprietary systems currently in
use by the Company include CLUES(TM), an artificial intelligence system that is
designed to expedite the review of applications, credit reports and property
appraisals. The Company believes that CLUES increases underwriters'
productivity, reduces costs and provides greater consistency to the
underwriting process. Another system in use is EDGE, which is an advanced
automated loan origination system that is designed to reduce the time and cost
associated with the loan application and funding process. This front-end system
was internally developed for the Company's exclusive use and is integrated with
the Company's loan servicing, sales, accounting and other systems. The Company
believes that the EDGE system improves the quality of the loan products and
customer service by: (i) reducing risk of deficient loans; (ii) facilitating
accurate pricing; (iii) promptly generating loan documents with the use of
laser printers; (iv) providing for electronic communication with credit bureaus
and other vendors; and (v) generally minimizing manual data input. From pre-
qualification to funding, the Company believes EDGE significantly reduces
origination and processing costs and speeds funding time.
The Company has developed and implemented DirectLine Plus(R), which is
designed to provide support to mortgage brokers and enable them to obtain the
latest pricing, to review the Company's lending program guidelines, to submit
applications, to directly obtain information about specific loans in progress
and to send and receive electronic messages to and from the Company's
processing center. Recent enhancements to DirectLine Plus integrate that
application with CLUES-ON-LINE, an adaptation of CLUES for use with DirectLine
Plus, which is designed to allow the mortgage broker to submit loan information
and receive a qualified underwriting decision within minutes.
In addition, the Company is developing CLASS, which is designed to offer
automated loan settlement services by using electronic data interchange to
facilitate the preparation of closing documents at the office of the closing
agent. The Company plans to deploy CLASS in the offices of a wide range of
business partners (such as realtors and other entities that are involved in the
closing of a mortgage loan transaction). Currently under development is the
LOAN COUNSELOR. The LOAN COUNSELOR is being designed to give business partners
direct access to the Company's package of financial services and to permit such
business partners to pre-qualify prospective applicants, provide "what if"
scenarios to help find the appropriate loan products, take the applications and
receive qualified underwriting decisions. The Company plans to integrate the
LOAN COUNSELOR with both CLUES and the EDGE system.
The Company intends to implement a telemarketing application designed to
provide enterprise-wide information on both current and prospective customers.
The purpose of the telemarketing system is to enable production divisions to
identify prospective customers to solicit for specific products or services,
and to obtain the results of any solicitation. Management believes that the
database will give the Company a significant
S-14
<PAGE>
advantage in its ability to protect its servicing portfolio and generate
additional revenue by cross-selling other products and services.
REGULATION
The Company's mortgage banking business is subject to the rules and
regulations of the Department of Housing and Urban Development, FHA, VA, Fannie
Mae, Freddie Mac and GNMA with respect to originating, processing, selling and
servicing mortgage loans. Those rules and regulations, among other things,
prohibit discrimination, provide for inspections and appraisals, require credit
reports on prospective borrowers and fix maximum loan amounts. Moreover, FHA
lenders such as the Company are required annually to submit to the Federal
Housing Commissioner audited financial statements, and GNMA requires the
maintenance of specified net worth levels (which vary depending on the amount
of GNMA securities issued by the Company). The Company's affairs are also
subject to examination by the Federal Housing Commissioner at all times to
assure compliance with the FHA regulations, policies and procedures. Mortgage
origination activities are subject to the Equal Credit Opportunity Act, the
Federal Truth-in-Lending Act, the Home Mortgage Disclosure Act and the Real
Estate Settlement Procedures Act and the regulations promulgated thereunder
which prohibit discrimination, require the disclosure of certain basic
information to mortgagors concerning credit and settlement costs, limit payment
for settlement services to the reasonable value of the services rendered and
require the maintenance and disclosure of information regarding the disposition
of mortgage applications based on race, gender, geographical distribution and
income level.
Additionally, there are various state laws and regulations affecting the
Company's mortgage banking operations. The Company is licensed as a mortgage
banker or retail installment lender in those states in which such license is
required.
Conventional mortgage operations may also be subject to state usury statutes.
FHA and VA loans are exempt from the effect of such statutes.
Securities broker-dealer operations are subject to federal and state
securities laws, as well as the rules of both the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.
Insurance agency and title insurance operations are subject to insurance laws
of each of the states in which the Company conducts such operations.
COMPETITION
The mortgage banking industry is highly competitive and fragmented. The
Company competes with other financial intermediaries (such as mortgage bankers,
commercial banks, savings and loan associations, credit unions and insurance
companies) and mortgage banking subsidiaries or divisions of diversified
companies. During the year ended February 28, 1995, increased mortgage interest
rates resulted in a substantial decrease in mortgage originations. This
decrease in mortgage originations created excess industry capacity which
resulted in increased price competition. Consequently, loan production for the
year ended February 28, 1995 was unprofitable. In addition, during periods of
increasing interest rates, as existed for most of the year ended February 28,
1995, consumers tend to prefer adjustable-rate mortgage products. Particularly
in California, savings and loans and other portfolio lenders competed with the
Company by offering aggressively-priced ARM products. The Company competes
principally by offering products with competitive features, by emphasizing the
quality of its service and by pricing its range of products at competitive
rates.
In recent years, the aggregate share of the United States market for
residential mortgage loans that is served by mortgage bankers has risen,
principally due to the decline in the savings and loan industry. According to
industry statistics, mortgage bankers' aggregate share of this market increased
from approximately 19% during calendar year 1989 to approximately 49% during
the third quarter of calendar year 1994. The Company believes that it has
benefited from this trend.
The Company is a Delaware corporation, and was originally incorporated in New
York under the name of OLM Credit Industries, Inc. in 1969. Its principal
executive offices are located at 155 North Lake Avenue, P. O. Box 7137,
Pasadena, California 91109-7137, and its telephone number is (818) 304-8400.
S-15
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
Underwriters named below (the "Underwriters"), and each of the Underwriters
severally has agreed to purchase, the aggregate number of shares of Common
Stock set forth opposite its name below. In the Purchase Agreement, the several
Underwriters have agreed, subject to the terms and conditions set forth
therein, to purchase all the shares of Common Stock offered hereby if any of
the shares of Common Stock are purchased. In the event of a default by an
Underwriter, the Purchase Agreement provides that, in certain circumstances,
the purchase commitments of the nondefaulting Underwriters may be increased or
the Purchase Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................
Goldman, Sachs & Co. ............................................
Lehman Brothers Inc. ............................................
Salomon Brothers Inc ............................................
Alex. Brown & Sons Incorporated..................................
Dean Witter Reynolds Inc. .......................................
----------
Total....................................................... 10,000,000
==========
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the shares to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ per share on
sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company has granted the Underwriters an option exercisable for 30 days
after the date hereof to purchase up to 1,500,000 additional shares of Common
Stock to cover over-allotments, if any, at the initial public offering price,
less the underwriting discount. If the Underwriters exercise this option, each
of the Underwriters have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof which the number of shares
of Common Stock to be purchased by it shown in the foregoing table is of the
10,000,000 shares of Common Stock initially offered hereby.
The Company has agreed that, for a period of 120 days from the date of this
Prospectus Supplement, it will not, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
the sale of, or otherwise dispose of, any Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock (except for
Common Stock issued pursuant to the Purchase Agreement, pursuant to employee
benefit plans referred to in this Prospectus Supplement or the Prospectus, or
pursuant to the exercise of convertible securities or options referred to in
this Prospectus Supplement or the Prospectus), or file any registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to any of the foregoing. Certain officers and directors of the
Company have each agreed that, for a period of 90 days from the date of this
Prospectus Supplement, they will not, without the prior written consent of the
Underwriters, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce an offering of, any shares of Common Stock
beneficially owned by such officer or director, or any securities convertible
into, or exchangeable for, shares of Common Stock, other than shares of Common
Stock disposed of as bona fide gifts or shares of Common Stock pledged,
hypothecated or otherwise encumbered in connection with the incurrence of
indebtedness.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
S-16
<PAGE>
VALIDITY OF SECURITIES
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Fried, Frank, Harris, Shriver & Jacobson, a partnership
including professional corporations, New York, New York. Edwin Heller, whose
professional corporation is a member of Fried, Frank, Harris, Shriver &
Jacobson, is a director of the Company. Brown & Wood, New York, New York will
serve as counsel to the Underwriters. Brown & Wood also serves as counsel for
CWMBS, Inc., a wholly owned subsidiary of the Company, in connection with
offerings of mortgage pass-through certificates, and as counsel for CWM.
S-17
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS +
+SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY +
+NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 16, 1995
PROSPECTUS SUPPLEMENT
- ---------------------
(To Prospectus Dated , 1995)
U.S. $500,000,000
COUNTRYWIDE FUNDING CORPORATION
MEDIUM-TERM NOTES, SERIES D
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND
INTEREST ON THE NOTES UNCONDITIONALLY GUARANTEED BY
LOGO COUNTRYWIDE (SM)
-----------------------
CREDIT INDUSTRIES, INC.
----------
Countrywide Funding Corporation ("CFC") may offer from time to time its
Medium-Term Notes, Series D (the "Notes"), each of which will be
unconditionally guaranteed as to payment of principal, premium, if any, and
interest by Countrywide Credit Industries, Inc. (the "Guarantor" or "CCI").
Each Note will mature nine months or more from the date of issue, as selected
by the purchaser and agreed to by CFC and may be subject to redemption or
repayment prior to maturity. The aggregate initial offering price of the Notes
to be offered will not exceed U.S. $500,000,000 or its equivalent in foreign
currencies or currency units. The Notes may be denominated in U.S. dollars or
in such foreign currencies or currency units (the "Specified Currency") as may
be designated by CFC.
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest at a fixed rate (a "Fixed Rate Note"), which may be zero in
the case of certain Notes issued at a price representing a substantial discount
from the principal amount payable upon maturity, or at a floating rate (a
"Floating Rate Note"). Unless otherwise specified in the applicable Pricing
Supplement, the Interest Payment Dates for each Fixed Rate Note will be January
15 and July 15 of each year and at maturity or such date of earlier redemption
or repayment. The Interest Payment Dates for each Floating Rate Note will be
established on the date of issue of such Note and will be set forth in the
applicable Pricing Supplement. Interest rates and interest rate formulas are
subject to change by CFC, but no change will affect any Note already issued or
as to which an offer to purchase has been accepted by CFC.
Each Note will be represented by either a global security registered in the
name of a nominee of The Depository Trust Company, as depositary (a "Book-Entry
Note"), or a certificate issued in definitive form (a "Certificated Note"), as
set forth in the applicable Pricing Supplement. Beneficial interests in Book-
Entry Notes will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to interests of its
participants) and by its participants (with respect to beneficial owners'
interests). Book-Entry Notes will not be issuable as Certificated Notes, except
under the limited circumstances described herein.
The Specified Currency, any applicable interest rate or interest rate
formula, the Stated Maturity Date, the Interest Payment Dates, if any, and any
redemption or repayment provisions for each Note and whether such Note will be
a Book-Entry Note or a Certificated Note will be established at the time of
issuance of such Note and set forth therein and in the applicable Pricing
Supplement.
The indenture pursuant to which the Notes will be issued does not contain any
restrictions on the ability of the Company, CFC or any of their respective
affiliates to incur additional indebtedness (secured or unsecured). As of May
31, 1995, the Guarantor did not have any secured indebtedness outstanding, and
CFC had $872,009,662 aggregate principal amount of secured indebtedness
outstanding, all of which was short-term indebtedness. As of such date, CFC had
$3,892,272,000 aggregate principal amount of unsecured indebtedness
outstanding, which indebtedness ranked pari passu in right of payment with
CFC's other unsecured and unsubordinated indebtedness and will rank pari passu
in right of payment with the Notes. See "Description of Debt Securities and
Guarantees--General" and Note D to CCI's Consolidated Financial Statements
included in the accompanying Prospectus.
FOR A DESCRIPTION OF CERTAIN RISK FACTORS RELATING TO INVESTMENTS IN THE
NOTES, SEE "RISK FACTORS" ON PAGE S-2 OF THIS PROSPECTUS SUPPLEMENT.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE
PROSPECTUS, OR ANY SUPPLEMENT HERETO. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT
PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Agents' Commission or Proceeds to
Public(1)(2) Discount(2)(3) Company(2)(3)(4)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................ % %- % %- %
- ------------------------------------------------------------------------------------------------
Total................... U.S. $500,000,000 U.S. $ -$ U.S. $ -$
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Unless otherwise specified in the applicable Pricing Supplement, the Price
to Public will be 100% of the principal amount of the Notes being issued.
(2) Or the equivalent thereof in a Specified Currency other than U.S. dollars.
(3) CFC will pay to Lehman Brothers, Lehman Brothers Inc. (including its
affiliate, Lehman Government Securities Inc.), Goldman, Sachs & Co.,
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Salomon Brothers Inc (each, an "Agent," and collectively, the "Agents") a
commission, which may be in the form of a discount, ranging from % to %
of the principal amount of any Note (or in the case of any Original Issue
Discount Note (as defined herein), the price to public), depending on its
maturity, sold through such Agent, except that the commission payable by
CFC to the Agents with respect to Notes with maturities of greater than 30
years will be negotiated at the time of the sale thereof. Unless otherwise
specified in the applicable Pricing Supplement, any Note sold to an Agent
as principal will be purchased by such Agent at a price equal to 100% of
the principal amount thereof less a percentage of the principal amount
equal to the commission applicable to an agency sale of a Note of identical
maturity and may be resold by such Agent to one or more investors or other
purchasers at varying prices related to prevailing market prices at the
time of such resale, as determined by such Agent, or if so agreed, at a
fixed public offering price. CFC has agreed to indemnify the Agents against
certain liabilities, including liabilities under the Securities Act of
1933, as amended.
(4) Before deducting other expenses payable by CFC estimated at U.S. $675,000.
----------
The Notes are being offered on a continuous basis by CFC through the Agents,
each of which has agreed to use its reasonable best efforts to solicit
purchases of the Notes. CFC also may sell Notes to any Agent acting as
principal for resale to one or more investors or other purchasers or may sell
Notes directly to investors on its own behalf. Unless otherwise specified in
the applicable Pricing Supplement, the Notes will not be listed on any
securities exchange, and there can be no assurance that the Notes offered by
this Prospectus Supplement and the accompanying Prospectus will be sold or that
there will be a secondary market for the Notes. CFC reserves the right to
withdraw, cancel or modify the offer made hereby without notice. CFC and the
Agents may reject any offer to purchase Notes in whole or in part. See "Plan of
Distribution of Notes."
----------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
, 1995
<PAGE>
IN CONNECTION WITH THE DISTRIBUTION OF NOTES UNDERWRITTEN BY AN AGENT ACTING
AS PRINCIPAL ON A FIXED PRICE BASIS, SUCH AGENT MAY OVER-ALLOT OR EFFECT
TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR MAINTAINING THE MARKET
PRICE OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
RISK FACTORS
INDEX RISK
An investment in the Notes indexed, as to principal, premium, if any, or
interest, to one or more currencies or currency units (including exchange rates
and swap indices between currencies or currency units), commodities, interest
rates or other indices entails significant risks that are not associated with
similar investments in a conventional fixed rate or floating rate debt
security. Such risks include, without limitation, the possibility that such
index or indices may be subject to significant changes, that the resulting
interest rate will be less than that payable on a conventional fixed rate or
floating rate debt security issued at the same time, that the repayment of
principal or premium, if any, can occur at a time other than that expected by
the investor, and that the investor could lose all or a substantial portion of
principal or premium, if any, payable on the Maturity Date (as defined below).
Such risks depend on a number of interrelated factors, including economic,
financial and political events, over which CFC and the Guarantor have no
control. Additionally, if the formula used to determine the amount of
principal, premium, if any, or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the
applicable index or indices will be magnified. In recent years, values of
certain indices have been highly volatile and such volatility may be expected
to continue in the future. Fluctuations in the value of any particular index
that have occurred in the past are not necessarily indicative, however, of
fluctuations in such value that may occur in the future. The secondary market
for such Notes will be affected by a number of factors independent of the
creditworthiness of CFC and the value of the applicable index or indices,
including the complexity and volatility of such index or indices, the method of
calculating the principal, premium, if any, and interest in respect of such
Notes, the time remaining to the maturity of such Notes, the outstanding amount
of such Notes and market interest rates generally. The credit ratings assigned
to CFC's medium-term note program may not reflect the potential impact of all
risks related to structure and other factors on the market value of the Notes.
Accordingly, prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in the Notes and the
suitability of such Notes in light of their particular circumstances.
FOREIGN CURRENCY RISKS
Governing Laws and Judgments. The Notes will be governed by and construed in
accordance with the laws of the State of New York. Courts in the United States
have not customarily rendered judgments for money damages denominated in any
currency or currency unit other than U.S. dollars. The Judiciary Law of the
State of New York provides, however, that an action based upon an obligation
denominated in a currency or currency unit other than U.S. dollars will be
rendered in the foreign currency or currency unit of the underlying obligation
and converted into U.S. dollars at a rate of exchange prevailing on the date of
the entry of the judgment or decree.
Exchange Rates and Exchange Controls. An investment in Notes that are
denominated in a foreign currency or currency unit entails significant risks
that are not associated with a similar investment in a security denominated in
U.S. dollars. Such risks include, without limitation, the possibility of
significant changes in rates of exchange between the U.S. dollar and the
various foreign currencies or currency units and the possibility of the
imposition or modification of exchange controls by either the United States or
foreign governments. Such risks generally depend on economic and political
events and on the supply of and demand for the relevant currencies, factors
over which CFC and the Guarantor have no control. In recent
S-2
<PAGE>
years, rates of exchange between the U.S. dollar and foreign currencies and
currency units have been highly volatile and such volatility may be expected
in the future. Fluctuations in any particular exchange rate that have occurred
in the past are not necessarily indicative, however, of fluctuations in such
rate that may occur during the term of any Note. Depreciation of the
applicable foreign currency or currency unit against the U.S. dollar would
result in a decrease in the effective yield of such Note, in the value of the
principal and premium, if any, payable on the Maturity Date of such Note and,
generally, in the market value of such Note.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT DESCRIBE
ALL OF THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED AND/OR PAYABLE IN A
FOREIGN CURRENCY OR CURRENCY UNIT, AND CFC AND THE GUARANTOR DISCLAIM ANY
RESPONSIBILITY TO ADVISE PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT
THE DATE OF THIS PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME
TO TIME. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL
ADVISORS AS TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED AND/OR
PAYABLE IN CURRENCIES OR CURRENCY UNITS OTHER THAN U.S. DOLLARS. SUCH NOTES
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Unless otherwise specified in the applicable Pricing Supplement, Notes
denominated in a Specified Currency other than U.S. dollars or ECU (as defined
below) will not be sold in, or to residents of, the country of the Specified
Currency in which particular Notes are denominated.
The information set forth in this Prospectus Supplement is directed to
prospective investors who are United States residents, and CFC and the
Guarantor disclaim any responsibility to advise prospective investors who are
residents of countries other than the United States with respect to any
matters that may affect the purchase, holding or receipt of payments of
principal of, or premium, if any, or interest on, the Notes. Such persons
should consult their own advisors with regard to such matters.
Governments or monetary authorities have imposed from time to time, and may
in the future impose, exchange controls which could affect exchange rates as
well as the availability of the Specified Currency on the applicable Interest
Payment Date or Maturity Date of a Note. Even if there are no actual exchange
controls, it is possible that on such Interest Payment Date or Maturity Date
the Specified Currency for such Note would not be available to CFC due to
circumstances beyond the control of CFC. In that event, CFC will make the
required payments in U.S. dollars on the basis of the Exchange Rate (as
defined below) two Business Days (as defined below) prior to the Interest
Payment Date or the Maturity Date, as the case may be (or, if no rate is
quoted for such Specified Currency on such date, the last date such rate is
quoted). See "Description of Notes--Payment Currency."
Currency Exchange. Purchasers are required to pay for the Notes in the
currency or currency unit in which such Notes are denominated (the "Specified
Currency"), unless otherwise provided in the applicable Pricing Supplement.
Currently, there are limited facilities in the United States for conversion of
U.S. dollars into foreign currencies or currency units and vice versa, and
many banks do not offer non-U.S. dollar denominated checking or savings
account facilities in the United States. Upon request, the Agents will arrange
for the conversion of U.S. dollars into a Specified Currency other than U.S.
dollars to enable purchasers to pay for the Notes. Such request must be made
on the trade date. Each such conversion will be made by the Agents on such
terms and subject to such conditions, limitations and charges as the Agents
may from time to time establish in accordance with their regular foreign
exchange practice. All costs of exchange will be borne by the investors in the
Notes.
References herein to "U.S. dollars," "dollar," "U.S.$" or "$" are to the
currency of the United States of America.
S-3
<PAGE>
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith, replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the accompanying Prospectus, to which description reference is hereby
made. Unless otherwise specified in a Pricing Supplement, the terms of the
Notes will be as set forth below.
GENERAL
The Notes are to be issued as a series of Debt Securities limited to U.S.
$500,000,000, or its equivalent in one or more foreign currencies or currency
units, aggregate initial offering price under an Indenture dated as of January
1, 1992, as amended, supplemented or modified from time to time, including
Supplemental Indenture No. l thereto dated as of June 15, 1995 (collectively,
the "Indenture"), among CFC, Countrywide Credit Industries, Inc. (the
"Guarantor" or "CCI") and The Bank of New York, as trustee (the "Trustee"),
which is described more fully under "Description of Debt Securities and
Guarantees" in the accompanying Prospectus. The statements herein concerning
the Notes and the Indenture do not purport to be complete and are qualified in
their entirety by reference to the provisions of the Indenture, including the
definitions of certain terms used herein without definition.
The Notes will be offered on a continuous basis and will mature on any day
nine months or more from their dates of issue, as specified in the applicable
Pricing Supplement. Unless otherwise specified in the applicable Pricing
Supplement, interest-bearing Notes will be either Fixed Rate Notes or Floating
Rate Notes, as specified in the applicable Pricing Supplement. Notes also may
be issued that do not bear any interest currently or that bear interest at a
below market rate.
Each Note will be represented by either a global security registered in the
name of a nominee of The Depository Trust Company, New York, New York ("DTC"),
as depositary (a "Book-Entry Note"), or a certificate issued in definitive form
(a "Certificated Note"), as set forth in the applicable Pricing Supplement.
Beneficial interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC (with respect
to interests of its Participants (as defined below)) and by its Participants
(with respect to interests of beneficial owners (as defined below)). Book-Entry
Notes will not be issuable as Certificated Notes, except under the limited
circumstances described herein.
Unless otherwise specified in the applicable Pricing Supplement, the minimum
denomination of Notes will be $100,000, or the equivalent thereof in the
Specified Currency (if other than U.S. dollars), and integral multiples of
$1,000 in excess thereof or the equivalent thereof in such Specified Currency.
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of the Notes
purchased in any single transaction.
Unless otherwise specified herein or in the applicable Pricing Supplement,
"Exchange Rate" means, with respect to a Specified Currency (other than
European Currency Units ("ECU")), the noon Dollar buying rate for such
Specified Currency for cable transfers quoted by the Exchange Rate Agent (as
specified in the applicable Pricing Supplement) in The City of New York on the
Record Date or Special Record Date (each as defined below) or the fifteenth day
immediately preceding the Maturity Date or on such other date provided in the
applicable Note or in the Indenture, as the case may be, as certified for
customs purposes by the Federal Reserve Bank of New York. With respect to ECU,
"Exchange Rate" means the exchange rate between U.S. dollars and ECU reported
by the Council of the European Communities on the applicable Record Date or
Special Record Date with respect to an Interest Payment Date or the fifteenth
day immediately preceding the Maturity Date or on such other date as provided
in the applicable Note or in the Indenture, as the case may be.
S-4
<PAGE>
Certificated Notes may be presented for registration of transfer or exchange
at the Corporate Trust Office of the Trustee in the Borough of Manhattan, The
City of New York. Registration of transfers or exchanges of Book-Entry Notes
may be effected only through a participating member of the Depositary (as
defined below).
The Notes will constitute unsecured and unsubordinated indebtedness of CFC
and will rank pari passu in right of payment with CFC's other unsecured and
unsubordinated indebtedness. As of May 31, 1995, the Guarantor did not have any
secured indebtedness outstanding, and CFC had $872,009,662 aggregate principal
amount of secured indebtedness outstanding, all of which was short-term
indebtedness. As of such date, CFC had $3,892,272,000 aggregate principal
amount of unsecured indebtedness outstanding, which indebtedness ranked pari
passu in right of payment with CFC's other unsecured and unsubordinated
indebtedness and will rank pari passu in right of payment with the Notes. See
"Description of Debt Securities and Guarantees--General" and "--Guarantees" in
the accompanying Prospectus. A substantial portion of the assets of CFC may be
pledged under various credit agreements among CFC and various lending
institutions. See Note D to CCI's Financial Statements included in the
accompanying Prospectus.
The Indenture does not contain any provisions that would limit the ability of
CFC or any of its affiliates to incur indebtedness (secured or unsecured) or
that would afford Holders of the Notes protection in the event of a highly
leveraged transaction, restructuring, change in control, merger or similar
transaction involving CFC that may adversely affect Holders of the Notes.
If so specified in the applicable Pricing Supplement, the Notes will be
redeemable at the option of CFC or repayable at the option of the Holder prior
to maturity. See "--Redemption and Repayment" below. The Notes will not be
subject to any sinking fund.
"Business Day" means (A) any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law, regulation or executive order to close in (i) New York, New
York or Los Angeles, California, or (ii) if the Specified Currency specified in
the applicable Pricing Supplement is other than U.S. dollars, the Principal
Financial Center (as defined below), and (B) with respect to Floating Rate
Notes as to which LIBOR is an applicable Base Rate, a London Banking Day (as
defined below). "Principal Financial Center" means the capital city of the
country issuing the related Specified Currency, except that with respect to
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECU, the "Principal Financial Center" shall be Sydney, Frankfurt,
Amsterdam, Milan, Zurich and Luxembourg, respectively. "London Banking Day"
means any day on which dealings in deposits in U.S. dollars are transacted in
the London interbank market.
The "Maturity Date" means the earlier of the date on which the principal of a
Note is redeemed (the "Redemption Date") or repaid (the "Repayment Date") or
the date on which the Note will mature (the "Stated Maturity Date").
Unless otherwise specified in the applicable Pricing Supplement, all
percentages resulting from any calculation of the rate of interest on Floating
Rate Notes will be rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point, with five one-millionths of a percentage point rounded
upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or
.0987655)), and all dollar amounts used in or resulting from such calculation
on Floating Rate Notes will be rounded to the nearest cent (with one-half cent
being rounded upward).
The Pricing Supplement relating to each Note will describe the following
terms: (1) the Specified Currency; (2) whether such Note is a Fixed Rate Note,
a Floating Rate Note or such other Note as is specified in such Pricing
Supplement; (3) if other than 100%, the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be issued to the
public (the "Issue Price"); (4) the trade date; (5) the date on which such Note
will be issued (the "Issue Date"); (6) the Stated Maturity Date and whether the
Stated Maturity Date may be extended by CFC, and if so, the Extension Periods
and Final
S-5
<PAGE>
Maturity Date (each as defined below); (7) if such Note is a Fixed Rate Note,
the rate per annum at which such Note will bear interest, if any, and the
Interest Payment Dates (as defined below) and whether such rate may be reset by
CFC prior to the Stated Maturity Date and, if so, the date(s) and basis or
formula therefor; (8) if such Note is a Floating Rate Note, whether it is a
"Floating Rate/Fixed Rate Note" and, if so, the Fixed Rate Commencement Date
and Fixed Interest Rate (each as defined below), as well as the Base Rate, the
Initial Interest Rate, the Interest Determination Dates, the Interest Reset
Dates, the Interest Payment Dates, the Index Maturity, the Maximum Interest
Rate and/or the Minimum Interest Rate, if any, and the Spread and/or Spread
Multiplier, if any (each as defined below), and any other terms relating to the
particular method of calculating the interest rate for such Note, and whether
the Spread and/or Spread Multiplier may be reset by CFC prior to the Stated
Maturity Date and, if so, the date(s) and basis or formula therefor; (9)
whether such Note may be redeemed at the option of CFC, or repaid at the option
of the Holder, prior to maturity, and if so, the earliest date of redemption
(the "Initial Redemption Date") and optional date(s) of repayment (each, an
"Optional Repayment Date") and the other provisions relating to such redemption
or repayment; (10) whether such Note will be issued initially as a Book-Entry
Note or a Certificated Note; and (11) any other terms of such Note not
inconsistent with the provisions of the Indenture.
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Principal, premium, if any, and interest will be paid by CFC in the Specified
Currency. If and as so specified in the applicable Pricing Supplement, at the
request of a Holder of a Note payable in a Specified Currency other than U.S.
dollars, payments of principal, premium, if any, and interest in respect of
such Note will be paid in U.S. dollars. Under such circumstances, CFC will be
required to tender payment in U.S. dollars at the Exchange Rate, and any costs
associated with such conversion would be borne by such Holder through deduction
from such payments. Such Holder may elect to receive payments in U.S. dollars
by delivering a written request to the Trustee not later than the close of
business on the Record Date immediately preceding the Interest Payment Date or
the fifteenth day immediately preceding the Maturity Date, as the case may be.
Such election will remain in effect until revoked by written notice from such
Holder to the Trustee, but written notice of any such revocation must be
received by the Trustee not later than the close of business on the Record Date
immediately preceding the Interest Payment Date or the fifteenth day
immediately preceding the Maturity Date, as the case may be. Upon request, the
Trustee will mail a copy of a form of request to any Holder.
Unless otherwise specified in the applicable Pricing Supplement, interest on
the certificated Notes due on any Interest Payment Date other than the Maturity
Date will be paid, except as provided below, by mailing a check in the
Specified Currency (from an account at a bank located outside of the United
States if such check is payable in a Specified Currency other than U.S.
dollars) to the Holder at the address of such Holder appearing on the Security
Register on the applicable Record Date. Unless otherwise specified in the
applicable Pricing Supplement, the first payment of interest on any Note
originally issued between a Record Date and an Interest Payment Date will be
made on the Interest Payment Date following the next Record Date to the Holder
on such next Record Date. Notwithstanding the foregoing, on any Interest
Payment Date other than the Maturity Date, a Holder of U.S. $10,000,000 (or the
equivalent thereof in a Specified Currency other than U.S. dollars) or more in
aggregate principal amount of Notes (whether or not having identical terms and
provisions) shall be entitled: (i) if the Specified Currency is U.S. dollars,
to receive such payment by wire transfer of immediately available funds to an
account maintained by the payee with a bank located in the United States, but
only if appropriate wire transfer instructions have been received in writing by
the Trustee not later than the Record Date immediately preceding such Interest
Payment Date, and (ii) if the Specified Currency is other than U.S. dollars, to
receive such payment by wire transfer of immediately available funds to an
account maintained by the payee with a bank located in a jurisdiction in which
payment in such Specified Currency is then lawful. CFC will pay any
administrative costs imposed by banks in connection with making payments by
wire transfer, but any tax, assessment or other governmental charge imposed
upon payments will be borne by the Holders of the Notes in respect of which
payments are made. Beneficial owners of Global Notes (as defined below) will be
paid in accordance with the procedures of the Depositary and its Participants
in effect from time to time as described under "--Book-Entry Notes" below.
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Unless otherwise specified in the applicable Pricing Supplement, payments of
principal, premium, if any, and interest on the Maturity Date will be made in
immediately available funds in the Specified Currency upon presentation and
surrender of Notes at the Corporate Trust Office of the Trustee. In the case of
such payments in a Specified Currency other than U.S. dollars, Notes shall be
presented and surrendered to the Trustee in time for the Trustee to make such
payments in accordance with its normal procedures.
If any Interest Payment Date other than the Maturity Date for any Floating
Rate Note would otherwise fall on a day that is not a Business Day, such
Interest Payment Date shall be postponed to the next Business Day, except that
if interest thereon is determined by reference to LIBOR and such next Business
Day falls in the next calendar month, such Interest Payment Date shall be the
immediately preceding Business Day. If the Maturity Date for any Fixed Rate
Note or Floating Rate Note or the Interest Payment Date for any Fixed Rate Note
falls on a day which is not a Business Day, payment of principal, premium, if
any, and interest with respect to such Note will be made on the next Business
Day with the same force and effect as if made on such date, and no interest on
such payment will accrue to such next Business Day.
Any interest not punctually paid or duly provided for with respect to a Note
("Defaulted Interest") will forthwith cease to be payable to the Holder thereof
on the applicable Record Date and may either be paid to the person in whose
name such Note is registered at the close of business on a special record date
(the "Special Record Date") for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to the Holder of such Note
not less than ten days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely provided in the
Indenture.
Unless otherwise specified in the applicable Pricing Supplement, the "Record
Date" with respect to any Interest Payment Date for Floating Rate Notes shall
be the fifteenth day immediately preceding such Interest Payment Date, and for
Fixed Rate Notes shall be the December 31 or June 30 immediately preceding such
Interest Payment Date, in each case whether or not such date shall be a
Business Day.
PAYMENT CURRENCY
If any payment of principal, premium, if any, or interest in respect of any
Note is to be made in a Specified Currency other than U.S. dollars and such
Specified Currency is not available to CFC for making such payment due to the
imposition of exchange controls or other circumstances beyond the control of
CFC, CFC will be entitled to satisfy its obligations to the Holder of such Note
by making such payment in U.S. dollars on the basis of the Exchange Rate (as
defined below) two Business Days prior to the Interest Payment Date or the
Maturity Date, as the case may be (or, if no rate is quoted for such Specified
Currency on such date, the last date such Exchange Rate is quoted). Any payment
made under such circumstances in U.S. dollars where the required payment is in
a Specified Currency other than U.S. dollars will not constitute an Event of
Default under the Indenture. For purposes of this section, the "Exchange Rate"
for a foreign currency or ECU will be the noon Dollar selling rate for such
foreign currency or ECU for cable transfers quoted by the Exchange Rate Agent
in The City of New York, as certified for customs purposes by the Federal
Reserve Bank of New York.
If payment on any Note is required to be made in ECU and ECU is unavailable
due to the imposition of exchange controls or other circumstances beyond the
control of CFC, or is no longer used in the European Monetary System, all
payments due on that Interest Payment Date or Maturity Date with respect to
such Note shall be made in U.S. dollars. The amount so payable on any date in
ECU shall be converted into U.S. dollars, at a rate determined by the Exchange
Rate Agent as of the second Business Day prior to the date on which such
payment is due on the following basis. The component currencies of the ECU for
this purpose (the "Components") shall be the currency amounts which were
components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by the
Exchange Rate Agent on the basis of the most recently available Exchange Rate.
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If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies (in appropriate
proportions), the sum of which shall be equal to the amount of the former
component currency.
All determinations referred to above made by an Exchange Rate Agent shall be
at its sole discretion (except to the extent expressly provided that any
determination is subject to approval) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder of such Note and
such Exchange Rate Agent shall have no liability therefor.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest from its Issue Date at the rate per
annum stated on the face thereof until the principal amount thereof is paid or
made available for payment. Unless otherwise specified in the applicable
Pricing Supplement, interest on each Fixed Rate Note will be payable semi-
annually in arrears on each January 15 and July 15 (each, an "Interest Payment
Date") and on the Maturity Date. Each payment of interest shall include
interest accrued from and including the Issue Date or the most recent Interest
Payment Date to which interest has been paid or duly provided for, as the case
may be, to, but excluding, the applicable Interest Payment Date or the Maturity
Date, as the case may be (each, an "Interest Period"). Unless otherwise
specified in the applicable Pricing Supplement, interest on the Fixed Rate
Notes will be computed on the basis of a 360-day year of twelve 30-day months.
FLOATING RATE NOTES
Each Floating Rate Note will bear interest at a rate determined by reference
to an interest rate basis (each, a "Base Rate"), which may be adjusted by a
Spread and/or Spread Multiplier. The applicable Pricing Supplement will
designate one or more of the following Base Rates as applicable to each
Floating Rate Note: (a) the Commercial Paper Rate (as defined below), (b) LIBOR
(as defined below), (c) the Treasury Rate (as defined below), (d) the
Certificate of Deposit Rate (as defined below), (e) the Federal Funds Rate (as
defined below), (f) the Prime Rate (as defined below), (g) the CMT Rate (as
defined below), (h) the 11th District Cost of Funds Rate (as defined below) or
(i) such other interest rate basis or formula as is set forth in such Pricing
Supplement and in such Floating Rate Note. The "Index Maturity" for any
Floating Rate Note is the period of maturity of the instrument or obligation
from which the Base Rate is calculated.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate, or the lowest, highest or average of two or more specified
Base Rates, (a) plus or minus the Spread, if any, and/or (b) multiplied by the
Spread Multiplier, if any. The "Spread" is the number of basis points (one
basis point equals one-hundredth of a percentage point) specified in the
applicable Pricing Supplement as being applicable to the interest rate for such
Floating Rate Note, and the "Spread Multiplier" is the percentage specified in
the applicable Pricing Supplement as being applicable to the interest rate for
such Floating Rate Note.
If a Floating Rate Note is designated as a "Floating Rate/Fixed Rate Note,"
unless otherwise specified in the applicable Pricing Supplement, the interest
rate will be calculated in the same manner as any other Floating Rate Note
until a designated date when the interest rate will become fixed (the "Fixed
Rate Commencement Date"). The interest rate in effect for the period commencing
on the Fixed Rate Commencement Date and continuing until the Maturity Date will
be the rate per annum specified in the applicable Pricing Supplement as the
"Fixed Interest Rate" or, if no Fixed Interest Rate is specified, the interest
rate in effect on the day immediately preceding the Fixed Rate Commencement
Date. Unless
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otherwise specified herein or in the applicable Pricing Supplement, the Fixed
Rate Commencement Date shall also constitute an Interest Payment Date for
purposes of calculating and paying interest. Unless otherwise specified herein
or in the applicable Pricing Supplement, the Floating Rate/Fixed Rate Note
shall be treated as a Floating Rate Note until the Fixed Rate Commencement Date
and as a Fixed Rate Note from the Fixed Rate Commencement Date thereafter.
As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any Interest Period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate
of interest which may accrue during any Interest Period ("Minimum Interest
Rate"). In addition to any Maximum Interest Rate which may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on a
Floating Rate Note will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States law of general
application.
Except as provided below, the rate of interest on each Floating Rate Note
will be reset daily, weekly, monthly, quarterly, semi-annually or annually, as
specified in the applicable Pricing Supplement. Unless otherwise specified in
the applicable Pricing Supplement, the "Interest Reset Date" will be, in the
case of Floating Rate Notes which reset (a) daily, each Business Day; (b)
weekly, the Wednesday of each week (with the exception of weekly reset Floating
Rate Notes as to which the Treasury Rate is an applicable Base Rate, which will
reset the Tuesday of each week, except as specified below); (c) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating
Rate Notes as to which the 11th District Cost of Funds Rate is an applicable
Base Rate, which will reset on the first calendar day of each month); (d)
quarterly, the third Wednesday of March, June, September and December; (e)
semi-annually, the third Wednesday of the two months specified in the
applicable Pricing Supplement; and (f) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement. If an Interest Reset Date
for any Floating Rate Note would otherwise be a day that is not a Business Day,
such Interest Reset Date shall be postponed to the next Business Day, except
that if interest thereon is determined by reference to LIBOR and such next
Business Day falls in the next calendar month, such Interest Reset Date shall
be the immediately preceding Business Day.
The interest rate in effect on each day will be (i) if such day is an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date (as defined below) immediately preceding such Interest Reset
Date or (ii) if such day is not an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately preceding the most
recent Interest Reset Date. The "Interest Determination Date" means the
Commercial Paper Rate Determination Date, the LIBOR Determination Date, the CD
Rate Determination Date, the Federal Funds Rate Determination Date, the Prime
Rate Determination Date, the Treasury Rate Determination Date, the CMT Rate
Determination Date or the 11th District Rate Determination Date (each as
defined below), as the case may be. If interest on a Floating Rate Note is
determined by reference to two or more Base Rates, the "Interest Determination
Date" means the most recent Business Day which is at least two Business Days
prior to the applicable Interest Reset Date on which each Base Rate shall be
determinable. Each Base Rate shall be determined and compared as of such date,
and the applicable interest rate shall take effect on the related Interest
Reset Date.
Interest on Floating Rate Notes will be payable on the Interest Payment Dates
specified in the applicable Pricing Supplement (each, an "Interest Payment
Date") and on the Maturity Date. Unless otherwise specified in the applicable
Pricing Supplement, interest payments shall be the amount of interest accrued
from and including the most recent Interest Payment Date to which interest has
been paid or duly provided for, or, if no interest has been paid or duly
provided for, from and including the Issue Date to but excluding the applicable
Interest Payment Date or the Maturity Date, as the case may be (each, an
"Interest Period").
With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factor calculated for each day in the Interest Period for which
accrued interest is being calculated. The interest factor for each such day is
computed by dividing the interest rate
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applicable to such day by 360, if an applicable Base Rate is the Commercial
Paper Rate, Certificate of Deposit Rate, Federal Funds Rate, Prime Rate, 11th
District Cost of Funds Rate or LIBOR, or by the actual number of days in the
year, if an applicable Base Rate is the Treasury Rate or CMT Rate. If more than
one Base Rate is applicable to a Floating Rate Note, the interest factor will
be calculated in the same manner as if only the Base Rate specified for such
purpose in the applicable Pricing Supplement applied.
Unless otherwise specified in the applicable Pricing Supplement, The Bank of
New York will be the calculation agent (the "Calculation Agent") with respect
to the Floating Rate Notes. Upon the request of the Holder of any Floating Rate
Note, the Calculation Agent will provide the interest rate then in effect and,
if determined, the interest rate which will become effective on the next
Interest Reset Date with respect to such Floating Rate Note. The "Calculation
Date," if applicable, pertaining to a Floating Rate Note will be the earlier of
(i) the 10th day after the Interest Determination Date pertaining to a Base
Rate or, if such day is not a Business Day, the next Business Day or (ii) the
Business Day immediately preceding the applicable Interest Payment Date or the
Maturity Date, as the case may be.
The interest rate in effect with respect to a Floating Rate Note from the
Issue Date to the first Interest Reset Date (the "Initial Interest Rate") will
be specified in the applicable Pricing Supplement. The interest rate for each
subsequent Interest Reset Date, except in the case of a Floating Rate/Fixed
Rate Note for the period subsequent to the Fixed Rate Commencement Date, will
be determined by the Calculation Agent as follows.
COMMERCIAL PAPER RATE
Unless otherwise specified in the applicable Pricing Supplement, the
"Commercial Paper Rate" for each applicable Interest Reset Date will be
determined by the Calculation Agent as of the second Business Day prior to such
Interest Reset Date (a "Commercial Paper Rate Determination Date") and will be
the Money Market Yield (as defined below) on such date of the rate for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates," or any successor
publication ("H.15(519")), under the heading "Commercial Paper." In the event
that such rate is not published prior to 3:00 P.M., New York City time, on the
Calculation Date, then the Commercial Paper Rate will be the Money Market Yield
on such Commercial Paper Rate Determination Date of the rate for commercial
paper of the specified Index Maturity as published by the Federal Reserve Bank
of New York in its daily statistical release "Composite 3:30 P.M. Quotations
for U.S. Governmental Securities" ("Composite Quotations") under the heading
"Commercial Paper." If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate will be the Money Market Yield of
the arithmetic mean of the offered rates as of 11:00 A.M., New York City time,
on such Commercial Paper Rate Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper of the specified Index Maturity, placed for an industrial
issuer whose bond rating is "AA," or the equivalent, from a nationally
recognized statistical rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates as
mentioned in this sentence, the Commercial Paper Rate for such Interest Reset
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Determination Date.
"Money Market Yield" will be a yield (expressed as a percentage) calculated
in accordance with the following formula:
D X 360
Money Market Yield = X 100
------------
360 - (D X M)
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal and "M" refers to the
actual number of days in the Interest Period for which interest is being
calculated corresponding to the Index Maturity specified in the applicable
Pricing Supplement.
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LIBOR
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each applicable Interest Reset Date will be determined by the Calculation Agent
as follows:
(i) If "LIBOR Reuters" is specified in the applicable Pricing Supplement,
on the second London Banking Day prior to the applicable Interest Reset
Date (a "LIBOR Determination Date"), the Calculation Agent will determine
LIBOR as the arithmetic mean of the offered rates for deposits in U.S.
dollars for the period of the Index Maturity which appear on the "Reuters
Screen LIBO Page" at approximately 11:00 A.M., London time, on such LIBOR
Determination Date. "Reuters Screen LIBO Page" means the display designated
as page "LIBO" on the Reuter Monitor Money Rates Service (or such other
page as may replace the LIBO page on that service for the purpose of
displaying London interbank offered rates of major banks).
If "LIBOR Telerate" is specified in the applicable Pricing Supplement or
if no other method is specified in such Pricing Supplement as the method
for determining LIBOR, on the LIBOR Determination Date, the Calculation
Agent will determine LIBOR as the rate for deposits in U.S. dollars for the
period of the Index Maturity which appears on "Telerate Page 3750" at
approximately 11:00 A.M., London time, on such LIBOR Determination Date.
"Telerate Page 3750" means the display page so designated on the Dow Jones
Telerate Service (or such other page as may replace such page on that
service for the purpose of displaying London interbank offered rates of
major banks).
(ii) If LIBOR Reuters is specified in the applicable Pricing Supplement
and fewer than two offered rates for the applicable Index Maturity appear
on the Reuters Screen LIBO Page or if LIBOR Telerate is applicable for
determining LIBOR and no rate appears on Telerate Page 3750, as applicable,
the Calculation Agent will request the principal London offices of each of
four major banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in U.S. dollars for the period of the Index Maturity
commencing on the second London Banking Day following such LIBOR
Determination Date to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Determination Date and
in a principal amount equal to an amount of not less than U.S. $1,000,000
that is representative of a single transaction in such market at such time.
If at least two such quotations are provided, LIBOR will be the arithmetic
mean of such quotations. If fewer than two quotations are provided, LIBOR
in respect of that LIBOR Determination Date will be the arithmetic mean of
rates quoted by three major banks in The City of New York selected by the
Calculation Agent at approximately 11:00 A.M., New York City time, on such
LIBOR Determination Date for loans in U.S. dollars to leading European
banks, for the period of the Index Maturity designated in the applicable
Pricing Supplement and in the principal amount equal to an amount of not
less than U.S. $1,000,000 that is representative for a single transaction
in such market at such time; provided, however, that if fewer than three
banks selected as aforesaid by the Calculation Agent are quoting rates as
mentioned in this sentence, LIBOR in effect for such Interest Reset Date
will be LIBOR in effect on such LIBOR Determination Date.
CERTIFICATE OF DEPOSIT RATE
Unless otherwise specified in the applicable Pricing Supplement, the
"Certificate of Deposit Rate" for each applicable Interest Reset Date will be
determined by the Calculation Agent as of the second Business Day prior to the
Interest Reset Date (a "CD Rate Determination Date") and will be the rate for
negotiable certificates of deposit having the Index Maturity designated in the
applicable Pricing Supplement as published in H.15(519) under the heading "CDs
(Secondary Market)." In the event that such rate is not published prior to 3:00
P.M., New York City time, on the Calculation Date pertaining to such CD Rate
Determination Date, then the Certificate of Deposit Rate will be the rate on
such CD Rate Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
P.M., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the
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Certificate of Deposit Rate will be calculated by the Calculation Agent and
will be the arithmetic mean of the secondary market offered rates as of 10:00
A.M., New York City time, on such CD Rate Determination Date of three leading
non-bank dealers (which may include one or more of the Agents or their
affiliates) in negotiable U.S. dollar certificates of deposit in The City of
New York selected by the Calculation Agent for negotiable certificates of
deposit of major United States money center banks (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement in a denomination of
U.S. $5,000,000; provided, however, that if the dealers selected as aforesaid
by such Calculation Agent are not quoting offered rates as mentioned in this
sentence, the Certificate of Deposit Rate for such Interest Reset Date will be
the Certificate of Deposit Rate in effect on such CD Rate Determination Date.
FEDERAL FUNDS RATE
Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" for each applicable Interest Reset Date will be determined by the
Calculation Agent as of the second Business Day prior to such Interest Reset
Date (a "Federal Funds Rate Determination Date") and will be the rate on such
Federal Funds Rate Determination Date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." In the event that such
rate is not published prior to 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Federal Funds Rate Determination Date, the
Federal Funds Rate will be the rate on such Federal Funds Rate Determination
Date as published in Composite Quotations under the heading "Federal
Funds/Effective Rate." If by 3:00 P.M., New York City time, on such Calculation
Date such rate is not yet published in either H.15(519) or Composite
Quotations, then the Federal Funds Rate will be calculated by the Calculation
Agent and will be the arithmetic mean of the rates for transactions in
overnight Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent as of
9:00 A.M., New York City time, on such Federal Funds Rate Determination Date;
provided, however, that if the three brokers selected as aforesaid by the
Calculation Agent are not quoting rates as mentioned in this sentence, the
Federal Funds Rate for such Interest Reset Date will be the Federal Funds Rate
in effect on such Federal Funds Rate Determination Date.
PRIME RATE
Unless otherwise specified in the applicable Pricing Supplement, the "Prime
Rate" for each applicable Interest Reset Date will be determined by the
Calculation Agent as of the second Business Day prior to such Interest Reset
Date (a "Prime Rate Determination Date") and will be the rate on such date as
such rate is published in H.15(519) under the heading "Bank Prime Loan." If
such rate is not published prior to 3:00 P.M., New York City time, on the
Calculation Date pertaining to the Prime Rate Determination Date, then the
Calculation Agent shall determine the Prime Rate as the arithmetic mean of the
rates of interest publicly announced by each bank that appears on the "Reuters
Screen NYMF Page" as such bank's prime rate or base lending rate as in effect
for such Prime Rate Determination Date. "Reuters Screen NYMF Page" means the
display designated as page "NYMF" on the Reuter Monitor Money Rates Service (or
such other page as may replace the NYMF Page on that service for the purpose of
displaying prime rates or base lending rates of major United States banks). If
fewer than four such rates but more than one such rate appear on the Reuters
Screen NYMF Page for such Prime Rate Determination Date, the Calculation Agent
shall determine the Prime Rate as the arithmetic mean of the prime rates quoted
on the basis of the actual number of days in the year divided by a 360-day year
as of the close of business in The City of New York on such Prime Rate
Determination Date by three major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Calculation Agent shall determine the Prime Rate
as the arithmetic mean on the basis of the prime rates quoted as of the close
of business in The City of New York on such Prime Rate Determination Date by
three substitute banks or trust companies that are organized and doing business
under the laws of the United States or any state thereof, have total equity
capital of at least U.S. $500,000,000 and are subject to supervision or
examination by Federal or state authorities; provided, however, that if fewer
than three such substitute banks or trust companies are
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quoting prime rates as mentioned in this sentence, the Prime Rate for such
Interest Reset Date will be the Prime Rate in effect on such Prime Rate
Determination Date.
TREASURY RATE
Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Treasury Rate Determination Date (as
defined below), the rate for the auction held on such Treasury Rate
Determination Date of direct obligations of the United States ("Treasury
bills") having the Index Maturity designated in the applicable Pricing
Supplement as published in H.15(519) under the heading "Treasury bills--auction
average (investment)" or, if not so published by 9:00 A.M., New York City time,
on the Calculation Date pertaining to such Treasury Rate Determination Date,
the auction average rate (expressed as a bond equivalent, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the Index
Maturity designated in the applicable Pricing Supplement are not published or
reported as provided above by 3:00 P.M., New York City time, on such
Calculation Date or if no such auction is held on such Treasury Rate
Determination Date, then the Treasury Rate will be calculated by the
Calculation Agent and shall be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate
Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent for the issue of Treasury
bills with a remaining maturity closest to the Index Maturity designated in the
applicable Pricing Supplement; provided, however, that if the dealers selected
as aforesaid by the Calculation Agent are not quoting bid rates as mentioned in
this sentence, the Treasury Rate for such Interest Reset Date will be the
Treasury Rate in effect on such Treasury Rate Determination Date.
The "Treasury Rate Determination Date" will be the day of the week in which
the applicable Interest Reset Date falls on which Treasury bills would normally
be auctioned. Treasury bills are normally sold at auction on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday; provided, however, that if such auction is held
on the preceding Friday, such Friday will be the Treasury Rate Determination
Date pertaining to the Interest Reset Date occurring in the next week; and,
provided, further that if an auction falls on an Interest Reset Date, then such
Interest Reset Date will be the first Business Day following such auction.
Treasury Rate Notes, like other Notes, are not obligations of the United
States government and are not guaranteed by the United States government.
CMT RATE
Unless otherwise specified in the applicable Pricing Supplement, the "CMT
Rate" for each applicable Interest Reset Date will be determined by the
Calculation Agent as of the second Business Day prior to such Interest Reset
Date (the "CMT Rate Determination Date"), and will be the rate displayed on the
Designated CMT Telerate Page (as defined below) under the caption ". . .
Treasury Constant Maturities . . . Federal Reserve Board Release H.15 . . .
Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page
is 7055, the rate on such CMT Rate Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the applicable CMT Rate
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such CMT Rate Determination Date, then the CMT Rate for such
CMT Rate Determination Date will be such treasury constant maturity rate for
the Designated CMT Maturity Index as published in the relevant H.15(519). If
such rate is no longer published in the relevant H.15(519), or if not published
by 3:00 P.M., New York City time, on the Calculation Date pertaining to such
CMT Rate Determination Date, then the CMT Rate for such CMT Rate Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index
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(or other United States Treasury rate for the Designated CMT Maturity Index)
for the CMT Rate Determination Date with respect to such Interest Reset Date as
may then be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in the relevant H.15(519). If such
information is not provided by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such CMT Rate Determination Date, then the CMT
Rate for the CMT Rate Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity, based on the arithmetic mean of the
secondary market closing offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Rate Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Notes") with an original maturity
of approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year. If
the Calculation Agent cannot obtain three such Treasury Note quotations, the
CMT Rate for such CMT Rate Determination Date will be calculated by the
Calculation Agent and will be a yield to maturity based on the arithmetic mean
of the secondary market offer side prices as of approximately 3:30 P.M., New
York City time, on the CMT Rate Determination Date of three Reference Dealers
in The City of New York (from five such Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least U.S. $100,000,000. If three or four (and not
five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate for such Interest Reset
Date will be the CMT Rate in effect on such CMT Rate Determination Date. If two
Treasury Notes with an original maturity as described in the second preceding
sentence have remaining terms to maturity equally close to the Designated CMT
Maturity Index, the quotes for the Treasury Note with the shorter remaining
term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as published in H.15(519)), for the
purpose of displaying Treasury Constant Maturities as published in H.15(519).
If no such page is specified in the applicable Pricing Supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
Treasury Notes (either one, two, three, five, seven, ten, twenty or thirty
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
11TH DISTRICT COST OF FUNDS RATE
Unless otherwise specified in the applicable Pricing Supplement, the "11th
District Cost of Funds Rate" for each applicable Interest Reset Date will be
determined by the Calculation Agent as of the last Business Day of the month
prior to such Interest Reset Date (the "11th District Rate Determination
Date"), and will be the rate equal to the monthly weighted average cost of
funds for the calendar month preceding such 11th District Rate Determination
Date as set forth under the caption "11th District" on Telerate Page 7058 as of
11:00 A.M., San Francisco time, on such 11th District Rate Determination Date.
If such rate does not appear
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on Telerate Page 7058 on any related 11th District Rate Determination Date, the
11th District Cost of Funds Rate for such 11th District Rate Determination Date
shall be the monthly weighted average cost of funds paid by member institutions
of the Eleventh Federal Home Loan Bank District that was most recently
announced by the Federal Home Loan Bank ("FHLB") of San Francisco as such cost
of funds for the calendar month preceding the date of such announcement. If the
FHLB of San Francisco fails to announce such rate for the calendar month next
preceding such 11th District Rate Determination Date, then the 11th District
Cost of Funds Rate for such Interest Reset Date will be the 11th District Cost
of Funds Rate then in effect on such 11th District Rate Determination Date.
RESET NOTES
The Pricing Supplement relating to each Note will indicate whether CFC has
the option with respect to such Note to reset the interest rate, in the case of
a Fixed Rate Note, or to reset the Spread and/or Spread Multiplier, in the case
of a Floating Rate Note (in each case, a "Reset Note"), and, if so, (i) the
date or dates on which such interest rate or such Spread and/or Spread
Multiplier, as the case may be, may be reset (each an "Optional Interest Reset
Date") and (ii) the basis or formula, if any, for such resetting.
CFC may exercise such option with respect to a Note by notifying the Trustee
of such exercise at least 45 but not more than 60 calendar days prior to an
Optional Interest Reset Date for such Note. If the Company so notifies the
Trustee of such exercise, not later than 40 calendar days prior to such
Optional Interest Reset Date the Trustee will send by telegram, telex,
facsimile transmission or letter (first class, postage prepaid) to the Holder
of such Note a notice (the "Reset Notice") indicating (i) that CFC has elected
to reset the interest rate, in the case of a Fixed Rate Note, or the Spread
and/or Spread Multiplier, in the case of a Floating Rate Note, (ii) such new
interest rate or such new Spread and/or Spread Multiplier, as the case may be,
and (iii) the provisions, if any, for redemption by CFC during the period from
such Optional Interest Reset Date to the next Optional Interest Reset Date or,
if there is no such next Optional Interest Reset Date, to the Stated Maturity
Date of such Note (each such period, a "Subsequent Interest Period"), including
the date or dates on which, or the period or periods during which, and the
price or prices at which such redemption may occur during such Subsequent
Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior to an
Optional Interest Reset Date for a Note, CFC may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the Reset
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a higher Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, for the Subsequent Interest Period commencing on such Optional Interest
Reset Date by causing the Trustee to send by telegram, telex, facsimile
transmission or letter (first class, postage prepaid) notice of such higher
interest rate or higher Spread and/or Spread Multiplier, as the case may be, to
the Holder of such Note. Such notice shall be irrevocable. All Notes with
respect to which the interest rate or Spread and/or Spread Multiplier is reset
on an Optional Interest Reset Date, and with respect to which Holders of such
Notes have not surrendered such Notes for repayment (or have validly revoked
any such surrender) pursuant to the next paragraph, will bear such higher
interest rate, in the case of a Fixed Rate Note, or higher Spread and/or Spread
Multiplier, in the case of a Floating Rate Note.
If CFC elects prior to an Optional Interest Reset Date to reset the interest
rate or the Spread and/or Spread Multiplier of a Note, the Holder of such Note
will have the option to elect repayment of such Note by CFC on such Optional
Interest Reset Date at a price equal to the principal amount thereof plus any
accrued interest to such Optional Interest Reset Date. In order to obtain
repayment of such Note to be so repaid on such Optional Interest Reset Date,
the Holder thereof must follow the procedures set forth below under "Redemption
and Repayment" for optional repayment, except that the period for delivery of
such Note or notification to the Trustee shall be at least 25 but not more than
35 calendar days prior to such Optional Interest Reset Date. A Holder who has
tendered a Note for repayment following receipt of a Reset Notice may revoke
such tender for repayment by written notice to the Trustee received prior to
5:00 P.M., New York City time, on the 10th calendar day prior to such Optional
Interest Reset Date.
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EXTENSION OF MATURITY
The Pricing Supplement relating to each Note will indicate whether the
Company has the option to extend the Stated Maturity Date of such Note for one
or more periods of one to five whole years (each such period, an "Extension
Period") up to but not beyond the date (the "Final Stated Maturity Date") set
forth in such Pricing Supplement.
CFC may exercise such option with respect to a Note by notifying the Trustee
of such exercise at least 45 but not more than 60 calendar days prior to the
Stated Maturity Date of such Note in effect prior to the exercise of such
option (the "Current Stated Maturity Date"). If CFC so notifies the Trustee of
such exercise, not later than 40 calendar days prior to the Current Stated
Maturity Date the Trustee will send by telegram, telex, facsimile transmission
or letter (first class, postage prepaid) to the Holder of such Note a notice
(the "Extension Notice") relating to such Extension Period, indicating (i) that
CFC has elected to extend the Current Stated Maturity Date of such Note, (ii)
the new Stated Maturity Date and the Final Stated Maturity Date, (iii) in the
case of a Fixed Rate Note, the interest rate applicable to the Extension Period
or, in the case of a Floating Rate Note, the Spread and/or Spread Multiplier
applicable to the Extension Period, and (iv) the provisions, if any, for
redemption by CFC during the Extension Period, including the date or dates on
which, or the period or periods during which, and the price or prices at which
such redemption may occur during the Extension Period. Upon the sending by the
Trustee of an Extension Notice to the Holder of a Note, the Current Stated
Maturity Date of such Note shall be extended automatically, and, except as
modified by the Extension Notice and as described in the next two paragraphs,
such Note will have the same terms as prior to the sending of such Extension
Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior to the
Current Stated Maturity Date of a Note, CFC may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, provided for in the Extension
Notice and establish a higher interest rate, in the case of a Fixed Rate Note,
or a higher Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, for the Extension Period by causing the Trustee to send by telegram,
telex, facsimile transmission or letter (first class, postage prepaid) notice
of such higher interest rate or higher Spread and/or Spread Multiplier, as the
case may be, to the Holder of such Note. Such notice shall be irrevocable. All
Notes with respect to which the Current Stated Maturity Date is extended, and
with respect to which the Holders of such Notes have not surrendered such Notes
for repayment (or have validly revoked any such surrender) pursuant to the next
paragraph, will bear such higher interest rate, in the case of a Fixed Rate
Note, or higher Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, for the Extension Period.
If CFC elects to extend the Current Stated Maturity Date of a Note, the
Holder of such Note will have the option to elect repayment of such Note by CFC
on the Current Stated Maturity Date at a price equal to the principal amount
thereof plus any accrued interest to the Current Stated Maturity Date. In order
for a Note to be so repaid on the Current Stated Maturity Date, the Holder
thereof must follow the procedures set forth below under "Redemption and
Repayment" for optional repayment, except that the period for delivery of such
Note or notification to the Trustee shall be at least 25 but not more than 35
calendar days prior to the Current Stated Maturity Date. A Holder who has
tendered a Note for repayment following receipt of an Extension Notice may
revoke such tender for repayment by written notice to the Trustee received
prior to 5:00 P.M., New York City time on the 10th calendar day prior to the
Current Stated Maturity Date.
RENEWABLE NOTES
If so indicated in the applicable Pricing Supplement, the term of all or any
portion of a Note may be renewed beyond the Stated Maturity Date by the Holder
in accordance with the procedures described in such Supplement.
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COMBINATION OF PROVISIONS
If so specified in the applicable Pricing Supplement, any Note may be
subject to all of the provisions, or any combination of the provisions,
described above under "--Reset Notes," "--Extension of Maturity" and "--
Renewable Notes."
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes having the same Specified Currency,
Issue Date, Stated Maturity Date, redemption and/or repayment provisions, if
any, reset and/or extension provisions, if any, Interest Payment Dates, if
any, and, in the case of Fixed Rate Notes, interest rate or, in the case of
Floating Rate Notes, Base Rate or Rates, Initial Interest Rate, Index
Maturity, Interest Reset Dates, Spread and/or Spread Multiplier, if any,
Minimum Interest Rate, if any, and/or Maximum Interest Rate, if any, will be
represented by one or more global securities (each, "Global Note"). Each
Global Note representing Book-Entry Notes will be deposited with, or on behalf
of, DTC, or such other depositary as is specified in the Pricing Supplement
(the "Depositary"), and registered in the name of a nominee of such
Depositary. Global Notes may not be transferred except as a whole by the
applicable Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any nominee to a successor of such Depositary or a nominee of
such successor.
Book-Entry Notes will not be exchangeable for Certificated Notes and, except
under the limited circumstances described below, will not otherwise be
issuable in definitive form.
DTC has advised CFC and the Agents as follows:
DTC will initially act as securities depository for the Global Notes. The
Global Notes will be issued as fully registered securities registered in
the name of Cede & Co. (DTC's partnership nominee). One fully registered
Global Note will be issued with respect to each $200,000,000 of principal
amount of Notes.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended. DTC holds
securities that its participants ("Participants") deposit with it. DTC also
facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to DTC's system
is also available to others such as securities brokers and dealers, banks,
and trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and its Participants are on
file with the Securities and Exchange Commission.
Purchases of securities under DTC's system must be made by or through
Direct Participants, which will receive a credit for the securities on
DTC's records. The ownership interest of each actual purchaser of each
security (a "beneficial owner") is in turn recorded on the Direct
Participant's and Indirect Participant's records. Beneficial owners will
not receive written confirmation from DTC of their purchase, but such
beneficial owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct Participant or Indirect Participant through which
the beneficial owner entered into the transaction. Transfers of ownership
interests in the securities are to be accomplished by entries made on the
books of Participants acting on behalf of beneficial owners. Beneficial
owners will not receive certificates representing their ownership
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interests in securities, except in the event that use of the book-entry
system for the securities is discontinued.
To facilitate subsequent transfers, all securities deposited by
Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of securities with DTC and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the
securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such securities are credited, which may or
may not be the beneficial owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to beneficial owners is
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in
such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to
securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
issuer as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the securities are credited on the record date (identified
in a listing attached to the Omnibus Proxy).
Principal, premium, if any, and interest payments on the securities will
be made to DTC. DTC's practice is to credit Direct Participants' accounts
on the payable date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive
payment on the payable date. Payments by Participants to beneficial owners
will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of such
Participant and not of DTC, the applicable Paying Agent, or CFC, subject to
any statutory or regulatory requirements as may be in effect from time to
time. Payment of principal and interest to DTC is the responsibility of CFC
or the applicable Paying Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the beneficial owners shall be the responsibility of Direct
Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Global Notes at any time by giving reasonable notice to CFC,
the Trustee or the applicable Paying Agent. Under such circumstances, in
the event that a successor securities depository is not obtained, the
Global Notes are required to be printed and delivered.
CFC may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depository). In that event, the
Global Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that CFC believes to be reliable, but CFC takes
no responsibility for the accuracy thereof.
So long as the Depositary for a Global Note, or its nominee, is the
registered owner of such Global Note, such Depositary or such nominee, as the
case may be, will be considered the sole owner or Holder of the Book-Entry
Notes represented by such Global Note for all purposes under the Indenture
governing such Book-Entry Notes. Except as set forth below, owners of
beneficial interests in such Global Notes will not be entitled to have Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Notes and will not be
considered the owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the
procedures of the Depositary and, if such person is not a Participant, those of
the Participant
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through which such person owns its interests, in order to exercise any rights
of a Holder under the Indenture or such Note. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the ability
to transfer beneficial interests in a Global Note.
Principal, premium, if any, and interest payments on Notes registered in the
name of or held by the Depositary or its nominee will be made to the Depositary
or its nominee, as the case may be, as the registered owner or the Holder of
the Global Note representing such Book-Entry Notes. None of CFC, the Trustee,
the Calculation Agent, any Paying Agent or the Security Registrar will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note for
such Book-Entry Notes or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
If the Depositary is at any time unwilling, unable or ineligible to continue
as Depositary and a successor Depositary is not appointed by CFC within 60 days
or if an Event of Default under the Indenture has occurred and is continuing,
CFC will issue Certificated Notes in exchange for the Global Note or Notes
representing such Book-Entry Notes. In addition, CFC may at any time and in its
sole discretion determine not to have any Notes in registered form represented
by one or more Global Notes and, in such event, will issue Certificated Notes
in exchange for all Global Notes representing such Notes. In any such instance,
an owner of a beneficial interest in a Global Note will be entitled to physical
delivery of Certificated Notes represented by such Global Note equal in
principal amount to such beneficial interest and to have such Notes registered
in its name.
REDEMPTION AND REPAYMENT
If so specified in the applicable Pricing Supplement, CFC may at its option
on and after the Initial Redemption Date, if any, set forth in a Note redeem
such Note in whole or, from time to time, in part in increments of $1,000
(provided that any remaining principal amount thereof shall not be less than
$100,000 (or such other amount in a foreign currency or currency unit as is
specified in the applicable Pricing Supplement), or, if another minimum
denomination is set forth in the applicable Pricing Supplement, then such
minimum denomination) at the sum of (i) 100% of the unpaid principal amount
thereof or the portion thereof redeemed (or, if such Note is an Original Issue
Discount Security (as defined below), the Amortized Face Amount (as defined
below) determined as of the Redemption Date as provided below), plus (ii) the
Initial Redemption Percentage specified in the applicable Pricing Supplement
(as adjusted by the Annual Redemption Percentage Reduction, if applicable)
multiplied by the unpaid principal amount or the portion thereof redeemed (or,
if such Note is an Original Issue Discount Security, the Issue Price thereof,
net of any portion of such Issue Price which has been deemed paid prior to
redemption (by reason of any payments, other than a payment of qualified stated
interest, in excess of the original issue discount accrued to the date of such
payment), or the portion of such Issue Price (or such net amount) proportionate
to the portion of the unpaid principal amount of the Note redeemed), plus (iii)
accrued interest to the Redemption Date (or, if such Note is an Original Issue
Discount Security, any accrued interest to the Redemption Date the payment of
which would constitute qualified stated interest payments within the meaning of
Treasury Regulation Section 1.1273-1(c) under the Internal Revenue Code of
1986, as amended (the "Code"), as in effect on the date hereof). Such Initial
Redemption Percentage shall decline at each anniversary of the Initial
Redemption Date by an amount equal to the Annual Redemption Percentage
Reduction, if any, specified in the applicable Pricing Supplement, until the
Initial Redemption Percentage equals zero percent. CFC may exercise such option
by causing the Trustee to mail a notice of such redemption to the Holder of
such Note not less than 30 but not more than 60 days prior to the Redemption
Date. In the event of redemption of such Note in part only, a new Note or Notes
for the unredeemed portion thereof shall be issued in the name of the Holder
thereof upon the cancellation thereof. If less than all of the Notes with like
tenor and terms to such Note are to be redeemed, the Notes to be redeemed shall
be selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.
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An "Original Issue Discount Security" means any Note that has been issued at
an Issue Price lower, by an amount that equals or exceeds a de minimis amount
(as determined under United States Federal income tax rules applicable to
original issue discount instruments), than the principal amount thereof. The
"Amortized Face Amount" of such Note shall be the amount equal to the sum of
(a) the Issue Price plus (b) the aggregate of the portions of the original
issue discount (the excess of the amounts considered as part of the "stated
redemption price at maturity" of such Note within the meaning of Section
1273(a)(2) of the Code, whether denominated as principal or interest, over the
Issue Price of such Note) which shall theretofore have accrued pursuant to
Section 1272 of the Code (without regard to Section 1272(a)(7) of the Code)
from the Issue Date of such Note to the date of determination, minus (c) any
amount considered as part of the "stated redemption price at maturity" of such
Note which has been paid on such Note from the Issue Date to the date of
determination. If a Note is an Original Issue Discount Security, the amount
payable in the event of acceleration of the maturity thereof shall be the
Amortized Face Amount, plus accrued but unpaid qualified stated interest as
defined in clause (iii) of the first sentence of the preceding paragraph.
If so specified in the applicable Pricing Supplement, the Notes will be
repayable by CFC in whole or in part at the option of Holders thereof on their
respective Optional Repayment Dates specified in such Pricing Supplement. If no
Optional Repayment Date is specified with respect to a Note, such Note will not
be repayable at the option of the Holder thereof prior to the Stated Maturity
Date. Any repayment in part will be in increments of $1,000 (provided that any
remaining principal amount thereof shall be at least the minimum denomination).
Unless otherwise specified in the applicable Pricing Supplement, the repayment
price for any Note to be repaid means an amount equal to the sum of (i) 100% of
the unpaid principal amount thereof or the portion to be repaid thereof plus
(ii) accrued interest to the Repayment Date. For any Note to be repaid, such
Note must be received, together with the form thereon entitled "Option to Elect
Repayment" duly completed, by the Trustee at its Corporate Trust Office (or
such other address of which CFC shall from time to time notify the Holders) not
more than 60 nor less than 30 days prior to the Repayment Date. Exercise of
such repayment option by the Holder will be irrevocable, except as otherwise
provided above under "--Reset Notes" and "--Extension of Maturity."
While the Book-Entry Notes are represented by the Global Notes held by or on
behalf of the Depositary, and registered in the name of the Depositary or the
Depositary's nominee, the option for repayment may be exercised by the
Depositary, acting on behalf of each applicable Participant who is, in turn,
acting on behalf of the beneficial owners of the Global Note or Notes
representing such Book-Entry Notes, by delivering a written notice
substantially similar to the above mentioned form to the Trustee at its
Corporate Trust Office (or such other address of which CFC shall from time to
time notify the Holders), not more than 60 nor less than 30 days prior to the
Repayment Date. Notices of elections from the Depositary must be received by
the Trustee by 5:00 P.M., New York City time, on the last day for giving such
notice. In order to ensure that a notice is received by the Trustee on a
particular day, the beneficial owner of the Global Note or Notes representing
such Book-Entry Notes must so direct the applicable Participant before such
Participant's deadline for accepting instructions for that day. Different firms
may have different deadlines for accepting instructions from their customers.
Accordingly, beneficial owners of the Global Note or Notes representing Book-
Entry Notes should consult the Participants through which they own their
interest therein for the respective deadlines for such Participants. All
instructions given to Participants from beneficial owners of Global Notes
relating to the option to elect repayment shall be irrevocable, except as
otherwise provided above under "--Reset Notes" and "--Extension of Maturity."
In addition, at the time such instructions are given, such beneficial owners
shall cause the applicable Participant to transfer such beneficial owner's
interest in the Global Note or Notes representing the related Book-Entry Notes,
on the Depositary's records, to the Trustee. See "--Book-Entry Notes" above.
CFC or CCI may purchase Notes in the open market by tender or contract. Notes
so purchased may be held, resold or surrendered to the Trustee for
cancellation.
If applicable, CFC will comply with the requirements of Rule 14e-1 under the
Securities Exchange Act of 1934, as amended, and any other securities laws or
regulations in connection with any such repayment.
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GUARANTEES
The Notes will be unconditionally guaranteed by CCI as to payment of
principal, premium, if any, and interest, when and as the same shall become due
and payable, whether at maturity or upon redemption or repayment or otherwise.
See "Description of Debt Securities and Guarantees" in the accompanying
Prospectus.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain of the anticipated United
States Federal income tax consequences of the purchase, ownership and
disposition of Notes.
The summary is for general information only and is based on the Code, the
Treasury Regulations promulgated or proposed thereunder, and judicial and
administrative interpretations thereof, all as in effect on the date hereof and
all of which are subject to change, possibly with retroactive effect, or to
different interpretations. Holders of Notes should be aware that on December
15, 1994, the Internal Revenue Service released proposed amendments to the
Treasury Regulations. If adopted, these amendments would generally be effective
for debt instruments issued 60 days or more after the date on which such
proposed amendments are finalized.
The tax treatment of a holder of the Notes may vary depending upon the
particular situation of the holder. The summary is limited to investors who
will hold the Notes as "capital assets" within the meaning of Section 1221 of
the Code and does not deal with holders in special tax situations (including,
but not limited to, insurance companies, tax-exempt organizations, financial
institutions, dealers in securities or currencies, holders whose functional
currency is not the U.S. dollar, or holders who will hold Notes as a hedge
against currency risks or as a position in a "straddle" for tax purposes), who
may be subject to special rules not discussed below. The summary does not apply
to holders that are not United States Holders (defined below). The summary is
applicable to initial purchasers of Notes only and does not address subsequent
purchasers. The discussion below also does not address the effect of any United
States, state, local or foreign tax law on a holder of Notes. As used herein,
the term "United States Holder" means an individual who is a citizen or
resident of the United States, a partnership, corporation or other entity
organized in or under the laws of the United States or any state thereof, or an
estate or trust that is subject to United States Federal income taxation
without regard to the source of its income.
The summary does not constitute, and should not be considered as, legal or
tax advice to prospective holders of Notes. Each prospective holder of Notes
should consult a tax advisor as to the particular tax consequences of holding
Notes to such holder, including the applicability and effect of any state,
local or foreign tax laws.
PAYMENTS OF INTEREST
Interest on a Note, other than interest on a Discount Note (defined below
under "Original Issue Discount") that is not a "qualified stated interest"
payment (also as defined under "Original Issue Discount"), will be taxable to a
holder as ordinary interest income at the time it is accrued or is received in
accordance with the holder's method of accounting for tax purposes. If interest
is paid in a Specified Currency other than U.S. dollars ("Foreign Currency"),
the amount of interest income realized by a holder will be the U.S. dollar
value of (a) in the case of a cash basis holder, the Foreign Currency received
(based on the spot rate in effect on the date of receipt), or (b) in the case
of an accrual basis holder, the Foreign Currency accrued during an interest
accrual period, or partial interest accrual period (based on (i) the average
exchange rate in effect during the accrual period, (ii) the spot rate on the
last day of the accrual period or (iii) the spot rate on the payment date, if
such date is within five business days of the last day of the accrual period),
in each case, regardless of whether the payment is in fact converted into U.S.
dollars. In the case of an accrual basis holder,
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at the time the interest accrued is received, the holder will realize exchange
gain or loss, taxable as ordinary income or loss, equal to the difference, if
any, between the amount of Foreign Currency received with respect to such
accrual period (translated into U.S. dollars at the spot rate in effect on the
date the interest is received) and the amount of interest on the Note included
in income. The Federal income tax consequences of the disposition of Foreign
Currency received as interest are described below under "--Exchange of Amounts
in Foreign Currency."
ORIGINAL ISSUE DISCOUNT
General. A Note will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the "stated redemption price at maturity" of
the Note over its issue price (defined as the first price at which a
substantial amount of Notes of the same issue is sold to the public) equals or
exceeds a de minimis amount (generally 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years from
the issue date to maturity). "Stated redemption price at maturity" is the total
of all payments provided by the Note that are not payments of "qualified stated
interest." A "qualified stated interest" payment is a payment of stated
interest that is unconditionally payable in cash or property (other than debt
instruments of CFC) at least annually during the entire term of the Note,
including short periods, with respect to a Floating Rate Note, at certain
specified types of variable rates (as discussed below) or, with respect to a
Fixed Rate Note, at a single fixed rate. Interest is payable at a single fixed
rate only if the rate appropriately takes into account the length of the
intervals between payments. Stated interest that exceeds qualified stated
interest is included in the Note's stated redemption price at maturity.
Holders of Discount Notes having a maturity of more than one year from their
date of issue will be required to include original issue discount in income as
it accrues, which can result in recognition of income before the receipt of
cash attributable to such income. The amount of original issue discount
includable in income by the holder of such a Discount Note is the sum of the
daily portions of original issue discount with respect to the Discount Note for
each day during the taxable year or portion of the taxable year in which it
holds such Discount Note ("accrued original issue discount"). The daily portion
is determined by allocating to each day in any "accrual period" a pro rata
portion of the original issue discount that accrued in such period (the excess
of (a) the product of the Discount Note's adjusted issue price at the beginning
of the accrual period and its yield to the maturity, appropriately adjusted for
the length of the period, over (b) the sum of the qualified stated interest
payments, if any, payable during the accrual period). The "accrual period" for
a Discount Note may be of any length and may vary in length over the term of a
Note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the first day or
the last day of an accrual period. The "adjusted issue price" of a Discount
Note at the start of any accrual period is the sum of the issue price of the
Note plus the accrued original issue discount for each prior accrual period
minus any prior payments on the Note that were not qualified stated interest
payments. Holders of Notes with a de minimis amount of original issue discount
must include a proportionate amount of each payment of stated principal
received in respect of the Notes in income as capital gain.
Floating Rate Notes. If a Floating Rate Note that otherwise qualifies as a
"variable rate debt instrument" under the applicable Treasury Regulations
provides for stated interest at a single "qualified floating rate" or a single
"objective rate" (each as defined in the Treasury Regulations) that is
unconditionally payable in cash or property (other than debt instruments of
CFC), or that will be constructively received, at least annually, then all
payments of stated interest with respect to such Note will be "qualified stated
interest." The amount of original issue discount (if any) with which such a
Note is issued will be determined under the rules discussed above by assuming
that the Floating Rate Note pays stated interest at the appropriate fixed rate
substitute (generally, the value, as of the Issue Date, of the floating rate,
or in the case of certain Floating Rate Notes, a fixed rate that reflects the
yield that is reasonably expected for such Notes).
The Treasury Regulations provide additional rules for Floating Rate Notes
that qualify as variable rate debt instruments and that provide for stated
interest at more than one floating rate or at a fixed rate for a portion of its
term. In certain cases, such Floating Rate Notes that are not issued at a
discount may be deemed
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to bear original issue discount for Federal income tax purposes, with the
result that inclusion of original issue discount in gross income for Federal
income tax purposes may vary from the cash payments of interest received on
such Notes, generally accelerating income for cash method taxpayers. For
example, under the Treasury Regulations, a Floating Rate Note may be a Discount
Note where (a) it bears interest at a floating rate followed by another
floating rate and, as of the Issue Date, the values of the two floating rates
differ, or (b) it bears interest at a fixed rate followed by a floating rate
(or vice versa) and, as of the Issue Date, the value of the floating rate
differs from the fixed rate. The tax treatment of a United States Holder of a
Floating Rate Note ultimately will depend upon the precise terms of the Notes
offered; consequently, the proper tax treatment of such Notes will be more
fully described in the applicable Pricing Supplement.
A Floating Rate Note that does not qualify as a variable rate debt instrument
under the Treasury Regulations will be treated as a contingent payment
obligation. For example, a Floating Rate Note will not qualify as a variable
rate debt instrument under the Treasury Regulations if, among other things, it
provides for either a minimum rate of interest or a maximum rate of interest
that, in either case, is not fixed throughout its term and is reasonably
expected, as of the Issue Date, to cause the yield on the Note to be
significantly more or less than the yield determined without regard to the
minimum or maximum rate of interest. The Treasury Regulations governing the
treatment of contingent payment obligations currently are only in proposed
form. The tax treatment of a Floating Rate Note that is treated as a contingent
payment obligation will be more fully described in the applicable Pricing
Supplement.
Any determination of the type described above made by CFC when a Note is
issued may be subject to subsequent changes and clarifications of applicable
law or to challenge by the Internal Revenue Service.
Optional Redemption. An unconditional option of CFC or a Holder to redeem a
Note prior to the Maturity Date will be presumed to be exercised if, by
utilizing any date on which the Note may be redeemed as its maturity date and
the amount payable on that date in accordance with the terms of the Note (the
"redemption price") as its stated redemption price at maturity, the yield on
the Note is lower than its yield to maturity in the case of an option
exercisable by CFC (or, in the case of an option exercisable by a Holder, is
greater than its yield to maturity). If such an option is not in fact exercised
when presumed to be, solely for purposes of accruing original issue discount,
the Note will be treated as if it were redeemed, and a new Note issued, on the
presumed exercise date for an amount equal to its adjusted issue price on that
date.
Short-Term Notes. A Note that matures one year or less from the date of its
issuance (a "Short-Term Note") will be treated as having been issued at an
original issue discount equal to the excess of the total principal and interest
payments on the Note over its issue price. In general, an individual or other
cash basis holder of a Short-Term Note is not required to currently include in
income accrued original issue discount for United States Federal income tax
purposes unless it elects to do so. Accrual basis holders and certain other
holders are required to include in income accrued original issue discount on
Short-Term Notes on a straight-line basis unless an irrevocable election is
made to include in income accrued original issue discount under the constant
yield method (based on daily compounding). In the case of a holder not required
and not electing to include accrued original issue discount in income
currently, any gain realized on the sale or retirement of the Short-Term Note
will be ordinary income to the extent of the original issue discount accrued on
a straight-line basis (or, at the holder's irrevocable election, under a
constant yield method, based on daily compounding) through the date of sale or
retirement. A holder who is not required and does not elect to include in
income accrued original issue discount on a Short-Term Note will be required to
defer deduction of a portion of the holder's interest expense with respect to
any indebtedness incurred or maintained to purchase or carry the Note.
Foreign Currency Denominated Discount Notes. In the case of a Discount Note
denominated in a Foreign Currency, for purposes of calculating original issue
discount, a holder should: (i) calculate the amount and accrual of original
issue discount in respect of the Note in the Foreign Currency; (ii) determine
the U.S. dollar amount of original issue discount includable in income for each
accrual period by translating the Foreign Currency amounts into U.S. dollars
based on the average exchange rate in effect during that accrual period
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or based on the spot rate (A) on the last day of the relevant accrual period
(or partial accrual period) or (B) on the payment date, if such date is within
five business days of the last day of the accrual period; and (iii) recognize
any Foreign Currency gain or loss when the original issue discount is received
to the extent of the difference between the amount determined pursuant to
clause (ii) above and the U.S. dollar value of such payment determined by
translating the Foreign Currency at the spot rate in effect on the date of
payment. The Federal income tax consequences of the disposition of any Foreign
Currency received are described below under "--Exchange of Amounts in Foreign
Currency." For these purposes, all receipts with respect to a Note will be
treated first as the receipt of periodic interest (determined under Section
1273 of the Code and the Treasury Regulations), second as payments of
previously accrued original issue discount (to the extent thereof, with
payments treated as made for the earliest accrual periods first), and
thereafter as the receipt of principal.
NOTES PURCHASED AT A PREMIUM
A holder that purchases a Note for an amount in excess of its principal
amount may elect to treat that excess as "amortizable bond premium," in which
case the amount required to be included in the holder's income each year with
respect to interest on the Note will be reduced by the amount of amortizable
bond premium allocable (based on the Note's yield to maturity) to that year.
Any such election would apply to all bonds (other than bonds the interest on
which is excludable from gross income) held by the holder at the beginning of
the first taxable year to which the election applies or thereafter acquired by
the holder, and is irrevocable without the consent of the Internal Revenue
Service. Amortizable bond premium on a Note denominated in a Foreign Currency
will, if a holder so elects, reduce the amount of Foreign Currency interest
income on the Note. An electing holder will recognize exchange gain or loss at
the time it offsets the portion of the premium amortized with respect to any
period against the interest income for such period, by treating such portion
as a return of principal.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
A holder may elect to treat all interest on any Note as original issue
discount and calculate the amount includible in gross income under the
constant yield method described above. For the purposes of this election,
interest includes stated interest, acquisition discount, original issue
discount, de minimis original issue discount, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. The election is made for the year in which the
holder acquired the Note, and may not be revoked without the consent of the
Internal Revenue Service.
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A holder's tax basis in a Note will be its cost, increased by the amount of
any original issue discount included in the holder's income with respect to
the Note and reduced by the amount of any cash payments on the Note that are
not qualified stated interest payments and by the amount of any amortizable
bond premium applied to reduce interest on the Note. In the case of a Note
denominated, and purchased, in a Foreign Currency, the holder's initial tax
basis will be the U.S. dollar value of the Foreign Currency on the date of
purchase of the Note.
A holder will recognize gain or loss on the sale or retirement of a Note
equal to the difference between the amount realized on the sale or retirement
and the holder's tax basis in the Note. The amount realized on a sale or
retirement for an amount in a Foreign Currency will be the U.S. dollar value
of that currency on the date, determined in accordance with the holder's
method of accounting, that such Foreign Currency is deemed received.
As a general rule (with the exception of amounts attributable to accrued but
unpaid interest, amounts attributable to changes in exchange rates, and
amounts received with respect to certain Short-Term Notes), gain or loss
recognized on the sale or retirement of a Note will be capital gain or loss
and will be long-term
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capital gain or loss if the Note was held for more than one year. Gain or loss
recognized by a holder on the sale or retirement of a Note denominated in a
Foreign Currency will be treated as ordinary income or loss to the extent such
gain or loss is attributable to changes in exchange rates. Gain or loss
attributable to changes in exchange rates will be calculated by multiplying the
holder's tax basis in a Note by the change in exchange rates between the date
that the holder acquired the Note and the date on which the amount realized on
its sale or retirement is due or received, in accordance with the holder's
method of accounting. However, exchange gain or loss is taken into account only
to the extent of total gain or loss realized on the transaction.
If Treasury Regulations proposed on March 17, 1992 are finalized in their
current form, certain United States Holders will be able to elect to apply
mark-to-market treatment to all foreign currency denominated financial
transactions they enter into, including the Notes, for purposes of determining
the amount and timing of foreign currency gain or loss to be recognized on the
Notes. Under these proposed regulations, similar non-elective rules will apply
with respect to the determination of foreign currency gain or loss on Notes
denominated in certain hyperinflationary currencies.
EXCHANGE OF AMOUNTS IN FOREIGN CURRENCY
Foreign Currency received on the sale or retirement of a Note will have a tax
basis equal to the U.S. dollar value of that currency on the date received. An
accrual basis holder may realize exchange gain or loss upon receipt of such
Foreign Currency, if the date of receipt differs from the date such Foreign
Currency is deemed received. Foreign Currency received as interest on a Note
will have a tax basis equal to its U.S. dollar value on the date such interest
was received. Foreign Currency which is purchased generally will have a tax
basis equal to the U.S. dollar cost of acquisition. Any gain or loss recognized
on a sale or other disposition of Foreign Currency (including its use to
purchase Notes or upon exchange for U.S. dollars) will be ordinary income or
loss. Accordingly, a holder that converts U.S. dollars to a Foreign Currency
and immediately uses that Foreign Currency to purchase a Note denominated in
the same currency normally will not recognize gain or loss in connection with
such conversion and purchase. However, a holder that purchases a Note with
previously owned Foreign Currency may recognize ordinary income or loss in an
amount equal to the difference between the holder's tax basis in the Foreign
Currency and the U.S. dollar value of the Note on the date of purchase.
BACKUP WITHHOLDING
A holder of a Note may be subject to backup withholding at a rate of 31% with
respect to payments of principal and any premium or interest (including
original issue discount) made on the Note or the proceeds of a sale or exchange
of the Note before maturity unless such holder (a) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact, or (b) provides a taxpayer identification number, certifies that the
holder is not subject to backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A holder of a Note
that does not provide CFC, or its agent, with a correct taxpayer identification
number or an adequate basis for exemption may be subject to penalties imposed
by the Internal Revenue Service. The backup withholding tax is not an
additional tax and will be credited against a holder's United States Federal
income tax liability provided the required information is furnished to the
Internal Revenue Service.
PLAN OF DISTRIBUTION OF NOTES
Under the terms of a Selling Agency Agreement (the "Agency Agreement"), the
Notes are offered on a continuous basis by CFC through Lehman Brothers, Lehman
Brothers Inc. (including its affiliate, Lehman Government Securities Inc.),
Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Brothers Inc (the "Agents"), each of which has
agreed to use its reasonable best efforts to solicit purchases of the Notes.
CFC will pay to each Agent a commission, in the form of a discount, ranging
from % to % of the principal amount of any Note (or in the case of an
Original
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<PAGE>
Issue Discount Note, the price to the public), depending on its maturity, sold
through such Agent, except that the commission payable by CFC to the Agents
with respect to Notes with maturities of greater than 30 years will be
negotiated at the time CFC issues such Notes. Each Agent will have the right,
in its discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by such Agent.
CFC will have the sole right to accept offers to purchase Notes and may
reject any such offer in whole or in part. CFC also may sell Notes to an Agent,
acting as principal, at a discount to be agreed upon at the time of sale, for
resale to one or more investors or other purchasers at varying prices related
to prevailing market prices at the time of such resale, as determined by such
Agent or, if so specified in the applicable Pricing Supplement, for resale at a
fixed public offering price. CFC reserves the right to sell Notes from time to
time directly on its own behalf to investors or through other agents, dealers
or underwriters; if CFC grants any discount or pays any commission to such
persons, such discount or commission will be disclosed in the applicable
Pricing Supplement.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and
such discount allowed to any dealer may be all or part of the discount to be
received by such Agent from CFC. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to an agency sale of a Note of
identical maturity, and may be resold by the Agent to investors and other
purchasers from time to time in one or more transactions, including negotiated
transactions, at fixed prices or at varying prices as described above. After
the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold on a
fixed price basis), concession and discount may be changed.
Payment of the purchase price of the Notes will be required to be made in
immediately available funds in The City of New York.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). CFC has agreed to
indemnify each Agent against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments an Agent may be required to
make in respect thereof. CFC has agreed to reimburse the Agents for certain
expenses, including fees and disbursements of counsel to the Agents.
CFC has been advised by the Agents that they may from time to time purchase
and sell Notes in the secondary market, but that they are not obligated to do
so. No assurance can be given that there will be a secondary market for the
Notes or liquidity in the secondary market if one develops.
VALIDITY OF SECURITIES
The validity of the Notes will be passed upon for CFC and CCI by Fried,
Frank, Harris, Shriver & Jacobson, a partnership including professional
corporations, New York, New York. The statements under "Certain Federal Income
Tax Considerations," to the extent they constitute statements of law, are set
forth herein in reliance upon the opinion of Fried, Frank, Harris, Shriver &
Jacobson. Edwin Heller, whose professional corporation is a member of Fried,
Frank, Harris, Shriver & Jacobson, is a director of CCI. Brown & Wood, New
York, New York will serve as counsel to the Agents. Brown & Wood also serves as
counsel for CWMBS, Inc., a wholly owned subsidiary of CCI, in connection with
offerings of mortgage pass-through certificates, and as counsel to CWM Mortgage
Holdings, Inc.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 16, 1995
PROSPECTUS
LOGO COUNTRYWIDE (SM)
-----------------------
CREDIT INDUSTRIES, INC.
COMMON STOCK, PREFERRED STOCK AND DEBT SECURITIES
COUNTRYWIDE FUNDING CORPORATION
DEBT SECURITIES
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
UNCONDITIONALLY GUARANTEED BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
-----------
Countrywide Credit Industries, Inc. (the "Company" or "CCI") may offer, from
time to time, together or separately, (i) shares of its common stock, $.05 par
value per share (the "Common Stock"), (ii) shares of its preferred stock, $.05
par value per share (the "Preferred Stock") and (iii) debt securities (the
"Company Debt Securities"), in each case, in amounts, at prices and on the
terms to be determined at the time of the offering. In addition, Countrywide
Funding Corporation, a wholly owned subsidiary of the Company ("CFC"), may
offer, from time to time, its debt securities (the "CFC Debt Securities", and
together with the Company Debt Securities, the "Debt Securities"), which will
be unconditionally guaranteed (the "Guarantees") as to payment of principal,
premium, if any, and interest by the Company (in its capacity as guarantor, the
"Guarantor"), in the amounts, at prices and on the terms to be determined at
the time of the offering. The Common Stock, Preferred Stock and Debt Securities
are collectively called the "Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series or issuances and will have an aggregate public offering price of up
to $750,000,000 (or the equivalent thereof, based on the applicable exchange
rate at the time of sale, in one or more foreign currencies, currency units or
composite currencies as shall be designated by the Company or CFC, as the case
may be). Certain specific terms of the particular Securities in respect of
which this Prospectus is being delivered are set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement"), including, where
applicable, (i) in the case of Common Stock, the aggregate number of shares
offered, the public offering price and other terms of the offering and sale
thereof, (ii) in the case of Preferred Stock, the specific title, the aggregate
number of shares offered, any dividend (including the method of calculating
payment of dividends), liquidation, redemption, voting and other rights, any
terms for any conversion or exchange into other securities, and the public
offering price and other terms of the offering and sale thereof and (iii) in
the case of Debt Securities, the specific title, the aggregate principal
amount, aggregate offering price, the denomination, the maturity, the premium,
if any, the interest rate (which may be fixed, floating or adjustable), if any,
the time and method of calculating payment of interest, if any, the place or
places where principal of, premium, if any, and interest, if any, on such Debt
Securities will be payable, the currency in which principal of, premium, if
any, and interest, if any, on such Debt Securities will be payable, any terms
of redemption at the option of the Company or CFC, as the case may be, or
repayment at the option of the holder, any sinking fund provisions, the terms
(in the case of Company Debt Securities) for any conversion or exchange into
other securities, any other special terms, and the public offering price and
other terms of the offering and sale thereof. If so specified in the applicable
Prospectus Supplement, Debt Securities of a series may be issued in whole or in
part in the form of one or more temporary or permanent global securities.
The Common Stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange under the trading symbol "CCR." Any Common Stock sold pursuant
to a Prospectus Supplement will be listed on such exchanges, subject to
official notice of issuance.
Unless otherwise specified in a Prospectus Supplement, the Debt Securities
and any Guarantees, when issued, will be unsecured and unsubordinated
obligations of the Company or CFC, as the case may be, and will rank pari passu
in right of payment with all other unsecured and unsubordinated indebtedness of
the Company or CFC, as the case may be.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURI-
TIES 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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
-----------
The Securities may be sold directly, through agents, underwriters or dealers
as designated from time to time, or through a combination of such methods. If
agents of the Company or any dealers or underwriters are involved in the sale
of the Securities in respect of which this Prospectus is being delivered, the
names of such agents, dealers or underwriters and any applicable commissions or
discounts will be set forth in or may be calculated from the Prospectus
Supplement with respect to such Securities.
-----------
The date of this Prospectus is , 1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF ANY CLASS OR
SERIES OF SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
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 Securities and Exchange
Commission (the "Commission"). Information as of particular dates concerning
its directors and officers and any material interest of such persons in
transactions with the Company is disclosed in proxy statements distributed to
stockholders and filed with the Commission. Such reports, proxy statements and
other information can be inspected and copied at the offices of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at its regional offices located at Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661 and Suite 1300, 7 World Trade Center,
New York, New York 10048. Copies of such materials can also be obtained from
the Public Reference Section of the Commission at its principal office in
Washington, D.C. at prescribed rates. The Common Stock is listed on the New
York and Pacific Stock Exchanges. Reports, proxy material and other
information concerning securities of the Company can also be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New
York; and the Pacific Stock Exchange, Inc., 115 Sansome Street, San Francisco,
California.
This Prospectus constitutes a part of the Registration Statement on Form S-3
(together with all amendments, schedules and exhibits thereto, the
"Registration Statement") filed by the Company and CFC with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus and the accompanying Prospectus Supplement omit certain of the
information contained in the Registration Statement in accordance with the
rules and regulations of the Commission. For further information with respect
to the Company, CFC and the Securities, reference is made to the Registration
Statement, including the schedules and exhibits filed therewith. Statements
contained in this Prospectus as to the contents of certain documents are not
necessarily complete, and, with respect to each such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission,
reference is made to the copy of the document so filed. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There is incorporated herein by reference the following documents of the
Company heretofore filed by it with the Commission: (1) Annual Report on Form
10-K for the year ended February 28, 1995; and (2) Current Report on Form 8-K
dated June 12, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus or any
Prospectus Supplement and prior to the termination of the offering of the
Securities are incorporated herein by reference and such documents shall be
deemed to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus or any Prospectus Supplement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or any Prospectus Supplement.
The Company will provide without charge to each person to whom this
Prospectus or any Prospectus Supplement is delivered, on the request of any
such person, a copy of any or all of the foregoing documents incorporated
herein by reference (not including exhibits to the information that is
incorporated by reference unless such exhibits are specifically incorporated
by reference into the information that this Prospectus or any Prospectus
Supplement incorporates). Requests for copies of such documents should be
directed to Countrywide Credit Industries, Inc., 155 North Lake Avenue, P. O.
Box 7137, Pasadena, California 91109-7137, telephone (818) 304-8400,
Attention: Investor Relations.
2
<PAGE>
THE COMPANY AND CFC
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Countrywide Credit Industries, Inc. (the "Company", "CCI" or, in its capacity
as guarantor of the CFC Debt Securities (as defined below), the "Guarantor") is
a holding company which through its principal subsidiary, Countrywide Funding
Corporation ("CFC"), is engaged primarily in the mortgage banking business.
CCI, through its other wholly owned subsidiaries, offers products and services
complementary to its mortgage banking business. A subsidiary of CCI sells
mortgage-backed securities, primarily on an odd-lot basis (i.e., in
denominations between $25,000 and $1,000,000), to broker-dealers and also sells
subordinate interests in mortgage-backed securities evidencing interests in
whole mortgage loans to institutional investors. In addition, a subsidiary of
CCI receives fee income for managing the operations of CWM Mortgage Holdings,
Inc. ("CWM"), a real estate investment trust whose shares are traded on the New
York Stock Exchange. CWM conducts real estate lending activities and has an
affiliate engaged in the operation of a jumbo and non-conforming mortgage loan
conduit. CCI also has a subsidiary which acts as an agent in the sale of
homeowners, fire, flood, earthquake, mortgage life and disability insurance to
CFC's mortgagors in connection with CFC's mortgage banking operations. Another
subsidiary of CCI earns fee income by brokering servicing contracts owned by
other mortgage lenders and loan servicers. CCI has recently begun operating a
title agent business through newly formed subsidiaries. Unless the context
otherwise requires, references to the "Company" herein shall be deemed to refer
to the Company and its consolidated subsidiaries.
CCI is a Delaware corporation, and was originally incorporated in New York
under the name of OLM Credit Industries, Inc. in 1969. Its principal executive
offices are located at 155 North Lake Avenue, P. O. Box 7137, Pasadena,
California 91109-7137, and its telephone number is (818) 304-8400.
COUNTRYWIDE FUNDING CORPORATION
CFC is engaged primarily in the mortgage banking business and as such
originates, purchases, sells and services mortgage loans. CFC's mortgage loans
are principally first-lien mortgage loans secured by single-(one to four)
family residences. CFC also offers home equity loans both in conjunction with
newly produced first- lien mortgages and as a separate product. The principal
sources of revenue of CFC are (i) loan origination fees; (ii) gains from the
sale of loans, if any; (iii) interest earned on mortgage loans during the
period that they are held by CFC pending sale, net of interest paid on funds
borrowed to finance such mortgage loans; (iv) loan servicing fees; and (v)
interest benefit derived from the custodial balances associated with CFC's
servicing portfolio.
CFC produces mortgage loans through three separate divisions. The Consumer
Markets Division originates loans through a nationwide network of retail branch
offices and direct contact with consumers. Through the Wholesale Division, CFC
originates and purchases loans through mortgage loan brokers. Through the
Correspondent Division, CFC purchases loans primarily from other mortgage
bankers, savings and loan associations, commercial banks, credit unions and
other financial intermediaries. CFC customarily sells all loans that it
originates or purchases. Substantially all loans sold by CFC are sold without
recourse, subject, in the case of loan guaranties by the Veterans
Administration ("VA"), to the limits of such guaranties.
CFC services on a non-recourse basis substantially all of the mortgage loans
that it originates or purchases. In addition, CFC purchases bulk servicing
contracts, also on a non-recourse basis, to service single-family residential
mortgage loans originated by other lenders. Servicing mortgage loans includes
collecting and remitting loan payments, making advances when required,
accounting for principal and interest, holding custodial (impound) funds for
payment of property taxes and hazard insurance, making any physical inspections
of the property, contacting delinquent mortgagors, supervising foreclosures and
property dispositions in the event of unremedied defaults and generally
administering the loans. CFC receives fee income for servicing mortgage loans
ranging generally from 1/4% to 1/2% per annum on the declining principal
balances of the loans. CFC has in the past and may in the future sell to other
mortgage servicers a portion of its portfolio of loan servicing rights.
3
<PAGE>
CFC's principal financing needs are the financing of loan funding activities
and the investment in servicing rights. To meet these needs, CFC currently
relies on commercial paper backed by its revolving credit facility, medium-term
note issuances, pre-sale funding facilities, mortgage-backed securities, whole
loan reverse-repurchase agreements, subordinated notes and cash flows from
operations. In addition, in the past, CFC has relied on direct borrowings under
its revolving credit facility, servicing-secured bank facilities, privately-
placed financings and contributions from CCI of the proceeds of public
offerings of Common Stock and Preferred Stock.
CFC is a New York corporation, originally incorporated in 1969. Its principal
executive offices are located at 155 North Lake Avenue, P. O. Box 7137,
Pasadena, California 91109-7137, and its telephone number is (818) 304-8400.
USE OF PROCEEDS
Except as may be otherwise stated in any Prospectus Supplement, the Company
and/or CFC intend to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include retirement of indebtedness of the
Company or CFC and investment in servicing rights through the current
production of loans and the bulk acquisition of contracts to service loans.
4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated financial data with respect to CCI set forth below for each
of the five fiscal years in the period ended February 28, 1995 has been derived
from, and should be read in conjunction with, the related audited financial
statements and accompanying notes included elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28(29),
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF
EARNINGS DATA:
Revenues:
Loan origination fees.. $ 203,426 $ 379,533 $ 241,584 $ 91,933 $ 38,317
Gain (loss) on sale of
loans................. (41,342) 88,212 67,537 38,847 24,236
---------- ---------- ---------- ---------- ----------
Loan production reve-
nue................... 162,084 467,745 309,121 130,780 62,553
Interest earned........ 343,138 376,225 211,542 115,213 83,617
Interest charges....... (267,685) (275,906) (148,765) (81,959) (73,428)
---------- ---------- ---------- ---------- ----------
Net interest income.... 75,453 100,319 62,777 33,254 10,189
Loan servicing income.. 428,994 307,477 177,291 94,830 66,486
Less amortization of
servicing assets...... (95,768) (242,177) (151,362) (53,768) (24,871)
Add (less) servicing
hedge benefit (ex-
pense)................ (40,030) 73,400 74,075 17,000 --
Less write-off of ser-
vicing hedge.......... (25,600) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net loan administration
income................ 267,596 138,700 100,004 58,062 41,615
Gain on sale of servic-
ing................... 56,880 -- -- 4,302 6,258
Commissions, fees and
other income.......... 40,650 48,816 33,656 19,714 14,396
---------- ---------- ---------- ---------- ----------
Total revenues........ 602,663 755,580 505,558 246,112 135,011
---------- ---------- ---------- ---------- ----------
Expenses:
Salaries and related
expenses.............. 199,061 227,702 140,063 72,654 48,961
Occupancy and other of-
fice expenses......... 102,193 101,691 64,762 36,645 24,577
Guarantee fees......... 85,831 57,576 29,410 13,622 9,529
Marketing expenses..... 23,217 26,030 12,974 5,015 3,117
Branch and administra-
tive office consolida-
tion costs............ 8,000 -- -- -- --
Other operating
expenses.............. 37,016 43,481 24,894 17,849 11,642
---------- ---------- ---------- ---------- ----------
Total expenses........ 455,318 456,480 272,103 145,785 97,826
---------- ---------- ---------- ---------- ----------
Earnings before income
taxes.................. 147,345 299,100 233,455 100,327 37,185
Provision for income
taxes.................. 58,938 119,640 93,382 40,131 14,874
---------- ---------- ---------- ---------- ----------
Net earnings............ $ 88,407 $ 179,460 $ 140,073 $ 60,196 $ 22,311
========== ========== ========== ========== ==========
SELECTED BALANCE SHEET
DATA AT END OF PERIOD:
Mortgage loans shipped
and held for sale...... $2,898,825 $3,714,261 $2,316,297 $1,585,392 $ 509,008
Total assets............ 5,579,662 5,585,521 3,299,133 2,409,974 1,121,999
Short-term debt......... 2,664,006 3,111,945 1,579,689 1,046,289 459,470
Long-term debt.......... 1,499,306 1,197,096 734,762 383,065 153,811
7% convertible subordi-
nated debentures....... -- -- -- -- 20,918
Convertible preferred
stock.................. -- -- 25,800 37,531 38,098
Common shareholders' eq-
uity................... 942,558 880,137 693,105 558,617 133,460
OPERATING DATA (DOLLAR
AMOUNTS IN MILLIONS):
Volume of loans origi-
nated.................. $ 27,866 $ 52,459 $ 32,388 $ 12,156 $ 4,577
Loan servicing portfolio
(at period end)(1)..... 113,111 84,678 54,484 27,546 15,684
Ratio of earnings to
fixed charges(2)....... 1.54 2.06 2.52 2.18 1.49
</TABLE>
- --------
(1) Includes warehoused loans and loans under subservicing agreements.
(2) For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before Federal income taxes, plus fixed charges.
Fixed charges include interest expense on debt and the portion of rental
expenses which is considered to be representative of the interest factor
(one-third of operating leases). Since the major portion of CCI's interest
costs is incurred to finance mortgage loans which generate interest income,
and since interest income and interest expense are generated
simultaneously, management of CCI believes that a more meaningful measure
of its debt service requirements is the ratio of earnings to net fixed
charges. Under this alternative formula, net fixed charges are defined as
interest expense on debt, other than debt incurred to finance CCI's
mortgage loan inventory, plus the interest element (one-third of operating
leases). Under such alternative formula, these ratios for each of the five
fiscal years in the period ended February 28, 1995, commencing with the
fiscal year ended February 28, 1995, were 3.36, 4.26, 5.18, 3.06 and 2.43,
respectively.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's strategy is concentrated on three components of its business:
loan production, loan servicing and businesses ancillary to mortgage lending.
See "The Company and CFC." The Company intends to continue its efforts to
increase its market share of, and realize increased income from, its loan
production. In addition, the Company is engaged in building its loan servicing
portfolio because of the returns it can earn from such investment. A strong
loan production capability and a growing servicing portfolio are the primary
means used by the Company to reduce the sensitivity of its earnings to changes
in interest rates because loan production income characteristics are
countercyclical to the effect of interest rate changes on servicing income.
Finally, the Company is involved in business activities complementary to its
mortgage banking business, such as acting as agent in the sale of homeowners,
fire, flood, earthquake, mortgage life and disability insurance to its
mortgagors, brokering servicing rights and selling odd-lot and other mortgage-
backed securities ("MBS").
The Company's results of operations historically have been primarily
influenced by: (i) the level of demand for mortgage credit, which is affected
by such external factors as the level of interest rates, the strength of the
various segments of the economy and the demographics of the Company's lending
markets; (ii) the direction of interest rates; and (iii) the relationship
between mortgage interest rates and the cost of funds.
The fiscal year ended February 28, 1993 ("Fiscal 1993") was a then-record
performance year for the Company. The Company became the nation's leader in
single-family mortgage loan originations in calendar year 1992. This
performance was due to: (i) the development of a stronger capital base that
supported increased production; (ii) the implementation of an expansion
strategy for the production divisions designed to penetrate new markets and
expand in existing markets, particularly outside California, and to further
increase market share in both the purchase and refinance market segments; (iii)
the development of state-of-the-art technologies that expanded the Company's
production and servicing capabilities and capacity; and (iv) a decline in
average mortgage interest rates. In Fiscal 1993, the Company's market share
increased to approximately 4% of the single-family mortgage origination market.
During the year ended February 28, 1993, the Company' servicing portfolio
nearly doubled to $54.5 billion.
The Company's performance during the fiscal year ended February 28, 1994
("Fiscal 1994") set new operating records. In calendar year 1993, the Company
became the nation's largest servicer of single-family mortgages and at February
28, 1994 had a servicing portfolio of $84.7 billion, an increase of 55% over
the portfolio at the end of Fiscal 1993. This servicing portfolio growth was
accomplished through increased loan production volume of low-coupon mortgages.
In addition, the Company acquired bulk servicing rights with an aggregate
principal balance of $3.4 billion. The Company also maintained its position as
the nation's leader in originations of single-family mortgages for the second
consecutive year. This performance was due to: (i) continued implementation of
the Company's production expansion strategy designed to penetrate new markets
and expand in existing markets, particularly outside California, and to further
increase market share; (ii) a continued decline in average mortgage interest
rates that prevailed during most of 1993; and (iii) the introduction of new
technologies that improved productivity. In Fiscal 1994, the Company's market
share increased to approximately 5.1% of the estimated $1.0 trillion single-
family mortgage origination market, up from approximately 4% of the estimated
$825 billion market in Fiscal 1993.
The fiscal year ended February 28, 1995 ("Fiscal 1995") was a period of
transition from a mortgage market dominated by refinances resulting from
historically low interest rates to an extremely competitive and smaller
mortgage market in which refinances declined to a relatively small percentage
of total fundings and customer preference for adjustable-rate mortgages
increased. In this transition, which resulted from the increase in interest
rates during the year, intense price competition developed that resulted in the
Company
6
<PAGE>
experiencing negative production margins in Fiscal 1995. At the same time, the
increase in interest rates caused a decline in the prepayment rate in the
servicing portfolio which, combined with a decline in the rate of expected
future prepayments, caused a reduction in amortization of the capitalized
servicing fees receivable and purchased servicing rights ("Servicing Assets").
This decrease in amortization contributed to improved earnings from the
Company's servicing activities. The Company addressed the challenges of the
year by: (i) expanding its share of the home purchase market; (ii) reducing
costs to maintain its production infrastructure in line with reduced production
levels; and (iii) accelerating the growth of its servicing portfolio by
aggressively acquiring servicing contracts through bulk purchases. These
strategies produced the following results: (i) home purchase production
increased from $13.3 billion, or 25% of total fundings, in Fiscal 1994 to $19.5
billion, or 70% of total fundings, in Fiscal 1995, helping the Company maintain
its position as the nation's leader in originations of single-family mortgages
for the third consecutive year; (ii) the number of staff engaged in production
activities declined from approximately 3,900 at the end of Fiscal 1994 to
approximately 2,400 at the end of Fiscal 1995; (iii) production-related and
overhead costs declined from $328 million in Fiscal 1994 to $270 million in
Fiscal 1995; and (iv) bulk servicing purchases increased to $17.6 billion in
Fiscal 1995 from $3.4 billion in Fiscal 1994. These bulk servicing
acquisitions, combined with slower prepayments caused by increased mortgage
interest rates, helped the Company maintain its position as the nation's
largest servicer of single-family mortgages for the second consecutive year. In
Fiscal 1995, the Company's market share decreased to approximately 4% of the
estimated $660 billion single-family mortgage origination market.
RESULTS OF OPERATIONS
Fiscal 1995 Compared with Fiscal 1994
Revenues for Fiscal 1995 decreased 20% to $602.7 million from $755.6 million
for Fiscal 1994. Net earnings decreased 51% to $88.4 million in Fiscal 1995
from $179.5 million in Fiscal 1994. The decrease in revenues was due to
decreased loan production resulting from increased mortgage interest rates in
Fiscal 1995. In addition, intense price competition during Fiscal 1995 resulted
in the Company's recording a loss on the sale of loans. The Company had a gain
on sale of loans in Fiscal 1994. In Fiscal 1995, the Company did not realize
any servicing hedge gains; in addition, amortization of option and interest
rate floor premiums related to the servicing hedge amounted to $40.0 million
and the write-off of the remaining unamortized costs of the Company's prior
servicing hedge amounted to $25.6 million. During Fiscal 1994, the Company
realized $73.4 million in net servicing hedge gains. These negative effects
experienced in Fiscal 1995 were somewhat offset by the favorable impact of a
larger and more slowly prepaying loan servicing portfolio and of a gain
recognized on the sale of servicing. The decrease in net earnings for Fiscal
1995 was primarily the result of the decrease in revenues, a smaller decline in
expenses than revenues from Fiscal 1994 to Fiscal 1995, higher guarantee fees
caused by the larger servicing portfolio and a charge due to the Company's
downsizing and office consolidation process.
The total volume of loans produced decreased 47% to $27.9 billion for Fiscal
1995 from $52.5 billion for Fiscal 1994. Refinancings totaled $8.4 billion, or
30% of total fundings, for Fiscal 1995, as compared to $39.2 billion, or 75% of
total fundings, for Fiscal 1994. Adjustable-rate mortgage loan ("ARM")
production totaled $9.5 billion, or 34% of total fundings, for Fiscal 1995, as
compared to $10.1 billion, or 19% of total fundings, for Fiscal 1994.
Production in the Company's Consumer Markets Division decreased to $7.1 billion
for Fiscal 1995 compared to combined production of $11.6 billion for the Retail
and Consumer Divisions for Fiscal 1994. Production in the Company's Wholesale
Division decreased to $8.5 billion (which included approximately $3.3 billion
of originated loans and $5.2 billion of purchased loans) for Fiscal 1995 from
$21.5 billion (which included approximately $10.9 billion of originated loans
and $10.6 billion of purchased loans) for Fiscal 1994. The Company's
Correspondent Division purchased $12.3 billion in mortgage loans for Fiscal
1995 compared to $19.4 billion for Fiscal 1994. The factors which affect the
relative volume of production among the Company's three divisions include
pricing decisions and the relative competitiveness of such pricing, the level
of real estate and mortgage lending activity in each division's markets, and
the success of each division's sales and marketing efforts.
At February 28, 1995 and 1994, the Company's pipeline of loans in process was
$3.6 billion and $7.6 billion, respectively. In addition, at February 28, 1995,
the Company had committed to make loans in the
7
<PAGE>
amount of $2.7 billion, subject to property identification and approval of the
loans ("Lock N' Shop SM Pipeline"). At February 28, 1994, the Lock N' Shop
Pipeline was $1.6 billion. Historically, approximately 43% to 75% of the
pipeline of loans in process has funded. In Fiscal 1995 and Fiscal 1994, the
Company received 315,632 and 515,104 new loan applications, respectively, at
an average daily rate of $141 million and $282 million, respectively. The
following actions were taken during Fiscal 1995 on the total applications
received during that year: 220,715 loans (70% of total applications received)
were funded and 66,725 applications (21% of total applications received) were
either rejected by the Company or withdrawn by the applicant. The following
actions were taken during Fiscal 1994 on the total applications received
during that year: 358,257 loans (70% of total applications received) were
funded and 98,809 applications (19% of total applications received) were
either rejected by the Company or withdrawn by the applicant. The factors that
affect the percentage of applications received and funded during a given time
period include the movement and direction of interest rates, the average
length of loan commitments issued, the creditworthiness of applicants, the
production divisions' loan processing efficiency and loan pricing decisions.
Loan origination fees decreased in Fiscal 1995 as compared to Fiscal 1994
and a loss was recorded in Fiscal 1995 on the sale of loans due to lower loan
production that resulted from the increase in the level of mortgage interest
rates. Reduced margins due to increased price competition caused by lower
demand for mortgage loans during Fiscal 1995 than Fiscal 1994 also contributed
to the loss on the sale of loans. In general, loan origination fees and gain
or loss on sale of loans are affected by numerous factors, including loan
pricing decisions, volatility of and the general direction of interest rates
and the volume of loans produced.
Net interest income (interest earned net of interest charges) decreased to
$75.5 million for Fiscal 1995 from $100.3 million for Fiscal 1994.
Consolidated net interest income is principally a function of: (i) net
interest income earned from the Company's mortgage loan warehouse ($35.7
million and $110.1 million for Fiscal 1995 and Fiscal 1994, respectively);
(ii) interest expense related to the Company's investment in servicing rights
($20.0 million and $68.0 million for Fiscal 1995 and Fiscal 1994,
respectively); and (iii) interest income earned from the custodial balances
associated with the Company's servicing portfolio ($59.8 million and $58.2
million for Fiscal 1995 and Fiscal 1994, respectively). The Company earns
interest on, and incurs interest expense to carry, mortgage loans held in its
warehouse. The decrease in net interest income from the mortgage loan
warehouse was attributable to a decrease in the average amount of the mortgage
loan warehouse due to the decline in production and to a decrease in the net
earnings rate. The decrease in interest expense on the investment in servicing
rights resulted primarily from a decline in the payments of interest to
certain investors pursuant to customary servicing arrangements with regard to
paid-off loans which payments exceeded the interest earned on these loans
through their respective payoff dates ("Interest Costs Incurred on Payoffs").
The increase in net interest income earned from the custodial balances was
related to an increase in the earnings rate, offset somewhat by a decline in
the average custodial balances from Fiscal 1994 to Fiscal 1995.
During Fiscal 1995, loan administration income was positively affected by
the continued growth of the Company's loan servicing portfolio. At February
28, 1995, the Company serviced $113.1 billion of loans (including $0.7 billion
of loans subserviced for others) compared to $84.7 billion (including $0.6
billion of loans subserviced for others) at February 28, 1994, a 34% increase.
The growth in the Company's servicing portfolio during Fiscal 1995 was the
result of loan production volume and the acquisition of bulk servicing rights,
partially offset by prepayments, partial prepayments, scheduled amortization
of mortgage loans and a sale of servicing rights of loans with principal
balances aggregating $5.9 billion. The weighted average interest rate of the
mortgage loans in the Company's servicing portfolio at February 28, 1995 was
7.6% compared to 7.2% at February 28, 1994. It is the Company's strategy to
build and retain its servicing portfolio because of the returns the Company
can earn from such investment and because the Company believes that servicing
income is countercyclical to loan origination income. See "--Prospective
Trends--Market Factors."
During Fiscal 1995, the prepayment rate of the Company's servicing portfolio
was 9%, as compared to 35% for Fiscal 1994. In general, the prepayment rate is
affected by the relative level of mortgage interest rates, activity in the
home purchase market and the relative level of home prices in a particular
market. The decrease in the prepayment rate is primarily attributable to
decreased refinance activity caused by increased
8
<PAGE>
mortgage interest rates in Fiscal 1995 from Fiscal 1994. The primary means used
by the Company to reduce the sensitivity of its earnings to changes in interest
rates is through a strong loan production capability and a growing servicing
portfolio. To mitigate the effect on earnings of higher amortization (which is
deducted from loan servicing income) resulting from increased prepayment
activity, the Company acquires financial instruments, including derivative
contracts, that increase in value when interest rates decline (the "Servicing
Hedge"). These financial instruments include call options on U.S. treasury
futures and MBS, interest rate floors and certain tranches of collateralized
mortgage obligations ("CMOs").
The CMOs, which consist primarily of principal-only ("P/O") securities, have
been purchased at deep discounts to their par values. As interest rates
decline, prepayments on the collateral underlying the CMOs should increase.
These changes should result in a decline in the average lives of P/O securities
and an increase in the present values of their cash flows.
The Servicing Hedge instruments utilized by the Company partially protect the
value of the investment in servicing rights from the effects of increased
prepayment activity that generally results from declining interest rates. To
the extent that interest rates increase, as they did in Fiscal 1995, the value
of the servicing rights increases while the value of the hedge instruments
declines. However, the Company is not exposed to loss beyond its initial outlay
to acquire the hedge instruments. At February 28, 1995, the carrying value of
interest rate floor contracts and P/O securities included in the Servicing
Hedge was approximately $16 million and $42 million, respectively. There can be
no assurance the Company's Servicing Hedge will generate gains in the future.
See Note F to the Company's Consolidated Financial Statements included
elsewhere herein.
For Fiscal 1995, total amortization amounted to $95.8 million, representing
an annual rate of 7% of average Servicing Assets. During Fiscal 1995, the
Company did not realize any Servicing Hedge gains; in addition, amortization of
option and interest rate floor premiums related to the Servicing Hedge amounted
to $40.0 million. Also during Fiscal 1995, the Company decided to replace its
prior Servicing Hedge with a new hedge resulting in a write-down of the
remaining unamortized costs of the prior hedge of $25.6 million. For Fiscal
1994, total amortization was $242.2 million, or an annual rate of 28% of the
average Servicing Assets. Amortization for Fiscal 1994 was offset by Servicing
Hedge gains which aggregated $73.4 million. The decline in the rate of
amortization from Fiscal 1994 to Fiscal 1995 resulted primarily from a decline
in the current and projected future prepayment rates caused by an increase in
mortgage interest rates. The factors affecting the rate of amortization
recorded in an accounting period include the level of prepayments during the
period, the change in prepayment expectations and the amount of Servicing Hedge
gains in excess of amortization due to impairment.
During Fiscal 1995, the Company acquired bulk servicing rights for loans with
principal balances aggregating $17.6 billion at a price of $261.9 million or
1.49% of the aggregate outstanding principal balances of the servicing
portfolios acquired. During Fiscal 1994, the Company acquired bulk servicing
rights for loans with principal balances aggregating $3.4 billion at a price of
$46.6 million or 1.36% of the aggregate outstanding principal balances of the
servicing portfolios acquired.
During Fiscal 1995, the Company sold servicing rights for loans with
principal balances aggregating $5.9 billion and recognized a gain of $56.9
million. No servicing rights were sold during Fiscal 1994.
Salaries and related expenses are summarized below for Fiscal 1995 and Fiscal
1994.
<TABLE>
<CAPTION>
FISCAL 1995
---------------------------------------------
PRODUCTION LOAN OTHER
ACTIVITIES ADMINISTRATION ACTIVITIES TOTAL
---------- -------------- ---------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Base Salaries.................... $109,276 $23,929 $ 6,811 $140,016
Incentive Bonus.................. 29,815 463 4,204 34,482
Payroll Taxes and Benefits....... 19,695 4,020 848 24,563
-------- ------- ------- --------
Total Salaries and Related Ex-
penses.......................... $158,786 $28,412 $11,863 $199,061
======== ======= ======= ========
Average Number of Employees...... 2,631 850 246 3,727
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
FISCAL 1994
---------------------------------------------
PRODUCTION LOAN OTHER
ACTIVITIES ADMINISTRATION ACTIVITIES TOTAL
---------- -------------- ---------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Base Salaries.................... $123,454 $18,974 $4,730 $147,158
Incentive Bonus.................. 54,460 323 2,663 57,446
Payroll Taxes and Benefits....... 18,896 3,544 658 23,098
-------- ------- ------ --------
Total Salaries and Related Ex-
penses.......................... $196,810 $22,841 $8,051 $227,702
======== ======= ====== ========
Average Number of Employees...... 3,351 680 145 4,176
</TABLE>
The amount of salaries decreased during Fiscal 1995 primarily due to the
decreased number of employees resulting from reduced loan production, offset
somewhat by an increased number of employees due to a larger servicing
portfolio. Incentive bonuses earned during Fiscal 1995 decreased primarily due
to decreased loan production and decreased loan production personnel.
Occupancy and other office expenses for Fiscal 1995 slightly increased to
$102.2 million from $101.7 million for Fiscal 1994. This was due to increased
office and equipment rental expenses resulting from the opening of 59 Consumer
Markets Division branch offices in Fiscal 1995, partially offset by a decline
in expenses resulting from the closure of 86 Consumer Markets Division
satellite offices and 13 Wholesale Division branch offices.
Guarantee fees (fees paid to guarantee timely and full payment of principal
and interest on mortgage-backed securities and whole loans sold to permanent
investors and to transfer the credit risk of the loans in the servicing
portfolio) for Fiscal 1995 increased 49% to $85.8 million from $57.6 million
for Fiscal 1994. This increase resulted primarily from an increase in the
servicing portfolio.
Marketing expenses for Fiscal 1995 decreased 11% to $23.2 million from $26.0
million for Fiscal 1994. The decrease in marketing expenses reflected the
Company's strategy to centralize and streamline its marketing functions.
In Fiscal 1995, the Company incurred an $8.0 million charge related to the
consolidation and relocation of branch and administrative offices that occurred
as a result of the reduction in staff caused by declining production.
Other operating expenses for Fiscal 1995 decreased from Fiscal 1994 by $6.5
million, or 15%. This decrease was due primarily to decreased loan production.
Profitability of Loan Production and Servicing Activities. In Fiscal 1995,
the Company's pre-tax loss from its loan production activities (which include
loan origination and purchases, warehousing and sales) was $94.8 million. In
Fiscal 1994, the Company's comparable pre-tax earnings were $250.1 million. The
decrease of $344.9 million is primarily attributed to lower loan production and
increased price competition caused by lower demand for mortgage loans. In
Fiscal 1995, the Company's pre-tax earnings from its loan servicing activities
(which include administering the loans in the servicing portfolio, selling
homeowners and other insurance and acting as tax payment agent) was $229.6
million as compared to $46.6 million in Fiscal 1994. This increase was
primarily due to an increase in the servicing portfolio, a reduction in
amortization due to lower prepayment activity and reduced prepayment
expectations and a sale of servicing during Fiscal 1995 which resulted in a
gain of $56.9 million. The increase was partially offset by an increase in
Servicing Hedge expense and a write-off of the remaining costs of the prior
Servicing Hedge.
10
<PAGE>
Fiscal 1994 Compared to Fiscal 1993
Revenues for Fiscal 1994 increased 49% to $755.6 million from $505.6 million
for Fiscal 1993. Net earnings increased 28% to $179.5 million in Fiscal 1994
from $140.1 million in Fiscal 1993. The increase in revenues and net earnings
for Fiscal 1994 reflected increased loan production and continued growth of the
loan servicing portfolio. The increase in revenues was partially offset by an
increase in expenses.
The total volume of loans produced increased 62% to $52.5 billion for Fiscal
1994 from $32.4 billion for Fiscal 1993. Refinancings totaled $39.2 billion, or
75% of total fundings, for Fiscal 1994, as compared to $23.6 billion, or 73% of
total fundings, for Fiscal 1993. ARM loan production totaled $10.1 billion, or
19% of total fundings, for Fiscal 1994, as compared to $9.2 billion, or 28% of
total fundings, for Fiscal 1993. Production in the Company's Retail Division
(which in Fiscal 1995 became part of the Consumer Markets Division) increased
to $7.7 billion for Fiscal 1994 compared to $4.6 billion for Fiscal 1993.
Production in the Company's Wholesale Division increased to $21.5 billion
(which included approximately $10.9 billion of originated loans and $10.6
billion of purchased loans) for Fiscal 1994 compared to $15.5 billion (which
included approximately $8.7 billion of originated loans and $6.8 billion of
purchased loans) for Fiscal 1993. The Company's Correspondent Division
purchased $19.4 billion in mortgage loans for Fiscal 1994 compared to $10.8
billion for Fiscal 1993. Production in the Company's Consumer Division (which
in Fiscal 1995 became part of the Consumer Markets Division) increased to $3.9
billion for Fiscal 1994 compared to $1.5 billion for Fiscal 1993.
At February 28, 1994 and 1993, the Company's pipeline of loans in process was
$7.6 billion and $5.9 billion, respectively. In addition, at February 28, 1994,
the Company had committed to make loans in the amount of $1.6 billion, subject
to property identification and borrower qualification. At February 28, 1993,
the amount of loan commitments subject to property identification and borrower
qualification was not material. Historically, approximately 43% to 75% of the
pipeline of loans in process has funded. In Fiscal 1994 and Fiscal 1993, the
Company received 515,104 and 340,242 new loan applications, respectively, at an
average daily rate of $282 million and $191 million, respectively. The
following actions were taken during Fiscal 1994 on the total applications
received during that year: 358,257 loans (70% of total applications received)
were funded and 98,809 applications (19% of total applications received) were
either rejected by the Company or withdrawn by the applicant. The following
actions were taken during Fiscal 1993 on the total applications received during
that year: 212,765 loans (63% of total applications received) were funded and
79,991 applications (24% of total applications received) were either rejected
by the Company or withdrawn by the applicant.
Loan origination fees and gain on sale of loans benefited from the increase
in loan production. The percentage increase in loan origination fees was less
than the percentage increase in total production primarily because of an
increase in the percentage of production attributable to products that
contained lower origination fees in their pricing structure.
Net interest income (interest earned net of interest charges) increased to
$100.3 million for Fiscal 1994 from $62.8 million for Fiscal 1993. Consolidated
net interest income is principally a function of: (i) net interest income
earned from the Company's mortgage loan warehouse ($110.1 million and $59.4
million for Fiscal 1994 and Fiscal 1993, respectively); (ii) interest expense
related to the Company's investment in servicing rights ($68.0 million and
$21.3 million for Fiscal 1994 and Fiscal 1993, respectively); and (iii)
interest income earned from the custodial balances associated with the
Company's servicing portfolio ($58.2 million and $21.8 million for Fiscal 1994
and Fiscal 1993, respectively). The increase in net interest income from the
mortgage loan warehouse was attributable to an increase in loan production. The
increase in interest expense on the investment in servicing rights resulted
primarily from an increase in Interest Costs Incurred on Payoffs. The increase
in net interest income earned from the custodial balances was related to larger
custodial account balances (caused by a larger servicing portfolio and an
increase in the prepayment rate of the Company's servicing portfolio), offset
somewhat by a decline in the earnings rate from Fiscal 1993 to Fiscal 1994.
11
<PAGE>
During Fiscal 1994, loan administration income was positively affected by the
continued growth of the loan servicing portfolio. At February 28, 1994, the
Company serviced $84.7 billion of loans (including $0.6 billion of loans
subserviced for others) compared to $54.5 billion (including $0.6 billion of
loans subserviced for others) at February 28, 1993, a 55% increase. The growth
in the Company's servicing portfolio during Fiscal 1994 was the result of loan
production volume and the acquisition of bulk servicing rights, partially
offset by prepayments, partial prepayments and scheduled amortization of
mortgage loans. The weighted average interest rate of the mortgage loans in the
Company's servicing portfolio at February 28, 1994 was 7.2% compared to 8.0% at
February 28, 1993.
During Fiscal 1994, the prepayment rate of the Company's servicing portfolio
was 35%, as compared to 20% for Fiscal 1993. The increase in the prepayment
rate was primarily attributable to increased refinance activity caused by
generally declining mortgage interest rates. During most of Fiscal 1994,
interest rates continued their decline to historically low levels although they
began to rise toward the end of the year.
For Fiscal 1994, total amortization amounted to $242.2 million, representing
an annual rate of 28% of average Servicing Assets. Amortization for Fiscal 1994
was partially offset by net Servicing Hedge gains which aggregated $73.4
million. For Fiscal 1993, total amortization was $151.4 million, or an annual
rate of 29% of the average Servicing Assets. This amortization amount was
comprised of $101.4 million related to current and projected prepayment rates
and $50.0 million resulting from Servicing Hedge gains, in accordance with the
Company's accounting policies. Amortization for Fiscal 1993 was offset by
Servicing Hedge gains which aggregated $74.1 million.
The following summarizes the notional amounts of Servicing Hedge
transactions.
<TABLE>
<CAPTION>
LONG LONG CALL OPTIONS
CALL OPTIONS ON U.S. TREASURY
ON MBS FUTURES
------------ -----------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C>
Balance, March 1, 1991........................... $ -- $ --
Additions...................................... 560 --
------ ------
Balance, February 29, 1992....................... 560 --
Additions...................................... 2,287 700
Dispositions................................... 2,847 700
------ ------
Balance, February 28, 1993....................... -- --
Additions...................................... 4,700 2,520
Dispositions................................... 2,700 750
------ ------
Balance, February 28, 1994....................... $2,000 $1,770
====== ======
</TABLE>
The long call options purchased by the Company partially protect the value of
the investment in servicing rights from the effects of increased prepayment
activity that generally results from declining interest rates. To the extent
that interest rates increase, as they did toward the end of Fiscal 1994, the
value of the servicing rights increases while the value of the options
declines. The value (i.e., replacement cost) of the options can decline below
the remaining unamortized cost of such options, but the options cannot expose
the Company to loss beyond its initial outlay to acquire them. Although the
replacement cost of the call options tends to decline when interest rates rise,
the options continue to provide protection over their remaining term against a
decline in interest rates below the level implied at purchase by their exercise
price. Accordingly, the Company amortizes option premiums over the lives of the
respective options. Any unamortized premium remaining when an option gain is
realized (through exercise or sale) is deducted from such gain. At February 28,
1994, the call options on MBS, which expired from March through September 1994,
had an unamortized cost of approximately $19 million and a replacement value of
approximately $1 million. At February 28, 1994, the call options on U.S.
treasury futures, which expired in September 1994, had an unamortized cost of
approximately $21 million and a replacement value of approximately $7 million.
12
<PAGE>
During Fiscal 1994, the Company acquired bulk servicing rights for loans with
principal balances aggregating $3.4 billion at a price of $46.6 million or
1.36% of the aggregate outstanding principal balances of the servicing
portfolios acquired. During Fiscal 1993, the Company acquired bulk servicing
rights for loans with principal balances aggregating $2.7 billion at a price of
$34.3 million or 1.29% of the aggregate outstanding principal balances of the
servicing portfolios acquired.
Salaries and related expenses are summarized below for Fiscal 1994 and Fiscal
1993.
<TABLE>
<CAPTION>
FISCAL 1994
---------------------------------------------
PRODUCTION LOAN OTHER
ACTIVITIES ADMINISTRATION ACTIVITIES TOTAL
---------- -------------- ---------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Base Salaries.................... $123,454 $18,974 $4,730 $147,158
Incentive Bonus.................. 54,460 323 2,663 57,446
Payroll Taxes and Benefits....... 18,896 3,544 658 23,098
-------- ------- ------ --------
Total Salaries and Related Ex-
penses.......................... $196,810 $22,841 $8,051 $227,702
======== ======= ====== ========
Average Number of Employees...... 3,351 680 145 4,176
<CAPTION>
FISCAL 1993
---------------------------------------------
PRODUCTION LOAN OTHER
ACTIVITIES ADMINISTRATION ACTIVITIES TOTAL
---------- -------------- ---------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Base Salaries.................... $ 73,114 $13,801 $4,666 $ 91,581
Incentive Bonus.................. 32,455 145 2,502 35,102
Payroll Taxes and Benefits....... 10,253 2,470 657 13,380
-------- ------- ------ --------
Total Salaries and Related Ex-
penses.......................... $115,822 $16,416 $7,825 $140,063
======== ======= ====== ========
Average Number of Employees...... 2,024 490 118 2,632
</TABLE>
The amount of salaries increased during Fiscal 1994 primarily due to the
increased number of employees resulting from increased loan production and an
increased servicing portfolio. Incentive bonuses earned during Fiscal 1994
increased primarily due to increased loan production and increases in loan
production personnel.
Occupancy and other office expenses for Fiscal 1994 increased 57% to $101.7
million from $64.8 million for Fiscal 1993. This increase was attributable
primarily to the expansion of the Retail and Wholesale Divisions' branch
networks. As of February 28, 1994, there were 295 Retail Division branch
offices (including 110 satellite offices and nine regional support centers) and
80 Wholesale Division branch offices (including 11 regional support centers).
As of February 28, 1993, there were 167 Retail Division branch offices
(including 45 satellite offices and two regional support centers) and 55
Wholesale Division branch offices (including nine regional support centers). In
addition, the increase in the Company's loan production and loan servicing
portfolio resulted in an increase in occupancy and other office expenses
related to the Company's central office.
Guarantee fees for Fiscal 1994 increased 96% to $57.6 million from $29.4
million for Fiscal 1993. This increase resulted primarily from an increase in
the servicing portfolio.
Marketing expenses for Fiscal 1994 increased 101% to $26.0 million from $13.0
million for Fiscal 1993. The increase in marketing expenses reflected the
Company's strategy to expand its market share, particularly in the home
purchase lending market.
Other operating expenses for Fiscal 1994 increased over Fiscal 1993 by $18.6
million, or 75%. This increase was due primarily to several factors, including
loan production, a larger servicing portfolio and expansion of loan production
capabilities.
13
<PAGE>
Profitability of Loan Production and Servicing Activities. In Fiscal 1994,
the Company's pre-tax earnings from its loan production activities (which
include loan origination and purchases, warehousing and sales) was $250.1
million. In Fiscal 1993, the Company's comparable pre-tax earnings were $175.8
million. The increase of $74.3 million was primarily attributed to higher loan
production. In Fiscal 1994, the Company's pre-tax earnings from its loan
servicing activities was $46.6 million as compared to $53.0 million in Fiscal
1993. The additional loan administration revenues derived from a larger
portfolio during Fiscal 1994 were more than offset by an increase in
amortization of the Servicing Assets, net of gains from the Servicing Hedge,
and an increase in Interest Costs Incurred on Payoffs.
INFLATION
Inflation affects the Company in the areas of loan production and servicing.
Interest rates normally increase during periods of high inflation and decrease
during periods of low inflation. Historically, as interest rates increase, loan
production, particularly from loan refinancings, decreases, although in an
environment of gradual interest rate increases, purchase activity may actually
be stimulated by an improving economy or the anticipation of increasing real
estate values. In such periods of reduced loan production, production margins
may decline due to increased competition resulting from overcapacity in the
market. In a higher interest rate environment, servicing-related earnings are
enhanced because prepayment rates tend to slow down, thereby extending the
average life of the Company's servicing portfolio and reducing amortization of
the Servicing Assets and Interest Costs Incurred on Payoffs, and because the
rate of interest earned from the custodial balances tends to increase.
Conversely, as interest rates decline, loan production, particularly from loan
refinancings, increases. However, during such periods, prepayment rates tend to
accelerate (principally on the portion of the portfolio having a note rate
higher than the then-current interest rates), thereby decreasing the average
life of the Company's servicing portfolio and adversely impacting its
servicing-related earnings primarily due to increased amortization of the
Servicing Assets, a decreased rate of interest earned from the custodial
balances, and increased Interest Costs Incurred on Payoffs.
SEASONALITY
The mortgage banking industry is generally subject to seasonal trends. These
trends reflect the general national pattern of sales and resales of homes,
although refinancings tend to be less seasonal and more closely related to
changes in interest rates. Sales and resales of homes typically peak during the
spring and summer seasons and decline to lower levels from mid-November through
February.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal financing needs are the financing of loan funding
activities and the investment in servicing rights. To meet these needs, the
Company currently relies on commercial paper supported by its revolving credit
facility, medium-term note issuances, pre-sale funding facilities, MBS and
whole loan reverse-repurchase agreements, subordinated notes and cash flow from
operations. In addition, in the past the Company has relied on direct
borrowings from its revolving credit facility, servicing-secured bank
facilities, privately-placed financings and public offerings of preferred and
common stock. See Note D to the Company's Consolidated Financial Statements
included elsewhere herein for more information on the Company's financings.
Certain of the debt obligations of the Company and CFC contain various
provisions that may affect the ability of the Company and CFC to pay dividends
and remain in compliance with such obligations. These provisions include
requirements concerning net worth, current ratio and other financial covenants.
These provisions have not had, and are not expected to have, an adverse impact
on the ability of the Company and CFC to pay dividends.
On September 23, 1994, CFC entered into a new three-year revolving credit
agreement with a group of forty commercial banks, replacing the existing
mortgage warehouse credit facility. The agreement permits
14
<PAGE>
CFC to borrow an aggregate maximum amount of $2.5 billion, less commercial
paper backed by the agreement. The amount available under the facility is
subject to a borrowing base, which consists of mortgage loans held for sale,
receivables for mortgage loans shipped and mortgage servicing rights. The
agreement expires on September 19, 1997.
The Company continues to investigate and pursue alternative and supplementary
methods to finance its growing operations through the public and private
capital markets. These may include such methods as mortgage loan sale
transactions designed to expand the Company's financial capacity and reduce its
cost of capital and the securitization of servicing income cash flows.
At times, the Company must meet margin requirements to cover changes in the
market value of its commitments to sell MBS and of its interest rate swaps. To
the extent that aggregate commitment prices are less than the current market
prices, the Company must deposit cash or certain government securities or
obtain letters of credit. The Company's credit facility provides a means of
obtaining such letters of credit to meet these margin requirements. With
respect to the interest rate swap agreements, the margin requirements are
negotiated with the various counterparties and are generally tied to the credit
ratings of CFC and each counterparty.
In the course of the Company's mortgage banking operations, the Company sells
to investors the mortgage loans it originates and purchases but generally
retains the right to service the loans, thereby increasing the Company's
investment in loan servicing rights. The Company views the sale of loans on a
servicing-retained basis in part as an investment vehicle. Significant
unanticipated prepayments in the Company's servicing portfolio could have a
material adverse effect on the Company's future operating results and
liquidity.
Cash Flows
Operating Activities. In Fiscal 1995, the Company's operating activities
provided cash primarily from the decline in its warehouse of mortgage loans of
approximately $815 million, offset by increases in other assets and working
capital of $125 million. The Company's operating activities also generated $212
million of positive cash flow. Cash provided by operating activities was
principally allocated to the long-term investment in servicing as discussed
below under "--Investing Activities."
Investing Activities. The primary investing activity for which cash was used
in Fiscal 1995 was the investment in servicing. Net cash used by investing
activities decreased to $717 million for Fiscal 1995 from $765 million for
Fiscal 1994. This decrease was primarily from the cash provided by the sale of
servicing rights during Fiscal 1995 and lower cash outlay for purchases of
property, equipment and leasehold improvements during Fiscal 1995 than in
Fiscal 1994, offset somewhat by an increase in purchased servicing rights and
capitalized servicing fees receivable of $97 million during Fiscal 1995.
Financing Activities. Net cash used by financing activities amounted to $0.2
billion for Fiscal 1995. Net cash provided by financing activities amounted to
$2.0 billion for Fiscal 1994. This change was primarily attributable to the
Company's net reduction in borrowings in Fiscal 1995 and net additions to
borrowings in Fiscal 1994.
PROSPECTIVE TRENDS
Applications and Pipeline of Loans in Process. During Fiscal 1995, the
Company received new loan applications at an average daily rate of $141 million
and at February 28, 1995, the Company's pipeline of loans in process was $3.6
billion. This compares to a daily application rate in Fiscal 1994 of $282
million and a pipeline of loans in process at February 28, 1994 of $7.6
billion. The decline in the pipeline of loans in process from Fiscal 1994 to
Fiscal 1995 was primarily due to a decrease in demand for mortgage loans caused
by an increase in mortgage interest rates. The size of the pipeline is
generally an indication of the level of future fundings, as historically 43% to
75% of the pipeline loans in process has funded. In addition, the
15
<PAGE>
Company's Lock N' Shop Pipeline at February 28, 1995 was $2.7 billion and at
February 28, 1994 was $1.6 billion. Future application levels and loan fundings
are dependent on numerous factors, including the level of demand for mortgage
credit, the extent of price competition in the market, the direction of
interest rates, seasonal factors and general economic conditions. For the month
ended March 31, 1995, the average daily amount of applications received was
$153 million, and at March 31, 1995, the pipeline of loans in process was $3.9
billion and the Lock N' Shop Pipeline was $1.9 billion.
Market Factors. Since late 1993, mortgage interest rates have increased. An
environment of rising interest rates has resulted in lower production
(particularly from refinancings) and greater price competition, which has
adversely impacted earnings from loan origination activities and may continue
to do so in the future. The Company has taken steps to maintain its
productivity and efficiency, particularly in the loan production area, by
reducing staff and embarking on a program to reduce production-related and
overhead costs. However, there was a time lag between the reduction in income
caused by declining production and the reduction in expenses. The Company's
production staff declined from approximately 3,900 at February 28, 1994 to
approximately 2,400 at February 28, 1995. The Company has reduced its total
staffing levels from approximately 4,900 at February 28, 1994 to approximately
3,600 at February 28, 1995. However, the rising interest rates enhanced
earnings from the Company's loan servicing portfolio as amortization of the
Servicing Assets and Interest Costs Incurred on Payoffs decreased from levels
experienced during the prior periods of declining interest rates, and the rate
of interest earned from the custodial balances associated with the Company's
servicing portfolio increased. The Company has further increased the size of
its servicing portfolio, thereby increasing its servicing revenue base, by
acquiring servicing contracts through bulk purchases. During Fiscal 1995, the
Company purchased such servicing contracts with principal balances amounting to
$17.6 billion.
The Company's primary competitors are commercial banks and savings and loans
and mortgage banking subsidiaries of diversified companies, as well as other
mortgage bankers. Particularly in California, savings and loans and other
portfolio lenders are competing with the Company by offering aggressively
priced adjustable-rate mortgage products which have grown in popularity with
the rise in interest rates. Generally, the Company has experienced significant
price competition among mortgage lenders which has resulted in downward
pressure on loan production earnings.
Some regions in which the Company operates, particularly some regions of
California, have been experiencing slower economic growth, and real estate
financing activity in these regions has been negatively impacted. As a result,
home lending activity for single-(one to four) family residences in these
regions may also have experienced slower growth. There can be no assurance that
the Company's operations and results will not continue to be negatively
impacted by such adverse economic conditions. The Company's California mortgage
loan production (measured by principal balance) constituted 31% of its total
production during Fiscal 1995, down from 46% for Fiscal 1994. The decline in
the percentage of California loan production was due to the Company's
continuing effort to expand its production capacity outside of California and
the aggressively priced adjustable-rate mortgage products offered by the
Company's competitors in the state. Since California's mortgage loan production
constituted a significant portion of the Company's production during Fiscal
1995, there can be no assurance that the Company's operations will not continue
to be adversely affected to the extent California continues to experience a
slower or negative economic growth resulting in decreased residential real
estate lending activity or market factors further impact the Company's
competitive position in the state.
Because the Company services substantially all conventional loans on a non-
recourse basis, foreclosure losses are generally the responsibility of the
investor or insurer and not the Company. Accordingly, any increase in
foreclosure activity should not result in significant foreclosure losses to the
Company. However, the Company's expenses may be increased somewhat as a result
of the additional staff efforts required to foreclose on a loan. Similarly,
government loans serviced by the Company (22% of the Company's servicing
portfolio at February 28, 1995) are insured or partially guaranteed against
loss by the Federal Housing
16
<PAGE>
Administration or the Veterans Administration. In the Company's view, the
limited unreimbursed costs that may be incurred by the Company on government
foreclosed loans are not material to the Company's consolidated financial
statements.
Servicing Hedge. As previously discussed, the Company realized no gains and
recorded amortization of Servicing Hedge option premiums amounting to $40.0
million during Fiscal 1995. In addition, the Company decided to replace its
prior Servicing Hedge with a new hedge, which the Company believed would be
more cost effective. As a result, the Company recorded an additional write-down
of $25.6 million during Fiscal 1995, representing the unamortized costs of the
prior Servicing Hedge. At February 28, 1995, the carrying value of interest
rate floor contracts and P/O securities included in the Servicing Hedge was
approximately $16 million and $42 million, respectively. There can be no
assurance the Company's Servicing Hedge will generate gains in the future.
Federal Legislation. In August 1993, a one percent increase in the corporate
federal tax rate was enacted. However, the Company has been diversifying its
business activities outside California, a state which has a corporate tax rate
that is higher than the average tax rate among the states in which the Company
does business. This diversification serves to reduce the Company's average tax
rate which offsets the enacted increase in the federal tax rate.
Implementation of New Accounting Standards. Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan, was issued
in May 1993. Implementation of this standard, which is required for the
Company's fiscal year beginning March 1, 1995, is not expected to have a
material effect on the Company's financial statements.
In May 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 122, Accounting for Mortgage
Servicing Rights. This Statement, among other provisions, requires the
recognition of originated mortgage servicing rights ("OMSRs"), as well as
purchased mortgage servicing rights ("PMSRs"), as assets by allocating total
costs incurred between the loan and the servicing rights based on their
relative fair values. Presently, the cost of OMSRs is included with the cost of
the related loans and written off against income when the loans are sold, while
the cost of PMSRs is recorded as an asset. Also under the new Statement, all
capitalized mortgage servicing rights are evaluated for impairment based on the
excess of the carrying amount of the mortgage servicing rights over their fair
value. In measuring impairment, the carrying amount must be stratified based on
one or more predominant risk characteristics of the underlying loans.
Impairment is recognized through a valuation allowance for an individual
stratum. Under current accounting requirements, the impairment evaluation may
be made using either discounted or undiscounted cash flows. No uniform required
level of disaggregation is specified. The Company uses a disaggregated,
undiscounted method.
The Statement is effective prospectively in fiscal years beginning after
December 15, 1995, with earlier application encouraged. The Company adopted the
Statement in the quarter ended May 31, 1995. The actual effect of implementing
this new Statement on the Company's financial position and results of
operations will depend on factors determined as of the end of a reporting
period, including the amount and mix of originated and purchased production,
the level of interest rates and market estimates of future prepayment rates.
Accordingly, the Company will have to determine as of the end of each reporting
period the impact on its earnings of applying the new methodologies of
recording all mortgage servicing rights as assets, of calculating impairment
and of applying the other provisions of the Statement.
17
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 240,000,000 shares of
Common Stock, par value $.05 per share, and 1,500,000 shares of Preferred
Stock, par value $.05 per share. The following summary description of the
capital stock of the Company does not purport to be complete and is qualified
in its entirety by reference to the Company's Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation"), a copy of which
is filed as an exhibit to the Registration Statement of which this Prospectus
is part and the certificate of designations which will be filed with the
Commission in connection with any offering of Preferred Stock.
COMMON STOCK
As of June 14, 1995, 91,574,247 shares of Common Stock were issued and
outstanding and there were 2,572 holders of record of the Common Stock. Each
holder of record of Common Stock is entitled to one vote per share on all
matters submitted to a vote of holders. Dividends may be paid to the record
holders of Common Stock when, as and if declared by the Board of Directors of
the Company (the "Board of Directors"), out of funds legally available
therefor, and each share of Common Stock is entitled to share equally therein
and in other distributions to holders of Common Stock, including distributions
upon liquidation, dissolution or winding up of the Company. The Common Stock
carries no preemptive rights, conversion or subscription rights, redemption
provisions, sinking fund provisions or cumulative voting rights.
PREFERRED STOCK PURCHASE RIGHTS
In February 1988, the Board of Directors declared a dividend distribution of
one preferred stock purchase right ("Right") for each outstanding share of the
Common Stock. As the result of stock splits and stock dividends, 0.399 of a
Right is presently associated with each outstanding share of Common Stock and
the same fraction of a Right will be associated with each share of Common Stock
issued prior to the Distribution Date (as defined below). Each Right, when
exercisable, entitles the holder to purchase from the Company one one-hundredth
of a share of Series A Participating Preferred Stock, par value $0.05 per
share, of the Company (the "Series A Preferred Stock"), at a price of $145,
subject to adjustments in certain cases to prevent dilution.
The Rights are evidenced by the Common Stock certificates and are not
exercisable or transferable, apart from the Common Stock, until the date (the
"Distribution Date") of the earlier of a public announcement that a person or
group, without prior consent of the Company, has acquired 20% or more of the
Common Stock (an "Acquiring Person"), or ten days (subject to extension by the
Board of Directors) after the commencement of a tender offer made without the
prior consent of the Company.
In the event a person becomes an Acquiring Person, then each Right (other
than those owned by the Acquiring Person) will entitle its holder to purchase,
at the then current exercise price of the Right, that number of shares of
Common Stock, or the equivalent thereof, which, at the time of such
transaction, would have a market value of two times the exercise price of the
Right. The Board of Directors may delay the exercisability of the Rights during
the period in which they are exercisable only for Series A Preferred Stock (and
not Common Stock).
In the event that, after a person has become an Acquiring Person, the Company
is acquired in a merger or other business combination, as defined for the
purposes of the Rights, each Right (other than those held by the Acquiring
Person) will entitle its holder to purchase, at the then current exercise price
of the Right, that number of shares of Common Stock, or the equivalent thereof,
of the other party (or publicly traded parent thereof) to such merger or
business combination which at the time of such transaction would have a market
value of two times the exercise price of the Right. The Rights expire on the
earlier of February 28, 2002, the consummation of certain merger transactions
or the optional redemption by the Company prior to any person becoming an
Acquiring Person.
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PREFERRED STOCK
Certain terms of any series of Preferred Stock offered by any Prospectus
Supplement will be described in the Prospectus Supplement relating to such
series of Preferred Stock. The Board of Directors is authorized to provide for
the issuance of Preferred Stock in one or more series with such distinctive
designations as may be stated in the resolution or resolutions providing for
the issue of such Preferred Stock. At the time that any series of Preferred
Stock is authorized, the Board of Directors will fix the dividend rights, any
conversion rights, any voting rights, redemption provisions, liquidation
preferences and any other rights, preferences, privileges and restrictions of
such series, as well as the number of shares constituting such series and the
designation thereof.
The only series of Preferred Stock currently authorized by the Board of
Directors for issuance is the Series A Preferred Stock in connection with the
exercise of Rights. See "--Preferred Stock Purchase Rights."
The Board of Directors could, without stockholder approval, cause the Company
to issue Preferred Stock which has voting, conversion and other rights which
could adversely affect the holders of Common Stock or make it more difficult to
effect a change in control of the Company. The Preferred Stock could be used to
dilute the stock ownership of persons seeking to obtain control of the Company
and thereby hinder a possible takeover attempt which, if stockholders were
offered a premium over the market value of their shares, might be viewed as
being beneficial to the stockholders of the Company. In addition, the Preferred
Stock could be issued with voting, conversion and other rights and preferences
which would adversely affect the voting power and other rights of holders of
Common Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS OF THE
COMPANY
In addition to the Rights described above under "--Preferred Stock Purchase
Rights" and the terms of any Preferred Stock that the Company may determine to
issue as described above under "--Preferred Stock," certain other provisions of
the Certificate of Incorporation and the Company's Bylaws may have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. The Certificate
of Incorporation (i) provides for a three-year staggered Board of Directors,
vacancies on which shall be filled by the Board of Directors and whose members
may be removed only for cause and only by the vote of the holders of two-thirds
of the outstanding shares of Common Stock, (ii) limits the Company's power to
purchase shares of voting stock of the Company (capital stock having the right
to vote generally on matters relating to the Company and any security which is
convertible into such stock) from a five percent holder at a price in excess of
its fair market value, unless such purchase is approved by a majority of these
shares (unless a greater vote is required by law), excluding the vote of such
five percent holder, (iii) prohibits action by written consent of the
stockholders and (iv) provides that the Company's Bylaws may be amended by the
Board of Directors or, with certain exceptions, a vote of two-thirds of the
voting shares and further provides that a two-thirds vote of all voting shares
of the Company is required to amend the provisions of the Certificate of
Incorporation referred to in this sentence, unless such amendment has been
approved by two-thirds of the Board of Directors and a majority of the
continuing directors (directors who became members of the Board of Directors
prior to the time when any stockholder who beneficially owns ten percent of the
outstanding shares first became a ten percent stockholder). The Company's
Bylaws provide that special meetings of the stockholders may be called only by
the directors and limits the business which may be transacted at such meetings
to those matters set forth in the request of the proposed meeting.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
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DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following description of the terms of the Company Debt Securities and the
terms of the CFC Debt Securities sets forth certain general terms and
provisions of such Debt Securities. To the extent any terms described below
apply specifically to the Company Debt Securities or the CFC Debt Securities,
specific references to "Company Debt Securities" or "CFC Debt Securities" will
be made; otherwise, references to "Debt Securities" shall be deemed to apply to
both the Company Debt Securities and the CFC Debt Securities. The extent, if
any, to which such general provisions do not apply to the Debt Securities
offered by any Prospectus Supplement will be described in such Prospectus
Supplement.
The Company Debt Securities are to be issued under an Indenture, as amended,
supplemented or modified from time to time (the "Company Indenture"), between
the Company and The Bank of New York, as trustee (in such capacity, the
"Company Trustee"), the form of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. Each series of
Company Debt Securities issued pursuant to the Company Indenture will be issued
pursuant to an amendment or supplement thereto in the form of a supplemental
indenture or pursuant to an Officers' Certificate, in each case delivered
pursuant to resolutions of the Board of Directors of the Company and in
accordance with the provisions of Section 301 or Article Ten of the Company
Indenture, as the case may be. The terms of the Company Debt Securities include
those stated in the Company Indenture and those made a part of the Company
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"TIA"). The Company Debt Securities are subject to all such terms and the
holders of Company Debt Securities are referred to the Company Indenture and
the TIA for a statement of such terms.
The CFC Debt Securities are to be issued under the Indenture dated as of
January 1, 1992, as amended, supplemented or modified from time to time (the
"CFC Indenture", and together with the Company Indenture, the "Indentures")
among CFC, the Guarantor and The Bank of New York, as Trustee (in such
capacity, the "CFC Trustee," and together with the Company Trustee, the
"Trustees"), which is incorporated by reference in the Registration Statement
of which this Prospectus forms a part. Each series of CFC Debt Securities
issued pursuant to the CFC Indenture will be issued pursuant to an amendment or
supplement thereto in the form of a supplemental indenture or pursuant to an
Officers' Certificate, in each case delivered pursuant to resolutions of the
Board of Directors of CFC and in accordance with the provisions of Section 301
or Article Ten of the CFC Indenture, as the case may be. The CFC Indenture is
expected to be amended by Supplemental Indenture No. 1 thereto, to be dated as
of June 15, 1995, among CFC, the Guarantor and the CFC Trustee, the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. The terms of the CFC Debt Securities include those
stated in the CFC Indenture and those made part of the CFC Indenture by
reference to the TIA. The CFC Debt Securities are subject to all such terms and
the holders of CFC Debt Securities are referred to the CFC Indenture and the
TIA for a statement of such terms.
The following summaries of certain provisions of each Indenture and the Debt
Securities are not complete and are qualified in their entirety by reference to
the provisions of each Indenture, including the definitions of capitalized
terms used herein without definition. Numerical references in parentheses are
to sections in the applicable Indenture and unless otherwise indicated
capitalized terms have the meanings given them in the applicable Indenture.
GENERAL
Neither Indenture limits the aggregate principal amount of Debt Securities
that may be issued from time to time in series. (Section 301)
The Company Debt Securities will constitute unsecured and unsubordinated
indebtedness of the Company and will rank pari passu in right of payment with
the Company's other unsecured and unsubordinated indebtedness.
Substantially all the Company's operations are conducted through
subsidiaries, and any right of the Company to receive assets of any of its
subsidiaries upon the liquidation or recapitalization of any such subsidiary
(and the consequent right of holders of the Company Debt Securities, or the
holders of the CFC
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Debt Securities looking to the Guarantees for repayment thereof, to participate
in those assets) will be subject to the claims of such subsidiary's creditors,
except to the extent that the Company itself is recognized as a creditor of
such subsidiary. Even if the Company is recognized as a creditor of a
subsidiary, the Company's claims would still be subject to any security
interests in the assets of such subsidiary and any indebtedness or other
liability of such subsidiary that is senior to the Company's claims.
Accordingly, by operation of the foregoing principles, the Company Debt
Securities and the Guarantees will effectively be subordinated to all
indebtedness and other liabilities, including trade accounts payable, of the
Company's subsidiaries. "Holder" means a person in whose name a Debt Security
is registered in the related Security Register.
The CFC Debt Securities will constitute unsecured and unsubordinated
indebtedness of CFC and will rank pari passu in right of payment with CFC's
other unsecured and unsubordinated indebtedness. A substantial portion of the
assets of CFC may be pledged under various credit agreements among CFC and
various lending institutions. See Note D to the Company's Consolidated
Financial Statements included elsewhere herein.
Reference is made to the Prospectus Supplement and pricing supplement, if
any, relating to the particular series of Debt Securities offered thereby for a
description of the terms of such Debt Securities in respect of which this
Prospectus is being delivered, including, where applicable: (i) the title of
such Debt Securities; (ii) any limit on the aggregate principal amount of such
Debt Securities; (iii) the date or dates, or the method or methods, if any, by
which such date or dates shall be determined or extended, on which the
principal of such Debt Securities is payable; (iv) any places other than the
issuer's office or agency in The City of New York where such Debt Securities
shall be payable or surrendered for registration of transfer or exchange; (v)
the denominations in which such Debt Securities shall be issuable; (vi) the
currency of denomination of such Debt Securities, which may be in U.S. dollars,
any foreign currency or currency unit, including European Currency Units
("ECU"), and, if applicable, certain other information relating to such foreign
currency or currency unit; (vii) the designation of the currency or currencies
in which payment of the principal of and premium, if any, and interest on such
Debt Securities will be made and whether payment of the principal of and
premium, if any, or the interest on Debt Securities designated in a foreign
currency or currency unit, at the election of a holder thereof, may instead be
payable in U.S. dollars and the terms and conditions upon which such election
may be made; (viii) the rate or rates (which may be fixed or floating), if any,
at which such Debt Securities will bear interest, or the method or methods, if
any, by which such rate or rates are to be determined or reset, the date or
dates, if any, from which such interest will accrue, or the method or methods,
if any, by which such date or dates shall be determined or reset, the dates on
which such interest will be payable, the record date for the interest payable
on any interest payment date, and the basis upon which interest shall be
calculated if other than that of a 360-day year of twelve 30-day months; (ix)
the terms and conditions, if any, on which such Debt Securities may be redeemed
at the option of the Company or CFC, as the case may be, or repaid at the
option of the Holders thereof; (x) the obligation, if any, of the Company or
CFC, as the case may be, to redeem, repay or purchase such Debt Securities
pursuant to any sinking fund or analogous provisions, and the terms and
conditions on which such Debt Securities shall be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (xi) if other than
the principal amount thereof, the portion of the principal amount of such Debt
Securities which will be payable upon declaration of acceleration of the
maturity thereof; (xii) provisions, if any, for the defeasance of such Debt
Securities; (xiii) the ability, if any, of the Holder of a Debt Security to
renew all or any portion of a Debt Security; (xiv) any additional Events of
Default or restrictive covenants provided for with respect to such Debt
Securities; (xv) the obligation, if any, of the Company to permit the
conversion or exchange of any Company Debt Securities into or for other
securities and the terms and conditions upon which such conversion or exchange
shall be effected (including, without limitation, the initial conversion or
exchange price or rate, the conversion or exchange period, any adjustment of
the applicable conversion or exchange price and any requirements relative to
the reservation of such other securities for purposes of conversion or
exchange); (xvi) any other terms not inconsistent with the applicable
Indenture, including any terms which may be required by or advisable under
United States laws or regulations; (xvii) if such Debt Securities are
denominated or payable in a currency or currency unit other than U.S. dollars,
the designation of the initial Exchange Rate Agent and, if other than as set
forth in the applicable Indenture, the definition of the
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"Exchange Rate"; and (xviii) the form of such Debt Securities and, if in global
form, the name of the depositary with respect thereto and the terms upon which
and the circumstances under which such Debt Securities may be exchanged.
(Section 301)
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
Debt Securities will be issued only in fully registered form without coupons.
Debt Securities denominated in U.S. dollars will be issued in denominations of
$1,000 or any integral multiple thereof unless otherwise provided in the
Prospectus Supplement relating thereto. (Section 302) The Prospectus
Supplement relating to a series of Debt Securities denominated in a foreign
currency or currency unit will specify the denominations thereof.
The Indentures do not contain any provisions that would limit the ability of
the Company, CFC or any of their respective affiliates to incur indebtedness
(secured or unsecured) or that would afford Holders of Debt Securities
protection in the event of a highly leveraged transaction, restructuring,
change in control, merger or similar transaction involving the Company or CFC
that may adversely affect Holders of the Debt Securities.
One or more series of Debt Securities may be sold at a substantial discount
below their stated principal amount, bearing no interest or interest at a rate
which at the time of issuance is below market rates. One or more series of Debt
Securities may be floating rate debt securities, and may be exchangeable for
fixed rate debt securities. Federal income tax consequences and special
considerations applicable to any such series will be described in the
Prospectus Supplement relating thereto.
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
principal of, and any premium or interest on, any series of Company Debt
Securities will be payable, and such Company Debt Securities will be
exchangeable and transfers thereof will be registerable, at the Corporate Trust
Office of the Company Trustee, initially at 101 Barclay Street, New York, New
York 10286, provided that, at the option of the Company, payment of interest
may be made by check mailed to the address of the Person entitled thereto as it
appears in the related Security Register. (Sections 301, 305, 306, 307 and
1102)
Unless otherwise indicated in the Prospectus Supplement relating thereto, the
principal of, and any premium or interest on, any series of CFC Debt Securities
will be payable, and such CFC Debt Securities will be exchangeable and
transfers thereof will be registerable, at the Corporate Trust Office of the
CFC Trustee, initially at 101 Barclay Street, New York, New York 10286,
provided that, at the option of CFC, payment of interest may be made by check
mailed to the address of the Person entitled thereto as it appears in the
related Security Register. (Sections 301, 305, 306, 307 and 1102)
No Debt Security shall be entitled to any benefit under the applicable
Indenture or be valid or obligatory for any purpose unless there appears on
such Debt Security a certificate of authentication substantially in the form
provided for in such Indenture duly executed by the applicable Trustee by
manual signature of one of its authorized officers, and such certificate upon
any Debt Security shall be conclusive evidence, and the only evidence, that
such Debt Security has been duly authenticated and delivered under such
Indenture and is entitled to the benefits of such Indenture. (Section 203)
EVENTS OF DEFAULT
The Company Indenture provides that the following shall constitute "Events of
Default" with respect to any series of Company Debt Securities thereunder: (i)
default in payment of principal of (or premium, if any, on) any Company Debt
Security of such series at Maturity; (ii) default for 30 days in payment of
interest on any Company Debt Security of such series when due; (iii) default in
the deposit of any sinking fund payment on any Company Debt Security of such
series when due; (iv) default in the performance or breach of any other
covenant or warranty of the Company in the Company Indenture or the Company
Debt Securities, continued for 60 days after written notice thereof by the
Company Trustee or the Holders of at least 25% in aggregate principal amount of
the Company Debt Securities of such series at the time outstanding; (v) default
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resulting in acceleration of maturity of any other indebtedness for borrowed
money of the Company or any direct or indirect subsidiary of the Company in an
amount in excess of $10,000,000 and such acceleration shall not be rescinded or
annulled for a period of 10 days after written notice thereof by the Company
Trustee or the Holders of at least 25% in aggregate principal amount of the
Company Debt Securities of such series at the time outstanding; (vi) certain
events of bankruptcy, insolvency or reorganization; and (vii) any other Event
of Default provided with respect to such series of Company Debt Securities.
(Section 601) No Event of Default with respect to a particular series of
Company Debt Securities issued under the Company Indenture necessarily
constitutes an Event of Default with respect to any other series of Company
Debt Securities issued thereunder. "Maturity," when used with respect to any
Debt Security, means the date on which the principal of such Debt Security
becomes due and payable as provided in such Debt Security or in the applicable
Indenture, whether at the Stated Maturity or by declaration of acceleration,
notice of redemption, notice of option to elect repayment or otherwise. "Stated
Maturity," when used with respect to any Debt Security or any installment of
principal thereof or interest thereon, means the date specified in such Debt
Security as the fixed date on which the principal of such Debt Security or such
installment of principal or interest is due and payable.
The CFC Indenture provides that the following shall constitute "Events of
Default" with respect to any series of CFC Debt Securities thereunder: (i)
default in payment of principal of (or premium, if any, on) any CFC Debt
Security of such series at Maturity; (ii) default for 30 days in payment of
interest on any CFC Debt Security of such series when due; (iii) default in the
deposit of any sinking fund payment on any CFC Debt Security of such series
when due; (iv) default in the performance or breach of any other covenant or
warranty of CFC or the Guarantor in the CFC Indenture, the CFC Debt Securities
or the related Guarantees, continued for 60 days after written notice thereof
by the CFC Trustee or the Holders of at least 25% in aggregate principal amount
of the CFC Debt Securities of such series at the time outstanding; (v) default
resulting in acceleration of maturity of any other indebtedness for borrowed
money of CFC, the Guarantor or any direct or indirect subsidiary of the
Guarantor in an amount in excess of $10,000,000 and such acceleration shall not
be rescinded or annulled for a period of 10 days after written notice thereof
by the CFC Trustee or the Holders of at least 25% in aggregate principal amount
of the CFC Debt Securities of such series at the time outstanding; (vi) certain
events of bankruptcy, insolvency or reorganization; and (vii) any other Event
of Default provided with respect to such series of CFC Debt Securities.
(Section 601) No Event of Default with respect to a particular series of CFC
Debt Securities issued under the CFC Indenture necessarily constitutes an Event
of Default with respect to any other series of CFC Debt Securities issued
thereunder.
Each Indenture provides that if an Event of Default specified therein shall
occur and be continuing, either the applicable Trustee or the Holders of at
least 25% in aggregate principal amount of the Debt Securities of such series
then outstanding may declare the principal amount of the Debt Securities of
such series (or, in the case of Original Issue Discount Securities, such other
amount, if any, as provided for in the terms of such Original Issue Discount
Securities) to be due and payable immediately upon written notice thereof to
the Company, and, in the case of the CFC Indenture, CFC. In certain cases, the
Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of any such series may, on behalf of the Holders of all such Debt
Securities, rescind and annul such declaration of acceleration. (Section 602)
"Original Issue Discount Security" means, except as otherwise defined in a Debt
Security, any Debt Security which is issued with original issue discount within
the meaning of Section 1273(a) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
The agreements governing certain of the Company's and CFC's outstanding
indebtedness, including CFC's Subordinated Notes due July 15, 2002 and CFC's
revolving credit agreement described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources", contain provisions to the effect that certain Events of
Default under the Company Indenture or the CFC Indenture would constitute an
event of default under such agreements which, among other things, could cause
an acceleration of the indebtedness thereunder.
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Each Indenture contains a provision entitling the applicable Trustee, subject
to the duty of such Trustee during default under any series of Debt Securities
to act with the required standard of care, to be indemnified by the Holders of
the Debt Securities of such series before proceeding to exercise any right or
power under such Indenture with respect to such series at the request of such
Holders. (Sections 701, 703) Each Indenture provides that no Holders of Debt
Securities of any series issued thereunder may institute any proceedings,
judicial or otherwise, to enforce such Indenture except in the case of failure
of the applicable Trustee thereunder, for 60 days, to act after it has received
a written request to enforce such Indenture by the Holders of at least 25% in
aggregate principal amount of the then outstanding Debt Securities of such
series, and an offer of reasonable indemnity. (Section 607) This provision will
not prevent any Holder of Debt Securities from enforcing payment of the
principal thereof, premium, if any, and interest thereon at the respective due
dates thereof. (Section 608) The Holders of a majority in aggregate principal
amount of the Debt Securities of any series issued under either Indenture then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee or exercising any trust or
power conferred on it with respect to the Debt Securities of such series. Such
Trustee may, however, refuse to follow any direction that it determines may not
lawfully be taken or would be illegal or in conflict with such Indenture or
involve it in personal liability or which would be unjustly prejudicial to
Holders of the Debt Securities of such series not joining therein. (Section
612)
Each Indenture provides that the applicable Trustee will, within 90 days
after the occurrence of a default with respect to any series of Debt Securities
issued thereunder, give to the Holders thereof notice of such default, unless
such default has been cured or waived. Except in the case of a default in the
payment of principal of, or premium, if any, or interest on any Debt Securities
or payment of any sinking fund installment, each Trustee shall be protected in
the withholding of such notice if it determines in good faith that the
withholding of such notice is in the interest of the Holders of the Debt
Securities of such series. (Section 702)
The Company and, in the case of the CFC Debt Securities, CFC will be required
to file with each Trustee annually an Officers' Certificate as to the absence
of certain defaults under the terms of the applicable Indenture. (Section 1105)
MODIFICATION AND WAIVER
Modifications of and amendments to each Indenture may be made by the Company
and, in the case of the CFC Indenture, CFC, and the applicable Trustee with the
consent of the Holders of a majority in aggregate principal amount of the
outstanding Debt Securities of each series affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder of each outstanding Debt Security affected
thereby: (i) except as otherwise permitted in such Indenture in connection with
Debt Securities for which the Stated Maturity is extendible, change the Stated
Maturity of the principal of, or any installment of interest on, such Debt
Security; (ii) reduce the principal amount of, or, except as otherwise
permitted in such Indenture in connection with Debt Securities for which the
interest rate may be reset, interest on, or any premium payable upon redemption
or repayment of, such Debt Security; (iii) reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon a
declaration of acceleration of the Maturity thereof; (iv) adversely affect the
right of repayment at the option of a Holder of such Debt Security; (v) reduce
the amount of, or postpone the date fixed for, any payment under any sinking
fund or analogous provisions of such Debt Security; (vi) change the place or
currency or currency unit of payment of the principal of, premium, if any, or
interest on such Debt Security; (vii) change or eliminate the rights of a
Holder to receive payment in a designated currency; (viii) impair the right to
institute suit for the enforcement of any required payment on or with respect
to such Debt Security; (ix) reduce the percentage of the aggregate principal
amount of the outstanding Debt Securities of any series the consent of whose
Holders is required for modification or amendment of such Indenture, for waiver
of compliance with certain provisions of such Indenture, or for waiver of
certain defaults; (x) modify any of the provisions of Section 613 (described
below) except to increase such percentage or to provide that certain other
provisions of such Indenture cannot be modified or waived without the consent
of the Holder
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of each outstanding Debt Security affected thereby; or (xi) in the case of the
CFC Indenture, modify or affect the terms and conditions of the related
Guarantees in a manner adverse to the interests of the Holders of the CFC Debt
Securities.
Each Indenture also contains provisions permitting the Company and, in the
case of the CFC Indenture, CFC, and the applicable Trustee, without the consent
of any Holders of Debt Securities under such Indenture, to enter into
supplemental indentures, in form satisfactory to such Trustee, for any of the
following purposes: (i) to evidence the succession of another corporation to
the Company or, in the case of the CFC Indenture, CFC or the Guarantor and the
assumption by such successor of the obligations and covenants of the Company
or, in the case of the CFC Indenture, CFC or the Guarantor contained in such
Indenture and in the Debt Securities and, in the case of the CFC Indenture, the
related Guarantees, as the case may be; (ii) to add to the covenants of the
Company or, in the case of the CFC Indenture, CFC or the Guarantor, for the
benefit of the Holders of all or any series of Debt Securities issued under
such Indenture (and if such covenants are to be for the benefit of less than
all series of Debt Securities issued under such Indenture, stating that such
covenants are expressly being included solely for the benefit of such series),
or to surrender any right or power herein conferred upon the Company or, in the
case of the CFC Indenture, CFC or the Guarantor; (iii) to add any additional
Events of Default (and if such Events of Default are to be applicable to less
than all series of Debt Securities issued under such Indenture, stating that
such Events of Default are expressly being included solely to be applicable to
such series); (iv) to add or change any of the provisions of such Indenture to
such extent as shall be necessary to permit or facilitate the issuance of Debt
Securities in bearer form, registrable or not registrable as to principal, and
with or without interest coupons; (v) to change or eliminate any of the
provisions of such Indenture, provided that any such change or elimination
shall become effective only when there is no Debt Security outstanding of any
series created prior to the execution of such supplemental indenture which is
entitled to the benefit of such provision; (vi) to establish the form or terms
of Debt Securities of any series as otherwise permitted by such Indenture;
(vii) to evidence and provide for the acceptance of appointment under such
Indenture by a successor Trustee with respect to the Debt Securities of one or
more series issued under such Indenture and to add to or change any of the
provisions of such Indenture as shall be necessary to provide for or facilitate
the administration of the trusts thereunder by more than one Trustee, pursuant
to the requirements of such Indenture; (viii) to secure the Debt Securities
issued under such Indenture; (ix) to cure any ambiguity, to correct or
supplement any provision in such Indenture which may be defective or
inconsistent with any other provision of such Indenture, or to make any other
provisions with respect to matters or questions arising under such Indenture
which shall not be inconsistent with any provision of such Indenture, provided
such other provisions shall not adversely affect the interests of the Holders
of Debt Securities of any series issued under such Indenture in any material
respect; (x) to modify, eliminate or add to the provisions of such Indenture to
such extent as shall be necessary to effect the qualification of such Indenture
under the TIA or under any similar federal statute subsequently enacted and to
add to such Indenture such other provisions as may be expressly required under
the TIA; or (xi) in the case of the CFC Indenture, to effect the assumption, by
the Guarantor or a Subsidiary thereof, of the payment obligations with respect
to the CFC Debt Securities and of the performance of every covenant of the CFC
Indenture on the part of CFC to be performed or observed. (Section 1001)
The Holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all Holders of Debt Securities
of that series, waive any past default under the applicable Indenture with
respect to Debt Securities of that series except a default in the payment of
the principal of, (or premium, if any) or interest on, any Debt Security of
that series and except a default in respect of a covenant or provision the
modification or amendment of which would require the consent of the Holder of
each outstanding Debt Security of the affected series. (Section 613)
CONVERSION AND EXCHANGE RIGHTS
The terms and conditions, if any, upon which the Company Debt Securities of
any series are convertible into or exchangeable for other securities will be
set forth in the applicable Prospectus Supplement relating
25
<PAGE>
thereto. Such terms will include whether such Company Debt Securities are
convertible into or exchangeable for other securities, the conversion or
exchange price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the Holders
thereof or the Company, the events requiring an adjustment of the conversion
or exchange price and provisions affecting conversion or exchange in the event
of the redemption of such Company Debt Securities.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Securities may be
issued in either registered or bearer form and in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for
individual certificates evidencing Debt Securities in definitive form
represented thereby, a Global Security may not be transferred except as a
whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the Prospectus Supplement relating to
such series.
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Under the Company Indenture, the Company may not consolidate with or merge
into any corporation, or transfer its assets substantially as an entirety to
any Person, unless: (i) the successor corporation or transferee assumes the
Company's obligations on the Company Debt Securities and under the Company
Indenture; (ii) after giving effect to the transaction, no Event of Default
and no event which, after notice or lapse of time or both, would become an
Event of Default shall have occurred and be continuing; and (iii) certain
other conditions are met. (Section 901)
Under the CFC Indenture, neither CFC nor the Guarantor may consolidate with
or merge into any corporation, or transfer its assets substantially as an
entirety to any Person, unless: (i) the successor corporation or transferee
assumes the Company's or the Guarantor's obligations on the Debt Securities or
the related Guarantees, as the case may be, and under the CFC Indenture, and
in the case of a consolidation or merger of CFC, the Guarantor delivers an
affirmation of the continuance of its obligations to the CFC Trustee; (ii)
after giving effect to the transaction, no Event of Default and no event
which, after notice or lapse of time or both, would become an Event of Default
shall have occurred and be continuing; and (iii) certain other conditions are
met. (Sections 901 and 903)
SATISFACTION, DISCHARGE AND DEFEASANCE
Each Indenture, with respect to any series of Debt Securities (except for
certain specified surviving obligations, including (A) any rights of
registration of transfer and exchange and (B) rights to receive the principal,
premium, if any, and interest on the Debt Securities) will be discharged and
cancelled upon the satisfaction of certain conditions, including the
following: (i) all Debt Securities of such series not theretofore delivered to
the applicable Trustee for cancellation have become due or payable, will
become due and payable at their Stated Maturity within one year, or are to be
called for redemption within one year and (ii) the deposit with such Trustee
of an amount in the Specified Currency sufficient to pay the principal,
premium, if any, and interest to the Maturity of all Debt Securities of such
series. (Section 501)
If so specified in the Prospectus Supplement with respect to Debt Securities
of any series, the Company or CFC, as the case may be, at its option, (i) will
be discharged from any and all obligations in respect of the Debt Securities
of such series (except for certain obligations to register the transfer or
exchange of Debt Securities of such series, replace stolen, lost or mutilated
Debt Securities of such series, maintain certain offices or agencies in each
Place of Payment, and hold moneys for payment in trust), or (ii) will not be
subject
26
<PAGE>
to provisions of the applicable Indenture described above under "--
Consolidation, Merger and Transfer of Assets" with respect to the Debt
Securities of such series, in each case if the Company or CFC, as the case may
be, irrevocably deposits with the applicable Trustee, in trust, money or U.S.
Government Obligations (as defined in the applicable Indenture) which through
the payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient (in the opinion of independent
public accountants) to pay all the principal (including any mandatory sinking
fund payments) of, and premium, if any, and interest on, the Debt Securities of
such series on the dates such payments are due in accordance with the terms of
such Debt Securities. To exercise any such option, the Company or CFC, as the
case may be, is required to deliver to the applicable Trustee (1) an opinion of
counsel to the effect that (a) the deposit and related defeasance would not
cause the Holders of the Debt Securities of such series to recognize income,
gain or loss for Federal income tax purposes, (b) the Company's exercise of
such option will not cause any violation of the Investment Company Act of 1940,
as amended, and (c) if the Debt Securities of such series are then listed on
the New York Stock Exchange, such Debt Securities would not be delisted as a
result of the exercise of such option and (2) in the case of the Debt
Securities of such series being discharged, a ruling received from or published
by the United States Internal Revenue Service to the effect that the deposit
and related defeasance would not cause the Holders of the Debt Securities of
such series to recognize income, gain or loss for Federal income tax purposes.
(Sections 1401 and 1402)
GUARANTEES
The CFC Debt Securities will be unconditionally guaranteed (the "Guarantees")
by the Guarantor as to payment of principal, premium, if any, and interest when
and as the same shall become due and payable, whether at their Stated Maturity
or upon redemption or repayment or otherwise. (Section 401) The Guarantees will
rank pari passu in right of payment with all other unsecured and unsubordinated
obligations of the Guarantor, including the Company Debt Securities.
The obligations of the Guarantor under the Guarantees will be unconditional
regardless of the enforceability of the CFC Debt Securities or the CFC
Indenture and will not be discharged until all obligations contained in such
CFC Debt Securities and the CFC Indenture are satisfied. Holders of the CFC
Debt Securities may proceed directly against the Guarantor in the event of an
Event of Default with respect to such CFC Debt Securities without first
proceeding against CFC. (Section 401)
Because the Guarantor is a holding company, the rights of its creditors,
including the Holders of the CFC Debt Securities in the event the Guarantees
are enforced, to share in the distribution of the assets of any subsidiary upon
the subsidiary's liquidation or recapitalization will be subject to the prior
claims of the subsidiary's creditors, except to the extent the Guarantor may
itself be a creditor with recognized claims against the subsidiary. See "--
General" above.
CONCERNING THE TRUSTEES
The Bank of New York is the Trustee under each of the Company Indenture and
the CFC Indenture. The Company and CFC maintain banking relationships in the
ordinary course of business with the Trustee. Among other things, The Bank of
New York is a lending bank under CFC's revolving credit facility. See Notes to
the Company's Consolidated Financial Statements included elsewhere herein.
PLAN OF DISTRIBUTION
The Company or CFC may sell Securities to or through one or more underwriters
or dealers and also may sell Securities directly to institutional investors or
other purchasers, or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters or agents may receive
compensation from the Company or CFC or from purchasers of Securities for whom
they may act as agents in the form of discounts,
27
<PAGE>
concessions or commissions. Underwriters may sell Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers and agents
that participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions received by them from the
Company and any profit on the resale of Securities by them may be deemed to be
underwriting discounts and commissions, under the Securities Act. Any such
underwriter or agent will be identified, and any such compensation received
from the Company or CFC will be described, in the related Prospectus
Supplement.
Under agreements which may be entered into by the Company and/or CFC,
underwriters and agents who participate in the distribution of Securities may
be entitled to indemnification by the Company and CFC against certain
liabilities, including liabilities under the Securities Act.
If so indicated in the related Prospectus Supplement, the Company or CFC will
authorize underwriters or other persons acting as the Company's or CFC's agents
to solicit offers by certain institutions to purchase Securities from the
Company or CFC pursuant to contracts providing for payment and delivery on a
future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all cases
such institutions must be approved by the Company or CFC. The obligations of
any purchaser under any such contract will be subject to the condition that the
purchase of the Securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such contracts.
Certain of the underwriters or agents and their associates may engage in
transactions with and perform services for the Company, CFC or their respective
affiliates in the ordinary course of their respective businesses.
The Securities may or may not be listed on a national securities exchange
(other than the Common Stock, which is listed on the New York Stock Exchange
and the Pacific Stock Exchange). Any Common Stock sold pursuant to a Prospectus
Supplement will be listed on the New York Stock Exchange and the Pacific Stock
Exchange, subject to official notice of issuance. No assurances can be given
that there will be an active trading market for the Securities.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company and CFC by
Fried, Frank, Harris, Shriver & Jacobson, a partnership including professional
corporations, New York, New York. Edwin Heller, whose professional corporation
is a member of Fried, Frank, Harris, Shriver & Jacobson, is a director of the
Company. Brown & Wood, New York, New York will serve as counsel for any
underwriters and agents. Brown & Wood also serves as counsel for CWMBS, Inc., a
wholly owned subsidiary of the Company, in connection with offerings of
mortgage pass-through certificates, and as counsel to CWM.
EXPERTS
The consolidated financial statements of the Company included or incorporated
by reference in this Registration Statement, of which this Prospectus forms a
part, have been audited by Grant Thornton LLP, independent certified public
accountants, for the periods and to the extent indicated in their report
thereon, and have been included or so incorporated in reliance upon the
authority of said firm as experts in accounting and auditing.
28
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
FEBRUARY 28, 1995
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants ........................ F-2
Financial Statements
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Earnings...................................... F-4
Consolidated Statement of Common Shareholders' Equity.................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Countrywide Credit Industries, Inc.
We have audited the accompanying consolidated balance sheets of Countrywide
Credit Industries, Inc. and Subsidiaries as of February 28, 1995 and 1994, and
the related consolidated statements of earnings, common shareholders' equity,
and cash flows for each of the three years in the period ended February 28,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Countrywide
Credit Industries, Inc. and Subsidiaries as of February 28, 1995 and 1994, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended February 28, 1995, in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Los Angeles, California
April 18, 1995
F-2
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28,
<TABLE>
<CAPTION>
1995 1994
ASSETS ---------- ----------
(DOLLAR AMOUNTS IN
THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Cash..................................................... $ 17,624 $ 4,034
Receivables for mortgage loans shipped................... 1,174,648 1,970,431
Mortgage loans held for sale............................. 1,724,177 1,743,830
Other receivables........................................ 476,754 349,770
Property, equipment and leasehold improvements, at cost--
net of
accumulated depreciation and amortization............... 145,612 145,625
Capitalized servicing fees receivable.................... 464,268 289,541
Purchased servicing rights............................... 1,332,629 836,475
Other assets............................................. 243,950 245,815
---------- ----------
Total assets........................................... $5,579,662 $5,585,521
========== ==========
Borrower and investor custodial accounts (segregated in
special
accounts--excluded from corporate assets)............... $1,063,676 $1,366,643
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Notes payable............................................ $3,963,091 $3,859,227
Drafts payable issued in connection with mortgage loan
closings................................................ 200,221 449,814
Accounts payable and accrued liabilities................. 105,097 87,818
Deferred income taxes.................................... 368,695 308,525
---------- ----------
Total liabilities...................................... 4,637,104 4,705,384
Commitments and contingencies............................ -- --
Shareholders' equity
Preferred stock--authorized, 1,500,000 shares of $0.05
par value;
issued and outstanding, none............................ -- --
Common stock--authorized, 240,000,000 shares of $0.05 par
value;
issued and outstanding, 91,370,364 shares in 1995 and
91,063,751 shares in 1994............................... 4,568 4,553
Additional paid-in capital............................... 608,289 606,031
Retained earnings........................................ 329,701 269,553
---------- ----------
Total shareholders' equity............................. 942,558 880,137
---------- ----------
Total liabilities and shareholders' equity............. $5,579,662 $5,585,521
========== ==========
Borrower and investor custodial accounts................. $1,063,676 $1,366,643
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEAR ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(DOLLAR AMOUNTS IN
THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Loan origination fees.......................... $203,426 $379,533 $241,584
Gain (loss) on sale of loans, net of commitment
fees.......................................... (41,342) 88,212 67,537
-------- -------- --------
Loan production revenue...................... 162,084 467,745 309,121
Interest earned................................ 343,138 376,225 211,542
Interest charges............................... (267,685) (275,906) (148,765)
-------- -------- --------
Net interest income.......................... 75,453 100,319 62,777
Loan servicing income.......................... 428,994 307,477 177,291
Less amortization of servicing assets.......... (95,768) (242,177) (151,362)
Add (less) servicing hedge benefit (expense)... (40,030) 73,400 74,075
Less write-off of servicing hedge.............. (25,600) -- --
-------- -------- --------
Net loan administration income............... 267,596 138,700 100,004
Gain on sale of servicing...................... 56,880 -- --
Commissions, fees and other income............. 40,650 48,816 33,656
-------- -------- --------
Total revenues............................. 602,663 755,580 505,558
Expenses
Salaries and related expenses.................. 199,061 227,702 140,063
Occupancy and other office expenses............ 102,193 101,691 64,762
Guarantee fees................................. 85,831 57,576 29,410
Marketing expenses............................. 23,217 26,030 12,974
Branch and administrative office consolidation
costs......................................... 8,000 -- --
Other operating expenses....................... 37,016 43,481 24,894
-------- -------- --------
Total expenses............................. 455,318 456,480 272,103
-------- -------- --------
Earnings before income taxes..................... 147,345 299,100 233,455
Provision for income taxes..................... 58,938 119,640 93,382
-------- -------- --------
NET EARNINGS................................... $ 88,407 $179,460 $140,073
======== ======== ========
Earnings per share
Primary........................................ $0.96 $1.97 $1.65
Fully diluted.................................. $0.96 $1.94 $1.52
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
THREE YEARS ENDED FEBRUARY 28, 1995
<TABLE>
<CAPTION>
ADDITIONAL
NUMBER COMMON PAID-IN RETAINED
OF SHARES STOCK CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AT MARCH 1, 1992...... 50,474,619 $2,523 $462,465 $ 93,629 $558,617
Cash dividends paid--
preferred.................... -- -- -- (3,482) (3,482)
Cash dividends paid--common... -- -- -- (20,090) (20,090)
Stock options exercised....... 471,288 24 2,252 -- 2,276
Tax benefit of stock options
exercised.................... -- -- 2,808 -- 2,808
Conversion of preferred stock
for common stock............. 1,964,794 98 11,633 -- 11,731
Dividend reinvestment plan.... 1,571 -- 38 -- 38
401(k) Plan contribution...... 39,716 2 1,141 -- 1,143
Settlement of three-for-two
stock split.................. 65,688 4 (13) -- (9)
Net earnings for the year..... -- -- -- 140,073 140,073
Effect of 5% stock dividend
effective subsequent to year
end.......................... 2,650,884 133 93,311 (93,444) --
---------- ------ -------- -------- --------
BALANCE AT FEBRUARY 28, 1993.. 55,668,560 2,784 573,635 116,686 693,105
Cash dividends paid--
preferred.................... -- -- -- (732) (732)
Cash dividends paid--common... -- -- -- (24,389) (24,389)
Stock options exercised....... 452,522 22 3,338 -- 3,360
Tax benefit of stock options
exercised.................... -- -- 2,495 -- 2,495
Conversion of preferred stock
for common stock............. 4,511,283 225 25,575 -- 25,800
Dividend reinvestment plan.... 1,994 -- 55 -- 55
401(k) Plan contribution...... 33,637 2 1,005 -- 1,007
Settlement of 5% stock
dividend..................... 41,171 2 1,446 (1,472) (24)
Net earnings for the year..... -- -- -- 179,460 179,460
Effect of three-for-two stock
split effective subsequent to
year end..................... 30,354,584 1,518 (1,518) -- --
---------- ------ -------- -------- --------
BALANCE AT FEBRUARY 28, 1994.. 91,063,751 4,553 606,031 269,553 880,137
Cash dividends paid--common... -- -- -- (28,259) (28,259)
Stock options exercised....... 283,147 14 1,584 -- 1,598
Tax benefit of stock options
exercised.................... -- -- 697 -- 697
Dividend reinvestment plan.... -- -- (14) -- (14)
Settlement of three-for-two
stock split.................. 23,466 1 (9) -- (8)
Net earnings for the year..... -- -- -- 88,407 88,407
---------- ------ -------- -------- --------
BALANCE AT FEBRUARY 28, 1995.. 91,370,364 $4,568 $608,289 $329,701 $942,558
========== ====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
YEAR ENDED FEBRUARY 28,
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................ $ 88,407 $ 179,460 $ 140,073
Adjustments to reconcile net
earnings to net cash provided
(used) by operating activities:
Amortization of purchased servicing
rights............................ 92,897 141,321 119,878
Amortization of capitalized
servicing fees receivable......... 2,871 100,856 31,484
Depreciation and other
amortization...................... 26,050 15,737 8,746
Deferred income taxes.............. 58,938 119,640 93,382
Gain on bulk sale of servicing
rights............................ (56,880) -- --
Origination and purchase of loans
held for sale..................... (27,866,170) (52,458,879) (32,387,774)
Principal repayments and sale of
loans............................. 28,681,606 51,060,915 31,725,953
------------ ------------ ------------
Decrease (increase) in mortgage
loans shipped and held for sale... 815,436 (1,397,964) (661,821)
Increase in other receivables and
other assets...................... (142,241) (407,080) (28,700)
Increase in accounts payable and
accrued liabilities............... 17,279 30,221 16,462
------------ ------------ ------------
Net cash provided (used) by
operating activities.............. 902,757 (1,217,809) (280,496)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to purchased servicing
rights............................. (589,051) (521,326) (280,459)
Additions to capitalized servicing
fees receivable.................... (207,663) (178,611) (148,248)
Purchase of property, equipment and
leasehold improvements--net........ (21,414) (64,660) (49,401)
Proceeds from bulk sale of servicing
rights............................. 100,676 -- --
Proceeds from sale of finance
receivables........................ -- -- 111,897
Finance receivables originations.... -- -- (425)
Principal repayments on finance
receivables........................ -- -- 4,254
------------ ------------ ------------
Net cash used by investing
activities........................ (717,452) (764,597) (362,382)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in warehouse
debt and other short-term
borrowings......................... (451,915) 1,477,593 526,820
Issuance of long-term debt.......... 399,205 576,718 462,000
Repayment of long-term debt......... (93,019) (59,721) (103,723)
Issuance of common stock............ 2,273 4,398 3,448
Cash dividends paid................. (28,259) (25,121) (23,572)
Net decrease in thrift investment
accounts........................... -- -- (224,036)
------------ ------------ ------------
Net cash (used) provided by
financing activities.............. (171,715) 1,973,867 640,937
------------ ------------ ------------
Net increase (decrease) in cash...... 13,590 (8,539) (1,941)
Cash at beginning of period.......... 4,034 12,573 14,514
------------ ------------ ------------
Cash at end of period................ $ 17,624 $ 4,034 $ 12,573
============ ============ ============
Supplemental cash flow information:
Cash used to pay interest........... $262,858 $277,518 $143,106
Cash (refunded from) used to pay
income taxes....................... $(841) $(1,823) $4,567
Noncash financing activities--
conversion of preferred stock...... $-- $25,800 $11,731
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying consolidated financial
statements follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of the parent and
all wholly-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
2. Receivables for Mortgage Loans Shipped
Gain or loss on the sale of mortgage loans is recognized at the date the
loans are shipped to investors pursuant to existing sales commitments.
3. Mortgage Loans Held for Sale
Mortgage loans held for sale are carried at the lower of cost or market,
which is computed by the aggregate method (unrealized losses are offset by
unrealized gains). The cost of mortgage loans is adjusted by gains and losses
generated from corresponding closed hedging transactions entered into to
protect the inventory value from increases in interest rates. Hedge positions
are also used to protect the pipeline of loan applications in process from
changes in interest rates. Gains and losses resulting from changes in the
market value of the inventory, pipeline and open hedge positions are netted.
Any net gain that results is deferred; any net loss that results is recognized
when incurred. Hedging gains and losses realized during the commitment and
warehousing period related to the pipeline and mortgage loans held for sale are
deferred. Hedging losses are recognized currently if deferring such losses
would result in mortgage loans held for sale and the pipeline being valued in
excess of their estimated net realizable value.
4. Property, Equipment and Leasehold Improvements
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives using the
straight-line method. Leasehold improvements are amortized over the lesser of
the life of the lease or service lives of the improvements using the straight-
line method.
5. Capitalized Servicing Fees Receivable
The Company sells substantially all of the mortgage loans it produces and
retains the servicing rights thereto. These servicing rights entitle the
Company to a future stream of cash flows based on the outstanding principal
balance of the mortgage loans and the related contractual service fee. The
sales price of the loans, which is generally at or near par, and the resulting
gain or loss on sale are adjusted to provide for the recognition of a normal
service fee rate over the estimated lives of the serviced loans. The amount of
the adjustment approximates the amount that investors were willing to pay for
the excess servicing fees at the time of the loan sale. The adjustment results
in a receivable that is expected to be realized through receipt of the excess
service fee over time.
6. Purchased Servicing Rights
The Company capitalizes the cost of bulk purchases of servicing rights, as
well as the net cost of servicing rights acquired through the purchase of loans
servicing-released which will be sold servicing-retained. The purchase price of
loans acquired servicing-released is allocated between the servicing rights and
the value of the loans on a servicing-retained basis. The portion of the
purchase price that represents the cost of acquiring the servicing rights in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 65,
F-7
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting for Certain Mortgage Banking Activities, is capitalized as purchased
servicing. The remainder of the purchase price represents the cost basis of the
loan that will be sold. Purchased mortgage loans include closed loans acquired
from financial institutions and table funded loans meeting all the criteria set
forth in EITF Issue 92-10, "Loan Acquisitions Involving Table Funding
Arrangements," acquired from financial institutions and mortgage brokers. The
amount capitalized does not exceed the present value of future net servicing
income related to the purchased loans.
7. Servicing Portfolio Hedge
The Company acquires financial instruments, including derivative contracts,
that increase in value when interest rates decline ("Servicing Hedge"). These
financial instruments include call options on U.S. treasury futures and
mortgage-backed securities ("MBS"), interest rate floors and certain tranches
of collateralized mortgage obligations ("CMOs"). The Servicing Hedge partially
protects the value of the capitalized servicing fees receivable and purchased
servicing rights ("Servicing Assets") from the effects of increased prepayment
activity. The value of the interest rate floors and call options is derived
from an underlying instrument or index. The notional or contractual amount is
not recognized in the balance sheet. The cost of the interest rate floors and
call options is charged to expense (and included in net loan administration
income) over the contractual life of the contract. Unamortized costs are
included in Other Assets in the balance sheet. Realized gains from the
Servicing Hedge are recognized first as an offset to the "Incremental
Amortization" of the Servicing Assets (i.e., amortization due to impairment
caused by increased projected prepayment speeds). To the extent the Servicing
Hedge generates gains in excess of Incremental Amortization, the Company
reduces the carrying amount of the Servicing Assets by such excess through
additional amortization. The Company recognized $65 million in net expense
(including a write-off of the Servicing Hedge amounting to $26 million) and $73
million as an offset to incremental amortization for the years ended February
28, 1995 and 1994, respectively. The Company measures the effectiveness of its
Servicing Hedge by computing the correlation under a variety of interest rate
scenarios between the present value of servicing cash flows and the value of
the Servicing Hedge instruments.
8. Amortization of Purchased Servicing Rights and Capitalized Servicing Fees
Receivable
Amortization of each year's purchased servicing rights is based on the ratio
of net servicing income received in the current period to total net servicing
income projected to be realized from each year's purchased servicing rights.
The Company evaluates the recoverability of each year's purchased servicing
rights separately by type of loan and interest rate stratum. This level of
disaggregation results in pools of loans which have homogeneous credit and
prepayment risk characteristics. The Company records any additional
amortization necessary to adjust the carrying value of each such stratum's
purchased servicing portfolio to its net realizable value. Amortization of
capitalized servicing fees receivable is based on the decline during the period
in the present value of the projected excess servicing fees using the same
discount rate as that which is implied by the price that investors were willing
to pay for the excess servicing fees at the time of the loan sale. Projected
net servicing income and excess servicing fees are in turn determined on the
basis of the estimated future balance of the underlying mortgage loan
portfolio, which declines over time from prepayments and scheduled loan
amortization. The Company estimates future prepayment rates based on current
interest rate levels, other economic conditions and market forecasts, as well
as relevant characteristics of the servicing portfolio, such as loan types,
interest rate stratification and recent prepayment experience.
9. Deferred Commitment Fees
Deferred commitment fees, included in Other Assets, primarily consist of fees
paid to permanent investors to ensure the ultimate sale of loans and put and
call option fees paid for the option of selling or
F-8
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
buying MBS. Fees paid to permanent investors are recognized as an adjustment
to the sales price when the loans are shipped to permanent investors or
charged to expense when it becomes evident the commitment will not be used.
Put and call option fees are amortized over the life of the option to reflect
the decline in its time value. Any unamortized option fees are charged to
income when the related option is exercised.
10. Investment Securities
The Company has designated its investments in certain tranches of CMOs as
available for sale. Those securities are reported at fair value, with any net
material unrealized gains and losses included in equity. Unrealized losses
that are other than temporary are recognized in earnings.
11. Loan Origination Fees
Loan origination fees and discount points are recorded as an adjustment of
the cost of the loan and are included in loan production revenue when the loan
is sold.
12. Interest Rate Swap Agreements
The differential to be received or paid under the agreements is accrued and
is recognized as an adjustment to net interest income. The related amount
payable to or receivable from counterparties is included in Accounts Payable
and Accrued Liabilities.
13. Sale of Servicing Rights
The Company recognizes gain or loss on the sale of servicing rights when
title and all risks and rewards have irrevocably passed to the buyer and there
are no significant unresolved contingencies.
14. Income Taxes
Effective March 1, 1993, the Company adopted SFAS No. 109, Accounting for
Income Taxes. The adoption of SFAS 109 changes the Company's method of
accounting from the deferred method to an asset and liability approach.
Previously, the Company deferred the past tax effects of timing differences
between financial reporting and taxable income. The asset and liability
approach requires the recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between the
financial statement carrying amounts and the tax bases of other assets and
liabilities. Adoption of SFAS 109 did not result in a material adjustment to
previously recorded deferred income tax liabilities.
15. Earnings Per Share
Primary earnings per share is computed on the basis of the weighted average
number of common and common equivalent shares outstanding during the
respective periods after giving retroactive effect to stock dividends and
stock splits. Fully diluted earnings per share is based on the assumption that
all dilutive convertible preferred stock and stock options were converted at
the beginning of the reporting period. The computations assume that net
earnings have been adjusted for the dividends on the convertible preferred
stock.
The weighted average shares outstanding for computing primary and fully
diluted earnings per share were 92,087,000 and 92,216,000, respectively, for
the year ended February 28, 1995; 90,501,000 and 92,445,000, respectively, for
the year ended February 28, 1994 and 82,514,000 and 92,214,000, respectively,
for the year ended February 28, 1993.
16. Financial Statement Reclassifications and Restatement
Certain amounts reflected in the Consolidated Financial Statements for the
years ended February 28, 1994 and 1993 have been reclassified to conform to
the presentation for the year ended February 28, 1995.
F-9
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On July 17, 1992, a 3-for-2 split of the Company's $0.05 par value common
stock was accomplished. On April 23, 1993, a 5% stock dividend was paid. On May
3, 1994, the Company's $0.05 par value common stock was split 3 for 2. All
references in the accompanying consolidated balance sheets, consolidated
statements of earnings and notes to consolidated financial statements to the
number of common shares and share amounts have been restated to reflect the
stock splits and the stock dividend.
NOTE B--PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consisted of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
------------------------------
1995 1994
-------------- --------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Buildings................................... $ 36,983 $ 35,305
Office equipment............................ 116,661 95,976
Leasehold improvements...................... 25,729 23,656
Mobile homes................................ 3,751 8,829
-------------- --------------
183,124 163,766
Less: accumulated depreciation and
amortization............................... (55,848) (41,823)
-------------- --------------
127,276 121,943
Land........................................ 18,336 23,682
-------------- --------------
$ 145,612 $ 145,625
============== ==============
</TABLE>
NOTE C--CAPITALIZED SERVICING FEES RECEIVABLE AND PURCHASED SERVICING RIGHTS
The components of capitalized servicing fees receivable and purchased
servicing rights are as follows:
<TABLE>
<CAPTION>
FEBRUARY 28,
-------------------------------
1995 1994 1993
---------- --------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
CAPITALIZED SERVICING FEES RECEIVABLE
Balance at beginning of period............ $ 289,541 $ 211,785 $ 95,021
Additions................................. 207,663 178,612 148,248
Sale of servicing......................... (30,065) -- --
Amortization
Scheduled............................... (2,871) (32,970) (21,333)
Unscheduled............................. -- (67,886) (10,151)
---------- --------- --------
Balance at end of period.................. $ 464,268 $ 289,541 $211,785
========== ========= ========
PURCHASED SERVICING RIGHTS
Balance at beginning of period............ $ 836,475 $ 456,470 $295,889
Additions................................. 589,051 521,326 280,459
Amortization
Scheduled............................... (92,897) (108,822) (55,511)
Unscheduled............................. -- (32,499) (64,367)
---------- --------- --------
Balance at end of period.................. $1,332,629 $ 836,475 $456,470
========== ========= ========
</TABLE>
F-10
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D--NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------------
1995 1994
-------------- --------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Commercial paper.............................. $ 2,122,348 $ 2,194,543
Medium-term notes, Series A, B and C, net of
discounts.................................... 1,393,900 1,088,550
Reverse-repurchase agreements................. 245,212 312,129
Pre-sale funding facilities................... -- 63,210
Subordinated notes............................ 200,000 200,000
Other notes payable (2.40%-2.90%)............. 1,631 795
-------------- --------------
$ 3,963,091 $ 3,859,227
============== ==============
</TABLE>
REVOLVING CREDIT FACILITY AND COMMERCIAL PAPER
As of February 28, 1995, Countrywide Funding Corporation ("CFC"), the
Company's mortgage banking subsidiary, had an unsecured credit agreement
(revolving credit facility) with forty-two commercial banks permitting CFC to
borrow an aggregate maximum amount of $2.5 billion, less commercial paper
backed by the agreement. The amount available under the facility is subject to
a borrowing base, which consists of mortgage loans held for sale, receivables
for mortgage loans shipped and mortgage servicing rights. The facility
contains various financial covenants and restrictions, certain of which limit
the amount of dividends that can be paid by the Company or CFC. The interest
rate on direct borrowings is based on a variety of sources, including the
prime rate and the London Interbank Offered Rates ("LIBOR") for U.S. dollar
deposits. This interest rate varies depending on CFC's credit ratings. The
weighted average borrowing rate on direct borrowings and commercial paper
borrowings for the year ended February 28, 1995, including the effect of the
interest rate swap agreements discussed in Note F, was 4.69%. The weighted
average borrowing rate on commercial paper outstanding as of February 28, 1995
was 5.94%. Under certain circumstances, including the failure to maintain
specified minimum credit ratings, borrowings under the revolving credit
facility and commercial paper may become secured by mortgage loans held for
sale, receivables for mortgage loans shipped and mortgage servicing rights.
The revolving credit facility expires on September 19, 1997.
MEDIUM-TERM NOTES
As of February 28, 1995, outstanding medium-term notes issued by the parent
and CFC under various shelf registrations filed with the Securities and
Exchange Commission were as follows:
<TABLE>
<CAPTION>
OUTSTANDING BALANCE INTEREST RATE MATURITY DATE
------------------------------- -------------- -----------------
FLOATING-
RATE FIXED-RATE TOTAL FROM TO FROM TO
--------- ---------- ---------- ------- ------ -------- --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Parent
Series A... $ -- $ 10,600 $ 10,600 10.60% 10.60% Jun 1995 Aug 1995
CFC
Series A... 5,000 424,800 429,800 6.10% 8.79% Mar 1995 Mar 2002
Series B... 11,000 469,000 480,000 5.11% 6.98% Mar 1996 Aug 2005
Series C... 278,000 195,500 473,500 6.31% 8.43% Dec 1997 Mar 2004
-------- ---------- ----------
Subtotal... $294,000 $1,089,300 $1,383,300
-------- ---------- ----------
Total...... $294,000 $1,099,900 $1,393,900
======== ========== ==========
</TABLE>
F-11
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D--NOTES PAYABLE (CONTINUED)
As of February 28, 1995, all of the outstanding fixed-rate notes of CFC had
been effectively converted by interest rate swap agreements to floating-rate
notes. The weighted average borrowing rate on CFC's medium-term note borrowings
for the year ended February 28, 1995, including the effect of the interest rate
swap agreements, was 5.54%. As of February 28, 1995, $26.5 million was
available for future issuance under the Series C shelf registration.
REVERSE-REPURCHASE AGREEMENTS
As of February 28, 1995, the Company had entered into short-term financing
arrangements to sell MBS and whole loans under agreements to repurchase. The
weighted average borrowing rate for the year ended February 28, 1995, was
4.63%. The weighted average borrowing rate on reverse-repurchase agreements
outstanding as of February 28, 1995 was 6.01%. The reverse-repurchase
agreements were collateralized by either MBS or whole loans. All MBS and whole
loans underlying reverse-repurchase agreements are held in safekeeping by
broker-dealers, and all agreements are to repurchase the same or substantially
identical MBS or whole loans.
PRE-SALE FUNDING FACILITIES
As of February 28, 1995, CFC had a $500 million revolving credit facility
("As Soon as Pooled Agreement") with the Federal National Mortgage Association
("Fannie Mae"). The credit facility is secured by conforming mortgage loans
which are in the process of being pooled into Fannie Mae MBS. Interest rates
are based on LIBOR and/or federal funds. The weighted average borrowing rate
for the year ended February 28, 1995, was 5.03%. This facility is committed
through July 20, 1995, subject to CFC's compliance with certain financial and
operational covenants. As of February 28, 1995, the Company had no outstanding
borrowings under this facility.
As of February 28, 1995, CFC had an uncommitted revolving credit facility
("Pre-sale Funding Facility") with an affiliate of an investment banking firm.
The credit facility is secured by conforming mortgage loans which are in the
process of being pooled into MBS. Interest rates are based on LIBOR. The
weighted average borrowing rate for the year ended February 28, 1995, was
6.03%. As of February 28, 1995, the Company had no outstanding borrowings under
this facility.
As of February 28, 1995, CFC had an uncommitted revolving credit facility
("Early Funding Agreement") with the Federal Home Loan Mortgage Corporation
("Freddie Mac"). The credit facility is secured by conforming mortgage loans
which are in the process of being pooled into Freddie Mac participation
certificates. Interest rates under the agreement are based on the prevailing
rates for MBS reverse-repurchase agreements. The weighted average borrowing
rate for the year ended February 28, 1995 was 3.91%. As of February 28, 1995,
the Company had no outstanding borrowings under this facility.
SUBORDINATED NOTES
The 8.25% subordinated notes are due July 15, 2002. Interest is payable semi-
annually on each January 15 and July 15. The subordinated notes are not
redeemable prior to maturity and are not subject to any sinking fund.
F-12
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D--NOTES PAYABLE (CONTINUED)
Maturities of notes payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING FEBRUARY 28(29),
---------------------------- (DOLLAR AMOUNTS IN THOUSANDS)
<S> <C>
1996....................................... $2,463,785
1997....................................... 114,006
1998....................................... 180,300
1999....................................... 102,000
2000....................................... 228,000
Thereafter................................. 875,000
----------
$3,963,091
==========
</TABLE>
NOTE E--INCOME TAXES
Components of the provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
------------------------------
1995 1994 1993
--------- ---------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Federal expense--deferred.................. $ 48,680 $ 99,074 $ 71,152
State expense--deferred.................... 10,258 20,566 22,230
--------- ---------- ---------
$ 58,938 $ 119,640 $ 93,382
========= ========== =========
</TABLE>
The following is a reconciliation of the statutory federal income tax rate to
the effective income tax rate reflected in the consolidated statements of
earnings:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Statutory federal income tax rate.............. 35.0% 35.0% 34.0%
State income and franchise taxes............... 5.0 5.0 6.4
Tax rate differential on reversing timing dif-
ferences...................................... -- -- (.4)
------- ------- -------
Effective income tax rate.................... 40.0% 40.0% 40.0%
======= ======= =======
</TABLE>
In August 1993, legislation was enacted that implemented a one percent
increase in the corporate federal tax rate. As a result, the Company increased
its deferred federal tax liability in the amount of approximately $5 million.
Also, the Company has diversified its business activities outside California, a
state that has a corporate tax rate that is higher than the average tax rate
among the states in which the Company does business. This diversification
reduced the Company's effective state tax rate by approximately one percent,
and therefore its deferred state tax liability was decreased by approximately
$5 million. Consequently, the Company's total deferred tax liability and
combined tax rate did not change materially as a result of these two events.
F-13
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E--INCOME TAXES (CONTINUED)
The tax effects of temporary differences that gave rise to deferred income
tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-----------------------
1995 1994
----------- -----------
(DOLLAR AMOUNTS
IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Federal net operating losses...................... $ 111,455 $ 68,240
State net operating losses........................ 10,685 7,342
Alternative minimum tax credits................... 2,664 2,664
State income and franchise taxes.................. 25,183 22,326
Allowance for losses.............................. 4,968 5,965
Other............................................. 3,297 1,650
----------- -----------
Total deferred income tax assets.................... 158,252 108,187
----------- -----------
Deferred income tax liabilities:
Capitalized servicing fees receivable and pur-
chased servicing rights.......................... 521,225 410,773
Accumulated depreciation.......................... 5,722 5,939
----------- -----------
Total deferred income tax liabilities............... 526,947 416,712
----------- -----------
Deferred income taxes............................... $ 368,695 $ 308,525
=========== ===========
</TABLE>
Deferred income tax expense (benefit) resulted from timing differences in the
recognition of revenues and expenses for tax and financial statement purposes.
The sources of these differences and the effects of each were as follows:
<TABLE>
<CAPTION>
FEBRUARY 28, 1993
-----------------
(DOLLAR AMOUNTS
IN THOUSANDS)
<S> <C>
Capitalized servicing fees............................... $101,800
State income and franchise taxes......................... (7,729)
Accelerated depreciation................................. 1,022
Allowance for credit losses.............................. (1,711)
--------
$ 93,382
========
</TABLE>
At February 28, 1995, the Company had net operating loss carryforwards for
federal income tax purposes of $13,612,000 expiring in 2003, $16,448,000
expiring in 2004, $4,712,000 expiring in 2006, $8,034,000 expiring in 2008,
$124,160,000 expiring in 2009 and $151,477,000 expiring in 2010.
NOTE F--FINANCIAL INSTRUMENTS
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes a variety of derivative financial instruments in the
management of interest-rate risk. These instruments include priced short-term
commitments to extend credit, MBS mandatory forward delivery and purchase
commitments, put and call options to sell or buy mortgage-backed and treasury
securities, interest rate floors and interest rate swaps. These instruments
involve, to varying degrees, elements of credit and interest-rate risk. All of
the Company's derivative financial instruments are held or issued for purposes
other than trading.
F-14
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F--FINANCIAL INSTRUMENTS (CONTINUED)
While the Company does not anticipate nonperformance by any counterparty, the
Company is exposed to credit loss in the event of nonperformance by the
counterparties to the various instruments. The Company manages credit risk with
respect to MBS mandatory forward commitments, put or call options to sell or
buy mortgage-backed and treasury securities and interest rate swaps and floors
by entering into agreements with entities approved by senior management and
initially having a long-term credit rating of single A or better. These
entities include Wall Street firms having primary dealer status, money center
banks and permanent investors. The Company's exposure to credit risk in the
event of default by the counterparty is the difference between the contract
price and the current market price offset by any available margins retained by
the Company or an independent clearing agent. The amounts of credit risk as of
February 28, 1995, if the counterparties failed completely and if the margins,
if any, retained by the Company or an independent clearing agent were to become
unavailable, are approximately $61 million for MBS mandatory forward
commitments, approximately $14 million for interest rate swaps and
approximately $23 million for interest rate floors.
As of February 28, 1995, the Company had priced short-term commitments
amounting to approximately $2.2 billion (including $1.5 billion fixed-rate and
$0.7 billion adjustable-rate) to fund mortgage loan applications in process
subject to approval of the loans and an additional $2.7 billion (including $2.5
billion fixed-rate and $0.2 billion adjustable-rate) subject to property
identification and approval of the loans. Substantially all of these
commitments are for periods of 90 days or less. After funding and sale of the
mortgage loans, the Company's exposure to credit loss in the event of
nonperformance by the mortgagor is limited as described in Note G4. The Company
uses the same credit policies in the approval of the commitments as are applied
to all lending activities.
HEDGE OF MORTGAGE LOAN INVENTORY AND COMMITTED PIPELINE
In order to offset the risk that a change in interest rates will result in a
decrease in the value of the Company's current mortgage loan inventory or its
commitments to purchase or originate mortgage loans ("Committed Pipeline"), the
Company enters into hedging transactions. The Company's hedging policies
generally require that substantially all of its inventory of conforming and
government loans and the maximum portion of its Committed Pipeline that may
close be hedged with forward contracts for the delivery of MBS or options on
MBS. The MBS that are to be delivered under these contracts and options are
fixed- or adjustable-rate, corresponding with the composition of the Company's
inventory and Committed Pipeline. At February 28, 1995, the Company had open
commitments amounting to approximately $8.5 billion to sell MBS with varying
settlement dates generally not extending beyond May 1995 and options on MBS
through October 1995 with a total notional amount of $4.2 billion. The mortgage
loan inventory is used to form the MBS that will fill the forward delivery
contracts and options. The Company hedges its inventory and Committed Pipeline
of jumbo mortgage loans by using whole-loan sale commitments to ultimate buyers
or by using temporary "cross hedges" with sales of MBS since such loans are
ultimately sold based on a market spread to MBS. As such, the Company is not
exposed to significant risk nor will it derive any significant benefit from
changes in interest rates on the price of the mortgage loan inventory net of
gains or losses of associated hedge positions. The correlation between the
price performance of the hedge instruments and the inventory being hedged is
very high due to the similarity of the asset and the related hedge instrument.
The Company is exposed to interest-rate risk to the extent that the portion of
loans from the Committed Pipeline that actually closes at the committed price
is less than the portion expected to close in the event of a decline in rates
and such decline in closings is not covered by forward contracts and options to
purchase MBS needed to replace the loans in process that do not close at their
committed price. At February 28, 1995, the notional amount of forward contracts
and options to purchase MBS aggregated $4.1 billion and $2.6 billion,
F-15
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F--FINANCIAL INSTRUMENTS (CONTINUED)
respectively. The forward contracts extend through May 1995 and the options
extend through September 1995. The Company determines the portion of its
Committed Pipeline that it will hedge based on numerous factors, including the
composition of the Company's Committed Pipeline, the portion of such Committed
Pipeline likely to close, the timing of such closings and anticipated changes
in interest rates.
SERVICING HEDGE
The primary means used by the Company to reduce the sensitivity of its
earnings to changes in interest rates is through a strong production capability
and a growing servicing portfolio. To further mitigate the effect on earnings
of higher amortization (which is deducted from loan servicing income) resulting
from increased prepayment activity, the Company utilizes its Servicing Hedge,
consisting of financial instruments, including derivative contracts, that
increase in value when interest rates decline. These financial instruments
include call options on U.S. treasury futures and MBS, interest rate floors and
certain tranches of CMOs.
The CMOs, which consist primarily of principal-only ("P/O") securities, have
been purchased at deep discounts to their par values. As interest rates
decline, prepayments on the collateral underlying the CMOs should increase.
These changes should result in a decline in the average lives of the P/O
securities and an increase in the present values of their cash flows.
The following summarizes the notional amounts of Servicing Hedge derivative
contracts:
<TABLE>
<CAPTION>
INTEREST LONG LONG CALL OPTIONS
RATE CALL OPTIONS ON U.S. TREASURY
FLOORS ON MBS FUTURES
-------- ------------ -----------------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Balance, March 1, 1992............... $ -- $ 560 $ --
Additions.......................... -- 2,287 700
Dispositions....................... -- 2,847 700
------ ------ ------
Balance, February 28, 1993........... -- -- --
Additions.......................... -- 4,700 2,520
Dispositions....................... -- 2,700 750
------ ------ ------
Balance, February 28, 1994........... -- 2,000 1,770
Additions.......................... 4,000 -- 1,300
Dispositions....................... -- 2,000 3,070
------ ------ ------
Balance, February 28, 1995........... $4,000 $ -- $ --
====== ====== ======
</TABLE>
The terms of the open Servicing Hedge derivative contracts at February 28,
1995 are presented below:
<TABLE>
<CAPTION>
INTEREST RATE FLOORS
--------------------
<S> <C>
Index............................. 10-Year Constant Maturity Treasury Yield
Floor............................. 6.50%--7.25%
Term.............................. 3--5 Years
</TABLE>
The Servicing Hedge instruments utilized by the Company partially protect the
value of the investment in servicing rights from the effects of increased
prepayment activity that generally results from declining interest rates. To
the extent that interest rates increase, the value of the servicing rights
increases while the value of the hedge instruments declines. However, the
Company is not exposed to loss beyond its initial outlay to acquire the hedge
instruments. At February 28, 1995, the carrying value of interest rate floor
contracts and P/O securities included in the Servicing Hedge was approximately
$16 million and $42 million, respectively. There can be no assurance the
Company's Servicing Hedge will generate gains in the future.
F-16
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F--FINANCIAL INSTRUMENTS (CONTINUED)
INTEREST RATE SWAPS
As of February 28, 1995, CFC had interest rate swap agreements with certain
financial institutions having notional principal amounts totaling $2.47
billion. The effect of these agreements is to enable CFC to convert a portion
of its medium-term note borrowings to LIBOR-based floating-rate cost borrowings
(notional amount $1.09 billion), to convert a portion of its commercial paper
and medium-term note borrowings from one floating-rate index to another
(notional amount $0.13 billion) and to convert the earnings rate on the
custodial accounts held by CFC from floating to fixed (notional amount $1.25
billion). Payments are due periodically through the termination date of each
agreement. The agreements expire between March 1995 and August 2005.
The terms of the open interest rate swap agreements at February 28, 1995 are
presented below:
<TABLE>
<S> <C>
Swaps related to debt
Average receive rate..................................... 6.367%
Average pay rate......................................... 6.329%
Index.................................................... 3-month LIBOR
Swaps related to custodial accounts
Average receive rate..................................... 6.468%
Average pay rate......................................... 6.223%
Index.................................................... 1-3 month LIBOR
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
as of February 28, 1995 and 1994 is made by the Company using available market
information and appropriate valuation methodologies. However, considerable
judgment is necessarily required to interpret market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize in a current
market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
<TABLE>
<CAPTION>
FEBRUARY 28, 1995 FEBRUARY 28, 1994
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Mortgage loans shipped and held
for sale...................... $2,898,825 $2,941,709 $3,714,261 $3,725,913
Capitalized servicing fees re-
ceivable...................... 464,268 473,623 289,541 295,403
Items included in other assets: -- -- 238,841 173,829
Principal-only securities.... 91,793 92,726 -- --
Derivatives:
Interest rate floors......... 15,820 23,396 -- --
Contracts and options related
to mortgage loans shipped
and held for sale........... 47,647 (2,926) -- 59,533
Liabilities:
Notes payable.................. 3,963,091 3,934,160 3,859,227 3,901,179
Derivatives gain (loss):
Interest rate swaps.......... 4,093 (55,570) 2,950 (6,669)
Short-term commitments to ex-
tend credit................. -- 69,252 -- (59,533)
</TABLE>
F-17
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE F--FINANCIAL INSTRUMENTS (CONTINUED)
The fair value estimates as of February 28, 1995 and 1994 are based on
pertinent information available to management as of the respective dates.
Although management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
The following describes the methods and assumptions used by the Company in
estimating fair values.
Mortgage Loans Shipped and Held for Sale
Fair value is estimated using the quoted market prices for securities backed
by similar types of loans and dealer commitments to purchase loans on a
servicing-retained basis.
Capitalized Servicing Fees Receivable
Fair value is estimated by discounting future cash flows from excess
servicing fees using discount rates that approximate current market rates and
market consensus prepayment rates.
Other Financial Instruments
Fair value is estimated using quoted market prices and by discounting future
cash flows using discount rates that approximate current market rates and
market consensus prepayment rates.
Derivatives
Fair value is estimated as the amounts that the Company would receive or pay
to terminate the contracts at the reporting date, taking into account the
current unrealized gains or losses on open contracts. Market or dealer quotes
are available for many derivatives; otherwise, pricing or valuation models are
applied to current market information to estimate fair value.
Notes Payable
Rates currently available to the Company for debt with similar terms and
remaining maturities are used to estimate the fair value of existing debt.
NOTE G--COMMITMENTS AND CONTINGENCIES
1. Commitments to Sell Mortgage-Backed Securities
In connection with its open commitments to buy or sell MBS and with its
interest rate swap agreements, the Company may be required to maintain margin
deposits. With respect to the MBS commitments, these requirements are generally
greatest during periods of rapidly declining interest rates. The interest rate
swap margin requirements are generally greatest during periods of increasing
interest rates.
F-18
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE G--COMMITMENTS AND CONTINGENCIES (CONTINUED)
2. Lease Commitments
The Company leases office facilities under lease agreements extending through
September 2011. Future minimum annual rental commitments under these non-
cancelable operating leases with initial or remaining terms of one year or more
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING FEBRUARY 28(29),
---------------------------- (DOLLAR AMOUNTS IN THOUSANDS)
<S> <C>
1996....................................... $ 15,214
1997....................................... 13,151
1998....................................... 10,778
1999....................................... 8,619
2000....................................... 6,078
Thereafter................................. 55,588
--------
$109,428
========
</TABLE>
Rent expense was $22,136,000, $19,115,000 and $13,049,000 for the years ended
February 28, 1995, 1994 and 1993, respectively.
3. Restrictions on Transfers of Funds
The Company and certain of its subsidiaries are subject to regulatory and/or
credit agreement restrictions which limit their ability to transfer funds to
the Company through intercompany loans, advances or dividends. Pursuant to the
revolving credit facility as of February 28, 1995, the Company is required to
maintain $750 million in consolidated net worth and CFC is required to maintain
$725 million of net worth, as defined in the credit agreement.
4. Loan Servicing
As of February 28, 1995, 1994 and 1993, the Company was servicing loans
totaling approximately $113.1 billion, $84.7 billion and $54.5 billion,
respectively. Included in the loans serviced as of February 28, 1995, 1994 and
1993 were loans being serviced under subservicing agreements with total
principal balances of $679 million, $592 million and $627 million,
respectively.
Conforming conventional loans serviced by the Company (57% of the servicing
portfolio at February 28, 1995) are securitized through Fannie Mae or Freddie
Mac programs on a non-recourse basis, whereby foreclosure losses are generally
the responsibility of Fannie Mae or Freddie Mac and not of the Company.
Similarly, the government loans serviced by the Company are securitized through
Government National Mortgage Association programs, whereby the Company is
insured against loss by the Federal Housing Administration (16% of the
servicing portfolio at February 28, 1995) or partially guaranteed against loss
by the Veterans Administration (6% of the servicing portfolio at February 28,
1995). In addition, jumbo mortgage loans (21% of the servicing portfolio at
February 28, 1995) are also serviced on a non-recourse basis.
Properties securing the mortgage loans in the Company's servicing portfolio
are geographically dispersed throughout the United States. As of February 28,
1995, approximately 43% of the mortgage loans (measured by unpaid principal
balance) in the Company's servicing portfolio are secured by properties located
in California. No other state contains more than 4% of the properties securing
mortgage loans.
F-19
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H--EMPLOYEE BENEFITS
1. Stock Option Plans
The Company has stock option plans (the "Plans") that provide for the
granting of both qualified and non-qualified options to employees and
directors. Options are generally granted at the average market price of the
Company's common stock on the date of grant and are exercisable beginning one
year from the date of grant and expire up to eleven years from date of grant.
Stock option transactions under the Plans were as follows:
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
(NUMBER OF SHARES)
<S> <C> <C> <C>
Shares subject to:
Outstanding options at beginning of
year.............................. 5,603,325 4,478,703 3,653,193
Options granted.................. 1,948,290 1,955,273 1,749,678
Options exercised................ (307,847) (701,619) (837,621)
Options expired or canceled...... (560,354) (129,032) (86,547)
------------ ------------ ------------
Outstanding options at end of year. 6,683,414 5,603,325 4,478,703
============ ============ ============
Exercise price:
Per share for options exercised
during the year................... $2.19-$19.50 $2.19-$16.19 $1.98-$12.65
Per share for options outstanding
at end of year.................... $2.39-$21.83 $2.19-$21.83 $2.19-$16.19
</TABLE>
Of the outstanding options as of February 28, 1995, 2,704,728 shares were
immediately exercisable under the Plans. Also as of February 28, 1995,
2,393,441 shares were designated for future grants under the Plans.
2. Pension Plan
The Company has a defined benefit pension plan (the "Plan") covering
substantially all of its employees. The Company's policy is to contribute the
amount actuarially determined to be necessary to pay the benefits under the
Plan, and in no event to pay less than the amount necessary to meet the minimum
funding standards of ERISA.
F-20
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE H--EMPLOYEE BENEFITS (CONTINUED)
The following table sets forth the Plan's funded status and amounts
recognized in the Company's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28,
----------------
1995 1994
------- -------
(DOLLAR AMOUNTS
IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested.................................................. $ 5,112 $ 5,024
Non-vested.............................................. 1,095 1,540
------- -------
Total accumulated benefit obligation...................... 6,207 6,564
Additional benefits based on estimated future salary lev-
els...................................................... 4,250 4,517
------- -------
Projected benefit obligations for service rendered to
date..................................................... 10,457 11,081
Less Plan assets at fair value, primarily mortgage-backed
securities............................................... (9,484) (7,482)
------- -------
Projected benefit obligation in excess of Plan assets..... 973 3,599
Unrecognized net gain (loss) from past experience
different from that assumed and effects of changes in
assumptions.............................................. 1,862 (780)
Prior service cost not yet recognized in net periodic pen-
sion cost................................................ (1,422) (1,522)
Unrecognized net asset at February 28, 1987 being recog-
nized over 15 years...................................... 496 566
------- -------
Accrued pension cost...................................... $ 1,909 $ 1,863
======= =======
Net pension cost included the following components:
Service cost--benefits earned during the period......... $ 1,648 $ 1,395
Interest cost on projected benefit obligations.......... 789 677
Actual return on Plan assets............................ (318) (413)
Net amortization and deferral........................... (327) (28)
------- -------
Net periodic pension cost................................. $ 1,792 $ 1,631
======= =======
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7.625% and 5.0%, respectively. The weighted
average expected long-term rate of return on assets used was 8.125%. Pension
expense for 1995, 1994 and 1993 was $1,792,000, $1,631,000 and $992,000,
respectively. The Company makes contributions to the Plan in amounts that are
deductible in accordance with federal income tax regulations.
NOTE I--REDEEMABLE PREFERRED STOCK
On July 6, 1993, the Company called all of its outstanding convertible
preferred stock, which was represented by depositary convertible shares (each
depositary share represented 1/10 of a share of convertible preferred stock).
Each depositary share was convertible into 6.3 shares of common stock, and each
depositary share not converted was redeemable for $27.375 in cash. All holders
converted their shares into common stock.
NOTE J--SHAREHOLDERS' EQUITY
In February 1988, the Board of Directors of the Company declared a dividend
distribution of one preferred stock purchase right ("Right") for each
outstanding share of the Company's common stock. As a
F-21
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE J--SHAREHOLDERS' EQUITY (CONTINUED)
result of stock splits and stock dividends, 0.399 of a Right is presently
associated with each outstanding share of the Company's common stock and the
same fraction of a Right will be associated with each share of the Company's
common stock issued prior to the Distribution Date (as defined below). Each
Right, when exercisable, entitles the holder to purchase from the Company one
one-hundredth of a share of Series A Participating Preferred Stock, par value
$0.05 per share, of the Company (the "Series A Preferred Stock"), at a price of
$145, subject to adjustments in certain cases to prevent dilution.
The Rights are evidenced by the common stock certificates and are not
exercisable or transferable, apart from the common stock, until the date (the
"Distribution Date") of the earlier of a public announcement that a person or
group, without prior consent of the Company, has acquired 20% or more of the
common stock (an "Acquiring Person"), or ten days (subject to extension by the
Board of Directors) after the commencement of a tender offer made without the
prior consent of the Company.
In the event a person becomes an Acquiring Person, then each Right (other
than those owned by the Acquiring Person) will entitle its holder to purchase,
at the then current exercise price of the Right, that number of shares of
common stock, or the equivalent thereof, of the Company which, at the time of
such transaction, would have a market value of two times the exercise price of
the Right. The Board of Directors of the Company may delay the exercisability
of the Rights during the period in which they are exercisable only for Series A
Preferred Stock (and not common stock).
In the event that, after a person has become an Acquiring Person, the Company
is acquired in a merger or other business combination, as defined for the
purposes of the Rights, each Right (other than those held by the Acquiring
Person) will entitle its holder to purchase, at the then current exercise price
of the Right, that number of shares of common stock, or the equivalent thereof,
of the other party (or publicly traded parent thereof) to such merger or
business combination which at the time of such transaction would have a market
value of two times the exercise price of the Right. The Rights expire on the
earlier of February 28, 2002, the consummation of certain merger transactions
or optional redemption by the Company prior to any person becoming an Acquiring
Person.
NOTE K--RELATED PARTY TRANSACTIONS
Countrywide Asset Management Corporation ("CAMC"), a wholly-owned subsidiary
of the Company, has entered into an agreement (the "Management Agreement") with
CWM Mortgage Holdings, Inc. ("CWM"), formerly Countrywide Mortgage Investments,
Inc., a real estate investment trust. CAMC has entered into a subcontract with
its affiliate, CFC, to perform such services for CWM and its subsidiaries as
CAMC deems necessary. In accordance with the Management Agreement, CAMC advises
CWM on various facets of its business and manages its operations subject to the
supervision of CWM's Board of Directors. For performing these services, CAMC
receives certain management fees and incentive compensation. CAMC waived all
management fees pursuant to the above for calendar year 1993 and 25% of
incentive compensation earned in 1994. In addition, in 1993 CAMC absorbed $0.9
million of operating expenses incurred in connection with its duties under the
Management Agreement. CWM and its subsidiaries began paying all expenses of the
new operations in June 1993. During the fiscal years ended February 28, 1995,
1994 and 1993, CAMC earned $0.3 million, $0.1 million and $0.8 million,
respectively, in base management fees from CWM and its subsidiaries. In
addition, during the fiscal year ended February 28, 1995, CAMC recorded $1.1
million in incentive compensation, net of the amount waived as described above.
The Management Agreement is renewable annually and expires on May 15, 1995. As
of February 28, 1995, the Company and CAMC own 1,120,000 shares or
approximately 2.77% of the common stock of CWM.
F-22
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE K--RELATED PARTY TRANSACTIONS (CONTINUED)
CAMC incurs many of the expenses related to the operations of CWM and its
subsidiaries, including personnel and related expenses, subject to
reimbursement by CWM. CWM's conduit operations are primarily conducted in
Independent National Mortgage Corporation ("INMC"), formerly Countrywide
Mortgage Conduit, and all other operations are conducted in CWM. Accordingly,
INMC is charged with the majority of the conduit's cost and CWM is charged with
the other operations' costs. During Fiscal 1995, the amount of common expenses
incurred by CFC which were allocated to CAMC and reimbursed by CWM totaled $1.2
million.
CWM has an option to purchase conventional loans from CFC at the prevailing
market price. During the years ended February 28, 1995, 1994 and 1993, CWM
purchased $80.4 million, $300.5 million and $130.3 million, respectively, of
conventional non-conforming mortgage loans from CFC pursuant to this option.
During the year ended February 28, 1995, CFC purchased from INMC bulk
servicing rights for loans with principal balances aggregating $3.0 billion at
a price of $38.2 million. In 1987 and 1993, subsidiaries of CWM entered into
servicing agreements appointing CFC as servicer of mortgage loans
collateralizing five series of CMOs with outstanding balances of approximately
$94.0 million at February 28, 1995. CFC is entitled under each agreement to an
annual fee of up to 0.32% of the aggregate unpaid principal balance of the
pledged mortgage loans. Servicing fees received by CFC under such agreements
for the years ended February 28, 1995, 1994 and 1993 were approximately $0.3
million, $0.5 million and $0.3 million, respectively.
CFC has extended CWM a $10 million line of credit bearing interest at prime
and maturing September 30, 1995. At February 28, 1995, there was no outstanding
amount under the agreement.
NOTE L--SEGMENT INFORMATION
The Company and its subsidiaries operate primarily in the mortgage banking
industry. Operations in mortgage banking involve CFC's origination and purchase
of mortgage loans, sale of mortgage loans in the secondary mortgage market,
servicing of mortgage loans and the purchase and sale of rights to service
mortgage loans.
Segment information for the year ended February 28, 1995 follows:
<TABLE>
<CAPTION>
ADJUSTMENTS
MORTGAGE AND
BANKING OTHER ELIMINATIONS CONSOLIDATED
---------- ---------- ------------ ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Unaffiliated revenue........... $ 563,586 $ 39,077 $ -- $ 602,663
Intersegment revenue........... 744 -- (744) --
---------- ---------- --------- ----------
Total revenue................ $ 564,330 $ 39,077 $ (744) $ 602,663
========== ========== ========= ==========
Earnings before income taxes... $ 136,220 $ 11,125 $ -- $ 147,345
========== ========== ========= ==========
Identifiable assets as of Feb-
ruary 28, 1995................ $5,520,283 $1,014,391 $(955,012) $5,579,662
========== ========== ========= ==========
</TABLE>
F-23
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE L--SEGMENT INFORMATION (CONTINUED)
Segment information for the year ended February 28, 1994 follows:
<TABLE>
<CAPTION>
ADJUSTMENTS
MORTGAGE AND
BANKING OTHER ELIMINATIONS CONSOLIDATED
---------- -------- ------------ ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Unaffiliated revenue.......... $ 719,533 $ 36,047 $ -- $ 755,580
Intersegment revenue.......... 744 -- (744) --
---------- -------- --------- ----------
Total revenue............... $ 720,277 $ 36,047 $ (744) $ 755,580
========== ======== ========= ==========
Earnings before income taxes.. $ 286,069 $ 13,031 $ -- $ 299,100
========== ======== ========= ==========
Identifiable assets as of Feb-
ruary 28, 1994............... $5,523,664 $930,720 $(868,863) $5,585,521
========== ======== ========= ==========
</TABLE>
Segment information for the year ended February 28, 1993 follows.
<TABLE>
<CAPTION>
ADJUSTMENTS
MORTGAGE AND
BANKING OTHER ELIMINATIONS CONSOLIDATED
---------- -------- ------------ ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Unaffiliated revenue.......... $ 463,394 $ 42,164 $ -- $ 505,558
Intersegment revenue.......... 3,021 -- (3,021) --
---------- -------- --------- ----------
Total revenue............... $ 466,415 $ 42,164 $ (3,021) $ 505,558
========== ======== ========= ==========
Earnings before income taxes.. $ 217,073 $ 16,382 $ -- $ 233,455
========== ======== ========= ==========
Identifiable assets as of Feb-
ruary 28, 1993............... $3,229,243 $765,954 $(696,064) $3,299,133
========== ======== ========= ==========
</TABLE>
NOTE M--BRANCH AND ADMINISTRATIVE OFFICE CONSOLIDATION COSTS
As a result of the decline in production caused by increasing mortgage
interest rates during Fiscal 1995, the Company reduced headcount by
approximately 30%, closed underperforming branch offices and consolidated its
administrative offices. A charge of $8 million related to these consolidation
efforts was recorded during the year ended February 28, 1995.
Branch and administrative office consolidation costs incurred during Fiscal
1995 and related reserves at February 28, 1995 are presented below:
<TABLE>
<CAPTION>
RESERVED AT
EXPENSE INCURRED FEBRUARY 28, 1995
---------------- -----------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Office lease costs....................... $4,348 $ 743
Equipment and improvement relocation,
disposal and abandonment costs.......... 1,976 474
Other.................................... 1,676 1,146
------ ------
$8,000 $2,363
====== ======
</TABLE>
NOTE N--SUBSEQUENT EVENTS
On March 20, 1995, the Company declared a cash dividend of $0.08 per common
share paid April 17, 1995 to shareholders of record on April 3, 1995.
F-24
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE O--QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly data is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------
MAY 31 AUGUST 31 NOVEMBER 30 FEBRUARY 28
------------- ------------- -------------- --------------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Year ended February 28,
1995
Revenue............... $ 177,118 $ 151,106 $ 133,726 $ 140,713
Expenses.............. 120,903 119,257 106,795 108,363
Provision for income
taxes................ 22,486 12,739 10,773 12,940
Net earnings.......... 33,729 19,110 16,158 19,410
Earnings per share(1)
Primary............. $ 0.37 $ 0.21 $ 0.18 $ 0.21
Fully diluted....... $ 0.37 $ 0.21 $ 0.18 $ 0.21
Year ended February 28,
1994
Revenue............... $ 166,665 $ 188,272 $ 196,446 $ 204,197
Expenses.............. 94,503 111,507 124,844 125,626
Provision for income
taxes................ 28,865 30,706 28,641 31,428
Net earnings.......... 43,297 46,059 42,961 47,143
Earnings per share(1)
Primary............. $ 0.49 $ 0.51 $ 0.46 $ 0.51
Fully diluted....... $ 0.47 $ 0.50 $ 0.46 $ 0.51
</TABLE>
- --------
(1) Earnings per share is computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share amounts
may not equal the annual amount. This is caused by rounding and the
averaging effect of the number of share equivalents utilized throughout the
year, which changes with the market price of the common stock.
NOTE P--SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
Summarized financial information for Countrywide Funding Corporation is as
follows:
<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------------------
1995 1994
-------------- --------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Balance Sheets:
Mortgage loans shipped and held for sale..... $ 2,898,825 $ 3,714,261
Other assets................................. 2,621,458 1,809,403
-------------- --------------
Total assets............................... $ 5,520,283 $ 5,523,664
============== ==============
Short- and long-term debt.................... $ 4,152,712 $ 4,296,291
Other liabilities............................ 433,025 374,559
Equity....................................... 934,546 852,814
-------------- --------------
Total liabilities and equity............... $ 5,520,283 $ 5,523,664
============== ==============
Statements of Earnings:
Revenues..................................... $ 564,330 $ 720,277
Expenses..................................... 428,110 434,208
Provision for income taxes................... 54,488 114,427
-------------- --------------
Net earnings............................... $ 81,732 $ 171,642
============== ==============
</TABLE>
F-25
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS OR IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Summary Information....................................................... S-3
Recent Developments....................................................... S-4
Use of Proceeds........................................................... S-5
Dividends and Price Range of
Common Stock............................................................. S-5
Capitalization............................................................ S-6
The Company............................................................... S-7
Underwriting.............................................................. S-16
Validity of Securities.................................................... S-17
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents
by Reference............................................................. 2
The Company and CFC....................................................... 3
Use of Proceeds........................................................... 4
Selected Consolidated Financial Data...................................... 5
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 6
Description of Capital Stock.............................................. 18
Description of Debt Securities and
Guarantees............................................................... 20
Plan of Distribution...................................................... 27
Validity of Securities.................................................... 28
Experts................................................................... 28
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
10,000,000 SHARES
LOGO COUNTRYWIDE (SM)
-----------------------
CREDIT INDUSTRIES, INC.
COMMON STOCK
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
SALOMON BROTHERS INC
ALEX. BROWN & SONS
INCORPORATED
DEAN WITTER REYNOLDS INC.
, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or in-
corporated by reference in this Prospectus Supplement or the Prospectus in
connection with the offering covered by this Prospectus Supplement and the
Prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by the Company, the Guarantor or any
Agent. This Prospectus Supplement and the Prospectus do not constitute an of-
fer to sell, or a solicitation of an offer to buy, the Notes in any jurisdic-
tion where, or to any person whom, it is unlawful to make such offer or solic-
itation. Neither the delivery of this Prospectus Supplement and the Prospectus
nor any sale made hereunder or thereunder shall, under any circumstances, cre-
ate an implication that there has not been any change in the facts set forth
in this Prospectus Supplement or the Prospectus or in the affairs of CFC or
the Guarantor since the date hereof.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
Prospectus Supplement
<S> <C>
Risk Factors.............................................................. S-2
Description of Notes...................................................... S-4
Certain Federal Income Tax Considerations................................. S-21
Plan of Distribution of Notes............................................. S-25
Validity of Securities.................................................... S-26
Prospectus
Available Information..................................................... 2
Incorporation of Certain Documents
by Reference............................................................. 2
The Company and CFC....................................................... 3
Use of Proceeds........................................................... 4
Selected Consolidated Financial Data...................................... 5
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 6
Description of Capital Stock.............................................. 18
Description of Debt Securities and Guarantees............................. 20
Plan of Distribution...................................................... 27
Validity of Securities.................................................... 28
Experts................................................................... 28
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
U. S. $500,000,000
COUNTRYWIDE
FUNDING
CORPORATION
MEDIUM-TERM NOTES, SERIES D
DUE NINE MONTHS OR MORE
FROM DATE OF ISSUE
PAYMENT OF PRINCIPAL, PREMIUM,
IF ANY, AND INTEREST
UNCONDITIONALLY GUARANTEED BY
LOGO COUNTRYWIDE (SM)
-----------------------
CREDIT INDUSTRIES, INC.
---------------
PROSPECTUS AND PROSPECTUS SUPPLEMENT
, 1995
---------------
LEHMAN BROTHERS
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Rule 424(b)(3)
File No. 33-59559
PRICING SUPPLEMENT NO. DATED 19
(To Prospectus Dated , 1995, as Supplemented , 1995)
COUNTRYWIDE FUNDING CORPORATION
MEDIUM-TERM NOTES, SERIES D
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY,
AND INTEREST UNCONDITIONALLY GUARANTEED BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
FIXED RATE NOTES
----------------
Trade Date: Issue Price: Original Issue Date:
Stated Maturity Date: Interest Payment Dates:
Book-Entry: [_] Record Dates:
Certificated:[_]
Principal Amount:
Net Proceeds:
Minimum Denomination:
Specified Currency:
Exchange Rate Agent:
Redemption:
Check box opposite applicable paragraph.
[_] The Notes cannot be redeemed prior to maturity.
[_] The Notes may be redeemed prior to maturity.
Initial Redemption Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction, if any:
Repayment:
Check box opposite applicable paragraph.
[_] The Notes cannot be repaid prior to maturity.
[_] The Notes may be repaid prior to maturity.
Optional Repayment Dates:
Additional/Other Terms:
----------------
The Notes to which this Pricing Supplement relates will constitute unsecured
and unsubordinated indebtedness of CFC and will rank pari passu in right of
payment with CFC's other unsecured and unsubordinated indebtedness. As of ,
19 , the Guarantor had $ aggregate principal amount of secured
indebtedness outstanding, and CFC had $ aggregate principal amount of
secured indebtedness outstanding. As of such date, CFC had $
aggregate principal amount of unsecured indebtedness outstanding, which
indebtedness ranked pari passu in right of payment with CFC's other unsecured
and unsubordinated indebtedness and which indebtedness will rank pari passu in
right of payment with the Notes to which this Pricing Supplement relates.
<PAGE>
Rule 424(b)(3)
File No. 33-59559
PRICING SUPPLEMENT NO. DATED 19
(To Prospectus Dated , 1995, as Supplemented , 1995)
COUNTRYWIDE FUNDING CORPORATION
MEDIUM-TERM NOTES, SERIES D
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY,
AND INTEREST UNCONDITIONALLY GUARANTEED BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
FLOATING RATE NOTES
----------------
Trade Date: Book-Entry: [_]
Issue Price: Certificated: [_]
Original Issue Date: Principal Amount:
Stated Maturity Date: Net Proceeds:
Specified Currency:
Base Rate(s): [_] Commercial Paper Rate [_] LIBOR (See Additional/
Other Terms)
[_] Certificate of Deposit Rate
[_] Treasury Rate [_] Federal Funds Rate [_] Prime Rate
[_] CMT Rate (See Additional/[_] Eleventh District [_] Other
Other Terms) Cost of Funds Rate
Exchange Rate Agent:
Minimum Denomination:
Initial Interest Rate: Fixed Rate Commencement Date:
Interest Reset Dates: Fixed Interest Rate:
Interest Payment Dates:
Index Maturity:
Maximum Interest Rate:
Minimum Interest Rate:
Spread (plus or minus):
Interest Factor Convention: Spread Multiplier:
Calculation Agent:
Redemption:
Check box opposite applicable paragraph.
[_] The Notes cannot be redeemed prior to maturity.
[_] The Notes may be redeemed prior to maturity.
Initial Redemption Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction, if any:
Additional/Other Terms:
Repayment:
Check box opposite applicable paragraph.
[_] The Notes cannot be repaid prior to maturity.
[_] The Notes may be repaid prior to maturity.
Optional Repayment Dates:
----------------
The Notes to which this Pricing Supplement relates will constitute unsecured
and unsubordinated indebtedness of CFC and will rank pari passu in right of
payment with CFC's other unsecured and unsubordinated indebtedness. As of ,
19 , the Guarantor had $ aggregate principal amount of secured
indebtedness outstanding, and CFC had $ aggregate principal amount of
secured indebtedness outstanding. As of such date, CFC had $
aggregate principal amount of unsecured indebtedness outstanding, which
indebtedness ranked pari passu in right of payment with CFC's other unsecured
and unsubordinated indebtedness and which indebtedness will rank pari passu in
right of payment with the Notes to which this Pricing Supplement relates.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 258,621
Stock exchange listing fees................................... 47,750
Blue sky fees and expenses.................................... 20,000
Legal fees and expenses....................................... 260,000
Accounting fees and expenses.................................. 60,000
Printing and engraving expenses............................... 200,000
Trustees' fees and expenses................................... 10,000
Rating agency fees............................................ 150,000
Miscellaneous................................................. 93,629
----------
Total..................................................... $1,100,000
==========
</TABLE>
- --------
*Except for the SEC registration fee, all of the foregoing expenses have
been estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides, in substance,
that Delaware corporations shall have the power, under specified circumstances,
to indemnify their directors, officers, employees and agents in connection with
actions, suits or proceedings brought against them by a third party or in the
right of the corporation, by reason of the fact that they were or are such
directors, officers, employees or agents, against expenses incurred in any such
action, suit or proceeding. The Delaware General Corporation Law also provides
that Delaware corporations may purchase insurance on behalf of any such
director, officer, employee or agent. Sections 722, 723, 725 and 726 of the New
York Business Corporation Law are substantively equivalent to Section 145 of
the Delaware General Corporation Law.
Article SIXTH of the Certificate of Incorporation of the Company provides
that the Company may indemnify its directors and officers to the full extent
permitted by the laws of the State of Delaware. Article VIII of the Company's
Bylaws provides that the Company shall indemnify its directors and officers,
and persons serving as directors and officers of CFC at the request of the
Company, against any threatened, pending or completed action, suit or
proceeding or investigation brought against such directors and officers by
reason of the fact that such persons were such directors or officers, provided
that such persons acted in good faith and in a manner which they reasonably
believed to be in or not opposed to the best interests of the Company; except
that in the case of actions brought by or in the right of the Company to
procure a judgment in its favor, no indemnification is permitted in respect to
any claim, issue or matter as to which any such director or officer shall have
been adjudged to be liable to the Company unless the court in which the action
was brought determines that such person is entitled to indemnification. The
Company's Bylaws further contemplate that the indemnification provisions
permitted thereunder are not exclusive of any other rights to which such
directors and officers are otherwise entitled by means of Bylaw provisions,
agreements, vote of stockholders or disinterested directors or otherwise. The
Company has entered into indemnity agreements with certain of its directors and
executive officers (including the directors and executive officers of CFC),
whereby such individuals are indemnified by the Company up to an aggregate
limit of $5,000,000 for any claims made against such individual based on any
act, omission or breach of duty committed while acting as a director or
officer, except, among other things, cases involving dishonesty or improper
personal benefit. The Company also maintains an insurance policy pursuant to
which its directors and officers (including the directors and executive
officers of CFC) are insured against certain liabilities which might arise out
of their relationship with the Company as directors and officers.
II-1
<PAGE>
Article SEVENTH of the Certificate of Incorporation provides that a director
of the Company shall have no personal liability to the Company or its
stockholders for monetary damages for breach of his fiduciary duty of care as a
director to the full extent permitted by the Delaware General Corporation Law,
as it may be amended from time to time.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 --Form of Purchase Agreement (for equity securities of the
Company)*
1.2 --Form of Purchase Agreement (for debt securities of the
Company)*
1.3 --Form of Selling Agency Agreement (for debt securities of
CFC)*
4.1 --Specimen Certificate of the Company's Common Stock (in-
corporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K dated February 6, 1987)
4.2 --Certificate of Amendment of Restated Certificate of In-
corporation of the Company (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-
Q dated August 31, 1987)
4.3 --Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q dated August 31,
1987)
4.4 --Bylaws of the Company, as amended and restated (incorpo-
rated by reference to the Company's Current Report on
Form 8-K dated February 10, 1988)
4.5 --Rights Agreement, dated as of February 10, 1988, between
the Company and Bank of America NT & SA, as Rights Agent
(incorporated by reference to Exhibit 4 to the Company's
Form 8-A filed on February 12, 1988)
4.6 --Amendment No. 1 to Rights Agreement, dated as of March
24, 1992, between the Company and Bank of America NT &
SA, as Rights Agent (incorporated by reference in Exhibit
1 to the Company's Form 8 filed on March 27, 1992)
4.7 --Form of Indenture between the Company and The Bank of
New York, as trustee*
4.8 --Indenture, dated as of January 1, 1992, among CFC, the
Guarantor and The Bank of New York, as trustee (incorpo-
rated by reference to Exhibit 4.1 to the Registration
Statement on Form S-3 of CFC and the Guarantor (File Nos.
33-50661 and 33-50661-01) filed on October 19, 1993)
4.9 --Form of Supplemental Indenture No. 1 dated as of June
15, 1995, to the Indenture dated as of January 1, 1992,
among CFC, the Guarantor and The Bank of New York, as
trustee*
4.10 --Form of Fixed Rate Medium-Term Note*
4.11 --Form of Floating Rate Medium-Term Note*
5.1 --Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company and CFC, as to the legality of the
securities being offered**
8.1 --Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company and CFC, as to certain tax mat-
ters*
12.1 --Statement regarding computation of ratio of earnings to
fixed charges (incorporated by reference to Exhibit 12.1
to the Company's Annual Report on Form 10-K dated Febru-
ary 28, 1995)
12.2 --Statement regarding computation of ratio of earnings to
net fixed charges (incorporated by reference to Exhibit
12.2 to the Company's Annual Report on Form 10-K dated
February 28, 1995)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
23.1 --Consent of Grant Thornton LLP*
23.2 --Consent of Fried, Frank, Harris, Shriver & Jacobson (in-
cluded in Exhibit 5.1)**
23.3 --Consent of Fried, Frank, Harris, Shriver & Jacobson (in-
cluded in Exhibit 8.1)*
24 --Powers of Attorney for the Company and CFC relating to
subsequent amendments**
25.1 --Form T-1 Statement of Eligibility Under Trust Indenture
Act of 1939 of The Bank of New York relating to debt se-
curities of CFC (separately bound)**
25.2 --Form T-1 Statement of Eligibility Under Trust Indenture
Act of 1939 of The Bank of New York relating to debt se-
curities of the Company (separately bound)**
</TABLE>
- --------
*Filed herewith.
**Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned Company and CFC (the "Registrants") hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) under the Securities Act of
1933 if, in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that the undertakings set forth in paragraphs (1) (i)
and (ii) above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the Registrants pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Each of the undersigned Registrants hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the provisions permitted under Item 15 above or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted against the
Registrants by such director, officer or controlling person in connection with
the securities being registered hereby, the Registrants will, unless in the
opinion of their counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by them is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(d) Each of the undersigned Registrants hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Countrywide
Credit Industries, Inc. certifies that it has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pasadena, State of California, on the 16th day
of June, 1995.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
/s/ Stanford L. Kurland
By: ____________________________________
Stanford L. Kurland
Senior Managing Director and Chief
Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board of June 16, 1995
____________________________________ Directors and President
DAVID S. LOEB (Principal Executive
Officer); Director
* Executive Vice President and June 16, 1995
____________________________________ Vice Chairman of the Board
ANGELO R. MOZILO of Directors; Director
* Managing Director--Finance, June 16, 1995
____________________________________ Chief Financial Officer and
CARLOS M. GARCIA Chief Accounting Officer
(Principal Financial and
Accounting Officer)
* Director June 16, 1995
____________________________________
ROBERT J. DONATO
* Director June 16, 1995
____________________________________
BEN M. ENIS
* Director June 16, 1995
____________________________________
EDWIN HELLER
* Director June 16, 1995
____________________________________
HARLEY W. SNYDER
</TABLE>
/s/ Stanford L. Kurland
*By ___________________________
STANFORD L. KURLAND
ATTORNEY-IN-FACT
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Countrywide
Funding Corporation certifies that it has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pasadena, State of California, on the 16th day
of June, 1995.
COUNTRYWIDE FUNDING CORPORATION
By: /s/ Stanford L. Kurland
-------------------------------------
Stanford L. Kurland
President and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director June 16, 1995
____________________________________
DAVID S. LOEB
* Chairman of the Board of June 16, 1995
____________________________________ Directors and Chief
ANGELO R. MOZILO Executive Officer (Principal
Executive Officer); Director
/s/ Stanford L. Kurland President and Chief June 16, 1995
____________________________________ Operating Officer; Director
STANFORD L. KURLAND
* Executive Vice President and June 16, 1995
____________________________________ Chief Financial Officer
THOMAS K. MCLAUGHLIN (Principal Financial and
Accounting Officer)
</TABLE>
/s/ Stanford L. Kurland
*By:___________________________
STANFORD L. KURLAND ATTORNEY-
IN-FACT
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Purchase Agreement (for equity securities of the Com-
pany)*
1.2 --Form of Purchase Agreement (for debt securities of the Compa-
ny)*
1.3 --Form of Selling Agency Agreement (for debt securities of CFC)*
4.1 --Specimen Certificate of the Company's Common Stock (incorpo-
rated by reference to Exhibit 4.2 to the Company's Current Re-
port on Form 8-K dated February 6, 1987)
4.2 --Certificate of Amendment of Restated Certificate of Incorpora-
tion of the Company (incorporated by reference to Exhibit 4.1
to the Company's Quarterly Report on Form 10-Q dated August 31,
1987)
4.3 --Restated Certificate of Incorporation of the Company (incorpo-
rated by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q dated August 31, 1987)
4.4 --Bylaws of the Company, as amended and restated (incorporated
by reference to the Company's Current Report on Form 8-K dated
February 10, 1988)
4.5 --Rights Agreement, dated as of February 10, 1988, between the
Company and Bank of America NT & SA, as Rights Agent (incorpo-
rated by reference to Exhibit 4 to the Company's Form
8-A filed on February 12, 1988)
4.6 --Amendment No. 1 to Rights Agreement, dated as of March 24,
1992, between the Company and Bank of America NT & SA, as
Rights Agent (incorporated by reference to Exhibit 1 in the
Company's Form 8 filed on March 27, 1992)
4.7 --Form of Indenture between the Company and The Bank of New
York, as trustee*
4.8 --Indenture, dated as of January 1, 1992, among CFC, the Guaran-
tor and The Bank of New York, as trustee (incorporated by ref-
erence to Exhibit 4.1 to the Registration Statement on Form S-3
of CFC and the Guarantor (File Nos. 33-50661 and 33-50661-01)
filed on October 19, 1993)
4.9 --Form of Supplemental Indenture No. 1 dated as of June 15,
1995, to the Indenture dated as of January 1, 1992, among CFC,
the Guarantor and The Bank of New York, as trustee*
4.10 --Form of Fixed Rate Medium-Term Note*
4.11 --Form of Floating Rate Medium-Term Note*
5.1 --Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
to the Company and CFC, as to the legality of the securities
being offered**
8.1 --Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
to the Company and CFC, as to certain tax matters*
12.1 --Statement regarding computation of ratio of earnings to fixed
charges (incorporated by reference to Exhibit 12.1 to the
Company's Annual Report on Form 10-K dated February 28, 1995)
12.2 --Statement regarding computation of ratio of earnings to net
fixed charges (incorporated by reference to Exhibit 12.2 to the
Company's Annual Report on Form 10-K dated February 28, 1995)
23.1 --Consent of Grant Thornton LLP*
23.2 --Consent of Fried, Frank, Harris, Shriver & Jacobson (included
in Exhibit 5.1)**
23.3 --Consent of Fried, Frank, Harris, Shriver & Jacobson (included
in Exhibit 8.1)*
24 --Powers of Attorney for the Company and CFC relating to subse-
quent amendments**
25.1 --Form T-1 Statement of Eligibility Under Trust Indenture Act of
1939 of The Bank of New York relating to debt securities of CFC
(separately bound)**
25.2 --Form T-1 Statement of Eligibility Under Trust Indenture Act of
1939 of The Bank of New York relating to debt securities of the
Company (separately bound)**
</TABLE>
- -------
* Filed herewith.
** Previously filed.
<PAGE>
EXHIBIT 1.1
10,000,000 Shares
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(a Delaware corporation)
Common Stock
(Par Value $.05 Per Share)
PURCHASE AGREEMENT
------------------
_____________, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
as Representatives of the several Underwriters
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
Countrywide Credit Industries, Inc., a Delaware corporation (the
"Company"), confirms its agreement with Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), and each of the other
Underwriters named in Schedule A hereto (collectively, the "Underwriters", which
term shall also include any underwriter substituted as hereinafter provided in
Section 10 hereof), for whom Merrill Lynch, Goldman, Sachs & Co., Lehman
Brothers Inc., Salomon Brothers Inc, Alex. Brown & Sons Incorporated and Dean
Witter Reynolds Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of the respective numbers of
shares of Common Stock, par value $.05 per share, of the Company ("Common
Stock") set forth in said Schedule A, and with respect to the grant by the
Company to the Underwriters, acting severally and not jointly, of the option
described in
<PAGE>
Section 2(b) hereof to purchase all or any part of 1,500,000 additional shares
of Common Stock to cover over-allotments, if any. The aforesaid 10,000,000
shares of Common Stock (the "Initial Securities") to be purchased by the
Underwriters and all or any part of the 1,500,000 shares of Common Stock subject
to the option described in Section 2(b) hereof (the "Option Securities") are
collectively hereinafter called the "Securities".
Prior to the purchase and public offering of the Securities by the several
Underwriters, the Company and the Representatives, acting on behalf of the
several Underwriters, shall enter into an agreement substantially in the form of
Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take the
form of an exchange of any standard form of written telecommunication between
the Company and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Securities
will be governed by this Agreement, as supplemented by the Pricing Agreement.
From and after the date of the execution and delivery of the Pricing Agreement,
this Agreement shall be deemed to incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-59559) and a related
preliminary prospectus for the registration under the Securities Act of 1933, as
amended (the "1933 Act") of certain securities, including the Securities
(collectively, the "Registered Securities") and the offering thereof from time
to time in accordance with Rule 415 under the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations"), which registration
statement has been declared effective by the Commission and copies of which have
heretofore been delivered to you. Such Registration Statement, in the form in
which it was declared effective, as amended through the date hereof, including
all documents incorporated or deemed to be incorporated by reference therein and
the information, if any, deemed to be part thereof pursuant to Rule 430A(b) or
Rule 434 of the 1933 Act Regulations through the date hereof, is hereinafter
referred to as the "Registration Statement". The Company proposes to file with
the Commission pursuant to Rule 424(b) of the 1933 Act Regulations the
Prospectus Supplement (as defined in Section 3(i) hereof) relating to the
Securities and the prospectus dated __________, 1995 (the "Base Prospectus")
relating to the Registered Securities, and has previously advised you of all
further information (financial and other) with respect to the Company set forth
therein. The Base Prospectus together with the Prospectus Supplement, in their
respective forms on the date of the Pricing Agreement (being the forms in which
they are to be filed with the Commission pursuant to Rule 424(b) of the 1933 Act
Regulations), including all documents incorporated or deemed to be incorporated
by reference therein through the date of the Pricing Agreement, are hereinafter
referred to as the "Prospectus", except that if any revised prospectus or
prospectus supplement shall be provided
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to the Underwriters by the Company for use in connection with the offering of
the Securities which differs from the Prospectus (whether or not such revised
prospectus or prospectus supplement is required to be filed by the Company
pursuant to Rule 424(b) of the 1933 Act Regulations), the term "Prospectus"
shall refer to such revised prospectus or prospectus supplement, as the case may
be, from and after the time it is first provided to the Underwriters for such
use. Unless the context otherwise requires, all references in this Agreement to
documents, financial statements and schedules and other information which is
"contained", "included", "stated", "described" or "referred to" in the
Registration Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such documents, financial
statements and schedules and other information which is or is deemed to be
incorporated by reference in the Registration Statement or the Prospectus, as
the case may be; and all references in this Agreement to amendments or
supplements to the Registration Statement or the Prospectus shall be deemed to
mean and include the filing of any document under the Securities Exchange Act of
1934 (the "1934 Act") after the date of this Agreement which is or is deemed to
be incorporated by reference in the Registration Statement or the Prospectus, as
the case may be. If the Company elects to rely on Rule 434 under the 1933 Act
Regulations, all references to the Prospectus shall be deemed to include,
without limitation, the form of prospectus and the abbreviated term sheet, taken
together, provided to the Underwriters by the Company in reliance on Rule 434
under the 1933 Act Regulations (the "Rule 434 Prospectus"). If the Company
files a registration statement to register a portion of the Securities and
relies on Rule 462(b) under the 1933 Act Regulations for such registration
statement to become effective upon filing with the Commission (the "Rule 462
Registration Statement"), then any reference to "Registration Statement" herein
shall be deemed to be to both the registration statement referred to above (No.
33-59559) and the Rule 462 Registration Statement, as each such registration
statement may be amended pursuant to the 1933 Act.
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
the Pricing Agreement has been executed and delivered.
Section 1. Representations and Warranties. (a) The Company represents
------------------------------
and warrants to each Underwriter as of the date hereof, as of the date of the
Pricing Agreement (such latter date being hereinafter referred to as the
"Representation Date") and as of the Closing Time referred to in Section 2(c)
hereof, and agrees with each Underwriter, as follows:
(i) The Company meets the requirements for use of Form S-3 under the
1933 Act and the 1933 Act Regulations. The Registration Statement and the
Base Prospectus, at the time the Registration Statement became effective,
complied in all material respects with the requirements of the
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1933 Act and the 1933 Act Regulations (including Rule 415(a) of the 1933
Act Regulations), and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
at the Representation Date (unless the term "Prospectus" refers to a
prospectus which has been provided to the Underwriters by the Company for
use in connection with the offering of the Securities which differs from
the Prospectus filed with the Commission pursuant to Rule 424(b) of the
1933 Act Regulations, in which case at the time it is first provided to the
Underwriters for such use) and at the Closing Time, does not and will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the representations and warranties in this subsection
-------
shall not apply to statements in or omissions from the Registration
Statement or Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any Underwriter through
the Representatives expressly for use in the Registration Statement or the
Prospectus or to those parts of the Registration Statement that constitute
the Statements of Eligibility and Qualification of the Trustees under the
Trust Indenture Act of 1939, as amended (the "1939 Act"), filed as exhibits
to the Registration Statement (the "Forms T-1"). For purposes of this
Section 1(a), all references to the Registration Statement, any post-
effective amendments thereto and the Prospectus shall be deemed to include,
without limitation, any electronically transmitted copies thereof,
including, without limitation, any copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR").
(ii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, when they became effective or at the time they
were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the 1933 Act or the 1934
Act, as applicable, and the rules and regulations of the Commission
thereunder, and, when read together with the other information in the
Prospectus, at the time the Registration Statement and any post-effective
amendments thereto become effective and at the Closing Time, will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(iii) The Company has complied with, and is and will be in compliance
with, the provisions of that certain Florida act relating to disclosure of
doing business with Cuba,
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codified as Section 517.075 of the Florida statutes, and the rules and
regulations thereunder, or is exempt therefrom.
(b) Any certificate signed by any officer of the Company and delivered to
the Representatives or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to the matters
covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
(a) On the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, the Company agrees to
sell to each Underwriter, severally and not jointly, and each Underwriter,
severally and not jointly, agrees to purchase from the Company, at the price per
share set forth in the Pricing Agreement, the number of Initial Securities set
forth in Schedule A opposite the name of such Underwriter (except as otherwise
provided in the Pricing Agreement), plus any additional number of Initial
Securities which such Underwriter may become obligated to purchase pursuant to
the provisions of Section 10 hereof.
(1) If the Company has elected not to rely upon Rule 430A under the
1933 Act Regulations, the initial public offering price and the purchase
price per share to be paid by the several Underwriters for the Securities
have each been determined and set forth in the Pricing Agreement, and an
amendment to the Registration Statement and the Prospectus will be filed
before the Registration Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A under the 1933
Act Regulations, the initial public offering price and the purchase price
per share to be paid by the several Underwriters for the Securities shall
be determined by agreement between the Representatives and the Company and,
when so determined, shall be set forth in the Pricing Agreement. In the
event that such prices have not been agreed upon and the Pricing Agreement
has not been executed and delivered by all parties thereto by the close of
business on the fourteenth business day following the date of this
Agreement, this Agreement shall terminate forthwith, without liability of
any party to any other party, unless otherwise agreed to by the Company and
the Representatives, except that Sections 6 and 7 shall remain in effect.
(b) In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the Underwriters, severally and not jointly, to
purchase up to an additional 1,500,000 shares of Common Stock at the price per
share set forth in the Pricing Agreement, less an amount per share equal to any
dividends or distributions declared by the Company and payable on the Initial
Securities but not payable on the Option Securities. The option hereby granted
will expire
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30 days after (i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A under the 1933 Act Regulations, or
(ii) the Representation Date, if the Company has elected to rely on Rule 430A
under the 1933 Act Regulations, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Initial Securities upon
notice by the Representatives to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Securities. Any
such time and date of delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined, unless otherwise agreed by the Representatives and the
Company. If the option is exercised as to all or any portion of the Option
Securities, each of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Securities then being
purchased which the number of Initial Securities set forth in Schedule A
opposite the name of such Underwriter bears to the total number of Initial
Securities (except as otherwise provided in the Pricing Agreement), subject in
each case to such adjustments as the Representatives in their discretion shall
make to eliminate any sales or purchases of fractional shares.
(c) Payment of the purchase price for, and delivery of certificates for,
the Initial Securities shall be made at the office of Fried, Frank, Harris,
Shriver & Jacobson, New York, New York, or at such other place as shall be
agreed upon by the Representatives and the Company, at 10:00 A.M. (New York
time) on the third business day (unless postponed in accordance with the
provisions of Section 10) following the date the Registration Statement becomes
effective (or, if the Company has elected to rely upon Rule 430A of the 1933 Act
Regulations, the third business day after execution of the Pricing Agreement),
or such other time not later than ten business days after such date as shall be
agreed upon by the Representatives and the Company (such time and date of
payment and delivery being herein called "Closing Time"). In addition, in the
event that any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for, and delivery of certificates
for, such Option Securities shall be made at the above-mentioned offices of
Fried, Frank, Harris, Shriver & Jacobson, or at such other place as shall be
agreed upon by the Representatives and the Company, on each Date of Delivery as
specified in the notice from the Representatives to the Company. Payment shall
be made to the Company by certified or official bank check or checks drawn in
next day funds payable to the order of the Company, against delivery to the
Representatives for the respective accounts of the Underwriters of certificates
for the Securities to be purchased by them. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations and
registered in such names as the Representatives may request in
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writing at least one business day before the Closing Time or the relevant Date
of Delivery, as the case may be. It is understood that each Underwriter has
authorized the Representatives, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the Initial Securities and the
Option Securities, if any, which it has agreed to purchase. Merrill Lynch,
individually and not as representative of the Underwriters, may (but shall not
be obligated to) make payment of the purchase price for the Initial Securities
or the Option Securities, if any, to be purchased by any Underwriter whose check
has not been received by the Closing Time or the relevant Date of Delivery, as
the case may be, but such payment shall not relieve such Underwriter from its
obligations hereunder. The certificates for the Initial Securities and the
Option Securities, if any, will be made available for examination and packaging
by the Representatives in The City of New York not later than 3:00 P.M. on the
last business day prior to the Closing Time or the relevant Date of Delivery, as
the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
Underwriter as follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective (as and when requested by the
Representatives) and, if the Company elects to rely upon Rule 430A and
subject to Section 3(b), will comply with the requirements of Rule 430A and
will notify the Representatives immediately, and confirm the notice in
writing, (i) when the Registration Statement, or any post-effective
amendment to the Registration Statement, shall become effective, or any
supplement to the Prospectus or any amended Prospectus shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or
preliminary prospectus supplement, or of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction,
or of or the initiation or threatening of any proceedings for any of such
purposes. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment. If the Company elects to
rely on Rule 434 under the 1933 Act Regulations, the Company will prepare
an "abbreviated term sheet" that complies with the requirements of Rule 434
under the 1933 Act Regulations. If the Company elects not to rely on Rule
434, the Company will provide the Underwriters with copies of the form of
Prospectus, in such number as the Underwriters may reasonably request, and
file or transmit for filing with the
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Commission such Prospectus in accordance with Rule 424(b) of the 1933 Act
Regulations by the close of business in New York on the business day
immediately succeeding the date of the Pricing Agreement. If the Company
elects to rely on Rule 434, the Company will provide the Underwriters with
copies of the form of Rule 434 Prospectus, in such number as the
Underwriters may reasonably request, and file or transmit for filing with
the Commission the form of Prospectus complying with Rule 434(c)(2) of the
1933 Act Regulations in accordance with Rule 424(b) of the 1933 Act
Regulations by the close of business in New York on the business day
immediately succeeding the date of the Pricing Agreement.
(b) The Company will give the Representatives notice of its intention
to file or prepare any amendment to the Registration Statement (including
any post-effective amendment) or any amendment or supplement to the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise,
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which
differs from the prospectus on file at the Commission at the time the
Registration Statement first becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations or any abbreviated term sheet prepared in reliance on Rule 434
of the 1933 Act Regulations), will furnish the Representatives with copies
of any such amendment or supplement a reasonable amount of time prior to
such proposed filing or use, as the case may be, and will not file any such
amendment or supplement or use any such prospectus to which the
Representatives or counsel for the Underwriters shall object.
(c) The Company has furnished or will deliver to the Representatives
and counsel for the Underwriters, without charge, signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be incorporated by reference
therein) and signed copies of all consents and certificates of experts, and
will also deliver to the Representatives a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Underwriters.
(d) The Company will deliver to each Underwriter, without charge,
from time to time until the effective date of the Registration Statement
(or, if the Company has elected to rely upon Rule 430A, until such time the
Pricing Agreement is executed and delivered), as many copies of each
preliminary prospectus and preliminary prospectus supplement as such
Underwriter may reasonably request, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each
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Underwriter, without charge, from time to time during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
such number of copies of the Prospectus (as amended or supplemented) as
such Underwriter may reasonably request for the purposes contemplated by
the 1933 Act or the 1934 Act or the respective applicable rules and
regulations of the Commission thereunder.
(e) If any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or
for the Company, to amend the Registration Statement or amend or supplement
the Prospectus in order that the Prospectus will not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company
will furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A of the 1933 Act Regulations, then immediately following the
execution of the Pricing Agreement, the Company will prepare, and file or
transmit for filing with the Commission in accordance with such Rule 430A
and Rule 424(b) of the 1933 Act Regulations, copies of an amended
Prospectus, or, if required by such Rule 430A, a post-effective amendment
to the Registration Statement (including an amended Prospectus), containing
all information so omitted and will use its best efforts to cause such
post-effective amendment to be declared effective as promptly as
practicable.
(g) The Company will use its best efforts, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States as the Representatives may designate and to maintain such
qualifications in effect for as long as may be required for the
distribution of the Securities; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
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taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities
have been so qualified, the Company will file such statements and reports
as may be required by the laws of such jurisdiction to continue such
qualification in effect as long as may be required for the distribution of
the Securities.
(h) As soon as practicable, the Company will make generally available
to its security holders and the Underwriters an earnings statement (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve month period beginning not later than the first day of
the Company's fiscal quarter next following the "effective date" (as
defined in said Rule 158) of the Registration Statement.
(i) Immediately following the execution of the Pricing Agreement, the
Company will prepare a prospectus supplement, dated the Representation Date
(the "Prospectus Supplement"), containing such information as may be
required by the 1933 Act or the 1933 Act Regulations and such other
information as the Underwriters and the Company deem appropriate, and will
file or transmit for filing with the Commission copies of the Prospectus
(including such Prospectus Supplement) in accordance with Rule 424(b) of
the 1933 Act Regulations by the close of business in New York on the
business day immediately succeeding the date hereof.
(j) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Prospectus Supplement
under "Use of Proceeds".
(k) The Company will use its best efforts to effect the listing of
the Securities on the New York Stock Exchange.
(l) During a period of 120 days from the date of the Pricing
Agreement, the Company will not, without the prior written consent of the
Representatives, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Common Stock or any
securities convertible into or exchangeable or exercisable for Common Stock
(except for Common Stock issued pursuant to this Agreement, pursuant to
employee benefit plans referred to in the Prospectus or pursuant to the
exercise of convertible securities or options referred to in the
Prospectus), or file any registration statement under the 1933 Act with
respect to any of the foregoing.
(m) The Company, during the period when the Prospectus is required to
be delivered under the 1933 Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to the 1934 Act within
the time periods
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required by the 1934 Act and the rules and regulations of the Commission
under the 1934 Act.
SECTION 4. Payment of Expenses. The Company will pay all expenses
-------------------
incident to the performance of its obligations under this Agreement, including
(i) the printing and filing of the Registration Statement as originally filed
and of each amendment thereto, (ii) the preparation, printing and delivery to
the Underwriters of this Agreement, the Pricing Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, including any capital duties, stamp duties and stock or other
transfer taxes payable upon the sale of the Securities to the Underwriters, (iv)
the fees and disbursements of the Company's counsel, accountants and other
advisors, (v) the qualification of the Securities under securities laws in
accordance with the provisions of Section 3(g) hereof, including filing fees and
the fees and disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation of the Blue Sky Survey and any
supplement thereto, (vi) the printing and delivery to the Underwriters of copies
of each preliminary prospectus, preliminary prospectus supplement and of the
Prospectus and Prospectus Supplement and any amendments or supplements thereto
including any abbreviated term sheet delivered by the Company pursuant to Rule
434 of the 1933 Act Regulations, (vii) the preparation, printing and delivery to
the Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities and (ix) the fees and expenses incurred in connection with the
listing of the Securities on the New York Stock Exchange.
If this Agreement is terminated by the Representatives in accordance with
the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) The Registration Statement shall have become effective not later
than 5:30 P.M. on the date hereof, or with the consent of the
Representatives, at a later time and date, not later, however, than 5:30
P.M. on the first business day following the date hereof, or at such later
time and date as may be approved by a majority in interest of the several
Underwriters; and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or
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proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. If the Company has elected to rely upon Rule 430A of the
1933 Act Regulations, the price of the Securities and any price-related
information previously omitted from the effective Registration Statement
pursuant to such Rule 430A shall have been transmitted to the Commission
for filing in accordance with Rule 424(b) of the 1933 Act Regulations
within the prescribed time period and prior to Closing Time the Company
shall have provided evidence satisfactory to the Representatives of such
timely filing, or a post-effective amendment providing such information
shall have been promptly filed and declared effective in accordance with
the requirements of Rule 430A of the 1933 Act Regulations.
(b) At Closing Time the Representatives shall have received:
(1) The favorable opinion, dated as of Closing Time, of Fried,
Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) Each of the Company and each significant subsidiary of
the Company, as defined in Rule 405 of Regulation C of the 1933
Act Regulations (individually, a "Subsidiary" and collectively,
the "Subsidiaries"), has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full
corporate power and authority to own its properties and conduct
its business as described in the Registration Statement (each
such Subsidiary being identified on a Schedule attached thereto);
(ii) The Company's authorized equity capitalization is as
set forth in the Prospectus; the capital stock of the Company and
the Securities conform in all material respects to the
descriptions thereof contained in the Prospectus; the Securities
have been duly authorized by the Company and, when issued and
delivered by the Company pursuant to this Agreement against
payment of the consideration set forth in the Pricing Agreement,
will be fully paid and nonassessable and subject to no preemptive
rights, and no holder of the Securities is or will be subject to
personal liability by reason of being such a holder; the
certificates for the Securities are in
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valid and sufficient form; and the holders of outstanding shares
of capital stock of the Company are not entitled to preemptive or
other rights to subscribe for the Securities;
(iii) The Securities have been duly authorized for listing,
subject to official notice of issuance, on the New York Stock
Exchange;
(iv) To the knowledge of such counsel: (a) there is no
pending or threatened action, suit or proceeding before any court
or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries, of a character
required to be disclosed in the Registration Statement which is
not adequately disclosed in the Prospectus, and (b) there is no
contract or other document of a character required to be
described in the Registration Statement or Prospectus, or to be
filed as an exhibit, which is not described or filed as required;
(v) The Registration Statement has become effective under
the 1933 Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued, no
proceedings for that purpose have been instituted or threatened
and the Registration Statement and the Prospectus and each
amendment or supplement thereto (exclusive of the documents
incorporated by reference therein), as of their respective
effective or issue dates (other than the financial statements and
other financial and statistical information contained therein and
the Forms T-1 as to which such counsel need express no opinion)
appear on their face to be responsive as to form in all material
respects with the applicable requirements of the 1933 Act and the
1933 Act Regulations; the Rule 434 Prospectus appears on its face
to be responsive as to form to the requirements of Rule 434 of
the 1933 Act Regulations in all material respects;
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(vi) This Agreement and the Pricing Agreement have been duly
authorized, executed and delivered by the Company;
(vii) No consent, approval, authorization or order of any
United States federal or New York, California or, with respect to
matters arising under the Delaware General Corporation Law,
Delaware court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the Pricing Agreement, except such as have been obtained
under the 1933 Act and the 1933 Act Regulations and such as may
be required under the state securities or blue sky laws, rules or
regulations of any jurisdiction in connection with the purchase
and distribution of the Securities by the Underwriters and such
other approvals as have been obtained;
(viii) Neither the issue and sale of the Securities, the
compliance by the Company with all the provisions of this
Agreement and the Pricing Agreement, the consummation of any
other of the transactions herein or therein contemplated nor the
fulfillment of the terms hereof or thereof will conflict with,
result in a breach of, or constitute a default under the charter
or by-laws of the Company or the terms of any indenture or other
agreement or instrument filed with the Commission and to which
the Company or any of its Subsidiaries is a party or bound, or
any decree, order or regulation (other than any federal or state
securities or blue sky laws, rules or regulations) known to such
counsel to be applicable to the Company or any of its
Subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over
the Company or any of its Subsidiaries;
(ix) To the knowledge of such counsel, no holders of
securities of the Company have rights to the registration of such
securities under the Registration Statement or otherwise
registered by the Company under the 1933 Act;
(x) The information in the Base Prospectus under
"Description of Capital Stock -- Common Stock" and "-- Preferred
Stock Purchase Rights", to the extent that it constitutes matters
of law, summaries of legal matters, documents or proceedings, or
legal conclusions, has been reviewed by them and fairly presents
the information disclosed therein in all material respects;
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(xi) The documents incorporated by reference in the
Prospectus (other than the financial statements and other
financial and statistical data contained therein, as to which no
opinion need be rendered), when they were filed with the
Commission appeared on their face to be responsive as to form in
all material respects with the requirements of the 1934 Act and
the rules and regulations of the Commission thereunder; and
(xii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
Such counsel shall also state that in the course of the preparation by
the Company and its counsel of the Registration Statement and Prospectus,
such counsel attended conferences with certain of the officers of, and the
independent public accountants for, the Company, at which the Registration
Statement and Prospectus were discussed. Given the limitations inherent in
the independent verification of factual matters and the character of
determinations involved in the registration process, such counsel need not
pass upon and need not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, except as specifically described in the opinion
set forth in paragraphs (iv), (v), (x) and (xi) above. Subject to the
foregoing and on the basis of the information such counsel gained in the
performance of the services referred to above, including information
obtained from officers and other representatives of the Company, such
counsel shall state that such counsel has no reason to believe that at the
time it became effective the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, at the Representation Date (unless the
term "Prospectus" refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the offering of the
Securities that differs from the Prospectus on file at the Commission at
the Representation Date, in which case at the time it is first provided to
the Underwriters for such use) or at Closing Time includes any untrue
statement of material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that such counsel need not express a
view or belief with respect to financial statements, notes or schedules
thereto, or other financial and statistical information included or
incorporated by reference in the Registration Statement and Prospectus or
the Forms T-1.
15
<PAGE>
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of California, the State of New York, the State of Delaware (but only with
respect to the Delaware General Corporation Law) or the United States, to
the extent they deem proper and specified in such opinion, upon the opinion
of other counsel of good standing whom they believe to be reliable and who
are satisfactory to counsel for the Underwriters and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus
in this paragraph (b)(1) include any supplements thereto at the Closing
Date.
(2) The favorable opinion, dated as of Closing Time, of Sandor
E. Samuels, Esq., General Counsel of the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or
conducts material business other than jurisdictions in which the
failure to so qualify, when considered in the aggregate and not
individually, would not have a material adverse effect on the
Company and its subsidiaries considered as one enterprise;
(ii) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock
of the Subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, after
due inquiry, any other security interests, claims, liens or
encumbrances;
(iii) The outstanding shares of Common Stock have been duly
and validly authorized and issued and are fully paid and
nonassessable;
(iv) Except as disclosed in or specifically contemplated
by the Prospectus, to such counsel's knowledge, there are no
outstanding options, warrants or other rights calling for the
issuance of, and no commitments, obligations, plans or
arrangements to issue, any shares of capital stock of the Company
or any security convertible into or exchangeable for capital
stock of the Company.
16
<PAGE>
The outstanding stock options relating to the Company's Common
Stock have been duly authorized and validly issued and conform to
the description thereof contained in the Prospectus in all
material respects;
(v) Neither the issue and sale of the Securities, the
compliance by the Company with all the provisions of this
Agreement and the Pricing Agreement, the consummation of any
other of the transactions herein and therein contemplated nor the
fulfillment of the terms hereof or thereof will conflict with,
result in a breach of, or constitute a default under the charter
or by-laws of the Company or, to the knowledge of such counsel,
the terms of any indenture or other agreement or instrument to
which the Company or any of its subsidiaries is a party or bound,
or any decree, order or regulation (other than any federal or
state securities or blue sky laws, rules or regulations) known to
such counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over
the Company or any of its subsidiaries;
(vi) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the Pricing Agreement, except such as have been obtained
under the 1933 Act, the 1933 Act Regulations and such as may be
required under the state securities or blue sky laws, rules or
regulations of any jurisdiction in connection with the purchase
and distribution of the Securities by the Underwriters and such
other approvals as have been obtained; and
(vii) To such counsel's knowledge, neither the Company nor
any Subsidiary is in violation of its charter or by-laws.
(3) The favorable opinion, dated as of Closing Time, of Brown &
Wood, counsel for the Underwriters, with respect to the issuance and
sale of the Securities, this Agreement, the Pricing Agreement, the
17
<PAGE>
Registration Statement, the Prospectus and other related matters as
the Representatives may reasonably require.
In giving their opinion required by this subsection, Brown & Wood
shall additionally state that nothing has come to their attention that
caused them to believe that the Registration Statement (except for
financial statements and schedules and other financial or statistical
data included or incorporated by reference therein and the Forms T-1,
as to which such counsel need make no statement), at the time it
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (except for financial statements and schedules and other
financial or statistical data included or incorporated by reference
therein and the Forms T-1, as to which such counsel need make no
statement), at the Representation Date (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by
the Company for use in connection with the offering of the Securities
which differs from the Prospectus on file at the Commission at the
Representation Date, in which case at the time it is first provided to
the Underwriters for such use) or at Closing Time, included an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. In giving
their opinion, Brown & Wood may rely, to the extent recited therein,
(A) as to matters involving the application of laws of any
jurisdiction other than the State of California, the State of New
York, the State of Delaware or the United States, to the extent they
deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable, (B) as to
all matters of fact, upon certificates and written statements of
officers of the Company, and (C) as to the qualification and good
standing of the Company to do business in any state or jurisdiction,
upon certificates of appropriate government officials.
(c) At Closing Time there shall not have been, since the date hereof
or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, and the Representatives
shall have received a certificate of the President or a Vice President of
the Company and the chief financial or chief accounting officer of the
Company,
18
<PAGE>
dated as of Closing Time, to the effect that (i) there has been no such
material adverse change, (ii) the representations and warranties in Section
1 hereof are true and correct with the same force and effect as though
expressly made at and as of Closing Time, (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been initiated or, to the best
knowledge and information of such officer, threatened by the Commission.
As used in this Section 5(c), the term "Prospectus" means the Prospectus in
the form first used to confirm sales of the Securities.
(d) At the time of execution of this Agreement, the Representatives
shall have received from Grant Thornton LLP a letter, dated such date, in
form and substance satisfactory to the Representatives, and substantially
in the same form as the draft letter previously delivered to and approved
by the Representatives.
(e) At Closing Time the Representatives shall have received from
Grant Thornton LLP a letter, dated as of Closing Time, to the effect that
they reaffirm the statements made in the letter furnished pursuant to
subsection (d) of this Section, except that the specified date referred to
shall be a date not more than three days prior to Closing Time and, if the
Company has elected to rely on Rule 430A of the 1933 Act Regulations, to
the further effect that they have carried out certain specified procedures
with respect to certain amounts, percentages and financial information
specified by the Representatives and deemed to be a part of the
Registration Statement pursuant to Rule 430A(b) and have found such
amounts, percentages and financial information to be in agreement with the
relevant accounting, financial and other records of the Company and its
subsidiaries identified in such letter.
(f) At Closing Time the Securities shall have been duly listed,
subject to notice of issuance, on the New York Stock Exchange.
[(g) At the date of this Agreement, the Representatives shall have
received an agreement substantially in the form of Exhibit B hereto signed
by David S. Loeb and Angelo R. Mozilo.]
(h) At Closing Time and each Date of Delivery, if any, counsel for
the Underwriters shall have been furnished with such documents and opinions
as they may reasonably require for the purpose of enabling them to pass
upon the issuance and sale of the Securities as herein contemplated and
related proceedings, or in order to evidence the accuracy and completeness
of any of the representations and
19
<PAGE>
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance
and sale of the Securities as herein contemplated shall be satisfactory in
form and substance to the Representatives and counsel for the Underwriters.
(i) In the event the Underwriters exercise their option provided in
Section 2 hereof to purchase all or any portion of the Option Securities,
the representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be
true and correct as of each Date of Delivery, and the Representatives shall
have received:
(1) The favorable opinion of Fried, Frank, Harris, Shriver &
Jacobson, counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, dated such Date of Delivery, relating
to the Option Securities and otherwise to the same effect as the
opinion required by Section 5(b)(1) hereof.
(2) The favorable opinion of Sandor E. Samuels, Esq., General
Counsel of the Company, in form and substance satisfactory to counsel
for the Underwriters, dated such Date of Delivery, relating to the
Option Securities and otherwise to the same effect as the opinion
required by Section 5(b)(2) hereof.
(3) The favorable opinion of Brown & Wood, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required by
Section 5(b)(3) hereof.
(4) A certificate of the President or a Vice President of the
Company and the chief financial or chief accounting officer of the
Company, dated such Date of Delivery, confirming that the certificate
delivered at Closing Time pursuant to Section 5(c) hereof remains true
and correct as of such Date of Delivery.
(5) A letter from Grant Thornton LLP, in form and substance
satisfactory to the Representatives, dated such Date of Delivery,
substantially the same in scope and substance as the letter furnished
to the Representatives pursuant to Section 5(e) hereof except that the
"specified date" in the letter furnished pursuant to this subsection
shall be a date not more than three days prior to such Date of
Delivery.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriters by notifying the
20
<PAGE>
Company at any time at or prior to Closing Time, and such termination shall be
without liability of any party to any other party except as provided in Section
4 hereof and except that Sections 6 and 7 shall survive any such termination and
remain in full force and effect.
Section 6. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the information deemed to be part of
the Registration Statement pursuant to Rule 430A(b) or Rule 434 of the 1933
Act Regulations, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, any preliminary prospectus supplement or the
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the fees and disbursements of counsel
chosen by the Representatives), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
21
<PAGE>
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus, preliminary
prospectus supplement or the Prospectus (or any amendment or supplement
thereto), and provided further, that the foregoing indemnity with respect to any
-------- -------
untrue statement or omission or alleged untrue statement contained in or
omission from any preliminary prospectus or preliminary prospectus supplement,
shall not inure to the benefit of any Underwriter (or any person controlling any
Underwriter within the meaning of Section 15 of the 1933 Act) from whom the
person asserting any such loss, liability, claim, damage or expense purchased
any of the Securities which are the subject thereof if the Company shall sustain
the burden of proving that such person was not sent or given, a copy of the
Prospectus (or the Prospectus as amended or supplemented), at or prior to the
written confirmation of the sale of such Securities to such person, and the
untrue statement contained in or omission from such preliminary prospectus or
preliminary prospectus supplement was corrected in the Prospectus (or the
Prospectus as amended or supplemented).
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any preliminary prospectus, preliminary prospectus
supplement or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company by
such Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus, preliminary prospectus supplement or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
22
<PAGE>
(d) For purposes of this Section 6, all references to the Registration
Statement, any preliminary prospectus, preliminary prospectus supplement or the
Prospectus, or any amendment or supplement to any of the foregoing, shall be
deemed to include, without limitation, any electronically transmitted copies
thereof, including, without limitation, any copies filed with the Commission
pursuant to EDGAR.
Section 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
Section 6 hereof is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and the
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and one or more of the Underwriters, as incurred, in
such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus Supplement bears to the initial public offering
price appearing thereon and the Company is responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
the purposes of this Section, each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as the Company.
Section 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or
the Pricing Agreement, or contained in certificates of officers of the Company
submitted pursuant hereto or thereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or any controlling person, or by or on behalf of the Company, and
shall survive delivery of the Securities to the Underwriters.
Section 9. Termination of Agreement. (a) The Representatives may
------------------------
terminate this Agreement, by notice to the Company, at any time at or prior to
Closing Time (i) if there has been, since the date of this Agreement or since
the respective dates as of which information is given in the Prospectus
(exclusive of any supplement thereto), any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there shall have occurred any material adverse change in the financial
23
<PAGE>
markets in the United States or any outbreak or escalation of hostilities or
other national or international calamity or crisis the effect of which is such
as to make it, in the judgment of the Representatives, impracticable to market
the Securities or enforce contracts for the sale of the Securities, or (iii) if
trading in any securities of the Company has been suspended by the Commission or
a national securities exchange, or if trading generally on either the American
Stock Exchange or the New York Stock Exchange shall have been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by either Federal or New York authorities or (iv)
if the rating assigned by any nationally recognized securities rating agency to
any debt securities of the Company as of the date hereof shall have been lowered
since that date or if any such rating agency shall have publicly announced since
that date that it has under surveillance or review, with possible negative
implications, its rating of any debt securities of the Company, or (v) if there
shall have come to your attention any facts that would cause you to believe that
the Prospectus, at such time, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances existing at the time of such delivery,
not misleading.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and provided further that Sections 6 and 7 shall
survive such termination and remain in full force and effect.
Section 10. Default by One or More of the Underwriters. If one or more of
------------------------------------------
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
and the Pricing Agreement (the "Defaulted Securities"), the Representatives
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting Underwriters, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of
all non-defaulting Underwriters, or
24
<PAGE>
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representatives or the Company shall have the right
to postpone the Closing Time or a Date of Delivery for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangements. As used herein, the
term "Underwriter" includes any person substituted for an Underwriter under this
Section 10.
Section 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Underwriters shall be directed to the Representatives at Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New York 10281-
1201, attention of Steven J. Goulart, and notices to the Company shall be
directed to it at 155 N. Lake Avenue, Pasadena, California 91101, attention of
the legal department.
Section 12. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Underwriters and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation other than the Underwriters
and the Company and their respective successors and the controlling persons and
the officers and directors referred to in Sections 6 and 7 hereof and their
heirs and legal representatives any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and said officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor or an assign merely by reason of
such purchase.
Section 13. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE PRICING
----------------------
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH
STATE. UNLESS STATED OTHERWISE, ALL SPECIFIED TIMES OF DAY REFER TO NEW YORK
CITY TIME.
25
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By: ______________________________
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: _____________________________________
Authorized Signatory
For themselves and as Representatives of the
other Underwriters named in Schedule A hereto.
26
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial
Name of Underwriter Securities
------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .........................
Goldman, Sachs & Co. .............................
Lehman Brothers Inc. .............................
Salomon Brothers Inc .............................
Alex. Brown & Sons Incorporated .................
Dean Witter Reynolds Inc. ........................
__________
Total ................................ 10,000,000
==========
</TABLE>
SA-1
<PAGE>
EXHIBIT A
10,000,000 Shares
Countrywide Credit Industries, Inc.
(a Delaware corporation)
Common Stock
(Par Value $.05 Per Share)
PRICING AGREEMENT
-----------------
__________, 199_
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
as Representatives of the several Underwriters
named in the within-mentioned Purchase Agreement
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
Reference is made to the Purchase Agreement dated __________, 199_ (the
"Purchase Agreement") relating to the purchase by the several Underwriters named
in Schedule A thereto, for whom Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Goldman, Sachs & Co., Lehman Brothers Inc., Salomon
Brothers Inc, Alex. Brown & Sons Incorporated and Dean Witter Reynolds Inc. are
acting as representatives (the "Representatives"), of the above shares of Common
Stock (the "Securities"), of Countrywide Credit Industries, Inc., a Delaware
corporation (the "Company").
Pursuant to Section 2 of the Purchase Agreement, the Company agrees with
each Underwriter as follows:
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $__________.
A-1
<PAGE>
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $__________, being an amount equal to the
initial public offering price set forth above less $__________ per share;
provided that the purchase price per share for any Option Securities (as
--------
defined in the Purchase Agreement) purchased upon exercise of the over-
allotment option described in Section 2(b) of the Purchase Agreement shall
be reduced by an amount per share equal to any dividends or distributions
declared by the Company and payable on the Initial Securities (as defined
in the Purchase Agreement) but not payable on the Option Securities.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
IN SAID STATE.
A-2
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By: ______________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: _____________________________________
Authorized Signatory
For themselves and as Representatives of the
other Underwriters named in Schedule A
to the Purchase Agreement.
A-3
<PAGE>
EXHIBIT B
Countrywide Credit Industries, Inc.
Public Offering of Common Stock
____________, 199_
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS INC.
SALOMON BROTHERS INC
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
as Representatives of the several Underwriters
named in the within-mentioned Purchase Agreement
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Dear Sirs:
This letter is being delivered to you in connection with the Purchase
Agreement, dated __________, 1995 (the "Purchase Agreement"), between
Countrywide Credit Industries, Inc., a Delaware corporation (the "Company"), and
each of the Underwriters named in Schedule A to the Purchase Agreement, relating
to an underwritten public offering of common stock, $.05 par value (the "Common
Stock") of the Company.
In order to induce you to enter into the Purchase Agreement, the
undersigned agrees not to offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce an offering of, any shares of Common
Stock beneficially owned by the undersigned or any securities convertible into,
or exchangeable for, shares of Common Stock for a period of 90 days following
the day on which the Pricing Agreement (as defined in the Purchase Agreement) is
executed without your prior written consent, other than shares of Common Stock
disposed of as bona fide gifts. Notwithstanding anything to the contrary herein,
the undersigned may pledge, grant a lien on, or otherwise hypothecate or
encumber any of such shares of Common Stock.
B-1
<PAGE>
If for any reason the Purchase Agreement shall be terminated prior to the
Closing Time (as defined in the Purchase Agreement), the agreement set forth
above shall likewise be terminated.
Very truly yours,
[David S. Loeb]
[Angelo R. Mozilo]
B-2
<PAGE>
EXHIBIT 1.2
$___,000,000
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(a Delaware corporation)
[Debt Securities, Due ____]
PURCHASE AGREEMENT
------------------
_____________, 199_
[Names of Underwriters]
c/o [Name and address of
Representatives of the Underwriters]
Dear Sirs:
Countrywide Credit Industries, Inc., a Delaware corporation (the
"Company"), confirms its agreement with ___________________ ("____________"),
and each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom ________________ are acting
as representatives (in such capacity, the "Representatives"), with respect to
the sale by the Company and the purchase by the Underwriters, acting severally
and not jointly, of the respective principal amounts set forth in said Schedule
A of the Company's [Debt Securities, due ____] (the "Securities"). The
Securities are to be issued pursuant to an indenture dated as of ___________,
199_ (the "Indenture"), which term, as used herein, includes the Officer's
Certificate (as defined in the Indenture) establishing the form and terms of the
Securities pursuant to Sections 202 and 301 of the Indenture, between the
Company and The Bank of New York, as Trustee (the "Trustee").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 33-59559) and a related
preliminary prospectus for the registration under the Securities Act of 1933, as
amended (the "1933 Act") of certain securities, including the Securities
(collectively, the "Registered Securities") and the offering thereof from time
to time in accordance with Rule 415 under the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations"), which registration
statement has been declared effective by the Commission and copies of which have
heretofore been delivered to you. The Indenture has been
<PAGE>
qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act").
Such Registration Statement, in the form in which it was declared effective, as
amended through the date hereof, including all documents incorporated or deemed
to be incorporated by reference therein and the information, if any, deemed to
be part thereof pursuant to Rule 434 of the 1933 Act Regulations through the
date hereof, is hereinafter referred to as the "Registration Statement". The
Company proposes to file with the Commission pursuant to Rule 424(b) of the 1933
Act Regulations the Prospectus Supplement (as defined in Section 3(h) hereof)
relating to the Securities and the prospectus dated __________, 199_ (the "Base
Prospectus") relating to the Registered Securities, and has previously advised
you of all further information (financial and other) with respect to the Company
set forth therein. The Base Prospectus together with the Prospectus Supplement,
in their respective forms on the date hereof (being the forms in which they are
to be filed with the Commission pursuant to Rule 424(b) of the 1933 Act
Regulations), including all documents incorporated or deemed to be incorporated
by reference therein and the information, if any, deemed to be part thereof
pursuant to Rule 434 of the 1933 Act Regulations through the date hereof, are
hereinafter referred to as the "Prospectus", except that if any revised
prospectus or prospectus supplement shall be provided to the Underwriters by the
Company for use in connection with the offering of the Securities which differs
from the Prospectus (whether or not such revised prospectus or prospectus
supplement is required to be filed by the Company pursuant to Rule 424(b) of the
1933 Act Regulations), the term "Prospectus" shall refer to such revised
prospectus or prospectus supplement, as the case may be, from and after the time
it is first provided to the Underwriters for such use. Unless the context
otherwise requires, all references in this Agreement to documents, financial
statements and schedules and other information which is "contained", "included",
"stated", "described" or "referred to" in the Registration Statement or the
Prospectus (and all other references of like import) shall be deemed to mean and
include all such documents, financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all references
in this Agreement to amendments or supplements to the Registration Statement or
the Prospectus shall be deemed to mean and include the filing of any document
under the Securities Exchange Act of 1934 (the "1934 Act") after the date of
this Agreement which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be. If the Company
elects to rely on Rule 434 under the 1933 Act Regulations, all references to the
Prospectus shall be deemed to include, without limitation, the form of
prospectus and the abbreviated term sheet, taken together, provided to the
Underwriters by the Company in reliance on Rule 434 under the 1933 Act
Regulations (the "Rule 434 Prospectus"). If the Company files a registration
statement to register a portion of the Securities and relies on Rule 462(b)
under the 1933 Act Regulations for such registration statement to become
effective
2
<PAGE>
upon filing with the Commission (the "Rule 462 Registration Statement"), then
any reference to "Registration Statement" herein shall be deemed to be to both
the registration statement referred to above (No. 33-59559) and the Rule 462
Registration Statement, as each such registration statement may be amended
pursuant to the 1933 Act.
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
Section 1. Representations and Warranties. (a) The Company represents
------------------------------
and warrants to each Underwriter as of the date hereof (such date being
hereinafter referred to as the "Representation Date") and as of the Closing Time
referred to in Section 2(b) hereof, and agrees with each Underwriter, as
follows:
(i) The Company meets the requirements for use of Form S-3 under
the 1933 Act and the 1933 Act Regulations. The Registration Statement and
the Base Prospectus, at the time the Registration Statement became
effective, complied in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations (including Rule 415(a) of the 1933
Act Regulations) and the 1939 Act and the rules and regulations of the
Commission under the 1939 Act, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, at the Representation Date (unless the term "Prospectus" refers
to a prospectus which has been provided to the Underwriters by the Company
for use in connection with the offering of the Securities which differs
from the Prospectus filed with the Commission pursuant to Rule 424(b) of
the 1933 Act Regulations, in which case at the time it is first provided to
the Underwriters for such use) and at the Closing Time, does not and will
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this
-------- -------
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through the Representatives expressly for use in the
Registration Statement or the Prospectus or to those parts of the
Registration Statement that constitute the Statements of Eligibility and
Qualification of the Trustees under the 1939 Act filed as exhibits to the
Registration Statement (the "Forms T-1"). For purposes of this Section
1(a), all references to the Registration Statement, any post-effective
amendments thereto and the Prospectus shall be deemed to include, without
limitation, any electronically
3
<PAGE>
transmitted copies thereof, including, without limitation, any copy filed
with the Commission pursuant to its Electronic Data Gathering, Analysis,
and Retrieval system ("EDGAR").
(ii) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, when they became effective or at the time they
were or hereafter are filed with the Commission, complied and will comply
in all material respects with the requirements of the 1933 Act or the 1934
Act, as applicable, and the rules and regulations of the Commission
thereunder, and, when read together with the other information in the
Prospectus, at the respective times the Registration Statement and any
post-effective amendments thereto became effective, at the Representation
Date and at Closing Time, did not, do not and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(iii) The Indenture has been duly authorized by the Company and,
at Closing Time, will have been duly qualified under the 1939 Act and duly
executed and delivered by the Company and will constitute a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer,
fraudulent conveyance or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles.
(iv) The Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business with Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder, or is exempt
therefrom.
(b) Any certificate signed by any officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company to each Underwriter as to
the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
------------------------------------------
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
____% of the principal amount thereof, the principal amount of Securities set
forth in Schedule A hereto opposite the name of such Underwriter, plus any
additional principal amount of Securities which such
4
<PAGE>
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Payment of the purchase price for, and delivery of certificates
for, the Securities shall be made at the office of Fried, Frank, Harris, Shriver
& Jacobson, New York, New York, or at such other place as shall be agreed upon
by the Representatives and the Company, at 10:00 A.M. (New York time) on the
third business day (unless postponed in accordance with the provisions of
Section 10) following the date hereof, or such other time not later than ten
business days after such date as shall be agreed upon by the Representatives and
the Company (such time and date of payment and delivery being herein called
"Closing Time"). Payment shall be made to the Company by certified or official
bank check or checks drawn in next day funds payable to the order of the
Company, against delivery to the Representatives for the respective accounts of
the Underwriters of certificates for the Securities to be purchased by them.
Certificates for the Securities shall be in such denominations and registered in
such names as the Representatives may request in writing at least one business
day before the Closing Time. It is understood that each Underwriter has
authorized the Representatives, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the Securities which it has
agreed to purchase. __________, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Securities to be purchased by any Underwriter whose check has not
been received by the Closing Time or the relevant Date of Delivery, as the case
may be, but such payment shall not relieve such Underwriter from its obligations
hereunder. The certificates for the Securities will be made available for
examination and packaging by the Representatives in The City of New York not
later than 3:00 P.M. on the last business day prior to Closing Time.
SECTION 3. Covenants of the Company. The Company covenants with
------------------------
each Underwriter as follows:
(a) The Company will notify the Representatives immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement, shall become effective, (ii) of the mailing or the
delivery to the Commission for filing of the Prospectus or any amendment to
the Registration Statement or amendment or supplement to the Prospectus or
any document to be filed pursuant to the 1934 Act during any period when
the Prospectus is required to be delivered under the 1933 Act, (iii) of the
receipt of any comments or inquiries from the Commission relating to the
Registration Statement or Prospectus, (iv) of any request by the Commission
for any amendment to the Registration Statement or any amendment or
supplement to the Prospectus or for additional information, and (v) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement
5
<PAGE>
or of any order preventing or suspending the use of any preliminary
prospectus or preliminary prospectus supplement, or of the suspension of
the qualification of the Securities for offering or sale in any
jurisdiction, or of or the initiation or threatening of any proceedings for
any of such purposes. The Company will make every reasonable effort to
prevent the issuance of any stop order and, if any stop order is issued, to
obtain the lifting thereof at the earliest possible moment. If the Company
elects to rely on Rule 434 under the 1933 Act Regulations, the Company will
prepare an "abbreviated term sheet" that complies with the requirements of
Rule 434 under the 1933 Act Regulations. If the Company elects not to rely
on Rule 434, the Company will provide the Underwriters with copies of the
form of Prospectus, in such number as the Underwriters may reasonably
request, and file or transmit for filing with the Commission such
Prospectus in accordance with Rule 424(b) of the 1933 Act Regulations by
the close of business in New York on the business day immediately
succeeding the date hereof. If the Company elects to rely on Rule 434, the
Company will provide the Underwriters with copies of the form of Rule 434
Prospectus, in such number as the Underwriters may reasonably request, and
file or transmit for filing with the Commission the form of Prospectus
complying with Rule 434(c)(2) of the 1933 Act Regulations in accordance
with Rule 424(b) of the 1933 Act Regulations by the close of business in
New York on the business day immediately succeeding the date hereof.
(b) The Company will give the Representatives notice of its intention
to file or prepare any amendment to the Registration Statement (including
any post-effective amendment) or any amendment or supplement to the
Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise,
(including any revised prospectus which the Company proposes for use by the
Underwriters in connection with the offering of the Securities which
differs from the prospectus filed with the Commission pursuant to Rule
424(b) of the 1933 Act Regulations, whether or not such revised prospectus
is required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations, or any abbreviated term sheet prepared in reliance on Rule 434
of the 1933 Act Regulations), will furnish the Representatives with copies
of any such amendment or supplement a reasonable amount of time prior to
such proposed filing or use, as the case may be, and will not file any such
amendment or supplement or use any such prospectus to which the
Representatives or counsel for the Underwriters shall object.
(c) The Company has furnished or will deliver to the Representatives
and counsel for the Underwriters, without charge, signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein
and documents incorporated or deemed to be
6
<PAGE>
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Representatives a
conformed copy of the Registration Statement as originally filed and of
each amendment thereto (without exhibits) for each of the Underwriters.
(d) The Company will deliver to each Underwriter, without charge, as
many copies of each preliminary prospectus and preliminary prospectus
supplement as such Underwriter may reasonably request, and the Company
hereby consents to the use of such copies for purposes permitted by the
1933 Act. The Company will furnish to each Underwriter, without charge,
from time to time during the period when the Prospectus is required to be
delivered under the 1933 Act or the 1934 Act, such number of copies of the
Prospectus (as amended or supplemented) as such Underwriter may reasonably
request for the purposes contemplated by the 1933 Act or the 1934 Act or
the respective applicable rules and regulations of the Commission
thereunder.
(e) If any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the Underwriters or
for the Company, to amend the Registration Statement or amend or supplement
the Prospectus in order that the Prospectus will not include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to
amend the Registration Statement or amend or supplement the Prospectus in
order to comply with the requirements of the 1933 Act or the 1933 Act
Regulations, the Company will promptly prepare and file with the
Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company
will furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) The Company will use its best efforts, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions of the
United States as the Representatives may designate and to maintain such
qualifications in effect for as long as may be required for the
distribution of the Securities; provided, however, that the Company shall
not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction
7
<PAGE>
in which the Securities have been so qualified, the Company will file such
statements and reports as may be required by the laws of such jurisdiction
to continue such qualification in effect for as long as may be required for
the distribution of the Securities.
(g) As soon as practicable, the Company will make generally available
to its security holders and the Underwriters an earnings statement (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve month period beginning not later than the first day of
the Company's fiscal quarter next following the "effective date" (as
defined in said Rule 158) of the Registration Statement.
(h) Immediately following the execution hereof, the Company will
prepare a prospectus supplement, dated the date hereof (the "Prospectus
Supplement"), containing such information as may be required by the 1933
Act or the 1933 Act Regulations and such other information as the
Underwriters and the Company deem appropriate, and will file or transmit
for filing with the Commission copies of the Prospectus (including such
Prospectus Supplement) in accordance with Rule 424(b) of the 1933 Act
Regulations by the close of business in New York on the business day
immediately succeeding the date hereof.
(i) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Prospectus Supplement
under "Use of Proceeds".
(j) The Company, during the period when the Prospectus is required to
be delivered under the 1933 Act or the 1934 Act, will file all documents
required to be filed with the Commission pursuant to the 1934 Act within
the time periods required by the 1934 Act and the rules and regulations of
the Commission under the 1934 Act.
SECTION 4. Payment of Expenses. The Company will pay all expenses
-------------------
incident to the performance of its obligations under this Agreement, including
(i) the printing and filing of the Registration Statement as originally filed
and of each amendment thereto, (ii) the preparation, printing and delivery to
the Underwriters of this Agreement, any Agreement among Underwriters,
8
<PAGE>
the Indenture and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
the Blue Sky Survey, any supplement thereto and any Legal Investment Survey,
(vi) the printing and delivery to the Underwriters of copies of each preliminary
prospectus, preliminary prospectus supplement and of the Prospectus and
Prospectus Supplement and any amendments or supplements thereto, including any
abbreviated term sheet delivered by the Company pursuant to Rule 434 of the 1933
Act Regulations, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey, any supplement thereto and any
Legal Investment Survey, (viii) the fees and expenses of the Trustee, including
the fees and disbursements of counsel for the Trustee, and (ix) any fees payable
in connection with the rating of the Securities.
If this Agreement is terminated by the Representatives in accordance with
the provisions of Section 5 or Section 9(a)(i) hereof, the Company shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
---------------------------------------
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company herein contained, to the
performance by the Company of its obligations hereunder, and to the following
further conditions:
(a) At Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the
Underwriters. The Prospectus (including the Prospectus Supplement referred
to in Section 3(h) hereof) shall have been filed or transmitted for filing
with the Commission in accordance with Rule 424(b) of the 1933 Act
Regulations within the prescribed time period, and prior to Closing Time
the Company shall have provided evidence satisfactory to the
Representatives of such timely filing.
(b) At Closing Time the Representatives shall have received:
9
<PAGE>
(1) The favorable opinion, dated as of Closing Time, of Fried,
Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) Each of the Company and each significant subsidiary
of the Company, as defined in Rule 405 of Regulation C of the
1933 Act Regulations (individually, a "Subsidiary" and
collectively, the "Subsidiaries"), has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its properties and
conduct its business as described in the Registration Statement
(each such Subsidiary being identified on a Schedule attached
thereto);
(ii) The Company's authorized equity capitalization is as
set forth in the Prospectus; the capital stock of the Company
conforms in all material respects to the description thereof
contained in the Prospectus;
(iii) To the knowledge of such counsel: (a) there is no
pending or threatened action, suit or proceeding before any court
or governmental agency, authority or body or any arbitrator
involving the Company or any of its subsidiaries, of a character
required to be disclosed in the Registration Statement which is
not adequately disclosed in the Prospectus, and (b) there is no
contract or other document of a character required to be
described in the Registration Statement or Prospectus, or to be
filed as an exhibit, which is not described or filed as required;
(iv) The Registration Statement has become effective
under the 1933 Act; any required filing of the Prospectus, and
any supplements thereto,
10
<PAGE>
pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); to the knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus and each amendment or supplement
thereto (exclusive of the documents incorporated by reference
therein), as of their respective effective or issue dates (other
than the financial statements and other financial and statistical
information contained therein and the Forms T-1, as to which such
counsel need express no opinion) appear on their face to be
responsive as to form in all material respects with the
applicable requirements of the 1933 Act and the 1933 Act
Regulations; the Rule 434 Prospectus appears on its face to be
responsive as to form conforms to the requirements of Rule 434 of
the 1933 Act Regulations in all material respects;
(v) This Agreement has been duly authorized, executed
and delivered by the Company;
(vi) The Indenture has been duly authorized, executed and
delivered by the Company and (assuming the due authorization,
execution and delivery thereof by the Trustee) constitutes a
valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer, fraudulent
conveyance or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles;
(vii) The Securities are in the form contemplated by the
Indenture, have been duly authorized by the Company and, when
executed by the Company and authenticated by the Trustee in the
manner provided in the Indenture (assuming the due authorization,
execution and delivery of the Indenture by the Trustee) and
delivered against payment of the purchase price therefor
specified in Schedule A hereto, will constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer, fraudulent conveyance or other
similar laws relating to or affecting creditors' rights generally
or by general equitable principles, and will be entitled to the
benefits of the Indenture;
11
<PAGE>
(viii) The Indenture has been qualified under the 1939
Act;
(ix) The Securities and the Indenture conform in all
material respects to the descriptions thereof contained in the
Prospectus;
(x) No consent, approval, authorization or order of any
United States federal or New York, California or, with respect to
matters arising under the Delaware General Corporation Law,
Delaware court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the Indenture, except such as have been obtained under the
1933 Act and the 1933 Act Regulations and such as may be required
under the 1939 Act or under the state securities or blue sky
laws, rules or regulations of any jurisdiction in connection with
the purchase and distribution of the Securities by the
Underwriters and such other approvals as have been obtained;
(xi) Neither the issue and sale of the Securities, the
compliance by the Company with all the provisions of this
Agreement and the Indenture, the consummation of any other of the
transactions herein or therein contemplated nor the fulfillment
of the terms hereof or thereof will conflict with, result in a
breach of, or constitute a default under the charter or by-laws
of the Company or the terms of any indenture or other agreement
or instrument filed with the Commission and to which the Company
or any of its Subsidiaries is a party or bound, or any decree,
order or regulation (other than any federal or state securities
or blue sky laws, rules or regulations) known to such counsel to
be applicable to the Company or any of its Subsidiaries of any
court, regulatory body, administrative agency, governmental body
or arbitrator having jurisdiction over the Company or any of its
Subsidiaries;
(xii) The information in the Base Prospectus under
"Description of Debt Securities and Guarantees" and in the
Prospectus Supplement under ["Description of the Securities"] and
["Certain Federal Income Tax Considerations"], to the extent that
it constitutes matters of law, summaries of legal matters,
documents or proceedings, or legal conclusions, has been reviewed
by them and fairly presents the information disclosed therein in
all material respects [and the opinion of such firm set forth in
the Prospectus Supplement under "Certain Federal Income Tax
Considerations" is confirmed];
(xiii) The documents incorporated by reference in the
Prospectus (other than the financial
12
<PAGE>
statements and other financial and statistical data contained
therein and the Forms T-1, as to which no opinion need be
rendered), when they were filed with the Commission appeared on
their face to be responsive as to form in all material respects
with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder; and
(xiv) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
Such counsel shall also state that in the course of the preparation by
the Company and its counsel of the Registration Statement and Prospectus,
such counsel attended conferences with certain of the officers of, and the
independent public accountants for, the Company, at which the Registration
Statement and Prospectus were discussed. Given the limitations inherent in
the independent verification of factual matters and the character of
determinations involved in the registration process, such counsel need not
pass upon and need not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement and Prospectus, except as specifically described in the opinion
set forth in paragraphs (iii), (iv), (ix), (xii) and (xiii) above. Subject
to the foregoing and on the basis of the information such counsel gained in
the performance of the services referred to above, including information
obtained from officers and other representatives of the Company, such
counsel shall state that such counsel has no reason to believe that at the
time it became effective the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, at the Representation Date (unless the
term "Prospectus" refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the offering of the
Securities that differs from the Prospectus on file at the Commission at
the Representation Date, in which case at the time it is first provided to
the Underwriters for such use) or at Closing Time includes any untrue
statement of material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that such counsel need not express a
view or belief with respect to financial statements, notes or schedules
thereto or other financial and statistical information included or
incorporated by reference in the Registration Statement and Prospectus or
the Forms T-1.
13
<PAGE>
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of California, the State of New York, the State of Delaware (but only with
respect to the Delaware General Corporation Law) or the United States, to
the extent they deem proper and specified in such opinion, upon the opinion
of other counsel of good standing whom they believe to be reliable and who
are satisfactory to counsel for the Underwriters and (B) as to matters of
fact, to the extent they deem proper, on certificates of responsible
officers of the Company and public officials. References to the Prospectus
in this paragraph (b)(1) include any supplements thereto at the Closing
Date.
(2) The favorable opinion, dated as of Closing Time, of Sandor E.
Samuels, Esq., General Counsel of the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) Each of the Company and the Subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or
conducts material business other than jurisdictions in which the
failure to so qualify, when considered in the aggregate and not
individually, would not have a material adverse effect on the
Company and its subsidiaries considered as one enterprise;
(ii) All the outstanding shares of capital stock of each
Subsidiary have been duly and validly authorized and issued and
are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock
of the Subsidiaries are owned by the Company either directly or
through wholly owned subsidiaries free and clear of any perfected
security interest and, to the knowledge of such counsel, after
due inquiry, any other security interests, claims, liens or
encumbrances;
(iii) Neither the issue and sale of the Securities, the
compliance by the Company with all the provisions of this
Agreement and the Indenture, the consummation of any other of the
transactions herein and therein contemplated nor the fulfillment
of the terms hereof or thereof will conflict with, result in a
breach of, or constitute a default under the charter or by-laws
of the Company or, to the knowledge of such counsel, the terms of
any indenture or other agreement or instrument to which the
Company or any of its subsidiaries is a party or bound, or
14
<PAGE>
any decree, order or regulation (other than any federal or state
securities or blue sky laws, rules or regulations) known to such
counsel to be applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over
the Company or any of its subsidiaries;
(iv) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the Indenture, except such as have been obtained under the
1933 Act and the 1933 Act Regulations and such as may be required
under 1939 Act and the rules and regulations thereunder or under
the state securities or blue sky laws, rules or regulations of
any jurisdiction in connection with the purchase and distribution
of the Securities by the Underwriters and such other approvals as
have been obtained; and
(v) To such counsel's knowledge, neither the Company nor
any Subsidiary is in violation of its charter or by-laws.
(3) The favorable opinion, dated as of Closing Time, of Brown &
Wood, counsel for the Underwriters, with respect to the issuance and
sale of the Securities, the Indenture, this Agreement, the
Registration Statement, the Prospectus and other related matters as
the Representatives may reasonably require.
In giving their opinion required by this subsection, Brown & Wood
shall additionally state that nothing has come to their attention that
caused them to believe that the Registration Statement (except for
financial statements and schedules and other financial or statistical
data included or incorporated by reference therein and the Forms T-1,
as to which such counsel need make no statement), at the time it
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (except for financial statements and schedules and other
financial or statistical data included or incorporated
15
<PAGE>
by reference therein and the Forms T-1, as to which such counsel need
make no statement), at the Representation Date (unless the term
"Prospectus" refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the offering of
the Securities which differs from the Prospectus on file at the
Commission at the Representation Date, in which case at the time it is
first provided to the Underwriters for such use) or at Closing Time,
included an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. In giving their opinion, Brown & Wood may rely, to the
extent recited therein, (A) as to matters involving the application of
laws of any jurisdiction other than the State of California, the State
of New York, the State of Delaware or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of
other counsel of good standing whom they believe to be reliable, (B)
as to all matters of fact, upon certificates and written statements of
officers of the Company, and (C) as to the qualification and good
standing of the Company to do business in any state or jurisdiction,
upon certificates of appropriate government officials.
(c) At Closing Time there shall not have been, since the date hereof
or since the respective dates as of which information is given in the
Prospectus, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of
the Company and its subsidiaries considered as one enterprise, whether or
not arising in the ordinary course of business, and the Representatives
shall have received a certificate of the President or a Vice President of
the Company and the chief financial or chief accounting officer of the
Company, dated as of Closing Time, to the effect that (i) there has been no
such material adverse change, (ii) the representations and warranties in
Section 1 hereof are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the Company has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to Closing Time, and (iv) no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been initiated or, to the best
knowledge and information of such officer, threatened by the Commission.
As used in this Section 5(c), the term "Prospectus" means the Prospectus in
the form first used to confirm sales of the Securities.
(d) At the time of execution of this Agreement, the Representatives
shall have received from Grant Thornton LLP a letter, dated such date, in
form and substance
16
<PAGE>
satisfactory to the Representatives, and substantially in the same form as
the draft letter previously delivered to and approved by the
Representatives.
(e) At Closing Time the Representatives shall have received from
Grant Thornton LLP a letter, dated as of Closing Time, to the effect that
they reaffirm the statements made in the letter furnished pursuant to
subsection (d) of this Section, except that the specified date referred to
shall be a date not more than three days prior to Closing Time.
(f) At Closing Time, counsel for the Underwriters shall have been
furnished with such documents and opinions as they may reasonably require
for the purpose of enabling them to pass upon the issuance and sale of the
Securities as herein contemplated and related proceedings, or in order to
evidence the accuracy and completeness of any of the representations and
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance
and sale of the Securities as herein contemplated shall be satisfactory in
form and substance to the Representatives and counsel for the Underwriters.
If any condition specified in this Section shall not have been fulfilled
when and as required to be fulfilled, this Agreement may be terminated by the
Underwriters by notifying the Company at any time at or prior to Closing Time,
and such termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 6 and 7 shall survive
any such termination and remain in full force and effect.
17
<PAGE>
Section 6. Indemnification. (a) The Company agrees to indemnify and hold
---------------
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the information deemed to
be part of the Registration Statement pursuant to Rule 434 of the 1933 Act
Regulations, if applicable, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus, any preliminary prospectus supplement or the Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 6(c) hereof, the fees and disbursements of
counsel chosen by the Representatives), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through the Representatives expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus, preliminary
prospectus supplement or the Prospectus (or any amendment or supplement
thereto), and provided further, that the foregoing indemnity with respect to any
-------- -------
untrue statement or omission or alleged untrue statement contained in or
18
<PAGE>
omission from any preliminary prospectus or preliminary prospectus supplement,
shall not inure to the benefit of any Underwriter (or any person controlling any
Underwriter within the meaning of Section 15 of the 1933 Act) from whom the
person asserting any such loss, liability, claim, damage or expense purchased
any of the Securities which are the subject thereof if the Company shall sustain
the burden of proving that such person was not sent or given, a copy of the
Prospectus (or the Prospectus as amended or supplemented), at or prior to the
written confirmation of the sale of such Securities to such person, and the
untrue statement contained in or omission from such preliminary prospectus or
preliminary prospectus supplement was corrected in the Prospectus (or the
Prospectus as amended or supplemented).
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any preliminary prospectus, preliminary prospectus
supplement or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company by
such Underwriter through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus, preliminary prospectus supplement or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances.
(d) For purposes of this Section 6, all references to the Registration
Statement, any preliminary prospectus, preliminary prospectus supplement or the
Prospectus, or any amendment or supplement to any of the foregoing, shall be
deemed to include, without limitation, any electronically transmitted copies
thereof, including, without limitation, any copies filed with the Commission
pursuant to EDGAR.
19
<PAGE>
Section 7. Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
Section 6 hereof is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and the
Underwriters shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by said indemnity agreement
incurred by the Company and one or more of the Underwriters, as incurred, in
such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus Supplement bears to the initial public offering
price appearing thereon and the Company is responsible for the balance;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. For
the purposes of this Section, each person, if any, who controls an Underwriter
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as such Underwriter and each director of the Company, each officer
of the Company who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as the Company.
Section 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement, or
contained in certificates of officers of the Company submitted pursuant hereto
or thereto, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of any Underwriter or any controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the Underwriters.
Section 9. Termination of Agreement. (a) The Representatives may
------------------------
terminate this Agreement, by notice to the Company, at any time at or prior to
Closing Time (i) if there has been, since the date of this Agreement or since
the respective dates as of which information is given in the Prospectus
(exclusive of any supplement thereto), any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there shall have occurred any material adverse change in the financial
markets in the United States or any outbreak or escalation of hostilities or
other national or international calamity or crisis the effect of which is such
as to make it, in the judgment of the Representatives, impracticable to market
the Securities or enforce contracts for the sale of the Securities, or (iii) if
trading in any securities of the Company has been suspended by the Commission or
a national securities exchange, or if trading generally on either the American
Stock Exchange or the New York Stock Exchange shall have been suspended, or
minimum or maximum
20
<PAGE>
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by either of said exchanges or by order of the Commission or
any other governmental authority, or if a banking moratorium has been declared
by either Federal or New York authorities or (iv) if the rating assigned by any
nationally recognized securities rating agency to any debt securities of the
Company as of the date hereof shall have been lowered since that date or if any
such rating agency shall have publicly announced since that date that it has
under surveillance or review, with possible negative implications, its rating of
any debt securities of the Company, or (v) if there shall have come to your
attention any facts that would cause you to believe that the Prospectus, at such
time, contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in light of the
circumstances existing at the time of such delivery, not misleading.
(b) If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party except as
provided in Section 4 hereof, and provided further that Sections 6 and 7 shall
survive such termination and remain in full force and effect.
Section 10. Default by One or More of the Underwriters. If one or more of
------------------------------------------
the Underwriters shall fail at Closing Time to purchase the Securities which it
or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representatives shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the
full amount thereof in the proportions that their respective underwriting
obligations hereunder bear to the underwriting obligations of all non-
defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representatives or the Company shall have the right
to postpone the Closing Time for a
21
<PAGE>
period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
As used herein, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 10.
Section 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of written telecommunication. Notices to the
Underwriters shall be directed to the Representatives at
___________________________, and notices to the Company shall be directed to it
at 155 N. Lake Avenue, Pasadena, California 91101, attention of the legal
department.
Section 12. Parties. This Agreement shall inure to the benefit of and be
-------
binding upon the Underwriters and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation other than the Underwriters
and the Company and their respective successors and the controlling persons and
the officers and directors referred to in Sections 6 and 7 hereof and their
heirs and legal representatives any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the Underwriters and the Company and their
respective successors, and said controlling persons and said officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor or an assign merely by reason of
such purchase.
Section 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. EXCEPT AS OTHERWISE SET
FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
22
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters and the Company in accordance with its terms.
Very truly yours,
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By: ______________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
[Names of Representatives]
By: ____________________________________
Authorized Signatory
For themselves and as Representatives
of the other Underwriters named
in Schedule A hereto.
23
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
Name of Underwriter of Securities
------------------- -------------
<S> <C>
__________
Total ................................ $
==========
</TABLE>
SA-1
<PAGE>
EXHIBIT 1.3
FORM OF SELLING AGENCY AGREEMENT
for
MEDIUM-TERM NOTES
ISSUED BY COUNTRYWIDE FUNDING CORPORATION
Countrywide Funding Corporation
U.S. $___________
Medium-Term Notes, Series __
Due Nine Months or More
From Date of Issue
Unconditionally Guaranteed as to Payment
of Principal, Premium, if any, and Interest by
Countrywide Credit Industries, Inc.
SELLING AGENCY AGREEMENT
____________, 1995
[Names and Addresses
of Agents]
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
Ladies and Gentlemen:
Countrywide Funding Corporation, a New York corporation (the "Company"),
confirms its agreement with each of you (including, in the case of
____________________, its affiliate _____________ ________________;
individually, an "Agent", and collectively, the "Agents") with respect to the
issue and sale by the Company of up to U.S. $___________ aggregate principal
amount of its Medium-Term Notes, Series __, Due Nine Months or More from Date of
Issue (the "Notes"). The Notes will be unconditionally guaranteed as to payment
of principal, premium, if any, and interest (the "Guarantees") by Countrywide
Credit Industries, Inc. (the "Guarantor"). The Notes and the Guarantees will be
issued under an indenture dated as of January 1, 1992, as supplemented by
Supplemental Indenture No. 1 thereto dated as of
<PAGE>
June 15, 1995 (collectively, the "Indenture"), among the Company, the Guarantor
and The Bank of New York, as trustee (the "Trustee"). Unless otherwise specified
in the Pricing Supplement referred to below, the Notes will be issued in minimum
denominations of U.S. $100,000 and in denominations exceeding such amount by
integral multiples of U.S. $1,000, and if denominated in a currency or currency
unit other than U.S. dollars, the equivalent in such other currency or currency
unit (the "Specified Currency") as determined in accordance with the Indenture,
of U.S. $100,000 (rounded down to an integral multiple of 1,000 units of such
Specified Currency) and any larger amount that is an integral multiple of 1,000
units of such Specified Currency, will be issued only in fully registered
certificated or book-entry form, and will be issued in the currency or currency
units and will have the maturities, annual interest rates (whether fixed or
floating), redemption provisions and other terms set forth in a pricing
supplement (the "Pricing Supplement") to the Prospectus referred to below. The
Notes will be issued, and the terms thereof established, in accordance with the
Indenture and the Medium-Term Note Administrative Procedures attached hereto as
Exhibit A (the "Procedures"). The Procedures may only be amended by written
agreement of the Company and each Agent after notice to, and in the case of
amendments which affect the rights, duties or obligations or the Trustee, with
the approval of, the Trustee.
1. Representations and Warranties. The Company and the Guarantor,
------------------------------
jointly and severally, represent and warrant to, and agree with, each Agent
that:
(a) The Company and the Guarantor meet the requirements for use of
Form S-3 under the Securities Act of 1933, as amended (the "Act") and rules
and regulations ("Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") promulgated thereunder and have filed with
the Commission a registration statement on such Form (File No. 33-59559),
and a related preliminary prospectus for the registration under the Act of
certain securities, including the Notes and the Guarantees (collectively,
the "Securities") and the offering thereof from time to time in accordance
with Rule 415 under the Rules and Regulations, which registration statement
has been declared effective by the Commission and copies of which have
heretofore been delivered to you. Such registration statement, as it may be
amended or supplemented, meets the requirements set forth in Rule
415(a)(1)(x) and (a)(2) under the Act and complies in all other material
respects with said Rule. In connection with the sale of Notes, the Company
and the Guarantor propose to file with the Commission pursuant to Rule 424
under the Act a supplement to the form of prospectus included in such
registration statement relating to the Notes and the Guarantees and the
2
<PAGE>
plan of distribution thereof and have previously advised the Agents of all
further information (financial and other) with respect to the Company and
the Guarantor to be set forth therein. Such registration statement, in the
form in which it was declared effective, as amended through the date
hereof, including all documents incorporated or deemed to be incorporated
by reference therein and the information, if any, deemed to be a part
thereof pursuant to Rule 430A(b) of the Rules and Regulations through the
date hereof, is hereinafter referred to as the "Registration Statement".
Such prospectus, as supplemented through the date hereof, is hereinafter
called the "Prospectus", except that if any revised prospectus or
prospectus supplement shall be provided to the Agents by the Company for
use in connection with the offering of the Securities which differs from
the Prospectus (whether or not such revised prospectus or prospectus
supplement is required to be filed by the Company pursuant to Rule 424(b)
of the Rules and Regulations), the term "Prospectus" shall refer to such
revised prospectus or prospectus supplement, as the case may be, from and
after the time it is first provided to the Agents for such use. Any
reference herein to the Registration Statement or the Prospectus shall be
deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or
before the date of this Agreement or the date of the Prospectus, as the
case may be; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement or the Prospectus
shall be deemed to refer to and include the filing of any document under
the Exchange Act after the date of this Agreement or the date of the
Prospectus, as the case may be, deemed to be incorporated therein by
reference.
(b) As of the date hereof, when any amendment to the Registration
Statement becomes effective (including the filing of any document
incorporated by reference in the Registration Statement), when any
supplement to the Prospectus is filed with the Commission, as of the date
of any Terms Agreement (as defined by Section 2 hereof) and at the date of
delivery by the Company of any Notes sold hereunder (a "Settlement Date"),
(i) the Registration Statement, as amended as of any such time, and the
Prospectus, as supplemented as of any such time, and the Indenture
complies, or will comply, as the case may be, in all material respects with
the applicable requirements of the Act, the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and the Exchange Act and the
respective rules and regulations thereunder and (ii) neither the
Registration Statement, as amended as of any such time, nor the Prospectus,
as supplemented as of any such time,
3
<PAGE>
contains, or will contain, as the case may be, any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; provided, however, that the representations or warranties in
-------- -------
this subsection shall not apply to (a) that part of the Registration
Statement which shall constitute the Statement of Eligibility on Form T-1
under the Trust Indenture Act of the Trustee or (b) the information
contained in or omitted from the Registration Statement or the Prospectus
or any amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company or the
Guarantor by any of you specifically for use in connection with the
preparation of the Registration Statement and the Prospectus or any
amendment thereof or supplement thereto.
(c) Neither the Company nor the Guarantor nor any of their respective
subsidiaries is in violation of its corporate charter or bylaws or in
default under any agreement, indenture or instrument to which the Company,
the Guarantor or any of their respective subsidiaries is a party, the
effect of which violation or default would be material to the Company or
the Guarantor and its subsidiaries considered as a whole; the execution,
delivery and performance of this Agreement and the Indenture and
consummation of the transactions contemplated hereunder and thereunder
will not conflict with, result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company, the Guarantor
or any of their respective subsidiaries pursuant to the terms of, or
constitute a default under, any agreement, indenture or instrument, or
result in a violation of the charter or by-laws of the Company or the
Guarantor or any order, rule or regulation of any court or governmental
agency having jurisdiction over the Company, the Guarantor or any of their
respective subsidiaries; and except as required by the Act, the Trust
Indenture Act, the Exchange Act and applicable state securities laws, no
consent, authorization or order of, or filing or registration
with, any court or governmental agency is required for the execution,
delivery and performance of this Agreement and the Indenture.
(d) Except as described in or contemplated by the Registration
Statement and the Prospectus, there has not been any material adverse
change in, or any adverse development which materially affects, the
business, properties, financial condition or results of operations of the
Company or the Guarantor and its subsidiaries considered as a whole since
the dates as of which information is given in the Registration Statement
and the Prospectus.
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(e) Grant Thornton LLP, whose reports have been incorporated by
reference or included in the Guarantor's most recent Annual Report on Form
10-K, which is incorporated by reference in the Prospectus, are independent
public accountants as required by the Act and the Rules and Regulations.
(f) (i) The Indenture has been duly authorized, executed and delivered
by the Company and the Guarantor and constitutes the legally binding
obligation of the Company and the Guarantor, respectively, enforceable in
accordance with its terms subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, fraudulent conveyance, moratorium or
other laws affecting creditors' rights generally and general principles of
equity, (ii) on any Settlement Date, the Notes will have been duly
authorized and, upon payment therefor as provided in this Agreement, will
constitute legally binding obligations of the Company enforceable in
accordance with their terms subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, fraudulent conveyance, moratorium or
other laws affecting creditors' rights generally and general principles of
equity and the holders of the Notes will be entitled to the benefits of the
Indenture, (iii) on any Settlement Date, the Guarantees will have been duly
authorized and, upon delivery of the related Notes, will constitute legally
binding obligations of the Guarantor enforceable in accordance with their
terms subject to bankruptcy, insolvency, reorganization, fraudulent
transfer, fraudulent conveyance, moratorium or other laws affecting
creditors' rights generally and general principles of equity and the
holders of the Notes upon which the Guarantees are endorsed will be
entitled to the benefits of the Indenture, and (iv) the Indenture conforms,
and the Notes and related Guarantees will conform, in each case in all
material respects to the descriptions thereof contained in the Prospectus.
(g) Each of the Company, the Guarantor and any Significant Subsidiary
of the Company or the Guarantor, as defined in Rule 405 of Regulation C of
the Rules and Regulations (individually, a "Subsidiary" and collectively,
the "Subsidiaries"), has been duly incorporated, is validly existing and in
good standing under the laws of the jurisdiction in which it is chartered
or organized, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership of property
or the conduct of its business requires such qualification (except where
the failure to be so qualified would not have a material adverse effect on
the business operations or financial condition of the Company or the
Guarantor and its subsidiaries taken as a whole), and has power and
authority necessary to own or hold its property and to conduct the business
in which it is engaged.
(h) All of the outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and
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issued and are fully paid and nonassessable, and all outstanding shares of
capital stock of the Subsidiaries are owned by the Company or the
Guarantor, directly or through subsidiaries, free and clear of any
perfected security interest, other security interests, claims, liens or
encumbrances.
(i) Except as described in the Prospectus, there is no material
litigation or governmental proceeding pending or, to the knowledge of the
Company or the Guarantor, threatened against the Company, the Guarantor or
any of their respective subsidiaries which is reasonably likely to result
in any material adverse change in the financial condition, results of
operations, business or prospects of the Company or the Guarantor and its
subsidiaries considered as a whole or which is required to be disclosed in
the Registration Statement.
(j) The financial statements filed or incorporated as part of the
Registration Statement or included or incorporated in the Prospectus
present fairly, or (in the case of any amendment or supplement to any such
document, or any material incorporated by reference in any such document,
filed with the Commission after the date as of which this representation is
being made) will present fairly, at all times during the effectiveness of
this Agreement, the financial condition and results of operations of the
Guarantor, at the dates and for the periods indicated, and have been, and
(in the case of any amendment or supplement to any such document, or any
material incorporated by reference in any such document, filed with the
Commission after the date as of which this representation is being made)
will be at all times during the effectiveness of this Agreement, prepared
in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as otherwise
required pursuant to such generally accepted accounting principles; and the
summarized financial information of the Company incorporated in the
Registration Statement and the Prospectus presents fairly the information
required to be stated therein.
(k) The documents incorporated by reference into the Prospectus have
been, and (in the case of any amendment or supplement to any such document,
or any material incorporated by reference in any such document, filed with
the Commission after the date as of which this representation is being
made) will be at all times during the effectiveness of this Agreement,
prepared in all material respects in conformity with the applicable
requirements of the Act and the Rules and Regulations and the Exchange Act
and the rules and regulations of the Commission thereunder and such
documents
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have been, or (in the case of any amendment or supplement to any such
document, or any material incorporated by reference in any such document,
filed with the Commission after the date as of which this representation is
being made) will be at all times during the effectiveness of this Agreement
hereof, timely filed as required thereby.
(l) There are no contracts or other documents which are required to
be filed as exhibits to the Registration Statement by the Act or by the
Rules and Regulations, or which were required to be filed as exhibits to
any document incorporated by reference in the Prospectus by the Exchange
Act or the rules and regulations of the Commission thereunder, which have
not been filed as exhibits to the Registration Statement or to such
document or incorporated therein by reference as permitted by the Rules and
Regulations or the rules and regulations of the Commission under the
Exchange Act as required.
2. Appointment of Agents; Solicitations by the Agents of Offers to
---------------------------------------------------------------
Purchase; Sales of Notes to a Purchaser. (a) Subject to the terms and
- ---------------------------------------
conditions set forth herein, and to the reservation by the Company of the right
to sell, solicit, and accept offers to purchase Notes directly on its own
behalf, the Company hereby authorizes each Agent to act as its agent to solicit
offers for the purchase of all or part of the Notes from the Company.
On the basis of the representations and warranties, and subject to the
terms and conditions set forth herein, each of the Agents agrees, as agent of
the Company, to use its reasonable best efforts to solicit offers to purchase
the Notes from the Company upon the terms and conditions set forth herein and in
the Prospectus as amended or supplemented and in the Procedures.
The Company reserves the right, in its sole discretion, to instruct the
Agents or any one or more of the Agents from time to time to suspend at any
time, for any period of time or permanently, the solicitation of offers to
purchase the Notes. Upon receipt of instructions from the Company, such Agents
will forthwith suspend solicitation of offers to purchase Notes from the
Company until such time as the Company has advised them that such solicitation
may be resumed.
Unless otherwise agreed between the Company and such Agent, the Company
agrees to pay each Agent a commission in U.S. dollars, at the time of settlement
of each sale of Notes by the Company as a result of a solicitation made by such
Agent, in an amount equal to that percentage specified in Schedule I hereto (or,
with respect to Notes in which the stated maturity is in excess of 30 years,
such percentage as shall be agreed upon by the Company and the related Agent at
such time) of the aggregate
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principal amount of the Notes sold by the Company as a result of solicitations
by such Agent and such commission shall be payable as specified in the
Procedures.
Subject to the provisions of this Section and to the Procedures, offers for
the purchase of Notes may be solicited by each Agent as agent for the Company at
such time and in such amounts as such Agent deems advisable; provided, however,
-------- -------
that so long as this Agreement shall be in effect, the Company shall not solicit
offers to purchase Notes through any agents other than the Agents.
Notwithstanding anything to the contrary contained herein, the Company may
authorize any other person, partnership or corporation (an "Additional Agent")
to act as its agent to solicit offers for the purchase of all or part of the
Notes of the Company and/or accept offers to purchase Notes from any such
Additional Agent, provided that the Company shall have delivered written notice
--------
to each Agent of its intent to do so at least two business days prior to such
appointment and any such Additional Agent shall have entered into an agreement
with the Company upon the same terms and conditions as set forth in this
Agreement.
(b) Subject to the terms and conditions stated herein, the Company agrees
that, whenever the Company determines to sell Notes directly to any Agent as
principal for resale to others, it will enter into a separate agreement relating
to such sale in accordance with the provisions of this Section 2(b). For the
purposes of this Agreement, the term "Agent" shall refer to each of you acting
solely in the capacity as agent for the Company hereunder and not as principal;
the term "Purchaser" shall refer to each of you acting solely as principal
hereunder and not as agent, and the term "you" shall refer to each of you acting
in both such capacities or in either such capacity.
Each sale of Notes to a Purchaser shall be made in accordance with the
terms of this Agreement and the Procedures and a supplemental agreement which
will provide for the sale of such Notes to, and the purchase and reoffering
thereof by, a Purchaser. Each such supplemental agreement (which may be an oral
agreement and confirmed in writing between a Purchaser and the Company) is
herein referred to as a "Terms Agreement". Each such Terms Agreement, whether
oral (and confirmed in writing, which may be by facsimile transmission) or in
writing, shall be with respect to such information (as applicable) as is
specified in Exhibit B hereto. A Purchaser's commitment to purchase Notes shall
be deemed to have been made on the basis of the representations and warranties
of the Company and the Guarantor herein contained and shall be subject to the
terms and conditions herein set forth. Each Terms Agreement shall describe the
Notes to be purchased by the Purchaser pursuant thereto, specify the principal
amount of such Notes, the price to be paid to the Company for such Notes, the
currency or currency unit in which such Notes shall be denominated and be
payable, whether the Notes will be
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issued in certificated or book-entry form, whether interest shall be payable at
a fixed or floating rate, the date and time of delivery of payment for such
Notes (the "Purchase Date"), the place of delivery of the Notes and payment
therefor, the method of payment and any requirements for the delivery of the
opinions of counsel, the certificates from the Company, the Guarantor or their
officers, or the letter from Grant Thornton LLP pursuant to Section 6(b). Such
Terms Agreement shall also specify the period of time, if applicable, referred
to in Section 4(l). In connection with the resale of any Notes purchased by a
Purchaser, such Purchaser may engage the services of any other broker or dealer
in connection with such resale and may allow all or any portion of the discount
received to such brokers and dealers.
Delivery of the certificates for Notes sold to a Purchaser pursuant to any
Terms Agreement shall be made as agreed to between the Company and the Purchaser
as set forth in the respective Terms Agreement, not later than the Purchase Date
set forth in such Terms Agreement, against payment of funds to the Company in
the net amount due to the Company for such Notes by the method and in the form
set forth in the respective Terms Agreement.
3. Offering Procedure. (a) Unless otherwise agreed between the
------------------
Company and each Agent, each Agent shall communicate to the Company, orally or
in writing, each offer to purchase Notes received by such Agent (unless such
offer is rejected by such Agent in accordance herewith) on terms previously
communicated by the Company to such Agent, and unless otherwise agreed between
the Company and each Agent, the Company shall have the sole right to accept such
offers to purchase Notes and may refuse any proposed purchase of Notes in whole
or in part for any reason.
(b) Unless otherwise agreed between the Company and each Agent, each Agent
shall have the right, in its discretion reasonably exercised, to reject any
proposed purchase of Notes, as a whole or in part, and any such rejection shall
not be deemed a breach of its agreement contained herein. Each Agent and the
Company agree to perform the respective duties and obligations specifically
provided to be performed by them in the Procedures.
4. Agreements. The Company and the Guarantor, jointly and severally,
----------
agree with each Agent that:
(a) Prior to the termination of the offering of the Notes, the
Company and the Guarantor will not file any amendment of the Registration
Statement or supplement to the Prospectus (except for a supplement relating
to an offering of securities other than the Notes and related Guarantees)
unless the Company or the Guarantor has furnished to such Agent a copy for
its review prior to filing and will not
9
<PAGE>
file any such proposed amendment or supplement to which such Agent may
reasonably object. Subject to the foregoing sentence, the Company and the
Guarantor will cause each supplement to the Prospectus to be filed (or
mailed for filing) with the Commission as required pursuant to Rule 424.
The Company and the Guarantor will promptly advise such Agent (i) when each
supplement to the Prospectus shall have been filed (or mailed for filing)
with the Commission pursuant to Rule 424, (ii) when any amendment of the
Registration Statement shall have become effective, (iii) of any request by
the Commission for any amendment of the Registration Statement or amendment
of or supplement to the Prospectus or for any additional information, (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (v) of the receipt by
the Company or the Guarantor of any notification with respect to the
suspension of the qualification of the Notes and related Guarantees for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company and the Guarantor will use their best efforts
to prevent the issuance of any such stop order and, if issued, to obtain as
soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Notes and
related Guarantees is required to be delivered under the Act, any event
occurs as a result of which the Registration Statement, as then amended, or
the Prospectus, as then supplemented, would include any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, any facts or events arise which, individually or
in the aggregate, would represent a fundamental change in the information
set forth or in the Registration Statement or the Prospectus, or if it
shall be necessary to amend the Registration Statement or to supplement the
Prospectus to comply with the Act or the Exchange Act or the respective
rules thereunder, the Company and the Guarantor promptly will (i) notify
such Agent to suspend the solicitation of offers to purchase Notes (and, if
so notified, such Agent shall forthwith suspend such solicitation and cease
using the Prospectus as then amended or supplemented), (ii) prepare and
file with the Commission, subject to the first sentence of paragraph (a) of
this Section 4, an amendment or supplement which will correct such
statement or omission or an amendment or supplement which will effect such
compliance and (iii) will supply any such amended or supplemented
Prospectus to such Agent in such quantities as such Agent may reasonably
request. If such amendment or supplement, and any documents, certificates
and opinions furnished to
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<PAGE>
such Agent pursuant to paragraph (f) of this Section 4 in connection with
the preparation or filing of such amendment or supplement are reasonably
satisfactory in all respects to such Agent, such Agent will, upon the
filing of such amendment or supplement with the Commission and upon the
effectiveness of an amendment to the Registration Statement if such an
amendment is required, resume such Agent's obligation to solicit offers to
purchase Notes hereunder.
(c) As soon as practicable, the Guarantor will make generally
available to the security holders of the Guarantor and to such Agent an
earnings statement which will satisfy the provisions of Section 11(a) of
the Act and Rule 158 under the Act.
(d) The Company and the Guarantor will furnish to such Agent and to
its counsel, without charge, copies of the Registration Statement
(including exhibits thereto) and each amendment thereto which shall become
effective and, so long as delivery of a prospectus may be required by the
Act, as many copies of any preliminary prospectus and the Prospectus and
any amendments thereof and supplements thereto as such Agent may reasonably
request.
(e) The Company and the Guarantor will arrange for the qualification
of the Notes and related Guarantees for sale under the laws of such
jurisdictions as such Agent may designate, will maintain such
qualifications in effect so long as required for the distribution of the
Notes and related Guarantees, and will arrange for the determination of the
legality of the Notes and related Guarantees for purchase by institutional
investors.
(f) The Company and the Guarantor shall furnish to such Agent and
counsel for such Agent, such documents, certificates of officers and
opinions of counsel relating to their respective businesses, operations and
affairs, the Registration Statement, any preliminary prospectus, the
Prospectus, and any amendments or supplements thereto, the Indenture, the
Notes, the Guarantees, this Agreement, the Procedures and the performance
by the Company, the Guarantor and such Agent of their respective
obligations hereunder and thereunder as such Agent may from time to time
and at any time prior to the termination of this Agreement reasonably
request.
(g) The Company and the Guarantor shall, whether or not any sale of
the Notes is consummated, (i) pay all expenses incident to the performance
of their obligations under this Agreement, including the fees and
disbursements of its accountants and counsel, the cost of printing (or
otherwise producing) and delivery of the Registration
11
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Statement, the Prospectus, all amendments thereof and supplements thereto,
the Indenture, this Agreement and all other documents relating to the
offering, the cost of preparing, printing, packaging and delivering the
Notes and related Guarantees, the fees and disbursements, including fees of
counsel, incurred in connection with the qualification of the Notes and
related Guarantees for sale and determination of eligibility for
investment of the Notes and related Guarantees under the securities or blue
sky laws of each such jurisdiction as such Agent may reasonably designate,
the fees and disbursements of the Trustee, the Calculation Agent (as such
term is used in the Prospectus, as supplemented, relating to the Notes and
related Guarantees) and the fees of any agency that rates the Notes, and
(ii) reimburse such Agent on a monthly basis for all out-of-pocket expenses
(including without limitation advertising expenses) incurred by such Agent
and approved by the Company or the Guarantor in advance, in connection with
the offering and the sale of the Notes and related Guarantees, and (iii) be
responsible for the reasonable fees and disbursements of such Agent's
counsel incurred heretofore or hereafter in connection with the offering
and sale of the Notes and related Guarantees.
(h) Each acceptance by the Company of an offer to purchase Notes will
be deemed to be a reconfirmation to you of the representations and
warranties of the Company and the Guarantor in Section 1(b).
(i) Each time that the Registration Statement or the Prospectus is
amended or supplemented (other than by an amendment or supplement (i)
relating to an offering of securities other than the Notes and related
Guarantees or (ii) providing solely for the specification of the terms of
the Notes (excluding (a) any change in the formula by which interest rates
on the Notes may be determined and (b) any information relating to
Specified Currencies other than U.S. dollars)) or there is filed with the
Commission any document incorporated by reference into the Prospectus, the
Company and the Guarantor will each deliver or cause to be delivered
forthwith to such Agent a certificate of its President or any Vice
President and its principal financial or accounting officer or the
Treasurer, dated the date of the effectiveness of such amendment or the
date of filing of such supplement, in form reasonably satisfactory to such
Agent, to the effect that the statements contained in the certificate that
was last furnished to such Agent pursuant to either Section 5(e) or this
Section 4(i) are true and correct at the time of the effectiveness of such
amendment or the filing of such supplement as though made at and as of such
time (except that (i) the last day of the fiscal quarter for which
financial statements of the Guarantor were last filed with
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the Commission shall be substituted for the corresponding date in such
certificate and (ii) such statements shall be deemed to relate to the
Registration Statement and the Prospectus as amended and supplemented to
the time of the effectiveness of such amendment or the filing of such
supplement) or, in lieu of such certificate, a certificate of the same
tenor as the certificate referred to in Section 5(e), but modified to
relate to the last day of the fiscal quarter for which financial statements
of the Guarantor were last filed with the Commission and to the
Registration Statement and the Prospectus as amended and supplemented to
the time of the effectiveness of such amendment or the filing of such
supplement.
(j) Each time that the Registration Statement or the Prospectus is
amended or supplemented (other than by an amendment or supplement (i)
relating to an offering of securities other than the Notes and related
Guarantees, (ii) providing solely for the specification of the terms of the
Notes (excluding (a) any change in the formula by which interest rates on
the Notes may be determined and (b) any information relating to Specified
Currencies other than U.S. dollars) or (iii) setting forth or incorporating
by reference financial statements or other financial information as of and
for a fiscal quarter, unless, in the case of clause (iii) above, in such
Agent's reasonable judgment, such financial statements or other financial
information are of such a nature that an opinion of counsel should be
furnished) or there is filed with the Commission any document incorporated
by reference into the Prospectus, the Company and the Guarantor shall
furnish or cause to be furnished forthwith to such Agent the written
opinion of the General Counsel of the Company and the Guarantor, or such
other counsel satisfactory to such Agent, dated the date of the
effectiveness of such amendment or the date of filing of such supplement,
in form satisfactory to such Agent, covering all of the matters referred to
in the opinions set forth in Sections 5(b) and 5(c) but modified to relate
to the Registration Statement and the Prospectus as amended and
supplemented to the time of the effectiveness of such amendment or the
filing of such supplement or, in lieu of such opinion, counsel last
furnishing such an opinion to such Agent may furnish a letter to the effect
that such Agent may rely on such last opinion to the same extent as though
it were dated the date of such letter authorizing reliance (except that
statements in such last opinion will be deemed to relate to the
Registration Statement and the Prospectus as amended and supplemented to
the time of the effectiveness of such amendment or the filing of such
supplement); provided, however, that, upon a reasonable request from such
-------- -------
Agent, the Company and the Guarantor shall cause to be furnished forthwith
to such Agent the written
13
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opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel to the Company
and the Guarantor, dated the date of the effectiveness of such amendment or
the date of filing of such supplement, in form satisfactory to such Agent,
of the same tenor as the opinions referred to in Section 5(b) but modified
to relate to the Registration Statement and the Prospectus as amended and
supplemented to the time of the effectiveness of such amendment or the
filing of such supplement.
(k) Each time that the Registration Statement or the Prospectus is
amended or supplemented to set forth amended or supplemental financial
information or such amended or supplemental information is incorporated by
reference in the Registration Statement or the Prospectus, the Company and
the Guarantor shall cause Grant Thornton LLP, their independent public
accountants, forthwith to furnish to such Agent a letter, dated the date of
the effectiveness of such amendment or the date of filing of such
supplement, in form satisfactory to such Agent, of the same tenor as the
letter referred to in Section 5(f) with such changes as may be necessary to
reflect the amended and supplemental financial information included or
incorporated by reference in the Registration Statement and the Prospectus,
as amended or supplemented to the date of such letter, provided that if the
--------
Registration Statement or the Prospectus is amended or supplemented solely
to include or incorporate by reference financial information as of and for
a fiscal quarter, Grant Thornton LLP may limit the scope of such letter,
which shall be satisfactory in form to such Agent, to the unaudited
financial statements included in such amendment or supplement, unless any
other information included or incorporated by reference therein of an
accounting, financial or statistical nature is of such a nature that, in
such Agent's reasonable judgment, such letter should cover such other
information.
(l) During the period, if any, specified in any Terms Agreement, the
Company and the Guarantor shall not, without the prior consent of the
Purchaser, issue or announce the proposed issuance of any debt securities
of the Company or the Guarantor in a public offering or register any debt
securities of the Company or the Guarantor under the Act in connection with
any secondary distribution of such debt securities.
5. Conditions to the Obligations of the Agents. The obligations of any
-------------------------------------------
Agent to solicit offers to purchase the Notes shall be subject to the accuracy
of the representations and warranties on the part of the Company and the
Guarantor contained herein as of the date hereof, as of the date of the
effectiveness of any amendment to the Registration Statement (including the
filing of any document incorporated by reference therein), as of
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the date any supplement to the Prospectus is filed with the Commission and as of
each Settlement Date, to the accuracy of the statements of the Company and the
Guarantor made in any certificates pursuant to the provisions hereof, to the
performance by the Company and the Guarantor of their respective obligations
hereunder and to the following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened.
(b) The Company and the Guarantor shall have furnished to the Agents
the opinion or opinions of Fried, Frank, Harris, Shriver & Jacobson,
counsel to the Company and the Guarantor, dated the date hereof,
substantially as set forth below, with such additional qualifications and
exceptions as shall be acceptable to the Agents and their counsel:
(i) Each of the Company and the Guarantor is a corporation duly
incorporated, validly existing and in good standing under the laws of
the state of its incorporation and has the corporate power and
authority to own its properties and to conduct its business as
described in the Prospectus.
(ii) The Company and the Guarantor have the corporate power and
authority to enter into this Agreement and the Terms Agreement (if
applicable), and this Agreement and the Terms Agreement (if
applicable) have been duly and validly authorized, executed and
delivered by the Company and the Guarantor, respectively.
(iii) The form and general terms of the Notes have been duly and
validly authorized and established in conformity with the provisions
of the Indenture by all necessary corporate action by the Company, and
when the particular terms of the Notes have been duly established in
accordance with the provisions of the Indenture, the Procedures and
the resolutions of the Board of Directors of the Company and such
Notes have been duly executed, authenticated and delivered against
payment therefor in accordance with the provisions of the Indenture,
the Procedures and this Agreement, will constitute the legal, valid
and binding obligations of
15
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the Company, enforceable against the Company in accordance with their
terms and the terms of the Indenture, and the holder of the Notes will
be entitled to the benefits of the Indenture; and the Indenture has
been duly authorized, executed and delivered by each of the Company
and Guarantor, has been qualified under the Trust Indenture Act, and
constitutes a legal, valid and binding obligation enforceable against
each of the Company and the Guarantor in accordance with its terms.
(iv) The Guarantees, in the forms certified to by an authorized
officer of the Guarantor, have been duly and validly authorized by all
necessary corporate action by the Guarantor and, upon due issuance,
authentication and delivery of the related Notes and due endorsement
of the Guarantees, the Guarantees will have been duly executed, issued
and delivered and will constitute the legal, valid and binding
obligations of the Guarantor enforceable against the Guarantor in
accordance with their terms and the terms of the Indenture, and the
holders of the Notes upon which the Guarantees are endorsed will be
entitled to the benefits of the Indenture.
(v) The Registration Statement has become effective under the Act;
any required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); to the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement has been issued, no proceedings for that purpose have been
instituted or threatened and the Registration Statement and the
Prospectus (other than (i) the financial statements and other
financial and statistical information contained therein, (ii) the
Statement of Eligibility on Form T-1 filed as an exhibit thereto and
(iii) the "Incorporated Documents", as defined in paragraph (c)(vi)
below, as to which such counsel need express no opinion) appear on
their face to be responsive as to form in all material respects with
the applicable requirements of the Act and the Rules and Regulations
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder.
(vi) No consent, approval, authorization or order of any United
States federal or New York, California or, with respect to matters
arising under the Delaware General Corporation Law, Delaware court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement or the Indenture, except
such as have been obtained under the Act and such as may be required
under the securities and blue sky laws, rules and regulations of any
jurisdiction in connection with the purchase and distribu-
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tion of the Notes and related Guarantees by the Agents and such other
approvals (specified in such opinion) as have been obtained.
(vii) Neither the issue and sale of the Notes (in the forms
certified to by an authorized officer of the Company), the compliance
by the Company and the Guarantor with all the provisions of this
Agreement, the Indenture, the Notes or the Guarantees (in the form
certified to by an authorized officer of the Guarantor), the
consummation of the transactions herein or therein contemplated nor
the fulfillment of the terms hereof or thereof will conflict with,
result in a breach of, or constitute a default under the charter or
bylaws of the Company or the Guarantor or the terms of any indenture
or other agreement or instrument filed with the Commission and to
which the Company or the Guarantor or any of the Guarantor's
subsidiaries is a party or bound, or any order, decree, order, or
regulation (other than any Federal or state securities or blue sky
laws, rules or regulations) known to such counsel to be applicable to
the Company or the Guarantor or any of the Guarantor's subsidiaries of
any court, regulatory body, administrative agency, governmental body
or arbitrator having jurisdiction over the Company or the Guarantor or
any of the Guarantor's subsidiaries.
(viii) To the best knowledge of such counsel, no holders of
securities of the Company or the Guarantor have rights to the
registration of such securities under the Registration Statement.
(ix) Such counsel confirms (i) that the statements in the
Prospectus under the caption "Certain Federal Income Tax
Considerations", insofar as such statements constitute a summary of
the legal matters referred to therein, fairly present the information
disclosed therein in all material respects (ii) the conformity in all
material respects of the Notes (in the forms certified to by an
authorized officer of the Company) to the statements relating thereto
in the Prospectus, and (iii) the accuracy in all material respects of
the statements in the Prospectus under the captions "Description of
Notes" and "Description of Debt Securities and Guarantees", insofar as
such statements purport to describe the Indenture and the Guarantees.
Such counsel shall also state that, in the course of their engagement to
represent or advise the Company and the Guarantor professionally, they have not
become aware of any pending legal proceeding before any court or administrative
agency or authority or any arbitration tribunal, nor have they devoted
substantive attention in the form of legal representation as to any current
17
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overtly threatened litigation against or directly affecting the Company or its
subsidiaries or the Guarantor or its subsidiaries, in each case that is required
to be described in the Registration Statement or the Prospectus and is not so
described. In making the foregoing statement, they shall endeavor, to the
extent they believe necessary, to determine from lawyers currently in their firm
who have performed substantive legal services for the Company or the Guarantor,
whether such services involved substantive attention in the form of legal
representation concerning pending legal proceedings or overtly threatened
litigation of the nature referred to above. Beyond that, they need not make any
review, search or investigation of public files or records or files or records
of the Company or the Guarantor, or of their respective transactions, or any
other investigation or inquiry with respect to the foregoing statement.
Such counsel shall also state that in the course of the preparation by the
Company, the Guarantor and their counsel of the Registration Statement and
Prospectus (other than the Incorporated Documents), such counsel attended
conferences with certain of the officers of, and the independent public
accountants for, the Company and the Guarantor, at which the Registration
Statement and Prospectus were discussed. Given the limitations inherent in the
independent verification of factual matters and the character of determinations
involved in the registration process, such counsel need not pass upon and need
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and Prospectus including the
Incorporated Documents, except as specifically described in the opinion set
forth in paragraph (ix) above. Subject to the foregoing and on the basis of the
information such counsel gained in the performance of the services referred to
above, including information obtained from officers and other representatives of
the Company and Guarantor, such counsel shall state that no facts have come to
such counsel's attention that has caused it to believe that the Registration
Statement, at the time it became effective or at the time an Annual Report on
Form 10-K was filed (whichever is later), contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, or that the
Prospectus, at its date or at the date hereof, included or includes, as the case
may be, any untrue statement of material fact or omitted or omits, as the case
may be, to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that such counsel need not express a view or belief with respect to (i)
the financial statements or other financial and statistical information included
or incorporated by reference in the Registration Statement and Prospectus or
(ii) that part of the Registration Statement which shall constitute the
Statement of Eligibility on Form T-1 under the Trust Indenture Act.
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References to the Prospectus in this Section 5(b) include any amendments or
supplements thereto at the date hereof.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
California, the State of New York, the State of Delaware (but only with respect
to the Delaware General Corporation Law) or the United States, to the extent
they deem proper and specified in such opinion, upon the opinion of other
counsel of good standing whom they believe to be reliable and who are
satisfactory to counsel for the Agents and (B) as to matters of fact, to the
extent they deem proper, on certificates of responsible officers of the Company,
the Guarantor and public officials.
In rendering the opinions set forth in paragraphs (iii) and (iv), such
counsel may state that such opinions are subject to the following: (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other laws now or hereafter in effect affecting creditors' rights generally; and
(ii) general principles of equity (including, without limitation, standards of
materiality, good faith, fair dealing and reasonableness) whether such
principles are considered in a proceeding in equity or at law.
In rendering the opinions set forth in paragraphs (iii) and (iv), such
counsel may state that enforceability of Section 311 of the Indenture is subject
to the qualification that an action under New York law based upon an obligation
payable in a currency or currency unit other than U.S. dollars will be rendered
in the foreign currency or currency unit of the underlying obligation and
converted into U.S. dollars at a rate of exchange prevailing on the date of the
entry of the judgment or decree.
(c) The Company and the Guarantor shall have furnished to the Agents
the opinion or opinions of Sandor E. Samuels, General Counsel of the
Company and the Guarantor, dated the date hereof, substantially as set
forth below, with such additional qualifications and exceptions as shall be
acceptable to the Agents and their counsel:
(i) Each Subsidiary, if any, is a corporation, duly incorporated,
validly existing and in good standing under the laws of the state of
its incorporation, with the corporate power and authority to own its
properties and to conduct its business as described in the Prospectus.
(ii) Each of the Company, the Guarantor and the Subsidiaries is
duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction which requires such
qualification wherein it owns or leases material properties or
conducts material business other than jurisdictions in which the
failure to so qualify, when considered in the aggregate and not
individually, would not have a material adverse effect on the Company
or the Guarantor and its Subsidiaries considered as one enterprise.
(iii) All the outstanding shares of capital stock of the Company
and each Subsidiary have been duly and
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<PAGE>
validly authorized and issued and are fully paid and nonassessable,
and, except as otherwise set forth in the Prospectus, all outstanding
shares of capital stock of the Company and the Subsidiaries are owned
by the Guarantor either directly or through wholly owned subsidiaries
free and clear of any perfected security interest and, to the
knowledge of such counsel, after due inquiry, any other security
interests, claims, liens or encumbrances.
(iii) The outstanding shares of common stock of the Guarantor have
been duly and validly authorized and issued and are fully paid and
nonassessable.
(iv) Neither the issue and sale of the Notes, the compliance by
the Company and the Guarantor with all the provisions of this
Agreement, the Indenture, the Notes or the Guarantees, the
consummation of any other of the transactions herein or therein
contemplated nor the fulfillment of the terms hereof or thereof will
conflict with, result in a breach of, or constitute a default under
the charter or by-laws of the Company or the Guarantor or, to the
knowledge of such counsel, the terms of any indenture or other
agreement or instrument to which the Company or the Guarantor or any
of the Guarantor's subsidiaries is a party or bound, or any order,
decree, law, judgment, rule or regulation known to such counsel to be
applicable to the Company or the Guarantor or any of the Guarantor's
subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company
or the Guarantor or any of the Guarantor's subsidiaries.
(v) The documents (the "Incorporated Documents") incorporated by
reference in the Registration Statement and Prospectus (except for the
financial statements and other financial or statistical data, as to
which no opinion need be expressed), as of the dates they were filed
with the Commission, complied as to form in all material respects to
the requirements of the Act and the Rules and Regulations and the
Exchange Act and the rules and regulations of the Commission
thereunder.
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement or the Indenture, except
such as have been obtained under the Act and such as may be required
under the securities and blue sky laws of any jurisdiction in
connection with the purchase and distribution of the Notes and related
Guarantees by the Agents and such other
20
<PAGE>
approvals (specified in such opinion) as have been obtained.
(d) Such Agent shall have received from Brown & Wood, counsel for the
Agents, such opinion or opinions, dated the date hereof, with respect to
the issuance and sale of the Notes and related Guarantees, this Agreement,
the Indenture, the Registration Statement, the Prospectus and other related
matters as such Agent may reasonably require, and the Company and the
Guarantor shall have furnished to such counsel such documents as they
request for the purpose of enabling them to pass upon such matters.
(e) The Company and the Guarantor shall have each furnished to such
Agent a certificate of its President, a Managing Director or a Vice
President and its Treasurer or an Assistant Treasurer, dated the date
hereof, to the effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus and this Agreement and
that:
(i) the representations and warranties of the Company or the
Guarantor, as the case may be, in this Agreement are true and correct
in all material respects on and as of the date hereof with the same
effect as if made on the date hereof, and the Company or the
Guarantor, as the case may be, has complied with all the agreements
and satisfied all the conditions on its part to be performed or
satisfied as a condition to the obligation of such Agent to solicit
offers to purchase the Notes;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the knowledge of the Company or
the Guarantor, as the case may be, threatened; and
(iii) since the date of the most recent financial statements
included or incorporated in the Prospectus, there has been no material
adverse change in the condition (financial or otherwise), earnings,
business or properties of the Company or the Guarantor and its
subsidiaries considered as a whole, whether or not arising from
transactions in the ordinary course of business, except as set forth
in or contemplated in the Prospectus.
(f) On the date hereof, Grant Thornton LLP shall have furnished to
such Agent a letter or letters (which may refer to letters previously
delivered to such Agent), dated as of the date hereof, in form and
substance satisfactory to such
21
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Agent, confirming that they are independent accountants within the meaning
of the Act and the Exchange Act and the respective applicable published
rules and regulations thereunder and stating in effect that:
(i) in their opinion the audited consolidated financial
statements and financial statement schedules included or incorporated
in the Registration Statement and the Prospectus and reported on by
them comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the
related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited
consolidated financial statements made available to them; carrying out
certain specified procedures (but not an examination in accordance
with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the
meetings of the stockholders, directors and standing committees
thereof; and inquiries of certain officials who have responsibility
for financial and accounting matters as to transactions and events
subsequent to the date of the most recent audited financial statements
included or incorporated in the Prospectus, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements included or
incorporated in the Registration Statement and the Prospectus do
not comply as to form in all material respects with applicable
accounting requirements of the Exchange Act as they apply to
quarterly reports on Form 10-Q or that any material modifications
should be made to said unaudited financial statements for them to
be in conformity with generally accepted accounting principles;
(2) with respect to the period subsequent to the date of
the most recent financial statements (other than any capsule
information), audited or unaudited, in or incorporated in the
Registration Statement and the Prospectus, there was any change,
at a specified date not more than five business days prior to the
date of the letter, in the capital stock or long and intermediate
term debt of the Company or the Guarantor and its subsidiaries
taken as a whole or any decreases in the shareholders' equity or
consolidated net assets as compared with the amounts shown on the
22
<PAGE>
most recent consolidated balance sheet included or incorporated
in the Registration Statement and the Prospectus, or for the
period from the date of the most recent financial statements
included or incorporated in the Registration Statement and the
Prospectus to such specified date there were any decreases, as
compared with the corresponding period in the preceding year in
consolidated revenues (net of interest charges), earnings before
income taxes or net earnings of the Company or the Guarantor and
its subsidiaries, except in all instances for changes or
decreases set forth in such letter; or
(3) the amounts included in any unaudited "capsule"
information included or incorporated in the Registration
Statement and the Prospectus do not agree with the amounts set
forth in the unaudited financial statements for the same periods
or were not determined on a basis substantially consistent with
that of the corresponding amounts in the audited financial
statements included or incorporated in the Registration Statement
and the Prospectus;
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature set forth in the
Registration Statement and the Prospectus and in Exhibit 12 to the
Registration Statement, the information included or incorporated in
Items 1, 2, 6, 7 and 11 of the Guarantor's Annual Report on Form 10-K
(and, if filed, the Company's Annual Report on Form 10-K),
incorporated in the Registration Statement and the Prospectus and the
information included in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included or
incorporated in the Company's or the Guarantor's Quarterly Reports on
Form 10-Q incorporated in the Registration Statement and the
Prospectus, agrees with the accounting records of the Company, the
Guarantor and their respective subsidiaries, excluding any questions
of legal interpretation; and
(iv) if pro forma financial statements are included or
incorporated in the Registration Statement and the Prospectus, on the
basis of a reading of the unaudited pro forma financial statements,
carrying out certain specified procedures, inquiries of certain
officials of the Company or the Guarantor, as the case may be, who
have responsibility for financial and
23
<PAGE>
accounting matters, and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in
the pro forma financial statements, nothing came to their attention
which caused them to believe that the pro forma financial statements
do not comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not been properly applied to the historical
amounts in the compilation of such statements.
References to the Registration Statement and the Prospectus in this
paragraph (f) are to such documents as amended and supplemented at the date of
the letter.
(g) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus (as amended or
supplemented, in the case of a Terms Agreement) there shall not have been
(i) any change or decrease specified in the letter or letters referred to
in paragraph (f) of this Section 5 or (ii) any change, or any development
involving a prospective change, in or affecting the business or properties
of the Company, the Guarantor and their respective subsidiaries the effect
of which, in any case referred to in clause (i) or (ii) above, is, in the
judgment of such Agent, so material and adverse as to make it impractical
or inadvisable to proceed with the soliciting of offers to purchase the
Notes as contemplated by the Registration Statement and the Prospectus (or,
in the case of a Terms Agreement, to proceed with the offering or the
delivery of the Notes to be purchased as contemplated by the Terms
Agreement).
(h) Prior to the date hereof, the Company and the Guarantor shall
have furnished to such Agent such further information, certificates and
documents as such Agent may reasonably request.
(i) Prior to the date hereof, the Notes shall have been rated, and on
the date hereof the Notes shall be rated, at least [BBB+] by Standard &
Poor's Corporation ("S&P") and [Baa3] by Moody's Investors Service, Inc.
("Moody's").
(j) Subsequent to the execution of this Agreement (i) the Company and
the Guarantor have not received notice that S&P or Moody's intends to
reduce, or is considering a reduction in, the ratings of any of their debt
securities unless such intention to so reduce or consideration of such a
reduction is then publicly known and (ii) the debt securities of the
Company and the Guarantor shall be rated as investment grade debt by S&P
and Moody's.
24
<PAGE>
If any of the conditions specified in this Section 5 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to such Agent and its counsel, this Agreement and all obligations
of such Agent hereunder may be canceled at any time by such Agent. Notice of
such cancellation shall be given to the Company and the Guarantor in writing or
by telephone or telegraph confirmed in writing.
The documents required to be delivered by this Section 5 shall be delivered
to the office of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza,
New York, New York 10004, or such other location as shall be mutually agreed
upon, on the date hereof.
6. Conditions to the Obligations of a Purchaser. The obligations of a
--------------------------------------------
Purchaser to purchase Notes pursuant to any Terms Agreement will be subject to
the accuracy of the representations and warranties on the part of the Company
and the Guarantor herein as of the date of the respective Terms Agreement and as
of the Purchase Date thereunder, to the performance and observance by the
Company and the Guarantor of all covenants and agreements herein contained on
its part to be performed and observed and to the following additional conditions
precedent:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been instituted or threatened.
(b) Except to the extent modified by the respective Terms Agreement,
the Purchaser shall have received, appropriately updated in a manner
consistent with Section 5 hereof, (i) certificates of the Company and the
Guarantor, dated as of the Purchase Date, to the effect set forth in
Section 5(e), (ii) the opinion or opinions of Fried, Frank, Harris, Shriver
& Jacobson, counsel to the Company and the Guarantor, dated as of the
Purchase Date, to the effect set forth in Section 5(b), (iii) the opinion
or opinions of Sandor E. Samuels, General Counsel to the Company and the
Guarantor, dated as of the Purchase Date, to the effect set forth in
Section 5(c), (iv) the opinion or opinions of Brown & Wood, counsel for the
Purchaser, dated as of the Purchase Date, to the effect set forth in
Section 5(d) and (v) letter of Grant Thornton LLP, dated as of the Purchase
Date, to the effect set forth in Section 5(f).
(c) The conditions set forth in Section 5(g) shall have been
satisfied.
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<PAGE>
(d) Prior to the Purchase Date, the Company and the Guarantor shall
have furnished to the Purchaser such further information, certificates and
documents as the Purchaser may reasonably request.
(e) Prior to and at the Purchase Date, the Notes shall have been
rated at least [BBB+] by S&P and [Baa3] by Moody's.
(f) Subsequent to the execution of any Terms Agreement, (i) the
Company and the Guarantor have not received notice that S&P or Moody's
intends to reduce, or is considering a reduction in the ratings of any of
the debt securities of the Company or the Guarantor unless S&P's or Moody's
intention to so reduce or consideration of such a reduction is then
publicly known and (ii) the debt securities of the Company and the
Guarantor shall be rated as investment grade debt by S&P and Moody's.
If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Purchaser and its counsel, this Agreement and all
obligations of the Purchaser hereunder may be canceled at, or at any time prior
to, the respective Purchase Date by the Purchaser. Notice of such cancellation
shall be given to the Company or the Guarantor in writing or by telephone or
telegraph confirmed in writing.
7. Reimbursement of the Agent's Expenses. If any condition to the
-------------------------------------
obligations of any Agent set forth in Section 5 hereof is not satisfied, if any
condition to the obligations of a Purchaser set forth in Section 6 hereof is not
satisfied, if any termination pursuant to Section 9 hereof shall occur or in the
case of any refusal, inability or failure on the part of the Company or the
Guarantor to perform any agreement herein or comply with any provision hereof
other than by reason of a default by an Agent, the Company and the Guarantor
will reimburse such Agent upon demand for all expenses that shall have been
incurred by such Agent pursuant to Section 4(g) hereof in connection with this
Agreement.
8. Indemnification and Contribution. (a) The Company and the Guarantor,
--------------------------------
jointly and severally, agree to indemnify and hold harmless each Agent and each
person who controls such Agent within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which such Agent or any of them may become subject under the Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar
26
<PAGE>
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement for the registration
of the Notes as originally filed or in any amendment thereof, or in the
Prospectus or any preliminary Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i) the
-------- -------
Company and the Guarantor will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company or the Guarantor by or on behalf of such
Agent specifically for use in connection with the preparation thereof, and (ii)
such indemnity with respect to any preliminary Prospectus or any Prospectus as
supplemented or amended shall not inure to the benefit of any Agent (or any
person controlling such Agent) from whom the person asserting any such loss,
claim, damage or liability purchased the Notes which are the subject thereof if
such Agent (or any person controlling such Agent) received a copy of such
Prospectus (or such Prospectus as so amended or supplemented) and if such person
did not receive a copy of the Prospectus (or the Prospectus as amended or
supplemented) excluding documents incorporated therein by reference at or prior
to the confirmation of the sale of such Notes to such person in any case where
such delivery is required by the Act and the untrue statement or omission or the
alleged untrue statement or omission was corrected in the Prospectus (or the
Prospectus as amended or supplemented). This indemnity agreement will be in
addition to any liability which the Company or the Guarantor may otherwise have.
(b) Each Agent agrees to indemnify and hold harmless the Company and the
Guarantor, their respective directors, each of their officers who sign the
Registration Statement, and each person who controls the Company or the
Guarantor within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity from the Company and the Guarantor to such
Agent, but only with reference to written information relating to such Agent
furnished to the Company or the Guarantor by or on behalf of such Agent
specifically for use in the preparation of the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability which such Agent may otherwise have. The Company and the Guarantor
acknowledge that the statements set forth in the last paragraph of the cover
page and under the heading "Plan of Distribution" in any preliminary Prospectus
and the Prospectus constitute the only information furnished in writing by or on
27
<PAGE>
behalf of such Agent for inclusion in the documents referred to in the foregoing
indemnity, and you confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
--------
however, that if the defendants in any such action include both the indemnified
- -------
party and the indemnifying party, and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by the Agents in the case of paragraph
(a) of this Section 8, representing the indemnified parties under such paragraph
(a) who are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party; and except
that, if clause (i) or (iii) is applicable, such liability shall be only in
respect of the counsel referred to in such clause (i) or (iii).
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<PAGE>
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable to such indemnified party as a result
of such losses, claims, damages, or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Guarantor on the one hand and each Agent on the other
from the offering of the Notes to which such loss, claim, damage or liability
(or action in respect thereof) relates. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Guarantor on the one hand and each Agent on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantor on the one hand and each Agent on the other shall be deemed to be in
the same proportion as the total net proceeds from such offering (before
deducting expenses) received by the Company bear to the total commissions
received by each Agent. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Guarantor on the one hand or any
Agent on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Guarantor and each Agent agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were determined by pro
rata allocation (even if the Agents were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred to above in
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Agent shall be required to contribute any amount in excess of
the amount by which the total price at which Notes sold by it exceeds the amount
of any damages which such Agent has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
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<PAGE>
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of the Agents in
this subsection (d) to contribute are several in proportion to their respective
underwriting obligations with respect to such Notes and not joint.
9. Termination. This Agreement will continue in effect until terminated
-----------
as provided in this Section 9.
(a) This Agreement may be terminated by either the Company or any
Agent giving written notice of such termination to the other party hereto.
This Agreement shall so terminate at the close of business on the first
business day following the receipt of such notice by the party to whom such
notice is given. This Agreement may be terminated as to one or more of the
Agents, and to the extent not terminated with respect to any Agent, this
Agreement shall remain in full force and effect as between the Company and
any such Agent. In the event of such termination, no party shall have any
liability to the other party hereto, except as provided in the fourth
paragraph of Section 2(a), Section 4(g), Section 7, Section 8 and Section
10.
(b) Each Terms Agreement shall be subject to termination in the
absolute discretion of the Purchaser, by notice given to the Company and
the Guarantor prior to delivery of and payment for Notes to be purchased
thereunder, if prior to such time (i) trading in securities generally, or
in the securities of the Guarantor, on the New York Stock Exchange shall
have been suspended or limited or minimum prices shall have been
established on such exchange, (ii) a banking moratorium shall have been
declared by either federal or New York State authorities or, in the case of
Notes denominated in other than U.S. dollars, by the authorities of the
country of the currency in which such Notes are so denominated or (iii)
there shall have occurred any outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the
financial markets of the United States or in the country or countries of
origin of any foreign currency or currency unit in which the Notes are
denominated, indexed or payable is such as to make it, in the judgment of
the Purchaser, impracticable to market such Notes.
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of the
Company, the Guarantor or any of their officers and of each Agent set forth in
or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of such Agent or the
30
<PAGE>
Company, the Guarantor or any of their officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Notes. The provisions of Sections 7 and 8 hereof shall survive
the termination or cancellation of this Agreement.
11. Right of Person Who Agreed to Purchase to Refuse to Purchase. The
------------------------------------------------------------
Company and the Guarantor agree that any person who has agreed to purchase and
pay for any Note, including a Purchaser and any person who purchases pursuant to
a solicitation by any of the Agents, shall have the right to refuse to purchase
such Note if, at the Settlement Date therefor, either (a) any condition set
forth in Section 5 or 6, as applicable, shall not be satisfied or (b) subsequent
to the agreement to purchase such Note, any change, or any development involving
a prospective change, in or affecting the business or properties of the Company
or the Guarantor and its subsidiaries shall have occurred the effect of which
is, in the reasonable judgment of the Purchaser or the Agent which presented the
offer to purchase such Note, as applicable, so material and adverse as to make
it impractical or inadvisable to proceed with the delivery of such Note.
12. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to an Agent, will be mailed, delivered
or telegraphed and confirmed to such Agent, at the address specified in Schedule
1 hereto; or, if sent to the Company, will be mailed, delivered or telegraphed
and confirmed to it at 155 North Lake Avenue, Pasadena, California 91101,
Attention: Chairman of the Board of Directors.
13. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed in
--------------
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State.
31
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and the acceptance by each of you shall represent a binding agreement
among the Company, the Guarantor and each of you.
Very truly yours,
COUNTRYWIDE FUNDING CORPORATION
By:____________________________________
Title:
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By:____________________________________
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date hereof.
____________________
By:_________________
Title:
____________________
By:_________________
Title:
____________________
By:_________________
Title:
32
<PAGE>
SCHEDULE 1
Selling Agency Agreement dated ___________, 1995
Unless otherwise agreed between the Company and such Agent, the Company
agrees to pay any Agent a commission equal to the following percentage of the
principal amount of each Note sold by such Agent:
<TABLE>
<CAPTION>
Term Commission Rate (a)
---- ---------------
<S> <C>
From 9 months to less than 1 year ...................... --%
From 1 year to less than 18 months...................... --%
From 18 months to less than 2 years..................... --%
From 2 years to less than 3 years....................... --%
From 3 years to less than 4 years....................... --%
From 4 years to less than 5 years....................... --%
From 5 years to less than 6 years....................... --%
From 6 years to less than 7 years....................... --%
From 7 years to less than 10 years...................... --%
From 10 years to less than 15 years..................... --%
From 15 years to less than 20 years..................... --%
From 20 years up to and including 30 years (b).......... --%
</TABLE>
(a) With respect to each Note that is an Original Issue Discount Note (as
defined in the Indenture), the commission payable to each Agent with respect
to each such Note sold as a result of a solicitation made by such Agent
shall be based on the purchase price of such Note, rather than on the
principal amount of such Note.
(b) Commissions for Notes with terms in excess of 30 years will be agreed upon
by the Company and the related Agent at the time of sale.
Addresses for Notices to Agents:
33
<PAGE>
EXHIBIT A
COUNTRYWIDE FUNDING CORPORATION
MEDIUM-TERM NOTE
ADMINISTRATIVE PROCEDURES
___________, 1995
Medium-Term Notes, Series __, Due Nine Months or More From Date of
Issue (the "Notes") are to be offered on a continuing basis by Countrywide
Funding Corporation (the "Company"). _______________ (including its affiliate
______________), _______________, _______________, and _______________
(individually, an "Agent", and collectively, the "Agents"), have agreed to
solicit purchases of the Notes. The Agents will not be obligated to purchase
Notes as principal. The Notes are being sold pursuant to a Selling Agency
Agreement among the Company, Countrywide Credit Industries, Inc. (the
"Guarantor") and the Agents dated __________, 1995 (the "Agency Agreement").
The Notes will be unconditionally guaranteed as to payment of principal,
premium, if any, and interest by the Guarantor (the "Guarantees"). The Notes
will rank equally with all other unsecured and unsubordinated debt of the
Company and have been registered with the Securities and Exchange Commission
(the "Commission"). Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Indenture referred to below.
Each Note and related Guarantee will be issued under an Indenture dated as
of January 1, 1992, as supplemented by Supplemental Indenture No. 1 thereto
dated as of June 15, 1995 (collectively, the "Indenture"), among the Company,
the Guarantor and The Bank of New York, as trustee (the "Trustee"). The Notes
will bear interest at either fixed rates ("Fixed Rate Notes") or floating rates
("Floating Rate Notes"). Each Note will be represented by either a certificate
delivered to the Holder thereof or a Person designated by such Holder (a
"Certificated Note") or a Global Security (as defined hereinafter) delivered to
the Trustee, as agent for The Depository Trust Company ("DTC"), and recorded in
the book-entry system maintained by DTC (a "Book-Entry Note"). An owner of a
Book-Entry Note will not be entitled to receive a certificate representing such
Note except in the limited circumstances described in the Prospectus (as defined
in the Agency Agreement).
The procedures to be followed during, and the specific terms of, the
solicitation of offers by the Agents and the sale as a result thereof by the
Company are explained below. Certificated Notes will be issued in accordance
with the administrative procedures set forth in Part I hereof and Book-Entry
Notes will
A-1
<PAGE>
be issued in accordance with the administrative procedures set forth in Part II
hereof. The Company will advise each Agent and the Trustee in writing of those
persons handling administrative responsibilities with whom the Agents and the
Trustee are to communicate regarding offers to purchase Notes and the details of
their delivery.
Administrative procedures and specific terms of the offering are explained
below. To the extent the procedures set forth below conflict with the provisions
of the Notes, the Indenture or the Agency Agreement, the relevant provisions of
the Notes, the Indenture and the Agency Agreement shall control.
PART I: ADMINISTRATIVE PROCEDURES FOR CERTIFICATED NOTES
Maturities: Each Certificated Note will mature on a date (the
- ---------- "Stated Maturity Date") nine months or more after the
date of delivery by the Company of such Certificated
Note (the "Settlement Date"), subject to any applicable
provisions relating to redemption or repayment or the
extension of maturity.
Price to Public: Each Certificated Note will be issued at the percentage
- --------------- of principal amount specified in the Prospectus.
Currencies: The Certificated Notes will be denominated in U.S.
- ---------- dollars or in such other currency or currency unit as
is specified in the Prospectus (the "Specified
Currency").
Denominations: Except as set forth in the Certificated Note, the
- ------------- denomination of any Certificated Note will be a
minimum U.S.$100,000 or any amount in excess thereof
which is an integral multiple of U.S.$1,000 or the
equivalent, as determined pursuant to the provisions of
the Indenture, of U.S.$100,000 and any amount in excess
thereof which is an integral multiple of U.S.$1,000 in
a Specified Currency other than U.S. dollars.
Registration: Certificated Notes will be issued only in fully
- ------------ registered form.
Interest Payments: Except as set forth in the Certificated Note, each
- ----------------- Certificated Note which is a
A-2
<PAGE>
Fixed Rate Note will bear interest from the Settlement
Date of such Certificated Note at the annual rate
stated on the face thereof, payable semiannually on
January 15 and July 15 of each year (each, an "Interest
Payment Date") and on the Stated Maturity Date or date
of earlier redemption or repayment (such date is herein
referred to as the "Maturity Date" with respect to the
principal repayable on such date), and each
Certificated Note which is a Floating Rate Note will
bear interest as determined in the manner set forth on
the face thereof, payable on the dates set forth on the
face thereof. Unless otherwise specified on the face
thereof, interest (including payments for partial
periods) on Fixed Rate Notes will be calculated on the
basis of a 360-day year of twelve 30-day months.
Interest on Floating Rate Notes will be determined in
the manner agreed upon by the Company and the purchaser
thereof in accordance with the provisions of the
Prospectus. Except as set forth in the Certificated
Note, the "Record Date" with respect to any Interest
Payment Date for Floating Rate Notes shall be the date
15 calendar days immediately preceding such Interest
Payment Date, and for Fixed Rate Notes shall be the
December 31 or June 30 next preceding such Interest
Payment Date, whether or not such date shall be a
Business Day, as defined in the Prospectus. The first
payment of interest on any Certificated Note originally
issued between a Record Date and an Interest Payment
Date will be made on the Interest Payment Date
following the next Record Date to the Holder on such
next succeeding Record Date. Notwithstanding the record
date provisions above, interest payable on the Maturity
Date will be payable to the person to whom principal
shall be payable. Interest on the Certificated Notes
will be paid in the Specified Currency by mailing a
check (from an account at a bank located outside of the
United States if such check is payable in a Specified
Currency other than U.S.
A-3
<PAGE>
dollars) to the Holder at the address of such Holder
appearing on the Security Register on the applicable
Record Date; provided, however, that a Holder of
-------- -------
U.S.$10,000,000 (or the equivalent thereof in a
Specified Currency other than U.S. dollars) or more in
aggregate principal amount of Notes (whether or not
having identical terms and provisions) shall be
entitled: (i) if the Specified Currency is U.S.
dollars, to receive U.S. dollar payments by wire
transfer of immediately available funds to an account
maintained by the payee with a bank located in the
United States, but only if appropriate wire transfer
instructions have been received in writing by the
Trustee not later than the Record Date immediately
preceding the applicable Interest Payment Date, and
(ii) if the Specified Currency is other than U.S.
dollars, to receive by wire transfer of immediately
available funds to an account maintained by the payee
with a bank located in a jurisdiction in which payment
in such Specified Currency is then lawful. Within ten
days following each Record Date, the Trustee will
inform the Company of the total amount of the interest
payments to be made by the Company on the next
succeeding Interest Payment Date and the currencies or
currency units in which such interest payments are to
be made. The Trustee will provide monthly to the
Company a list of the principal and interest to be paid
on Certificated Notes maturing in the next succeeding
month.
Procedure for The Company and the Agents will discuss from time to
- -------------
Rate Setting time the aggregate principal amount of, the issuance
- ------------
and Posting: price of, and the interest rates to be borne by,
- -----------
Certificated Notes that may be sold as a result of the
solicitation or offers by the Agents. If the Company
decides to establish prices of (including the currency
of issuance), and rates borne by, any Certificated
Notes to be sold (the establishment of such prices and
rates to be referred to herein as "posting")
A-4
<PAGE>
or if the Company decides to change prices or rates
previously posted by it, it will promptly advise the
Agents of the prices and rates to be posted.
Acceptance Unless otherwise agreed between the Company and such
- ---------- Agent, any Agent which receives an offer to purchase
of Offers: Certificated Notes will promptly advise the Company of
- --------- each such offer other than offers rejected by such
Agent as provided below. The Company will have the
sole right to accept any such offer to purchase
Certificated Notes. The Company may reject any such
offer in whole or in part.
Unless otherwise agreed between the Company and any
Agent, each Agent may, in its discretion reasonably
exercised, reject any offer to purchase Certificated
Notes received by it in whole or in part.
Preparation If any offer to purchase a Certificated Note is
- ----------- accepted by or on behalf of the Company, the
of Pricing Company and the Guarantor, with the approval of the
- ---------- Agents, will prepare a Pricing Supplement reflecting
Supplement: the terms of such Certificated Note and will arrange to
- ---------- have requisite copies of such Pricing Supplement filed
with the Commission, in each case no later than the
fifth business day after the date it is first used and
will supply at least ten copies thereof (or additional
copies if requested) to the Agents and one copy to the
Trustee no later than 11:00 A.M., New York City time,
on the Business Day following the date of acceptance at
the following applicable address (unless otherwise
specified in the applicable trading confirmation):_____
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
________________________________________ ; and if to
the Trustee, to The Bank of New York, 101 Barclay
Street, New York, New York 10286, attention of
Corporate Trust Office. Such Agent will cause a
A-5
<PAGE>
Pricing Supplement to be delivered to the purchaser of
the Certificated Note. In all respects, the Company
and the Guarantor will prepare and file each such
Pricing Supplement in accordance with Rule 424 under
the Act.
In each instance that a Pricing Supplement is
prepared, each Agent will affix the Pricing Supplement
to Prospectus Supplements prior to their use. Outdated
Pricing Supplements, and the Prospectus Supplements to
which they are attached (other than those retained for
files), will be destroyed.
Suspension of The Company reserves the right, in its sole discretion,
- ------------- to instruct the Agents to suspend at any time, for any
Solicitation; period of time or permanently, the solicitation of
- ------------- offers to purchase Certificated Notes. As soon as
Amendment or practicable, but in no event later than one Business
- ------------ Day after receipt of instructions from the Company,
Supplement: the Agents will suspend solicitation of offers to
- ---------- purchase Certificated Notes from the Company until
such time as the Company has advised them that such
solicitation may be resumed.
If the Company or the Guarantor decides to amend or
supplement the Registration Statement or the Prospectus
relating to the Notes (except in the case of a Pricing
Supplement to the Prospectus), the Company or the
Guarantor, as the case may be, will promptly advise the
Agents and the Trustee and will furnish the Agents and
the Trustee with the proposed amendment or supplement
in accordance with the terms of the Agency Agreement.
The Company or the Guarantor will mail or transmit to
the Commission for filing therewith any supplement to
the Prospectus relating to the Notes, provide the
Agents with copies of any supplement, and confirm to
the Agents that such supplement has been filed with the
Commission.
In the event that at the time the Company suspends
solicitation of offers
A-6
<PAGE>
to purchase Certificated Notes there shall be any
outstanding offers to purchase Certificated Notes that
have been accepted by the Company but for which
settlement has not yet occurred, the Company will
promptly advise the Agents and the Trustee whether such
sales may be settled and whether copies of the
Prospectus as supplemented to the time of the
suspension may be delivered in connection with the
settlement of such sales. The Company will have the
sole responsibility for such decision and for any
arrangements which may be made in the event that the
Company determines that such sales may not be settled
or that copies of such Prospectus may not be so
delivered.
Delivery of Each Agent shall, for each offer to purchase a
- ----------- Certificated Note that is solicited by such Agent and
Prospectus: accepted by the Company, deliver a copy of the
- ---------- Prospectus as most recently amended or supplemented
with the earlier of the delivery of the confirmation of
sale of the Certificated Note to the purchaser thereof
or such purchaser's agent.
Confirmation: For each offer to purchase a Certificated Note
- ------------ solicited by any Agent and accepted by the Company,
such Agent will issue a confirmation to the purchaser,
with a copy to the Company, setting forth the details
set forth above and delivery and payment instructions.
Settlement: The Settlement Date with respect to any offer to
- ---------- purchase Certificated Notes accepted by or on behalf
of the Company will be a date on or before the fifth
Business Day next succeeding the date of acceptance
unless otherwise agreed by the purchaser and the
Company and shall be specified upon acceptance of such
offer. The Company will instruct the Trustee to effect
delivery of each Certificated Note no later than 1:00
p.m., New York City time, on the Settlement Date to
such Agent for delivery to the purchaser.
A-7
<PAGE>
Details for For each offer to purchase a Certificated Note
- -----------
Settlement: received by any Agent and accepted pursuant to the
- ----------
terms of the Agency Agreement, such Agent will provide
(unless provided by the purchaser directly to the
Company) by telephone the following information (to the
extent applicable) to the Company:
1. Exact name of Holder.
2. Exact address of Holder and address for payment of
principal, premium, if any, and interest.
3. Taxpayer identification number of Holder (if
available).
4. Principal amount of the Note.
5. Specified Currency.
6. Interest rate or interest rate basis.
7. Base Rate(s), Index Maturity, Initial Interest
Rate, Maximum Interest Rate, Minimum Interest
Rate, Interest Reset Dates, Interest Payment
Dates, Calculation Dates, Interest Reset Dates and
Spread and/or Spread Multiplier (as each such term
is defined in the Prospectus).
8. Issue price of Note and proceeds to Company.
9. Settlement Date.
10. Stated Maturity Date.
11. Redemption and/or repayment provisions, if any.
12. Agent's commission to be paid in the form of a
discount upon settlement.
13. Other relevant terms, including any interest
reset and/or extension provisions.
Such Agent will advise the Company of the foregoing
information (unless provided by the purchaser directly
to the Company) for each offer to purchase a
Certificated Note solicited by such Agent and accepted
by the Company in time for the Trustee to prepare and
authenticate the required Certificated Note. Before
accepting any offer to purchase a Certificated Note to
be settled in less than three Business Days, the
Company shall verify that the
A-8
<PAGE>
Trustee will have adequate time to prepare and
authenticate such Certificated Note.
After receiving from such Agent the details for each
offer to purchase a Certificated Note, the Company
will, after recording the details and any necessary
calculations, provide appropriate documentation to the
Trustee, including the information provided by such
Agent necessary for the preparation and authentication
of such Certificated Note. Prior to preparing the
Certificated Note for delivery (but in any case no
later than 11:00 a.m., New York City time, on the
Business Day next preceding the Settlement Date
therefor), the Trustee will confirm the details of such
issue with such Agent by telephone.
Note Deliveries Upon receipt of appropriate documentation and
- --------------- instructions, the Company will cause the Trustee to
and Cash Payment: prepare and authenticate the pre-printed 4-ply
- ---------------- Certificated Note packet containing the following
documents in forms approved by the Company, the Agents
and the Trustee:
1. Certificated Note with customer confirmation.
2. Stub 1--For the applicable Agent.
3. Stub 2--For the Company.
4. Stub 3--For the Trustee.
Each Certificated Note shall be authenticated on or
before the Settlement Date therefor. The Trustee will
authenticate each Certificated Note and deliver it to
such Agent (and deliver the stubs as indicated above),
all in accordance with written instructions (which may
be in the form of facsimile transmission) from the
Company. Delivery by the Trustee of each Certificated
Note will be made against receipt by the Company by
1:00 p.m., New York City time, on the Settlement Date
in immediately available funds of an amount equal to
the issue price of such Certificated Note or the U.S.
dollar equivalent of the issue
A-9
<PAGE>
price of such Note as agreed between the Company and
such Agent, unless otherwise agreed between the Company
and such Agent, less such Agent's commission.
Upon verification by such Agent that a Note has been
prepared and properly authenticated by the Trustee and
registered in the name of the purchaser in the proper
principal amount and that the related Guarantee has
been duly endorsed thereon, payment will be made to the
Company by such Agent the same day in immediately
available funds in the Specified Currency. Such
payment shall be made only upon prior receipt by such
Agent of immediately available funds from or on behalf
of the purchaser in the Specified Currency unless such
Agent decides, at its option, to advance its own funds
for such payment against subsequent receipt of funds
from the purchaser.
Upon delivery of a Certificated Note to such Agent,
such Agent shall promptly deliver such Certificated
Note to the purchaser.
In the event any Certificated Note is incorrectly
prepared, the Trustee shall promptly issue a
replacement Certificated Note in exchange for the
incorrectly prepared Certificated Note.
Failure to Settle: If any Agent, at its own option, has advanced its own
- ----------------- funds for payment against subsequent receipt of funds
from the purchaser, and if the purchaser shall fail to
make payment for the Certificated Note on the
Settlement Date therefor, such Agent will promptly
notify the Trustee and the Company by telephone,
promptly confirmed in writing (but no later than the
next Business Day). In such event, the Company shall
promptly provide the Trustee with appropriate
documentation and instructions consistent with these
procedures for the return of the Certificated Note to
the Trustee and such Agent will promptly return the
Certificated Note to the
A-10
<PAGE>
Trustee. Upon confirmation (i) from the Trustee in
writing (which may be given by telex or telecopy) that
the Trustee has received the Certificated Note and (ii)
from such Agent in writing (which may be given by telex
or telecopy) that such Agent has not received payment
from the purchaser (the matters referred to in clauses
(i) and (ii) are referred to hereinafter as the
"Confirmations"), the Company will promptly pay to such
Agent an amount in immediately available funds equal to
the amount previously paid by such Agent in respect of
such Certificated Note. Assuming receipt of the
Certificated Note by the Trustee and of the
Confirmations by the Company, such payment will be made
on the Settlement Date, if reasonably practicable, and
in any event not later than the Business Day following
the date of receipt of the Certificated Note and
Confirmations. If a purchaser shall fail to make
payment for the Certificated Note for any reason other
than the failure of such Agent to provide the necessary
information to the Company as described above for
settlement or to provide a confirmation to the
purchaser within a reasonable period of time as
described above or otherwise to satisfy its obligation
hereunder or in the Agency Agreement, and if such Agent
shall have otherwise complied with its obligations
hereunder and in the Agency Agreement, the Company will
reimburse such Agent on an equitable basis for its loss
of the use of funds during the period when they were
credited to the account of the Company.
Immediately upon receipt of the Certificated Note in
respect of which the failure occurred, the Trustee will
void said Certificated Note, make appropriate entries
in its records and destroy the Certificated Note; and
upon such action, the Certificated Note will be deemed
not to have been issued, authenticated and delivered.
Trustee Not to Nothing herein shall be deemed to
- --------------
A-11
<PAGE>
Risk Funds: require the Trustee to risk or expend its own funds in
- ---------- connection with any payment to the Company, or any
Agent or the purchaser, it being understood by all
parties that payments made by the Trustee to either the
Company or any Agent shall be made only to the extent
that funds are provided to the Trustee for such
purpose.
Authenticity of The Company will cause the Trustee and the Guarantor to
- --------------- furnish each Agent from time to time with the specimen
Signatures: signatures of the officers, employees or agents who
- ---------- have been authorized to authenticate Certificated
Notes or execute the related Guarantee, as the case may
be, but each Agent will have no obligation or
liability to the Company, the Guarantor or the Trustee
in respect of the authenticity of the signature of any
officer, employee or agent of the Company, the
Guarantor or the Trustee on any Certificated Note.
Payment of Each Agent shall forward to the Company and the
- ---------- Guarantor, from time to time (but not more often than
Expenses: monthly), a statement of the out-of-pocket expenses
- -------- incurred by such Agent during the related period which
are reimbursable to it pursuant to the terms of the
Agency Agreement. The Company and the Guarantor will
promptly remit payment to such Agent.
Advertising The Company will determine with each Agent the amount
- ----------- of advertising that may be appropriate in soliciting
Costs: offers to purchase the Notes. Advertising expenses will
- ----- be paid by the Company and the Guarantor.
A-12
<PAGE>
PART II: ADMINISTRATIVE PROCEDURES FOR BOOK-ENTRY NOTES
In connection with the qualification of Book-Entry Notes for eligibility in
the book-entry system maintained by DTC, the Trustee will perform the custodial,
document control and administrative functions described below, in accordance
with its respective obligations under a Letter of Representations from the
Company, the Guarantor and the Trustee to DTC of even date herewith and a
Medium-Term Note Certificate Agreement between the Trustee and DTC, dated April
14, 1989 and its obligations as a participant in DTC, including DTC's Same-Day
Funds Settlement System ("SDFS").
Issuance: On any date of settlement (as defined under
- -------- "Settlement" below) for one or more Fixed Rate Book-
Entry Notes, the Company will issue a single global
security in fully registered form without coupons (a
"Global Security") representing up to U.S.$200,000,000
principal amount of all of such Notes that have the
same Issue Date, Specified Currency, Interest Rate,
Stated Maturity Date, redemption and/or repayment
provisions and Interest Payment Dates. Similarly, on
any settlement date for one or more Floating Rate Book-
Entry Notes, the Company will issue a single Global
Security representing up to U.S.$200,000,000 principal
amount of all of such Notes that have the same Issue
Date, Specified Currency, Base Rate(s), Index Maturity,
Interest Reset Dates, Spread and/or Spread Multiplier
(if any), Initial Interest Rate, Interest Payment
Dates, Minimum Interest Rate (if any), Maximum Interest
Rate (if any), Stated Maturity Date and redemption
and/or repayment provisions (if any). Each Global
Security will be dated and issued as of the date of its
authentication by the Trustee. Each Global Security
will bear an "Interest Accrual Date", which will be (i)
with respect to an original Global Security (or any
portion thereof), its original issuance date and (ii)
with respect to any Global Security (or portion
thereof) issued subsequently upon exchange of a Global
Security or in lieu of a destroyed, lost or stolen
Global Security, the most recent Interest Payment Date
to which interest has been
A-13
<PAGE>
paid or duly provided for on the predecessor Global
Security or Securities (or if no such payment or
provision has been made, the original issuance date of
the predecessor Global Security), regardless of the
date of authentication of such subsequently issued
Global Security. No Global Security will represent any
Certificated Note.
Price to Public: Each Book-Entry Note will be issued at the percentage
- --------------- of principal amount specified in the Prospectus.
Identification The Company will arrange, on or prior to
- -------------- commencement of a program for the offering of Book-
Numbers: Entry Notes, with the CUSIP Service Bureau of Standard
- ------- & Poor's Corporation (the "CUSIP Service Bureau") for
the reservation of a series of CUSIP numbers (including
tranche numbers), consisting of approximately 900 CUSIP
numbers and relating to Global Securities representing
the Book-Entry Notes. The Trustee has or will obtain
from the CUSIP Service Bureau a written list of such
series of reserved CUSIP numbers and will deliver to
the Company and DTC such written list of 900 CUSIP
numbers of such series. The Company will assign CUSIP
numbers to Global Securities as described below under
Settlement Procedure "B". DTC will notify the CUSIP
Service Bureau periodically of the CUSIP numbers that
the Company has assigned to Global Securities. The
Trustee will notify the Company at any time when fewer
than 100 of the reserved CUSIP numbers remain
unassigned to Global Securities, and if it deems
necessary, the Company will reserve additional CUSIP
numbers for assignment to Global Securities
representing Book-Entry Notes. Upon obtaining such
additional CUSIP numbers, the Trustee shall deliver
such additional CUSIP numbers to the Company and DTC.
Registration: Each Global Security will be registered in the name of
- ------------ CEDE & CO., as nominee for DTC, on the Securities
Register maintained under the Indenture governing
A-14
<PAGE>
such Global Security. The beneficial owner of a Book-
Entry Note (or one or more indirect participants in DTC
designated by such owner) will designate one or more
participants in DTC (with respect to such Note, the
"Participants") to act as agent or agents for such
owner in connection with the book-entry system
maintained by DTC, and DTC will record in book-entry
form, in accordance with instructions provided by such
Participants, a credit balance with respect to such
Note in the account of such Participants. The
ownership interest of such beneficial owner in such
Note will be recorded through the records of such
Participants or through the separate records of such
Participants and one or more indirect participants in
DTC.
Transfers: Transfer of a Book-Entry Note will be accomplished by
- --------- book entries made by DTC and, in turn, by Participants
(and in certain cases, one or more indirect par-
ticipants in DTC) acting on behalf of beneficial
transferors and transferees of such Note.
Consolidation and The Trustee may deliver to DTC and the CUSIP Service
- ----------------- Bureau at any time a written notice of consolidation
Exchange: specifying (i) the CUSIP numbers of two or more
- -------- outstanding Global Securities that represent (A) Fixed
Rate Book-Entry Notes having the same Issue Date,
Specified Currency, Interest Rate, Stated Maturity
Date, redemption and/or repayment provisions (if any)
and Interest Payment Dates and with respect to which
interest has been paid to the same date or (B) Floating
Rate Book-Entry Notes having the same Issue Date,
Specified Currency, Base Rate(s), Index Maturity,
Interest Reset Dates, Spread and/or Spread Multiplier
(if any), Initial Interest Rate, Interest Payment
Dates, Minimum Interest Rate (if any), Maximum Interest
Rate (if any), redemption and/or repayment provisions
(if any) and Stated Maturity Date and with respect to
which interest has been paid to the same date, (ii) a
date,
A-15
<PAGE>
occurring at least thirty days after such written
notice is delivered and at least thirty days before the
next Interest Payment Date for such Book-Entry Notes,
on which such Global Securities shall be exchanged for
a single replacement Global Security and (iii) a new
CUSIP number, obtained from the Company, to be assigned
to such replacement Global Security. Upon receipt of
such a notice, DTC will send to its Participants
(including the Trustee) a written reorganization notice
to the effect that such exchange will occur on such
date. Prior to the specified exchange date, the Trustee
will deliver to the CUSIP Service Bureau a written
notice setting forth such exchange date and the new
CUSIP number and stating that, as of such exchange
date, the CUSIP numbers of the Global Securities to be
exchanged will no longer be valid. On the specified
exchange date, the Trustee will exchange such Global
Securities for a single Global Security bearing the new
CUSIP number and a new Interest Accrual Date, and the
CUSIP numbers of the exchanged Global Securities will,
in accordance with CUSIP Service Bureau procedures, be
cancelled and not immediately reassigned.
Notwithstanding the foregoing, if the Global Securities
to be exchanged exceed U.S.$200,000,000 in aggregate
principal amount, one Global Security will be
authenticated and issued to represent each
U.S.$200,000,000 of principal amount of the exchanged
Global Securities and an additional Global Security
will be authenticated and issued to represent any
remaining principal amount of such Global Securities
(see "Denominations" below).
Maturities: Each Book-Entry Note will mature on a date nine months
- ---------- or more after the settlement date for such Note.
Notice of Redemption The Trustee will notify DTC not more than 60 but not
- -------------------- less than 30 days prior to each redemption date, if
Dates: any, with
- -----
A-16
<PAGE>
respect to a Book-Entry Note, of the CUSIP number of
such Note, the redemption date, the redemption price
and the principal amount of such Book-Entry Note to be
redeemed.
Denominations: Book-Entry Notes will be issued in principal amounts
- ------------- of U.S.$100,000 or any amount in excess thereof that is
an integral multiple of U.S.$1,000. Global Securities
will be denominated in principal amounts not in excess
of U.S.$200,000,000. If one or more Book-Entry Notes
having an aggregate principal amount in excess of
U.S.$200,000,000 would, but for the preceding sentence,
be represented by a single Global Security, then one
Global Security will be issued to represent each
U.S.$200,000,000 principal amount of such Book-Entry
Note or Notes and an additional Global Security will be
issued to represent any remaining principal amount of
such Book-Entry Note or Notes. In such a case, each of
the Global Securities representing such Book-Entry Note
or Notes shall be assigned the same CUSIP number.
Interest: General. Interest on each Book-Entry Note will accrue
- -------- -------
from the Interest Accrual Date of the Global Security
representing such Note. Except as set forth in the
underlying Global Security, each Book Entry Note which
is a Fixed Rate Note will bear interest at the annual
rate stated in such Global Security, payable
semiannually on January 15 and July 15 of each year
(each, an "Interest Payment Date") and on the Maturity
Date, and each Book-Entry Note which is a Floating Rate
Note will bear interest as determined in the manner set
forth in such Global Security, payable on the dates set
forth on such Global Security. Except as set forth in
the underlying Global Security, interest (including
payments for partial periods) on Fixed Rate Notes will
be calculated on the basis of a 360-day year of twelve
30-day months. Except as set forth in the underlying
Global
A-17
<PAGE>
Security, interest on Book-Entry Notes which are
Floating Rate Notes will be determined in the manner
agreed upon by the Company and the purchaser thereof in
accordance with the provisions of the Prospectus.
Except as set forth in the underlying Global Security,
the "Record Date" with respect to any Interest Payment
Date for Book-Entry Notes which are Floating Rate Notes
shall be the date 15 calendar days immediately
preceding such Interest Payment Date, and for Fixed
Rate Notes shall be the December 31 or June 30 next
preceding such Interest Payment Date, whether or not
such date shall be a Business Day. The first payment of
interest on any Book-Entry Note originally issued
between a Record Date and an Interest Payment Date will
be made on the Interest Payment Date following the next
succeeding Record Date to the Holder on such next
succeeding Record Date. Notwithstanding the record date
provisions above, interest payable on the Maturity
Date will be payable to the person to whom principal
shall be payable.
Standard & Poor's Corporation will use the information
received in the pending deposit message described under
Settlement Procedure "C" below in order to include the
amount of any interest payable and certain other
information regarding the related Global Security in
the appropriate weekly bond report published by
Standard & Poor's Corporation.
On the first Business Day of January, April, July and
October of each year, the Trustee will deliver to the
Company and DTC a written list of Record Dates and
Interest Payment Dates that will occur with respect to
Floating Rate Book-Entry Notes during the six-month
period beginning on such first Business Day. Promptly
after each Determination Date (as defined in the
Prospectus) for Floating Rate Notes, the Company will
notify the Trustee, and the Trustee in turn will notify
Standard & Poor's
A-18
<PAGE>
Corporation, of the interest rates determined on such
Interest Determination Date.
Payments of Payments of Interest Only. Promptly after each Record
- ----------- Date, the Trustee will deliver to the Company and
Principal DTC a written notice specifying by CUSIP number the
- --------- the amount of interest to be paid on each Global
and Interest: Security on the following Interest Payment Date (other
- ------------ than an Interest Payment Date coinciding with a
Maturity Date) and the total of such amounts. DTC will
confirm the amount payable on each Global Security on
such Interest Payment Date by reference to the daily
bond reports published by Standard & Poor's
Corporation. The Company will pay to the Trustee, as
paying agent, the total amount of interest due on such
Interest Payment Date (other than on the Maturity
Date), and the Trustee will pay such amount to DTC at
the times and in the manner set forth below under
"Manner of Payment".
Payments at Maturity. On or about the first Business
--------------------
Day of each month, the Trustee will deliver to the
Company and DTC a written list of principal and
interest to be paid on each Global Security with a
Maturity Date in the following month. The Company, the
Trustee and DTC will confirm the amounts of such
principal and interest payments with respect to each
such Global Security on or about the fifth Business Day
preceding the Maturity Date of such Global Security.
The Company will pay to the Trustee, as the paying
agent, the principal amount of such Global Security,
together with interest due on such Maturity Date. The
Trustee will pay such amount to DTC at the time and in
the manner set forth below under "Manner of Payment".
Promptly after payment to DTC of the principal and
interest due on the Maturity Date of such Global
Security, the Trustee will cancel such Global Security
and deliver it to the Company
A-19
<PAGE>
with an appropriate debit advice. On the first Business
Day of each month, the Trustee will prepare a written
statement indicating the total principal amount of
outstanding Global Securities for which it serves as
trustee as of the immediately preceding Business Day.
Manner of Payment. The total amount of any principal and interest due
- ----------------- on Global Securities on any Interest Payment Date or on
the Maturity Date shall be paid by the Company to the
Trustee in funds available for use by the Trustee as of
9:30 A.M. (New York City time) on such date. The
Company will make such payment on such Global
Securities by instructing the Trustee to withdraw funds
from an account maintained by the Company at the
Trustee. For maturity, redemption, repayment or any
other principal payments: prior to 10:00 A.M. (New York
City time) on such date or as soon as possible
thereafter, the Trustee will make such payments to DTC
in same day funds in accordance with DTC's Same Day
Funds Settlement Paying Agent Operating Procedures. For
interest payments: the Trustee will make such payments
to DTC in accordance with existing arrangements between
DTC and the Trustee. DTC will allocate such payments to
its participants in accordance with its existing
operating procedures. Neither the Company (either as
Issuer or as Paying Agent), the Trustee or any Agent
shall have any direct responsibility or liability for
the payment by DTC to such Participants of the
principal of and interest on the Book-Entry Notes.
Withholding Taxes. The amount of any taxes required under applicable law
- ----------------- to be withheld from any interest payment on a Book-
Entry Note will be determined and withheld by the
Participant, indirect participant in DTC or other
Person responsible for forwarding payments and
materials directly to the beneficial owner of such
Note.
A-20
<PAGE>
Procedure for The Company and the Agents will discuss from time to
- ------------- time the aggregate principal amount of, the issuance
Rate Setting price of, and the interest rates to be borne by,
- ------------ Book-Entry Notes that may be sold as a result of the
and Posting: solicitation or offers by the Agents. If the Company
- ----------- decides to establish prices of (including the currency
of issuance), and rates borne by, any Book-Entry Notes
to be sold (the establishment of such prices and rates
to be referred to herein as "posting") or if the
Company decides to change prices or rates previously
posted by it, it will promptly advise the Agents of
the prices and rates to be posted.
Acceptance Unless otherwise agreed between the Company and such
- ---------- Agent, any Agent which receives an offer to purchase
of Offers: Book-Entry Notes will promptly advise the Company of
- --------- each such offer other than offers rejected by such
Agent as provided below. The Company will have the sole
right to accept any such offer to purchase Book-Entry
Notes. The Company may reject any such offer in whole
or in part.
Unless otherwise agreed between the Company and any
Agent, each Agent may, in its discretion reasonably
exercised, reject any offer to purchase Book-Entry
Notes received by it in whole or in part.
Preparation of If any offer to purchase a Book-Entry Note is accepted
- -------------- by or on behalf of the Company, the Company and the
Pricing Guarantor, with the approval of the Agents, will
- ------- prepare a Pricing Supplement reflecting the terms of
Supplement: such Book-Entry Note and will arrange to have requisite
- ---------- copies of such Pricing Supplement filed with the
Commission, in each case no later than the fifth
business day after the date it is first used and will
supply at least ten copies thereof (or additional
copies if requested) to the Agents and one copy to the
Trustee no later than 11:00 A.M., New York City time,
on the Business Day
A-21
<PAGE>
following the date of acceptance at the following
applicable address (unless otherwise specified in the
applicable trading confirmation): _____________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
________________________________________ ; and if to
the Trustee, to The Bank of New York, 101 Barclay
Street, New York, New York 10286, attention of
Corporate Trust Office. Such Agent will cause a Pricing
Supplement to be delivered to the purchaser of the
Book-Entry Note. In all respects, the Company and the
Guarantor will prepare and file each such Pricing
Supplement in accordance with Rule 424 under the Act.
In each instance that a Pricing Supplement is prepared,
each Agent will affix the Pricing Supplement to
Prospectus Supplements prior to their use. Outdated
Pricing Supplements, and the Prospectus Supplements to
which they are attached (other than those retained for
files), will be destroyed.
Suspension of The Company reserves the right, in its sole discretion,
- ------------- to instruct the Agents to suspend at any time, for any
Solicitation; period of time or permanently, the solicitation of
- ------------- offers to purchase Book-Entry Notes. As soon as
Amendment or practicable, but in no event later than one business
- ------------ day after receipt of instructions from the Company, the
Supplement: Agents will suspend solicitation of offers to purchase
- ---------- Book-Entry Notes from the Company until such time as
the Company has advised them that such solicitation may
be resumed.
If the Company or the Guarantor decides to amend or
supplement the Registration Statement or the Prospectus
relating to the Notes (except in the case of a Pricing
Supplement to the Prospectus), the Company or the
Guarantor, as the case may be, will promptly advise the
A-22
<PAGE>
Agents and the Trustee and will furnish the
Agents and the Trustee with the proposed amendment or
supplement in accordance with the terms of the Agency
Agreement. The Company or the Guarantor will mail or
transmit to the Commission for filing therewith any
supplement to the Prospectus relating to the Notes,
provide the Agents with copies of any supplement, and
confirm to the Agents that such supplement has been
filed with the Commission.
In the event that at the time the Company suspends
solicitation of offers to purchase Book-Entry Notes
there shall be any outstanding offers to purchase Book-
Entry Notes that have been accepted by the Company but
for which settlement has not yet occurred, the Company
will promptly advise the Agents and the Trustee whether
such sales may be settled and whether copies of the
Prospectus as supplemented to the time of the
suspension may be delivered in connection with the
settlement of such sales. The Company will have the
sole responsibility for such decision and for any
arrangements which may be made in the event that the
Company determines that such sales may not be settled
or that copies of such Prospectus may not be so
delivered.
Delivery of Each Agent shall, for each offer to purchase a Book-
- ----------- Entry Note that is solicited by such Agent and
Prospectus: accepted by the Company, deliver a copy of the
- ---------- Prospectus as most recently amended or supplemented
with the earlier of the delivery of the confirmation of
sale or the Book-Entry Note to the purchaser thereof or
such purchaser's agent.
Confirmation: Such Agent will confirm the purchase of such Note to
- ------------ the purchaser either by transmitting to the
Participants with respect to such Note a confirmation
order or orders through DTC's institutional delivery
system or by mailing a written confirmation to such
purchaser.
A-23
<PAGE>
Settlement: The receipt by the Company of immediately available
- ---------- funds in payment for a Book-Entry Note and the
authentication and issuance of the Global Security
representing such Note shall constitute "settlement"
with respect to such Note. All orders accepted by the
Company will be settled on the next Business Day
pursuant to the timetable for settlement set forth
below unless the Company and the purchaser agree to
settlement on a later date.
Settlement Settlement Procedures with regard to each Book-Entry
- ---------- Note sold by the Company through an Agent, as agent,
Procedures: shall be as follows:
- ----------
A. Such Agent will advise the Company by telephone of
the following settlement information:
1. Principal amount.
2. Specified Currency.
3. Stated Maturity Date.
4. In the case of a Fixed Rate Book-Entry Note,
the interest rate, or, in the case of a
Floating Rate Book-Entry Note, Base Rate,
Index Maturity, Initial Interest Rate,
Maximum Interest Rate, Minimum Interest
Rate, Interest Reset Dates, Interest Payment
Dates, Calculation Dates, Interest Reset
Dates and Spread and/or Spread Multiplier.
5. Settlement date.
6. Redemption and/or repayment provisions, if
any.
7. Agent's commission, determined as provided
in the Agency Agreement between the Company
and such Agent.
8. The DTC Participant account number of such
Agent.
9. Taxpayer identification number of beneficial
owner (if available).
10. Issue price of Book-Entry Note and proceeds
to the Company.
A-24
<PAGE>
B. The Trustee will assign a CUSIP number to the
Global Security representing such Book-Entry Note
and will then advise the Company of such CUSIP
number. The Company will then advise the Trustee
by electronic transmission (confirmed by
telephone) of the information set forth in
Settlement Procedure "A" above and the name of
such Agent. Each such communication by the Company
shall constitute a representation and warranty by
the Company to the Trustee and each Agent that (i)
such Note is then, and at the time of issuance and
sale thereof will be, duly authorized for issuance
and sale by the Company, (ii) such Note, and the
Global Security representing such Note, will
conform with the terms of the Indenture pursuant
to which such Note and Global Security
are issued and (iii) upon authentication and
delivery of such Global Security, the aggregate
initial offering price of all Notes issued under
the Indenture will not exceed $___________ (except
for Book-Entry Notes represented by Global
Securities authenticated and delivered in exchange
for or in lieu of Global Securities pursuant to
the Indenture and except for Certificated Notes
authenticated and delivered upon registration of
transfer of, in exchange for, or in lieu of
Certificated Notes pursuant to the Indenture).
C. The Trustee will enter a pending deposit message
through DTC's Participant Terminal System,
providing the following settlement information to
DTC, such Agent, Standard & Poor's Corporation
and, upon request, the Trustee under the Indenture
pursuant to which such Note is to be issued:
1. The information set forth in Settlement
Procedure "A".
A-25
<PAGE>
2. Identification as a Fixed Rate Book-Entry
Note or a Floating Rate Book-Entry Note.
3. Initial Interest Payment Date for such Note
and amount of interest payable on such
Interest Payment Date.
4. Frequency of interest payments (monthly,
semiannually, quarterly, etc.).
5. CUSIP number of Global Security representing
such Note.
6. Whether such Global Security will represent
any other Book-Entry Note (to the extent
known at such time).
D. The Trustee will complete the Global Security, the
form of which was previously approved by the
Company, the Agents and the Trustee.
E. The Trustee, as Trustee, will authenticate the
Global Security representing such Note.
F. DTC will credit such Note to the Trustee's
participant account at DTC.
G. The Trustee will enter an SDFS deliver order
through DTC's Participant Terminal System
instructing DTC to (i) debit such Note to the
Trustee's participant account and credit such Note
to such Agent's participant account and (ii) debit
such Agent's settlement account and credit the
Trustee's settlement account for an amount equal
to the price of such Note less such Agent's
commission. The entry of such a deliver order
shall constitute a representation and warranty by
the Trustee to DTC that (i) the Global Security
representing such Book-Entry Note has been issued
and authenticated and (ii) the Trustee is holding
A-26
<PAGE>
such Global Security pursuant to the Certificate
Agreement.
H. Such Agent will enter an SDFS deliver order
through DTC's Participant Terminal System
instructing DTC (i) to debit such Note to such
Agent's participant account and credit such Note
to the participant accounts of the Participants
with respect to such Note and (ii) to debit the
settlement accounts of such Participants and
credit the settlement account of such Agent for an
amount equal to the price of such Note.
I. Transfers of funds in accordance with SDFS deliver
orders described in Settlement Procedures "G" and
"H" will be settled in accordance with SDFS
operating procedures in effect on the settlement
date.
J. The Trustee will credit to an account of the
Company maintained at the Trustee funds available
for immediate use in the amount transferred to the
Trustee in accordance with Settlement Procedure
"G".
K. The Trustee will hold the Global Security pursuant
to the Certificate Agreement and will send a
photocopy of such Global Security to the Company
by first-class mail. Upon written request the
Trustee will deliver a photocopy of such Global
Security to such Agent. Periodically, the Trustee
will send to the Company a statement setting forth
the principal amount of Notes Outstanding as of
that date and setting forth a brief description of
any sales of which the Company has advised the
Trustee but which have not yet been settled.
L. As set forth in "Delivery of Prospectus" above,
such Agent will
A-27
<PAGE>
deliver to the purchaser a copy of the most recent
Prospectus applicable to the Book-Entry Note with
or prior to any written offer of Book-Entry Notes
and the confirmation and payment by the purchaser
of such Note.
Such Agent will confirm the purchase of such Note to
the purchaser either by transmitting to the
Participants with respect to such Note a confirmation
order or orders through DTC's institutional delivery
system or by mailing a written confirmation to such
purchaser.
Settlement For offers to purchase Book-Entry Notes solicited by
- ----------
Procedures an Agent, as agent, and accepted by the Company
- ----------
Timetable: for settlement on the first Business Day after the
- ---------
sale date, Settlement Procedures "A" through "L" set
forth above shall be completed as soon as possible but
not later than the respective times (New York City
time) set forth below:
<TABLE>
<CAPTION>
Settlement
Procedure Time
--------- ----
<S> <C>
A-B 11:00 A.M. on the sale date
C 2:00 P.M. on the sale date
D 3:00 P.M. on day before settlement
date
E 9:00 A.M. on settlement date
F 10:00 A.M. on settlement date
G-H 2:00 P.M. on settlement date
I 4:45 P.M. on settlement date
J-L 5:00 P.M. on settlement date
</TABLE>
If a sale is to be settled more than one Business Day
after the sale date, Settlement Procedures "A", "B" and
"C" shall be completed as soon as
A-28
<PAGE>
practicable but no later than 11:00 A.M. and 2:00 P.M.,
as the case may be, on the first Business Day after the
sale date. If the initial interest rate for a Floating
Rate Book-Entry Note has not been determined at the
time that Settlement Procedure "A" is completed,
Settlement Procedures "B" and "C" shall be completed as
soon as such rate has been determined but no later than
11:00 A.M. and 12:00 Noon, respectively, on the second
Business Day before the settlement date. Settlement
Procedure "I" is subject to extension in accordance
with any extension of Fedwire closing deadlines and in
the other events specified in the SDFS operating
procedures in effect on the settlement date.
Failure to Settle: If the Trustee fails to enter an SDFS deliver order
- -----------------
with respect to a Book-Entry Note pursuant to
Settlement Procedure "G", the Trustee may deliver to
DTC, through DTC's Participant Terminal System, as soon
as practicable a withdrawal message instructing DTC to
debit such Note to the Trustee's participant account.
DTC will process the withdrawal message, provided that
the Trustee's participant account contains a principal
amount of the Global Security representing such Note
that is at least equal to the principal amount to be
debited. If a withdrawal message is processed with
respect to all the Book-Entry Notes represented by a
Global Security, the Trustee will mark such Global
Security "canceled", make appropriate entries in the
Trustee's records and send such canceled Global
Security to the Company. The CUSIP number assigned to
such Global Security shall, in accordance with CUSIP
Service Bureau procedures, be canceled and not
immediately reassigned. If a withdrawal message is
processed with respect to one or more, but not all, of
the Book-Entry Notes represented by a Global Security,
the Trustee will exchange such Global Security for two
Global Securities, one of which shall represent such
Book-Entry
A-29
<PAGE>
Note or Notes and shall be canceled immediately after
issuance and other Book-Entry Notes previously
represented by the surrendered Global Security and
shall bear the CUSIP number of the surrendered Global
Security.
If the purchase price for any Book-Entry Note is not
timely paid to the Participants with respect to such
Note by the beneficial purchaser thereof (or a Person,
including an indirect participant in DTC, acting on
behalf of such purchaser), such Participants and, in
turn, the Agent for such Note may enter SDFS deliver
orders through DTC's Participant Terminal System
reversing the orders entered pursuant to Settlement
Procedures "H" and "G", respectively. Thereafter, the
Trustee will deliver the withdrawal message and take
the related actions described in the preceding
paragraph.
Notwithstanding the foregoing, upon any failure to
settle with respect to a Book-Entry Note, DTC may take
any actions in accordance with its SDFS operating
procedures then in effect. In the event of a failure to
settle with respect to one or more, but not all, of the
Book-Entry Notes to have been represented by a Global
Security, the Trustee will provide, in accordance with
Settlement Procedures "D" and "E", for the
authentication and issuance of a Global Security
representing the other Book-Entry Notes to have been
represented by such Global Security and will make
appropriate entries in its records.
Trustee Not to Nothing herein shall be deemed to require the Trustee
- --------------
Risk Funds: to risk or expend its own funds in connection with
- ----------
any payment to the Company, or any Agent or the
purchaser, it being understood by all parties that
payments made by the Trustee to either the Company or
any Agent shall be made only to the extent that funds
are provided to the Trustee for such purpose.
A-30
<PAGE>
Authenticity of The Company will cause the Trustee and the Guarantor to
- ---------------
Signatures: furnish each Agent from time to time with the specimen
- ----------
signatures of the officers, employees or agents who
have been authorized to authenticate Notes or execute
the related Guarantee, but each Agent will have no
obligation or liability to the Company, the Guarantor
or the Trustee in respect of the authenticity of the
signature of any officer, employee or agent of the
Company, the Guarantor or the Trustee on any Note.
Payment of Each Agent shall forward to the Company and the
- ----------
Expenses: Guarantor, from time to time (but not more often than
- --------
monthly), a statement of the out-of-pocket expenses
incurred by such Agent during the related period which
are reimbursable to it pursuant to the terms of the
Agency Agreement. The Company and the Guarantor will
promptly remit payment to such Agent.
Advertising The Company will determine with each Agent the amount
- -----------
Costs: of advertising that maybe appropriate in soliciting
- -----
offers to purchase the Notes. Advertising expenses will
be paid by the Company and the Guarantor.
A-31
<PAGE>
EXHIBIT B
Countrywide Funding Corporation
Medium-Term Notes, Series __
Due Nine Months or More From Date of Issue
TERMS AGREEMENT
_________________, 19__
Countrywide Funding Corporation
155 North Lake Avenue
Pasadena, California 91101
Attention: Corporate Counsel
Subject in all respects to the terms and conditions of the Selling Agency
Agreement dated _________, 1995 among ______________ (including its affiliate
________________), ______________, ______________, and ____________________, and
you (the "Agreement"), the undersigned agrees to purchase the following Medium-
Term Notes, Series __ (the "Notes"), of Countrywide Funding Corporation:
Aggregate Principal Amount:
Currency or Currency Unit:
Interest Rate or Base Rate(s):
Spread:
Spread Multiplier:
Stated Maturity Date:
Interest Payment Dates:
Record Dates:
Purchase Price: % of Principal Amount [plus accrued interest, if any,
from _______________, 19 __]
Purchase Date and Time:
B-1
<PAGE>
Certificated or Book-Entry Form:
Place for Delivery of Notes
and Payment Therefor:
Method of Payment:
Modification, if any, in
the requirements to
deliver the documents
specified in Section 6(b)
of the Agreement:
Period during which additional
Notes may not be sold pursuant to
Section 4(l) of the Agreement:
Default provisions, if any:
Other terms:
____________________________________
By:________________________________]
____________________________________
By:________________________________]
____________________________________
By:________________________________]
Accepted:
COUNTRYWIDE FUNDING CORPORATION
By:______________________________
Title:
B-2
<PAGE>
EXHIBIT 4.7
_________________________________________________________________
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Issuer
TO
THE BANK OF NEW YORK
Trustee
__________________
INDENTURE
Dated as of June 15, 1995
__________________
Debt Securities
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TABLE OF CONTENTS
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PARTIES ................................................................. 1
RECITALS ................................................................ 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions......................................... 2
Act........................................................... 2
Affiliate..................................................... 2
Board of Directors............................................ 2
Board Resolution.............................................. 3
Business Day.................................................. 3
Commission.................................................... 3
Company....................................................... 3
Company Request............................................... 3
Components.................................................... 3
Conversion Date............................................... 4
Corporate Trust Office........................................ 4
corporation................................................... 4
Debt Securities............................................... 4
Defaulted Interest............................................ 4
Discharged.................................................... 4
Dollar........................................................ 4
ECU........................................................... 4
European Communities.......................................... 4
Event of Default.............................................. 4
Exchange Rate................................................. 4
Exchange Rate Agent........................................... 5
Exchange Rate Officers' Certificate........................... 5
Foreign Currency.............................................. 6
Holder........................................................ 6
Indenture..................................................... 6
Interest Payment Date......................................... 6
Maturity...................................................... 6
Officers' Certificate......................................... 6
Opinion of Counsel............................................ 6
Original Issue Discount Security.............................. 6
Outstanding................................................... 7
Paying Agent.................................................. 8
Person........................................................ 8
Place of Payment.............................................. 8
Predecessor Security.......................................... 8
Redemption Date............................................... 8
Redemption Price.............................................. 8
Regular Record Date........................................... 8
Repayment Date................................................ 8
Repayment Price............................................... 8
Required Currency............................................. 8
Responsible Officer........................................... 9
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Security Register" and "Security Registrar.................. 9
Special Record Date......................................... 9
Stated Maturity............................................. 9
Stated Principal Maturity................................... 9
Subsidiary.................................................. 9
Trustee..................................................... 9
Trust Indenture Act......................................... 10
U.S. Government Obligations................................. 10
Voting Stock 10
SECTION 102. Compliance Certificates and Opinions.............. 10
SECTION 103. Form of Documents Delivered to Trustee............ 11
SECTION 104. Acts of Holders................................... 11
SECTION 105. Notices, etc., to Trustee and the
Company........................................... 12
SECTION 106. Notice to Holders; Waiver......................... 13
SECTION 107. Conflict with Trust Indenture Act................. 13
SECTION 108. Effect of Headings and Table of
Contents.......................................... 13
SECTION 109. Successors and Assigns............................ 14
SECTION 110. Separability Clause............................... 14
SECTION 111. Benefits of Indenture............................. 14
SECTION 112. Governing Law..................................... 14
SECTION 113. Legal Holidays.................................... 14
SECTION 114. Moneys of Different Currencies to be
Segregated........................................ 14
SECTION 115. Payment to Be in Proper Currency.................. 15
ARTICLE TWO
FORMS OF DEBT SECURITIES
SECTION 201. Forms Generally................................... 16
SECTION 202. Forms of Debt Securities.......................... 16
SECTION 203. Form of Trustee's Certificate of
Authentication.................................... 16
ARTICLE THREE
THE DEBT SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.............. 18
SECTION 302. Denominations..................................... 20
SECTION 303. Execution, Authentication, Delivery and
Dating............................................ 21
SECTION 304. Temporary Debt Securities......................... 23
SECTION 305. Registration, Registration of Transfer
and Exchange...................................... 24
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Debt Securities................................... 26
SECTION 307. Payment of Interest; Interest Rights
Preserved......................................... 27
SECTION 308. Persons Deemed Owners............................. 30
SECTION 309. Cancellation...................................... 30
SECTION 310. Computation of Interest........................... 31
SECTION 311. Payment in Currencies............................. 31
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SECTION 312. Optional Extension of Stated Principal
Maturity.......................................... 34
ARTICLE FOUR
[RESERVED]
ARTICLE FIVE
SATISFACTION AND DISCHARGE
SECTION 501. Satisfaction and Discharge of Indenture........... 37
SECTION 502. Application of Trust Money........................ 38
ARTICLE SIX
REMEDIES
SECTION 601. Events of Default................................. 39
SECTION 602. Acceleration of Maturity; Rescission and
Annulment......................................... 40
SECTION 603. Collection of Indebtedness and Suits for
Enforcement by Trustee............................ 41
SECTION 604. Trustee May File Proofs of Claim.................. 42
SECTION 605. Trustee May Enforce Claims without
Possession of Debt Securities..................... 43
SECTION 606. Application of Money Collected.................... 43
SECTION 607. Limitation on Suits............................... 44
SECTION 608. Unconditional Right of Holders to
Receive Principal, Premium (if any) and
Interest.......................................... 45
SECTION 609. Restoration of Rights and Remedies................ 45
SECTION 610. Rights and Remedies Cumulative.................... 45
SECTION 611. Delay or Omission Not Waiver...................... 45
SECTION 612. Control by Holders................................ 46
SECTION 613. Waiver of Past Defaults........................... 46
SECTION 615. Waiver of Stay or Extension Laws.................. 47
ARTICLE SEVEN
THE TRUSTEE
SECTION 701. Certain Duties and Responsibilities............... 48
SECTION 702. Notice of Defaults................................ 49
SECTION 703. Certain Rights of Trustee......................... 49
SECTION 704. Not Responsible for Recitals
or Issuance of Debt Securities.................... 51
SECTION 705. May Hold Debt Securities.......................... 51
SECTION 706. Money Held in Trust............................... 51
SECTION 707. Compensation and Reimbursement.................... 51
SECTION 708. Corporate Trustee Required; Eligibility........... 52
SECTION 709. Resignation and Removal; Appointment of
Successor......................................... 52
SECTION 710. Acceptance of Appointment by Successor............ 55
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SECTION 711. Merger, Conversion, Consolidation or
Succession to Business............................ 56
ARTICLE EIGHT
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND THE COMPANY
SECTION 801. Company and Guarantor to Furnish
Trustee Names and Addresses of Holders............ 57
SECTION 802. Preservation of Information;
Communications to Holders......................... 57
SECTION 803. Reports by Trustee................................ 57
SECTION 804. Reports by Company................................ 58
ARTICLE NINE
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 901. Company May Consolidate, etc., Only on
Certain Terms..................................... 60
SECTION 902. Successor Corporation Substituted................. 60
SECTION 903. [RESERVED]........................................ 60
SECTION 904. [RESERVED]........................................ 61
SECTION 905. [RESERVED]........................................ 61
ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 1001. Supplemental Indentures without Consent
of Holders........................................ 62
SECTION 1002. Supplemental Indentures with Consent of
Holders........................................... 63
SECTION 1003. Execution of Supplemental Indentures.............. 64
SECTION 1004. Effect of Supplemental Indentures................. 64
SECTION 1005. Notice to Holders................................. 65
SECTION 1006. Conformity with Trust Indenture Act............... 65
SECTION 1007. Reference in Debt Securities to
Supplemental Indentures........................... 65
ARTICLE ELEVEN
COVENANTS
SECTION 1101. Payment of Principal, Premium and
Interest.......................................... 66
SECTION 1102. Maintenance of Office or Agency................... 66
SECTION 1103. Money for Debt Securities Payments to Be
Held in Trust..................................... 67
SECTION 1104. Investment Company Act............................ 68
SECTION 1105. Officers' Certificate as to Default............... 68
ARTICLE TWELVE
REDEMPTION OF DEBT SECURITIES
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SECTION 1201. Applicability of Article.......................... 69
SECTION 1202. Election to Redeem, Notice to Trustee............. 69
SECTION 1203. Selection by Trustee of Debt Securities
to Be Redeemed.................................... 69
SECTION 1206. Debt Securities Payable on Redemption
Date.............................................. 71
SECTION 1207. Debt Securities Redeemed in Part.................. 71
ARTICLE THIRTEEN
SINKING FUNDS
SECTION 1301. Applicability of Article.......................... 73
Section 1302. Satisfaction of Sinking Fund Payments
with Debt Securities.............................. 73
SECTION 1303. Redemption of Debt Securities for
Sinking Fund...................................... 73
ARTICLE FOURTEEN
DEFEASANCE
SECTION 1401. Applicability of Article.......................... 75
SECTION 1402. Defeasance Upon Deposit of Moneys or
U.S. Government Obligations....................... 75
SECTION 1403. Deposited Moneys and U.S. Government
Obligations to be Held in Trust................... 77
SECTION 1404. Repayment to Company.............................. 77
ARTICLE FIFTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1501. Applicability of Article.......................... 78
SECTION 1502. Repayment of Debt Securities...................... 78
SECTION 1503. Exercise of Option................................ 78
SECTION 1504. When Debt Securities Surrendered for
Repayment Become Due and Payable.................. 79
SECTION 1505. Debt Securities Repaid in Part.................... 79
EXHIBIT A
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INDENTURE dated as of __________, 1995, between COUNTRYWIDE CREDIT
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"),
having its principal office at 155 North Lake Avenue, Pasadena, California 91101
and THE BANK OF NEW YORK, a New York corporation (hereinafter called the
"Trustee"), having its Corporate Trust Office at 101 Barclay Street, New York,
New York 10286.
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its debentures,
notes, bonds or other evidences of indebtedness (herein called the "Debt
Securities"), to be issued in one or more series as in this Indenture provided.
All things necessary have been done to make this Indenture a valid
agreement of the Company, in accordance with its terms.
This Indenture is subject to the provisions of the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder that are required to be part of this Indenture
and, to the extent applicable, shall be governed by such provisions.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Debt
Securities by the Holders thereof, it is covenanted and agreed, for the equal
and proportionate benefit of all Holders of the Debt Securities or of series
thereof, as follows:
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ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
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For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such principles as are generally
accepted at the date of such computation; and
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Seven, are defined in that
Article.
"Act" when used with respect to any Holder has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Board of Directors" means the board of directors of the Company, or
the executive or any other committee of such board duly authorized to act in
respect hereof.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the
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Company, to have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day", when with respect to any Place of Payment, unless
otherwise specified in a Board Resolution, and an Officers' Certificate, or in a
supplemental indenture, means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in an applicable Place of
Payment or the city in which the Trustee's Corporate Trust Office is located or
in New York, New York or Los Angeles, California are authorized or obligated by
law, executive order or regulation to remain closed.
For purposes of Section 311(b)(4) of the Trust Indenture Act, the term
"cash transaction" means any transaction in which full payment for goods or
securities sold is made within seven days after delivery of the goods or
securities in currency or in checks or other orders drawn upon the banks or
bankers and payable upon demand.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or
if at any time after the execution of this instrument such commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" and "Company Order" mean, respectively, a written
request or order signed in the name of the Company by the Chairman of the Board,
the President or a Vice President, and by the Treasurer, an Assistant Treasurer,
the Controller, an Assistant Controller, the Secretary or an Assistant Secretary
of the Company and delivered to the Trustee.
"Components", with respect to a composite currency (including but not
limited to the ECU), means the currency amounts that are components of such
composite currency on the Conversion Date with respect to such composite
currency. If the official unit of any component currency is altered by way of
combination or subdivision, the amount of such currency in the Component shall
be proportionately divided or multiplied. If two or more component currencies
are consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the amounts of such consolidated component currencies expressed in such
single currency, and such amount shall thereafter be a Component. If after such
Conversion Date any component currency shall be divided into two or more
currencies, the amount of such
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currency as a Component shall be replaced by amounts of such two or more
currencies, each of which shall be equal to the amount of such former component
currency divided by the number of currencies into which such component currency
was divided, and such amounts shall thereafter be Components.
"Conversion Date", with respect to a composite currency (including but
not limited to the ECU), has the meaning specified in Section 311.
"Corporate Trust Office" means the corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which office at the date of execution of this
instrument is located at 101 Barclay Street, New York, New York 10286.
The term "corporation" includes corporations, associations, companies
and business trusts.
"Debt Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Debt Securities authenticated and
delivered under this Indenture.
"Defaulted Interest" has the meaning specified in Section 307.
"Discharged" has the meaning specified in Section 1402.
"Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public and
private debts.
"ECU" means the European Currency Unit as defined and revised from
time to time by the Council of the European Communities.
"European Communities" means the European Economic Community, the
European Coal and Steel Community and the European Atomic Energy Community.
"Event of Default" has the meaning specified in Section 601.
"Exchange Rate" means, unless otherwise specified in accordance with
Section 301, (a) with respect to Dollars in which payment is to be made on a
series of Debt Securities denominated in a composite currency, the exchange rate
between Dollars and such composite currency reported by the agency or
organization, if any, designated pursuant to Section 301(11) or by the Council
of the European Communities (in the case of ECU, whose reports are currently
based on the rates in effect at 2:30 P.M., Brussels time, on the relevant
exchange markets), as appropriate, on the applicable Regular or Special Record
Date with respect to an Interest Payment Date or the fifteenth day immediately
preceding the Maturity of an installment of principal, or on such other
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date provided herein, as the case may be; (b) with respect to Dollars in which
payment is to be made on a series of Debt Securities denominated in a Foreign
Currency, the noon Dollar buying rate for that currency for cable transfers
quoted by the Exchange Rate Agent in The City of New York on the Regular or
Special Record Date with respect to an Interest Payment Date or the fifteenth
day immediately preceding the Maturity of an installment of principal, or on
such other date provided herein, as the case may be, as certified for customs
purposes by the Federal Reserve Bank of New York and (c) with respect to Foreign
Currency in which payment is to be made on a series of Debt Securities converted
into Dollars pursuant to Section 311(d), the noon Dollar selling rate for that
currency for cable transfers quoted by the Exchange Rate Agent in The City of
New York on the second Business Day preceding an Interest Payment Date or the
second Business Day preceding the Maturity of an installment of principal, or on
such other date provided herein, as the case may be, as certified for customs
purposes by the Federal Reserve Bank of New York. If for any reason such rates
are not available with respect to one or more currencies for which an Exchange
Rate is required, the Company shall use such quotation of the Federal Reserve
Bank of New York as of the most recent available date, or quotations from one or
more commercial banks in The City of New York or in the country of issue of the
currency in question, or such other quotations as the Company, in each case,
shall deem appropriate. If there is more than one market for dealing in any
currency by reason of foreign exchange regulations or otherwise, the market to
be used in respect of such currency shall be the largest market upon which a
nonresident issuer of securities designated in such currency would purchase such
currency in order to make payments in respect of such securities.
"Exchange Rate Agent" means the New York clearing house bank
designated pursuant to Section 301, or any successor thereto.
"Exchange Rate Officer's Certificate", with respect to any date for
the payment of principal of (and premium, if any) and interest on any series of
Debt Securities, means a certificate setting forth the applicable Exchange Rate
as of the Regular or Special Record Date with respect to an Interest Payment
Date or the fifteenth day immediately preceding the maturity of an installment
of principal, as the case may be, and the amounts payable in Dollars in respect
of the principal of (and premium, if any) and interest on Debt Securities
denominated in ECU or any other Foreign Currency, and signed by the Chairman of
the Board, the President, any Vice President, any Assistant Vice President, the
Treasurer, any Assistant Treasurer, the Controller or any Assistant Controller
of the Company and delivered to the Trustee.
"Foreign Currency" means any currency, currency unit or composite
currency, including, without limitation, the ECU and any other composite
currency, issued by the government of one or
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more countries other than the United States of America or by any recognized
confederation or association of such governments.
"Holder" means a Person in whose name a Debt Security is registered in
the Security Register.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and, unless the context otherwise requires, shall include the terms of a
particular series of Debt Securities established as contemplated by Section 301.
The term "interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after Maturity, means
interest payable after Maturity.
"Interest Payment Date", with respect to any Debt Security, means the
Stated Maturity of an installment of interest on such Debt Security.
"Maturity", when used with respect to any Debt Security, means the
date on which the principal of such Debt Security becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, notice of redemption, notice of option to elect repayment or
otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President, any Managing Director, any Vice President, the
Treasurer, an Assistant Treasurer, the Controller, an Assistant Controller, the
Secretary or an Assistant Secretary of the Company that complies with the
requirements of Section 314(e) of the Trust Indenture Act and is delivered to
the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of, or counsel to, the Company and who shall be reasonably satisfactory
to the Trustee, which is delivered to the Trustee.
"Original Issue Discount Security" means, except as otherwise defined
in a Debt Security, any Debt Security which is issued with original issue
discount within the meaning of Section 1273(a) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
"Outstanding", when used with respect to Debt Securities, means, as of
the date of determination, all Debt Securities theretofore authenticated and
delivered under this Indenture, except:
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(i) Debt Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(ii) Debt Securities for whose payment, redemption or repayment
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Debt Securities; provided, however,
that if such Debt Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture and such Debt Securities or
provision therefor satisfactory to the Trustee has been made; and
(iii) Debt Securities which have been paid pursuant to Section
306 or in exchange for or in lieu of which other Debt Securities have been
authenticated and delivered pursuant to this Indenture, other than any such
Debt Securities in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Debt Securities are held by a
bona fide purchaser in whose hands such Debt Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
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principal amount of Debt Securities Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Debt Securities
owned by the Company or any other obligor upon the Debt Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon such request, demand, authorization,
direction, notice, consent or waiver, only Debt Securities which the Trustee
knows to be so owned shall be so disregarded. Debt Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Debt Securities and that the pledgee is not the Company or
any other obligor upon the Debt Securities or any Affiliate of the Company or of
such other obligor. The Trustee shall not be deemed to know that any Debt
Securities are so owned unless it has received written notice of such fact at
its Corporate Trust Office or unless one of its Responsible Officers has actual
knowledge thereof.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Debt Securities on behalf
of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
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"Place of Payment", when used with respect to the Debt Securities of
any series, unless otherwise specified in a Board Resolution, and an Officers'
Certificate, or in a supplemental indenture, means the office or agency of the
Company in the Borough of Manhattan, The City and State of New York, and such
other place or places, if any, where the principal of (and premium, if any) and
interest on the Debt Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Debt Security means every
previous Debt Security evidencing all or a portion of the same debt as that
evidenced by such particular Debt Security; and, for the purposes of this
definition, any Debt Security authenticated and delivered under Section 306 in
lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence
the same debt as the lost, destroyed or stolen Debt Security.
"Redemption Date", when used with respect to any Debt Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Debt Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Debt Securities of any series means the date specified for that
purpose as contemplated by Section 301.
"Repayment Date" means, when used with respect to any Debt Security to
be repaid at the option of the Holder, the date fixed for such repayment by or
pursuant to this Indenture.
"Repayment Price" means, when used with respect to any Debt Security
to be repaid at the option of the Holder, the price at which it is to be repaid
by or pursuant to this Indenture.
"Required Currency" means the currency in which the Debt Securities of
any series are payable, in accordance with their terms or pursuant to an
election made by one or more Holders pursuant to Section 301 hereof. If,
however, the Required Currency is unavailable for the reasons stated in Section
311(d)(i) or (ii), the Required Currency shall mean U.S. Dollars.
"Responsible Officer", when used with respect to the Trustee, means
any officer of the Trustee assigned to its corporate trust department or similar
group and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
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For purposes of Section 311(b)(6) of the Trust Indenture Act, the term
"self-liquidating paper" means any draft, bill of exchanges, acceptance or
obligation which is made, drawn, negotiated or incurred by the Company or any
other obligor upon the Debt Securities for the purpose of financing the
purchase, processing, manufacture, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to, possession of
or a lien upon, the goods, wares or merchandise or the receivables or proceeds
arising from the sale of the goods, wares or merchandise previously constituting
the security, provided the security is received by the Trustee simultaneously
with the creation of the creditor relationship with such Person arising from the
making, drawing, negotiation or incurring of the draft, bill of exchange,
acceptance or obligation.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Debt Security or any
installment of principal thereof or interest thereon, means the date specified
in such Debt Security as the fixed date on which the principal of such Debt
Security or such installment of principal or interest is due and payable.
"Stated Principal Maturity" means the Stated Maturity for the payment
of principal, or any installment of principal, of any Debt Security.
"Subsidiary" means any corporation at least a majority of the
outstanding Voting Stock of which shall at the time directly or indirectly be
owned or controlled by the Company or one or more Subsidiaries.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Debt Securities of any series shall mean the Trustee with respect
to Debt Securities of that series.
"Trust Indenture Act" means the Trust Indenture Act of 1939 and any
reference herein to such Act or a particular provision thereof shall mean such
Act or provision, as the case may be, as amended or replaced from time to time
or as supplemented from time to time by rules or regulations adopted by the
Commission under or in furtherance of the purposes of such Act or provision, as
the case may be.
"U.S. Government Obligations" has the meaning specified in Section
1402.
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"Voting Stock", as applied to the stock of any corporation, means
stock of any class or classes, however designated, having ordinary voting power
for the election of a majority of the directors of such corporation, other than
stock having such power only by reason of the happening of a contingency.
SECTION 102. Compliance Certificates and Opinions.
------------------------------------
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee an Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
--------------------------------------
In any case where several matters are required to be certified by or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such
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Person may certify or give an opinion as to such matters in one or several
documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based is
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
---------------
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 315 of the Trust Indenture Act) conclusive in
favor of the Trustee and the Company, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership, principal amount and serial numbers of Debt
Securities held by any Person, and the date of the commencement and the date of
the termination of holding the same, shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Debt Security shall bind every future
holder of the same Debt Security
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and the Holder of any Debt Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
suffered or omitted by the Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Debt Security.
(e) For purposes of determining the aggregate principal amount of
Outstanding Debt Securities of any series the Holders of which are required,
requested or permitted to give any request, demand, authorization, direction,
notice, consent, waiver or take any other Act under this Indenture, each Debt
Security denominated in a Foreign Currency shall be deemed to have a principal
amount determined by an Exchange Rate Agent (as evidenced by a certificate of
such Exchange Rate Agent) by converting the principal amount of such Debt
Security in the Foreign Currency in which such Debt Security is denominated into
Dollars at the Exchange Rate as of 9:00 A.M., New York time, on the date such
Act is delivered to the Trustee and, where it is hereby expressly required, to
the Company (or, if there is no such rate on such date for the reasons specified
in Section 311(d)(i) of the Indenture, such rate on the date specified in such
Section).
SECTION 105. Notices, etc., to Trustee and the Company.
-----------------------------------------
Except as provided in Sections 601(4) and (5), any request, demand,
authorization, direction, notice, consent, waiver or other Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company, Attention: Chairman of
the Board of Directors, 155 North Lake Avenue, Pasadena, California 91101.
SECTION 106. Notice to Holders; Waiver.
-------------------------
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date and not earlier than the earliest
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date, prescribed for the giving of such notice. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
In the event of suspension of regular mail service or for any other
reason it shall be impracticable to give such notice by mail, then such a
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
---------------------------------
If any provision hereof limits, qualifies or conflicts with any duties
under any required provision of the Trust Indenture Act imposed hereon by
Section 318(c) thereof, such required provision shall control.
SECTION 108. Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Company shall
bind their respective successors and assigns, whether or not so expressed.
SECTION 110. Separability Clause.
-------------------
In case any provision in this Indenture or in the Debt Securities
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 111. Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Debt Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any Paying Agent and the Holders, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
-------------
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This Indenture and the Debt Securities shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in said state.
SECTION 113. Legal Holidays.
--------------
Unless otherwise specifically provided for in the applicable Debt
Securities, in any case where any Interest Payment Date, Redemption Date,
Repayment Date, sinking fund payment date, Stated Maturity, Stated Principal
Maturity or Maturity of any Debt Security shall not be a Business Day at any
Place of Payment, then the required payment of principal, premium, if any,
and/or interest need not be made at such Place of Payment on such date, but may
be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date, Redemption Date,
Repayment Date, sinking fund payment date, Stated Maturity, Stated Principal
Maturity or Maturity, and no interest shall accrue on such payment for the
period from and after such Interest Payment Date, Repayment Date, Redemption
Date, sinking fund payment date, Stated Maturity, Stated Principal Maturity or
Maturity, as the case may be, to the next succeeding Business Day.
SECTION 114. Moneys of Different Currencies to be Segregated.
-----------------------------------------------
The Trustee shall segregate all moneys, funds and accounts held by the
Trustee hereunder in one currency from any moneys, funds or accounts in any
other currencies, notwithstanding any provision herein which would otherwise
permit the Trustee to commingle such amounts.
SECTION 115. Payment to Be in Proper Currency.
--------------------------------
Each reference in any Debt Security, or in the Board Resolution
relating thereto, to any currency shall be of the essence. The obligation of
the Company to make any payment of principal of (and premium, if any) and
interest on any Debt Security shall not be discharged or satisfied by any tender
by the Company or recovery by the Trustee, in any currency other than the
Required Currency, except to the extent that such tender or recovery shall
result in the Trustee timely holding the full amount of the Required Currency
then due and payable. If any such tender or recovery is in a currency other
than the Required Currency, the Trustee may take such actions as it considers
appropriate to exchange such currency for the Required Currency. The costs and
risks of any such exchange, including without limitation the risks of delay and
exchange rate fluctuation, shall be borne by the Company and the Company shall
remain fully liable for any shortfall or delinquency in the full amount of
Required Currency then due and payable, and in no circumstances shall the
Trustee be liable therefor. The Company hereby waives any defense of payment
based upon any such tender or recovery
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which is not in the Required Currency, or which, when exchanged for the Required
Currency by the Trustee, is less than the full amount of Required Currency then
due and payable.
Any costs incurred by or on behalf of the Company (other than costs
incurred by the Trustee that are passed on to the Company as provided above) in
connection with the conversion of any Foreign Currency to Dollars pursuant to an
election made by a Holder in accordance with Section 301 shall be borne by the
Holder making such an election through deduction from payments required to be
made to such Holder pursuant to the terms of this Indenture.
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ARTICLE TWO
FORMS OF DEBT SECURITIES
SECTION 201. Forms Generally.
---------------
The Debt Securities shall have such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
or designation and such legends or endorsements placed thereon, as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Indenture, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
securities exchange on which any of the Debt Securities may be listed, or to
conform to usage, all as determined by the officers executing such Debt
Securities, as conclusively evidenced by their execution of such Debt
Securities.
The Trustee's certificate of authentication shall be in substantially
the form set forth in Section 203.
SECTION 202. Forms of Debt Securities.
------------------------
Each Debt Security shall be in one of the forms approved from time to
time by or pursuant to a Board Resolution and an Officers' Certificate or one or
more indentures supplemental hereto which shall set forth the information
required by Section 301. If the form for a series of Debt Securities is
established by action taken pursuant to a Board Resolution, a copy of an
appropriate record of such action shall be certified by the Secretary or an
Assistant Secretary of the Company, as the case may be, and delivered to the
Trustee at or prior to the delivery of the Officers' Certificate setting forth
the form for such series.
SECTION 203. Form of Trustee's Certificate of Authentication.
-----------------------------------------------
The form of the Trustee's certificate of authentication to be borne by
the Debt Securities shall be substantially as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
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This is one of the Debt Securities of the series designated therein
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By: _____________________
Authorized Signatory
17
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ARTICLE THREE
THE DEBT SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
------------------------------------
The aggregate principal amount of Debt Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Debt Securities may be issued in one or more series. There shall
be established in or pursuant to a Board Resolution, and set forth in an
Officers' Certificate, or established in one or more indentures supplemental
hereto, with such notification to the Trustee in advance of the issuance of the
Debt Securities of any Series as may be agreed upon by the parties hereto:
(1) the title of the Debt Securities of the series (which shall
distinguish the Debt Securities of the series from all other Debt
Securities);
(2) the limit, if any, upon the aggregate principal amount of the
Debt Securities of the series which may be authenticated and delivered
under this Indenture (except for Debt Securities authenticated and
delivered upon registration or, transfer of, or in exchange for, or in lieu
of, other Debt Securities of the series pursuant to Section 304, 305, 306,
1007 or 1207);
(3) the date or dates, or the method or methods, if any, by which
such date or dates shall be determined or extended, on which the principal
of the Debt Securities of the series is payable;
(4) the rate or rates, if any, at which the Debt Securities of the
series shall bear interest, if any, or the method or methods, if any, by
which such rate or rates are to be determined or reset, the date or dates,
if any, from which such interest shall accrue, or the method or methods, if
any, by which such date or dates shall be determined or reset, the Interest
Payment Dates, if any, on which such interest shall be payable and the
Regular Record Dates, if any, for the interest payable on such Interest
Payment Dates, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(5) the place or places, if any, in addition to or other than the
office or agency of the Company in the Borough of Manhattan, The City of
New York and State of New York, where the principal of (and premium, if
any) and interest on Debt Securities of the series shall be payable, any
Debt Securities may be surrendered for registration of transfer or exchange
and notices or demands to or upon the
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Company in respect of such Debt Securities and this Indenture may be
served;
(6) the period or periods within which or the date or dates on which,
if any, the price or prices at which and the terms and conditions upon
which Debt Securities of the series may be redeemed, in whole or in part,
at the option of the Company;
(7) the obligation, if any, of the Company to redeem, repay or
purchase Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holders thereof, and the
period or periods within which, the price or prices at which and the other
terms and conditions upon which Debt Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Debt Securities of the series shall be
issuable;
(9) if other than the principal amount thereof, the portion of the
principal amount of Debt Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 602;
(10) provisions, if any, for the defeasance of Debt Securities of the
series;
(11) (A) the currency of denomination of the Debt Securities of any
series, which may be in Dollars or any Foreign Currency, including but not
limited to the ECU, (B) if such Debt Securities are denominated in a
Foreign Currency which is a composite currency other than the ECU, the
agency or organization, if any, responsible for overseeing such composite
currency and (C) if such Debt Securities are denominated in a Foreign
Currency other than a composite currency, the capital city of the country
of such Foreign Currency;
(12) the designation of the currency or currencies in which payment
of the principal of (and premium, if any) and interest on the Debt
Securities of the series will be made, and, if such currency or currencies
is a Foreign Currency, whether payment of the principal (and premium, if
any) or the interest on such Debt Securities, at the election of a Holder
thereof, may instead be payable in Dollars and the terms and conditions
upon which such election may be made;
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(13) any additional Events of Default or restrictive covenants
provided for with respect to Debt Securities of the series;
(14) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture), including any terms
which may be required or advisable under United States laws or regulations
or advisable in connection with the marketing of Debt Securities of the
series;
(15) if the Debt Securities of such series are to be denominated or
payable in a Foreign Currency, the designation of the initial Exchange Rate
Agent and, if other than as set forth herein, the definition of the
Exchange Rate;
(16) the form of Debt Securities of such series and, if issuable in
global form, the name of the depository with respect thereto and the terms
upon which and the circumstances under which such Notes may be exchanged;
(17) the ability, if any, of the Holder of a Debt Security to renew
all or any portion of a Debt Security; and
(18) the obligation, if any, of the Company to permit the conversion
or exchange of such Debt Securities into or for shares of other securities
and the terms and conditions upon which any such conversion or exchange
shall be effected, including, without limitation, the initial conversion or
exchange price or rate, the conversion or exchange period, any adjustment
of the applicable conversion or exchange price and any requirements
relative to the reservation of such other securities for purposes of
conversion or exchange.
All Debt Securities of any one series shall be substantially identical
except as to the currency of payments due thereunder, denomination, the rate or
rates of interest, if any, and Maturity and except as may otherwise be provided
in or pursuant to such Board Resolution and set forth in such Officers'
Certificate or in any such indenture supplemental hereto. In addition, all Debt
Securities of any one series need not be issued at the same time and, unless
otherwise so provided by the Company, a series may be reopened for issuance of
additional Debt Securities of such series or to establish additional terms of
such series of Debt Securities.
If any of the terms of a series of Debt Securities is established by
an action taken pursuant to a Board Resolution, a copy of an appropriate record
of such action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of such series.
SECTION 302. Denominations.
-------------
Unless otherwise specified in a supplemental indenture, the Debt
Securities of each series shall be issuable in registered form without coupons
in such denominations as shall be specified in accordance with the requirements
of Section 301. In the absence of any such provisions with respect to the Debt
Securities of any series, the Debt Securities of such series shall be issuable
in denominations of $1,000 or any integral multiple thereto. Debt Securities
denominated in a Foreign Currency shall be issuable in such denominations as are
established with respect to such Debt Securities in or pursuant to this
Indenture.
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SECTION 303. Execution, Authentication, Delivery and Dating.
----------------------------------------------
(a) The Debt Securities shall be executed on behalf of the Company by
its Chairman of the Board, its President or one of its Vice Presidents, under
its corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Debt
Securities may be manual or facsimile.
Debt Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Debt
Securities or did not hold such offices at the date of such Debt Securities.
(b) At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Debt Securities of any
series executed by the Company to the Trustee for authentication, together with
a Company Order for the authentication and delivery of each such series of such
Debt Securities, and the Trustee in accordance with the Company Order shall
authenticate and deliver such Debt Securities. The Trustee shall be entitled to
receive, prior to the authentication and delivery of such Debt Securities, the
supplemental indenture or the Board Resolution by or pursuant to which the form
and terms of such Debt Securities have been approved (and, if such form or terms
are approved pursuant to a Board Resolution, an Officers' Certificate approving
such terms and form), an Officers' Certificate as to the absence of any event
which is, or after notice or lapse of time or both would become, an Event of
Default, and an Opinion of Counsel stating that:
(1) all instruments furnished by the Company to the Trustee in
connection with the authentication and delivery of such Debt Securities
conform to the requirements of this Indenture and constitute sufficient
authority hereunder for the Trustee to authenticate and deliver such Debt
Securities;
(2) the form and terms of such Debt Securities have been established
in conformity with the provisions of this Indenture;
(3) in the event that the form or terms of such Debt Securities have
been established in a supplemental indenture the execution and delivery of
such supplemental indenture have been duly authorized by all necessary
corporate action of the Company, such supplemental indenture has been duly
executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Trustee, will constitute a legal, valid and
binding obligation enforceable against the Company in accordance with its
terms, subject to
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applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law);
(4) the execution and delivery of such Debt Securities have been duly
authorized by all necessary corporate action of the Company and such Debt
Securities have been duly executed by the Company, and, assuming due
authentication by the Trustee and delivery by the Company, will constitute
the legal, valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, entitled to the benefit of the
Indenture, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law);
(5) that all laws and requirements hereunder in respect of the
execution and delivery by the Company of such Debt Securities have been
complied with; and
(6) such other matters as the Trustee may reasonably request.
(c) If all the Debt Securities of any series are not to be issued at
one time, it shall not be necessary to deliver an Opinion of Counsel and
Officers' Certificates at the time of issuance of each Debt Security, but such
opinion and certificate, with appropriate modifications, shall be delivered at
or before the time of issuance of the first Debt Security of such series. Any
request by the Company that the Trustee authenticate Debt Securities of such
series will be deemed to be a certification by the Company that (i) all
conditions precedent provided for in this Indenture relating to the
authentication and delivery of such Debt Securities have been complied with and
(ii) there has not occurred an event which is, or after notice or lapse of time
or both, would become an Event of Default.
Notwithstanding the above, if the terms of Debt Securities are to be
established pursuant to a supplemental indenture, the Company shall deliver to
the Trustee, together with such supplemental indenture, the Opinion of Counsel
referred to in subsection (b), above, and the Officers' Certificate, referred to
in subsection (b), above, regarding the absence of an Event of Default.
(d) The Trustee shall not be required to authenticate such Debt
Securities if the issuance of such Debt Securities pursuant to this Indenture
will affect the Trustee's own rights, duties or immunities under the Debt
Securities and this Indenture or otherwise in a manner which is not reasonably
acceptable to the Trustee or if the Trustee determines that such authentication
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<PAGE>
may not lawfully be made or if the Trustee reasonably determines that such
authentication would be prejudicial to the Holders of Outstanding Debt
Securities.
(e) Each Debt Security shall be dated the date of its authentication.
(f) No Debt Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Debt Security a certificate of authentication substantially in the form provided
for herein duly executed by the Trustee by manual signature of one of its
authorized officers, and such certificate upon any Debt Security shall be
conclusive evidence, and the only evidence, that such Debt Security has been
duly authenticated and delivered hereunder and is entitled to the benefits of
this Indenture.
SECTION 304. Temporary Debt Securities.
-------------------------
Pending the preparation of definitive Debt Securities of any series,
the Company may execute, and upon Company Order the Trustee shall authenticate
and deliver, temporary Debt Securities which are printed, lithographed, or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Debt Securities in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as the
officers executing such Debt Securities may determine, as conclusively evidenced
by their execution of such Debt Securities.
Except in the case of temporary Debt Securities in global form, which
shall be exchanged in accordance with the provisions thereof, if temporary Debt
Securities of any series are issued, the Company will cause definitive Debt
Securities of such series to be prepared without unreasonable delay. After the
preparation of definitive Debt Securities of such series, the temporary Debt
Securities of such series shall be exchangeable for definitive Debt Securities
of such series upon surrender of the temporary Debt Securities of such series at
the office or agency of the Company in a Place of Payment for such series,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Debt Securities of any series, the Company shall execute and the
Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Debt Securities of the same series of authorized
denominations and of the same Stated Maturity. Unless otherwise specified as
contemplated by Section 301 with respect to temporary Debt Securities in global
form until so exchanged, the temporary Debt Securities of any series shall in
all respects be entitled to the same benefits under this Indenture as definitive
Debt Securities of such series.
SECTION 305. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
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The Company shall cause to be kept at one of its offices or agencies
maintained pursuant to Section 1102 a register (the register maintained in such
office being herein sometimes referred to as the "Security Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Debt Securities and of transfers of Debt
Securities. Said office or agency is hereby appointed "Security Registrar" for
the purpose of registering Debt Securities and transfers of Debt Securities as
herein provided.
Upon surrender for registration of transfer of any Debt Security of
any series at the office or agency of the Company maintained for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Debt
Securities of the same series of any authorized denomination or denominations,
of like tenor and aggregate principal amount.
Unless otherwise specified as contemplated by Section 301 with respect
to Debt Securities in global form at the option of the Holder, Debt Securities
of any series may be exchanged for other Debt Securities of the same series
containing identical terms and provisions of any authorized denomination or
denominations, of like aggregate principal amount, upon surrender of the Debt
Securities to be exchanged at such office or agency. Whenever any Debt
Securities are so surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and deliver, the Debt Securities which the Holder
making the exchange is entitled to receive.
Notwithstanding the foregoing, unless otherwise specified as
contemplated in Section 301, any global Debt Security shall be exchangeable for
definitive Debt Securities only if (i) the depository is at any time unwilling,
unable or ineligible to continue as Depository and a successor depository is not
appointed by the Company within 60 days of the date the Company is so informed
in writing, (ii) the Company executes and delivers to the Trustee a Company
Order to the effect that such global Debt Security shall be so exchangeable, or
(iii) an Event of Default has occurred and is continuing with respect to the
Debt Securities. If the beneficial owners of interests in a global Debt
Security are entitled to exchange such interests for definitive Debt Securities,
then without unnecessary delay but in any event not later than the earliest date
on which such interests may be so exchanged, the Company shall deliver to the
Trustee definitive Debt Securities in such form and denominations as are
required by or pursuant to this Indenture, and of the same series, containing
identical terms and in aggregate principal amount equal to the principal amount
of, such global Debt Security, executed by the Company. On or after the
earliest date on which such interests may be so exchanged, such global Debt
Security shall be surrendered from time to time by the depository specified in
the Company Order with respect thereto, and in accordance with instructions
given to the Trustee and such
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<PAGE>
depository, as the case may be (which instructions shall be in writing but need
be contained in or accompanied by an Officers' Certificate or be accompanied by
an Opinion of Counsel), as shall be specified in the Company Order with respect
thereto to the Trustee, as the Company's agent for such purpose, to be
exchanged, in whole or in part, for definitive Debt Securities as described
above without charge. The Trustee shall authenticate and make available for
delivery, in exchange for each portion of such surrendered global Debt Security,
a like aggregate principal amount of definitive Debt Securities of the same
series of authorized denominations and of like tenor as the portion of such
global Debt Security to be exchanged; provided, however, that no such exchanges
may occur during a period beginning at the opening of business 15 days before
any selection of Debt Securities of the same series and containing identical
terms to be redeemed and ending on the relevant Redemption Date. Promptly
following any such exchange in part, such global Debt Security shall be returned
by the Trustee to such Depository. If a Debt Security is issued in exchange for
any portion of a global Debt Security after the close of business at the office
or agency of the Company for such Debt Security where such exchange occurs on or
after (i) any Regular Record Date for such Debt Security and before the opening
of business at such office or agency on the next Interest Payment Date, or (ii)
any Special Record Date for such Debt Security and before the opening of
business at such office or agency on the related proposed date for payment of
interest or Defaulted Interest, as the case may be, interest shall not be
payable on such Interest Payment Date or proposed date for payment, as the case
may be, in respect of such Debt Security, but shall be payable on such Interest
Payment Date or proposed date for payment, as the case may be, only to the
Person to whom interest in respect of such portion of such global Debt Security
shall be payable in accordance with the provisions of this Indenture.
All Debt Securities issued upon any registration of transfer or
exchange of Debt Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Debt Securities surrendered upon such registration of transfer
or exchange.
Every Debt Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company, the Security
Registrar or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar and the Trustee duly executed, by the Holder thereof or his attorney
duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer, registration of transfer or exchange of Debt
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Securities, other than exchanges pursuant to Section 304, 1007 or 1207 not
involving any transfer.
Except as otherwise provided in or pursuant to this Indenture the
Company shall not be required (i) to issue, register the transfer of or exchange
Debt Securities of any particular series during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Debt Securities of such series selected for redemption under
Section 1203 and ending at the close of business on the day of such mailing,
(ii) to register the transfer of or exchange any Debt Security called for
redemption in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part or (iii) to issue, register the transfer of or
exchange any Debt Security which has been surrendered for repayment at the
option of the Holder thereof, except the portion, if any, of such Debt Security
not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Debt Securities.
-----------------------------------------------------
If (i) any mutilated Debt Security is surrendered to the Trustee, or
(ii) the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Debt Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Debt Security has been acquired by a bona fide purchaser, the
Company shall execute and upon its written request the Trustee shall
authenticate and deliver, in exchange for any such mutilated Debt Security or in
lieu of any such destroyed, lost or stolen Debt Security, a new Debt Security
containing identical provisions and of like principal amount, bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debt Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Debt Security, pay such Debt Security.
Upon the issuance of any new Debt Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Debt Security of any series issued pursuant to this Section
in lieu of any destroyed, lost or stolen Debt Security shall constitute an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Debt Security shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Debt Securities of that series duly
issued hereunder.
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The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debt Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
----------------------------------------------
(a) Unless otherwise specified as contemplated by Section 301,
interest on any Debt Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Debt Security (or one or more Predecessor Securities) is registered at
the close of business on the Regular Record Date for such interest, except that
in the case of a Debt Security issued between a Regular Record Date and the
initial Interest Payment Date relating to such Regular Record Date, interest for
the period beginning on the date of issue and ending on such initial Interest
Payment Date shall be paid to the person to whom such Debt Security shall have
been originally issued. Unless otherwise specified as contemplated by Section
301, at the option of the Company, payment of interest on any Debt Security may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register.
Unless otherwise specified as contemplated by Section 301, any
interest on any Debt Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered Holder on the relevant Regular Record Date by virtue of his having
been such Holder, and such Defaulted Interest may be paid by the Company, at its
election, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Debt Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Debt Security of such series and the date of the proposed payment,
and at the same time the Company shall deposit with the Trustee an amount
of money equal to the aggregate amount proposed to be paid in respect of
such Defaulted Interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided. Thereupon
the Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less than
10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the
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proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder of Debt Securities of such series at his address as it
appears in the Security Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the Persons in whose
names the Debt Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Debt Securities of any series in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debt
Securities may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
(b) The provisions of this Section 307(b) may be made applicable to
any series of Debt Securities pursuant to Section 301 (with such modifications,
additions or substitutions as may be specified pursuant to such Section 301).
The interest rate (or the spread and/or spread multiplier used to calculate such
interest rate, if applicable) on any Debt Security of such series may be reset
by the Company at its option on the date or dates specified in such Debt
Security (each, an "Optional Reset Date"). The Company may exercise such option
with respect to any such Debt Security by notifying the Trustee of such exercise
at least 45 but not more than 60 calendar days prior to an Optional Reset Date
for such Debt Security. If the Company so notifies the Trustee of such
exercise, not later than 40 calendar days prior to such Optional Reset Date the
Trustee shall transmit, in the manner provided for in Section 106, to the Holder
of such Debt Security a notice (the "Reset Notice") indicating (i) that the
Company has elected to reset the interest rate (or the spread and/or spread
multiplier used to calculate such interest rate, if applicable), (ii) such new
interest rate (or such new spread and/or spread multiplier, if applicable) and
(iii) the provisions, if any, for redemption by the Company during the period
from such Optional Reset Date to the next Optional Reset Date or, if there is no
such next Optional Reset Date, to the Stated Principal Maturity of such Debt
Security (each such period, a "Subsequent Interest Period"), including the date
or dates on which, or the period or periods during which, and the price or
prices at which such redemption may occur during such Subsequent Interest
Period.
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Notwithstanding the foregoing, not later than 20 calendar days prior
to the applicable Optional Reset Date for a Debt Security, the Company may, at
its option, revoke the interest rate (or the spread and/or spread multiplier
used to calculate such interest rate, if applicable) provided for in the Reset
Notice and establish an interest rate (or a spread and/or spread multiplier used
to calculate such interest rate, if applicable) that is higher than the interest
rate (or the spread and/or spread multiplier, if applicable) provided for in the
Reset Notice, for the Subsequent Interest Period by causing the Trustee to
transmit, in the manner provided for in Section 106, notice of such higher
interest rate (or such higher spread and/or spread multiplier, if applicable) to
the Holder of such Debt Security. Such notice shall be irrevocable. All Debt
Securities with respect to which the interest rate (or the spread and/or spread
multiplier used to calculate such interest rate, if applicable) is reset on an
Optional Reset Date, and with respect to which the Holders of such Debt
Securities have not surrendered such Debt Securities for repayment (or have
validly revoked any such surrender) pursuant to the next succeeding paragraph,
will bear such higher interest rate (or such higher spread and/or spread
multiplier, if applicable).
If the provisions of Section 307(b) are made applicable to any Debt
Security and the Company notifies the Trustee of the exercise of its option to
reset the interest rate (or the spread and/or spread multiplier used to
calculate such interest rate, if applicable) on such Debt Security on an
Optional Reset Date, the Holder of such Debt Security will have the option to
elect repayment by the Company of such Debt Security on such Optional Reset Date
at a price equal to the principal amount thereof plus any accrued interest to
such Optional Reset Date. In order to obtain repayment of such Debt Security on
such Optional Reset Date, the Holder must follow the procedures set forth in
Section 1503 for repayment at the option of Holders, except that (i) the period
for delivery of such Debt Security or notification to the Trustee shall be at
least 25 but not more than 35 calendar days prior to such Optional Reset Date
and (ii) if the Holder has surrendered such Debt Security for repayment
following receipt of the Reset Notice, the Holder may revoke such surrender for
repayment by written notice to the Trustee received prior to 5:00 P.M., New York
City time, on the tenth calendar day prior to such Optional Reset Date.
Subject to the foregoing provisions of this Section and Section 305,
each Debt Security delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Debt Security shall carry the
rights to interest accrued and unpaid, and to accrue, which were carried by such
other Debt Security.
SECTION 308. Persons Deemed Owners.
---------------------
Prior to due presentment of a Debt Security for registration of
transfer, the Company, the Trustee and any agent
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of the Company or the Trustee may treat the Person in whose name such Debt
Security is registered as the owner of such Debt Security for the purpose of
receiving payment of principal of (and premium, if any) and (subject to Sections
305 and 307) interest on such Debt Security and for all other purposes
whatsoever, whether or not such Debt Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
No holder of any beneficial interest in any global Debt Security held
on its behalf by a depository shall have any rights under this Indenture with
respect to such global Debt Security, and such depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the owner of
such global Debt Security for all purposes whatsoever. None of the Company, the
Trustee nor any agent of the Company or the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests of a global Debt Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
SECTION 309. Cancellation.
------------
Unless otherwise provided with respect to a series of Debt Securities,
all Debt Securities surrendered for payment, redemption, repayment, registration
of transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Debt Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Debt Securities so delivered shall be promptly cancelled by
the Trustee. No Debt Securities shall be authenticated in lieu of or in
exchange for any Debt Securities cancelled as provided in this Section, except
as expressly permitted by this Indenture. All cancelled Debt Securities held by
the Trustee shall be retained by the Trustee for such period as it may, in its
sole discretion, determine unless by a Company Order or the Company shall direct
that the cancelled Debt Securities be returned to it.
SECTION 310. Computation of Interest.
-----------------------
Except as otherwise specified as contemplated by Section 301 for Debt
Securities of any series, interest on the Debt Securities of each series shall
be computed on the basis of a year of twelve 30-day months.
SECTION 311. Payment in Currencies.
---------------------
(a) Payment of the principal of (and premium, if any) and interest on
the Debt Securities of any series shall be made in the currency or currencies
specified pursuant to Section 301; provided that in the case of Debt Securities
of a series
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denominated in one or more Foreign Currencies the Holder of a Debt Security of
such series may elect to receive such payment in Dollars if authorized pursuant
to Section 301(12).
A Holder may make such election by delivering to the Trustee a written
notice thereof, substantially in the form attached hereto as Exhibit A or in
such other form as may be acceptable to the Trustee, not later than the close of
business on the Regular or Special Record Date immediately preceding the
applicable Interest Payment Date or the fifteenth day immediately preceding the
Maturity of an installment of principal, as the case may be. Such election
shall remain in effect with respect to such Holder until such Holder delivers to
the Trustee a written notice rescinding such election, provided that any such
notice must be delivered to the Trustee not later than the close of business on
the Regular or Special Record Date immediately preceding the next Interest
Payment Date or the fifteenth day immediately preceding the Maturity of an
installment of principal, as the case may be, in order to be effective for the
payment to be made thereon; and provided, further, that no such rescission may
be made with respect to payments to be made on any Debt Security with respect to
which notice of redemption has been given by the Company pursuant to Article
Twelve or a notice of option to elect repayment has been sent by a Holder or
transferee pursuant to Article Fifteen. Upon request, the Trustee will mail a
copy of Exhibit A to any Holder requesting a copy thereof to the address of such
Holder set forth in such request.
(b) If at least one Holder has made the election referred to in
subsection (a) above to receive payments in Dollars on a series of Debt
Securities denominated in one or more Foreign Currencies, then the Trustee shall
deliver to the Company, not later than the fourth Business Day after the Regular
or Special Record Date with respect to an Interest Payment Date or the tenth day
immediately preceding the Maturity of an installment of principal, as the case
may be, a written notice specifying the amount of principal of (and premium, if
any) and interest on such series of Debt Securities to be paid in Dollars on
such payment date.
(c) Except as otherwise specified as contemplated by Section 301
hereof, if at least one Holder has made the election referred to in subsection
(a) above to receive payments in Dollars on a series of Debt Securities
denominated in one or more Foreign Currencies, then the amount receivable by
Holders of a series of Debt Securities who have elected payment in Dollars shall
be determined by the Company on the basis of the applicable Exchange Rate set
forth in the applicable Exchange Rate Officer's Certificate. The Company shall
deliver, not later than the eighth day following each Regular or Special Record
Date or the sixth day immediately preceding the Maturity of an installment of
principal, as the case may be, to the Trustee an Exchange Rate Officer's
Certificate in respect of the payments to be made to such Holders on such
payment date.
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(d) (i) If the Foreign Currency (other than the ECU or other
composite currency) in which a series of Debt Securities is denominated is not
available to the Company for making payment thereof due to the imposition of
exchange controls or other circumstances beyond the control of the Company, then
with respect to each date for the payment of principal of (and premium, if any)
and interest on such series of Debt Securities occurring after the final date on
which the Foreign Currency was so used, all payments with respect to the Debt
Securities of any such series shall be made in Dollars. If payment is to be made
in Dollars to the Holders of any such series of Debt Securities pursuant to the
provisions of the preceding sentence, then the amount to be paid in Dollars on a
payment date by the Company to the Trustee and by the Trustee or any Paying
Agent to Holders shall be determined by an Exchange Rate Agent and shall be
equal to the sum obtained by converting the specified Foreign Currency into
Dollars at the applicable Exchange Rate, or if no rate is quoted for such
Foreign Currency, the last date such rate is quoted.
(ii) If the ECU ceases to be used both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or is not available due to circumstances beyond
the control of the Company, or if any other composite currency in which a Debt
Security is denominated or payable ceases to be used for the purposes for which
it was established or is not available due to circumstances beyond the control
of the Company, then with respect to each date for the payment of principal of
(and premium, if any) and interest on a series of Debt Securities denominated in
ECU or such other composite currency, as appropriate (the "Conversion Date"),
occurring after the last date on which the ECU or such other composite currency
was so used, all payments with respect to the Debt Securities of any such series
shall be made in Dollars. If payment with respect to Debt Securities of a
series denominated in ECU or any other composite currency is to be made in
Dollars pursuant to the provisions of the preceding sentence, then the amount to
be paid in Dollars on a payment date by the Company to the Trustee and by the
Trustee or any Paying Agent to Holders shall be determined by an Exchange Rate
Agent and shall be equal to the sum of the amounts obtained by converting each
Component of such composite currency into Dollars at its respective Exchange
Rate, multiplied by the number of ECU or units of such other composite currency,
as appropriate, that would have been so paid had the ECU or such other composite
currency, as appropriate, not ceased to be so used.
(e) All decisions and determinations of an Exchange Rate Agent
regarding the Exchange Rate or conversion of Foreign Currency (other than the
ECU or other composite currency) into Dollars pursuant to subsection (d)(i)
above or the conversion of ECU or other composite currency into Dollars pursuant
to subsection (d)(ii) shall, in the absence of manifest error, be conclusive for
all purposes and irrevocably binding upon the
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Company, the Trustee, any Paying Agent and all Holders of the Debt Securities.
If a Foreign Currency (other than the ECU or other composite currency) in which
payment of a series of Debt Securities may be made, pursuant to subsection (a)
above is not available to the Company for making payments thereof due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company, after learning thereof, will give notice thereof to the
Trustee immediately (and the Trustee promptly thereafter will give notice to the
Holders in the manner provided in Section 106) specifying the last date on which
the Foreign Currency was used for the payment of principal of (and premium, if
any) or interest on such series of Debt Securities. In the event the ECU ceases
to be used both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or is
not available due to circumstances beyond the control of the Company, or if any
other composite currency in which a Debt Security is denominated or payable
ceases to be used for the purposes for which it was established or is not
available due to circumstances beyond the control of the Company, the Company,
after learning thereof, will give notice thereof to the Trustee immediately (and
the Trustee promptly thereafter will give notice to the Holders in the manner
provided in Section 106). In the event of any subsequent change in any
Component, the Company, after learning thereof, will give notice to the Trustee
similarly (and the Trustee promptly thereafter will give notice to the Holders
in the manner provided in Section 106). The Trustee shall be fully justified
and protected in relying and acting upon the information so received by it from
the Company and shall not otherwise have any duty or obligation to determine
such information independently.
SECTION 312. Optional Extension of Stated Principal Maturity.
-----------------------------------------------
The provisions of this Section 312 may be made applicable to any
series of Debt Securities pursuant to Section 301 (with such modifications,
additions or substitutions as may be specified pursuant to such Section 301).
The Stated Principal Maturity of any Debt Security of such series may be
extended by the Company at its option for the period or periods specified in
such Debt Security (each such period, an "Extension Period") up to but not
beyond the date (the "Final Maturity") specified in such Debt Security. The
Company may exercise such option with respect to any such Debt Security by
notifying the Trustee of such exercise at least 45 but not more than 60 calendar
days prior to the Stated Principal Maturity of such Debt Security then in effect
(the "Current Stated Principal Maturity"). If the Company so notifies the
Trustee of such exercise, not later than 40 calendar days prior to the Current
Stated Principal Maturity the Trustee shall transmit, in the manner provided
for in Section 106, to the Holder of such Debt Security a notice (the "Extension
Notice") indicating (i) that the Company has elected to extend the Current
Stated Principal Maturity, (ii) the new Stated Principal Maturity and the Final
Maturity, (iii) the interest
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rate (or the spread and/or spread multiplier used to calculate such interest
rate, if applicable) applicable to the Extension Period and (iv) the provisions,
if any, for redemption by the Company during such Extension Period, including
the date or dates on which, or the period or periods during which, and the price
or prices at which such redemption may occur during such Extension Period. Upon
the Trustee's transmittal of the Extension Notice to the Holder of such Debt
Security, the Current Stated Principal Maturity of such Debt Security shall be
extended automatically and, except as modified by the Extension Notice and as
described in the next two paragraphs, such Debt Security will have the same
terms as prior to the transmittal of such Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior
to the Current Stated Principal Maturity of such Debt Security, the Company may,
at its option, revoke the interest rate (or the spread and/or spread multiplier
used to calculate such interest rate, if applicable) provided for in the
Extension Notice and establish an interest rate (or a spread and/or spread
multiplier used to calculate such interest rate, if applicable) that is higher
than the interest rate (or the spread and/or spread multiplier, if applicable)
provided for in the Extension Notice for the Extension Period by causing the
Trustee to transmit, in the manner provided for in Section 106, notice of such
higher interest rate (or such higher spread and/or spread multiplier, if
applicable) to the Holder of such Debt Security. Such notice shall be
irrevocable. All Debt Securities with respect to which the Current Stated
Principal Maturity is extended, and with respect to which the Holders of such
Debt Securities have not surrendered such Debt Securities for repayment (or have
validly revoked any such surrender), will bear such higher interest rate (or
such higher spread and/or spread multiplier, if applicable).
If the provisions of this Section 312 are made applicable to any Debt
Security and the Company notifies the Trustee of the exercise of its option to
extend the Current Stated Principal Maturity of such Debt Security, the Holder
of such Debt Security will have the option to elect repayment of such Debt
Security by the Company on the Current Stated Principal Maturity at a price
equal to the principal amount thereof plus any accrued interest to the Current
Stated Principal Maturity. In order to obtain repayment of such Debt Security
on the Current Stated Principal Maturity, the Holder must follow the procedures
set forth in Section 1503 for repayment at the option of Holders, except that
(i) the period for delivery of such Debt Security or notification to the Trustee
shall be at least 25 but not more than 35 calendar days prior to the Current
Stated Principal Maturity and (ii) if the Holder has surrendered such Debt
Security for repayment following receipt of the Extension Notice, the Holder may
revoke such surrender for repayment prior to 5:00 P.M., New York City time, on
the tenth calendar day prior to the Current Stated Principal Maturity.
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ARTICLE FOUR
[RESERVED]
35
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ARTICLE FIVE
SATISFACTION AND DISCHARGE
SECTION 501. Satisfaction and Discharge of Indenture.
---------------------------------------
This Indenture shall upon a Company Request cease to be of further
effect with respect to any series of Debt Securities specified therein (except
as to any surviving rights of registration of transfer or exchange of Debt
Securities of such series herein expressly provided for and rights to receive
payments of principal, premium and interest thereon) and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Debt Securities of such series theretofore authenticated
and delivered (other than (i) Debt Securities of such series which
have been destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306 and (ii) Debt Securities of such
series for whose payment money in the Required Currency has
theretofore been deposited in trust or segregated and held in trust by
the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 1103) have been delivered to the
Trustee for cancellation; or
(B) all Debt Securities of such series not theretofore delivered
to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
by the Trustee in the name, and at the expense, of the Company,
and the Company has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust for the purpose an amount in
the Required Currency sufficient to pay and discharge the entire
indebtedness on such Debt Securities for principal (and premium, if
any) and interest to the date of such deposit (in the case of Debt
Securities which become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be;
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(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company with respect to the Outstanding Debt Securities of
such series; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
as to such series have been complied with.
In the event that there are Debt Securities of two or more series
hereunder, the Trustee shall be required to execute an instrument acknowledging
satisfaction and discharge of the Indenture only if requested to do so with
respect to the Debt Securities of such series as to which it is Trustee and if
the other conditions thereto are met.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to any series of Debt Securities, the obligations of the Company
pursuant to Section 115, the obligations of the Company to the Trustee under
Section 707 and, if money shall have been deposited with the Trustee pursuant to
Subclause (B) of Clause (1) of this Section, the obligations of the Trustee
under Section 502 and the last paragraph of Section 1103 shall survive.
SECTION 502. Application of Trust Money.
--------------------------
Subject to the provisions of the last paragraph of Section 1103, all
money deposited with the Trustee pursuant to Section 501 shall be held in trust
and applied by it, in accordance with the provisions of the Debt Securities and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee.
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ARTICLE SIX
REMEDIES
SECTION 601. Events of Default.
-----------------
"Event of Default", wherever used herein with respect to Debt
Securities of any series, means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law, pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body):
(1) default in the payment of any interest upon any Debt Security of
such series when it becomes due and payable, and continuance of such
default for a period of 30 days; or
(2) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its Maturity; or
(3) default in the deposit of any sinking fund payment when and as
due by the terms of a Debt Security of such series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture or the Debt Securities (other
than a covenant or warranty a default in whose performance or whose breach
is elsewhere in this Section specifically dealt with or which has expressly
been included in this Indenture solely for the benefit of Debt Securities
of a series other than such series), and continuance of such default or
breach for a period of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount of the
Outstanding Debt Securities of such series, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(5) if an event of default as defined in any mortgage, indenture or
instrument under which there may be issued, or by which there may be
secured or evidenced, any indebtedness for borrowed money of the Company or
any Subsidiary (including this Indenture), whether such indebtedness now
exists or shall hereafter be created, shall happen and shall result in such
indebtedness in an amount in excess of $10,000,000 becoming or being
declared due and payable prior to the date on which it would otherwise
become due and payable; and such acceleration shall not be rescinded or
annulled for a period of 10 days after there has been given, by registered
or certified mail, to the Company by the
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Trustee or to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of such
series, a written notice specifying such event of default and requiring it
to be remedied and stating that such notice is a "Notice of Default"
hereunder; or
(6) the entry of a decree or order for relief in respect of the
Company by a court having jurisdiction in the premises in an involuntary
case under the Federal bankruptcy laws, as now or hereafter constituted, or
any other Federal or State bankruptcy, insolvency or other similar law, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Company or of any
substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 90 consecutive days; or
(7) the commencement by the Company of a voluntary case under the
Federal bankruptcy laws, as now or hereafter constituted, or any other
applicable Federal or State bankruptcy, insolvency or other similar law, or
the consent by it to the entry of an order for relief in an involuntary
case under any such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of
the Company or of any substantial part of its property, or the making by it
of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or
the taking of any corporate action in furtherance of any of the foregoing;
or
(8) any other Event of Default provided with respect to the Debt
Securities of such series.
SECTION 602. Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default with respect to Debt Securities of any series
at the time Outstanding occurs and is continuing, then and in every such case
the Trustee or the Holders of not less than 25% in aggregate principal amount of
Outstanding Debt Securities of such series may declare the principal amount (or,
if the Debt Securities of such series are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms of such
series) of all the Debt Securities of such series to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Debt Securities of any series has been made and before a judgment or decree for
payment of the money due has been
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obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in aggregate principal amount of the Outstanding Debt Securities of
such series, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue installments of interest on all Debt Securities
of such series,
(B) the principal of (and premium, if any, on) any Debt
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates
prescribed therefor in such Debt Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest on each Debt Security
at the rate or rates prescribed therefor in such Debt Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Debt Securities of such
series, other than the non-payment of the principal of Debt Securities of
such series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 613.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 603. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
-------
The Company covenants that if:
(1) default is made in the payment of any installment of interest on
any Debt Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium,
if any, on) any Debt Security at the Maturity thereof or otherwise,
the Company will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Debt Securities, the amount then due and payable
on such Debt Securities for principal (and premium, if any) and interest and, to
the extent that
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payment of such interest shall be legally enforceable, interest upon the overdue
principal (and premium, if any) and upon overdue installments of interest, at
the rate or rates prescribed therefor in such Debt Securities; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon such Debt Securities and collect
the moneys adjudged or decreed to be payable in the manner provided by law out
of the property of the Company or any other obligor upon such Debt Securities,
wherever situated.
If an Event of Default with respect to Debt Securities of any series
occurs and is continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Debt Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 604. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceedings, or any voluntary or involuntary case under the Federal
bankruptcy laws as now or hereafter constituted, relative to the Company or any
other obligor upon the Debt Securities of a particular series or the property of
the Company or such other obligor or their creditors, the Trustee (irrespective
of whether the principal of such Debt Securities shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Company for the payment of overdue
principal or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Debt
Securities of such series and to file such other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of
the Holders allowed in such judicial proceeding, and
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(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, custodian, liquidator, sequestrator (or
other similar official) in any such proceeding is hereby authorized by each
Holder (i) to make such payments to the Trustee, and (ii) in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 707.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debt
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 605. Trustee May Enforce Claims without Possession of Debt
-----------------------------------------------------
Securities.
----------
All rights of action and claims under this Indenture or the Debt
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Debt Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name, as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Debt Securities in respect of
which such judgment has been recovered.
SECTION 606. Application of Money Collected.
------------------------------
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal (and premium,
if any) or interest, upon presentation of the Debt Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
707; and
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Debt Securities, in
respect of which or for the benefit of which such money has been collected
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Debt Securities for
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principal (and premium, if any) and interest, respectively. The Holders of
each series of Debt Securities denominated in a Foreign Currency shall be
entitled to receive a ratable portion of the amount determined by an
Exchange Rate Agent by converting the principal amount Outstanding of such
series of Debt Securities in the currency in which such series of Debt
Securities is denominated into Dollars at the Exchange Rate as of the date
of declaration of acceleration of the Maturity of the Debt Securities (or,
if there is no such rate on such date for the reasons specified in Section
311(d) of the Indenture, such rate on the date specified in such Section).
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 607. Limitation on Suits.
-------------------
No Holder of any Debt Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Debt Securities of such
series;
(2) the Holders of not less than 25% in aggregate principal amount of
the Outstanding Debt Securities of such series shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount at maturity of the Outstanding Debt Securities of such
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other such
Holders, or to obtain or to seek to obtain priority or preference over any other
of such Holders or to enforce any right under this Indenture, except in the
manner herein provided and for the equal and ratable benefit of all of such
Holders.
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SECTION 608. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium (if any) and Interest.
-----------------------------
Notwithstanding any other provision in this Indenture, the Holder of
any Debt Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Debt Security on the respective Stated Maturity or
Maturities expressed in such Debt Security (or, in the case of redemption, on
the Redemption Date or, in the case of repayment, on the Repayment Date) and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.
SECTION 609. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 610. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided in Section 306, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 611. Delay or Omission Not Waiver.
----------------------------
No delay or omission of the Trustee or of any Holder of any Debt
Security to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
SECTION 612. Control by Holders.
------------------
The Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series shall have the
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<PAGE>
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Debt Securities of such series, provided, that
the Trustee shall have the right to decline to follow any such direction
(1) if the Trustee being advised by counsel shall determine that the
action so directed may not lawfully be taken, or if the Trustee in good
faith shall, by a Responsible Officer or Officers of the Trustee, determine
that the proceedings would be illegal or in conflict with this Indenture or
involve it in personal liability; and
(2) subject to the provisions of Section 701, if the Trustee in good
faith shall, by a Responsible Officer or Responsible Officers of the
Trustee, determine that the proceeding so directed would be unjustly
prejudicial to the Holders of Debt Securities of such series not joining in
any such direction, and the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such direction.
SECTION 613. Waiver of Past Defaults.
-----------------------
The Holders of not less than a majority in aggregate principal amount
of the Outstanding Debt Securities of any series may on behalf of the Holders of
all the Debt Securities of any such series waive any past default hereunder with
respect to such series and its consequences, except a default
(1) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series, or
(2) in respect of a covenant or provision hereof which under Article
Ten cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 614. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Debt
Security by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against
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any party litigant in such suit, having due regard to the merits and good faith
of the claims or defenses made by such party litigant; but the provisions of
this Section shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding more than 10% in
aggregate principal amount of the Outstanding Debt Securities of any series, or
to any suit instituted by any Holder for the enforcement of the payment of the
principal of (or premium, if any) or interest on any Debt Security on or after
the respective Stated Maturity or Maturities expressed in such Debt Security
(or, in the case of redemption or repayment, on or after the Redemption Date or
the Repayment Date, as the case may be).
SECTION 615. Waiver of Stay or Extension Laws.
--------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE SEVEN
THE TRUSTEE
SECTION 701. Certain Duties and Responsibilities.
-----------------------------------
(a) With respect to Debt Securities of any series, except during the
continuance of an Event of Default with respect to the Debt Securities of such
series,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provisions
hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture.
(b) In case an Event of Default with respect to Debt Securities of
any series has occurred and is continuing, the Trustee shall, with respect to
the Debt Securities of such series, exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
their exercise, as a prudent man would exercise or use under the circumstances
in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it with respect to Debt Securities of
any series in good faith in accordance with the direction of the Holders of
a majority in aggregate principal amount of the Outstanding Debt Securities
of such series relating to the time, method and place of conducting any
proceeding for any remedy available
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<PAGE>
to the Trustee, or exercising any trust or power conferred upon the
Trustee, under this Indenture.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 702. Notice of Defaults.
------------------
Within 90 days after the occurrence of any default hereunder with
respect to Debt Securities of any series, the Trustee shall transmit by mail to
all Holders of Debt Securities of such series, as their names and addresses
appear in the Security Register, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund instalment with respect to Debt Securities of such
series, the Trustee shall be protected in withholding such notice if and so long
as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders of Debt
Securities of such series; and provided, further, that in the case of any
default of the character specified in Section 601(4) with respect to Debt
Securities of such series no such notice to Holders shall be given until at
least 30 days after the occurrence thereof. For the purpose of this Section,
the term "default" means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Debt Securities of such
series.
SECTION 703. Certain Rights of Trustee.
-------------------------
Subject to Sections 315(a) through (d) of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
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(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders of Debt Securities pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
relevant to the facts or matters that are the subject of its inquiry,
personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be charged with knowledge of any Event of
Default with respect to the Debt Securities of any series for which it is
acting as Trustee unless either (1) a Responsible Officer of the Trustee
shall have actual knowledge of the Event of Default or (2) written notice
of such Event of Default shall have been given to the Trustee
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<PAGE>
by the Company or any other obligor on such Debt Securities or by any
Holder of such Debt Securities; and
(i) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
SECTION 704. Not Responsible for Recitals or Issuance of Debt
------------------------------------------------
Securities.
----------
The recitals contained herein and in the Debt Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Debt Securities of any series. The Trustee shall not be
accountable for the use or application by the Company of any Debt Securities or
the proceeds thereof.
SECTION 705. May Hold Debt Securities.
------------------------
The Trustee, any Paying Agent, the Security Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Debt Securities, and, subject to Sections 310(b) and 311 of
the Trust Indenture Act, may otherwise deal with the Company with the same
rights it would have if it were not Trustee, Paying Agent, Security Registrar or
such other agent.
SECTION 706. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the Company.
SECTION 707. Compensation and Reimbursement.
------------------------------
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(2) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including those incurred
in connection with any application to the Commission for a stay pursuant to
Section 310(b) of the Trust Indenture Act (whether or not granted) and the
reasonable compensation and the reasonable expenses
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and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust or performance of its duties hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
As security for the performance of the obligations of the Company under
this Section the Trustee shall have a claim prior to the Debt Securities upon
all property and funds held or collected by the Trustee as such, except funds
held in trust for the payment of principal of (and premium, if any) or interest
on Debt Securities.
SECTION 708. Corporate Trustee Required; Eligibility.
---------------------------------------
There shall at all times be a Trustee hereunder that is a corporation
eligible to act as such pursuant to the terms of the Trust Indenture Act and
that has a combined capital and surplus of at least $50,000,000, subject to
supervision or examination by Federal or State authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
SECTION 709. Resignation and Removal; Appointment of Successor.
-------------------------------------------------
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 710.
(b) The Trustee may resign at any time with respect to the Debt
Securities of one or more series by giving written notice thereof to the
Company. If an instrument of acceptance by a successor Trustee shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the Debt
Securities of such series.
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(c) The Trustee may be removed at any time with respect to the Debt
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Debt Securities of such series, delivered to the Trustee and
to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the obligations imposed
upon it under Section 310(b) of the Trust Indenture Act with respect to the
Debt Securities of any series after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a Debt Security of such
series for at least six months, or
(2) the Trustee shall cease to be eligible under Section 708 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or a decree or order
for relief by a court having jurisdiction in the premises shall have been
entered in respect of the Trustee in an involuntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or State bankruptcy, insolvency or similar law; or a decree or
order by a court having jurisdiction in the premises shall have been
entered for the appointment of a receiver, custodian, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trustee or of its
property or affairs, or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation, winding up or liquidation, or
(4) the Trustee shall commence a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable
Federal or State bankruptcy, insolvency or similar law or shall consent to
the appointment of or taking possession by a receiver, custodian,
liquidator, assignee, trustee, sequestrator (or other similar official) of
the Trustee or its property or affairs, or shall make an assignment for the
benefit of creditors, or shall admit in writing its inability to pay its
debts generally as they become due, or shall take corporate action in
furtherance of any such action,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee with respect to all Debt Securities or the Debt Securities of such
series, or (ii) subject to Section 315(e) of the Trust Indenture Act, any Holder
who has been a bona fide Holder of a Debt Security of any series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee for the Debt
Securities of such series and the appointment of a successor Trustee.
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(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Debt Securities of one or more series, the Company, by or
pursuant to a Board Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Debt Securities of that or those series (it being
understood that any such successor Trustee may be appointed with respect to the
Debt Securities of one or more or all of such series and that at any time there
shall be only one Trustee with respect to the Debt Securities of any particular
series) and shall comply with the applicable requirements of Section 710. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee with respect to the Debt
Securities of any series shall be appointed by Act of the Holders of a majority
in aggregate principal amount of the Outstanding Debt Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee with respect to the Debt Securities of such series and to that
extent supersede the successor Trustee appointed by the Company. If no
successor Trustee with respect to the Debt Securities of any series shall have
been so appointed by the Company or the Holders and accepted appointment in the
manner hereinafter provided, any Holder who has been a bona fide Holder of a
Debt Security of such series for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee with respect to the Debt Securities
of such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Debt Securities of any series and
each appointment of a successor Trustee with respect to the Debt Securities of
any series by mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Debt Securities of such series as their names and
addresses appear in the Security Register. Each notice shall include the name of
the successor Trustee with respect to the Debt Securities of such series and the
address of its Corporate Trust Office.
SECTION 710. Acceptance of Appointment by Successor.
--------------------------------------
(a) In the case of an appointment hereunder of a successor Trustee
with respect to all Debt Securities, every such successor Trustee so appointed
shall execute, acknowledge and deliver to the Company and to the retiring
Trustee an instrument accepting such appointment, and thereupon the resignation
or removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the
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retiring Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder, subject
to its lien, if any, provided for in Section 707.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Debt Securities of one or more (but not all) series, the Company,
the retiring Trustee and each successor Trustee with respect to the Debt
Securities of one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall accept such appointment
and which (1) shall contain such provisions as shall be necessary or desirable
to transfer and confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Debt Securities of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not retiring with
respect to all Debt Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debt Securities of that or those
series as to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one Trustee, it being
understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such Trustee; and upon
the execution and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee with respect to the Debt Securities of that or those
series to which the appointment of such successor Trustee relates; but, on
request of the Company or any successor Trustee, such retiring Trustee shall
duly assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the Debt
Securities of that or those series to which the appointment of such successor
Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under this Article.
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SECTION 711. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business.
--------
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Debt Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Debt Securities so authenticated with the
same effect as if such successor Trustee had itself authenticated such Debt
Securities. In case any Debt Securities shall not have been authenticated by
such predecessor Trustee, any such successor Trustee, by merger, conversion or
consolidation, may authenticate and deliver such Debt Securities, in either its
own name or that of its predecessor Trustee, with the full force and effect
which this Indenture provides for the certificate of authentication of the
Trustee.
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ARTICLE EIGHT
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND THE COMPANY
SECTION 801. Company to Furnish Trustee Names and Addresses of
-------------------------------------------------
Holders.
-------
In accordance with Section 312(a) of the Trust Indenture Act, the
Company will furnish or cause to be furnished to the Trustee with respect to
Debt Securities of each series for which it acts as Trustee:
(a) semiannually, not more than 15 days after the Regular Record Date
in respect of the Debt Securities of such series or on June 30 and December
31 of each year with respect to each series of Debt Securities for which
there are no Regular Record Dates, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such
Regular Record Date or June 15 or December 15, as the case may be, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security
- -------- -------
Registrar for Debt Securities of a series, no such list need be furnished with
respect to such series of Debt Securities.
SECTION 802. Preservation of Information; Communications to Holders.
------------------------------------------------------
(a) The Trustee shall comply with the obligations imposed upon it
pursuant to Section 312 of the Trust Indenture Act.
(b) Every Holder of Debt Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with
Section 312 of the Trust Indenture Act, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 312(b)
of the Trust Indenture Act.
SECTION 803. Reports by Trustee.
------------------
(a) Within 120 days after February 28, of each year commencing with
the first February 28 after the first issuance of Securities pursuant to this
Indenture the Trustee shall transmit to the Holders of Securities, in the manner
and to the extent
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provided in Section 313(c) of the Trust Indenture Act, a brief report dated as
of such February 28, if required by Section 313(a) of the Trust Indenture Act.
The Trustee also shall comply with Section 313(b) of the Trust Indenture Act and
shall transmit to Holders such other reports, if any, as may be required
pursuant to the Trust Indenture Act.
(b) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and 313(d) of the Trust
Indenture Act.
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which any Debt Securities of such series are listed, with the Commission and
also with the Company. The Company will notify the Trustee when any series of
Debt Securities are listed on any stock exchange.
SECTION 804. Reports by Company.
------------------
Pursuant to Section 314(a) of the Trust Indenture Act, the Company
will:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections, then
it will file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Securities Exchange Act of 1934 in
respect of a security listed and registered on a national securities
exchange as may be prescribed from time to time in such rules and
regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Company with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, within 30 days after the filing thereof
with the Trustee, in the manner and to the extent provided in Section
313(c) of the Trust Indenture Act, such summaries of any information,
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documents and reports required to be filed by the Company pursuant to
paragraphs (1) and (2) of this Section as may be required by rules and
regulations prescribed from time to time by the Commission.
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ARTICLE NINE
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
SECTION 901. Company May Consolidate, etc., Only on Certain Terms.
----------------------------------------------------
The Company shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(1) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Company substantially as an entirety shall
be a corporation organized and existing under the laws of the United States
of America, any political subdivision thereof or any State thereof and
shall expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of (and premium, if any) and interest on
all the Debt Securities and the performance of every covenant of this
Indenture on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance or transfer and such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.
SECTION 902. Successor Corporation Substituted.
---------------------------------
Upon any consolidation with or merger into any other corporation, or
any conveyance or transfer of the properties and assets of the Company
substantially as an entirety in accordance with Section 901, the successor
corporation formed by such consolidation or into which the Company is merged or
the successor Person to which such conveyance or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor had been
named as the Company herein, and thereafter the predecessor corporation shall be
relieved of all obligations and covenants under this Indenture and the Debt
Securities.
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SECTION 905. [RESERVED]
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ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 1001. Supplemental Indentures without Consent of Holders.
--------------------------------------------------
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by such successor of the obligations and covenants of
the Company herein and in the Debt Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Debt Securities (and if such covenants are
to be for the benefit of less than all series of Debt Securities, stating
that such covenants are expressly being included solely for the benefit of
such series), or to surrender any right or power herein conferred upon the
Company; or
(3) to add any additional Events of Default (and if such Events of
Default are to be applicable to less than all series of Debt Securities,
stating that such Events of Default are expressly being included solely to
be applicable to such series); or
(4) to add or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of Debt
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only
when there is no Debt Security Outstanding of any series created prior to
the execution of such supplemental indenture which is entitled to the
benefit of such provision; or
(6) to establish the form or terms of Debt Securities of any series
as permitted by Sections 202 and 301; or
(7) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Debt Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant
to the requirements of Section 710; or
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(8) to secure the Debt Securities; or
(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent with
any provision of this Indenture, provided such other provisions shall not
adversely affect the interests of the Holders of Debt Securities of any
series in any material respect; or
(10) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the Trust Indenture Act or under any similar federal
statute hereafter enacted and to add to this Indenture such other
provisions as may be expressly required under the Trust Indenture Act.
SECTION 1002. Supplemental Indentures with Consent of Holders.
-----------------------------------------------
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such supplemental indenture, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders under this Indenture of such Debt Securities; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Debt Security affected thereby,
(1) change the Stated Principal Maturity (except as permitted
pursuant to Section 312 hereof) of the principal of, or change the Stated
Maturity of any installment of interest on, any Debt Security, or reduce
the principal amount thereof or, except as permitted pursuant to Section
307(b) hereof, the interest thereon or any premium payable upon redemption
or repayment thereof, or reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 602, or adversely
affect any right of repayment at the option of a Holder of any Debt
Security, or reduce the amount of, or postpone the date fixed for, any
payment under any sinking fund or analogous provisions of any Debt
Security, or change any Place of Payment, or the coin or currency or
currency unit in which any Debt Security or the interest thereon is
payable, or change or eliminate the rights of a Holder under Section 311,
or impair the right to institute suit for the enforcement of any such
payment on or after the Stated
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Maturity thereof (or, in the case of redemption or repayment, on or after
the Redemption Date or the Repayment Date, as the case may be), or
(2) reduce the percentage in aggregate principal amount of the
Outstanding Debt Securities of any series, the consent of whose Holder is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain provisions
of this Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section or Section 613,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Debt Security affected thereby.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Debt Securities, or which
modifies the rights of the Holders of Debt Securities of such series with
respect to such covenant or other provision, shall be deemed not to affect the
rights under this Indenture of the Holders of Debt Securities of any other
series.
SECTION 1003. Execution of Supplemental Indentures.
------------------------------------
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 315 of the Trust Indenture Act) shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
SECTION 1004. Effect of Supplemental Indentures.
---------------------------------
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Debt Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
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SECTION 1005. Notice to Holders.
-----------------
Promptly after the execution by the Company and the Trustee of any
supplemental indenture under Section 1002 of this Article, the Company shall
transmit by mail a notice, setting forth in general terms the substance of such
supplemental indenture, to all Holders of Debt Securities, as the names and
addresses of such Holders appear on the Security Register for each series of
Debt Securities.
SECTION 1006. Conformity with Trust Indenture Act.
-----------------------------------
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 1007. Reference in Debt Securities to Supplemental
--------------------------------------------
Indentures.
----------
Debt Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company or
the Trustee shall so determine, new Debt Securities of any series so modified as
to conform, in the opinion of the Trustee and the Company, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and delivered by the Trustee in exchange for Outstanding Debt
Securities of such series.
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ARTICLE ELEVEN
COVENANTS
SECTION 1101. Payment of Principal, Premium and Interest.
------------------------------------------
The Company covenants and agrees for the benefit of each series of
Debt Securities that it will duly and punctually pay the principal of (and
premium, if any) and interest on the Debt Securities in accordance with the
terms of the Debt Securities and this Indenture.
SECTION 1102. Maintenance of Office or Agency.
-------------------------------
The Company will maintain in each Place of Payment for any series of
Debt Securities an office or agency where Debt Securities may be presented or
surrendered for payment, where Debt Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee as the agent to receive all
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of such Place of Payment) where the Debt
Securities of one or more series may be presented or surrendered for any or all
of such purposes, and may from time to time rescind such designations; provided
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in each Place of
Payment for any series of Debt Securities, for such purposes. The Company will
give prompt written notice to the Trustee of any such designation and any change
in the location of any such other office or agency.
Unless otherwise set forth in, or pursuant to, a Board Resolution or
indenture supplemental hereto with respect to a series of Debt Securities, the
Company hereby initially designates as the Place of Payment for each series of
Debt Securities, the Borough of Manhattan, The City and State of New York, and
initially appoints the Trustee at its Corporate Trust Office as the Company's
office or agency for each such purpose in such city.
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SECTION 1103. Money for Debt Securities Payments to Be Held in Trust.
------------------------------------------------------
If the Company shall at any time act as its own Paying Agent with
respect to any series of Debt Securities, it will, on or before each due date of
the principal of (and premium, if any) or interest on any of the Debt Securities
of such series, segregate and hold in trust for the benefit of the Persons
entitled thereto a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due until such sums shall be paid to such Persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents with respect to
any series of Debt Securities, it will, prior to or on each due date of the
principal (and premium, if any) or interest on any Debt Securities of such
series, deposit with a Paying Agent a sum sufficient to pay the principal (and
premium, if any) or interest so becoming due, such sum to be held in trust for
the benefit of the Persons entitled to such principal, premium or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent with respect to any series of Debt
Securities other than the Trustee to execute and deliver to the Trustee an
instrument in which such Paying Agent shall agree with the Trustee, subject to
the provisions of this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Debt Securities of such series in trust for
the benefit of the Persons entitled thereto until such sums shall be paid
to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Debt Securities of such series) in the making of any
payment of principal of (and premium, if any) or interest on the Debt
Securities of such series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any
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Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Unless otherwise specified as contemplated by Section 301, any money
deposited with the 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 Debt Security of any series and remaining unclaimed for two years after such
principal (and premium, if any) or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Debt Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City and State of New York, and
each Place of Payment with respect to Debt Securities of the series with respect
to which such moneys are so held or cause to be mailed to each such Holder, or
both, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed balance of such money then remaining will be repaid to
the Company.
SECTION 1104. Investment Company Act.
----------------------
The Company will not take any action if as a result thereof it would
be required to register as an investment company under the Investment Company
Act of 1940, as amended.
SECTION 1105. Officers' Certificate as to Default.
-----------------------------------
The Company will deliver to the Trustee, on or before a date not more
than four months after the end of its fiscal year ending after the date hereof,
an Officers' Certificate from its principal executive officer, principal
financial officer or principal accounting officer, stating whether or not to the
best knowledge of the signers thereof the Company is in default in the
performance and observance of any of the terms, provisions and conditions of
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder), and, if the Company shall be in default, specifying all
such defaults and the nature thereof of which they may have knowledge.
The Company will deliver written notice to the Trustee five days after
any officer thereof has knowledge of the occurrence of any event which with the
giving of notice or the lapse of time or both would become an Event of Default
under Subsection (5) of Section 601.
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ARTICLE TWELVE
REDEMPTION OF DEBT SECURITIES
SECTION 1201. Applicability of Article.
------------------------
Debt Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Debt Securities of any
series) in accordance with this Article.
SECTION 1202. Election to Redeem, Notice to Trustee.
-------------------------------------
The election of the Company to redeem any Debt Securities shall be
evidenced by a Board Resolution. In case of any redemption at the election of
the Company of less than all of the Debt Securities of any series, the Company
shall, at least 60 days prior to the Redemption Date fixed by the Company
(unless a shorter notice shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date and of the principal amount of Debt Securities
of such series to be redeemed. In the case of any redemption of Debt Securities
prior to the expiration of any restriction on such redemption provided in the
terms of such Debt Securities or elsewhere in this Indenture, the Company shall
furnish the Trustee with an Officers' Certificate evidencing compliance with
such restriction.
SECTION 1203. Selection by Trustee of Debt Securities to be Redeemed.
------------------------------------------------------
If less than all the Debt Securities of any series are to be redeemed,
the particular Debt Securities to be redeemed shall be selected not more than 60
days prior to the Redemption Date by the Trustee, from the Outstanding Debt
Securities of such series not previously called for redemption, by such method
as the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Debt Securities of such series or any integral multiple
thereof) of the principal amount of Debt Securities of such series of a
denomination larger than the minimum authorized denomination for Debt Securities
of such series.
The Trustee shall promptly notify the Company in writing of the Debt
Securities selected for redemption and, in the case of any Debt Securities
selected for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Debt Securities shall
relate, in the case of any Debt Security redeemed or to be redeemed only in
part, to the portion of the principal amount of such Debt Security which has
been or is to be redeemed.
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SECTION 1204. Notice of Redemption.
--------------------
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Debt Securities to be redeemed, at his address appearing
in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all Outstanding Debt Securities of any series are to
be redeemed, the identification (and, in the case of partial redemption,
the principal amount) of the particular Debt Securities to be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Debt Security to be redeemed, and, if
applicable, that interest thereon shall cease to accrue on and after said
date,
(5) the Place or Places of Payment where such Debt Securities are to
be surrendered for payment of the Redemption Price,
(6) that the redemption is in connection with a sinking fund, if such
is the case, and
(7) if applicable, the CUSIP number for such Debt Security.
Notice of redemption of Debt Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1205. Deposit of Redemption Price.
---------------------------
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1103) an amount of
money in the currency in which the Debt Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the Debt Securities
of such series and except, if applicable, as provided in Section 311) sufficient
to pay the Redemption Price of, and (unless otherwise specified pursuant to
Section 301 for the Debt Securities of such series and the Redemption Date is an
Interest Payment Date) accrued interest on, all the Debt Securities or portion
thereof, as the case may be, which are to be redeemed on that date.
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SECTION 1206. Debt Securities Payable on Redemption Date.
------------------------------------------
Notice of redemption having been given as aforesaid, the Debt
Securities so to be redeemed shall become due and payable and shall be paid by
the Company on the Redemption Date and at the Redemption Price therein specified
and on and after such Redemption Date (unless the Company shall default in the
payment of the Redemption Price and any accrued interest in respect of such Debt
Securities on such Redemption Date) such Debt Securities shall, if the same were
interest bearing, cease to bear interest. Upon surrender of any such Debt
Security for redemption in accordance with said notice, the Redemption Price of
such Debt Security so to be repaid shall be paid by the Company, together with
accrued interest, if any, to the Redemption Date; provided, however, that
-------- -------
installments of interest, if any, on an Interest Payment Date that is prior to
the Redemption Date (or, if specified pursuant to Section 301, that is on the
Redemption Date) shall be payable (but without interest thereon, unless the
Company shall default in payment thereof) to the Holder of such Debt Security,
or one or more Predecessor Securities, registered as such at 5:00 P.M., New York
City time, on the relevant Record Date according to its or their terms and the
provisions of Section 307.
If any Debt Security called for redemption shall not be so paid upon
surrender thereof, the Redemption Price shall, until paid, bear interest from
the Redemption Date at the rate of interest (or the manner of calculating the
rate of interest) applicable to such Debt Security on the day prior to the
Redemption Date or, in the case of an Original Issue Discount Security, at the
yield to maturity of such Original Issue Discount Security.
SECTION 1207. Debt Securities Redeemed in Part.
--------------------------------
Any Debt Security which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the Company, the Security
Registrar or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company, the Security
Registrar and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Debt Security without
service charge, a new Debt Security or Debt Securities of the same series and
Stated Maturity of any authorized denomination as requested by such Holder in
aggregate principal amount equal to and in exchange for the unredeemed portion
of the principal of the Debt Security so surrendered. If a Debt Security in
global form is so surrendered, the Company shall execute, and the Trustee shall
authenticate and deliver to the depository for such global Debt Security,
without service charge, a new Debt Security in global form in a denomination
equal to and in exchange for the unredeemed portion of the principal of the
global Debt Security so surrendered.
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ARTICLE THIRTEEN
SINKING FUNDS
SECTION 1301. Applicability of Article.
------------------------
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Debt Securities of a series except as otherwise specified
as contemplated by Section 301 for Debt Securities of such series. The minimum
amount of any sinking fund payment provided for by the terms of Debt Securities
of any series is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of Debt
Securities of any series is herein referred to as an "optional sinking fund
payment". If provided for by the terms of Debt Securities of any series, the
amount of any cash sinking fund payment may be subject to reduction as provided
in Section 1302. Each sinking fund payment shall be applied to the redemption of
Debt Securities of any series as provided for by the terms of Debt Securities of
such series.
Section 1302. Satisfaction of Sinking Fund Payments with Debt
-----------------------------------------------
Securities.
----------
The Company (1) may deliver Outstanding Debt Securities of a
series (other than any previously called for redemption) and (2) may apply as a
credit Debt Securities of a series which have been redeemed either at the
election of the Company pursuant to the terms of such Debt Securities or through
the application of permitted optional sinking fund payments pursuant to the
terms of such Debt Securities, in each case in satisfaction of all or any part
of any sinking fund payment with respect to the Debt Securities of such series
required to be made pursuant to the terms of such Debt Securities as provided
for by the terms of such series; provided that such Debt Securities have not
been previously so credited. Such Debt Securities shall be received and credited
for such purpose by the Trustee at the Redemption Price specified in such Debt
Securities for redemption through operation of the sinking fund and the amount
of such sinking fund payment shall be reduced accordingly.
SECTION 1303. Redemption of Debt Securities for Sinking Fund.
----------------------------------------------
Not less than 60 days prior to each sinking fund payment date for
any series of Debt Securities (unless a shorter period shall be satisfactory to
the Trustee), the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash, the portion thereof, if any, which is to be
satisfied by crediting Debt Securities of that series pursuant to Section 1302
and, prior to or concurrently with the delivery of such Officers' Certificate,
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will also deliver to the Trustee any Debt Securities to be so credited and not
theretofore delivered to the Trustee. Not less than 45 days (unless a shorter
period shall be satisfactory to the Trustee) before each such sinking fund
payment date the Trustee shall select the Debt Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1203 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 1204. Such notice having been
duly given, the redemption of such Debt Securities shall be made upon the terms
and in the manner stated in Sections 1205, 1206 and 1207.
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ARTICLE FOURTEEN
DEFEASANCE
SECTION 1401. Applicability of Article.
------------------------
If, pursuant to Section 301, provision is made for the defeasance of
Debt Securities of a series, then the provisions of this Article shall be
applicable except as otherwise specified as contemplated by Section 301 for Debt
Securities of such series.
SECTION 1402. Defeasance Upon Deposit of Moneys or U.S. Government
----------------------------------------------------
Obligations.
-----------
At the Company's option, either (a) the Company shall be deemed to
have been Discharged (as defined below) from its obligations with respect to
Debt Securities of any series on the 91st day after the applicable conditions
set forth below have been satisfied or (b) the Company shall cease to be under
any obligation to comply with any term, provision or condition set forth in
Section 901, with respect to Debt Securities of any series at any time after the
applicable conditions set forth below have been satisfied:
(1) the Company shall have deposited or caused to be deposited
irrevocably with the Trustee as trust funds in trust, specifically pledged
as security for, and dedicated solely to, the benefit of the Holders of the
Debt Securities of such series (i) money in the Required Currency in an
amount, or (ii) in the case of Debt Securities denominated in Dollars, U.S.
Government Obligations (as defined below), which through the payment of
interest and principal in respect thereof in accordance with their terms
will provide (without any reinvestment of such interest or principal), not
later than one day before the due date of any payment, money in an amount,
or (iii) a combination of (i) and (ii) sufficient, in the opinion (with
respect to (ii) and (iii) of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee at or prior to the time of such deposit, to pay and
discharge each installment of principal (including any mandatory sinking
fund payments) of, and premium, if any, and interest on, the Outstanding
Debt Securities of such series on the dates such installments of interest,
premium or principal are due;
(2) the Company shall have delivered to the Trustee an Officers'
Certificate certifying as to whether the Debt Securities of such series are
then listed on the New York Stock Exchange;
(3) if the Debt Securities of such series are then listed on the New
York Stock Exchange, the Company shall be delivered to the Trustee an
Opinion of Counsel to the effect
73
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that the Company's exercise of its option under this Section would not
cause such Debt Securities to be delisted;
(4) no Event of Default or event (including such deposit) which, with
notice or lapse of time, or both, would become an Event of Default with
respect to the Debt Securities of such series shall have occurred and be
continuing on the date of such deposit as evidenced to the Trustee in an
Officers' Certificate delivered to the Trustee concurrently with such
deposit;
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (and containing no assumption or qualification)
(i) Holders of the Debt Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of the
Company's exercise of its option under this Section and will be subject to
Federal income tax on the same amount and in the same manner and at the
same time as would have been the case if such option had not been
exercised, and, in the case of the Debt Securities of such series being
Discharged, accompanied by a ruling to that effect received from or
published by the Internal Revenue Service (it being understood that (A)
such Opinion shall also state that such ruling is consistent with the
conclusions reached in such Opinion and (B) the Trustee shall be under no
obligation to investigate the basis or correctness of such ruling) and (ii)
all conditions precedent to the Discharge pursuant to this Section have
been complied with;
(6) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
provision will not cause any violation of the Investment Company Act of
1940, as amended, on the part of the Company, the trust, the trust funds
representing the Company's deposit or the Trustee; and
(7) the Company shall have paid or duly provided for payment of all
amounts then due to the Trustee pursuant to Section 707.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Debt Securities of such series and to have satisfied all the obligations under
this Indenture relating to the Debt Securities of such series (and the Trustee,
at the expense of the Company, shall execute proper instruments acknowledging
the same), except (A) the rights of Holders of Debt Securities of such series to
receive, from the trust fund described in clause (1) above, payment of the
principal of, and premium, if any, and the interest on such Debt Securities when
such payments are due, (B) the Company's obligations with respect to the Debt
Securities of such series under Sections 305, 306, 1102 and 1403 and (C) the
rights, powers, trusts, duties and
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immunities of the Trustee hereunder, including without limitation, the
provisions of Section 707.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) are not callable or redeemable at the option of the issuer
thereof.
SECTION 1403. Deposited Moneys and U.S. Government Obligations to be
------------------------------------------------------
Held in Trust.
-------------
All moneys and U.S. Government Obligations deposited with the Trustee
pursuant to Section 1402 in respect of Debt Securities of a series shall be held
in trust and applied by it, in accordance with the provisions of such Debt
Securities and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Holders of such Debt Securities, of all sums due
and to become due thereon for principal, premium, if any, and interest, if any,
but such money need not be segregated from other funds except to the extent
required by law.
SECTION 1404. Repayment to Company.
--------------------
The Trustee and any Paying Agent shall promptly pay or return to the
Company upon Company Request any money and U.S. Government Obligations held by
them at any time that are not required for the payment of the principal of, and
premium, if any, and interest on, the Debt Securities of any series for which
money or U.S. Government Obligations have been deposited pursuant to Section
1402. The provisions of the last paragraph of Section 1103 shall apply to any
money held by the Trustee or any Paying Agent under this Article that remains
unclaimed for two years after the Maturity of any series of Debt Securities for
which money or U.S. Government Obligations have been deposited pursuant to
Section 1402.
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ARTICLE FIFTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1501. Applicability of Article.
------------------------
Repayment of Debt Securities of any series before their Stated
Maturity at the option of Holders thereof shall be made in accordance with the
terms of such Debt Securities and (except as otherwise specified by the terms of
such series established pursuant to Section 301) in accordance with this Article
Fifteen.
SECTION 1502. Repayment of Debt Securities.
----------------------------
Debt Securities of any series subject to repayment in whole or in part
at the option of the Holders thereof will, unless otherwise provided in the
terms of such Debt Securities, be repaid at the Repayment Price thereof,
together with interest, if any, thereon accrued to the Repayment Date specified
in or pursuant to the terms of such Debt Securities. On or prior to the
Repayment Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1103) an amount of money in the currency in
which the Debt Securities of such series are payable (except as otherwise
specified pursuant to Section 301 for the Debt Securities of such series and
except, if applicable, as provided in Section 311) sufficient to pay the
Repayment Price of and (unless otherwise specified pursuant to Section 301 for
the Debt Securities of such series and the Repayment Date is an Interest Payment
Date) accrued interest on, all the Debt Securities or portions thereof, as the
case may be, to be repaid on such date.
SECTION 1503. Exercise of Option.
------------------
Debt Securities of any series subject to repayment at the option of
the Holders thereof will contain an "Option to Elect Repayment" form. In order
to be repaid at the option of the Holder, any Debt Security so providing for
such repayment, together with the "Option to Elect Repayment" form duly
completed by the Holder (or by the Holder's attorney duly authorized in
writing), must be received by or on behalf of the Company at the Place of
Payment therefor specified in the terms of such Debt Security (or at such other
place or places of which the Company shall from time to time notify the Holders
of such Debt Securities) not more than 60 nor less than 30 calendar days prior
to the Repayment Date. If less than the entire principal amount of such Debt
Security is to be repaid in accordance with the terms of such Debt Security, the
portion of such Debt Security to be repaid, in increments of the minimum
denomination for Debt Securities of such series, and the denomination or
denominations of the Debt Security or Debt Securities to be issued to the Holder
for the portion of such Debt Security surrendered that is not to be repaid, must
be specified. Any Debt Security providing
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for repayment at the option of the Holder thereof may not be repaid in part if,
following such repayment, the unpaid principal amount of such Debt Security
would be less than the minimum denomination of Debt Securities of the series of
which such Debt Security to be repaid is a part. Except as may be otherwise
provided in any Debt Security providing for repayment at the option of the
Holder thereof, exercise of the repayment option by the Holder shall be
irrevocable unless waived by the Company.
SECTION 1504. When Debt Securities Surrendered for Repayment Become
-----------------------------------------------------
Due and Payable.
---------------
If Debt Securities of any series providing for repayment at the option
of the Holders thereof shall have been surrendered as provided in this Article
Fifteen and as provided by or pursuant to the terms of such Debt Securities,
such Debt Securities or the portions thereof, as the case may be, to be repaid
shall become due and payable and shall be paid by the Company on the Repayment
Date therein specified, and on and after such Repayment Date (unless the Company
shall default in the payment of the Repayment Price and any accrued interest in
respect of such Debt Securities on such Repayment Date) such Debt Securities
shall, if the same were interest bearing, cease to bear interest. Upon
surrender of any such Debt Security for repayment in accordance with such
provisions, the Repayment Price of such Debt Security so to be repaid shall be
paid by the Company, together with accrued interest, if any, to the Repayment
Date; provided, however, that installments of interest, if any, on an Interest
Payment Date that is prior to the Repayment Date (or, if specified pursuant to
Section 301, that is on the Repayment Date) shall be payable (but without
interest thereon, unless the Company shall default in the payment thereof) to
the Holder of such Debt Security, or one or more Predecessor Securities,
registered as such at 5:00 P.M., New York City time, on the relevant Regular
Record Date according to its or their terms and the provisions of Section 307.
If any Debt Security surrendered for repayment shall not be so repaid
upon surrender thereof, the Repayment Price shall, until paid, bear interest
from the Repayment Date at the rate of interest (or manner of calculating the
rate of interest) applicable to such Debt Security on the day prior to the
Repayment Date or, in the case of an Original Issue Discount Security, at the
yield to maturity of such Original Issue Discount Security.
SECTION 1505. Debt Securities Repaid in Part.
------------------------------
Upon surrender of any Debt Security which is to be repaid in part
only, the Company shall execute and the Trustee shall authenticate and deliver
to the Holder of such Debt Security, without service charge and at the expense
of the Company, a new Debt Security or Debt Securities of the same series, of
any authorized denomination specified by the Holder, in an aggregate principal
amount equal to and in exchange for the
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portion of the principal of such Debt Security so surrendered which is not to be
repaid.
* * * * *
78
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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seal to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: COUNTRYWIDE CREDIT INDUSTRIES, INC.
_______________________________ By: ____________________________
Title: Title:
Attest: THE BANK OF NEW YORK
_______________________________ By: ____________________________
Title: Title:
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State of California )
County of Los Angeles) SS.:
On the ____ day of _______, 1995, before me personally came
_______________________, to me known, who, being by me duly sworn, did depose
and say that he is ________________________, of Countrywide Credit Industries,
Inc., one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
_____________________
Notary Public
Seal
State of California )
County of Los Angeles) SS.:
On the ____ day of _______, 1995 before me personally came
______________________ to me known, who, being by me duly sworn, did depose and
say that he is __________________ of The Bank of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation, and that he signed his name thereto by like
authority.
_________________________
Notary Public
[Seal]
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Exhibit A
Form of election to receive payments in
U.S. Dollars or to rescind such election
The undersigned, registered owner of certificate number ____-_____
(the "Certificate"), representing [name of series of Debt Securities] (the "Debt
Securities") in an aggregate principal amount of ________________, hereby
[_] elects to receive all payments in respect of the Debt Securities in U.S.
Dollars. Subject to the terms and conditions set forth in the indenture
under which the Debt Securities were issued (the "Indenture"), this
election shall take effect on the next Record Date (as defined in the
Indenture) after this election form is received by the Trustee and shall
remain in effect until it is rescinded by the undersigned or until the
Certificate is transferred or paid in full at Maturity.
[_] rescinds the election previously submitted by the undersigned to receive
all payments in respect of the Debt Securities in U.S. Dollars represented
by the Certificate. Subject to the terms and conditions set forth in the
Indenture, this rescission shall take effect on the next Record Date (as
defined in such Indenture) after this election form is received by the
Trustee, or, in the case of Maturity of an installment of principal, the
fifteenth day immediately preceding such Maturity.
The undersigned acknowledges that, except as provided in the
Indenture, any costs incurred by or on behalf of the Company in connection with
the conversion of foreign currency into U.S. Dollars shall be borne by the
undersigned through deduction from payments required to be made to the
undersigned pursuant to the terms of the Indenture.
All capitalized terms used herein, unless otherwise defined herein,
shall have the meanings assigned to them in the Indenture.
_____________________________
(Name of Owner)
(Signature of Owner)
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EXHIBIT 4.9
SUPPLEMENTAL INDENTURE NO. 1
DATED AS OF June 15, 1995
This SUPPLEMENTAL INDENTURE NO. 1, dated as of June 15, 1995, is among
COUNTRYWIDE FUNDING CORPORATION, a New York corporation (hereinafter called the
"Company"), COUNTRYWIDE CREDIT INDUSTRIES, INC., a Delaware corporation
(hereinafter called the "Guarantor"), each having its principal office at 155
North Lake Avenue, Pasadena, California 91101, and THE BANK OF NEW YORK, a New
York corporation (the "Trustee"), having its Corporate Trust Office at 101
Barclay Street, New York, New York 10286.
RECITALS:
A. The Company, the Guarantor and the Trustee have executed and delivered
an Indenture, dated as of January 1, 1992 (the "Indenture").
B. The Company and the Guarantor have, by appropriate corporate action,
duly authorized the execution of this Supplemental Indenture No. 1 for the
purpose, in part, of providing for the issuance of Debt Securities with: (i)
Stated Principal Maturities which may be extended by the Company at its option,
(ii) interest rates or formulas which may be reset by the Company at its option
prior to the related Stated Principal Maturities or (iii) provisions pursuant to
which such Debt Securities may be repaid at the option of the Holders thereof.
C. Section 1001 of the Indenture provides that the Company and the
Guarantor, when authorized by a Board Resolution, and the Trustee may enter into
one or more indentures supplemental thereto, in form satisfactory to the
Trustee, without the consent of any Holder of Debt Securities for certain
specified purposes, including to change or eliminate any of the provisions of
the Indenture, provided that any such change or elimination shall become
--------
effective only when there is no Debt Security Outstanding of any series created
prior to the execution of such supplemental indenture which is entitled to the
benefit of any such provision.
D. The Company, the Guarantor and the Trustee, pursuant to the foregoing
authority, propose in and by this Supplemental Indenture No. 1 to amend and
supplement the Indenture in certain respects with respect to the Debt Securities
of any series created on or after the date hereof.
E. Simultaneously with the delivery of this Supplemental Indenture No. 1,
the Company is furnishing to the Trustee an Opinion of Counsel to the effect
that all conditions precedent to the execution of this Supplemental Indenture
No. 1 have been complied with.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 1 WITNESSETH:
<PAGE>
For and in consideration of the premises, it is covenanted and agreed, for
the equal and proportionate benefit of all Holders of Debt Securities of any
series created on or after the date hereof, as follows:
ARTICLE ONE
RELATION TO INDENTURE; GENERAL PROVISIONS
Section 101. Relation to Indenture. This Supplemental Indenture No. 1
---------------------
constitutes an integral part of the Indenture, but is effective only with
respect to Debt Securities issued under Indenture after June 15, 1995.
Section 102. General Provisions. For all purposes of this Supplemental
------------------
Indenture No. 1:
(1) Capitalized terms used herein without definition shall have the
meanings specified in the Indenture.
(2) All references herein to Articles and Sections, unless otherwise
specified, refer to the corresponding Articles and Sections of the
Indenture as amended by this Supplemental Indenture No. 1.
(3) The terms "hereof," "herein," "hereby," "hereto," "hereunder,"
and "herewith" refer to this Supplemental Indenture No. 1.
ARTICLE TWO
AMENDMENTS TO THE INDENTURE
Section 201. Definitions. Section 101 of the Indenture is amended so that
-----------
the following definitions are amended (in the case of clause (ii) of
"Outstanding" below), restated or added in alphabetical order:
"Maturity", when used with respect to any Debt Security, means the
--------
date on which the principal of such Debt Security becomes due and payable
as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, notice of redemption, notice of option to
elect repayment or otherwise.
"Outstanding", when used with respect to Debt Securities, means, as of
-----------
the date of determination, all Debt Securities theretofore authenticated
and delivered under this Indenture, except:
------
(ii) Debt Securities for whose payment, redemption or repayment
money in the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than the Company or the Guarantor)
in trust or set aside and segregated in trust by the Company (if
2
<PAGE>
the Company shall act as its own, or authorize the Guarantor to act
as, Paying Agent) for the Holders of such Debt Securities; provided,
--------
however, that if such Debt Securities are to be redeemed, notice of
-------
such redemption has been duly given pursuant to this Indenture and
such Debt Securities or provision therefor satisfactory to the Trustee
has been made; and
"Repayment Date" means, when used with respect to any Debt Security to
--------------
be repaid at the option of the Holder, the date fixed for such repayment by
or pursuant to this Indenture.
"Repayment Price" means, when used with respect to any Debt Security
---------------
to be repaid at the option of the Holder, the price at which it is to be
repaid by or pursuant to this Indenture.
"Stated Principal Maturity" means the Stated Maturity for the payment
-------------------------
of principal, or any installment of principal, of any Debt Security.
Section 202. Legal Holidays. Section 113 of the Indenture is replaced by
--------------
the following:
Unless otherwise specifically provided for in the applicable Debt
Securities, in any case where any Interest Payment Date, Redemption Date,
Repayment Date, sinking fund payment date, Stated Maturity, Stated
Principal Maturity or Maturity of any Debt Security shall not be a Business
Day at any Place of Payment, then the required payment of principal,
premium, if any, and/or interest need not be made at such Place of Payment
on such date, but may be made on the next succeeding Business Day at such
Place of Payment with the same force and effect as if made on the Interest
Payment Date, Redemption Date, Repayment Date, sinking fund payment date,
Stated Maturity, Stated Principal Maturity or Maturity, and no interest
shall accrue on such payment for the period from and after such Interest
Payment Date, Repayment Date, Redemption Date, sinking fund payment date,
Stated Maturity, Stated Principal Maturity or Maturity, as the case may be,
to the next succeeding Business Day.
Section 203. Forms Generally. The third paragraph of Section 201 is
---------------
hereby deleted in its entirety.
Section 204. Amount Unlimited; Issuable in Series. Subsections (3), (4)
------------------------------------
and (7) of Section 301 of the Indenture are replaced by the following,
respectively:
(3) the date or dates, or the method or methods, if any, by which
such date or dates shall be determined or extended, on which the principal
of the Debt Securities of the series is payable;
3
<PAGE>
(4) the rate or rates, if any, at which the Debt Securities of the
series shall bear interest, if any, or the method or methods, if any, by
which such rate or rates are to be determined or reset, the date or dates,
if any, from which such interest shall accrue, or the method or methods, if
any, by which such date or dates shall be determined or reset, the Interest
Payment Dates, if any, on which such interest shall be payable and the
Regular Record Dates, if any, for the interest payable on such Interest
Payment Dates, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(7) the obligation, if any, of the Company to redeem, repay or
purchase Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holders thereof, and the
period or periods within which, the price or prices at which and the other
terms and conditions upon which Debt Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
Subsection (15) is amended by deleting the "and" following the semi-colon in
the last line thereof.
Subsection (16) is amended by replacing the period at the end of the last line
thereof with "; and ".
A new subsection (17) is added as follows:
(17) the ability, if any, of the Holder of a Debt Security to renew
all or any portion of a Debt Security.
Section 205. Registration, Registration of Transfer and Exchange. Section
---------------------------------------------------
305 of the Indenture is amended by replacing the word "or" before clause (ii) of
the last paragraph thereof with a comma and adding the following after clause
(ii):
or (iii) to issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the Holder
thereof, except the portion, if any, of such Debt Security not to be so
repaid.
Section 206. Optional Interest Reset. Section 307 of the Indenture is
-----------------------
amended by inserting the subheading "(a)" before the first paragraph thereof and
adding the following before the last paragraph thereof:
(b) The provisions of this Section 307(b) may be made applicable to
any series of Debt Securities pursuant to Section 301 (with such
modifications, additions or substitutions as may be specified pursuant to
such Section 301). The interest rate (or the spread and/or spread
multiplier used to calculate such interest rate, if applicable) on any Debt
Security of such series may be reset by the Company at its option on the
date or dates specified in such Debt Security (each, an "Optional Reset
Date"). The
4
<PAGE>
Company may exercise such option with respect to any such Debt Security by
notifying the Trustee of such exercise at least 45 but not more than 60
calendar days prior to an Optional Reset Date for such Debt Security. If
the Company so notifies the Trustee of such exercise, not later than 40
calendar days prior to such Optional Reset Date the Trustee shall
transmit, in the manner provided for in Section 106, to the Holder of such
Debt Security a notice (the "Reset Notice") indicating (i) that the Company
has elected to reset the interest rate (or the spread and/or spread
multiplier used to calculate such interest rate, if applicable), (ii) such
new interest rate (or such new spread and/or spread multiplier, if
applicable) and (iii) the provisions, if any, for redemption by the Company
during the period from such Optional Reset Date to the next Optional Reset
Date or, if there is no such next Optional Reset Date, to the Stated
Principal Maturity of such Debt Security (each such period, a "Subsequent
Interest Period"), including the date or dates on which, or the period or
periods during which, and the price or prices at which such redemption may
occur during such Subsequent Interest Period.
Notwithstanding the foregoing, not later than 20 calendar days prior
to the applicable Optional Reset Date for a Debt Security, the Company may,
at its option, revoke the interest rate (or the spread and/or spread
multiplier used to calculate such interest rate, if applicable) provided
for in the Reset Notice and establish an interest rate (or a spread and/or
spread multiplier used to calculate such interest rate, if applicable) that
is higher than the interest rate (or the spread and/or spread multiplier,
if applicable) provided for in the Reset Notice, for the Subsequent
Interest Period by causing the Trustee to transmit, in the manner provided
for in Section 106, notice of such higher interest rate (or such higher
spread and/or spread multiplier, if applicable) to the Holder of such Debt
Security. Such notice shall be irrevocable. All Debt Securities with
respect to which the interest rate (or the spread and/or spread multiplier
used to calculate such interest rate, if applicable) is reset on an
Optional Reset Date, and with respect to which the Holders of such Debt
Securities have not surrendered such Debt Securities for repayment (or have
validly revoked any such surrender) pursuant to the next succeeding
paragraph, will bear such higher interest rate (or such higher spread
and/or spread multiplier, if applicable).
If the provisions of Section 307(b) are made applicable to any Debt
Security and the Company notifies the Trustee of the exercise of its option
to reset the interest rate (or the spread and/or spread multiplier used to
calculate such interest rate, if applicable) on such Debt Security on an
Optional Reset Date, the Holder of such Debt Security will have the option
to elect repayment by the Company of such Debt Security on such Optional
Reset Date at a price equal to the principal amount thereof plus any
accrued interest to such Optional Reset Date. In order to obtain repayment
of such Debt
5
<PAGE>
Security on such Optional Reset Date, the Holder must follow the procedures
set forth in Section 1503 for repayment at the option of Holders, except
that (i) the period for delivery of such Debt Security or notification to
the Trustee shall be at least 25 but not more than 35 calendar days prior
to such Optional Reset Date and (ii) if the Holder has surrendered such
Debt Security for repayment following receipt of the Reset Notice, the
Holder may revoke such surrender for repayment by written notice to the
Trustee received prior to 5:00 P.M., New York City time, on the tenth
calendar day prior to such Optional Reset Date.
Section 207. Cancellation. The first sentence of Section 309 of the
------------
Indenture is replaced by the following:
Unless otherwise provided with respect to a series of Debt Securities,
all Debt Securities surrendered for payment, redemption, repayment,
registration of transfer or exchange or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly cancelled by it.
Section 208. Payment in Currencies. The second proviso of the second
---------------------
paragraph of Section 311(a) of the Indenture is replaced by the following:
; and provided, further, that no such rescission may be made with respect
-------- -------
to payments to be made on any Debt Security with respect to which notice of
redemption has been given by the Company pursuant to Article Twelve or a
notice of option to elect repayment has been sent by a Holder or transferee
pursuant to Article Fifteen.
Section 209. Optional Extension of Stated Principal Maturity. The
-----------------------------------------------
following is added as Section 312 of the Indenture after Section 311 thereof:
SECTION 312. Optional Extension of Stated Principal Maturity.
-----------------------------------------------
The provisions of this Section 312 may be made applicable to any
series of Debt Securities pursuant to Section 301 (with such modifications,
additions or substitutions as may be specified pursuant to such Section
301). The Stated Principal Maturity of any Debt Security of such series
may be extended by the Company at its option for the period or periods
specified in such Debt Security (each such period, an "Extension Period")
up to but not beyond the date (the "Final Maturity") specified in such Debt
Security. The Company may
6
<PAGE>
exercise such option with respect to any such Debt Security by notifying
the Trustee of such exercise at least 45 but not more than 60 calendar days
prior to the Stated Principal Maturity of such Debt Security then in effect
(the "Current Stated Principal Maturity"). If the Company so notifies the
Trustee of such exercise, not later than 40 calendar days prior to the
Current Stated Principal Maturity the Trustee shall transmit, in the
manner provided for in Section 106, to the Holder of such Debt Security a
notice (the "Extension Notice") indicating (i) that the Company has elected
to extend the Current Stated Principal Maturity, (ii) the new Stated
Principal Maturity and the Final Maturity, (iii) the interest rate (or the
spread and/or spread multiplier used to calculate such interest rate, if
applicable) applicable to the Extension Period and (iv) the provisions, if
any, for redemption by the Company during such Extension Period, including
the date or dates on which, or the period or periods during which, and the
price or prices at which such redemption may occur during such Extension
Period. Upon the Trustee's transmittal of the Extension Notice to the
Holder of such Debt Security, the Current Stated Principal Maturity of such
Debt Security shall be extended automatically and, except as modified by
the Extension Notice and as described in the next two paragraphs, such Debt
Security will have the same terms as prior to the transmittal of such
Extension Notice.
Notwithstanding the foregoing, not later than 20 calendar days prior
to the Current Stated Principal Maturity of such Debt Security, the Company
may, at its option, revoke the interest rate (or the spread and/or spread
multiplier used to calculate such interest rate, if applicable) provided
for in the Extension Notice and establish an interest rate (or a spread
and/or spread multiplier used to calculate such interest rate, if
applicable) that is higher than the interest rate (or the spread and/or
spread multiplier, if applicable) provided for in the Extension Notice for
the Extension Period by causing the Trustee to transmit, in the manner
provided for in Section 106, notice of such higher interest rate (or such
higher spread and/or spread multiplier, if applicable) to the Holder of
such Debt Security. Such notice shall be irrevocable. All Debt Securities
with respect to which the Current Stated Principal Maturity is extended,
and with respect to which the Holders of such Debt Securities have not
surrendered such Debt Securities for repayment (or have validly revoked any
such surrender), will bear such higher interest rate (or such higher spread
and/or spread multiplier, if applicable).
If the provisions of this Section 312 are made applicable to any Debt
Security and the Company notifies the Trustee of the exercise of its option
to extend the Current Stated Principal Maturity of such Debt Security, the
Holder of such
7
<PAGE>
Debt Security will have the option to elect repayment of such Debt Security
by the Company on the Current Stated Principal Maturity at a price equal to
the principal amount thereof plus any accrued interest to the Current
Stated Principal Maturity. In order to obtain repayment of such Debt
Security on the Current Stated Principal Maturity, the Holder must follow
the procedures set forth in Section 1503 for repayment at the option of
Holders, except that (i) the period for delivery of such Debt Security or
notification to the Trustee shall be at least 25 but not more than 35
calendar days prior to the Current Stated Principal Maturity and (ii) if
the Holder has surrendered such Debt Security for repayment following
receipt of the Extension Notice, the Holder may revoke such surrender for
repayment prior to 5:00 P.M., New York City time, on the tenth calendar day
prior to the Current Stated Principal Maturity.
Section 210. Unconditional Right of Holders to Receive Principal, Premium
------------------------------------------------------------
(if any) and Interest. Section 608 of the Indenture is replaced by the
- ---------------------
following:
Notwithstanding any other provision in this Indenture, the Holder of
any Debt Security shall have the right, which is absolute and
unconditional, to receive payment of the principal of (and premium, if any)
and (subject to Section 307) interest on such Debt Security on the
respective Stated Maturity or Maturities expressed in such Debt Security
(or, in the case of redemption, on the Redemption Date or, in the case of
repayment, on the Repayment Date) and to institute suit for the enforcement
of any such payment, and such right shall not be impaired without the
consent of such Holder.
Section 211. Undertaking for Costs. Section 614 of the Indenture is
---------------------
amended by the replacement of the parenthetical at the end of the last sentence
of Section 614 by the following:
(or, in the case of redemption or repayment, on or after the related
Redemption Date or Repayment Date, as the case may be)
Section 212. Supplemental Indentures with Consent of Holders. Subsection
-----------------------------------------------
(1) of Section 1002 of the Indenture is replaced by the following:
(1) change the Stated Principal Maturity (except as permitted
pursuant to Section 312 hereof) of the principal of, or change the Stated
Maturity of any installment of interest on, any Debt Security, or reduce
the principal amount thereof or, except as permitted pursuant to Section
307(b) hereof, the interest thereon or any premium payable upon redemption
or repayment thereof, or reduce the amount of the principal of an Original
Issue Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 602, or adversely
affect any right of repayment at the option of a Holder of any Debt
Security, or reduce the amount of, or postpone the date fixed for, any
payment under any sinking fund or analogous provisions of any Debt
Security, or change any Place of Payment, or the coin or currency or
currency unit in which any Debt Security or the interest thereon is
payable, or change or eliminate the rights
8
<PAGE>
of a Holder under Section 311, or impair the right to institute suit for
the enforcement of any such payment on or after the Stated Maturity thereof
(or, in the case of redemption or repayment, on or after the Redemption
Date or the Repayment Date, as the case may be), or
Section 213. Deposit of Redemption Price. Section 1205 of the Indenture
---------------------------
is replaced by the following:
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1103) an
amount of money in the currency in which the Debt Securities of such series
are payable (except as otherwise specified pursuant to Section 301 for the
Debt Securities of such series and except, if applicable, as provided in
Section 311) sufficient to pay the Redemption Price of, and (unless
otherwise specified pursuant to Section 301 for the Debt Securities of such
series and the Redemption Date is an Interest Payment Date) accrued
interest on, all the Debt Securities or portion thereof, as the case may
be, which are to be redeemed on that date.
Section 214. Debt Securities Payable on Redemption Date. Section 1206 of
------------------------------------------
the Indenture is replaced by the following:
Notice of redemption having been given as aforesaid, the Debt
Securities so to be redeemed shall become due and payable and shall be paid
by the Company on the Redemption Date and at the Redemption Price therein
specified and on and after such Redemption Date (unless the Company shall
default in the payment of the Redemption Price and any accrued interest in
respect of such Debt Securities on such Redemption Date) such Debt
Securities shall, if the same were interest bearing, cease to bear
interest. Upon surrender of any such Debt Security for redemption in
accordance with said notice, the Redemption Price of such Debt Security so
to be repaid shall be paid by the Company, together with accrued interest,
if any, to the Redemption Date; provided, however, that installments of
-------- -------
interest, if any, on an Interest Payment Date that is prior to the
Redemption Date (or, if specified pursuant to Section 301, that is on the
Redemption Date) shall be payable (but without interest thereon, unless the
Company shall default in payment thereof) to the Holder of such Debt
Security, or one or more Predecessor Securities, registered as such at 5:00
P.M., New York City time, on the relevant Record Date according to its or
their terms and the provisions of Section 307.
If any Debt Security called for redemption shall not be so paid upon
surrender thereof, the Redemption Price shall, until paid, bear interest
from the Redemption Date at the rate
9
<PAGE>
of interest (or the manner of calculating the rate of interest) applicable
to such Debt Security on the day prior to the Redemption Date or, in the
case of an Original Issue Discount Security, at the yield to maturity of
such Original Issue Discount Security.
Section 215. Repayment at the Option of the Holders. The following is
--------------------------------------
added as Article Fifteen of the Indenture after Article Fourteen:
ARTICLE FIFTEEN
REPAYMENT AT THE OPTION OF HOLDERS
SECTION 1501. Applicability of Article.
------------------------
Repayment of Debt Securities of any series before their Stated
Maturity at the option of Holders thereof shall be made in accordance with
the terms of such Debt Securities and (except as otherwise specified by the
terms of such series established pursuant to Section 301) in accordance
with this Article Fifteen.
SECTION 1502. Repayment of Debt Securities.
----------------------------
Debt Securities of any series subject to repayment in whole or in part
at the option of the Holders thereof will, unless otherwise provided in the
terms of such Debt Securities, be repaid at the Repayment Price thereof,
together with interest, if any, thereon accrued to the Repayment Date
specified in or pursuant to the terms of such Debt Securities. On or prior
to the Repayment Date, the Company shall deposit with the Trustee or with a
Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1103) an amount of money
in the currency in which the Debt Securities of such series are payable
(except as otherwise specified pursuant to Section 301 for the Debt
Securities of such series and except, if applicable, as provided in Section
311) sufficient to pay the Repayment Price of and (unless otherwise
specified pursuant to Section 301 for the Debt Securities of such series
and the Repayment Date is an Interest Payment Date) accrued interest on,
all the Debt Securities or portions thereof, as the case may be, to be
repaid on such date.
SECTION 1503. Exercise of Option.
------------------
Debt Securities of any series subject to repayment at the option of
the Holders thereof will contain an "Option to Elect Repayment" form. In
order to be repaid at the option of the Holder, any Debt Security so
providing for such repayment, together with the "Option to Elect Repayment"
form duly
10
<PAGE>
completed by the Holder (or by the Holder's attorney duly authorized in
writing), must be received by or on behalf of the Company at the Place of
Payment therefor specified in the terms of such Debt Security (or at such
other place or places of which the Company shall from time to time notify
the Holders of such Debt Securities) not more than 60 nor less than 30
calendar days prior to the Repayment Date. If less than the entire
principal amount of such Debt Security is to be repaid in accordance with
the terms of such Debt Security, the portion of such Debt Security to be
repaid, in increments of the minimum denomination for Debt Securities of
such series, and the denomination or denominations of the Debt Security or
Debt Securities to be issued to the Holder for the portion of such Debt
Security surrendered that is not to be repaid, must be specified. Any Debt
Security providing for repayment at the option of the Holder thereof may
not be repaid in part if, following such repayment, the unpaid principal
amount of such Debt Security would be less than the minimum denomination of
Debt Securities of the series of which such Debt Security to be repaid is a
part. Except as may be otherwise provided in any Debt Security providing
for repayment at the option of the Holder thereof, exercise of the
repayment option by the Holder shall be irrevocable unless waived by the
Company.
SECTION 1504. When Debt Securities Surrendered for Repayment Become
-----------------------------------------------------
Due and Payable.
---------------
If Debt Securities of any series providing for repayment at the option
of the Holders thereof shall have been surrendered as provided in this
Article Fifteen and as provided by or pursuant to the terms of such Debt
Securities, such Debt Securities or the portions thereof, as the case may
be, to be repaid shall become due and payable and shall be paid by the
Company on the Repayment Date therein specified, and on and after such
Repayment Date (unless the Company shall default in the payment of the
Repayment Price and any accrued interest in respect of such Debt Securities
on such Repayment Date) such Debt Securities shall, if the same were
interest bearing, cease to bear interest. Upon surrender of any such Debt
Security for repayment in accordance with such provisions, the Repayment
Price of such Debt Security so to be repaid shall be paid by the Company,
together with accrued interest, if any, to the Repayment Date; provided,
--------
however, that installments of interest, if any, on an Interest Payment Date
-------
that is prior to the Repayment Date (or, if specified pursuant to Section
301, that is on the Repayment Date) shall be payable (but without interest
thereon, unless the Company shall default in the payment thereof) to the
Holder of such Debt Security, or one or more Predecessor Securities,
registered as such at 5:00 P.M., New York City time, on the
11
<PAGE>
relevant Regular Record Date according to its or their terms and the
provisions of Section 307.
If any Debt Security surrendered for repayment shall not be so repaid
upon surrender thereof, the Repayment Price shall, until paid, bear
interest from the Repayment Date at the rate of interest (or manner of
calculating the rate of interest) applicable to such Debt Security on the
day prior to the Repayment Date or, in the case of an Original Issue
Discount Security, at the yield to maturity of such Original Issue Discount
Security.
SECTION 1505. Debt Securities Repaid in Part.
------------------------------
Upon surrender of any Debt Security which is to be repaid in part
only, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Debt Security, without service charge and at
the expense of the Company, a new Debt Security or Debt Securities of the
same series, of any authorized denomination specified by the Holder, in an
aggregate principal amount equal to and in exchange for the portion of the
principal of such Debt Security so surrendered which is not to be repaid.
ARTICLE THREE
MISCELLANEOUS
Section 301. Continued Effectiveness of Indenture. Except as amended
------------------------------------
hereby, the Indenture shall continue in full force and effect.
Section 302. Purpose. The purpose of this Supplemental Indenture No. 1
-------
is to effect the amendments set forth herein. The Company and the Guarantor
represent and warrant that all the conditions and requirements necessary to make
this Supplemental Indenture No. 1, when duly executed and delivered, a valid and
binding agreement in accordance with its terms and for the purposes herein
expressed, have been performed and fulfilled.
Section 303. Rights of Trustee. The Trustee executes this Supplemental
-----------------
Indenture No. 1 only on the condition that it shall have and enjoy with respect
thereto all of the rights, duties, and immunities as set forth in the Indenture.
Section 304. Successors and Assigns. All covenants and agreements in
----------------------
this Supplemental Indenture No. 1 by the Company and the Guarantor shall bind
their respective successors and assigns, whether or not so expressed.
Section 305. Separability Clause. In case any provision in this
-------------------
Supplemental Indenture No. 1 shall be invalid, illegal or
12
<PAGE>
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 306. Benefits of Supplemental Indenture No. 1. Nothing in this
----------------------------------------
Supplemental Indenture No. 1 or in the related Debt Securities, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any Paying Agent and the Holders of Debt Securities of any
series created on or after the date hereof, any benefit or any legal or
equitable right, remedy or claim under this Supplemental Indenture No. 1.
Section 307. Governing Law. This Supplemental Indenture No. 1 shall be
-------------
governed by and construed in accordance with the laws of the State of New York
applicable to agreements made and to be performed in said state.
Section 308. Counterparts. This Supplemental Indenture No. 1 may be
------------
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
Section 309. Effect of Headings and Table of Contents. The Article and
----------------------------------------
Section headings herein are for convenience only and shall not affect the
construction hereof.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 1 to be duly executed and delivered, all as of the day and year
first above written.
COUNTRYWIDE FUNDING CORPORATION
Attest: By:_____________________________
Title:
__________________________
Title:
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Attest: By:_____________________________
Title:
__________________________
Title:
THE BANK OF NEW YORK
Attest: By:_____________________________
Title:
__________________________
Title:
14
<PAGE>
EXHIBIT 4.10
COUNTRYWIDE FUNDING CORPORATION
CUSIP
REGISTERED PRINCIPAL AMOUNT
NO. FX- $
MEDIUM-TERM NOTE, SERIES D
(Fixed Rate)
Due Nine Months or More
From Date of Issue
Payment of the Principal, Premium, if any, and
Interest on this Note is Unconditionally
Guaranteed by Countrywide Credit Industries, Inc.
IF THE HOLDER OF THIS NOTE IS THE DEPOSITORY TRUST COMPANY (55 WATER STREET,
NEW YORK, NEW YORK) (THE "DEPOSITARY") OR A NOMINEE OF THE DEPOSITARY, THIS
NOTE IS A GLOBAL NOTE AND THE FOLLOWING LEGEND APPLIES:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND SUCH NOTE IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY
AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
ISSUE PRICE:
ORIGINAL ISSUE DATE:
PRINCIPAL AMOUNT:
SPECIFIED CURRENCY:
MINIMUM DENOMINATION
EXCHANGE RATE AGENT:
OPTION TO RECEIVE PAYMENT
IN U.S. DOLLARS:
/_/ NO
/_/ YES
OPTIONAL REDEMPTION:
/_/ NO
/_/ YES
INITIAL REDEMPTION
DATE:
INITIAL REDEMPTION
PERCENTAGE:
ANNUAL REDEMPTION
PERCENTAGE REDUCTION:
OPTIONAL REPAYMENT:
/_/ NO
/_/ YES
OPTIONAL REPAYMENT
DATE(S):
OTHER/ADDITIONAL TERMS:
INTEREST RATE:
STATED MATURITY DATE:
INTEREST PAYMENT DATES (IF OTHER THAN
JANUARY 15 AND JULY 15):
RECORD DATES (IF OTHER THAN DECEMBER 30
AND JUNE 30):
2
<PAGE>
COUNTRYWIDE FUNDING CORPORATION, a New York corporation (the
"Company"), for value received, hereby promises to pay to ________________, or
registered assignees, the principal sum of _____________________________________
(________) on the Stated Maturity Date specified above (except to the extent
redeemed or repaid prior to the Stated Maturity Date) at the office or agency of
the Company in the Borough of Manhattan, The City of New York, State of New
York, and such other place or places as may be provided for pursuant to the
Indenture referred to below, and to pay interest semi-annually in arrears on
January 15 and July 15 of each year or such other Interest Payment Dates
specified above (each, an "Interest Payment Date"), commencing on the Interest
Payment Date next succeeding the Original Issue Date specified above and on the
Stated Maturity Date or, if applicable, any date of earlier redemption (the
"Redemption Date") or repayment (the "Repayment Date") (the earliest of the
Stated Maturity Date, the Redemption Date and the Repayment Date is hereinafter
referred to as the "Maturity Date" with respect to the principal repayable on
such date) on said principal sum at the Interest Rate specified above from and
including the most recent Interest Payment Date to which interest has been paid
or duly provided for, or, if no interest has been paid or duly provided for,
from and including the Original Issue Date, until the principal hereof becomes
due and payable; provided, however, that any payment of principal, premium, if
any, and/or interest to be made on an Interest Payment Date or on the Maturity
Date which is not a Business Day shall be made on the next Business Day with the
same force and effect as if made on such Interest Payment Date or the Maturity
Date, as the case may be, and no interest on such payment shall accrue to the
next Business Day. For purposes of this Note, "Business Day" means any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions are authorized or required by law, regulation or
executive order to close in (i) New York, New York or Los Angeles, California or
(ii) if the Specified Currency specified above is other than U.S. dollars, the
Principal Financial Center (as defined below) of the country issuing the
Specified Currency. "Principal Financial Center" means the capital city of the
country issuing such Specified Currency, except that with respect to Australian
dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs and European
Currency Units ("ECU"), the "Principal Financial Center" shall be Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will be to the person (the "Holder") in whose name
this Note (or one or more predecessor Notes) is registered at the close of
business on the December 31 or June 30 or such other Record Dates specified
above (whether or not a Business Day) (each, a "Record Date") immediately
preceding such Interest Payment Date; provided, however, that interest payable
on the Maturity Date will be payable to the person to whom principal is payable.
Unless otherwise specified above, if this Note is originally issued between a
Record Date and an Interest Payment Date, the first payment of interest
3
<PAGE>
on this Note will be made on the Interest Payment Date following the next Record
Date to the Holder hereof on such next Record Date.
Unless otherwise specified above, payment of the principal of, and
premium, if any, and interest on, this Note due on the Maturity Date will be
made in immediately available funds in the Specified Currency, upon presentation
and surrender of this Note at the Corporate Trust Office of the Trustee. If the
Specified Currency is other than U.S. dollars, this Note must be presented and
surrendered to the Trustee referred to below in time for the Trustee to make
such payment in accordance with its normal procedures.
Unless otherwise specified above, payment of interest on this Note due
on any Interest Payment Date other than the Maturity Date will be made by
mailing a check in the Specified Currency (from an account at a bank located
outside the United States if such check is payable in a Specified Currency other
than U.S. dollars) to the address of the Holder hereof as such address shall
appear in the Security Register (as defined in the Indenture) on the applicable
Record Date. Notwithstanding the foregoing, on any Interest Payment Date other
than the Maturity Date, each Holder of U.S. $10,000,000 (or the equivalent
thereof in a Specified Currency other than U.S. dollars) or more in aggregate
principal amount of Notes (whether or not having identical terms and provisions)
shall be entitled: (i) if the Specified Currency is U.S. dollars, to receive
such payment by wire transfer of immediately available funds to an account
maintained by the payee with a bank located in the United States, but only if
appropriate wire transfer instructions have been received in writing by the
Trustee not later than the Record Date immediately preceding such Interest
Payment Date and (ii) if the Specified Currency is other than U.S. dollars, to
receive such payment by wire transfer of immediately available funds to an
account maintained by the payee with a bank located in a jurisdiction in which
payment in such Specified Currency is then lawful. The Company shall pay any
administrative costs imposed by banks in connection with making payments by wire
transfer; provided, however, that any tax, assessment or other governmental
charge imposed upon payments shall be borne by the Holder hereof in respect of
which payments are made.
All payments of principal, premium, if any, and interest in respect of
this Note will be made by the Company in the Specified Currency; provided,
however, that if the Specified Currency specified above is other than U.S.
dollars, the Holder hereof may, if indicated above under "Option to Receive
Payment in U.S. Dollars," elect to receive all payments of principal, premium if
any, and/or interest in respect of this Note in U.S. dollars by delivering a
written request to the Trustee not later than the close of business on the
Record Date immediately preceding the Interest Payment Date or the fifteenth day
immediately preceding the Maturity Date, as the case may be. Upon such election
by the Holder hereof, the Company shall tender payment in U.S. dollars at the
Exchange Rate (as defined below), and any costs associated with the conversion
of the Specified
4
<PAGE>
Currency into U.S. dollars shall be borne by the Holder hereof through
deductions from such payments. The Holder's election to receive payments in U.S.
dollars will remain in effect until revoked by written notice from the Holder to
the Trustee, provided that any such revocation must be received by the Trustee
not later than the close of business on the Record Date immediately preceding
the Interest Payment Date or the fifteenth day immediately preceding the
Maturity Date, as the case may be.
Unless otherwise specified above or elsewhere herein, "Exchange Rate"
means, with respect to a Specified Currency other than ECU, the noon Dollar
buying rate for such Specified Currency for cable transfers quoted by the
Exchange Rate Agent specified above in The City of New York on the Record Date
or Special Record Date (as defined below) or the fifteenth day immediately
preceding the Maturity Date or such other date provided herein or in the
Indenture, as the case may be, as certified for customs purposes by the Federal
Reserve Bank of New York. With respect to ECU, "Exchange Rate" means the
exchange rate between dollars and ECU reported by the Council of the European
Communities on the applicable Record Date or Special Record Date with respect to
an Interest Payment Date or the fifteenth day immediately preceding the Maturity
Date or such other date provided herein or in the Indenture, as the case may be.
If any payment of principal, premium, if any, or interest on this Note
is to be made in a Specified Currency other than U.S. dollars and such Specified
Currency is not available to the Company for making such payment due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to the Holder
hereof by making such payment in U.S. dollars on the basis of the Exchange Rate
referred to below two Business Days prior to the Interest Payment Date or the
Maturity Date, as the case may be (or, if no rate is quoted for such Specified
Currency on such date, the last date such Exchange Rate is quoted). Any payment
made under such circumstances in U.S. dollars where the required payment is in a
Specified Currency other than U.S. dollars will not constitute an Event of
Default under the Indenture. For purposes of this paragraph and the immediately
succeeding paragraph, the "Exchange Rate" for a foreign currency or ECU will be
the noon Dollar selling rate for that currency or ECU for cable transfers quoted
by the Exchange Rate Agent in The City of New York, as certified for customs
purposes by the Federal Reserve Bank of New York.
If payment on this Note is required to be made in ECU and ECU is
unavailable due to the imposition of exchange controls or other circumstances
beyond the control of the Company, or is no longer used in the European Monetary
System, all payments due on that Interest Payment Date or Maturity Date with
respect to this Note shall be made in U.S. dollars. The amount so payable on any
date in ECU shall be converted into U.S. dollars, at a rate determined by the
Exchange Rate Agent as of the second Business Day prior to the date on which
such payment is due on the following basis. The component currencies of the
5
<PAGE>
ECU for this purpose (the "Components") shall be the currency amounts which were
components of the ECU as of the last date on which the ECU was used in the
European Monetary System. The equivalent of the ECU in U.S. dollars shall be
calculated by aggregating the U.S. dollar equivalents of the Components. The U.S
dollar equivalent of each of the Components shall be determined by the Exchange
Rate Agent on the basis of the most recently available Exchange Rate.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies (in appropriate proportions)
the sum of which shall be equal to the amount of the former component currency.
All determinations referred to above made by the Exchange Rate Agent
shall be at its sole discretion (except to the extent expressly provided that
any determination is subject to approval) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder of this Note and
the Exchange Rate Agent shall have no liability therefor.
Any interest not punctually paid or duly provided for with respect to
this Note ("Defaulted Interest") will forthwith cease to be payable to the
Holder of this Note on the applicable Record Date and may either be paid to the
person in whose name this Note is registered at the close of business on a
special record date (the "Special Record Date") for the payment of such
Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to
the Holder of this Note not less than ten days prior to such Special Record
Date, or may be paid at any time in any other lawful manner, all as more
completely described in the Indenture.
Unless otherwise specified above, interest will be computed on the
basis of a 360-day year of twelve 30-day months.
This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (collectively, the "Debt
Securities"), of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture, dated as of January 1, 1992, as amended,
supplemented or modified from time to time, including Supplemental Indenture No.
1 thereto dated as of June 15, 1995 (collectively, the "Indenture"), among the
Company, the Guarantor (as defined below),
6
<PAGE>
and The Bank of New York, as trustee (the "Trustee," which term includes any
successor trustee under the Indenture), to which Indenture reference is hereby
made for a description of the respective rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company, the
Guarantor and the Holders of the Notes. The Debt Securities may be issued in one
or more series, which different series (and which Debt Securities issued within
each series) may be issued in various aggregate principal amounts, may mature at
different times, may bear interest, if any, at different rates or formulas, may
be subject to different redemption or repayment provisions, if any, may be
subject to different sinking, purchase or analogous funds, if any, and may
otherwise vary as provided in the Indenture. This Note is one of a series
designated as "Medium-Term Notes, Series D, Due Nine Months or More From Date of
Issue" of the Company (collectively, the "Notes"), limited in aggregate
offering price to U.S. $500,000,000, or the equivalent thereof in one or more
Specified Currencies other than U.S. dollars.
If an Event of Default, as defined in the Indenture, with respect to
the Notes shall have occurred and be continuing, the principal hereof (or, if
this Note is an Original Issue Discount Security (as defined below), the
Amortized Face Amount (as defined below)) and accrued interest (or, if this Note
is an Original Issue Discount Security, any accrued interest the payment of
which would constitute qualified stated interest within the meaning of Treasury
Regulation Section 1.1273-1(c) under the Internal Revenue Code of 1986, as
amended (the "Code"), as in effect on _______, 1995) hereon, may be declared,
and upon such declaration shall become, due and payable in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company, the
Guarantor and the Trustee, with the consent of the Holders of a majority in
aggregate principal amount of the Debt Securities at the time outstanding of
each series to be affected, evidenced as in the Indenture provided, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the Holders of the Debt Securities; provided, however, that no
such supplemental indenture shall, without the consent of the Holder of each
outstanding Debt Security affected thereby: (i) except as otherwise permitted
in the Indenture in connection with Debt Securities for which the Stated
Maturity is extendible, change the Maturity of the principal of, or any
installment of interest on, any such Debt Security; (ii) reduce the principal
amount of any such Debt Security or, except as otherwise permitted in the
Indenture in connection with Debt Securities for which the interest rate may be
reset, the interest thereon or any premium payable upon the redemption or
repayment thereof; (iii) reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof; (iv) adversely affect any right of payment
at the option of the Holder of any such Debt Security; (v) reduce the amount of,
or postpone the date fixed for, any
7
<PAGE>
payment under any sinking fund or analogous provisions for any Debt Security;
(vi) change any Place of Payment, or the currency or currency unit of the
payment of the principal of premium, if any, or interest on any Debt Security;
(vii) change or eliminate certain rights of Holders to receive payment in a
designated currency; (viii) impair the right to institute suit for the
enforcement of any required payment on or with respect to any Debt Security;
(ix) reduce the percentage in aggregate principal amount of the Outstanding Debt
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver (of compliance with certain provisions of the Indenture or certain
defaults thereunder and their consequences) provided for in the Indenture; (x)
modify certain other provisions of the Indenture; or (xi) modify or affect in
any manner adverse to the Holders the terms and conditions of the obligations of
the Guarantor in respect of the due and punctual payment of principal of, or
premium, if any, or interest on, the Debt Securities. It is also provided in the
Indenture that, with respect to certain defaults or Events of Default regarding
the Debt Securities of any series, the Holders of a majority in aggregate
principal amount of the Debt Securities of such series at the time outstanding
may on behalf of the Holders of all of the Debt Securities of such series waive
any past default or Event of Default and its consequences, except a default in
the payment of the principal of, or premium, if any, or interest on, any Debt
Security of such series or in respect of certain other covenants or provisions
of the Indenture. Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not any notation of such consent or waiver
is made upon this Note or such other Notes.
The Guarantor, or a Subsidiary thereof, may directly assume, by a
supplemental indenture, the due and punctual payment of the principal of, and
premium, if any, and interest on, all the Debt Securities, in which case the
Company shall be released from its liability as obligor on the Debt Securities.
No reference herein to the Indenture and no reference to any provision
of this Note shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and premium, if any, and
interest on, this Note at the places, at the respective times, at the rate and
in the currency herein prescribed.
The Notes are issuable in registered form without coupons in the
minimum denomination of U.S. $100,000, or the equivalent thereof in the
Specified Currency (if other than U.S. dollars), and in integral multiples of
U.S. $1,000 in excess thereof, or the equivalent thereof in such Specified
Currency, or such other minimum denomination as specified on the face hereof.
Notes may be exchanged by the Holder hereof, without charge except for any tax,
assessment or other governmental charge imposed in connection therewith, for a
like aggregate principal amount of Notes of other authorized
8
<PAGE>
denominations in the manner and subject to the limitations provided in the
Indenture at the Corporate Trust Office of the Trustee.
If this Note is subject to Optional Redemption as specified above, the
Company may at its option redeem this Note in whole or, from time to time, in
part in increments of U.S. $1,000 (provided that any remaining principal amount
hereof shall be not less than the minimum denomination, as described above) on
or after the Initial Redemption Date at the sum of (i) 100% of the unpaid
principal amount hereof or the portion thereof redeemed (or, if this Note is an
Original Issue Discount Security, the Amortized Face Amount determined as of the
Redemption Date as provided below), plus (ii) the Initial Redemption Percentage
specified above (as adjusted for the Annual Redemption Percentage Reduction, if
applicable) multiplied by the unpaid principal amount or the portion thereof
redeemed (or, if this Note is an Original Issue Discount Security, the Issue
Price specified above, net of any portion of such Issue Price which has been
deemed paid prior to redemption (by reason of any payments, other than a payment
of qualified stated interest, in excess of original issue discount accrued to
the date of such payment), or the portion of such Issue Price (or such net
amount) proportionate to the portion of the unpaid principal amount of the Note
redeemed), plus (iii) accrued interest to the Redemption Date (or, if this Note
is an Original Issue Discount Security, any accrued interest to the Redemption
Date the payment of which would constitute qualified stated interest payments
within the meaning of Treasury Regulation Section 1.1273-1(c) under the Code).
Such Initial Redemption Percentage shall decline at each anniversary of the
Initial Redemption Date by an amount equal to the Annual Redemption Percentage
Reduction, if any, specified above, until the Initial Redemption Percentage
equals zero percent. The Company may exercise such option by causing the
Trustee to mail a notice of such redemption to the Holder hereof not less than
30 but not more than 60 days prior to the Redemption Date. In the event of
redemption of this Note in part only, a new Note or Notes for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof. If less than all of the Notes with like tenor and terms to
this Note are to be redeemed, the Notes to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.
An "Original Issue Discount Security" means any Note that has been
issued at an Issue Price lower, by an amount that equals or exceeds a de minimis
amount (as determined under United States Federal income tax rules applicable to
original issue discount instruments), than the principal amount thereof. If
this Note is an Original Issue Discount Note, the "Amortized Face Amount" of
this Note shall be the amount equal to the sum of (a) the Issue Price plus (b)
the aggregate of the portions of the original issue discount (the excess of the
amounts considered as part of the "stated redemption price at maturity" of this
Note within the meaning of Section 1273(a)(2) of the Code, whether denominated
as principal or interest, over the Issue Price of this Note) which shall
theretofore have accrued pursuant to Section 1272 of the Code (without regard to
9
<PAGE>
Section 1272(a)(7) of the Code) from the Original Issue Date of this Note to the
date of determination, minus (c) any amount considered as part of the "stated
redemption price at maturity" of such Note which has been paid on this Note from
the Original Issue Date to the date of determination.
If this Note is subject to Optional Repayment as specified above, the
Holder hereof may at its option require the Company to repay this Note in whole
or from time to time in part in increments of U.S. $1,000 or the minimum
denomination specified above (provided that any remaining principal amount
hereof shall not be less than the minimum denomination, as described above) on
any Optional Repayment Date specified above at the sum of (i) 100% of the unpaid
principal amount hereof or the portion to be repaid thereof, plus (ii) accrued
interest to the Repayment Date. In order for this Note to be repaid, this Note
must be received, together with the form entitled "Option to Elect Repayment"
duly completed, by the Trustee at its Corporate Trust Office (or such other
address of which the Company shall from time to time notify the Holders of the
Notes) not more than 60 nor less than 30 days prior to the Repayment Date.
Exercise of such repayment option by the Holder hereof shall be irrevocable,
except as otherwise provided above.
Prior to due presentment of this Note for registration of transfer,
the Company, the Guarantor, the Trustee and any agent of the Company, the
Guarantor, or the Trustee may treat the Holder hereof as the owner of this Note
for the purpose of receiving payment of the principal hereof and premium, if
any, and interest hereon and for all other purposes whatsoever, whether or not
such Note be overdue, and neither the Company, the Guarantor, the Trustee nor
any such agent of the Company, the Guarantor or the Trustee shall be affected by
any notice to the contrary.
No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on, this Note, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture against
any incorporator, stockholder, officer, director or employee, as such, past,
present or future, of the Company or the Guarantor or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.
All terms used but not defined in this Note shall have the meanings
assigned to them in the Indenture.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
10
<PAGE>
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by or on behalf of the Trustee under the Indenture.
IN WITNESS WHEREOF, Countrywide Funding Corporation has caused this
instrument to be signed in its name by the facsimile signatures of its duly
authorized officers, and has caused a facsimile of its corporate seal to be
affixed hereunto or imprinted hereon.
Date: COUNTRYWIDE FUNDING CORPORATION
[SEAL]
By:____________________________________
President
Attest:__________________________________
Secretary
11
<PAGE>
GUARANTEE
OF
COUNTRYWIDE CREDIT INDUSTRIES, INC.
For value received, Countrywide Credit Industries, Inc., a corporation
duly organized and existing under the laws of Delaware (the "Guarantor"), hereby
unconditionally guarantees to the Holder of the Note upon which this Guarantee
is endorsed the due and punctual payment of the principal of, and premium, if
any, and interest on, and sinking fund payments, if any, required with respect
to said Note, when and as the same shall become due and payable, whether on the
Stated Maturity Date, by acceleration, redemption or repayment or otherwise,
according to the terms thereof and of the Indenture referred to therein. In
case of the failure of Countrywide Funding Corporation (the "Company")
punctually to pay any such principal, premium, interest, or sinking fund
payment, the Guarantor hereby agrees to cause any such payment to be made
punctually when and as the same shall become due and payable, whether on the
Stated Maturity Date, by acceleration, redemption or repayment or otherwise, and
as if such payment were made by the Company.
The Guarantor hereby agrees that its obligations hereunder shall be as
principal and not merely as surety, and shall be absolute, irrevocable and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of said Note or said Indenture, any failure to
enforce the provisions of said Note or said Indenture, or any waiver,
modification, consent or indulgence granted to the Company with respect thereto,
by the Holder of said Note or the Trustee under said Indenture, the recovery of
any judgment against the Company or any action to enforce the same, or any other
circumstances which may otherwise constitute a legal or equitable discharge of a
surety or guarantor. The Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of merger, insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest or notice with respect to said Note or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged except by payment in full of the principal of, and
premium, if any, and interest on, or any sinking fund payment required with
respect to, said Note and the complete performance of all other obligations
contained in said Note.
The Guarantor shall be subrogated to all rights of the Holder of said
Note against the Company in respect of any amounts paid to such Holder by the
Guarantor pursuant to the provisions of this Guarantee; provided, however, that
the Guarantor shall not be entitled to enforce, or to receive any payments
arising out of or based upon, such right of subrogation until the principal of,
and premium, if any, and interest on, and any
12
<PAGE>
sinking fund payments required with respect to, all Notes of this series issued
under said Indenture shall have been paid in full and its other obligations
under said Indenture completed.
The Guarantor hereby certifies and warrants that all acts, conditions
and things required to be done and performed and to have happened precedent to
the creation and issuance of this Guarantee and to constitute the same the valid
obligation of the Guarantor have been done and performed and have happened in
due compliance with all applicable laws.
This Guarantee as endorsed on said Note shall not be entitled to any
benefit under said Indenture or become valid or obligatory for any purpose until
the certificate of authentication on said Note shall have been signed manually
by or on behalf of the Trustee under said Indenture.
13
<PAGE>
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed in facsimile by its duly authorized officer under its corporate seal.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By:_______________________________
Vice Chairman and Executive
Vice President
Attest:_____________________________
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated therein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
Date: By:____________________________
Authorized Signatory
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<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Company
to repay this Note (or portion hereof specified below) in accordance with the
terms of this Note at a price equal to the principal amount hereof (or portion
hereof to be repaid), together with interest to the Repayment Date, by payment
to the undersigned at
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address, including zip code, of the
undersigned).
In order for this Note to be repaid, the Trustee must receive at its
Corporate Trust Office at 101 Barclay Street, New York, New York 10286, or at
such other place or places of which the Company shall from time to time notify
the Holders of the Notes, not more than 60 nor less than 30 days prior to the
Repayment Date, this Note with this Option to Elect Repayment form duly
completed.
If less than the entire principal amount of this Note is to be repaid,
specify the portion hereof (which shall be in increments of U.S. $1,000 or other
increments specified above) to be repaid: ______________.
If less than the entire principal amount of this Note is to be repaid,
specify the denomination(s) of the Note(s) to be issued for the unpaid amount
(which shall be U.S. $100,000 or increments of U.S. $1,000 in excess thereof, or
such other minimum denomination specified above):______________.
Date:
_________________________________________________
Note: The signature on this Option to Elect
Repayment must correspond with the name as written
upon the face of the within instrument in every
particular, without alteration or enlargement, or
any change whatsoever.
15
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
_______________________________________________________________________________
_______________________________________________________________________________
Please Print or Typewrite Name and Address Including Zip Code of Assignee
_______________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
_______________________________________________________________________________
to transfer said Note on the books of the Company, with full power of
substitution in the premises.
Dated:_______________________ Signature:____________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement, or any change whatsoever.
16
<PAGE>
EXHIBIT 4.11
COUNTRYWIDE FUNDING CORPORATION
CUSIP
REGISTERED PRINCIPAL AMOUNT
NO. FL- MEDIUM-TERM NOTE, SERIES D $
(Floating Rate)
Due Nine Months or More
From Date of Issue
Payment of the Principal, Premium, if any, and
Interest on This Note is Unconditionally Guaranteed
by Countrywide Credit Industries, Inc.
IF THE HOLDER OF THIS NOTE IS THE DEPOSITORY TRUST COMPANY (55 WATER
STREET, NEW YORK, NEW YORK) (THE "DEPOSITARY") OR A NOMINEE OF THE
DEPOSITARY, THIS NOTE IS A GLOBAL NOTE AND THE FOLLOWING LEGEND APPLIES:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITARY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH NOTE IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE>
ISSUE PRICE:
ORIGINAL ISSUE DATE:
PRINCIPAL AMOUNT:
SPECIFIED CURRENCY:
MINIMUM DENOMINATION:
EXCHANGE RATE AGENT:
BASE RATE(S):
IF CMT RATE,
DESIGNATED CMT TELERATE PAGE:
DESIGNATED CMT MATURITY INDEX:
INDEX MATURITY:
INTEREST FACTOR CONVENTION:
SPREAD (plus or minus):
SPREAD MULTIPLIER:
MAXIMUM INTEREST RATE:
MINIMUM INTEREST RATE:
OPTION TO RECEIVE PAYMENT IN U.S. DOLLARS:
/ / NO
/ / YES
REDEMPTION:
/ / NO
/ / YES
INITIAL REDEMPTION DATE:
INITIAL REDEMPTION PERCENTAGE:
ANNUAL REDEMPTION PERCENTAGE REDUCTION:
REPAYMENT:
/ / NO
/ / YES
OPTIONAL REPAYMENT DATE(S):
STATED MATURITY DATE:
INITIAL INTEREST RATE:
INTEREST RESET DATES:
INTEREST PAYMENT DATES:
FIXED RATE COMMENCEMENT DATE:
FIXED INTEREST RATE:
CALCULATION AGENT:
OTHER/ADDITIONAL TERMS:
2
<PAGE>
COUNTRYWIDE FUNDING CORPORATION, a New York corporation (the
"Company"), for value received, hereby promises to pay to ____________, or
registered assignees, the principal sum of ____________________ (_____________)
on the Stated Maturity Date specified above (except to the extent redeemed or
repaid prior to the Stated Maturity Date) at the office or agency of the Company
in the Borough of Manhattan, The City of New York, State of New York, and such
other place or places as may be provided for pursuant to the Indenture referred
to below, and to pay interest in arrears at a rate per annum equal to the
Initial Interest Rate specified above from the Original Issue Date specified
above until the first Interest Reset Date specified above following the Original
Issue Date and thereafter, except as specified herein, at a rate determined in
accordance with the provisions below under the heading "Determination of
Commercial Paper Rate," "Determination of LIBOR," "Determination of Certificate
of Deposit Rate," "Determination of Federal Funds Rate," "Determination of Prime
Rate," "Determination of Treasury Rate," "Determination of CMT Rate" or
"Determination of 11th District Cost of Funds Rate" depending upon whether an
applicable Base Rate specified above is the Commercial Paper Rate, LIBOR, the
Certificate of Deposit Rate, the Federal Funds Rate, the Prime Rate, the
Treasury Rate, the CMT Rate or the 11th District Cost of Funds Rate,
respectively, until the principal hereof becomes due and payable. The Company
will pay interest on the Interest Payment Dates specified above (each, an
"Interest Payment Date"), commencing with the Interest Payment Date next
succeeding the Original Issue Date, and on the Stated Maturity Date or, if
applicable, any date of earlier redemption (the "Redemption Date") or repayment
(the "Repayment Date") (the earliest of the Stated Maturity Date, the Redemption
Date and the Repayment Date is hereinafter referred to as the "Maturity Date"
with respect to the principal repayable on such date); provided, however, that
if an Interest Payment Date other than the Maturity Date would fall on a day
that is not a Business Day (as defined below), such Interest Payment Date shall
be postponed to the next Business Day, except that if interest hereon is
determined by reference to LIBOR and such next Business Day falls in the next
calendar month, such Interest Payment Date shall be the immediately preceding
Business Day; provided, further, that if the Maturity Date falls on a day that
is not a Business Day, payment of principal, premium, if any, and/or interest to
be made on the Maturity Date shall be made on the next Business Day with the
same force and effect as if made on the Maturity Date, and no interest on such
payment shall accrue to the next Business Day. "Business Day" means any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which banking institutions are authorized or required by law, regulation or
executive order to close in (i) New York, New York or Los Angeles, California or
(ii) if the Specified Currency specified above is other than U.S. dollars, the
Principal Financial Center (as defined below) of the country issuing such
Specified Currency, and if interest hereon is determined by reference to LIBOR,
such day is also a London Banking Day (as defined below). "Principal Financial
Center" means the capital city of the country issuing the related Specified
Currency, except that with respect to
3
<PAGE>
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs,
and European Currency Units ("ECU"), the "Principal Financial Center" shall be
Sydney, Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
"London Banking Day" means any day on which dealings in deposits in U.S. dollars
are transacted in the London interbank market.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will be paid to the person (the "Holder") in whose
name this Note (or one or more predecessor Notes) is registered at the close of
business on the fifteenth day (whether or not a Business Day) immediately
preceding such Interest Payment Date (each, a "Record Date"); provided, however,
that interest payable on the Maturity Date will be payable to the person to whom
principal is payable. Unless otherwise specified above, if this Note is
originally issued between a Record Date and an Interest Payment Date the first
payment of interest on this Note will be made on the Interest Payment Date
following the next Record Date to the Holder hereof on such next Record Date.
Unless otherwise specified above, payment of the principal of,
premium, if any, and interest on, this Note due on the Maturity Date will be
made in immediately available funds in the Specified Currency, upon presentation
and surrender of this Note at the Corporate Trust Office of the Trustee. If the
Specified Currency is other than U.S. dollars, this Note must be presented and
surrendered to the Trustee referred to below in time for the Trustee to make
such payment in accordance with its normal procedures.
Unless otherwise specified above, payment of interest on this Note due
on any Interest Payment Date other than the Maturity Date will be made by
mailing a check in the Specified Currency (from an account at a bank located
outside the United States if such check is payable in a Specified Currency other
than U.S. dollars) to the address of the Holder hereof as such address shall
appear in the Security Register (as defined in the Indenture) on the applicable
Record Date. Notwithstanding the foregoing, on any Interest Payment Date other
than the Maturity Date, each Holder of U.S.$10,000,000 (or the equivalent
thereof in a Specified Currency other than U.S. dollars) or more in aggregate
principal amount of Notes (whether or not having identical terms and provisions)
shall be entitled: (i) if the Specified Currency is U.S. dollars, to receive
such payment by wire transfer of immediately available funds to an account
maintained by the payee with a bank located in the United States, but only if
appropriate wire transfer instructions have been received in writing by the
Trustee not later than the Record Date immediately preceding such Interest
Payment Date and (ii) if the Specified Currency is other than U.S. dollars, to
receive such payment by wire transfer of immediately available funds to an
account maintained by the payee with a bank located in a jurisdiction in which
payment in such Specified Currency is then lawful. The Company shall pay any
administrative costs imposed by banks in connection with making payments by wire
transfer; provided,
4
<PAGE>
however, that any tax, assessment or other governmental charge imposed upon
payments shall be borne by the Holder hereby in respect of which payments are
made.
All payments of principal, premium, if any, and interest, in respect
of this Note will be made by the Company in the Specified Currency; provided,
however, that if the Specified Currency specified above is other than U.S.
dollars, the Holder hereof may, if indicated above under "Option to Receive
Payment in U.S. Dollars," elect to receive all payments of principal, premium,
if any, and/or interest in respect of this Note in U.S. dollars by delivering a
written request to the Trustee not later than the close of business on the
Record Date immediately preceding the Interest Payment Date or the fifteenth day
immediately preceding the Maturity Date, as the case may be. Upon such election
by the Holder hereof, the Company shall tender payment in U.S. dollars at the
Exchange Rate (as defined below), and any costs associated with the conversion
of the Specified Currency into U.S. dollars shall be borne by the Holder hereof
through deductions from such payments. The Holder's election to receive
payments in U.S. dollars will remain in effect until revoked by written notice
from the Holder to the Trustee, provided that any such revocation must be
received by the Trustee not later than the close of business on the Record Date
immediately preceding the Interest Payment Date or the fifteenth day immediately
preceding the Maturity Date, as the case may be.
Unless otherwise specified above or elsewhere herein, "Exchange Rate"
means, with respect to a Specified Currency other than ECU, the noon Dollar
buying rate for such Specified Currency for cable transfers quoted by the
Exchange Rate Agent specified above in The City of New York on the Record Date
or Special Record Date (as defined below) or the fifteenth day immediately
preceding the Maturity Date or such other date provided herein or in the
Indenture, as the case may be, as certified for customs purposes by the Federal
Reserve Bank of New York. With respect to ECU, "Exchange Rate" means the
exchange rate between U.S. dollars and ECU reported by the Council of the
European Communities on the applicable Record Date or Special Record Date with
respect to an Interest Payment Date or the fifteenth day immediately preceding
the Maturity Date or such other date as provided herein or in the Indenture, as
the case may be.
If any payment of principal, premium, if any, or interest on this Note
is to be made in a Specified Currency other than U.S. dollars and such Specified
Currency is not available to the Company for making such payment due to the
imposition of exchange controls or other circumstances beyond the control of the
Company, the Company will be entitled to satisfy its obligations to the Holder
hereof by making such payment in U.S. dollars on the basis of the Exchange Rate
referred to below two Business Days prior to the Interest Payment Date or the
Maturity Date, as the case may be (or, if no rate is quoted for such Specified
Currency on such date, the last date such Exchange Rate is quoted). Any payment
made under such circumstances in U.S. dollars where the required
5
<PAGE>
payment is in a Specified Currency other than U.S. dollars will not constitute
an Event of Default under the Indenture. For purposes of this paragraph and the
immediately succeeding paragraph, the "Exchange Rate" for a foreign currency or
ECU will be the noon Dollar selling rate for that foreign currency or ECU for
cable transfers quoted by the Exchange Rate Agent in The City of New York, as
certified for customs purposes by the Federal Reserve Bank of New York.
If payment on this Note is required to be made in ECU and ECU is
unavailable due to the imposition of exchange controls or other circumstances
beyond the control of the Company, or is no longer used in the European Monetary
System, all payments due on that due date with respect to this Note shall be
made in U.S. dollars. The amount so payable on any date in ECU shall be
converted into U.S. dollars, at a rate determined by the Exchange Rate Agent as
of the second Business Day prior to the date on which such payment is due on the
following basis. The component currencies of the ECU for this purpose (the
"Components") shall be the currency amounts which were components of the ECU as
of the last date on which the ECU was used in the European Monetary System. The
equivalent of the ECU in U.S. dollars shall be calculated by aggregating the
U.S. dollar equivalents of the Components. The U.S dollar equivalent of each of
the Components shall be determined by the Exchange Rate Agent on the basis of
the most recently available Exchange Rate.
If the official unit of any component currency is altered by way of
combination or subdivision, the number of units of that currency as a Component
shall be divided or multiplied in the same proportion. If two or more component
currencies are consolidated into a single currency, the amounts of those
currencies as Components shall be replaced by an amount in such single currency
equal to the sum of the amounts of the consolidated component currencies
expressed in such single currency. If any component currency is divided into
two or more currencies, the amount of that currency as a Component shall be
replaced by amounts of such two or more currencies (in appropriate proportions)
the sum of which shall be equal to the amount of the former component currency.
All determinations referred to above made by the Exchange Rate Agent
shall be at its sole discretion (except to the extent expressly provided that
any determination is subject to approval) and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Holder of this Note and
the Exchange Rate Agent shall have no liability therefor.
Any interest not punctually paid or duly provided for with respect to
this Note ("Defaulted Interest") will forthwith cease to be payable to the
Holder of this Note on the applicable Record Date and may either be paid to the
person in whose name this Note is registered at the close of business on a
special record date (the "Special Record
6
<PAGE>
Date") for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to the Holder of this Note not less than ten days
prior to such Special Record Date, or may be paid at any time in any other
lawful manner, all as more completely provided in the Indenture.
This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Company (collectively, the "Debt
Securities"), of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture, dated as of January 1, 1992, as amended,
supplemented or modified from time to time, including Supplemental Indenture No.
1 thereto, dated as of June 15, 1995 (collectively, the "Indenture"), among the
Company, the Guarantor (as defined below), and The Bank of New York, as trustee
(the "Trustee," which term includes any successor trustee under the Indenture),
to which Indenture reference is hereby made for a description of the respective
rights, limitation of rights, obligations, duties and immunities thereunder of
the Trustee, the Company, the Guarantor and the Holders of the Notes. The Debt
Securities may be issued in one or more series, which different series (and
which Debt Securities issued within each series) may be issued in various
aggregate principal amounts, may mature at different times, may bear interest,
if any, at different rates or formulas, may be subject to different redemption
or repayment provisions, if any, may be subject to different sinking, purchase
or analogous funds, if any, and may otherwise vary as provided in the Indenture.
This Note is one of a series designated as "Medium-Term Notes, Series D, Due
Nine Months or More From Date of Issue" of the Company (collectively, the
"Notes"), limited in aggregate issue amount to U.S.$500,000,000 or the
equivalent thereof in one or more Specified Currencies other than U.S. dollars.
The interest payable hereon on each Interest Payment Date will include
interest accrued from and including the most recent Interest Payment Date to
which interest has been paid or duly provided for, or, if no interest has been
paid or duly provided for, from and including the Original Issue Date, as the
case may be, to, but excluding, the applicable Interest Payment Date or the
Maturity Date, as the case may be (each, an "Interest Period"). Accrued
interest will be calculated by multiplying the principal amount hereof by an
accrued interest factor. Such accrued interest factor shall be computed by
adding the interest factor calculated for each day in the Interest Period for
which accrued interest is being calculated. The interest factor for each such
day shall be computed by dividing the interest rate applicable to such day by
360 if an applicable Base Rate is the Commercial Paper Rate, LIBOR, Certificate
of Deposit Rate, Federal Funds Rate, Prime Rate or 11th District Cost of Funds
Rate or by the actual number of days in the year if an applicable Base Rate is
the Treasury Rate or CMT Rate. If more than one Base Rate is applicable to this
Note, the interest factor will be calculated in the same manner as if only the
Base Rate specified above under "Interest Factor Convention" applied.
7
<PAGE>
This Note will bear interest at the rate determined in accordance with
the provisions set forth below by reference to the applicable Base Rate, or the
lowest, highest or average of two or more Base Rates, as specified above, based
on the Index Maturity, if any, specified above (i) plus or minus the Spread, if
any, and/or (ii) multiplied by the Spread Multiplier, if any, in each case
specified above. Commencing with the first Interest Reset Date specified above,
the rate at which interest on this Note is payable shall be reset as of each
Interest Reset Date; provided, however, that (i) the interest rate in effect for
the period, if any, from the Original Issue Date to the first Interest Reset
Date will be the Initial Interest Rate and (ii) if a Fixed Rate Commencement
Date is specified above, the interest rate in effect for the period commencing
on the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate specified above or, if no Fixed Interest Rate is specified above,
the interest rate in effect on the day immediately preceding the Fixed Rate
Commencement Date.
Except as set forth in the immediately preceding paragraph, the
interest rate in effect on each day shall be (i) if such day is an Interest
Reset Date, the interest rate determined as of the Interest Determination Date
(as defined below) immediately preceding such Interest Reset Date or (ii) if
such day is not an Interest Reset Date, the interest rate determined as of the
Interest Determination Date immediately preceding the most recent Interest Reset
Date. If any Interest Reset Date would otherwise be a day that is not a
Business Day, such Interest Reset Date shall be postponed to the next Business
Day, except that if interest hereon is determined by reference to LIBOR and such
next Business Day falls in the next calendar month, such Interest Reset Date
shall be the immediately preceding Business Day.
Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified above. In addition, the interest rate hereon
shall in no event be higher than the maximum rate permitted by New York law as
the same may be modified by United States law of general application.
Subject to applicable provisions of law and except as specified
herein, on each applicable Interest Reset Date the rate of interest will be
calculated by the Calculation Agent specified below in accordance with the
provisions of the applicable heading below.
Determination of Commercial Paper Rate. If an applicable Base Rate is
the Commercial Paper Rate, the "Commercial Paper Rate" for each applicable
Interest Reset Date will be determined by the Calculation Agent as of the second
Business Day prior to such Interest Reset Date (a "Commercial Paper Rate
Determination Date") and shall be the Money Market Yield (as defined below) on
such date of the rate for commercial paper having the Index Maturity specified
above as published by the Board of Governors of the
8
<PAGE>
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication ("H.15(519)"), under the heading
"Commercial Paper." In the event that such rate is not published prior to 3:00
P.M., New York City time, on the relevant Calculation Date (as defined below),
then the Commercial Paper Rate shall be the Money Market Yield on such
Commercial Paper Rate Determination Date of the rate for commercial paper of the
specified Index Maturity as published by the Federal Reserve Bank of New York in
its daily statistical release "Composite 3:30 P.M. Quotations for U.S.
Government Securities" ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 P.M., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
Commercial Paper Rate shall be the Money Market Yield of the arithmetic mean of
the offered rates as of 11:00 A.M., New York City time, on such Commercial Paper
Rate Determination Date of three leading dealers of commercial paper in The City
of New York selected by the Calculation Agent for commercial paper of the
specified Index Maturity, placed for an industrial issuer whose bond rating is
"AA," or the equivalent, from a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by the Calculation Agent are
not quoting offered rates as mentioned in this sentence, the Commercial Paper
Rate for such Interest Reset Date will be the Commercial Paper Rate in effect on
such Commercial Paper Rate Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage)
calculated in accordance with the following formula:
Money Market Yield = D x 360 x 100
---------------
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated
corresponding to the Index Maturity specified above.
Determination of LIBOR. If an applicable Base Rate is LIBOR, "LIBOR"
for each applicable Interest Reset Date will be determined by the Calculation
Agent as follows:
(i) If "LIBOR Reuters" is specified above, on the second London
Banking Day prior to the applicable Interest Reset Date (a "LIBOR Determination
Date"), the Calculation Agent will determine LIBOR as the arithmetic mean of the
offered rates for deposits in U.S. dollars for the period of the Index Maturity
specified above which appear on the "Reuters Screen LIBO Page" at approximately
11:00 A.M., London time, on such LIBOR Determination Date. "Reuters Screen LIBO
Page" means the display designated as page "LIBO" on the Reuter Monitor Money
Rates Service (or such other page as may
9
<PAGE>
replace the LIBO Page on that service for the purpose of displaying London
interbank offered rates of major banks).
If "LIBOR Telerate" is specified above or if no other method for
determining LIBOR is provided for, on the LIBOR Determination Date, the
Calculation Agent will determine LIBOR as the rate for deposits in U.S. dollars
for the period of the Index Maturity specified above which appears on "Telerate
Page 3750" at approximately 11:00 A.M., London time, on such LIBOR Determination
Date. "Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace such page on that
service for the purpose of displaying London interbank offered rates of major
banks).
(ii) If LIBOR Reuters is specified on the face hereof and if fewer
than two offered rates for the applicable Index Maturity appear on the Reuters
Screen LIBO Page or if LIBOR Telerate is applicable for determining LIBOR and no
rate appears on Telerate Page 3750, the Calculation Agent will request the
principal London offices of each of four major banks in the London interbank
market, as selected by the Calculation Agent, to provide the Calculation Agent
with its offered quotation for deposits in U.S. dollars for the period of the
Index Maturity specified above commencing on the second London Banking Day
following such LIBOR Determination Date to prime banks in the London interbank
market at approximately 11:00 A.M., London time, on such LIBOR Determination
Date and in a principal amount equal to an amount of not less than
U.S.$1,000,000 that is representative of a single transaction in such market at
such time. If at least two such quotations are provided, LIBOR will be the
arithmetic mean of such quotations. If fewer than two quotations are provided,
LIBOR in respect of that LIBOR Determination Date will be the arithmetic mean of
rates quoted by three major banks in The City of New York selected by the
Calculation Agent (after consultation with the Company) at approximately 11:00
A.M., New York City time, on such LIBOR Determination Date for loans in U.S.
dollars to leading European banks, for the period of the Index Maturity
specified above, and in the principal amount equal to an amount of not less than
U.S.$1,000,000 that is representative for a single transaction in such market at
such time; provided, however, that if fewer than three banks selected as
aforesaid by the Calculation Agent are quoting rates as mentioned in this
sentence, LIBOR in effect for such Interest Reset Date will be LIBOR in effect
on such LIBOR Determination Date.
Determination of Certificate of Deposit Rate. If an applicable Base
Rate is the Certificate of Deposit Rate, the "Certificate of Deposit Rate" for
each applicable Interest Reset Date shall be determined by the Calculation Agent
as of the second Business Day prior to such Interest Reset Date (a "CD Rate
Determination Date") and will be the rate for negotiable certificates of deposit
having the Index Maturity specified above, as published in H.15(519) under the
heading "CDs (Secondary Market)." In the event that such rate is not published
prior to 3:00 P.M., New York City time, on the
10
<PAGE>
Calculation Date pertaining to such CD Rate Determination Date, then the
Certificate of Deposit Rate will be the rate on such CD Rate Determination Date
for negotiable certificates of deposit of the Index Maturity specified above as
published in Composite Quotations under the heading "Certificates of Deposit."
If by 3:00 P.M., New York City time, on such Calculation Date such rate is not
yet published in either H.15(519) or Composite Quotations, then the Certificate
of Deposit Rate will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York
City time, on such CD Rate Determination Date of three leading non-bank dealers
in negotiable U.S. dollar certificates of deposit in The City of New York
selected by the Calculation Agent for negotiable certificates of deposit of
major United States money center banks (in the market for negotiable
certificates of deposit) with a remaining maturity closest to the Index Maturity
specified above in a denomination of U.S.$5,000,000; provided, however, that if
the dealers selected as aforesaid by such Calculation Agent are not quoting
offered rates as mentioned in this sentence, the Certificate of Deposit Rate for
such Interest Reset Date will be the Certificate of Deposit Rate in effect on
such CD Rate Determination Date.
Determination of Federal Funds Rate. If an applicable Base Rate is
the Federal Funds Rate, the "Federal Funds Rate" for each applicable Interest
Reset Date will be determined by the Calculation Agent as of the second Business
Day prior to such Interest Reset Date (a "Federal Funds Rate Determination
Date") and shall be the rate on such Federal Funds Rate Determination Date for
Federal Funds as published in H.15(519) under the heading "Federal Funds
(Effective)." In the event that such rate is not published prior to 3:00 P.M.,
New York City time, on the Calculation Date pertaining to such Federal Funds
Rate Determination Date, the Federal Funds Rate shall be the rate on such
Federal Funds Rate Determination Date as published in Composite Quotations under
the heading "Federal Funds/Effective Rate." If by 3:00 P.M., New York City
time, on such Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the Federal Funds Rate will be
calculated by the Calculation Agent and will be the arithmetic mean of the rates
for transactions in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent as of 9:00 A.M., New York City time, on such Federal Funds Rate
Determination Date; provided, however, that if the three brokers selected as
aforesaid by the Calculation Agent are not quoting rates as mentioned in this
sentence, the Federal Funds Rate for such Interest Reset Date will be the
Federal Funds Rate in effect on such Federal Funds Rate Determination Date.
Determination of Prime Rate. If an applicable Base Rate is the Prime
Rate, the "Prime Rate" for each applicable Interest Reset Date will be
determined by the Calculation Agent as of the second Business Day prior to such
Interest Reset Date (a "Prime Rate Determination Date") and shall be the rate on
such date as such rate is published in H.15(519) under the heading "Bank Prime
Loan." If such rate is not
11
<PAGE>
published prior to 3:00 P.M., New York City time, on the Calculation Date
pertaining to the Prime Rate Determination Date, then the Calculation Agent
shall determine the Prime Rate as the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the "Reuters Screen NYMF Page"
as such bank's prime rate or base lending rate as in effect for such Prime Rate
Determination Date. "Reuters Screen NYMF Page" means the display designated as
page "NYMF" on the Reuter Monitor Money Rates Service (or such other page as may
replace the NYMF Page on that service for the purpose of displaying prime rates
or base lending rates of major United States banks). If fewer than four such
rates but more than one such rate appear on the Reuters Screen NYMF Page for
such Prime Rate Determination Date, the Calculation Agent shall determine the
Prime Rate as the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business in The City of New York on such Prime Rate Determination Date by three
major money center banks in The City of New York selected by the Calculation
Agent. If fewer than two such rates appear on the Reuters Screen NYMF Page, the
Calculation Agent will determine the Prime Rate as the arithmetic mean on the
basis of the prime rates quoted as of the close of business in The City of New
York on such Prime Rate Determination Date by three substitute banks or trust
companies that are organized and doing business under the laws of the United
States or any state thereof, have total equity capital of at least
U.S.$500,000,000 and are subject to supervision or examination by Federal or
state authorities; provided, however, that if fewer than three such substitute
banks or trust companies are quoting prime rates as mentioned in this sentence,
the Prime Rate for such Interest Reset Date will be the Prime Rate in effect on
such Prime Rate Determination Date.
Determination of Treasury Rate. If an applicable Base Rate is the
Treasury Rate, the "Treasury Rate" with respect to any Treasury Rate
Determination Date (as defined below) will be the rate for the auction held on
such Treasury Rate Determination Date of direct obligations of the United States
("Treasury bills") having the Index Maturity specified above as published in
H.15(519) under the heading "Treasury bills--auction average (investment)" or,
if not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Treasury Rate Determination Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the auction
of Treasury bills having the Index Maturity specified above are not published or
reported as provided above by 3:00 P.M., New York City time, on such Calculation
Date or if no such auction is held on the Treasury Rate Determination Date, then
the Treasury Rate shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a bond equivalent, on the basis of a year of 365
or 366 days, as applicable and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates as of approximately 3:30
12
<PAGE>
P.M., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by the
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the Index Maturity specified above; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting bid rates
as mentioned in this sentence, the Treasury Rate for such Interest Reset Date
will be the Treasury Rate in effect on such Treasury Rate Determination Date.
The "Treasury Rate Determination Date" shall be the day of the week in
which the applicable Interest Reset Date falls on which Treasury bills would
normally be auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday; provided, however, that if such auction
is held on the preceding Friday, such Friday will be the Treasury Rate
Determination Date pertaining to the Interest Reset Date occurring in the next
week; and, provided further, that if an auction falls on an Interest Reset Date,
then such Interest Reset Date will be the first Business Day following such
auction.
Determination of CMT Rate. If an applicable Base Rate is the CMT
Rate, the "CMT Rate" for each applicable Interest Reset Date will be determined
by the Calculation Agent as of the second Business Day prior to such Interest
Reset Date (the "CMT Rate Determination Date") and will be the rate displayed on
the Designated CMT Telerate Page (as defined below) under the caption
"...Treasury Constant Maturities ... Federal Reserve Board Release H.15 ...
Mondays Approximately 3:45 P.M.," under the column for the Designated CMT
Maturity Index (as defined below) for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Determination Date and (ii) if the Designated
CMT Telerate Page is 7052, the week, or the month, as applicable, ended
immediately preceding the week in which the applicable CMT Rate Determination
Date occurs. If such rate is no longer displayed on the relevant page, or if
not displayed by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such CMT Rate Determination Date, then the CMT Rate for such CMT
Rate Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
rate is no longer published in the relevant H.15(519), or if not published by
3:00 P.M., New York City time, on the Calculation Date pertaining to such CMT
Rate Determination Date, then the CMT Rate for such CMT Rate Determination Date
will be such treasury constant maturity rate for the Designated CMT Maturity
Index (or other United States Treasury rate for the Designated CMT Maturity
Index) for the CMT Rate Determination Date with respect to such Interest Reset
Date as may then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed on
the Designated CMT Telerate Page and published in the relevant H.15(519). If
such
13
<PAGE>
information is not provided by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such CMT Rate Determination Date, then the CMT Rate for the
CMT Rate Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
the CMT Rate Determination Date reported, according to their written records, by
three leading primary United States government securities dealers (each, a
"Reference Dealer") in The City of New York selected by the Calculation Agent
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for the most recently issued direct noncallable fixed rate obligations
of the United States ("Treasury Notes") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to maturity
of not less than such Designated CMT Maturity Index minus one year. If the
Calculation Agent cannot obtain three such Treasury Note quotations, the CMT
Rate for such CMT Rate Determination Date will be calculated by the Calculation
Agent and will be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 P.M., New York City
time, on the CMT Rate Determination Date of three Reference Dealers in The City
of New York (from five such Reference Dealers selected by the Calculation Agent
and eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least U.S.$100,000,000. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers selected by the Calculation Agent are quoting as
described herein, the CMT Rate for such Interest Reset Date will be the CMT Rate
in effect on such CMT Rate Determination Date. If two Treasury Notes with an
original maturity as described in the second preceding sentence have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the quotes
for the Treasury Note with the shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones
Telerate Service on the page specified above (or any other page as may replace
such page on that service for the purpose of displaying Treasury Constant
Maturities as published in H.15(519)), for the purpose of displaying Treasury
Constant Maturities as published in H.15(519). If no such page is specified
above, the Designated CMT Telerate Page shall be 7052, for the most recent week.
14
<PAGE>
"Designated CMT Maturity Index" means the original period to maturity
of the Treasury Notes (either one, two, three, five, seven, ten, twenty or
thirty years) specified above with respect to which the CMT Rate will be
calculated. If no such maturity is specified above, the Designated CMT Maturity
Index shall be two years.
Determination of 11th District Cost of Funds Rate. If an applicable
Base Rate is the 11th District Cost of Funds Rate, the "11th District Cost of
Funds Rate" for each applicable Interest Reset Date will be determined by the
Calculation Agent as of the last Business Day of the month prior to such
Interest Reset Date (the "11th District Rate Determination Date") and will be
the rate equal to the monthly weighted average cost of funds for the calendar
month preceding such 11th District Rate Determination Date as set forth under
the caption "11th District" on Telerate Page 7058 as of 11:00 A.M., San
Francisco time, on such 11th District Rate Determination Date. If such rate
does not appear on Telerate Page 7058 on any related 11th District Rate
Determination Date, the 11th District Cost of Funds Rate for such 11th District
Rate Determination Date shall be the monthly weighted average cost of funds paid
by member institutions of the Eleventh Federal Home Loan Bank District that was
most recently announced by the Federal Home Loan Bank ("FHLB") of San Francisco
as such cost of funds for the calendar month preceding the date of such
announcement. If the FHLB of San Francisco fails to announce such rate for the
calendar month immediately preceding such 11th District Rate Determination Date,
then the 11th District Cost of Funds Rate for such Interest Reset Date will be
the 11th District Cost of Funds Rate then in effect on such 11th District Rate
Determination Date.
The "Interest Determination Date" means the Commercial Paper Rate
Determination Date, the LIBOR Determination Date, the CD Rate Determination
Date, the Federal Funds Rate Determination Date, the Prime Rate Determination
Date, the Treasury Rate Determination Date, the CMT Rate Determination Date or
the 11th District Rate Determination Date, as the case may be. If interest
hereon is determined by reference to two or more Base Rates, the "Interest
Determination Date" means the most recent Business Day which is at least two
Business Days prior to the applicable Interest Reset Date on which each Base
Rate shall be determinable. Each Base Rate shall be determined and compared as
of such date, and the applicable interest rate shall take effect on the related
Interest Reset Date.
The Bank of New York shall be the Calculation Agent, unless a
different Calculation Agent is specified above. At the request of the Holder
hereof, the Calculation Agent will provide the interest rate then in effect and,
if determined, the interest rate which will become effective on the next
Interest Reset Date.
The "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be earlier of (i) the 10th calendar day after such
Interest
15
<PAGE>
Determination Date or, if such day is not a Business Day, the next
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the Maturity Date, as the case may be.
If an Event of Default, as defined in the Indenture, with respect to
the Notes shall have occurred and be continuing, the principal hereof (or, if
this Note is an Original Issue Discount Security (as defined below), the
Amortized Face Amount (as defined below)) and accrued interest (or, if this Note
is an Original Issue Discount Security, any accrued interest the payment of
which would constitute qualified stated interest payments within the meaning of
Treasury Regulation Section 1.1273-1(c) under the Internal Revenue Code of 1986,
as amended (the "Code"), as in effect on _____ __, 1995), may be declared, and
upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company, the
Guarantor and the Trustee, with the consent of the Holders of a majority in
aggregate principal amount of the Debt Securities at the time outstanding of
each series to be affected, evidenced as in the Indenture provided, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or modifying in any manner
the rights of the Holders of the Debt Securities; provided, however, that no
such supplemental indenture shall, without the consent of the Holder of each
outstanding Debt Security affected thereby: (i) except as otherwise permitted in
the Indenture in connection with Debt Securities for which the Stated Maturity
is extendible, change the Stated Maturity of the principal of, or any
installment of interest on, any such Debt Security; (ii) reduce the principal
amount of any such Debt Security or, except as otherwise permitted in the
Indenture in connection with Debt Securities for which the interest rate may be
reset, the interest thereon or any premium payable upon the redemption or
repayment thereof; (iii) reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon a declaration of
acceleration of the Maturity thereof; (iv) adversely affect any right of
repayment at the option of the Holder of any such Debt Security; (v) reduce the
amount of, or postpone the date fixed for, any payment under any sinking fund or
analogous provisions for any Debt Security; (vi) change any Place of Payment, or
the currency or currency unit of the payment of the principal of, premium, if
any, or interest on any Debt Security; (vii) change or eliminate certain rights
of Holders to receive payment in a designated currency; (viii) impair the right
to institute suit for the enforcement of any required payment on or with respect
to any Debt Security; (ix) reduce the percentage in aggregate principal amount
of the Outstanding Debt Securities of any series, the consent of whose Holders
is required for any such supplemental indenture, or the consent of whose Holders
is required for any waiver (of compliance with certain provisions of the
Indenture or certain defaults thereunder and their consequences) provided for in
the Indenture; (x) modify certain other provisions of the Indenture; or (xi)
modify or affect in any manner adverse to the Holders
16
<PAGE>
the terms and the conditions of the obligations of the Guarantor in respect of
the due and punctual payment of principal, or premium, if any, or interest on,
the Debt Securities. It is also provided in the Indenture that, with respect to
certain defaults or Events of Default regarding the Debt Securities of any
series, the Holders of a majority in aggregate principal amount of the Debt
Securities of such series at the time outstanding may on behalf of the Holders
of all of the Debt Securities of such series waive any past default or Event of
Default and its consequences, except a default in the payment of the principal
of, or premium, if any, or interest on, any Debt Security of such series or in
respect of certain other covenants or provisions of the Indenture. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not any notation of such consent or waiver is made upon this
Note or such other Notes.
The Guarantor, or a Subsidiary thereof, may directly assume, by a
supplemental indenture, the due and punctual payment of the principal of, and
premium, if any, and interest on, all the Debt Securities, in which case the
Company shall be released from its liability as obligor on the Debt Securities.
No reference herein to the Indenture and no reference to any provision
of this Note shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and premium, if any, and
interest on, this Note at the places, at the respective times, at the rate and
in the currency herein prescribed.
The Notes are issuable in registered form without coupons in the
minimum denomination of U.S.$100,000, or the equivalent thereof in the Specified
Currency (if other than U.S. dollars), and in integral multiples of U.S.$1,000
in excess thereof, or the equivalent thereof in such Specified Currency, or such
other Minimum Denomination as specified on the face hereof. Notes may be
exchanged by the Holder hereof, without charge except for any tax, assessment or
other governmental charge imposed in connection therewith, for a like aggregate
principal amount of Notes of other authorized denominations in the manner and
subject to the limitations provided in the Indenture at the Corporate Trust
Office of the Trustee.
If this Note is subject to Optional Redemption as specified above, the
Company may at its option, redeem this Note in whole or, from time to time, in
part in increments of U.S.$1,000 (provided that any remaining principal amount
hereof shall be not less than the minimum denomination, as described above) on
or after the Initial Redemption Date specified above at the sum of (i) 100% of
the unpaid principal amount hereof or the portion thereof redeemed (or, if this
Note is an Original Issue Discount Security, the Amortized Face Amount
determined as of the Redemption Date as provided below), plus (ii) the Initial
Redemption Percentage specified above (as adjusted for the
17
<PAGE>
Annual Redemption Percentage Reduction, if applicable) multiplied by the unpaid
principal amount or the portion thereof redeemed (or, if this Note is an
Original Issue Discount Security, the Issue Price specified above, net of any
portion of such Issue Price which has been deemed paid prior to redemption (by
reason of any payments, other than a payment of qualified stated interest, in
excess of the original issue discount accrued to the date of such payment), or
the portion of such Issue Price (or such net amount) proportionate to the
portion of the unpaid principal amount of the Note redeemed), plus (iii) accrued
interest to the Redemption Date (or, if this Note is an Original Issue Discount
Security, any accrued interest to the Redemption Date the payment of which would
constitute qualified stated interest payments within the meaning of Treasury
Regulation Section 1.1273-1(c) under the Code). Such Initial Redemption
Percentage shall decline at each anniversary of the Initial Redemption Date by
an amount equal to the Annual Redemption Percentage Reduction, if any, specified
above, until the Initial Redemption Percentage equals zero percent. The Company
may exercise such option by causing the Trustee to mail a notice of such
redemption to the Holder hereof not less than 30 but not more than 60 days prior
to the Redemption Date. In the event of redemption of this Note in part only, a
new Note or Notes for the unredeemed portion hereof shall be issued in the name
of the Holder hereof upon the cancellation hereof. If less than all of the Notes
with like tenor and terms to this Note are to be redeemed, the Notes to be
redeemed shall be selected by the Trustee by such method as the Trustee shall
deem fair and appropriate.
An "Original Issue Discount Security" means any Note that has been
issued at an Issue Price lower, by an amount that equals or exceeds a de minimis
amount (as determined under United States Federal income tax rules applicable to
original issue discount instruments), than the principal amount thereof. If
this Note is an Original Issue Discount Note, the "Amortized Face Amount" of
this Note shall be the amount equal to the sum of (a) the Issue Price plus (b)
the aggregate of the portions of the original issue discount (the excess of the
amounts considered as part of the "stated redemption price at maturity" of this
Note within the meaning of Section 1273(a)(2) of the Code, whether denominated
as principal or interest, over the Issue Price of this Note) which shall
theretofore have accrued pursuant to Section 1272 of the Code (without regard to
Section 1272(a)(7) of the Code) from the Original Issue Date of this Note to the
date of determination, minus (c) any amount considered as part of the "stated
redemption price at maturity" of this Note which has been paid on this Note from
the Original Issue Date to the date of determination.
If this Note is subject to Optional Repayment as specified above, the
Holder hereof may at its option require the Company to repay this Note in whole
or from time to time in part in increments of U.S.$1,000 or the minimum
denomination specified above (provided that any remaining principal amount
hereof shall not be less than the minimum denomination, as described above) on
any Optional Repayment Date specified above at the sum of (i) 100% of the unpaid
principal amount hereof or the portion to be repaid
18
<PAGE>
thereof, plus (ii) accrued interest to the Repayment Date. In order for this
Note to be repaid, this Note must be received, together with the form entitled
"Option to Elect Repayment" duly completed, by the Trustee at its Corporate
Trust Office (or such other address of which the Company shall from time to time
notify the Holders of the Notes) not more than 60 nor less than 30 days prior to
the Repayment Date. Exercise of such repayment option by the Holder hereof shall
be irrevocable, except as otherwise provided above.
Prior to due presentment of this Note for registration of transfer,
the Company, the Guarantor, the Trustee and any agent of the Company, the
Guarantor, or the Trustee may treat the Holder hereof as the owner of this Note,
for the purpose of receiving payment of the principal hereof and premium, if
any, and interest hereon and for all other purposes whatsoever, whether or not
such Note be overdue, and neither the Company, the Guarantor, the Trustee nor
any such agent of the Company, the Guarantor, or the Trustee shall be affected
by any notice to the contrary.
No recourse shall be had for the payment of the principal of, or
premium, if any, or interest on, this Note, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer, director or employee, as such, past,
present, or future, of the Company or the Guarantor or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
All terms used but not defined in this Note shall have the meanings
assigned to them in the Indenture.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by or on behalf of the Trustee under the Indenture.
19
<PAGE>
IN WITNESS WHEREOF, Countrywide Funding Corporation has caused this
instrument to be signed in its name by the facsimile signatures of its duly
authorized officers, and has caused a facsimile of its corporate seal to be
affixed hereunto or imprinted hereon.
Date: COUNTRYWIDE FUNDING CORPORATION
[SEAL]
By:
----------------------------
President
Attest:
--------------------------------
Secretary
20
<PAGE>
GUARANTEE
OF
COUNTRYWIDE CREDIT INDUSTRIES, INC.
For value received, Countrywide Credit Industries, Inc., a corporation
duly organized and existing under the laws of Delaware (the "Guarantor"), hereby
unconditionally guarantees to the Holder of the Note upon which this Guarantee
is endorsed the due and punctual payment of the principal of, and premium, if
any, and interest on, and sinking fund payments, if any, required with respect
to said Note, when and as the same shall become due and payable, whether on the
Stated Maturity Date, by acceleration, redemption or repayment or otherwise,
according to the terms thereof and of the Indenture referred to therein. In
case of the failure of Countrywide Funding Corporation (the "Company")
punctually to pay any such principal, premium, interest, or sinking fund
payment, the Guarantor hereby agrees to cause any such payment to be made
punctually when and as the same shall become due and payable, whether on the
Stated Maturity Date, by acceleration, redemption or repayment, or otherwise,
and as if such payment were made by the Company.
The Guarantor hereby agrees that its obligations hereunder shall be as
principal and not merely as surety, and shall be absolute, irrevocable and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of said Note or said Indenture, any failure to
enforce the provisions of said Note or said Indenture, or any waiver,
modification, consent or indulgence granted to the Company with respect thereto,
by the Holder of said Note or the Trustee under said Indenture, the recovery of
any judgment against the Company or any action to enforce the same, or any other
circumstances which may otherwise constitute a legal or equitable discharge of a
surety or guarantor. The Guarantor hereby waives diligence, presentment, demand
of payment, filing of claims with a court in the event of merger, insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest or notice with respect to said Note or the indebtedness
evidenced thereby and all demands whatsoever, and covenants that this Guarantee
will not be discharged except by payment in full of the principal of, and
premium, if any, and interest on, or any sinking fund payment required with
respect to, said Note and the complete performance of all other obligations
contained in said Note.
The Guarantor shall be subrogated to all rights of the Holder of said
Note against the Company in respect of any amounts paid to such Holder by the
Guarantor pursuant to the provisions of this Guarantee; provided, however, that
the Guarantor shall not be entitled to enforce, or to receive any payments
arising out of or based upon, such
21
<PAGE>
right of subrogation until the principal of, and premium, if any, and interest
on, and any sinking fund payments required with respect to, all Notes of this
series issued under said Indenture shall have been paid in full and its other
obligations under said Indenture completed.
The Guarantor hereby certifies and warrants that all acts, conditions
and things required to be done and performed and to have happened precedent to
the creation and issuance of this Guarantee and to constitute the same the valid
obligation of the Guarantor have been done and performed and have happened in
due compliance with all applicable laws.
This Guarantee as endorsed on said Note shall not be entitled to any
benefit under said Indenture or become valid or obligatory for any purpose until
the certificate of authentication on said Note shall have been signed manually
by or on behalf of the Trustee under said Indenture.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York.
22
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed in facsimile by its duly authorized officer under its corporate seal.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By:
-------------------------------
Vice Chairman and Executive
Vice President
Attest:
-----------------------------
Secretary
CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities of the series designated therein referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
Date: By:
---------------------------------
Authorized Signatory
23
<PAGE>
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the Company
to repay this Note (or portion hereof specified below) in accordance with the
terms of this Note at a price equal to the principal amount hereof (or portion
hereof to be repaid), together with interest to the Repayment Date, by payment
to the undersigned at
________________________________________________________________________________
________________________________________________________________
(Please print or typewrite name and address, including zip code, of
the undersigned).
In order for this Note to be repaid, the Trustee must receive at its
Corporate Trust Office at 101 Barclay Street, New York, New York 10286, or at
such other place or places of which the Company shall from time to time notify
the Holders of the Notes, not more than 60 nor less than 30 days prior to the
Repayment Date, this Note with this Option to Elect Repayment form duly
completed.
If less than the entire principal amount of this Note is to be repaid,
specify the portion hereof (which shall be in increments of U.S.$1,000 or other
increments specified above) to be repaid: ______________.
If less than the entire principal amount of this Note is to be repaid,
specify the denomination(s) of the Note(s) to be issued for the unpaid amount
(which shall be U.S.$100,000 or increments of U.S.$1,000 in excess thereof, or
such other minimum denomination specified above):______________.
Date:
______________________________________________________
Note: The signature on this Option to Elect Repayment
must correspond with the name as written upon the face
of the within instrument in every particular, without
alteration or enlargement, or any change whatsoever.
24
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF
ASSIGNEE
- ---------------------------------
______________________________________________________________________________
Please Print or Typewrite Name and Address Including Zip Code of Assignee
______________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
________________________________________________________________________________
appointing to transfer said Note on the books of the Company, with full power of
____________________________
substitution in the premises.
Dated: Signature:
----------------------- --------------------------------------
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement, or any change whatsoever.
25
<PAGE>
EXHIBIT 8.1
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004-1980
212-859-8000
FAX 212-859-4000
WRITER'S DIRECT LINE
June 16, 1995 212-859-8171
(FAX: 212-859-8588)
Countrywide Funding Corporation
Countrywide Credit Industries, Inc.
155 North Lake Avenue
Pasadena, California 91101
Ladies and Gentlemen:
We have acted as your special counsel in connection with the Prospectus and
Prospectus Supplement dated , 1995 (the "Prospectus Supplement")
pertaining to your registration statement on Form S-3 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), filed with the Securities and Exchange Commission, with respect to the
public offering of Medium Term Notes, Series D, of Countrywide Funding
Corporation (the "Notes").
We hereby confirm, based on the assumptions and subject to the qualifications
and limitations set forth therein, that the statements in the section of the
Prospectus Supplement captioned "Certain Federal Income Tax Considerations," to
the extent that such statements constitute statements of law, reflect our
opinion regarding the material federal income tax consequences of the purchase,
ownership, and disposition of the Notes. No opinion is expressed on matters
other than those specifically referred to herein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.
The opinion expressed herein is solely for your benefit and may not be relied
upon in any manner or for any purpose by any other person and may not be quoted
in whole or in part without our prior written consent.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Lee S. Parker
-------------------------------------
Lee S. Parker
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We have issued our report dated April 18, 1995, accompanying the consolidated
financial statements and schedules of Countrywide Credit Industries, Inc. and
Subsidiaries appearing in the Annual Report on Form 10-K for the year ended
February 28, 1995, which is incorporated by reference in this Amendment No.2 to
the Registration Statement (File No. 33-59559) and included in the Prospectus.
We consent to the incorporation by reference in this Amendment No. 2 to the
Registration Statement and inclusion in the Prospectus of the aforementioned
report and to the use of our name as it appears under the caption
"Experts."
GRANT THORNTON LLP
/s/ GRANT THORNTON LLP
Los Angeles, California
June 16, 1995
