<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996
REGISTRATION NOS. 333-14111, 333-14111-01, 333-14111-02 AND 333-14111-03
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 4 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
COUNTRYWIDE CAPITAL I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE C/O COUNTRYWIDE CREDIT INDUSTRIES, INC. APPLIED FOR
(STATE OR OTHER 155 NORTH LAKE AVENUE (I.R.S. EMPLOYER
JURISDICTION PASADENA, CA 91101 IDENTIFICATION NO.)
OF INCORPORATION OR (818) 304-8400
ORGANIZATION)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
COUNTRYWIDE CAPITAL II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE C/O COUNTRYWIDE CREDIT INDUSTRIES, INC. APPLIED FOR
(STATE OR OTHER 155 NORTH LAKE AVENUE (I.R.S. EMPLOYER
JURISDICTION PASADENA, CA 91101 IDENTIFICATION NO.)
OF INCORPORATION OR (818) 304-8400
ORGANIZATION)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
COUNTRYWIDE HOME LOANS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 155 NORTH LAKE AVENUE 13-2631719
(STATE OR OTHER PASADENA, CA 91101 (I.R.S. EMPLOYER
JURISDICTION (818) 304-8400 IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 155 NORTH LAKE AVENUE 13-2641992
(STATE OR OTHER PASADENA, CA 91101 (I.R.S. EMPLOYER
JURISDICTION (818) 304-8400 IDENTIFICATION NO.)
OF INCORPORATION OR
ORGANIZATION)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
---------------
DAVID S. LOEB
DIRECTOR
COUNTRYWIDE HOME LOANS, INC.
AND
PRESIDENT AND CHAIRMAN OF THE BOARD
COUNTRYWIDE CREDIT INDUSTRIES, INC.
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 LLP
JACOBSON ONE WORLD TRADE CENTER
ONE NEW YORK PLAZA NEW YORK, NEW YORK 10048
NEW YORK, NEW YORK 10004-1980 (212) 839-5300
(212) 859-8000
---------------
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.
(Continued on next page)
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<PAGE>
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(Continued from previous page)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------
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. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PER UNIT(1)(2) PRICE(1)(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Trust Pass-through Securities ("Trust
Capital Securities") of Countrywide Capital I
and Countrywide Capital II......................
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Subordinated Debt Securities of Countrywide Home
Loans, Inc......................................
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Guarantees of Trust Capital Securities of
Countrywide Capital I and Countrywide Capital II
by Countrywide Credit Industries, Inc. and
certain back-up undertakings ("Trust Capital
Securities Guarantees") (3)(4)..................
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Guarantees of Subordinated Debt Securities of
Countrywide Home Loans, Inc. by Countrywide
Credit Industries, Inc. ("Debt Guarantees")
(4).............................................
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Total............................................ 100% $300,000,000 $90,909.10(5)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o). The aggregate public offering price of the Trust
Capital Securities of Countrywide Capital I and Countrywide Capital II and
the Subordinated Debt Securities of Countrywide Home Loans, Inc.
registered hereby will not exceed $300,000,000.
(2) Exclusive of accrued interest and distributions, if any.
(3) Includes the rights of holders of the Trust Capital Securities under the
Trust Capital Securities Guarantees and certain back-up undertakings
comprised of obligations of Countrywide Home Loans, Inc., guaranteed by
Countrywide Credit Industries, Inc., to provide certain indemnities in
respect of, and pay and be responsible for certain costs, expenses, debts
and liabilities of, each of Countrywide Capital I and Countrywide Capital
II (other than with respect to the Trust Capital Securities) and such
obligations of Countrywide Credit Industries, Inc. as set forth in the
Indenture relating to Subordinated Debt Securities registered hereby and
an amended and restated declaration of trust of each of Countrywide
Capital I and Countrywide Capital II under which the Trust Capital
Securities of such trust would be issued. The Trust Capital Securities
Guarantees, when taken together with Countrywide Home Loans, Inc.'s
obligations under the Subordinated Debt Securities and the Indenture,
including its obligations to pay costs, expenses, debts and other
liabilities of Countrywide Capital I and Countrywide Capital II (other
than with respect to the Trust Capital Securities), and Countrywide Credit
Industries, Inc.'s obligations under the Debt Guarantees, the Indenture
and the amended and restated declarations of trust, will provide a full
and unconditional guarantee on a subordinated basis by Countrywide Credit
Industries, Inc. of amounts due on the Trust Capital Securities.
(4) No separate consideration will be received for any Trust Capital
Securities Guarantees or Debt Guarantees or back-up undertakings.
(5) Previously paid.
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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 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
DECEMBER 9, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated , 1996)
$
COUNTRYWIDE CAPITAL I
% CAPITAL TRUST PASS-THROUGH SECURITIES SM (TRUPS SM)*
(LIQUIDATION AMOUNT $1,000 PER SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED AS TO DISTRIBUTIONS AND OTHER PAYMENTS BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
THE PROCEEDS OF WHICH ARE TO BE INVESTED IN
% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES DUE DECEMBER 1, 2026 OF
COUNTRYWIDE HOME LOANS, INC.
The % Capital Trust Pass-through Securities SM* (the "Capital Securities")
offered hereby represent undivided beneficial interests in the assets of
Countrywide Capital I, a statutory business trust formed under the laws of the
State of Delaware ("Countrywide Capital Trust" or the "Trust"). Countrywide
Credit Industries, Inc., a Delaware corporation ("CCI"), will own all the
common securities (the "Common Securities" and, together with the Capital
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE CAPITAL SECURITIES,
INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE
SUBORDINATED DEBT SECURITIES AND THE CAPITAL SECURITIES MAY BE DEFERRED AND THE
RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
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.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT TRUST(1)(3)
<S> <C> <C> <C>
Per Capital Security....................... $ (2) $
Total(s)................................... $ (2) $
</TABLE>
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(1) Plus accrued distributions, if any, from , 1996.
(2) In view of the fact that the proceeds of the sale of the Capital Securities
will be invested in the Subordinated Debt Securities, the Company has
agreed to pay to the Underwriter as compensation (the "Underwriter's
Compensation") for its arranging the investment therein of such proceeds
$ per Capital Security (or $ in the aggregate). See "Underwriting."
(3) Before deducting expenses payable by the Company estimated to be $ .
The Capital Securities are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Capital Securities will be made through the
facilities of The Depository Trust Company on or about , 1996.
- -----
* Salomon Brothers Inc has filed applications with the United States Patent and
Trademark Office for the registration of the Capital Trust Pass-through
Securities and TruPS service marks.
----------------------
SALOMON BROTHERS INC
-----------------------------------------------------------------------
The date of this Prospectus Supplement is , 1996.
<PAGE>
(continued from previous page)
Countrywide Capital Trust. Countrywide Capital Trust exists for the sole
purpose of issuing the Trust Securities and investing the gross proceeds
thereof in % Junior Subordinated Deferrable Interest Debentures due December
1, 2026 (the "Subordinated Debt Securities") of Countrywide Home Loans, Inc.,
a New York corporation and wholly-owned subsidiary of CCI ("CHL" or the
"Company"), and the Debt Guarantee (as defined below). The Subordinated Debt
Securities are fully and unconditionally guaranteed (the "Debt Guarantee") on
a subordinated basis as to payment of principal, premium, if any, and interest
by CCI. The Subordinated Debt Securities, the Debt Guarantee, the Capital
Securities and the Capital Securities Guarantee (as defined below) in respect
of which this Prospectus Supplement is being delivered shall be referred to
herein as the "Offered Securities." The Subordinated Debt Securities when
issued will be unsecured obligations of the Company and will be subordinate
and junior in right of payment to certain other indebtedness of the Company,
as described herein. Upon an event of default under the Declaration (as
defined herein), the holders of Capital Securities will have a preference over
the holders of the Common Securities with respect to payments in respect of
distributions and payments upon redemption, liquidation and otherwise.
Holders of the Capital Securities are entitled to receive cumulative cash
distributions at a rate of % per annum of the liquidation amount of $1,000
per Capital Security, accruing from , 1996 and payable semiannually in
arrears on June 1 and December 1 of each year, commencing June 1, 1997
("distributions"). The payment of distributions out of moneys held by
Countrywide Capital Trust, payments on liquidation of Countrywide Capital
Trust and payments upon the redemption of Capital Securities, as set forth
below, are guaranteed by CCI (the "Capital Securities Guarantee") as described
herein and under "Description of the Capital Securities Guarantees" in the
accompanying Prospectus. The Capital Securities Guarantee covers payments of
distributions and other payments on the Capital Securities only if and to the
extent that Countrywide Capital Trust has funds available therefor, which
funds will not be available except to the extent the Company has made payments
of interest or principal or other payments on the Subordinated Debt Securities
or CCI has made such payments pursuant to the Debt Guarantee held by
Countrywide Capital Trust as its sole assets. The Capital Securities
Guarantee, when taken together with the Company's obligations under the
Subordinated Debt Securities and the Indenture (as defined herein), including
the Company's obligations to pay costs, expenses, debts and other obligations
of Countrywide Capital Trust (other than with respect to the Trust
Securities), and CCI's obligations under the Debt Guarantee, the Indenture and
the Declaration, provide a full and unconditional guarantee on a subordinated
basis by CCI of amounts due on the Capital Securities. See "Risk Factors--
Capital Securities Guarantee Covers Distributions and Other Payments Only to
the Extent the Trust Has Available Funds; Related Remedies" herein. The
obligations of CCI under the Capital Securities Guarantee are subordinate and
junior in right of payment to all present and future liabilities of CCI,
including the Debt Guarantee. The obligations of the Company under the
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness (as defined herein) of the Company,
which aggregated approximately $5.5 billion at August 31, 1996, and rank pari
passu with the obligations to or rights of the Company's other general
unsecured creditors. The obligations of CCI under the Debt Guarantee are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of CCI and are also effectively subordinate to claims of
creditors of CCI's subsidiaries (including the Company). CCI had $200 million
of Senior Indebtedness as of August 31, 1996 (excluding indebtedness of
subsidiaries guaranteed by CCI), and the indebtedness of CCI's subsidiaries
(including the Senior Indebtedness and other indebtedness of the Company)
aggregated approximately $5.5 billion at August 31, 1996. There are no terms
in the Subordinated Debt Securities, the Debt Guarantee, the Capital
Securities or the Capital Securities Guarantee that limit the ability of CCI
or its subsidiaries (including the Company) to incur additional indebtedness,
including indebtedness that ranks senior to the Subordinated Debt Securities,
the Debt Guarantee and the Capital Securities Guarantee. The Subordinated Debt
Securities purchased by Countrywide Capital Trust may be subsequently
distributed pro rata to holders of the Capital Securities and Common
Securities in connection with the dissolution of Countrywide Capital Trust,
upon the occurrence of certain events.
S-2
<PAGE>
The distribution rate and the distribution payment dates and other payment
dates for the Capital Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Subordinated Debt
Securities, which, together with the Debt Guarantee, will be the sole assets
of Countrywide Capital Trust. As a result, if no principal or interest is paid
on the Subordinated Debt Securities, and no payments are made under the Debt
Guarantee, no amounts will be paid on the Capital Securities. If the Company
does not make principal or interest payments on the Subordinated Debt
Securities and CCI does not make such payments under the Debt Guarantee,
Countrywide Capital Trust will not have sufficient funds to make distributions
on the Capital Securities, and the Capital Securities Guarantee will not apply
to distributions for which Countrywide Capital Trust has insufficient funds
available.
So long as the Company is not in default in the payment of interest that has
become due and payable on the Subordinated Debt Securities and no accrued
interest from a prior, completed Extension Period is unpaid, the Company has
the right to defer payments of interest on the Subordinated Debt Securities by
extending the interest payment period on the Subordinated Debt Securities at
any time and from time to time for up to 10 consecutive semiannual periods
(each such interest payment extension period, an "Extension Period"). If
interest payments are so deferred, distributions on the Capital Securities
will also be deferred. During any such Extension Period, distributions will
continue to accrue at a distribution rate equal to % per annum compounded
semiannually (to the extent permitted by applicable law), and holders of
Capital Securities will be subject to United States federal income tax on the
deferred amounts in advance of receipt of cash distributions with respect to
such deferred interest payments. There could be multiple Extension Periods of
varying lengths, each up to 10 consecutive semiannual periods, throughout the
term of the Subordinated Debt Securities. See "Description of the Subordinated
Debt Securities and the Debt Guarantee--Option to Extend Interest Payment
Period," "Risk Factors--Option to Extend Interest Payment Period For Up to
Five Years and Consequent Deferral of Distributions on Capital Securities" and
"United States Federal Income Taxation--US Holders--Original Issue Discount."
The Subordinated Debt Securities are redeemable by the Company at par, plus
accrued and unpaid interest to the date of redemption, in whole or in part,
from time to time, on or after December 1, 2006, or at any time in certain
circumstances upon the occurrence of a Tax Event (as defined herein). If the
Company redeems Subordinated Debt Securities, Countrywide Capital Trust must
redeem on a pro rata basis Trust Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Debt
Securities so redeemed at a redemption price per Trust Security of $1,000 plus
accrued and unpaid distributions thereon (the "Redemption Price") to the date
fixed for redemption. See "Description of the Capital Securities--Mandatory
Redemption." The Capital Securities will be redeemed upon maturity of the
Subordinated Debt Securities, whereupon the Trust will be dissolved. In
addition, upon the occurrence of a Tax Event arising from a change in law or a
change in legal interpretation regarding tax matters, the Trust will be
dissolved, with the result that, unless the Subordinated Debt Securities are
redeemed in the limited circumstances described herein, the Subordinated Debt
Securities, together with the Debt Guarantee, will be distributed to the
holders of the Capital Securities, on a pro rata basis, in lieu of a cash
distribution in liquidation of Countrywide Capital Trust. See "Description of
the Capital Securities--Tax Event Redemption or Distribution" and "Description
of the Subordinated Debt Securities and the Debt Guarantee."
In the event of the involuntary or voluntary dissolution, winding up or
termination of Countrywide Capital Trust, the holders of the Capital
Securities will be entitled to receive for each Capital Security a liquidation
amount of $1,000 plus accrued and unpaid distributions thereon to the date of
payment, unless, in connection with such dissolution, the Subordinated Debt
Securities are distributed to the holders of the Capital Securities. See
"Description of the Capital Securities--Liquidation Distribution Upon
Dissolution."
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement.
COUNTRYWIDE CAPITAL TRUST
Countrywide Capital I is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of October 14, 1996, executed
by CCI, as sponsor (the "Sponsor") and the trustees of Countrywide Capital
Trust (the "Countrywide Trustees") and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on October 15, 1996.
Countrywide Capital Trust exists for the exclusive purposes of (i) issuing the
Trust Securities representing undivided beneficial interests in the assets of
the Trust, (ii) investing the gross proceeds from the sale of the Trust
Securities in the Subordinated Debt Securities and the Debt Guarantee and (iii)
engaging in only those other activities necessary or incidental thereto.
Countrywide Capital Trust's registered office in the State of Delaware is c/o
The Bank of New York (Delaware), 400 White Clay Center, Route 273, Newark,
Delaware 19711, Attn: Corporate Trust Administration. The principal place of
business of the Trust is c/o Countrywide Credit Industries, Inc., 155 North
Lake Avenue, P.O. Box 7137, Pasadena, California 91109-7137, and its telephone
number is (818) 304-8400.
THE COMPANY
Countrywide Home Loans, Inc. (formerly Countrywide Funding Corporation), the
principal subsidiary of CCI, is engaged primarily in the mortgage banking
business and as such originates, purchases, sells and services mortgage loans.
The Company 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.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Countrywide Credit Industries, Inc. is a holding company which through its
principal subsidiary, Countrywide Home Loans, Inc., 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.
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.
THE OFFERING
SECURITIES OFFERED......
$ aggregate liquidation amount of % Capital
Trust Pass-through Securities (liquidation amount
$1,000 per Capital Security). The Company and CCI
believe that the offering of Capital Securities
affords them the opportunity to obtain in a tax-
advantaged manner long-term subordinated financing
at attractive rates.
OFFERING PRICE.......... $ per Capital Security, plus accrued
distributions, if any.
DISTRIBUTIONS...........
Holders of the Capital Securities are entitled to
receive cumulative cash distributions at a rate of
% per annum
S-4
<PAGE>
of the stated liquidation amount of $1,000 per
Capital Security, accruing from , 1996 and
payable semiannually in arrears on June 1 and
December 1 of each year commencing June 1, 1997.
Distributions in arrears for more than one
semiannual period will accrue at the distribution
rate per annum of % thereof compounded
semiannually. See "Description of the Capital
Securities--Distributions."
EXTENSION PERIODS.......
Distributions on Capital Securities will be
deferred for the duration of any Extension Period
elected by the Company with respect to the payment
of interest on the Subordinated Debt Securities. No
Extension Period will exceed 10 consecutive
semiannual periods or extend beyond the maturity of
the Subordinated Debt Securities. See "--
Subordinated Debt Securities" below and "Risk
Factors--Option to Extend Interest Payment Period
For Up to Five Years and Consequent Deferral of
Distributions on Capital Securities," "Description
of the Subordinated Debt Securities and the Debt
Guarantee--Option to Extend Interest Payment
Period" and "United States Federal Income
Taxation--US Holders--Original Issue Discount"
herein.
REDEMPTION.............. The Trust Securities are subject to mandatory
redemption (i) at the stated maturity of the
Subordinated Debt Securities upon repayment
thereof, (ii) at any time on or after December 1,
2006 contemporaneously with the optional redemption
by the Company of the Subordinated Debt Securities
or (iii) at any time in certain circumstances upon
the occurrence of a Tax Event. See "Description of
the Capital Securities--Mandatory Redemption" and
"--Tax Event Redemption or Distribution."
LIQUIDATION $1,000 per Capital Security, plus an amount equal
PREFERENCE.............. to any accrued and unpaid distributions to the date
of payment. See "Description of the Capital
Securities--Liquidation Distribution Upon
Dissolution".
CAPITAL SECURITIES The payment of distributions out of moneys held by
GUARANTEE............... the Trust, payments on liquidation of the Trust and
payments upon the redemption of Capital Securities
are guaranteed by CCI as described herein under
"Description of the Capital Securities Guarantee"
and under "Description of the Capital Securities
Guarantees" in the accompanying Prospectus. The
Capital Securities Guarantee covers payments of
distributions and other payments on the Capital
Securities only if and to the extent that the Trust
has funds available therefor, which funds will not
be available except to the extent the Company has
made payments of interest or principal or other
payments on the Subordinated Debt Securities or CCI
has made such payments pursuant to the Debt
Guarantee. The Capital Securities Guarantee, when
taken together with the Company's obligations under
the Subordinated Debt Securities and the Indenture,
including its liabilities to pay costs, expenses,
debts and other liabilities of Countrywide Capital
Trust (other than with respect to the Trust
Securities), and CCI's
S-5
<PAGE>
obligations under the Debt Guarantee, the Indenture
and the Declaration, provide a full and
unconditional guarantee on a subordinated basis by
CCI of amounts due on the Capital Securities. See
"Risk Factors--Capital Securities Guarantee Covers
Distributions and Other Payments Only to the Extent
the Trust Has Available Funds; Related Remedies"
and "Description of the Capital Securities
Guarantee" herein and "Description of the Capital
Securities Guarantees" in the accompanying
Prospectus.
SUBORDINATED DEBT The Subordinated Debt Securities will mature on
SECURITIES.............. December 1, 2026, and will bear interest at the
rate of % per annum, payable semiannually in
arrears on June 1 and December 1 of each year,
commencing June 1, 1997. So long as the Company is
not in default in the payment of interest that has
become due and payable on the Subordinated Debt
Securities and no accrued interest from a prior,
completed Extension Period is unpaid, such payment
period may be extended from time to time by the
Company (during which period interest would
continue to accrue and compound semiannually) for a
period of up to 10 consecutive semiannual periods.
Prior to the termination of any Extension Period of
less than 10 consecutive semiannual periods, the
Company may further extend the interest payment
period as long as such Extension Period, as further
extended, does not exceed 10 consecutive semiannual
periods and does not extend beyond the maturity of
the Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment
of all amounts then due, the Company may select a
new Extension Period, subject to the terms stated
above. No interest shall be due during an Extension
Period until the end of such period. If the Company
extends an interest payment period or CCI is in
default with respect to its payment of any
obligations under the Capital Securities Guarantee
or the Common Securities Guarantee (as defined in
the Indenture), the Company and CCI will be
prohibited from paying cash dividends or
distributions on their respective capital stock and
making certain other payments until semiannual
interest payments are resumed and all accrued and
unpaid interest (including any interest payable to
effect semiannual compounding) on the Subordinated
Debt Securities is brought current. The obligations
of the Company under the Subordinated Debt
Securities will be subordinated and junior in right
of payment to all present and future Senior
Indebtedness of the Company and rank pari passu
with obligations to or rights of the Company's
other general unsecured creditors. See "Description
of the Subordinated Debt Securities and the Debt
Guarantee" and "Risk Factors--Option to Extend
Interest Payment Period for Up to Five Years and
Consequent Deferral of Distributions on Capital
Securities" herein and "Description of the
Subordinated Debt Securities and the Debt
Guarantees" in the accompanying Prospectus.
DEBT GUARANTEE..........
The Subordinated Debt Securities are fully and
unconditionally guaranteed on a subordinated basis
as to payment of principal, premium, if any, and
interest by CCI. See "Description of the
Subordinated Debt Securities and the Debt
Guarantee" herein and "Description of the
Subordinated Debt Securities and the
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<PAGE>
Debt Guarantees--Debt Guarantees" in the
accompanying Prospectus.
RANKING.................
The Common Securities will rank pari passu, and
payments will be made thereon on a pro rata basis,
with the Capital Securities, except that upon the
occurrence and during the continuance of a
Declaration Event of Default, the rights of the
holders of the Common Securities to receive payment
of periodic distributions and payments upon
liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the
Capital Securities. See "Description of the Capital
Securities--General." The Capital Securities
Guarantee will rank subordinate and junior in right
of payment to all present and future liabilities of
CCI, including the Debt Guarantee. The Subordinated
Debt Securities will be subordinated and junior in
right of payment to the extent and in the manner
set forth in the Indenture to all Senior
Indebtedness of the Company. The Debt Guarantee
will constitute an unsecured obligation of the
Company and will rank subordinate and junior in
right of payment to the extent and in the manner
set forth in the Debt Guarantee to all Senior
Indebtedness of CCI. See "Description of the
Subordinated Debt Securities and the Debt
Guarantee" herein and "Description of the
Subordinated Debt Securities and the Debt
Guarantees" in the accompanying Prospectus.
ERISA CONSIDERATIONS....
Prospective purchasers must carefully consider the
restrictions on purchase set forth under "ERISA
Considerations."
ABSENCE OF MARKET FOR
THE CAPITAL
SECURITIES.............. The Capital Securities will be a new issue of
securities for which there is currently no market.
Although the Underwriter has informed the Trust,
the Company and CCI that it currently intends to
make a market in the Capital Securities, the
Underwriter is not obligated to do so, and any such
market making may be discontinued at any time
without notice. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the Capital Securities. See
"Underwriting" herein.
USE OF PROCEEDS.........
The Trust will use the gross proceeds received from
the sale of the Trust Securities to purchase
Subordinated Debt Securities from the Company. The
Company intends to use the net proceeds (after
payment of the expenses of the offering and
Underwriter's Compensation) from the sale of the
Subordinated Debt Securities for general corporate
purposes, principally for investment in servicing
rights. Initially, the net proceeds will be used to
repay short-term commercial paper with interest
rates ranging from approximately 5 1/4% to 5 1/2%
per annum.
For additional information regarding the Capital Securities, see "Description
of the Capital Securities," "Description of the Capital Securities Guarantee,"
"Description of the Subordinated Debt Securities and the Debt Guarantee," and
"United States Federal Income Taxation" herein and "Description of the Capital
Securities," "Description of the Capital Securities Guarantees," and
"Description of the Subordinated Debt Securities and the Debt Guarantees" in
the accompanying Prospectus.
RISK FACTORS
Prospective investors should carefully consider the matters set forth under
"Risk Factors."
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<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC.
SUMMARY HISTORICAL FINANCIAL INFORMATION
The consolidated financial data with respect to CCI set forth below for each
of the five fiscal years in the period ended February 29, 1996 has been derived
from, and should be read in conjunction with, the related audited financial
statements and accompanying notes incorporated by reference herein. The
consolidated financial information presented below as of and for the six month
periods ended August 31, 1996 and August 31, 1995 is unaudited; however, in the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation have been included. The results
of operations for the six month period ended August 31, 1996 are not
necessarily indicative of the results of operations that may be expected for
the full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, YEARS ENDED FEBRUARY 28 (29),
---------------------- ----------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF EARNINGS
DATA:
Revenues:
Loan origination fees.. $ 101,546 $ 94,906 $ 199,724 $ 203,426 $ 379,533 $ 241,584 $ 91,933
Gain (loss) on sale of
loans................. 105,491 32,014 92,341 (41,342) 88,212 67,537 38,847
---------- ---------- ---------- ---------- ---------- ---------- ----------
Loan production
revenue.............. 207,037 126,920 292,065 162,084 467,745 309,121 130,780
Interest earned........ 200,426 165,614 354,226 280,917 320,217 191,389 103,014
Interest charges....... (153,309) (135,417) (281,573) (205,464) (219,898) (128,612) (68,760)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income... 47,117 30,197 72,653 75,453 100,319 62,777 33,254
Loan servicing income.. 342,874 268,513 575,058 428,994 307,477 177,291 94,830
Add (less) amortization
and
impairment/recovery of
servicing assets...... 13,662 (199,421) (342,811) (95,768) (242,177) (151,362) (53,768)
Servicing hedge
(expense) benefit..... (118,151) 135,080 200,135 (40,030) 73,400 74,075 17,000
Less write-off of
servicing hedge....... -- -- -- (25,600) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net loan
administration
income............... 238,385 204,172 432,382 267,596 138,700 100,004 58,062
Commissions, fees and
other income.......... 41,558 26,984 63,642 40,650 48,816 33,656 19,714
Gain on sale of
servicing............. -- -- -- 56,880 -- -- 4,302
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues........ 534,097 388,273 860,742 602,663 755,580 505,558 246,112
---------- ---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Salaries and related
expenses.............. 136,989 106,608 229,668 199,061 227,702 140,063 72,654
Occupancy and other
office expenses....... 61,313 51,083 106,298 102,193 101,691 64,762 36,645
Guarantee fees......... 76,864 54,281 121,197 85,831 57,576 29,410 13,622
Marketing expenses..... 17,922 12,540 27,115 23,217 26,030 12,974 5,015
Other operating
expenses.............. 39,171 21,881 50,264 37,016 43,481 24,894 17,849
Branch and
administrative office
consolidation costs... -- -- -- 8,000 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total expenses........ 332,259 246,393 534,542 455,318 456,480 272,103 145,785
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income
taxes.................. 201,838 141,880 326,200 147,345 299,100 233,455 100,327
Provision for income
taxes.................. 78,717 56,752 130,480 58,938 119,640 93,382 40,131
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings............ $ 123,121 $ 85,128 $ 195,720 $ 88,407 $ 179,460 $ 140,073 $ 60,196
========== ========== ========== ========== ========== ========== ==========
SELECTED BALANCE SHEET
DATA AT END OF PERIOD:
Mortgage loans shipped
and held for sale...... $3,650,611 $4,320,918 $4,740,087 $2,898,825 $3,714,261 $2,316,297 $1,585,392
Total assets............ 8,747,269 7,593,689 8,657,653 5,710,182 5,631,061 3,369,499 2,474,625
Short-term debt......... 3,703,795 4,078,760 4,423,738 2,664,006 3,111,945 1,579,689 1,046,289
Long-term debt.......... 2,036,500 1,542,700 1,911,800 1,499,306 1,197,096 734,762 383,065
Convertible preferred
stock.................. -- -- -- -- -- 25,800 37,531
Common shareholders'
equity................. 1,434,301 1,218,820 1,319,755 942,558 880,137 693,105 558,617
OPERATING DATA (DOLLAR
AMOUNTS IN MILLIONS):
Volume of loans
produced............... $ 20,172 $ 15,635 $ 34,584 $ 27,866 $ 52,459 $ 32,388 $ 12,156
Loan servicing portfolio
(at period end)(1)..... 148,623 126,415 136,835 113,111 84,678 54,484 27,546
Ratio of earnings to
fixed charges(2)....... 2.29 2.02 2.13 1.69 2.32 2.76 2.38
</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).
S-8
<PAGE>
RISK FACTORS
Prior to making an investment decision, prospective purchasers of Capital
Securities should carefully review the information contained elsewhere in this
Prospectus Supplement and in the accompanying Prospectus and should
particularly consider the following matters.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE CAPITAL SECURITIES GUARANTEE,
SUBORDINATED DEBT SECURITIES AND DEBT GUARANTEE
CCI's obligations under the Capital Securities Guarantee are subordinate and
junior in right of payment to all present and future liabilities of CCI,
including the Debt Guarantee. The obligations of the Company under the
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness of the Company and rank pari passu
with obligations to or rights of the Company's other general unsecured
creditors. The obligations of CCI under the Debt Guarantee are subordinate and
junior in right of payment to all present and future Senior Indebtedness of
CCI and are also effectively subordinate to claims of creditors of CCI's
subsidiaries (including the Company). No payment of principal of (including
redemption payments, if any) or premium, if any, or interest on the
Subordinated Debt Securities may be made if (i) any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended with such default not having been cured or waived or
ceasing to exist or (ii) the maturity of any Senior Indebtedness of the
Company has been accelerated because of a default. In addition, no payment by
CCI in respect of any obligation due under the Debt Guarantee may be made if
(i) any Senior Indebtedness of CCI is not paid when due and any applicable
grace period with respect to such default has ended with such default not
having been cured or waived or ceasing to exist or (ii) the maturity of any
Senior Indebtedness of CCI has been accelerated because of a default. As of
August 31, 1996, CCI had $200 million of Senior Indebtedness (excluding
indebtedness of subsidiaries guaranteed by CCI), Senior Indebtedness of the
Company aggregated approximately $5.5 billion, and the indebtedness of CCI's
subsidiaries (including the Senior Indebtedness and other indebtedness of the
Company) aggregated approximately $5.5 billion. There are no terms in the
Capital Securities, the Subordinated Debt Securities, the Capital Securities
Guarantee or the Debt Guarantee that limit the ability of CCI or its
subsidiaries (including the Company) to incur additional indebtedness,
including indebtedness that ranks senior to the Subordinated Debt Securities,
the Capital Securities Guarantee and the Debt Guarantee. See "Description of
the Capital Securities Guarantees--Status of the Capital Securities
Guarantees" and "Description of the Subordinated Debt Securities and the Debt
Guarantees" in the accompanying Prospectus, and "Description of the
Subordinated Debt Securities and the Debt Guarantee--Subordination" herein.
CAPITAL SECURITIES GUARANTEE COVERS DISTRIBUTIONS AND OTHER PAYMENTS ONLY TO
THE EXTENT THE TRUST HAS AVAILABLE FUNDS; RELATED REMEDIES
The Capital Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Bank
of New York will act as indenture trustee under the Capital Securities
Guarantee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "Capital Guarantee Trustee"). The Capital Guarantee Trustee
will hold the Capital Securities Guarantee for the benefit of the holders of
the Capital Securities.
The Capital Securities Guarantee guarantees to the holders of the Capital
Securities the payment of (i) any accrued and unpaid distributions that are
required to be paid on the Capital Securities, to the extent the Trust has
funds available therefor, (ii) the Redemption Price, including all accrued and
unpaid distributions to the date of redemption with respect to Capital
Securities called for redemption by the Trust, to the extent the Trust has
funds available therefor, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Subordinated Debt Securities to the holders of
Capital Securities upon the redemption
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<PAGE>
of all the Capital Securities), the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on the Capital
Securities to the date of the payment, to the extent the Trust has funds
available therefor and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Capital Securities in liquidation
of the Trust. The holders of a majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Capital Guarantee Trustee or to
direct the exercise of any trust or power conferred upon the Capital Guarantee
Trustee under the Capital Securities Guarantee. A holder of record of Capital
Securities may institute a legal proceeding directly against CCI to enforce
the Capital Guarantee Trustee's rights under the Capital Securities Guarantee
without first instituting any legal proceeding against the Trust, the Capital
Guarantee Trustee or any other person or entity. If the Company were to
default on its obligation to pay amounts payable on the Subordinated Debt
Securities and CCI were to default on its obligations under the Debt
Guarantee, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Capital Securities or
otherwise, and, in such event, holders of the Capital Securities would not be
able to rely upon the Capital Securities Guarantee for payment of such
amounts. Instead, each holder of Capital Securities would rely on the
enforcement (1) by the Institutional Trustee (as defined herein) of its rights
as registered holder of the Subordinated Debt Securities against the Company
pursuant to the terms of the Subordinated Debt Securities and against CCI
under the Debt Guarantee or (2) by such holder of Capital Securities of its
right against the Company to enforce payments of principal and interest on
Subordinated Debt Securities having an aggregate principal amount equal to the
aggregate liquidation amount of Capital Securities of such holder and against
CCI to enforce such payments on the Debt Guarantee. See "Description of the
Capital Securities Guarantees" and "Description of the Subordinated Debt
Securities and the Debt Guarantees" in the accompanying Prospectus. The
Declaration provides that each holder of Capital Securities, by acceptance
thereof, agrees to the provisions of the Capital Securities Guarantee,
including the subordination provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Capital Securities would, except as provided
below, rely on the enforcement by the Institutional Trustee of its rights as
holder of the Subordinated Debt Securities and the Debt Guarantee against the
Company and CCI. The holders of a majority in liquidation amount of the
Capital Securities will have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as holder of
the Subordinated Debt Securities and the Debt Guarantee. If the Institutional
Trustee fails to enforce its rights under the Subordinated Debt Securities or
the Debt Guarantee after the holders of a majority in liquidation amount of
the Capital Securities have so directed the Institutional Trustee, a holder of
record of Capital Securities may institute a legal proceeding directly against
the Company or CCI to enforce the Institutional Trustee's rights under the
Subordinated Debt Securities or the Debt Guarantee, as the case may be,
without first instituting any legal proceeding against the Institutional
Trustee or any other person or entity including, in the case of the Debt
Guarantee, against the Company. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to (i) the failure of the Company to pay interest or principal on
the Subordinated Debt Securities on the respective dates such interest or
principal is payable (or in the case of redemption, on the redemption date) or
(ii) the failure of CCI to pay any obligation in respect thereof under the
Debt Guarantee, then a holder of record of Capital Securities may institute a
proceeding directly against the Company or CCI, as the case may be, for
enforcement of payment, on or after the respective due dates specified in the
Subordinated Debt Securities, to such holder directly of the principal of or
interest on Subordinated Debt Securities having an aggregate principal amount
equal to the aggregate liquidation amount of the Capital Securities of such
holder (a "Direct Action"). In connection with such Direct Action, the Company
and CCI will be
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<PAGE>
subrogated to the rights of such holder of Capital Securities under the
Declaration to the extent of any payment made by the Company or CCI, as the
case may be, to such holder of Capital Securities in such Direct Action;
provided, however, that no such subrogation right may be exercised so long as
a Declaration Event of Default has occurred and is continuing. The holders of
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debt Securities or the Debt
Guarantee. See "Description of the Capital Securities--Declaration Events of
Default."
OPTION TO EXTEND INTEREST PAYMENT PERIOD FOR UP TO FIVE YEARS AND CONSEQUENT
DEFERRAL OF DISTRIBUTIONS ON CAPITAL SECURITIES
So long as the Company is not in default in the payment of interest that has
become due and payable on the Subordinated Debt Securities and no accrued
interest from a prior, completed Extension Period is unpaid, the Company has
the right under the Indenture to defer payments of interest on the
Subordinated Debt Securities by extending the interest payment period at any
time, and from time to time, for Extension Periods, each up to 10 consecutive
semiannual periods. During each such Extension Period, semiannual
distributions on the Capital Securities would also be deferred (but would
continue to accrue, despite such deferral, with interest thereon compounded
semiannually) by the Trust. In the event that the Company exercises this right
to defer interest payments and such deferral is continuing, or if there shall
have occurred and be continuing any event of default under the Indenture or if
the Guarantor shall be in default with respect to the payment of its
obligations under the Capital Securities Guarantee, (a) CCI and the Company
shall not declare or pay dividends on, or make a distribution with respect to,
or redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock (other than (i) purchases or acquisitions of shares
of any such capital stock or rights to acquire such capital stock in
connection with the satisfaction by CCI or the Company, respectively, of its
obligations under any employee benefit plans, (ii) as a result of a
reclassification of CCI's or the Company's capital stock or rights to acquire
such capital stock or the exchange or conversion of one class or series of
CCI's or the Company's capital stock or rights to acquire such capital stock
for another class or series of CCI's or the Company's capital stock or rights
to acquire such capital stock, (iii) the purchase of fractional interests in
shares of CCI's or the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged or (iv) dividends and distributions made on CCI's or the Company's
capital stock or rights to acquire such capital stock with CCI's or the
Company's capital stock or rights to acquire such capital stock) or make any
guarantee payments with respect to any of the foregoing and (b) CCI and the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by CCI or the
Company that rank pari passu with or junior to the Subordinated Debt
Securities. Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period; provided that each such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 10 consecutive semiannual periods or extend beyond the
maturity of the Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. See
"Description of the Capital Securities--Distributions" and "Description of the
Subordinated Debt Securities and the Debt Guarantee--Option to Extend Interest
Payment Period" and "Description of the Subordinated Debt Securities and the
Debt Guarantees--Certain Covenants" in the accompanying Prospectus.
During each Extension Period, if any, each holder of Capital Securities will
continue to accrue income (as original issue discount ("OID")) in respect of
the deferred interest (plus annual portions of de minimis OID on the
Subordinated Debt Securities allocable to its Capital Securities for United
States federal income tax purposes. In such event, each holder of Capital
Securities will recognize income for United States federal income tax purposes
in advance of the receipt of cash, and will not receive cash related to such
income from Countrywide Capital Trust if such holder disposes of its Capital
Securities prior to the record date for payment of such deferred interest. See
"United States Federal Income Taxation--US Holders--Original Issue Discount."
S-11
<PAGE>
The Company has no current intention of exercising its right to defer
payments of interest on the Subordinated Debt Securities. However, should the
Company determine to exercise such right in the future, the market price of
the Capital Securities is likely to be affected. A holder that disposes of its
Capital Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its
Capital Securities. In addition, as a result of the existence of the Company's
right to defer interest payments, the market price of the Capital Securities
(which represent undivided beneficial interests in the Subordinated Debt
Securities) may be more volatile than other securities on which OID accrues
that do not have such rights.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
in excess of twenty years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued a joint statement (the "Joint Statement")
indicating their intent that certain legislative proposals initiated by the
Clinton administration, including the Proposed Legislation, that may be
adopted by either of the tax-writing committees of Congress would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the
Subordinated Debt Securities. There can be no assurance, however, that the
effective date guidance contained in the Joint Statement will be incorporated
into the Proposed Legislation, if enacted, or that other legislation enacted
after the date hereof will not otherwise adversely affect the ability of the
Company to deduct the interest payable on the Subordinated Debt Securities.
Accordingly, there can be no assurance that a Tax Event will not occur. See
"--Tax Event Redemption or Distribution" below, "Description of the
Subordinated Debt Securities and the Debt Guarantee--Proposed Tax Legislation"
herein and "Description of the Capital Securities--Proposed Tax Legislation"
in the accompanying Prospectus.
TAX EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Tax Event, Countrywide Capital Trust will be
dissolved, except in the limited circumstances described below, with the
result that, after satisfaction of liabilities to creditors of the Trust (to
the extent not paid by the Company or CCI), the Subordinated Debt Securities,
together with the Debt Guarantee, would be distributed to the holders of the
Trust Securities in connection with the liquidation of the Trust. In certain
circumstances, the Company will have the right to redeem the Subordinated Debt
Securities, in whole or in part, in lieu of a distribution of the Subordinated
Debt Securities and the Debt Guarantee by the Trust, in which event the Trust
will redeem on a pro rata basis the Trust Securities to the same extent as the
Subordinated Debt Securities are redeemed by the Company. See "Description of
the Capital Securities--Tax Event Redemption or Distribution".
Under current United States federal income tax law, a distribution of
Subordinated Debt Securities, together with the Debt Guarantee, upon the
dissolution of Countrywide Capital Trust would not be a taxable event to
holders of the Capital Securities. Upon the occurrence of a Tax Event,
however, a dissolution of Countrywide Capital Trust in which holders of the
Capital Securities receive cash would be a taxable event to such holders. See
"United States Federal Income Taxation--US Holders--Receipt of Subordinated
Debt Securities (and the Debt Guarantee) or Cash Upon Liquidation of
Countrywide Capital Trust."
There can be no assurance as to the market prices for the Capital Securities
or the Subordinated Debt Securities that may be distributed in exchange for
Capital Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Capital Securities that an investor may purchase, whether
pursuant to the offering made hereby or in the secondary market, or the
Subordinated Debt Securities that a holder of Capital Securities may receive
on dissolution and liquidation of the Trust, may trade at
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<PAGE>
a discount to the price paid to purchase the Capital Securities offered
hereby. Because the ability of the Trust to pay amounts due on the Capital
Securities is wholly dependent upon the Company's making payments on the
Subordinated Debt Securities as and when required, or CCI's making payments on
the Debt Guarantee as and when required, and because holders of Capital
Securities may receive Subordinated Debt Securities and the Debt Guarantee
upon the occurrence of a Tax Event, prospective purchasers of Capital
Securities are also making an investment decision with regard to the
Subordinated Debt Securities and the Debt Guarantee and should carefully
review all the information regarding the Subordinated Debt Securities and the
Debt Guarantee contained herein and in the accompanying Prospectus and
evaluate the credit risk of the Company and CCI. See "Description of the
Capital Securities--Tax Event Redemption or Distribution" and "Description of
the Subordinated Debt Securities and the Debt Guarantee--General."
DECLARATION MAY BE MODIFIED TO EFFECT ADVERSE CHANGES TO RIGHTS, POWERS AND/OR
PREFERENCES OF CAPITAL SECURITIES WITHOUT THE CONSENT OF EACH HOLDER OF
CAPITAL SECURITIES AFFECTED THEREBY
The Declaration provides that it may be modified and amended if approved by
the Regular Trustees (as defined below) (and in certain circumstances, the
Institutional Trustee and the Delaware Trustee (as defined below)), provided
that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way
of amendment to the Declaration or otherwise or (ii) the dissolution, winding-
up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected
thereby; provided that if any amendment or proposal referred to in clause (i)
above would adversely affect only the Capital Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Trust Securities. Notwithstanding any provision of the Declaration, however,
Section 316(b) of the Trust Indenture Act provides that the right of any
holder of Trust Securities to receive payment of distributions and other
payments upon redemption or otherwise on or after their respective due dates,
or to institute suit for the enforcement of any such payment on or after such
respective due dates, shall not be impaired or affected without the consent of
such holder. Accordingly, amendments to the Declaration that may adversely
affect the powers, preferences or special rights of the Capital Securities--
other than those affecting a holder's rights to receive payments on or after
their respective due dates and to institute suit to enforce such payments on
or after their respective due dates as described in Section 316(b) of the
Trust Indenture Act--may be effected with the consent of only a majority in
liquidation amount of Capital Securities rather than with the consent of each
holder of Capital Securities affected thereby.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
Neither the Indenture nor the Debt Guarantee contains provisions that afford
holders of the Subordinated Debt Securities protection in the event of a
highly leveraged transaction, including a change of control, or other similar
transactions involving the Company or CCI that may adversely affect such
holders. See "Description of the Subordinated Debt Securities and the Debt
Guarantee--General."
LIMITED VOTING RIGHTS
Holders of Capital Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Countrywide Trustees (as defined herein), of which the Regular
Trustees (as defined herein) will be persons who are employees or officers of,
or who are affiliated with, CCI. Such voting rights with respect to the
Countrywide Trustees are vested exclusively in the holder of the Common
Securities which will be CCI. See "Description of the Capital Securities--
Voting Rights."
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<PAGE>
ABSENCE OF PRIOR PUBLIC MARKET
Prior to this offering, there has been no public market for the Capital
Securities. There can be no assurance that an active public market will
develop for the Capital Securities or that, if such market develops, the
market price will equal or exceed the public offering price set forth on the
cover page of this Prospectus Supplement. The public offering price for the
Capital Securities has been determined through negotiations among the Company,
CCI and the Underwriter. Trading prices for the Capital Securities will be
determined in the marketplace and may be influenced by many factors, including
the liquidity of the market for the Capital Securities, investor perceptions
of the Company and CCI and general industry and economic conditions.
POSSIBLE DECLINE OF TRADING PRICE
The Capital Securities are expected to trade at a price per Capital Security
plus accrued and unpaid distributions, if any, to the date of settlement.
Because the Capital Securities pay distributions at a fixed rate based upon
the fixed interest rate payable on the Subordinated Debt Securities, the
trading price of the Capital Securities may decline if interest rates rise.
ERISA CONSIDERATIONS
GENERAL
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), should consider
fiduciary standards under ERISA in the context of the particular circumstances
of such plan before authorizing an investment in the Capital Securities. Such
fiduciary should consider whether the investment satisfies ERISA's
diversification and prudence requirements, whether the investment constitutes
unauthorized delegation of fiduciary authority and whether the investment is
in accordance with the documents and instruments governing the plan. In
addition, ERISA and the Code prohibit a wide range of transactions
("Prohibited Transactions") involving the assets of a plan subject to ERISA or
the assets of an individual retirement account or plan subject to Section 4975
of the Code (hereinafter, an "ERISA Plan") and persons who have certain
specified relationships to the ERISA Plan ("parties in interest," within the
meaning of ERISA, and "disqualified persons," within the meaning of the Code).
Such transactions may require "correction" and may cause the ERISA Plan
fiduciary to incur certain liabilities and the parties in interest or
disqualified persons to be subject to excise taxes.
Governmental plans and certain church plans (each as defined under ERISA)
are not subject to the Prohibited Transaction rules. Such plans may, however,
be subject to federal, state or local laws or regulations which may affect
their investment in the Capital Securities. Any fiduciary of such a
governmental or church plan considering an investment in the Capital
Securities should determine the need for, and the availability, if necessary,
of any exemptive relief under such laws or regulations.
The discussion herein of ERISA is general in nature and is not intended to
be all inclusive. Any fiduciary of an ERISA Plan, governmental plan or church
plan considering an investment in the Capital Securities should consult with
its legal advisors regarding the consequences of such investment.
TRUST ASSETS AS "PLAN ASSETS"
The Department of Labor has issued final regulations (the "Regulations") as
to what constitutes assets of an employee benefit plan ("plan assets") under
ERISA. The Regulations provide that, as a general rule, when an ERISA Plan
acquires an equity interest in an entity and such interest does not represent
a "publicly offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, the ERISA Plan's assets
include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the
entity is an operating company or that equity participation in the entity by
"benefit plan
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<PAGE>
investors" is not "significant". For purposes of the Regulations, the Trust
will not be an investment company nor an operating company and the Capital
Securities will not constitute a "publicly offered security".
Under the Regulations, equity participation by benefit plan investors will
not be considered "significant" on any date only if, immediately after the
most recent acquisition of Capital Securities, the aggregate interest in the
Capital Securities held by benefit plan investors will be less than 25% of the
value of the Capital Securities. Although it is possible that the equity
participation by benefit plan investors on any date will not be "significant"
for purposes of the Regulations, such result cannot be assured. Consequently,
if ERISA Plans purchase the Capital Securities, the Trust's assets could be
deemed to be "plan assets" of such ERISA Plans for purposes of the fiduciary
responsibility and Prohibited Transaction provisions of ERISA and the Code.
Under ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of an ERISA Plan is considered to be a
fiduciary of such ERISA Plan. For example, the Institutional Trustee could
therefore become a fiduciary of the ERISA Plans that invest in the Capital
Securities and be subject to the general fiduciary requirements of ERISA in
exercising its authority with respect to the management of the assets of the
Trust. However, the Institutional Trustee will have only limited discretionary
authority with respect to the Trust's assets and the remaining functions and
responsibilities performed by the Institutional Trustee will be for the most
part custodial and ministerial in nature. Inasmuch as the Institutional
Trustee or another person with authority or control respecting the management
or disposition of the Trust assets may become a fiduciary with respect to the
ERISA Plans that will purchase the Capital Securities, there may be an
improper delegation by such ERISA Plans of the responsibility to manage plan
assets.
PROHIBITED TRANSACTIONS
The Company or any of its affiliates, and the Institutional Trustee may be a
party in interest or a disqualified person with respect to an ERISA Plan
investing in the Capital Securities and, therefore, such investment by an
ERISA Plan may give rise to a Prohibited Transaction. Consequently, any person
who is, or who in acquiring such Capital Securities is using the assets of, an
ERISA Plan may do so only if one of the following class exemptions from the
Prohibited Transaction rules is applicable to such person's investment in the
Capital Securities: Prohibited Transaction Class Exemption ("PTE") 90-1,
regarding investments by insurance company pooled separate accounts; PTE 91-
38, regarding investments by bank collective investment funds; PTE 84-14,
regarding transactions effected by qualified professional asset managers; PTE
96-23, regarding transactions effected by in-house asset managers; or PTE 95-
60, regarding investments by insurance company general accounts.
The acquisition of Capital Securities by any person who is using for such
acquisition the assets of an ERISA Plan shall constitute a representation by
such person to the Trust that (i) such person is eligible for exemptive relief
available pursuant to one of the class exemptions from the Prohibited
Transaction rules under ERISA and the Code described above (PTE 90-1, 91-38,
84-14, 96-23 or 95-60) with respect to the acquisition and holding of such
Capital Securities, and (ii) neither the Company nor CCI is a "fiduciary",
within the meaning of Section 3(21) of ERISA and the regulations thereunder,
with respect to such person's interest in the Capital Securities or the
Subordinated Debt Securities.
THE COMPANY
Countrywide Home Loans, Inc. (formerly Countrywide Funding Corporation), the
principal subsidiary of Countrywide Credit Industries, Inc., is engaged
primarily in the mortgage banking business and as such originates, purchases,
sells and services mortgage loans. The Company 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.
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<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Countrywide Credit Industries, Inc. is a holding company which through its
principal subsidiary, Countrywide Home Loans, Inc., 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. 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 CAPITAL TRUST
Countrywide Capital I is a statutory business trust formed under Delaware
law pursuant to (i) a declaration of trust, dated as of October 14, 1996,
executed by CCI, as sponsor, and the Countrywide Trustees and (ii) the filing
of a certificate of trust with the Secretary of State of the State of Delaware
on October 15, 1996. Such declaration will be amended and restated in its
entirety (the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act. Upon issuance of the Capital
Securities, the purchasers thereof will own all of the Capital Securities. See
"Description of the Capital Securities-- Book-Entry Only Issuance--
The Depository Trust Company." CCI will acquire Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of Countrywide
Capital Trust. Countrywide Capital Trust exists for the exclusive purposes of
(i) issuing the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds from the sale of
the Trust Securities in the Subordinated Debt Securities and the Debt
Guarantee and (iii) engaging in only those other activities necessary or
incidental thereto.
Pursuant to the Declaration, the number of Countrywide Trustees will
initially be five. Three of the Countrywide Trustees (the "Regular Trustees")
will be persons who are employees or officers of, or who are affiliated with,
CCI. The fourth trustee will be a financial institution that is unaffiliated
with CCI, which trustee will serve as institutional trustee under the
Declaration and as indenture trustee for the purposes of compliance with the
provisions of the Trust Indenture Act (the "Institutional Trustee").
Initially, The Bank of New York, a New York banking corporation, will be the
Institutional Trustee until removed or replaced by the holder of the Common
Securities. The Bank of New York will also act as trustee under the Capital
Securities Guarantee and as Debt Trustee (as defined herein) under the
Indenture. The fifth trustee will be an entity that maintains its principal
place of business in the State of Delaware (the "Delaware Trustee").
Initially, The Bank of New York (Delaware), an affiliate of the Institutional
Trustee, will act as Delaware Trustee. See "Description of the Capital
Securities Guarantees" in the accompanying Prospectus and "Description of the
Capital Securities--Voting Rights" herein.
The Institutional Trustee will hold title to the Subordinated Debt
Securities and the Debt Guarantee for the benefit of the holders of the Trust
Securities, and the Institutional Trustee will have the power to exercise all
rights, powers and privileges under the Indenture as the holder of the
Subordinated Debt Securities and the Debt Guarantee. In addition, the
Institutional Trustee will maintain exclusive control of a segregated non-
interest bearing bank account (the "Property Account") to hold all payments
made in respect of the Subordinated Debt Securities and the Debt Guarantee for
the benefit of the holders of the Trust Securities. The Institutional Trustee
will make payments of distributions and payments on liquidation, redemption
and otherwise to the holders of record of the Trust Securities out of funds
from the Property Account. The Capital Guarantee Trustee will hold the Capital
Securities Guarantee for the benefit of the holders of the Capital Securities.
CCI, as holder of all the Common Securities, will have the right, subject to
the Trust Indenture Act with respect to the Institutional Trustee and Delaware
law
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<PAGE>
with respect to the Delaware Trustee, to appoint, remove or replace any
Countrywide Trustee and to increase or decrease the number of Countrywide
Trustees. The Company will pay all fees and expenses related to Countrywide
Capital Trust and the offering and sale of the Trust Securities. See
"Description of the Subordinated Debt Securities and the Debt Guarantee--
Miscellaneous."
The rights of the holders of the Capital Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"),
and the Trust Indenture Act. See "Description of the Capital Securities."
Countrywide Capital Trust's registered office in the State of Delaware is
c/o The Bank of New York (Delaware), 400 White Clay Center, Route 273, Newark,
Delaware 19711, Attn: Corporate Trust Administration. The principal place of
business of the Trust is c/o Countrywide Credit Industries, Inc., 155 North
Lake Avenue, P.O. Box 7137, Pasadena, California 91109-7137, and its telephone
number is (818) 304-8400.
CAPITALIZATION
The following table sets forth the actual capitalization of CCI at August
31, 1996, and the "As Adjusted" column reflects, on a pro forma basis as of
such date, the application of the estimated net proceeds from the sale of the
Capital Securities. See "Use of Proceeds." The table should be read in
conjunction with CCI's consolidated financial statements and notes thereto
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
--------------- -----------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C>
Long-term debt................................. $ 2,036,500 $
Company-Obligated Mandatorily Redeemable
Capital Trust Pass-through Securities of
Subsidiary Trust holding solely a Company
Guaranteed Related Subordinated Debt(1)....... --
Stockholders' equity
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,
102,699,926 shares(2)....................... 5,135 5,135
Additional paid-in capital..................... 827,969 827,969
Retained earnings.............................. 601,197 601,197
--------------- --------------
Total common stockholders' equity.......... 1,434,301 1,434,301
--------------- --------------
Total Preferred Stock and common stockholders'
equity........................................ $ 1,434,301 $
=============== ==============
</TABLE>
- --------
(1) As described herein, the sole assets of Countrywide Capital Trust, a
subsidiary trust of CCI, will be the % Junior Subordinated Deferrable
Interest Debentures due December 1, 2026 of the Company with an aggregate
principal amount of approximately $ , and upon redemption of such debt,
the Capital Securities will be mandatorily redeemable.
(2) Does not include 13,901,226 shares reserved for issuance upon exercise of
stock options of which options for 3,926,880 shares were exercisable as of
August 31, 1996.
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<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of CCI
for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEARS ENDED FEBRUARY 28 (29),
----------- -----------------------------
1996 1995 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges........................ 2.29 2.02 2.13 1.69 2.32 2.76 2.38
</TABLE>
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).
ACCOUNTING TREATMENT
The financial statements of Countrywide Capital Trust will be consolidated
into CCI's consolidated financial statements, with the Capital Securities
shown as "Company-Obligated Mandatorily Redeemable Capital Trust Pass-through
Securities of Subsidiary Trust holding solely a Company Guaranteed Related
Subordinated Debt." The Trust's sole assets will be the Subordinated Debt
Securities and the Debt Guarantee. See "Capitalization."
USE OF PROCEEDS
The Trust will use the gross proceeds received from the sale of the Trust
Securities to purchase Subordinated Debt Securities from the Company. The
Company intends to use the net proceeds (after payment of the expenses of the
offering and Underwriter's Compensation) from the sale of the Subordinated
Debt Securities for general corporate purposes, principally for investment in
servicing rights. Initially, the net proceeds will be used to repay short term
commercial paper with interest rates ranging from approximately 5 1/4% to 5
1/2% per annum.
DESCRIPTION OF THE CAPITAL SECURITIES
The Capital Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, The Bank of New York, will act as
indenture trustee for the Capital Securities under the Declaration for
purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the Capital Securities will include those stated in the Declaration
and those made part of the Declaration by the Trust Indenture Act. The
following summary of the material terms and provisions of the Capital
Securities does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Declaration, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus Supplement is a
part, the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned by CCI.
The Common Securities will rank pari passu, and payments will be made thereon
on a pro rata basis, with the Capital Securities, except that upon the
occurrence and during the continuance of a Declaration Event of Default, the
rights of the holders of the Common Securities to receive payment of periodic
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Capital Securities. The
Declaration does not permit the issuance by the Trust of any securities other
than the Trust Securities or the incurrence of any indebtedness by the Trust.
Pursuant to the Declaration, the Institutional Trustee will
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<PAGE>
own the Subordinated Debt Securities and the Debt Guarantee purchased by the
Trust for the benefit of the holders of the Trust Securities. The payment of
distributions out of money held by the Trust, and payments upon redemption of
the Capital Securities or liquidation of the Trust, are guaranteed by CCI as
described under "Description of the Capital Securities Guarantees" in the
accompanying Prospectus. The Capital Securities Guarantee will be held by The
Bank of New York, the Capital Guarantee Trustee, for the benefit of the
holders of the Capital Securities. The Capital Securities Guarantee does not
cover payment of distributions to the extent the Trust does not have available
funds to pay such distributions. In such event, the remedy of holders of
Capital Securities would be, through the vote of holders of a majority in
liquidation amount of the Capital Securities, to direct the Institutional
Trustee to enforce the Institutional Trustee's rights under the Subordinated
Debt Securities and the Debt Guarantee except in the circumstances in which a
holder of Capital Securities may take Direct Action. See "--Voting Rights" and
"--Declaration Events of Default."
DISTRIBUTIONS
Distributions on the Capital Securities will be fixed at a rate per annum of
% of the stated liquidation amount of $1,000 per Capital Security.
Distributions in arrears for more than one semiannual period will accrue at
the distribution rate per annum of % thereof compounded semiannually. The
term "distribution" as used herein includes any such compounded distributions
payable unless otherwise stated. The amount of distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed per 30-day month.
Distributions on the Capital Securities will be cumulative, will accrue from
, 1996 and will be payable semiannually in arrears on June 1 and December
1 of each year, commencing June 1, 1997, when, as and if available for
payment. Distributions will be made by the Institutional Trustee, except as
otherwise described below.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
at any time and from time to time on the Subordinated Debt Securities, subject
to the conditions described below. If such right is exercised, semiannual
distributions on the Capital Securities will also be deferred (though such
distributions would continue to accrue at the distribution rate of % per
annum, compounded semiannually (to the extent permitted by law) since interest
would continue to accrue on the Subordinated Debt Securities at a rate of %
per annum compounded semiannually) during any Extension Period. Such right to
extend any interest payment period for the Subordinated Debt Securities is
limited to Extension Periods, each not exceeding 10 consecutive semiannual
periods, and no Extension Period may be initiated while accrued interest from
a prior, completed Extension Period is unpaid or while the Company is in
default in the payment of interest that has become due and payable on the
Subordinated Debt Securities, and no Extension Period may extend beyond the
maturity of the Subordinated Debt Securities. In the event that the Company
exercises this right, then during any Extension Period (a) CCI and the Company
shall not declare or pay dividends on, make a distribution with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to,
any of its capital stock or rights to acquire such capital stock (other than
(i) purchases or acquisitions of shares of any such capital stock or rights to
acquire such capital stock in connection with the satisfaction by CCI or the
Company, respectively, of its obligations under any employee benefit plans,
(ii) as a result of a reclassification of CCI's or the Company's capital stock
or rights to acquire such capital stock or the exchange or conversion of one
class or series of CCI's or the Company's capital stock or rights to acquire
such capital stock for another class or series of CCI's or the Company's
capital stock or rights to acquire such capital stock, (iii) the purchase of
fractional interests in shares of CCI's or the Company's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged or (iv) dividends and distributions made
on CCI's or the Company's capital stock or rights to acquire such capital
stock with CCI's or the
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<PAGE>
Company's capital stock or rights to acquire such capital stock) or make
guarantee payments with respect to any of the foregoing and (b) CCI and the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by CCI or the
Company that rank pari passu with or junior to such Subordinated Debt
Securities. Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period; provided that each such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 10 consecutive semiannual periods or extend beyond the
maturity of the Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. See
"Description of the Subordinated Debt Securities and the Debt Guarantee--
Interest" and "--Option to Extend Interest Payment Period" herein and
"Description of the Subordinated Debt Securities and the Debt Guarantees--
Certain Covenants" in the accompanying Prospectus. If distributions are
deferred, the distributions due shall be paid on the date that the related
Extension Period terminates to holders of the Capital Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date.
Distributions on the Capital Securities must be paid on the dates payable
(after giving effect to any Extension Period) to the extent that the Trust has
funds available for the payment of such distributions in the Property Account.
The Trust's funds available for distribution to the holders of the Capital
Securities will be limited to payments received from the Company on the
Subordinated Debt Securities and CCI on the Debt Guarantee. See "Description
of the Subordinated Debt Securities and the Debt Guarantee." The payment of
distributions out of moneys held by the Trust is guaranteed by CCI as set
forth under "Description of the Capital Securities Guarantees" in the
accompanying Prospectus.
Distributions on the Capital Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Capital Securities remain in book-entry
only form, will be one Business Day (as defined below) prior to the relevant
payment dates. Such distributions will be paid through the Institutional
Trustee who will hold amounts received in respect of the Subordinated Debt
Securities and the Debt Guarantee in the Property Account for the benefit of
the holders of the Trust Securities. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment will be
made as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below. In the event that the Capital Securities do not continue to
remain in book-entry only form, the Regular Trustees shall select relevant
record dates, which shall be more than one Business Day prior to the relevant
payment dates. In the event that any date on which distributions are to be
made on the Capital Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay) with the same force and effect as if made on such payment
date. A "Business Day" shall mean any day other than Saturday, Sunday or any
other day on which banking institutions in New York City (in the State of New
York) are permitted or required by any applicable law to close.
MANDATORY REDEMPTION
The Subordinated Debt Securities will mature on December 1, 2026 and may be
redeemed at par, plus accrued and unpaid interest to the date of redemption,
in whole or in part, at any time and from time to time on or after December 1,
2006, or at any time in certain circumstances upon the occurrence of a Tax
Event. See "Description of the Subordinated Debt Securities and the Debt
Guarantee." Upon the repayment of the Subordinated Debt Securities, whether at
maturity or upon redemption, the proceeds from such repayment or payment shall
simultaneously be applied to redeem Trust Securities on a pro rata basis
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debt Securities so repaid or redeemed; provided that
holders of Trust Securities shall be given not less than 30 nor more than 60
days' notice of such redemption. See "Description of the Subordinated Debt
Securities and the Debt Guarantee--Optional Redemption." In the event that
fewer
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<PAGE>
than all of the outstanding Capital Securities are to be redeemed, the Capital
Securities will be redeemed in accordance with the procedures of DTC (as
defined herein) as described under "--Book-Entry Only Issuance--The Depository
Trust Company" below.
TAX EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, clarification of or change (including any announced prospective
change) in, the laws (or any regulations thereunder) of the United States or
any political subdivision or taxing authority thereof or therein, (b) any
judicial decision or official administrative pronouncement, ruling, regulatory
procedure, notice or announcement, including any notice or announcement of
intent to adopt such procedures or regulations (an "Administrative Action") or
(c) any amendment to, clarification of or change in the administrative
position or interpretation of any Administrative Action or judicial decision
that differs from the theretofore generally accepted position, in each case,
by any legislative body, court, governmental agency or regulatory body,
irrespective of the manner in which such amendment, clarification or change is
made known, which amendment, clarification or change is effective or such
Administrative Action or decision is announced, in each case, on or after the
date of this Prospectus Supplement, there is more than an insubstantial risk
that (i) the Trust is, or will be within 90 days of the date thereof, subject
to United States federal income tax with respect to interest accrued or
received on the Subordinated Debt Securities or subject to more than a de
minimis amount of other taxes, duties or other governmental charges, (ii) any
portion of interest payable by the Company to the Trust on the Subordinated
Debt Securities is not, or within 90 days of the date thereof will not be,
deductible by the Company for United States federal income tax purposes, or
(iii) the Company could become liable to pay, on the next date on which any
amount would be payable with respect to the Subordinated Debt Securities, any
Additional Interest (as defined in the Indenture).
If, at any time, a Tax Event shall occur and be continuing, the Regular
Trustees will, except in the limited circumstances described below, dissolve
the Trust and, after satisfaction of liabilities to creditors, cause
Subordinated Debt Securities held by the Institutional Trustee, having an
aggregate principal amount equal to the aggregate stated liquidation amount
of, with an interest rate identical to the distribution rate of, and accrued
and unpaid interest equal to accrued and unpaid distributions on, and having
the same record date, as the Trust Securities, to be distributed to the
holders of the Trust Securities, together with the Debt Guarantee, in
liquidation of such holders' interests in the Trust on a pro rata basis within
90 days following the occurrence of such Tax Event; provided, however, that
such dissolution and distribution shall be conditioned on the Company being
unable to avoid the adverse effects of such Tax Event within such 90-day
period by taking some ministerial action such as filing a form or making an
election or pursuing some other similar reasonable measure that will have no
adverse effect on the Trust, CCI, the Company or the holders of the Trust
Securities. Furthermore, if after a Tax Event has occurred, the Company
receives an opinion (a "Redemption Tax Opinion") of nationally recognized
independent tax counsel experienced in such matters that, as a result of such
Tax Event, there is more than an insubstantial risk that the Company would be
precluded from deducting the interest on the Subordinated Debt Securities for
United States federal income tax purposes, even if the Subordinated Debt
Securities were distributed to the holders of Trust Securities in liquidation
of such holders' interests in the Trust as described above, the Company shall
have the right within 90 days following the occurrence of such Tax Event, upon
not less than 30 nor more than 60 days' notice, to redeem the Subordinated
Debt Securities, in whole or in part, for cash so long as such Tax Event is
continuing, and, following such redemption, Trust Securities with an aggregate
liquidation amount equal to the aggregate principal amount of the Subordinated
Debt Securities so redeemed shall be redeemed on a pro rata basis by the Trust
at a redemption price per Capital Security of $1,000 plus accrued and unpaid
distributions thereon to the date fixed for redemption;
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<PAGE>
provided, however, that if at the time there is available to the Company or
the Trust the opportunity to eliminate, within such 90-day period and before
any such notice is given, the adverse effects of the Tax Event by taking some
ministerial action, such as filing a form or making an election or pursuing
some other similar reasonable measure that will have no adverse effect on the
Trust, CCI, the Company or the holders of the Trust Securities, the Company or
the Trust will pursue such measure in lieu of redemption.
After the date for any distribution of Subordinated Debt Securities,
together with the Debt Guarantee, upon dissolution of the Trust, (i) the
Capital Securities will be deemed to be no longer outstanding, (ii) the
Depositary (as defined herein) or its nominee, as the record holder of the
Capital Securities, will receive a registered Global Certificate (as defined
herein) or Certificates representing the Subordinated Debt Securities and the
Debt Guarantee to be delivered upon such distribution, and (iii) any
certificates representing Capital Securities not held by the Depositary or its
nominee will be deemed to represent undivided beneficial interests in such of
the Subordinated Debt Securities as have an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the distribution rate of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, such Capital Securities until such
certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for either the Capital
Securities or the Subordinated Debt Securities that may be distributed in
exchange for the Capital Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Capital Securities that an investor may
purchase, whether pursuant to the offering made hereby or in the secondary
market, or the Subordinated Debt Securities that an investor may receive if a
dissolution and liquidation of the Trust were to occur, may trade at a
discount to the price paid to purchase the Capital Securities offered hereby.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Capital
Securities unless all accrued and unpaid distributions have been paid on all
Capital Securities for all semiannual distribution periods terminating on or
prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Capital Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time,
on the redemption date, provided that the Company has paid to the
Institutional Trustee a sufficient amount of cash in connection with the
related redemption or maturity of the Subordinated Debt Securities, the Trust
will irrevocably deposit with the Depositary funds sufficient to pay the
applicable Redemption Price and will give the Depositary irrevocable
instructions and authority to pay the Redemption Price to the holders of the
Capital Securities. See "--Book-Entry Only Issuance--The Depository Trust
Company." If notice of redemption shall have been given and funds deposited as
required, then, immediately prior to the close of business on the date of such
deposit, distributions will cease to accrue and all rights of holders of such
Capital Securities so called for redemption will cease, except the right of
the holders of such Capital Securities to receive the Redemption Price but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Capital Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day that is a Business Day (without any interest or other payment in respect
of any such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding Business
Day. In the event that payment of the Redemption Price in respect of Capital
Securities is improperly withheld or refused and not paid by the Trust, or by
CCI pursuant to the Capital Securities Guarantee, distributions on such
Capital Securities will continue to accrue at the then applicable rate from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
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In the event that fewer than all of the outstanding Capital Securities are
to be redeemed, the Capital Securities will be redeemed in accordance with the
procedures of DTC as described below under "--Book-Entry Only Issuance--The
Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), provided the acquiror is not the
holder of the Common Securities or the obligor under the Subordinated Debt
Securities, CCI or its subsidiaries may at any time, and from time to time,
purchase outstanding Capital Securities by tender, in the open market or by
private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the holders of
the Capital Securities will be entitled to receive out of the assets of the
Trust, after satisfaction of liabilities to creditors of the Trust (to the
extent not paid by the Company or CCI), distributions in an amount equal to
the aggregate of the stated liquidation amount of $1,000 per Capital Security
plus accrued and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such Liquidation,
Subordinated Debt Securities in an aggregate stated principal amount equal to
the aggregate stated liquidation amount of, with an interest rate identical to
the distribution rate of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, the Capital Securities have been
distributed on a pro rata basis to the holders of the Capital Securities. Upon
any Liquidation in which the Subordinated Debt Securities are distributed, if
at the time of such Liquidation the Capital Securities are rated by at least
one nationally recognized statistical rating organization, the Company will
use its best efforts to obtain from at least one such or other rating
organization a rating for the Subordinated Debt Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Capital Securities shall be paid on a pro rata basis. The holders
of the Common Securities will be entitled to receive distributions upon any
such Liquidation pro rata with the holders of the Capital Securities, except
that if a Declaration Event of Default has occurred and is continuing, the
Capital Securities shall have a preference over the Common Securities with
regard to such distributions.
Pursuant to the Declaration, the Trust shall dissolve (i) on December 31,
2050, the expiration of the term of the Trust, (ii) upon the bankruptcy of CCI
or the Company, (iii) (other than in connection with a merger, consolidation
or similar transaction not prohibited by the Indenture, Declaration, Debt
Guarantee or Capital Securities Guarantee, as the case may be) upon the filing
of a certificate of dissolution or its equivalent with respect to CCI or the
Company, upon the consent of the holders of at least a majority in liquidation
amount of the Trust Securities voting together as a single class to file a
certificate of cancellation with respect to the Trust, or upon the revocation
of the charter of CCI or the Company and the expiration of 90 days after the
date of revocation without a reinstatement thereof, (iv) upon the occurrence
of a Tax Event, except in the limited circumstance described under "--Tax
Event Redemption or Distribution" above, (v) upon the entry of a decree of a
judicial dissolution of CCI, the Company or the Trust, or (vi) upon the
redemption of all the Trust Securities. Pursuant to the Declaration, as soon
as practicable after the dissolution of the Trust and upon completion of the
winding up of the Trust, the Trust shall terminate upon the filing of a
certificate of cancellation.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the
Trust Securities (a "Declaration Event of Default"); provided that pursuant to
the Declaration, the holder of the Common Securities will be deemed to have
waived any Declaration Event of Default with respect to the Common Securities
until all Declaration
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Events of Default with respect to the Capital Securities have been cured,
waived or otherwise eliminated. Until such Declaration Events of Default with
respect to the Capital Securities have been so cured, waived, or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the holders of the Capital Securities and only the holders of the
Capital Securities will have the right to direct the Institutional Trustee
with respect to certain matters under the Declaration, and therefore the
Indenture. The holders of a majority in liquidation amount of the Capital
Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as holder of
the Subordinated Debt Securities and the Debt Guarantee. If the Institutional
Trustee fails to enforce its rights under the Subordinated Debt Securities or
the Debt Guarantee after the holders of a majority in liquidation amount of
the Capital Securities have so directed the Institutional Trustee, a holder of
record of Capital Securities may institute a legal proceeding against the
Company or CCI to enforce the Institutional Trustee's rights under the
Subordinated Debt Securities or the Debt Guarantee, as the case may be,
without first instituting any legal proceeding against the Institutional
Trustee or any other person or entity including in the case of the Debt
Guarantee, the Company. Notwithstanding the foregoing, if a Declaration Event
of Default has occurred and is continuing and such event is attributable to
(i) the failure of the Company to pay interest or principal on the
Subordinated Debt Securities on the respective dates such interest or
principal is payable (or in the case of redemption, the redemption date) or
(ii) the failure of CCI to pay any obligation in respect thereof under the
Debt Guarantee, then a holder of record of Capital Securities may institute
directly against the Company or CCI, as the case may be, a proceeding for
enforcement of payment, on or after the respective due dates specified in the
Subordinated Debt Securities, to such holder directly of the principal of or
interest on Subordinated Debt Securities having an aggregate principal amount
equal to the aggregate liquidation amount of the Capital Securities of such
holder. In connection with such Direct Action, the Company and CCI will be
subrogated to the rights of such holder of Capital Securities under the
Declaration to the extent of any payment made by the Company or CCI, as the
case may be, to such holder of Capital Securities in such Direct Action;
provided, however, that no such subrogation right may be exercised so long as
a Declaration Event of Default has occurred and is continuing. The holders of
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debt Securities or the Debt
Guarantee.
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee, so long as it is the sole holder of the Subordinated Debt Securities,
will have the right under the Indenture to declare the principal of and
interest on the Subordinated Debt Securities to be immediately due and
payable. CCI and the Trust are each required to file annually with the
Institutional Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "Description of the Capital Securities Guarantees--Modification of the
Capital Securities Guarantees; Assignment" in the accompanying Prospectus, and
as otherwise required by law and the Declaration, the holders of the Capital
Securities will have no voting rights. The Regular Trustees are required to
call a meeting of the holders of the Capital Securities if directed to do so
by holders of at least 10% in aggregate liquidation amount thereof.
Subject to the requirement of the Institutional Trustee's obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the Institutional
Trustee under the Declaration, including the right to direct the
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Institutional Trustee, as holder of the Subordinated Debt Securities and the
Debt Guarantee, to (i) exercise the remedies available to it under the
Indenture as a holder of the Subordinated Debt Securities and the Debt
Guarantee, (ii) waive any past default that is waivable under the Indenture,
(iii) exercise any right to rescind or annul a declaration that the principal
of all the Subordinated Debt Securities shall be due and payable or (iv)
consent on behalf of all the holders of the Preferred Securities to any
amendment, modification or termination of the Indenture, the Subordinated Debt
Securities or the Debt Guarantee where such consent shall be required;
provided, however, that, where a consent or action under the Indenture would
require the consent or act of holders of more than a majority in principal
amount of the Subordinated Debt Securities (a "Super-Majority") affected
thereby, the Institutional Trustee may only give such consent or take such
action at the written direction of the holders of at least the proportion in
aggregate liquidation amount of the Capital Securities outstanding which the
relevant Super-Majority represents of the aggregate principal amount of the
Subordinated Debt Securities outstanding. If the Institutional Trustee fails
to enforce its rights under the Subordinated Debt Securities or the Debt
Guarantee after the holders of a majority in liquidation amount of the Capital
Securities have so directed the Institutional Trustee, a holder of record of
Capital Securities may institute a legal proceeding directly against the
Company or CCI to enforce the Institutional Trustee's rights under the
Subordinated Debt Securities or the Debt Guarantee, as the case may be,
without first instituting any legal proceeding against the Institutional
Trustee or any other person or entity including, in the case of the Debt
Guarantee, against the Company. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to (a) the failure of the Company to pay interest or principal on
the Subordinated Debt Securities on the respective dates such interest or
principal is payable (or in the case of redemption, the redemption date) or
(b) the failure of CCI to pay any obligation in respect thereof under the Debt
Guarantee, then a holder of record of Capital Securities may directly
institute a proceeding for enforcement of payment, on or after the respective
due dates specified in the Subordinated Debt Securities, to such holder
directly of the principal of or interest on Subordinated Debt Securities
having an aggregate principal amount equal to the aggregate liquidation amount
of the Capital Securities of such holder. The Institutional Trustee shall
notify all holders of the Capital Securities of any default actually known to
the Institutional Trustee with respect to the Subordinated Debt Securities
unless (x) such defaults have been cured prior to the giving of such notice or
(y) the Institutional Trustee determines in good faith that the withholding of
such notice is in the interest of the holders of the Capital Securities,
except where the default relates to the payment of principal of (or premium,
if any) or interest on any of the Subordinated Debt Securities. Such notice
shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default. Except with respect to directing the time,
method and place of conducting a proceeding for a remedy, the Institutional
Trustee shall not take any of the actions described in clauses (i), (ii) or
(iii) above unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that, as a result of such action, the Trust will not be
classified as other than a grantor trust for United States federal income tax
purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Subordinated Debt Securities and the Debt Guarantee, is required under the
Indenture with respect to any amendment, modification or termination of the
Indenture, the Institutional Trustee shall request the direction of the
holders of the Trust Securities with respect to such amendment, modification
or termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where a
consent under the Indenture would require the consent of a Super-Majority, the
Institutional Trustee may only give such consent at the direction of the
holders of at least the proportion in liquidation amount of the Trust
Securities outstanding which the relevant Super-Majority represents of the
aggregate principal amount of the Subordinated Debt Securities outstanding.
The Institutional Trustee shall not take any such action in accordance with
the directions of the holders of the Trust Securities unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that, as
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a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Capital Securities may be
given at a separate meeting of holders of Capital Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Capital Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Capital Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a
description of any resolution proposed for adoption at such meeting on which
such holders are entitled to vote or of such matter upon which written consent
is sought; and (iii) instructions for the delivery of proxies or consents. No
vote or consent of the holders of Capital Securities will be required for the
Trust to redeem and cancel Capital Securities or distribute Subordinated Debt
Securities and the Debt Guarantee in accordance with the Declaration.
Notwithstanding that holders of Capital Securities are entitled to vote or
consent under any of the circumstances described above, any of the Capital
Securities that are owned at such time by CCI or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, CCI, shall not entitle the holders thereof to vote or consent
and shall, for purposes of such vote or consent, be treated as if such Capital
Securities were not outstanding.
The procedures by which holders of Capital Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company" below.
Holders of the Capital Securities will have no rights to appoint or remove
the Countrywide Trustees, who may be appointed, removed or replaced solely by
CCI as the holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended without the consent of the holders of the
Trust Securities to: (i) cure any ambiguity; (ii) correct or supplement any
provision in the Declaration that may be defective or inconsistent with any
other provision of the Declaration; (iii) add to the covenants, restrictions
or obligations of CCI; (iv) conform to any change in Rule 3a-5 under the
Investment Company Act of 1940, as amended (the "1940 Act"), or written change
in interpretation or application of Rule 3a-5 by any legislative body, court,
government agency or regulatory authority, which amendment does not have a
material adverse effect on the rights, preferences or privileges of the
holders of the Trust Securities; and (v) modify, eliminate and add to any
provision of the Declaration to such extent as may be necessary, provided that
no such amendment shall adversely affect the powers, preferences or special
rights of the holders of the Trust Securities.
In addition, the Declaration may be modified and amended if approved by the
Regular Trustees (and in certain circumstances the Institutional Trustee and
the Delaware Trustee), provided that, if any proposed amendment provides for,
or the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or
(ii) the dissolution, winding-up or termination of the Trust other than
pursuant to the terms of the Declaration, then the holders of the Trust
Securities voting together as a single class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of at least a majority in
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liquidation amount of the Trust Securities affected thereby; provided that if
any amendment or proposal referred to in clause (i) above would adversely
affect only the Capital Securities or the Common Securities, then only the
affected class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee in contravention of the Trust Indenture Act or (iii)
cause the Trust to be deemed an "investment company" which is required to be
registered under the 1940 Act. Notwithstanding any provision of the
Declaration, Section 316(b) of the Trust Indenture Act provides that the right
of any holder of Capital Securities to receive payment of distributions and
other payments upon redemption or otherwise on or after their respective due
dates, or to institute suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such holder.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, the Institutional
Trustee or the Delaware Trustee, consolidate, amalgamate, merge with or into,
or be replaced by, a trust organized as such under the laws of any State of
the United States; provided that (i) if the Trust is not the survivor, such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Trust Securities
other securities having substantially the same terms as the Trust Securities
(the "Successor Securities"), so that the Successor Securities rank the same
as the Trust Securities rank with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly acknowledges
a trustee of such successor entity possessing the same powers and duties as
the Institutional Trustee as the holder of the Subordinated Debt Securities
and CCI expressly acknowledges such trustee of such successor entity as the
holder of the Debt Guarantee, (iii) the Capital Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or with another
organization on which the Capital Securities are then listed or quoted, (iv)
such merger, consolidation, amalgamation or replacement does not cause the
Capital Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in such successor entity),
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation or replacement, the Regular
Trustees have received an opinion of a nationally recognized independent
counsel to the Trust experienced in such matters to the effect that (A) such
merger, consolidation, amalgamation or replacement does not adversely affect
the rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in such successor entity),
(B) following such merger, consolidation, amalgamation or replacement, neither
the Trust nor such successor entity will be required to register as an
investment company under the 1940 Act and (C) following such merger,
consolidation, amalgamation or replacement, neither the Trust nor such
successor entity will be classified as other than a grantor trust for United
States federal income tax purposes, and (viii) CCI guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Capital Securities Guarantee and the Common
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Securities Guarantee (as described in the accompanying Prospectus).
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by, any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace
it, if such consolidation, amalgamation, merger or replacement would cause the
Trust or the successor entity to be classified as other than a grantor trust
for United States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary (the
"Depositary") for the Capital Securities. The Capital Securities, on original
issuance, will be issued only as fully-registered securities registered in the
name of Cede & Co. (DTC's nominee). One or more fully-registered global
Capital Securities certificates (each, a "Global Certificate"), representing
the total aggregate number of Capital Securities, will be issued and will be
deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Capital Securities
as represented by a Global Certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Participants in DTC include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Participants and by the New York Stock Exchange, the American
Stock Exchange, Inc., and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others, such as securities
brokers and dealers, banks and trust companies that clear transactions through
or maintain a direct or indirect custodial relationship with a Direct
Participant 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 Capital Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Capital
Securities on DTC's records. The ownership interest of each actual purchaser
of each Capital Security ("Beneficial Owner") is in turn to be recorded on the
Direct Participants' and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which the Beneficial Owners
purchased Capital Securities. Transfers of ownership interests in the Capital
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Capital Securities,
except in the event that use of the book-entry system for the Capital
Securities is discontinued.
To facilitate subsequent transfers, all the Capital Securities deposited by
Participants with DTC will be registered in the name of DTC's nominee, Cede &
Co. The deposit of Capital Securities with DTC and their registration in the
name of Cede & Co. will effect no change in beneficial ownership. DTC will
have no knowledge of the actual Beneficial Owners of the Capital Securities.
DTC's records will reflect only the identity of the Direct Participants to
whose accounts such Capital Securities are
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credited, which may or may not be the Beneficial Owners. The Direct
Participants and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be
considered the sole owner or holder of the Capital Securities represented
thereby for all purposes under the Declaration and the Capital Securities. No
Beneficial Owner of an interest in a Global Certificate will be able to
transfer that interest except in accordance with DTC's applicable procedures.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Capital Securities (including the presentation of Capital
Securities for exchange as described below) only at the direction of one or
more Participants to whose accounts the DTC interests in the Global
Certificates are credited and only in respect of such portion of the aggregate
liquidation amount of Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is a
Declaration Event of Default with respect to the Capital Securities, DTC will,
upon notice, exchange the Global Certificates for certificated securities,
which it will distribute to its Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices in respect of the Capital Securities held in book-entry
form will be sent to Cede & Co. If less than all of the Capital Securities are
being redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Capital Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Capital Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to the Trust as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Capital Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Distributions on the Capital Securities held in book-entry form will be made
to DTC in immediately available funds. DTC's practice is to credit Direct
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Direct Participants and Indirect Participants and not
of DTC, the Trust, CCI or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of distributions
to DTC is the responsibility of the Trust, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct Participants
and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC, the Direct Participants and the Indirect Participants to exercise any
rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC,
DTC is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the
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Company, CCI, the Trust nor the Institutional Trustee will have any
responsibility for the performance by DTC or its Direct Participants or
Indirect Participants under the rules and procedures governing DTC. DTC may
discontinue providing its services as securities depositary with respect to
the Capital Securities at any time by giving notice to the Trust. Under such
circumstances, in the event that a successor securities depositary is not
obtained, Capital Security certificates are required to be printed and
delivered. Additionally, the Trust (with the consent of the Company) may
decide to discontinue use of the system of book-entry transfers through DTC
(or a successor depositary) with respect to the Capital Securities. In that
event, certificates for the Capital Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that CCI, the Company and the Trust believe to
be reliable, but neither CCI, the Company nor the Trust takes responsibility
for the accuracy thereof.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities represented by the Global
Certificates shall be made to DTC, which shall credit the relevant accounts at
DTC on the applicable distribution payment dates or, in the case of
certificated securities in non-book-entry form, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address
shall appear on books and records of the Trust. The paying agent for the Trust
Securities (the "Paying Agent") shall initially be The Bank of New York. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days'
written notice to the Institutional Trustee. In the event that The Bank of New
York shall no longer be the Paying Agent, the Institutional Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company).
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The Bank of New York will act as registrar, transfer agent and Paying Agent
for the Capital Securities.
Registration of transfers or exchanges of Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment (with
the giving of such indemnity as the Trust or the Company may require) in
respect of any tax or other government charges which may be imposed in
relation to it.
The Trust will not be required to register or cause to be registered the
transfer or exchange of Capital Securities after such Capital Securities have
been called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise such of the rights and
powers vested in it by the Declaration, and use the same degree of care and
skill in their exercise, as a prudent individual would exercise or use in the
conduct of his or her own affairs. Subject to such provisions, the
Institutional Trustee is under no obligation to exercise any of the powers
vested in it by the Declaration at the request of any holder of Capital
Securities, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The holders
of Capital Securities will not be required to offer such indemnity in the
event such holders, by exercising their voting rights, direct the
Institutional Trustee to take any action it is empowered to take under the
Declaration following a Declaration Event of Default. The Institutional
Trustee also serves as trustee under the Capital Securities Guarantee and the
Indenture. CCI and certain of its subsidiaries (including the Company) conduct
certain banking transactions with the Institutional Trustee in the ordinary
course of their business.
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Whenever in the exercise of its rights or powers or the performance of its
duties under the Declaration the Institutional Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy or right or
taking any other action thereunder, the Institutional Trustee (i) may request
instructions from the holders of the Capital Securities which instructions may
only be given by the holders of a majority, or such other proportion, in
liquidation amount of the Capital Securities as would be entitled to direct
the Institutional Trustee under the terms of the Capital Securities in respect
of such remedy, right or action, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance
with such instructions.
GOVERNING LAW
The Declaration and the Capital Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware, without
regard to principles of conflict of laws.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act nor be characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Subordinated Debt
Securities will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company, CCI and the
Regular Trustees are authorized to take any action, not inconsistent with
applicable law, the Declaration or the certificates of incorporation of the
Company and CCI, that each of the Company, CCI and the Regular Trustees
determine in their discretion to be necessary or desirable to achieve such
end, as long as such action does not adversely affect the interests of the
holders of the Capital Securities or vary the terms thereof.
Holders of the Capital Securities have no preemptive rights.
DESCRIPTION OF THE CAPITAL SECURITIES GUARANTEE
Pursuant to the Capital Securities Guarantee, CCI will irrevocably and
unconditionally agree to pay in full to the holders of the Capital Securities
the Guarantee Payments (as defined in the accompanying Prospectus) (except to
the extent paid by the Trust), as and when due, regardless of any defense,
right of set-off or counterclaim which the Trust may have or assert. CCI's
obligation to make a Guarantee Payment may be satisfied by direct payment of
the required amounts by CCI to the holders of Capital Securities or by causing
the Trust to pay such amounts to such holders. The Capital Securities
Guarantee covers payments of distributions and other payments on the Capital
Securities only if and to the extent that the Trust has funds available
therefor, which funds will not be available except to the extent the Company
has made payments of interest or principal or other payments on the
Subordinated Debt Securities or CCI has made such payments pursuant to the
Debt Guarantee. The Capital Securities Guarantee will be qualified as an
indenture under the Trust Indenture Act. The Bank of New York will act as
indenture trustee under the Capital Securities Guarantee. The terms of the
Capital Securities Guarantee will be those set forth in such Capital
Securities Guarantee and those made part of such Capital Securities Guarantee
by the Trust Indenture Act. The Capital Securities Guarantee will be held by
the Capital Guarantee Trustee for the benefit of the holders of the Capital
Securities. A summary description of the Capital Securities Guarantee appears
in the accompanying Prospectus under the caption "Description of the Capital
Securities Guarantees."
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
AND THE DEBT GUARANTEE
Set forth below is a description of the principal terms of the Subordinated
Debt Securities in which the Trust will invest the gross proceeds from the
issuance and sale of the Trust Securities. This description supplements the
description of the general terms and provisions of the Subordinated Debt
Securities set forth in the accompanying Prospectus under the caption
"Description of the Subordinated Debt Securities and the Debt Guarantees." The
following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the description in the
accompanying Prospectus and the Indenture, dated as of , 1996 (the "Base
Indenture"), among the Company, CCI and The Bank of New York, as trustee (or
successor thereto, in either case the "Debt Trustee"), as supplemented by a
First Supplemental Indenture, dated as of , 1996 (the Base Indenture, as
so supplemented, is hereinafter referred to as the "Indenture"), the forms of
which are filed as exhibits to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus form a part. Certain
capitalized terms used herein are defined in the Indenture. The Indenture will
be qualified as an indenture under the Trust Indenture Act. Initially, The
Bank of New York will be the Debt Trustee.
Under certain circumstances involving the dissolution of the Trust following
the occurrence of a Tax Event, Subordinated Debt Securities and the Debt
Guarantee may be distributed to the holders of the Trust Securities in
liquidation of the Trust. See "Description of the Capital Securities--Tax
Event Redemption or Distribution."
GENERAL
The Subordinated Debt Securities will be issued as unsecured debt under the
Indenture. The Subordinated Debt Securities will be limited to the sum of the
aggregate stated liquidation amounts of the Capital Securities and the Common
Securities.
The Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Subordinated Debt Securities
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compounded Interest (as defined herein) and
Additional Interest (as defined herein), if any, on December 1, 2026. The
Subordinated Debt Securities will be fully and unconditionally guaranteed on a
subordinated basis as to principal, premium, if any, and interest by CCI. See
"Description of the Subordinated Debt Securities and the Debt Guarantees--Debt
Guarantees" in the accompanying Prospectus.
If Subordinated Debt Securities are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debt Securities will initially be issued as a Global Security. As
described herein, under certain limited circumstances, Subordinated Debt
Securities may be issued in certificated non-book entry form in exchange for a
Global Security. See "--Book-Entry and Settlement" below. In the event that
Subordinated Debt Securities are issued in certificated non-book entry form in
connection with such circumstances, such Subordinated Debt Securities will be
in denominations of $1,000 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments on
Subordinated Debt Securities issued as a Global Security will be made to DTC,
a successor depositary or, in the event that no depositary is used, to a
paying agent for the Subordinated Debt Securities. In the event Subordinated
Debt Securities are issued in certificated non-book entry form, principal and
interest will be payable, the transfer of the Subordinated Debt Securities
will be registrable and Subordinated Debt Securities will be exchangeable for
Subordinated Debt Securities of other denominations of a like aggregate
principal amount at the corporate trust office of the Debt Trustee in New
York, New York; provided that payment of interest may be made at the option of
the Company by check mailed to the address of the holder entitled thereto or
by wire transfer to an account appropriately designated by the holder entitled
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thereto. Notwithstanding the foregoing, so long as the holder of any
Subordinated Debt Securities is the Institutional Trustee, the payment of
principal and interest on the Subordinated Debt Securities held by the
Institutional Trustee will be made at such place and to such account as may be
designated by the Institutional Trustee.
The Indenture does not contain provisions that afford holders of the
Subordinated Debt Securities protection in the event of a highly leveraged
transaction or other similar transaction involving the Company or CCI that may
adversely affect such holders.
SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all present and future Senior
Indebtedness of the Company and that the Debt Guarantee is subordinated and
junior in right of payment to all present and future Senior Indebtedness of
CCI. No payment of principal (including redemption payments), premium, if any,
or interest on the Subordinated Debt Securities and no payment under the Debt
Guarantees may be made if (i) any Senior Indebtedness of the Company or CCI,
as the case may be, is not paid when due and any applicable grace period with
respect to a payment default under such Senior Indebtedness has ended and such
default has not been cured or waived or ceased to exist or (ii) the maturity
of any Senior Indebtedness of the Company or CCI, as the case may be, has been
accelerated because of a default. Upon any distribution of assets of the
Company or CCI, as the case may be, to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings, all
principal, premium, if any, and interest due or to become due on all Senior
Indebtedness of the Company or CCI, as the case may be, must be paid in full
before the holders of Subordinated Debt Securities or the Debt Guarantee are
entitled to receive or retain any payment. Upon satisfaction of all claims of
all Senior Indebtedness then outstanding, the rights of the holders of the
Subordinated Debt Securities will be subrogated to the holders of Senior
Indebtedness of the Company or CCI, as the case may be, to receive payments or
distributions applicable to Senior Indebtedness until all amounts owing on the
Subordinated Debt Securities or the Debt Guarantee, as the case may be, are
paid in full.
The term "Senior Indebtedness" means, with respect to the Company or CCI, as
the case may be, (i) the principal, premium, if any, and interest in respect
of (A) indebtedness of such obligor for money borrowed and (B) indebtedness
evidenced by securities, debentures, bonds or other similar instruments issued
by such obligor, (ii) all capital lease obligations of such obligor, (iii) all
obligations of such obligor issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such obligor and all
obligations of such obligor under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business), (iv) all
obligations of such obligor for the reimbursement on any letter of credit, any
banker's acceptance, any security purchase facility, any repurchase agreement
or similar arrangement, any interest rate swap, any other hedging arrangement,
any obligation under options or any similar credit or other transaction, (v)
all obligations of the type referred to in clauses (i) through (iv) above of
other persons for the payment of which such obligor is responsible or liable
as obligor, guarantor or otherwise and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons secured by any
lien on any property or asset of such obligor (whether or not such obligation
is assumed by such obligor), except for (1) any such indebtedness that
contains express terms, or is issued under a deed, indenture or other
instrument that contains express terms, providing that it is subordinate to or
ranks pari passu with the Subordinated Debt Securities or the Debt Guarantee,
as the case may be, (2) any indebtedness between or among the Company or CCI
or any affiliate of the Company or CCI and (3) all other debt securities and
guarantees in respect of those debt securities, in any case issued by the
Company or CCI to (a) any other Countrywide Trust or a trustee of such trust
and (b) any other trust, or a trustee of such trust, partnership or other
entity affiliated with the Company or CCI that is a financing vehicle of the
Company or CCI (a "financing entity") in connection with the issuance by such
financing entity
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of securities of a similar nature to the Capital Securities or of other
securities that rank pari passu with, or junior to, the Capital Securities.
Such Senior Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company or CCI. CCI's obligations under the Debt
Guarantee are also effectively subordinate to claims of creditors of CCI's
subsidiaries (including the Company). As of August 31, 1996, CCI had $200
million of Senior Indebtedness (excluding indebtedness of subsidiaries
guaranteed by CCI), Senior Indebtedness of the Company aggregated
approximately $5.5 billion and the indebtedness of CCI's subsidiaries
(including the Senior Indebtedness and other indebtedness of the Company)
aggregated approximately $5.5 billion.
OPTIONAL REDEMPTION
The Company may redeem the Subordinated Debt Securities, without premium or
penalty, in whole or in part, from time to time, on or after December 1, 2006,
or at any time in certain circumstances upon the occurrence of a Tax Event as
described under "Description of the Capital Securities--Tax Event Redemption
or Distribution," upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date.
INTEREST
Each of the Subordinated Debt Securities shall bear interest at the rate of
% per annum from the original date of issuance, payable semiannually in
arrears on June 1 and December 1 of each year (each an "Interest Payment
Date"), commencing June 1, 1997, to the person in whose name such Subordinated
Debt Security is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. In the
event the Subordinated Debt Securities shall not continue to remain in book-
entry only form, the Company shall select relevant record dates, which shall
be more than one Business Day prior to the relevant Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full semiannual period for which interest is
computed will be computed on the basis of the actual number of days elapsed
per 30-day month. In the event that any date on which interest is payable on
the Subordinated Debt Securities is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day (and without any interest or other payment in respect of any
such delay) with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company is not in default in the payment of interest that has
become due and payable on the Subordinated Debt Securities and no accrued
interest from a prior completed Extension Period is unpaid, the Company shall
have the right to defer payments of interest on the Subordinated Debt
Securities by extending the interest payment period, at any time and from time
to time, for Extension Periods, each not exceeding 10 consecutive semiannual
periods, and on the date on which each such Extension Period ends the Company
shall pay all interest then accrued and unpaid (including any Additional
Interest), together with interest thereon compounded semiannually at the rate
specified for the Subordinated Debt Securities to the extent permitted by
applicable law ("Compounded Interest"); provided that during any Extension
Period (a) CCI and the Company shall not declare or pay dividends on, make any
distribution with respect to, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock or rights to
acquire such capital stock (other
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than (i) purchases or acquisitions of shares of any such capital stock or
rights to acquire such capital stock in connection with the satisfaction by
CCI or the Company, respectively, of its obligations under any employee
benefit plans, (ii) as a result of a reclassification of CCI's or the
Company's capital stock or rights to acquire such capital stock or the
exchange or conversion of one class or series of CCI's or the Company's
capital stock or rights to acquire such capital stock for another class or
series of CCI's or the Company's capital stock or rights to acquire such
capital stock, (iii) the purchase of fractional interests in shares of CCI's
or the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
or (iv) dividends and distributions made on CCI's or the Company's capital
stock or rights to acquire such capital stock with CCI's or the Company's
capital stock or rights to acquire such capital stock) or make any guarantee
payments with respect to any of the foregoing and (b) CCI and the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by CCI or the Company
that rank pari passu with or junior to the Subordinated Debt Securities. Prior
to the termination of any such Extension Period, the Company may further defer
payments of interest by extending the interest payment period; provided,
however, that each such Extension Period, including all such previous and
further extensions thereof, may not exceed 10 consecutive semiannual periods
or extend beyond the maturity of the Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all amounts then due,
the Company may commence a new Extension Period, subject to the terms set
forth in this section. No interest during an Extension Period, except on the
date on which such Extension Period terminates, shall be due and payable. The
Company has no present intention of exercising its right to defer payments of
interest on the Subordinated Debt Securities. If the Institutional Trustee
shall be the sole holder of the Subordinated Debt Securities, the Company
shall give the Regular Trustees, the Institutional Trustee and the Debt
Trustee notice of its initiation of any Extension Period one Business Day
prior to the earlier of (i) the next succeeding date distributions on the
Capital Securities are payable or (ii) the date the Regular Trustees are
required to give notice to holders of the Capital Securities (or any national
securities exchange or other organization on which the Capital Securities are
listed) of the record date or the distribution payment date, in each case with
respect to distributions on the Trust Securities the payment of which is being
deferred. The Regular Trustees shall give notice of the Company's initiation
of any Extension Period to the holders of the Capital Securities. If the
Institutional Trustee shall not be the sole holder of the Subordinated Debt
Securities, the Company shall give the holders of the Subordinated Debt
Securities notice of its initiation of such Extension Period 10 Business Days
prior to the earlier of (i) the next succeeding Interest Payment Date or (ii)
the date upon which the Company is required to give notice to holders of the
Subordinated Debt Securities (or any national securities exchange or other
organization on which the Capital Securities are listed) of the record date or
interest payment date, in each case with respect to interest payments the
payment of which is being deferred.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") on the Subordinated Debt Securities held by the Institutional
Trustee such additional amounts as shall be required so that the net amounts
received and retained by the Trust after paying any such taxes, duties,
assessments or other governmental charges will equal the amounts the Trust and
the Institutional Trustee would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation
which, among other things, would generally deny corporate issuers a deduction
for interest in respect of certain debt obligations issued on or after
December 7, 1995, if such debt obligations have a maximum term in
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excess of twenty years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth, Jr. and House Ways and Means Committee
Chairman Bill Archer issued the Joint Statement indicating their intent that
certain legislative proposals initiated by the Clinton administration,
including the Proposed Legislation, that may be adopted by either of the tax-
writing committees of Congress would have an effective date that is no earlier
than the date of "appropriate Congressional action." Based upon the Joint
Statement, it is expected that if the Proposed Legislation were to be enacted,
such legislation would not apply to the Subordinated Debt Securities. There
can be no assurance, however, that the effective date guidance contained in
the Joint Statement will be incorporated into the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of the Company to deduct the interest
payable on the Subordinated Debt Securities. Accordingly, there can be no
assurance that a Tax Event will not occur. See "Description of the Capital
Securities--Tax Event Redemption or Distribution."
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Subordinated Debt Securities, will
have the right to declare the principal of and the interest on the
Subordinated Debt Securities (including any Compounded Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Subordinated Debt Securities. See "Description of the
Subordinated Debt Securities and the Debt Guarantees--Events of Default,
Waiver and Notice" and "--Certain Covenants" in the accompanying Prospectus
for a description of the Indenture Events of Default and certain consequences
thereof. An Indenture Event of Default also constitutes a Declaration Event of
Default. The holders of Capital Securities in certain circumstances have the
right to direct the Institutional Trustee to exercise its rights as the holder
of the Subordinated Debt Securities and the Debt Guarantee. See "Description
of the Capital Securities--Declaration Events of Default" and "--Voting
Rights." Notwithstanding the foregoing, if an Indenture Event of Default has
occurred and is continuing and such event is attributable to (i) the failure
of the Company to pay interest or principal on the Subordinated Debt
Securities on the respective dates such interest or principal is payable (or
in the case of redemption, on the redemption date) or (ii) the failure of CCI
to pay any obligation in respect thereof under the Debt Guarantee, the Company
and CCI acknowledge that a holder of record of Capital Securities may
institute a Direct Action for payment, on or after the respective due dates
specified in the Subordinated Debt Securities, to such holder directly of the
principal of or interest on Subordinated Debt Securities having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such holder. Notwithstanding any payments made to such holder of
Capital Securities by CCI or the Company in connection with a Direct Action,
CCI and the Company shall remain obligated to pay the principal of or interest
on the Subordinated Debt Securities held by the Trust or the Institutional
Trustee, and CCI or the Company, as the case may be, shall be subrogated to
the rights of such holder of such Capital Securities under the Declaration to
the extent of any payments made by CCI or the Company, as the case may be, to
such holder in any Direct Action; provided, however, that no such subrogation
right may be exercised so long as a Declaration Event of Default has occurred
and is continuing. Except to the extent described above under "Description of
the Capital Securities--Declaration Events of Default" and "--Voting Rights,"
the holders of Capital Securities will not be able to exercise directly any
other remedy available to the holders of the Subordinated Debt Securities and
the Debt Guarantee.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Capital Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence of a Tax Event, the Subordinated Debt Securities
will be issued in the form of one or more global certificates (each a "Global
Security") registered in the name of the Depositary or its nominee. Except
under the limited
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circumstances described below, Subordinated Debt Securities represented by a
Global Security will not be exchangeable for, and will not otherwise be
issuable as, Subordinated Debt Securities in definitive form. The Global
Securities described above may not be transferred except 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 to a successor depositary
or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to receive physical delivery of Subordinated
Debt Securities in definitive form and will not be considered the holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debt Securities shall be
exchangeable, except for another Global Security of like denomination and
tenor to be registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the Depositary or if such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debt Securities are distributed to holders of Capital
Securities in liquidation of such holders' interests in the Trust, DTC will
act as securities Depositary for the Subordinated Debt Securities. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Capital Securities--Book-Entry Only Issuance--The
Depository Trust Company." As of the date of this Prospectus Supplement, the
description herein of DTC's book-entry system and DTC's practices as they
relate to purchases, transfers, notices and payments with respect to the
Capital Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC. The Company may
appoint a successor to DTC or any successor depositary in the event DTC or
such successor depositary is unable or unwilling to continue as the Depositary
for the Global Securities.
None of CCI, the Company, the Trust, the Institutional Trustee, the Debt
Trustee, any paying agent and any other agent of CCI, the Company, the Trust,
the Institutional Trustee or the Debt Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for the
Subordinated Debt Securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debt Securities
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies the Company that it is unwilling or unable
to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Subordinated Debt Securities registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect
to ownership of beneficial interests in such Global Security.
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DEFEASANCE AND DISCHARGE
See "Description of the Subordinated Debt Securities and the Debt
Guarantees--Defeasance and Discharge" in the accompanying Prospectus.
GOVERNING LAW
The Indenture, the Subordinated Debt Securities and the Debt Guarantee will
be governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflict of laws principles.
MISCELLANEOUS
The Indenture will provide that the Company will pay all fees and expenses
related to (i) the offering and sale of the Trust Securities, the Subordinated
Debt Securities and the Debt Guarantee, (ii) the organization, maintenance and
dissolution of the Trust, (iii) the retention of the Countrywide Trustees and
(iv) the enforcement by the Institutional Trustee of the rights of the holders
of the Capital Securities. The payment of such fees and expenses will be fully
and unconditionally guaranteed by CCI.
The Company and CCI will have the right at all times to assign any of their
respective rights or obligations under the Indenture to a direct or indirect
wholly-owned subsidiary of the Company or CCI; provided that, in the event of
any such assignment, the Company or CCI, as the case may be, will remain
liable for all of their respective obligations. Subject to the foregoing, the
Indenture will be binding upon and inure to the benefit of the parties thereto
and their respective successors and assigns. The Indenture provides that it
may not otherwise be assigned by the parties thereto.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBT SECURITIES, THE DEBT
GUARANTEE AND THE CAPITAL SECURITIES GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
and sell the Trust Securities evidencing undivided beneficial interests in the
assets of the Trust and to invest the proceeds from such issuance and sale in
the Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Subordinated Debt
Securities will be equal to the aggregate stated liquidation amount of the
Trust Securities; (ii) the interest rate and the interest and other payment
dates on the Subordinated Debt Securities will match the distribution rate and
distribution and other payment dates for the Capital Securities; (iii) the
Company shall pay all, and the Trust shall not be obligated to pay directly or
indirectly any, costs, expenses, debt and obligations of the Trust (other than
with respect to the Trust Securities); and (iv) the Declaration further
provides that the Countrywide Trustees shall not cause or permit the Trust to,
among other things, engage in any activity that is not consistent with the
purposes of the Trust.
Payments of distributions (to the extent funds therefor are available to the
Trust) and other payments due on the Capital Securities (to the extent funds
therefor are available to the Trust) are guaranteed by CCI as set forth under
"Description of the Capital Securities Guarantees" in the accompanying
Prospectus. If the Company does not make interest payments on the Subordinated
Debt Securities purchased by the Trust and CCI does not make payments under
the Debt Guarantee, it is expected that the Trust will not have sufficient
funds to pay distributions on the Capital Securities. The Capital Securities
Guarantee does not apply to any payment of distributions except to the extent
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that the Trust has funds available for the payment of such distributions. The
Capital Securities Guarantee covers the payment of distributions and other
payments on the Capital Securities only if and to the extent that the Company
or CCI has made payments of interest or principal on the Subordinated Debt
Securities or the Debt Guarantee held by the Trust as its sole assets. The
Capital Securities Guarantee, when taken together with the Company's
obligations under the Subordinated Debt Securities and the Indenture,
including its obligations to pay costs, expenses, debts and liabilities of the
Trust (other than with respect to the Trust Securities), and CCI's obligations
under the Debt Guarantee, the Indenture and the Declaration, provide a full
and unconditional guarantee on a subordinated basis by CCI of amounts due on
the Capital Securities.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities when due (after giving effect to any Extension Period) and CCI
fails to make payments under the Debt Guarantee with respect to such payments
due on the Subordinated Debt Securities, the Declaration provides a mechanism
whereby the holders of the Capital Securities, using the procedures described
herein under "Description of the Capital Securities--Book-Entry Only
Issuance--The Depository Trust Company" and "--Voting Rights," may direct the
Institutional Trustee to enforce its rights under the Subordinated Debt
Securities and the Debt Guarantee, including proceeding directly against CCI
to enforce the Debt Guarantee without first proceeding against the Company
under the Subordinated Debt Securities. If the Institutional Trustee fails to
enforce its rights under the Subordinated Debt Securities or the Debt
Guarantee after a majority in liquidation amount of the Capital Securities
have so directed the Institutional Trustee, a holder of record of Capital
Securities may institute a legal proceeding against the Company or CCI to
enforce the Institutional Trustee's rights under the Subordinated Debt
Securities or the Debt Guarantee, as the case may be, without first
instituting any legal proceeding against the Institutional Trustee or any
other person or entity including, in the case of the Debt Guarantee, against
the Company. Notwithstanding the foregoing, if a Declaration Event of Default
has occurred and is continuing and such event is attributable to (i) the
failure of the Company to pay interest or principal on the Subordinated Debt
Securities on the respective dates such interest or principal is payable (or
in the case of redemption, on the redemption date) or (ii) the failure of CCI
to pay any obligation in respect thereof under the Debt Guarantee, then a
holder of record of Capital Securities may institute a Direct Action for
payment on or after the respective due dates specified in the Subordinated
Debt Securities. In connection with such Direct Action, the Company or CCI, as
the case may be, will be subrogated to the rights of such holder of Capital
Securities under the Declaration to the extent of any payment made by the
Company or CCI, as the case may be, to such holder of Capital Securities in
such Direct Action; provided, however, that no such subrogation right may be
exercised so long as a Declaration Event of Default has occurred and is
continuing. CCI, under the Capital Securities Guarantee, acknowledges that the
Capital Guarantee Trustee shall enforce the Capital Securities Guarantee on
behalf of the holders of the Capital Securities. If CCI fails to make payments
under the Capital Securities Guarantee, any holder of Capital Securities may
institute a legal proceeding directly against CCI to enforce its right to
receive payment under the Capital Securities Guarantee on or after the date
such payment is due and payable under the Capital Securities Guarantee without
first instituting a legal proceeding against the Trust, the Capital Guarantee
Trustee, or any other person or entity.
CCI and the Trust believe that the above mechanisms and obligations, taken
together, provide a full and unconditional guarantee on a subordinated basis
by CCI of payments due on the Capital Securities. See "Description of the
Capital Securities Guarantees--General" in the accompanying Prospectus.
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<PAGE>
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
In addition to the two specific opinions referred to below under "--US
Holders--Characterization of the Trust" and "--Characterization of the
Subordinated Debt Securities," Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), special counsel to the
Company, CCI and the Trust ("Counsel"), will have, prior to the issuance of
the Capital Securities, rendered its opinion generally to the effect that,
subject to the exceptions and qualifications set forth therein, the discussion
of United States federal income taxation which follows summarizes the material
United States federal income tax consequences of the purchase, ownership and
disposition of Capital Securities. A copy of Counsel's opinion will be filed
with the Commission as part of a Form 8-K of CCI prior to the issuance of the
Capital Securities.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations thereunder, and administrative and judicial
interpretations thereof, each as of the date hereof, all of which are subject
to change, possibly on a retroactive basis.
Except as otherwise stated, this summary deals only with a Capital Security
held as a capital asset by a holder who or which (i) purchased Capital
Securities upon original issuance (an "Initial Holder") and (ii) is a US
Holder (as defined below). It does not deal with all aspects of United States
federal income taxation, nor with the particular United States federal income
tax (hereafter, "income tax") consequences which may be applicable to certain
classes of US Holders (such as banks, thrift institutions, real estate
investment trusts, regulated investment companies, insurance companies,
brokers and dealers in securities or currencies, other financial institutions,
tax-exempt organizations, persons holding Capital Securities as a position in
a "straddle," as part of a "synthetic security or hedge," as part of a
"conversion transaction" or as part of any other integrated investment,
persons having a functional currency other than the U.S. Dollar and certain
United States expatriates). Further, this summary does not address (a) the
income tax consequences to shareholders in, or partners or beneficiaries of, a
holder of Capital Securities, (b) the United States federal alternative
minimum tax consequences of the purchase, ownership or disposition of Capital
Securities, or (c) any state, local or foreign tax consequences of the
purchase, ownership and disposition of Capital Securities.
A "US Holder" is a holder of Capital Securities who or which is a citizen or
individual resident (or is treated as a citizen or individual resident) of the
United States for income tax purposes, a corporation or partnership created or
organized (or treated as created or organized for income tax purposes) in or
under the laws of the United States or any political subdivision thereof, or a
trust or estate the income of which is includible in its gross income for
income tax purposes without regard to its source. (For taxable years beginning
after December 31, 1996 (or for the immediately preceding taxable year, if the
trustee of a trust so elects), a trust is a US Holder for income tax purposes
if, and only if (i) a court within the United States is able to exercise
primary supervision over the administration of the trust, and (ii) one or more
United States trustees have the authority to control all substantial decisions
of the trust.)
US HOLDERS
CHARACTERIZATION OF THE TRUST
Prior to the issuance of the Capital Securities, Counsel will have rendered
its opinion generally to the effect that, under then current law and assuming
full compliance with the terms of the Declaration (and other documents), and
based on certain assumptions and qualifications referenced in the opinion, the
Trust will be characterized for United States federal income tax purposes as a
grantor trust, and will not be characterized as an association taxable as a
corporation for such purposes. Accordingly, for income tax purposes, each
holder of Capital Securities generally will be considered the owner of an
undivided interest in the Subordinated Debt Securities owned by the Trust, and
each US Holder
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will be required to include all income or gain recognized for income tax
purposes with respect to its allocable share of the Subordinated Debt
Securities on its own income tax return.
CHARACTERIZATION OF THE SUBORDINATED DEBT SECURITIES
Prior to the issuance of the Capital Securities, Counsel will have rendered
its opinion generally to the effect that, under then current law and assuming
full compliance with the terms of the Indenture (and other documents), and
based on certain assumptions and qualifications referenced in the opinion, the
Subordinated Debt Securities will be characterized for United States federal
income tax purposes as debt of the Company.
ORIGINAL ISSUE DISCOUNT
Under the terms of the Subordinated Debt Securities, the Company has the
option to defer payments of interest from time to time by extending the
interest payment period for a period not exceeding 10 consecutive semiannual
periods, but not beyond the maturity of the Subordinated Debt Securities.
Recently issued Treasury regulations under Section 1273 of the Code provide
that debt instruments like the Subordinated Debt Securities will not be
considered issued with OID by reason of the Company's option to defer payments
of interest if the likelihood of deferral is "remote."
The Company has concluded, and this discussion assumes, that, as of the date
of this Prospectus Supplement, the likelihood of exercise of that option is
"remote" within the meaning of the applicable regulations, in part because
exercising that option would prevent the Company and CCI from declaring
dividends on their stock and would prevent the Company and CCI from making any
payments with respect to debt securities that rank pari passu or junior to the
Subordinated Debt Securities. Therefore, the Subordinated Debt Securities
should not be treated as issued with OID by reason of the Company's deferral
option. Rather, stated interest on the Subordinated Debt Securities will
generally be taxable to a US Holder, as ordinary income, when paid or accrued
in accordance with that holder's method of accounting for income tax purposes.
It should be noted, however, that these regulations have not yet been
addressed in any rulings or other interpretations by the Service. Accordingly,
it is possible that the Service could take a position contrary to the
interpretation described herein.
In the event the Company subsequently exercised its option to defer payments
of interest, the Subordinated Debt Securities would be treated as reissued for
OID purposes and the sum of the remaining interest payments on the
Subordinated Debt Securities (and any de minimis OID on the Subordinated Debt
Securities (discussed below)) would thereafter be treated as OID, which would
accrue, and be includible in a US Holder's taxable income, on an economic
accrual basis (regardless of the US Holder's method of accounting for income
tax purposes) over the remaining term of the Subordinated Debt Securities
(including any period of interest deferral), without regard to the timing of
payments under the Subordinated Debt Securities. (Subsequent distributions of
interest on the Subordinated Debt Securities generally would not be taxable.)
The amount of OID that accrued in any period would generally equal the amount
of interest that accrued on the Subordinated Debt Securities in that period at
the stated interest rate (adjusted for any de minimis OID on the Subordinated
Debt Securities). Consequently, during any period of interest deferral, US
Holders will include OID in gross income in advance of the receipt of cash,
and a US Holder which disposes of a Capital Security prior to the record date
for payment of distributions on the Subordinated Debt Securities following
that period will be subject to income tax on OID accrued through the date of
disposition (and not previously included in income), but will not receive cash
from the Trust with respect to that OID.
In the absence of the Company's election to defer an interest payment
period, de minimis OID would not be subject to income tax until a holder's
Subordinated Debt Securities were sold, redeemed or retired, in which event
the de minimis OID would increase any gain or decrease any loss recognized
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by the holder. De minimis OID will be present with respect to the Subordinated
Debt Securities, in an amount equal to the excess of (a) the stated redemption
price at maturity (as defined for income tax purposes) of a Subordinated Debt
Security, over (b) the issue price of the Subordinated Debt Security, as such
amount is less than the product of (x) 0.25% of that redemption price, and (y)
the number of complete calendar years from the Subordinated Debt Security's
issue date to its maturity.
If the Company's option to defer payments of interest were not treated as
remote, the Subordinated Debt Securities would be treated as initially issued
with OID in an amount equal to the aggregate stated interest over the term of
the Subordinated Debt Securities, plus the amount of de minimis OID on the
Subordinated Debt Securities. That OID would generally be includible in a US
Holder's taxable income, over the term of the Subordinated Debt Securities, on
an economic accrual basis.
CHARACTERIZATION OF INCOME
Because the income underlying the Capital Securities will not be
characterized as dividends for income tax purposes, corporate holders of
Capital Securities will not be entitled to a dividend received deduction for
any income recognized with respect to the Capital Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Capital Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Subordinated Debt Securities
with market discount or acquisition premium (as each phrase is defined for
income tax purposes).
RECEIPT OF SUBORDINATED DEBT SECURITIES (AND THE DEBT GUARANTEE) OR CASH
UPON LIQUIDATION OF COUNTRYWIDE CAPITAL TRUST
Under the circumstances described under the caption "Description of the
Capital Securities--Tax Event Redemption or Distribution" above, Subordinated
Debt Securities, together with the Debt Guarantee, may be distributed to
holders in exchange for the Capital Securities and in liquidation of the
Trust. Except as discussed below, such a distribution would not be a taxable
event for income tax purposes, and each US Holder would have an aggregate
adjusted basis in its Subordinated Debt Securities (including the Debt
Guarantee) for income tax purposes equal to such holder's aggregate adjusted
basis in its Capital Securities. For income tax purposes, a US Holder's
holding period in the Subordinated Debt Securities (including the Debt
Guarantee) received in such a liquidation of the Trust would include the
period during which the Capital Securities were held by the holder. If,
however, the relevant event is a Tax Event which results in the Trust being
treated as an association taxable as a corporation, the distribution would
likely constitute a taxable event to US Holders of the Capital Securities for
income tax purposes.
Upon retirement of the Capital Securities, and under certain circumstances
described herein (see "Description of the Capital Securities"), the
Subordinated Debt Securities may be redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Such a redemption would be taxable for income tax purposes, and a US Holder
would recognize gain or loss as if it had sold the Capital Securities for
cash. See "--Sales of Capital Securities" below.
SALES OF CAPITAL SECURITIES
A US Holder that sells Capital Securities will recognize gain or loss equal
to the difference between its adjusted basis in the Capital Securities and the
amount realized on the sale of such Capital Securities. A US Holder's adjusted
basis in the Capital Securities generally will be its initial purchase price,
increased by OID, if any, previously included (or currently includible) in
such holder's gross income to the date of disposition, and decreased by
payments received on the Capital Securities
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subsequent to the effective date of the Company's first exercise of its option
to defer payments of interest. Any such gain or loss generally will be capital
gain or loss, and generally will be a long-term capital gain or loss if the
Capital Securities have been held for more than one year.
A holder who disposes of his Capital Securities between record dates for
payments of distributions thereon will be required to include accrued but
unpaid interest (or OID) on the Subordinated Debt Securities through the date
of disposition in its taxable income for United States federal income tax
purposes (notwithstanding that the holder may receive a separate payment from
the purchaser with respect to accrued interest), and to deduct that amount
from the sales proceeds received (including the separate payment, if any, with
respect to accrued interest) for the Capital Securities (or as to OID only, to
add such amount to such holder's adjusted tax basis in its Capital
Securities). To the extent the selling price is less than the holder's
adjusted tax basis (which will include accrued but unpaid OID, if any), a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
NON-US HOLDERS
The following discussion applies to an Initial Holder who is not a US Holder
(a "Non-US Holder").
Payments to a holder of a Capital Security which is a Non-US Holder will
generally not be subject to withholding of income tax, provided that (a) the
beneficial owner of the Capital Security does not (directly or indirectly,
actually or constructively) own 10% or more of the total combined voting power
of all classes of stock of the Company entitled to vote, (b) the beneficial
owner of the Capital Security is not a controlled foreign corporation that is
related to the Company through stock ownership, and (c) either (I) the
beneficial owner of the Capital Securities certifies to the Trust or its
agent, under penalties of perjury, that it is a Non-US Holder and provides its
name and address, or (II) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Trust or its agent, under
penalties of perjury, that such a statement has been received from the
beneficial owner by it or by another Financial Institution between it and the
beneficial owner in the chain of ownership, and furnishes the Trust or its
agent with a copy thereof.
As discussed above (see "Description of the Capital Securities--Tax Event
Redemption or Distribution"), changes in legislation affecting the income tax
consequences of the Subordinated Debt Securities are possible, and could
adversely affect the ability of the Company to deduct the interest payable on
the Subordinated Debt Securities. Moreover, any such legislation could, as the
Proposed Legislation would have, adversely affect Non-US Holders by
characterizing income derived from the Subordinated Debt Securities as
dividends, generally subject to a 30% income tax (on a withholding basis) when
paid to a Non-US Holder, rather than as interest which, as discussed above, is
generally exempt from income tax in the hands of a Non-US Holder.
A Non-US Holder of a Capital Security will generally not be subject to
withholding of income tax on any gain realized upon the sale or other
disposition of a Capital Security.
A Non-US Holder which holds Capital Securities in connection with the active
conduct of a United States trade or business will be subject to income tax on
all income and gains recognized with respect to its proportionate share of the
Subordinated Debt Securities.
INFORMATION REPORTING
In general, information reporting requirements will apply to payments made
on, and proceeds from the sale of, Capital Securities held by a noncorporate
US Holder within the United States. In addition,
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payments made on, and payments of the proceeds from the sale of, Capital
Securities to or through the United States office of a broker are subject to
information reporting unless the holder thereof certifies as to its non-United
States status or otherwise establishes an exemption from information reporting
and backup withholding (see "--Backup Withholding" below). Taxable income on
the Capital Securities for a calendar year should be reported to US Holders on
Forms 1099 by the following January 31st.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification or exemption requirements. Any amounts so withheld
will be allowed as a credit against the holder's income tax liability, or
refunded, provided the required information is provided to the United States
Internal Revenue Service.
* * *
THE PRECEDING DISCUSSION IS ONLY A SUMMARY AND DOES NOT ADDRESS THE
CONSEQUENCES TO A PARTICULAR HOLDER OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF CAPITAL SECURITIES. POTENTIAL HOLDERS OF CAPITAL SECURITIES ARE URGED TO
CONTACT THEIR OWN TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX CONSEQUENCES.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), Countrywide Capital Trust has agreed to sell
to Salomon Brothers Inc (the "Underwriter"), and the Underwriter has agreed to
purchase, the Capital Securities. In the Underwriting Agreement, the
Underwriter has agreed, subject to the terms and conditions set forth therein,
to purchase all the Capital Securities offered hereby if any of the Capital
Securities are purchased.
The Underwriter proposes to offer the Capital Securities, in part, directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement and, in part, to certain securities dealers at
such price less a concession of $ per Capital Security. The Underwriter may
allow, and such dealers may reallow, a concession not in excess of $ per
Capital Security to certain brokers and dealers. After the Capital Securities
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriter.
In view of the fact that the gross proceeds of the sale of the Capital
Securities will ultimately be used by Countrywide Capital Trust to purchase
the Subordinated Debt Securities of the Company, the Underwriting Agreement
provides that the Company will pay as compensation ("Underwriter's
Compensation") to the Underwriter arranging the investment therein of such
proceeds an amount in immediately available funds of $ per Capital Security
(or $ in the aggregate).
During a period of 30 days from the date of this Prospectus Supplement,
neither Countrywide Capital Trust, CCI nor the Company will, without the prior
written consent of the Underwriter, directly or indirectly, sell, offer to
sell, grant any option for sale of, or otherwise dispose of, any Capital
Securities, any security convertible into or exchangeable into or exercisable
for Capital Securities or Subordinated Debt Securities or any debt securities
substantially similar to the Subordinated Debt Securities or equity securities
substantially similar to the Capital Securities (except for the Subordinated
Debt Securities and the Capital Securities offered hereby).
Prior to this offering there has been no public market for the Capital
Securities. The Underwriter may make a market in the Capital Securities, but
the Underwriter is not obligated to do so and may discontinue market-making at
any time without notice. No assurance can be given as to the liquidity of the
trading market in the Capital Securities. See "Risk Factors--Absence of Prior
Public Market."
Countrywide Capital Trust, CCI and the Company have agreed to indemnify the
Underwriter against, or contribute to payments that the Underwriter may be
required to make in respect of, certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The Underwriter engages in transactions with, and, from time to time, has
performed services for, CCI and its subsidiaries in the ordinary course of
business.
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<PAGE>
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities and the formation of the Trust will be passed upon on behalf of the
Trust by Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the
Trust. The validity under New York law of the Subordinated Debt Securities,
the Capital Securities Guarantee and the Debt Guarantee will be passed upon
for CCI and the Company by Fried, Frank, Harris, Shriver & Jacobson, a
partnership including professional corporations, New York, New York. Edwin
Heller (whose professional corporation retired as a partner of Fried, Frank,
Harris, Shriver & Jacobson in September 1996) is of counsel to Fried, Frank,
Harris, Shriver & Jacobson and is a director of CCI. Certain United States
federal income tax matters will be passed upon for the Company, CCI and the
Trust by Fried, Frank, Harris, Shriver & Jacobson. Certain legal matters will
be passed upon for the Underwriter by Brown & Wood LLP, New York, New York.
Brown & Wood LLP also serves as counsel for CWMBS, Inc. and CWABS, Inc., each
a wholly-owned subsidiary of CCI, in connection with offerings of mortgage-
backed and asset-backed securities, 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
DECEMBER 9, 1996
PROSPECTUS
$300,000,000
COUNTRYWIDE HOME LOANS, INC.
SUBORDINATED DEBT SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL AND INTEREST BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
COUNTRYWIDE CAPITAL I
COUNTRYWIDE CAPITAL II
CAPITAL SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED AS TO DISTRIBUTIONS AND OTHER PAYMENTS BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Countrywide Home Loans, Inc., a New York corporation (the "Company"), and a
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a Delaware
corporation ("CCI"), may from time to time offer its subordinated debentures,
notes or other evidence of indebtedness (the "Subordinated Debt Securities") in
one or more series and in amounts, at prices and on terms to be determined at
the time of the offering. The Subordinated Debt Securities when issued will be
unsecured obligations of the Company and will be fully and unconditionally
guaranteed as to payment of principal, premium, if any, and interest by CCI
(the "Debt Guarantees"). The Company's obligations under the Subordinated Debt
Securities and CCI's obligations under the Debt Guarantees will be subordinate
and junior in right of payment to certain other indebtedness of the Company and
CCI, respectively, as may be described in an accompanying Prospectus Supplement
(the "Prospectus Supplement") and in an aggregate amount to be set forth as of
the most recent practicable date in such Prospectus Supplement.
Countrywide Capital I and Countrywide Capital II (each, a "Countrywide Capital
Trust" or a "Trust"), each a statutory business trust formed under the laws of
the State of Delaware, may offer, from time to time, capital securities
representing undivided beneficial interests in its assets ("Capital
Securities"). The payment of periodic cash distributions ("distributions") with
respect to Capital Securities of each of the Countrywide Capital Trusts out of
moneys held by such Countrywide Capital Trust, and payment on liquidation,
redemption or otherwise with respect to such Capital Securities, will be
guaranteed by CCI (each a "Capital Securities Guarantee"). See "Description of
the Capital Securities Guarantees" below. CCI's obligations under the Capital
Securities Guarantees are subordinate and junior in right of payment to all
other liabilities of CCI. Subordinated Debt Securities
(continued on following page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
(continued from previous page)
may be issued and sold from time to time in one or more series to a
Countrywide Capital Trust, or a trustee of such Countrywide Capital Trust, in
connection with the investment of the proceeds from theoffering of Capital
Securities and Common Securities (as defined herein, together the "Trust
Securities") of such Countrywide Capital Trust. The Subordinated Debt
Securities purchased by a Countrywide Capital Trust may be subsequently
distributed pro rata to holders of Capital Securities and Common Securities in
connection with the dissolution of such Countrywide Capital Trust upon the
occurrence of certain events as may be described in an accompanying Prospectus
Supplement. The Subordinated Debt Securities, the related Debt Guarantees and
the Capital Securities and the related Capital Securities Guarantees are
sometimes collectively referred to hereafter as the "Offered Securities."
Specific terms of the Subordinated Debt Securities of any series and the
Capital Securities of any Countrywide Capital Trust, the terms of which will
mirror the terms of the Subordinated Debt Securities held by such Countrywide
Capital Trust, in respect of which this prospectus (the "Prospectus") is being
delivered, will be set forth in a Prospectus Supplement with respect to such
securities, which will describe, without limitation, and if and where
applicable, the following: (i) in the case of Subordinated Debt Securities,
the specific designation, aggregate principal amount, denomination, maturity,
premium, if any, any exchange, conversion, redemption or sinking fund
provisions, if any, interest rate (which may be fixed or variable), if any,
the time and method of calculating interest payments, if any, dates on which
premium, if any, and interest, if any, will be payable, the right of the
Company, if any, to defer payment of interest on the Subordinated Debt
Securities and the maximum length of such deferral periods, the initial public
offering price, subordination terms, any listing on a securities exchange and
other specific terms of the offering and (ii) in the case of Capital
Securities, the designation, number of securities, liquidation preference per
security, initial public offering price, any listing on a securities exchange,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall
accrue, any voting rights, terms for any conversion or exchange into other
securities, any redemption, exchange or sinking fund provisions, any other
rights, preferences, privileges, limitations or restrictions relating to the
Capital Securities and the terms upon which the proceeds of the sale of the
Capital Securities shall be used to purchase a specific series of Subordinated
Debt Securities of the Company.
The Offered Securities may be offered in amounts, at prices and on terms to be
determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Offered Securities shall not exceed
$300,000,000. The Prospectus Supplement relating to any series of Offered
Securities will contain information concerning certain United States federal
income tax considerations, if applicable, to the Offered Securities.
The Company and/or each of the Countrywide Capital Trusts intends to sell the
Offered Securities through underwriters. See "Plan of Distribution" below. The
names of any underwriters involved in the sale of the Offered Securities and
any applicable commissions and discounts will be set forth in any related
Prospectus Supplement.
This Prospectus may not be used to consummate sales of securities unless
accompanied by a Prospectus Supplement.
2
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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 OR ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS OR ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, CCI, ANY COUNTRYWIDE CAPITAL TRUST OR ANY UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY, CCI
OR ANY COUNTRYWIDE CAPITAL TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS OR ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a combined Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company, CCI and the Countrywide Capital Trusts with
the Securities and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Offered
Securities. This Prospectus does not contain all of the information set forth
in such Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC, although it does include
a summary of the material terms of the Indenture (as defined herein) and the
Declarations (as defined herein). Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company, CCI, the Countrywide Capital Trusts and the Offered
Securities. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the SEC or incorporated by reference herein are not necessarily complete,
and, in each instance, reference is made to the copy of such document so filed
for a more complete description of the matter involved. Each such statement is
qualified in its entirety by such reference.
CCI is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the SEC. Reports,
proxy statements and other information concerning CCI can be inspected and
copied at prescribed rates at the SEC's Public Reference Room, Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well as
the following Regional Offices of the SEC: 7 World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The SEC also maintains a Web site
(http://www.sec.gov) from which such reports, proxy statements and other
information concerning CCI may be obtained. Such reports, proxy statements and
other information may also be inspected at the offices of the following stock
exchanges on which certain of CCI's securities are listed: the New York Stock
Exchange, 20 Broad Street, New York, New York 10005 and the Pacific Stock
Exchange, 115 Sansome Street, San Francisco, California 94104.
No separate financial statements of any of the Countrywide Capital Trusts
have been included herein. CCI does not consider that such financial
statements would be material to holders of the Capital Securities because (i)
all of the voting securities of each of the Countrywide Capital Trusts will be
owned by CCI, a reporting company under the Exchange Act, (ii) each of the
Countrywide Capital
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Trusts has no independent operations but exists for the sole purpose of
issuing securities representing undivided beneficial interests in the assets
of such Countrywide Capital Trust and investing the proceeds of the sale
thereof in Subordinated Debt Securities guaranteed by CCI, and (iii) the
Company's obligations described herein and in any accompanying Prospectus
Supplement to provide certain indemnities in respect of and be responsible for
certain costs, expenses, debts and liabilities of each of Countrywide Capital
I and II under the Indenture and any supplemental indenture thereto and
pursuant to the Declaration of each Trust, the guarantee issued by CCI with
respect to the Capital Securities issued by that Trust, the Subordinated Debt
Securities purchased by that Trust, the guarantee issued by CCI with respect
to the Subordinated Debt Securities purchased by that Trust and the related
Indenture, taken together, constitute a full and unconditional guarantee on a
subordinated basis by CCI of payments due on the Capital Securities. See
"Description of the Subordinated Debt Securities and the Debt Guarantees" and
"Description of the Capital Securities Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this Prospectus:
(a) CCI's Annual Report on Form 10-K for the fiscal year ended February
29, 1996;
(b) CCI's Quarterly Report on Form 10-Q for the quarter ended May 31,
1996; and
(c) CCI's Quarterly Report on Form 10-Q for the quarter ended August 31,
1996.
All documents filed by CCI pursuant to Sections 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 Offered
Securities shall be deemed to be incorporated by reference in this Prospectus
and such Prospectus Supplement and to be a part hereof and thereof from the
date of filing of such documents. Any statement contained in this Prospectus
or any Prospectus Supplement or in a document incorporated or deemed to be
incorporated by reference herein or in any Prospectus Supplement shall be
deemed to be modified or superseded for purposes of this Prospectus and such
Prospectus Supplement to the extent that a statement contained herein or
therein (or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein or therein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
CCI will provide without charge to each person to whom a copy of this
Prospectus or any Prospectus Supplement has been delivered, upon the written
or oral request of such person, a copy of any or all of the documents referred
to above which have been or may be incorporated by reference herein or therein
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies 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.
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THE COMPANY
Countrywide Home Loans, Inc. (formerly Countrywide Funding Corporation), the
principal subsidiary of Countrywide Credit Industries, Inc., 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 prime credit quality 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 and sub-prime credit quality first-lien single-family mortgage loans.
The principal sources of revenue of the Company 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.
The Company produces mortgage loans through three separate divisions. The
Consumer Markets Division originates loans using direct contact with consumers
through its nationwide network of retail branch offices and its telemarketing
systems. Through its Wholesale Division, the Company originates loans through
and purchases loans from mortgage loan brokers. Through 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 customarily sells all loans that it
originates or purchases. Substantially all loans sold by the Company are sold
without recourse, subject, in the case of loan guaranties by the Veterans
Administration, to the limits of such guaranties.
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 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, counseling delinquent
mortgagors, supervising foreclosures and property dispositions in the event of
unremedied defaults and generally administering the loans. The Company
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. The
Company has sold, and may sell in the future, a portion of its portfolio of
loan servicing rights to other mortgage servicers.
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 utilizes commercial paper supported by its revolving credit
facility, medium-term notes, mortgage-backed securities, repurchase
agreements, subordinated notes, unsecured notes, pre-sale funding facilities
and cash flows from operations. In the past, the Company has utilized whole
loan repurchase agreements, servicing-secured bank facilities, direct
borrowings from its revolving credit facility, privately-placed financings and
contributions from CCI of the proceeds of public offerings of preferred and
common stock.
The Company 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.
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<PAGE>
THE TRUSTS
Each of Countrywide Capital I and Countrywide Capital II is a statutory
business trust formed under Delaware law pursuant to (i) a separate
declaration of trust executed by CCI, as sponsor for such Trust (the
"Sponsor"), and the Countrywide Capital Trustees (as defined herein) for such
Trust and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on October 15, 1996. Each such declaration will be amended
and restated in its entirety (each as so amended and restated, a
"Declaration"). Each Countrywide Capital Trust exists for the exclusive
purposes of (i) issuing Capital Securities and common securities representing
undivided beneficial interests in the assets of such Trust (the "Common
Securities" and, together with the Capital Securities, the "Trust
Securities"), (ii) investing the gross proceeds of the Trust Securities issued
by such Trust in the Subordinated Debt Securities, and (iii) engaging in only
those other activities necessary or incidental thereto.
The Countrywide Capital Trusts may issue Capital Securities concurrently or
at different times. To the extent that a Countrywide Capital Trust issues
Capital Securities, it will issue Capital Securities mirroring the terms of
only one issue of Subordinated Debt Securities. Since any Countrywide Capital
Trust will purchase only a single issue of Subordinated Debt Securities,
Countrywide Capital I and Countrywide Capital II have been organized in order
to allow the issuance of up to two issues of Subordinated Debt Securities and
related Capital Securities under this Prospectus. All of the Common Securities
of each Trust will be directly or indirectly owned by CCI. The Common
Securities of each Trust will rank pari passu, and payments will be made
thereon pro rata, with the Capital Securities of such Trust except that upon
an event of default under the Declaration, the rights of the holders of the
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Capital Securities. CCI will acquire Common Securities in
an aggregate liquidation amount equal to 3% of the total capital of each
Countrywide Capital Trust. Except as otherwise provided in a Prospectus
Supplement, each Countrywide Capital Trust has a term of approximately 54
years, but may earlier terminate as provided in the relevant Declaration. Each
Countrywide Capital Trust's business and affairs will be conducted by the
trustees (the "Countrywide Capital Trustees") appointed by CCI, as the holder
of all the Common Securities. The holder of the Common Securities of a
Countrywide Capital Trust will be entitled to appoint, remove or replace any
of, or increase or reduce the number of, the Countrywide Capital Trustees of
such Countrywide Capital Trust. The duties and obligations of the Countrywide
Capital Trustees shall be governed by the Declaration of such Countrywide
Capital Trust. A majority of the Countrywide Capital Trustees (the "Regular
Trustees") of each Countrywide Capital Trust will be persons who are employees
or officers of or affiliated with the Company or CCI. One Countrywide Capital
Trustee of each Countrywide Capital Trust will be a financial institution
which will be unaffiliated with the Company and CCI and which shall be
eligible and act as property trustee and as indenture trustee for purposes of
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"),
pursuant to the terms set forth in a Prospectus Supplement (the "Institutional
Trustee"). In addition, unless the Institutional Trustee maintains a principal
place of business in the State of Delaware, and otherwise meets the
requirements of applicable law, one Countrywide Capital Trustee of each
Countrywide Capital Trust will have its principal place of business or reside
in the State of Delaware (the "Delaware Trustee"). The Company will pay all
fees and expenses related to the Countrywide Capital Trusts and the offering
and sale of Trust Securities, the payment of which will be guaranteed by CCI.
The office of the Delaware Trustee for each Countrywide Capital Trust in the
State of Delaware is The Bank of New York (Delaware), White Clay Center, Route
273, Newark, Delaware 19711. The principal place of business of each
Countrywide Capital Trust shall be c/o Countrywide Credit Industries, Inc.,
155 North Lake Avenue, P.O. Box 7137, Pasadena, California 91109-7137.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Countrywide Credit Industries, Inc. is a holding company which through its
principal subsidiary, Countrywide Home Loans, Inc., is engaged primarily in
the mortgage banking business. CCI, through
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its other wholly-owned subsidiaries, offers products and services
complementary to its mortgage banking business. A subsidiary of CCI trades
with other broker-dealers and institutional investors mortgage-backed
securities and other mortgage-related assets. CCI has a subsidiary which acts
as an agent in the sale of homeowners, fire, flood, earthquake, mortgage life
and disability insurance to the Company's mortgagors in connection with the
Company's mortgage banking operations. Another subsidiary of CCI earns fee
income by brokering servicing contracts owned by other mortgage lenders and
loan servicers. CCI also has a subsidiary that acts as a provider of various
title insurance and escrow services in the capacity of an agent rather than an
underwriter.
In addition, Countrywide Asset Management Corp. ("CAMC"), 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. On November 4, 1996, CCI and CWM announced that they had reached
a preliminary understanding for the acquisition by CWM of the operations and
employees of CAMC. The proposed transaction is to be structured as a merger of
CAMC with and into CWM, with CCI to receive for its interest in CAMC
approximately 3.6 million newly issued common shares of CWM (approximately
$75.0 million based on certain recent closing prices of CWM's common stock),
subject to adjustment based on the market price of CWM common stock prior to
closing. As of the date of this Prospectus, a definitive agreement with
respect to the proposed transaction has not been executed, and there can be no
assurance that the proposed transaction will be consummated.
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.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of CCI
for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, YEARS ENDED FEBRUARY 28 (29)
----------------- -----------------------------
1996 1995 1996 1995 1994 1993 1992
-------- -------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges.................. 2.29 2.02 2.13 1.69 2.32 2.76 2.38
</TABLE>
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).
USE OF PROCEEDS
Each Countrywide Capital Trust will use gross proceeds received from the
sale of the Trust Securities to purchase Subordinated Debt Securities from the
Company. Except as may be otherwise stated in any Prospectus Supplement, the
Company intends to use the net proceeds (after payment of the expenses of the
offering and underwriters' compensation) from the sale of the Subordinated
Debt Securities for general corporate purposes, principally for investment in
servicing rights. Initially, the net proceeds will be used to repay short term
commercial paper with interest rates ranging from approximately 5 1/4% to 5
1/2% per annum.
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<PAGE>
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES AND THE DEBT GUARANTEES
Subordinated Debt Securities may be issued from time to time in one or more
series under an Indenture (the "Indenture") among the Company, CCI and The
Bank of New York, as Trustee (the "Debt Trustee"). The terms of the
Subordinated Debt Securities will include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
following summary of the material terms of the Indenture does not purport to
be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the Indenture, a form of which is
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and the Trust Indenture Act. Whenever particular provisions or
defined terms in the Indenture are referred to herein, such provisions or
defined terms are incorporated by reference herein. Section and Article
references used herein are references to provisions of the Indenture unless
otherwise noted.
GENERAL
The Subordinated Debt Securities will be unsecured, subordinated obligations
of the Company. The Indenture does not limit the aggregate principal amount of
Subordinated Debt Securities which may be issued thereunder and provides that
the Subordinated Debt Securities may be issued from time to time in one or
more series. The Subordinated Debt Securities are issuable in one or more
series pursuant to an indenture supplemental to the Indenture or a resolution
of the Company's Board of Directors or a special committee appointed thereby
(each, a "Supplemental Indenture"). (Section 2.03)
In the event Subordinated Debt Securities are issued to a Countrywide
Capital Trust or a trustee of such Trust in connection with the issuance of
Trust Securities by such Countrywide Capital Trust, such Subordinated Debt
Securities subsequently may be distributed pro rata to the holders of such
Trust Securities in connection with the dissolution of such Countrywide
Capital Trust upon the occurrence of certain events described in the
Prospectus Supplement relating to such Trust Securities. Only one series of
Subordinated Debt Securities will be issued to a Countrywide Capital Trust or
a trustee of such Trust in connection with the issuance of Trust Securities by
such Countrywide Capital Trust.
Reference is made to the Prospectus Supplement relating to the particular
Subordinated Debt Securities being offered thereby for the following terms:
(1) the designation of such Subordinated Debt Securities; (2) the aggregate
principal amount of such Subordinated Debt Securities; (3) the percentage of
their principal amount at which such Subordinated Debt Securities will be
issued; (4) the date or dates on which such Subordinated Debt Securities will
mature and the right, if any, to extend such date or dates; (5) the rate or
rates, if any, per annum, at which such Subordinated Debt Securities will bear
interest, or the method of determination of such rate or rates; (6) the date
or dates from which such interest shall accrue, the interest payment dates on
which such interest will be payable or the manner of determination of such
interest payment dates and the record dates for the determination of holders
to whom interest is payable on any such interest payment dates; (7) the right,
if any, to extend the interest payment periods and the duration of such
extension; (8) provisions for a sinking, purchase or other analogous fund, if
any; (9) the period or periods, if any, within which, the price or prices at
which, and the terms and conditions upon which such Subordinated Debt
Securities may be redeemed, in whole or in part, at the option of the Company
or the holder; (10) the form of such Subordinated Debt Securities; and (11)
any other specific terms of the Subordinated Debt Securities. Principal,
premium, if any, and interest, if any, will be payable, and the Subordinated
Debt Securities offered thereby will be transferable, at the corporate trust
office of the Debt Trustee in New York, New York, provided that payment of
interest, if any, may be made at the option of the Company by check mailed to
the address of the person entitled thereto as it appears in the Security
Register or by wire transfer to an account appropriately designated by the
holder entitled thereto. (Sections 3.01 and 3.02)
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If a Prospectus Supplement specifies that a series of Subordinated Debt
Securities is denominated in a currency or currency unit other than United
States dollars, such Prospectus Supplement shall also specify the denomination
in which such Subordinated Debt Securities will be issued and the coin or
currency in which the principal, premium, if any, and interest, if any, on
such Subordinated Debt Securities will be payable, which may be United States
dollars based upon the exchange rate for such other currency or currency unit
existing on or about the time a payment is due.
There are no terms in the Indenture or the Debt Guarantee that limit the
ability of CCI or its subsidiaries (including the Company) to incur additional
indebtedness, including indebtedness that may rank senior to, or pari passu
with, the Subordinated Debt Securities. The Indenture contains no covenants or
other provisions to afford protection to holders of the Subordinated Debt
Securities in the event of a highly leveraged transaction or a change in
control of the Company or CCI, except to the limited extent described under
"--Limitation on Mergers and Sales of Assets" below.
DEBT GUARANTEES
The Indenture provides that CCI will fully and unconditionally guarantee the
due and punctual payment of the principal, premium, if any, and interest on
the Subordinated Debt Securities when and as the same shall become due and
payable, whether at maturity, upon redemption or otherwise. (Section 2.13)
Since CCI is a holding company, the right of CCI and, hence, the right of
creditors of CCI (including the holders of the Subordinated Debt Securities)
to participate in any distribution of the assets of any subsidiary of CCI,
whether upon liquidation, reorganization, or otherwise, is subject to prior
claims of creditors of such subsidiary, except to the extent that claims of
CCI itself as a creditor of such subsidiary may be recognized.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Subordinated Debt Securities will be issued in fully registered form without
coupons and in denominations of $1,000 and multiples of $1,000. No service
charge will be made for any transfer or exchange of the Subordinated Debt
Securities, but the Company or the Debt Trustee may require payment of a sum
sufficient to cover any tax or other government charge payable in connection
therewith. Where Subordinated Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special United States federal income tax
considerations, applicable to any such Subordinated Debt Securities and to
payment on and transfer and exchange of such Subordinated Debt Securities will
be described in the applicable Prospectus Supplement. Bearer Subordinated Debt
Securities will be transferable by delivery.
Unless otherwise provided in the applicable Prospectus Supplement, principal
and premium, if any, or interest, if any, will be payable and the Subordinated
Debt Securities may be surrendered for payment or transferred at the offices
of the Debt Trustee as paying and authenticating agent, provided that payment
of interest on registered securities may be made at the option of the Company
by check mailed to the address of the person entitled thereto as it appears in
the Security Register or by wire transfer to an account approximately
designated by the holder entitled thereto. Payment of Subordinated Debt
Securities in bearer form will be made at such paying agencies outside of the
United States as the Company may appoint.
BOOK-ENTRY SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities of a series may be issued in whole or in
part in the form of one or more global securities (each, a "Global Security")
that will be deposited with, or on behalf of, a depositary (the "Global
Depositary"), or its nominee, identified in the Prospectus Supplement relating
to such series. In such a case, one or more Global Securities will be issued
in a denomination or
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<PAGE>
aggregate denomination equal to the portion of the aggregate principal amount
of outstanding Subordinated Debt Securities of the series to be represented by
such Global Security or Securities. Unless and until it is exchanged in whole
or in part for Subordinated Debt Securities in definitive registered form, a
Global Security may not be registered for transfer or exchange except as a
whole by the Global Depositary to a nominee for such Global Depositary and
except in the circumstances described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Subordinated Debt Securities to be represented by a Global
Security and a description of the Global Depositary will be provided in the
applicable Prospectus Supplement.
SUBORDINATION
The Subordinated Debt Securities will be subordinated and junior in right of
payment to certain other indebtedness of the Company and the Debt Guarantees
will be subordinated and junior in right of payment to certain other
indebtedness of CCI to the extent set forth in the applicable Prospectus
Supplement.
CERTAIN COVENANTS
If Subordinated Debt Securities are issued to a Countrywide Capital Trust or
a trustee of such Trust in connection with the issuance of Trust Securities by
such Countrywide Capital Trust and (i) there shall have occurred and be
continuing any event that would constitute an Event of Default (as defined
herein), (ii) CCI shall be in default with respect to its payment of any
obligations under the related Capital Securities Guarantee or Common
Securities Guarantee (as defined in the Indenture), or (iii) the Company shall
have given notice of its election to defer payments of interest on the
Subordinated Debt Securities by extending the interest payment period as
provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (a) the Company and CCI shall not declare or pay any dividend
on, make a distribution with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock or rights to
acquire such capital stock (other than (i) purchases or acquisitions of shares
of any such capital stock or rights to acquire such capital stock in
connection with the satisfaction by CCI or the Company, respectively, of its
obligations under any employee benefit plans, (ii) as a result of a
reclassification of CCI's or the Company's capital stock or rights to acquire
such capital stock or the exchange or conversion of one class or series of
CCI's or the Company's capital stock or rights to acquire such capital stock
for another class or series of CCI's or the Company's capital stock or rights
to acquire such capital stock, (iii) the purchase of fractional interests in
shares of CCI's or the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, or (iv) dividends and distributions made on CCI's or the Company's
capital stock or rights to acquire such capital stock with CCI's or the
Company's capital stock or rights to acquire such capital stock) or make any
guarantee payments with respect to any of the foregoing and (b) the Company
and CCI shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company or
CCI that rank pari passu with or junior to such Subordinated Debt Securities.
(Section 3.07)
In the event Subordinated Debt Securities are issued to a Countrywide
Capital Trust or a trustee of such Trust in connection with the issuance of
Trust Securities by such Countrywide Capital Trust, for so long as such Trust
Securities remain outstanding, CCI will covenant (i) to maintain 100%
ownership of the Common Securities of such Countrywide Capital Trust;
provided, however, that any permitted successor of CCI under the Indenture may
succeed to CCI's ownership of such Common Securities, (ii) to use its
reasonable efforts to cause such Countrywide Capital Trust (a) to remain a
statutory business trust, except in connection with the distribution of
Subordinated Debt Securities to the holders of Trust Securities in liquidation
of such Countrywide Capital Trust, the redemption of all of
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<PAGE>
the Trust Securities of such Countrywide Capital Trust or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration of such
Countrywide Capital Trust, and (b) to otherwise continue not to be classified
as a grantor trust for United States federal income tax purposes and (iii) to
use its reasonable efforts to cause each holder of Trust Securities to be
treated as owning an undivided beneficial interest in the Subordinated Debt
Securities. (Section 3.08)
LIMITATION ON MERGERS AND SALES OF ASSETS
Nothing contained in the Indenture or in the Subordinated Debt Securities of
any series shall prevent any consolidation or merger of the Company or CCI
with or into any other corporation (whether or not affiliated with the Company
or CCI, as the case may be) or successive consolidations or mergers in which
the Company or CCI, as the case may be, or its successor or successors shall
be a party, or shall prevent any sale, conveyance, transfer or other
disposition of the property of the Company or CCI, as the case may be, or its
successor or successors as an entirety, or substantially as an entirety, to
any other corporation (whether or not affiliated with the Company or CCI, as
the case may be, or its successor or successors) authorized to acquire and
operate the same; provided, however, the Company or CCI, as the case may be,
shall, upon any such consolidation, merger, sale, conveyance, transfer or
other disposition, cause the obligations of the Company under such series of
Subordinated Debt Securities or the obligations of CCI under the Debt
Guarantee, as the case may be, and under the Indenture, to be expressly
assumed, by supplemental indenture satisfactory in form to the Debt Trustee
and executed and delivered to the Debt Trustee, by the successor entity formed
by such consolidation or into which the Company or CCI, as the case may be,
shall have been merged, or which shall have acquired such property. Upon
execution and delivery of such supplemental indenture to the Debt Trustee,
such successor entity will be substituted under the Indenture, such series of
Subordinated Debt Securities and each Debt Guarantee, as the case may be, and
thereupon the Company and CCI, as the case may be, will be relieved of any
further liability or obligation thereunder. (Sections 10.01 and 10.02)
EVENTS OF DEFAULT, WAIVER AND NOTICE
The Indenture provides than any one or more of the following described
events which has occurred and is continuing with respect to any series of
Subordinated Debt Securities constitutes an "Event of Default" with respect to
such series of Subordinated Debt Securities:
(a) default for 30 days in payment of any interest on the Subordinated
Debt Securities of that series, including any Additional Interest in
respect thereof, when due; provided, however, that a valid extension of the
interest payment period by the Company shall not constitute a default in
the payment of interest for this purpose; or
(b) default in payment of principal and premium, if any, on the
Subordinated Debt Securities of that series when due either at maturity,
upon redemption, by declaration or otherwise; provided, however, that a
valid extension of the maturity of such Subordinated Debt Securities shall
not constitute a default for this purpose; or
(c) default by the Company or CCI in the performance of any other of the
covenants or agreements in the Indenture which shall not have been remedied
for a period of 90 days after notice; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company or CCI; or
(e) in the event Subordinated Debt Securities of that series are issued
to a Countrywide Capital Trust or a trustee of such trust in connection
with the issuance of Trust Securities by such Countrywide Capital Trust,
the voluntary or involuntary dissolution, winding-up or termination of such
Countrywide Capital Trust, except in connection with the distribution of
Subordinated Debt Securities of that series to the holders of Trust
Securities in liquidation of such Countrywide Capital Trust, the redemption
of all of the Trust Securities of such Countrywide Capital Trust, or
certain mergers, consolidations or amalgamations, each as permitted by the
Declaration of such Countrywide Capital Trust. (Section 5.01)
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The Indenture provides that the Debt Trustee may, under certain
circumstances, withhold from the holders notice of default with respect to any
series of Subordinated Debt Securities (except for any default in payment of
principal of or interest or premium on the Subordinated Debt Securities of
such series) if the Trustee considers it in the interest of such holders to do
so. (Section 5.08)
The Indenture provides that if an Event of Default on any series of
Subordinated Debt Securities shall have occurred and be continuing, either the
Debt Trustee or the holders of not less than 25% in aggregate principal amount
of the Subordinated Debt Securities of such series then outstanding may
declare the principal of and accrued interest on all Subordinated Debt
Securities of such series to be due and payable immediately, but upon certain
conditions such declarations may be annulled and past defaults may be waived
(except defaults in payment of principal of or interest or premium on the
Subordinated Debt Securities, which must be cured or paid in full) by the
holders of a majority in aggregate principal amount of the Subordinated Debt
Securities of such series (or of all series, as the case may be) then
outstanding. (Section 5.01)
No holder of any Subordinated Debt Security of any series shall have any
right to institute any suit, action or proceeding for any remedy under the
Indenture, unless such holder previously shall have given to the Debt Trustee
written notice of a continuing Event of Default with respect to the
Subordinated Debt Securities of that series and unless the holders of not less
than 25% in aggregate principal amount of the Subordinated Debt Securities of
that series then outstanding shall have given the Debt Trustee a written
request to institute such action, suit or proceeding and shall have offered to
the Debt Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred thereby, and the Debt Trustee
for 60 days after its receipt of such notice, request and offer of indemnity
shall have failed to institute any such action, suit or proceeding; provided
that no holder of Subordinated Debt Securities of any series shall have any
right to prejudice the rights of any other holder of Subordinated Debt
Securities, obtain priority or preference over any other such holder or
enforce any right under this Indenture except as provided in the Indenture and
for the equal, ratable and common benefit of all holders of Subordinated Debt
Securities of the applicable series. Notwithstanding the foregoing, the right
of any holder of any Subordinated Debt Security to receive payment of the
principal of, premium, if any, and interest, if any, on such Subordinated Debt
Security when due, or to institute suit for the enforcement of any such
payment, shall not be impaired or affected without the consent of such holder.
(Section 5.04)
The holders of a majority in aggregate principal amount of the Subordinated
Debt Securities of any and all series affected (voting as one class) and then
outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to, or exercising any trust
or power conferred on, the Debt Trustee under the Indenture; provided,
however, that, except under certain circumstances, the Debt Trustee may
decline to follow any such direction if the Debt Trustee determines that the
action so directed would be unjustly prejudicial to holders not taking part in
such direction or unlawful or would involve the Debt Trustee in personal
liability. (Section 5.07) The Indenture requires the annual filing by the
Company with the Debt Trustee of a certificate as to the absence of certain
defaults under the Indenture. (Section 3.05)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company, CCI and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Subordinated Debt Securities of all series affected
(voting as one class) by such modification at the time outstanding, to modify
the Indenture or any supplemental indenture or the rights of the holders of
the Subordinated Debt Securities; provided, however, that no such modification
shall (i) extend the fixed maturity of any Subordinated Debt Security, or
reduce the principal amount thereof (including in the case of a discounted
Subordinated Debt Security the amount payable thereon in the event of
acceleration or the amount provable in bankruptcy) or any redemption premium
thereon, or reduce the rate or extend the
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time of payment of interest thereon, or make the principal of, or interest or
premium on, the Subordinated Debt Securities payable in any coin or currency
other than that provided in the Subordinated Debt Securities, or impair or
affect the right of any holder of Subordinated Debt Securities to institute
suit for the payment thereof or the right of prepayment, if any, at the option
of the holder, without the consent of the holder of each Subordinated Debt
Security so affected, or (ii) reduce the aforesaid percentage of Subordinated
Debt Securities the consent of the holders of which is required for any such
modification, without, in each such case, the consent of the holders of each
Subordinated Debt Security affected. (Section 9.02)
The Company, CCI and the Debt Trustee may enter into supplemental
indentures, without the consent of any holder of the Subordinated Debt
Securities: (a) to evidence the succession of another corporation to the
Company or CCI and the assumption by the successor corporation of the
covenants, agreements and obligations of the Company or CCI, as the case may
be, pursuant to the Indenture; (b) to add to the covenants of the Company or
CCI such further covenants, restrictions or conditions for the protection of
the holders of all or any series of Subordinated Debt Securities and to make
the occurrence, or the occurrence and continuance (including any or no grace
periods), of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of
remedies provided in the Indenture; (c) to provide for the issuance of
Subordinated Debt Securities in coupon form (including Subordinated Debt
Securities registrable as to principal only) and to provide for
exchangeability of such Subordinated Debt Securities and to make all
appropriate changes for such purpose; (d) to cure any ambiguity or to correct
or supplement any provision contained in the Indenture or in any supplemental
indenture which may be defective or inconsistent with any other provision
contained therein or in any supplemental indenture, or to make such other
provisions in regard to matters or questions arising under the Indenture;
provided that any such action shall not adversely affect the interests of the
holders of the Subordinated Debt Securities; (e) to add on, delete from, or
revise the terms of Subordinated Debt Securities of any series as permitted by
the Indenture, including, without limitation, any terms relating to the
issuance, exchange, registration or transfer of Subordinated Debt Securities
issued in whole or in part in the form of one or more Global Securities and
the payment of any principal thereof, or interest or premium, if any, thereon;
(f) to evidence and provide for the acceptance of appointment under the
Indenture by a successor Debt Trustee with respect to the Subordinated Debt
Securities of one or more series and to add to or change any of the provisions
of the Indenture as shall be necessary to provide for or facilitate the
administration of the trusts under the Indenture by more than one Debt
Trustee, pursuant to the Indenture; (g) to make any change that does not
adversely affect the rights of any holder of any Subordinated Debt Security in
any material respect; or (h) to provide for the issuance, and establish the
form and terms and conditions, of the Subordinated Debt Securities and the
Debt Guarantees of any series, to establish the form of any certifications
required to be furnished pursuant to the terms of the Indenture or any series
of Subordinated Debt Securities or to add to the rights of the holders of any
series of Subordinated Debt Securities. (Section 9.01)
DEFEASANCE AND DISCHARGE
The Indenture provides that the Company, at the Company's option: (a) will
be discharged from any and all obligations in respect of the Subordinated Debt
Securities of a series (except for certain obligations to register the
transfer or exchange of Subordinated Debt Securities, replace stolen, lost or
mutilated Subordinated Debt Securities, maintain paying agencies and hold
moneys for payment in trust) or (b) need not comply with certain restrictive
covenants of the Indenture (including those described under "--Certain
Covenants" above), in each case if the Company deposits, in trust with the
Debt Trustee or the Defeasance Agent (as defined in the Indenture), money or
U.S. Government Obligations which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an
amount sufficient to pay all the principal (including any mandatory sinking
fund payments) of, and interest and premium, if any, on, the Subordinated Debt
Securities of
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such series on the dates such payments are due in accordance with the terms of
such Subordinated Debt Securities. To exercise any such option, the Company is
required to deliver to the Debt Trustee and the Defeasance Agent, if any, an
opinion of counsel to the effect that (i) the deposit and related defeasance
would not cause the holders of the Subordinated Debt Securities of such series
to recognize income, gain or loss for federal income tax purposes and, in the
case of a discharge pursuant to clause (a), such opinion shall be accompanied
by a private letter ruling to such effect received from the United States
Internal Revenue Service or a revenue ruling pertaining to a comparable form
of transaction to such effect published by the United States Internal Revenue
Service, and (ii) if listed on any national securities exchange, such
Subordinated Debt Securities would not be delisted from such exchange as a
result of the exercise of such option. (Sections 11.01 and 11.05)
GOVERNING LAW
The Indenture, the Subordinated Debt Securities and the Debt Guarantees will
be governed by, and construed in accordance with, the laws of the State of New
York, without regard to conflict of laws principles. (Section 13.05)
THE DEBT TRUSTEE
The Company and CCI may have normal banking relationships with the Debt
Trustee in the ordinary course of business.
DESCRIPTION OF THE CAPITAL SECURITIES
Each Countrywide Capital Trust may issue, from time to time, only one series
of Capital Securities having terms described in the Prospectus Supplement
relating thereto. The Declaration of each Countrywide Capital Trust will
authorize the Regular Trustees of such Countrywide Capital Trust to issue on
behalf of such Countrywide Capital Trust one series of Capital Securities. The
Declaration will be qualified as an indenture under the Trust Indenture Act.
The Capital Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in the
Declaration or made part of the Declaration by the Trust Indenture Act and
which will mirror the terms of the Subordinated Debt Securities held by such
Countrywide Capital Trust and described in the Prospectus Supplement relating
thereto. Reference is made to the Prospectus Supplement relating to the
Capital Securities of such Countrywide Capital Trust for specific terms,
including (i) the distinctive designation of such Capital Securities; (ii) the
number of Capital Securities issued by such Countrywide Capital Trust; (iii)
the annual distribution rate (or method of determining such rate) for Capital
Securities issued by such Countrywide Capital Trust and the date or dates upon
which such distributions shall be payable, subject, however, to the right, if
any, to extend the interest payment periods; (iv) whether distributions on
Capital Securities issued by such Countrywide Capital Trust shall be
cumulative, and, in the case of Capital Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on Capital Securities issued by such
Countrywide Capital Trust shall be cumulative; (v) the amount or amounts which
shall be paid out of the assets of such Countrywide Capital Trust to the
holders of Capital Securities of such Countrywide Capital Trust upon voluntary
or involuntary dissolution, winding-up or termination of such Countrywide
Capital Trust; (vi) the obligation, if any, of such Countrywide Capital Trust
to purchase or redeem Capital Securities issued by such Countrywide Capital
Trust and the price or prices at which, the period or periods within which,
and the terms and conditions upon which, Capital Securities issued by such
Countrywide Capital Trust shall be purchased or redeemed, in whole or in part,
pursuant to such obligation; (vii) the voting rights, if any, of Capital
Securities issued by such Countrywide Capital Trust in addition to those
required by law, including the number of votes per Capital Security and any
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requirement for the approval by the holders of Capital Securities, or of
Capital Securities issued by one or more Countrywide Capital Trusts, or of
both, as a condition to specified action or amendments to the Declaration of
such Countrywide Capital Trust; (viii) the terms and conditions, if any, upon
which the Subordinated Debt Securities may be distributed to holders of
Capital Securities; (ix) if applicable, any securities exchange upon which the
Capital Securities shall be listed; and (x) any other relevant rights,
preferences, privileges, limitations or restrictions of Capital Securities
issued by such Countrywide Capital Trust not inconsistent with the Declaration
of such Countrywide Capital Trust or with applicable law. All Capital
Securities offered hereby will be guaranteed by CCI as set forth below under
"Description of the Capital Securities Guarantees." Certain United States
federal income tax considerations applicable to any offering of Capital
Securities will be described in the Prospectus Supplement relating thereto.
In connection with the issuance of Capital Securities, each Countrywide
Capital Trust will issue one series of Common Securities. The Declaration of
each Countrywide Capital Trust will authorize the Regular Trustees of such
Trust to issue on behalf of such Countrywide Capital Trust one series of
Common Securities having such terms including distributions, redemption,
voting, liquidation rights or such restrictions as shall be set forth therein.
The terms of the Common Securities issued by a Countrywide Capital Trust will
be substantially identical to the terms of the Capital Securities issued by
such Trust and the Common Securities will rank pari passu, and payments will
be made thereon pro rata, with the Capital Securities except that, upon an
event of default under the Declaration, the rights of the holders of the
Common Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Capital Securities. Except in certain limited
circumstances, the Common Securities will also carry the right to vote to
appoint, remove or replace any of the Countrywide Capital Trustees of a
Countrywide Capital Trust. All of the Common Securities of each Countrywide
Capital Trust will be owned by CCI.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If an Event of Default under the Declaration of a Countrywide Capital Trust
occurs and is continuing, then the holders of Capital Securities of such
Countrywide Capital Trust would, except as provided below, rely on the
enforcement by the Institutional Trustee of its rights as a holder of the
applicable series of Subordinated Debt Securities against the Company and CCI.
Subject to the requirement of the Institutional Trustee's obtaining a tax
opinion in certain circumstances, the holders of a majority in liquidation
amount of the Capital Securities of such Countrywide Capital Trust will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Institutional Trustee, or exercising any trust
or power conferred upon the Institutional Trustee under the applicable
Declaration, including the right to direct the Institutional Trustee to
exercise the remedies available to it as a holder of the Subordinated Debt
Securities and the related Debt Guarantee. If the Institutional Trustee fails
to enforce its rights under the applicable series of Subordinated Debt
Securities or the related Debt Guarantee after the holders of a majority in
liquidation amount of the Capital Securities have so directed the
Institutional Trustee, a holder of record of such Capital Securities may
institute a legal proceeding directly against the Company or CCI to enforce
the Institutional Trustee's rights under the applicable series of Subordinated
Debt Securities or the related Debt Guarantee as the case may be, without
first instituting any legal proceeding against the Institutional Trustee or
any other person or entity, including, in the case of the Debt Guarantee,
against the Company. Notwithstanding the foregoing, if an Event of Default
under the applicable Declaration has occurred and is continuing and such event
is attributable to (i) the failure of the Company to pay interest or principal
on the applicable series of Subordinated Debt Securities on the respective
dates such interest or principal is payable (or in the case of redemption, on
the redemption date) or (ii) the failure of CCI to pay any obligation in
respect thereof under the related Debt Guarantee, then a holder of record of
Capital Securities of such Countrywide Capital Trust may directly institute a
proceeding for enforcement of payment, on or after the respective due dates
specified in such
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Subordinated Debt Securities, to such holder of the principal of or interest
on the applicable series of Subordinated Debt Securities having an aggregate
principal amount equal to the aggregate liquidation amount of the Capital
Securities of such holder (a "Direct Action"). In connection with such Direct
Action, the Company and CCI will be subrogated to the rights of such holder of
Capital Securities under the applicable Declaration to the extent of any
payment made by the Company or CCI, as the case may be, to such holder of
Capital Securities in such Direct Action; provided, however, that no such
subrogation right may be exercised so long as an event of default under the
applicable Declaration has occurred and is continuing. The holders of Capital
Securities of a Countrywide Capital Trust will not be able to exercise
directly any other remedy available to the holders of the applicable series of
Subordinated Debt Securities or the related Debt Guarantee.
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations issued on or after December 7,
1995 (the "Proposed Legislation") if such debt obligations have a maximum term
in excess of twenty years and are not shown as indebtedness on the issuer's
applicable consolidated balance sheet. In addition, the Proposed Legislation
would deny issuers an interest deduction on any debt instruments with a
weighted average maturity greater than 40 years. On March 29, 1996, Senate
Finance Committee Chairman William V. Roth, Jr. and House Ways and Means
Committee Chairman Bill Archer issued a joint statement (the "Joint
Statement") indicating their intent that certain legislative proposals
initiated by the Clinton administration, including the Proposed Legislation,
that may be adopted by either of the tax-writing committees of Congress would
have an effective date that is no earlier than the date of "appropriate
Congressional action." Based upon the Joint Statement, it is expected that if
the Proposed Legislation were to be enacted, such Legislation would not apply
to a series of Subordinated Debt Securities if the series (i) was issued prior
to the date of "appropriate Congressional action" or (ii) had a maximum term
that did not exceed 20 years. The Company intends that any series of
Subordinated Debt Securities will either be issued prior to the date of
"appropriate Congressional action" or will have a maximum term that does not
exceed 20 years. Accordingly, the Company does not expect the Proposed
Legislation to apply to any series of Subordinated Debt Securities. There can
be no assurance, however, that the effective date guidance contained in the
Joint Statement will be incorporated into the Proposed Legislation, if
enacted, or that other legislation enacted after the date hereof will not
otherwise adversely affect the ability of the Company to deduct the interest
payable on any series of Subordinated Debt Securities. Accordingly, there can
be no assurance that a Tax Event will not occur.
DESCRIPTION OF THE CAPITAL SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Capital
Securities Guarantees which will be executed and delivered by CCI for the
benefit of the holders from time to time of Capital Securities. Each Capital
Securities Guarantee will be qualified as an indenture under the Trust
Indenture Act. The Bank of New York will act as indenture trustee under each
Capital Securities Guarantee for purposes of the Trust Indenture Act (the
"Capital Guarantee Trustee"). The terms of each Capital Securities Guarantee
will be those set forth in such Capital Securities Guarantee and those made
part of such Capital Securities Guarantee by the Trust Indenture Act. This
summary of the material terms of the Capital Securities Guarantees does not
purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Capital Securities
Guarantee, a form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each Capital Securities Guarantee will be held by the Capital Guarantee
Trustee for the benefit of the holders of the Capital Securities of the
applicable Countrywide Capital Trust.
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GENERAL
Pursuant to each Capital Securities Guarantee, CCI will irrevocably and
unconditionally agree to pay in full, to the holders of the Capital Securities
issued by a Countrywide Capital Trust, the Guarantee Payments (as defined
herein) (except to the extent paid by such Countrywide Capital Trust), as and
when due, regardless of any defense, right of set-off or counterclaim which
such Countrywide Capital Trust may have or assert. The following payments with
respect to Capital Securities issued by a Countrywide Capital Trust, to the
extent not paid by such Countrywide Capital Trust (the "Guarantee Payments"),
will be subject to the Capital Securities Guarantee thereon (without
duplication): (i) any accrued and unpaid distributions which are required to
be paid on such Capital Securities, to the extent such Countrywide Capital
Trust shall have funds available therefor; (ii) the redemption price,
including all accrued and unpaid distributions to the date of redemption (the
"Redemption Price"), to the extent such Countrywide Capital Trust has funds
available therefor, with respect to any Capital Securities called for
redemption by such Countrywide Capital Trust and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of such Countrywide Capital
Trust (other than in connection with the distribution of Subordinated Debt
Securities to the holders of Capital Securities upon the redemption of all of
the Capital Securities), the lesser of (a) the aggregate of the liquidation
amount and all accrued and unpaid distributions on such Capital Securities to
the date of payment, to the extent such Countrywide Capital Trust has funds
available therefor, and (b) the amount of assets of such Countrywide Capital
Trust remaining available for distribution to holders of such Capital
Securities in liquidation of such Countrywide Capital Trust. The redemption
price and liquidation amount will be fixed at the time the Capital Securities
are issued. CCI's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by CCI to the holders of Capital
Securities or by causing the applicable Countrywide Capital Trust to pay such
amounts to such holders.
Each Capital Securities Guarantee will not apply to any payment of
distributions except to the extent the applicable Countrywide Capital Trust
shall have funds available therefor. If the Company does not make interest
payments on the Subordinated Debt Securities purchased by a Countrywide
Capital Trust and CCI does not fulfill its obligations under the Debt
Guarantee relating to such Subordinated Debt Securities, such Countrywide
Capital Trust will not pay distributions on the Capital Securities issued by
such Countrywide Capital Trust and will not have funds available therefor. See
"Description of the Subordinated Debt Securities and the Debt Guarantees--
Certain Covenants." The Capital Securities Guarantee, when taken together with
the Company's obligations under the Subordinated Debt Securities and the
Indenture, including its obligations to pay costs, expenses, debts and
liabilities of such Countrywide Capital Trust (other than with respect to the
Trust Securities), and CCI's obligations under the Debt Guarantee, the
Indenture and the Declaration, will provide a full and unconditional guarantee
on a subordinated basis by CCI of payments due on the Capital Securities.
CCI has also agreed separately to irrevocably and unconditionally guarantee
the obligations of each Countrywide Capital Trust with respect to its Common
Securities (the "Common Securities Guarantees") to the same extent as the
respective Capital Securities Guarantees, except that upon an event of default
under the Declaration of a Countrywide Capital Trust, holders of Capital
Securities of such Trust shall have priority over holders of Common Securities
of such Trust with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF CCI
In each Capital Securities Guarantee, CCI will covenant that, so long as any
Capital Securities issued by the applicable Countrywide Capital Trust remain
outstanding, if CCI shall be in default under such Capital Securities
Guarantee or there shall have occurred and be continuing any event that would
constitute an event of default under the Declaration of such Countrywide
Capital Trust, then (a) CCI shall not, and shall cause the Company not to,
declare or pay any dividend on, make a distribution
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with respect to, or redeem, purchase or make a liquidation payment with
respect to, any of CCI's or the Company's capital stock or rights to acquire
such capital stock (other than (i) purchases or acquisitions of shares of any
such capital stock or rights to acquire such capital stock in connection with
the satisfaction by CCI or the Company, respectively, of its obligations under
any employee benefit plans, (ii) as a result of a reclassification of CCI's or
the Company's capital stock or rights to acquire such capital stock or the
exchange or conversion of one class or series of CCI's or the Company's
capital stock or rights to acquire such capital stock for another class or
series of CCI's or the Company's capital stock or rights to acquire such
capital stock, (iii) the purchase of fractional interests in shares of CCI's
or the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
or (iv) dividends and distributions made on CCI's or the Company's capital
stock or rights to acquire such capital stock with CCI's or the Company's
capital stock or rights to acquire such capital stock) or make any guarantee
payments with respect to any of the foregoing and (b) CCI shall not, and shall
cause the Company not to, make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by CCI or
the Company that rank pari passu with or junior to such Subordinated Debt
Securities.
MODIFICATION OF THE CAPITAL SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Capital Securities (in which case no vote of such holders will
be required), each Capital Securities Guarantee may be amended only with the
prior approval of the holders of not less than a majority in liquidation
amount of the outstanding Capital Securities issued by the applicable
Countrywide Capital Trust. All guarantees and agreements contained in a
Capital Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of CCI and shall inure to the benefit of the
holders of the Capital Securities of the applicable Countrywide Capital Trust
then outstanding.
TERMINATION
Each Capital Securities Guarantee will terminate as to the Capital
Securities issued by the applicable Countrywide Capital Trust (a) upon full
payment of the Redemption Price of all Capital Securities of such Countrywide
Capital Trust, (b) upon distribution of the Subordinated Debt Securities held
by such Countrywide Capital Trust to the holders of the Capital Securities of
such Countrywide Capital Trust or (c) upon full payment of the amounts payable
in accordance with the Declaration of such Countrywide Capital Trust upon
liquidation of such Countrywide Capital Trust. Each Capital Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of Capital Securities issued by the applicable
Countrywide Capital Trust must restore payment of any sums paid under such
Capital Securities or such Capital Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Capital Securities Guarantee will occur upon the
failure of CCI to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Capital Securities
relating to such Capital Securities Guarantee have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Capital Guarantee Trustee in respect of the Capital Securities
Guarantee or to direct the exercise of any trust or power conferred upon the
Capital Guarantee Trustee under such Capital Securities Guarantee. A holder of
record of such Capital Securities may institute a legal proceeding directly
against CCI to enforce the Capital Guarantee Trustee's rights under such
Capital Securities Guarantee, without first instituting a legal proceeding
against the relevant Countrywide Capital Trust, the Capital Guarantee Trustee
or any other person or entity. In the Capital Securities Guarantees CCI will
waive any right or remedy to require that any action be brought first against
such Countrywide Capital Trust or any other person or entity before proceeding
directly against CCI.
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STATUS OF THE CAPITAL SECURITIES GUARANTEES
CCI's obligations under the Capital Securities Guarantees are subordinate
and junior in right of payment to all present and future liabilities of CCI,
including the Debt Guarantee. The terms of the Capital Securities provide that
each holder of Capital Securities issued by the applicable Countrywide Capital
Trust by acceptance thereof agrees to the subordination provisions and other
terms of the Capital Securities Guarantee relating thereto.
INFORMATION CONCERNING THE CAPITAL GUARANTEE TRUSTEE
The Capital Guarantee Trustee, prior to the occurrence of a default with
respect to a Capital Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in such Capital Securities Guarantee and,
after default, shall exercise such of the rights and powers vested in it by
such Capital Securities Guarantee, and use the same degree of care and skill
in their exercise, as a prudent individual would exercise or use in the
conduct of his or her own affairs. Subject to such provisions, the Capital
Guarantee Trustee is under no obligation to exercise any of the powers vested
in it by a Capital Securities Guarantee at the request of any holder of
Capital Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby.
CCI and certain of its affiliates maintain a banking relationship with the
Capital Guarantee Trustee.
GOVERNING LAW
The Capital Securities Guarantees will be governed by and construed in
accordance with the laws of the State of New York, without regard to conflict
of laws principles.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES, THE DEBT
GUARANTEES AND THE CAPITAL SECURITIES GUARANTEES
As set forth in the applicable Declaration, the sole purpose of each of the
Countrywide Capital Trusts is to issue and sell the Trust Securities
evidencing undivided beneficial interests in the assets of such Countrywide
Capital Trust, and to invest the gross proceeds from such issuance and sale in
the Subordinated Debt Securities of the series issued by the Company in
accordance with such Trust Securities.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities of that series, such payments will be sufficient
to cover distributions and payments due on such Trust Securities because of
the following factors: (i) the aggregate principal amount of Subordinated Debt
Securities of that series will be equal to the aggregate stated liquidation
amount of such Trust Securities; (ii) the interest rate and the interest and
other payment dates on the Subordinated Debt Securities of that series will
match the distribution rate and distribution and other payment dates for the
Capital Securities of such Trust; (iii) the Company shall pay all, and such
Trust shall not be obligated to pay directly or indirectly any, costs,
expenses, debt, and obligations of such Trust (other than with respect to such
Trust Securities); and (iv) the Declaration of such Trust further provides
that the Countrywide Capital Trustees of such Trust shall not take or cause or
permit such Trust to, among other things, engage in any activity that is not
consistent with the purposes of such Trust.
Payments of distributions (to the extent funds therefor are available to
such Trust) and other payments due on such Capital Securities (to the extent
funds therefor are available to such Trust) are guaranteed by CCI as set forth
under "Description of the Capital Securities Guarantees." If the Company does
not make interest payments on the Subordinated Debt Securities of that series
19
<PAGE>
purchased by such Trust and CCI does not make payments under the related Debt
Guarantee, it is expected that such Trust will not have sufficient funds to
pay distributions on such Capital Securities. The Capital Securities Guarantee
will not apply to any payment of distributions except to the extent that such
Trust has funds available for the payment of such distributions. The Capital
Securities Guarantee will cover the payment of distributions and other
payments on such Capital Securities only if and to the extent that the Company
or CCI has made payments of interest or principal on the Subordinated Debt
Securities of that series or the related Debt Guarantees held by such Trust as
its sole assets. The Capital Securities Guarantee, when taken together with
the Company's obligations under the Subordinated Debt Securities of that
series and the Indenture, including its obligations to pay costs, expenses,
debts and liabilities of such Trust (other than with respect to the Trust
Securities), and CCI's obligations under such Debt Guarantee, the Indenture
and such Declaration, provide a full and unconditional guarantee on a
subordinated basis by CCI of amounts when due on such Capital Securities.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities of that series when due (after giving effect to any Extension
Period) and CCI fails to make payments under such Debt Guarantee with respect
to such payments due on the Subordinated Debt Securities of that series, such
Declaration provides a mechanism whereby the holders of the Capital
Securities, using the procedures described in "Description of the Capital
Securities--Book-Entry Only Issuance--The Depository Trust Company" and "--
Voting Rights" in the accompanying Prospectus Supplement with respect thereto,
may direct the Institutional Trustee to enforce its rights under the
Subordinated Debt Securities of that series and such Debt Guarantee, including
proceeding directly against CCI under such Debt Guarantee without first
proceeding against the Company under the Subordinated Debt Security. If the
Institutional Trustee fails to enforce its rights under the Subordinated Debt
Securities of that series or such Debt Guarantee after the holders of a
majority in liquidation amount of the Capital Securities have so directed the
Institutional Trustee, a holder of record of such Capital Securities may
institute a legal proceeding against the Company or CCI to enforce the
Institutional Trustee's rights under the Subordinated Debt Securities of that
series or such Debt Guarantee, as the case may be, without first instituting
any legal proceeding against the Institutional Trustee or any other person or
entity, including, in the case of such Debt Guarantee, against the Company.
Notwithstanding the foregoing, if a Declaration Event of Default under such
Declaration has occurred and is continuing and such event is attributable to
(i) the failure of the Company to pay interest or principal on the
Subordinated Debt Securities of that series on the respective dates such
interest or principal is under such Declaration payable (or in the case of
redemption, on the redemption date) or (ii) the failure of CCI to make payment
under such Debt Guarantee with respect to such payments due on the
Subordinated Debt Securities of that series, then a holder of record of such
Capital Securities may institute a Direct Action for payment on or after the
respective due dates specified in the Subordinated Debt Securities of that
series. In connection with such Direct Action, CCI or the Company, as the case
may be, will be subrogated to the rights of such holder of such Capital
Securities under such Declaration to the extent of any payment made by CCI or
the Company, as the case may be, to such holder of such Capital Securities in
such Direct Action; provided, however, that no such subrogation right may be
exercised so long as a Declaration Event of Default under such Declaration has
occurred and is continuing. CCI, under the Capital Securities Guarantee,
acknowledges that the Capital Securities Trustee shall enforce the Capital
Securities Guarantee on behalf of the holders of such Capital Securities. If
CCI fails to make payments under the Capital Securities Guarantee, any holder
of such Capital Securities may institute a legal proceeding directly against
CCI to enforce its right to receive payment under the Capital Securities
Guarantee on or after the date such payment is due and payable under the
Capital Securities Guarantee without first instituting a legal proceeding
against such Trust, the Capital Guarantee Trustee, or any other person or
entity.
20
<PAGE>
CCI and each of the Countrywide Capital Trusts believe that the above
mechanisms and obligations, taken together, provide a full and unconditional
guarantee on a subordinated basis by CCI of payments due on the Capital
Securities of each such Trust. See "Description of the Capital Securities
Guarantees--General."
PLAN OF DISTRIBUTION
The Company intends to sell the Subordinated Debt Securities and any
Countrywide Capital Trust may sell Capital Securities through underwriters.
In connection with any such sale, an underwriting agreement will be executed
with such underwriters at the time of sale to them and the names of the
underwriters and the terms of the transaction will be set forth in the
Prospectus Supplement.
Underwriters may be entitled under the relevant agreements to
indemnification by the Company, CCI and/or any Countrywide Capital Trust, as
the case may be, against certain liabilities, including liabilities under the
Securities Act.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered are set forth in the accompanying
Prospectus Supplement.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Capital
Securities and formation of the Trust will be passed upon on behalf of the
Countrywide Capital Trusts by Morris, Nichols, Arsht & Tunnell, special
Delaware counsel to the Countrywide Capital Trusts. The validity under New
York law of the Subordinated Debt Securities, the Debt Guarantees and the
Capital Security Guarantees will be passed upon by Fried, Frank, Harris,
Shriver & Jacobson, a partnership including professional corporations, New
York, New York. Edwin Heller (whose professional corporation retired as a
partner of Fried, Frank, Harris, Shriver & Jacobson in September 1996) is of
counsel to Fried, Frank, Harris, Shriver & Jacobson and a director of CCI.
Certain United States federal income tax matters also will be passed upon by
Fried, Frank, Harris, Shriver & Jacobson. Brown & Wood LLP, New York, New
York, will serve as counsel for any underwriters. Brown & Wood LLP also serves
as counsel for CWMBS, Inc. and CWABS, Inc., each a wholly-owned subsidiary of
CCI, in connection with offerings of mortgage-backed and asset-backed
securities, and as counsel to CWM.
EXPERTS
The annual consolidated financial statements of CCI incorporated by
reference in the 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 so incorporated in reliance upon the authority of such
firm as experts in accounting and auditing.
21
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPO-
RATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNEC-
TION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY COUNTRYWIDE CREDIT INDUSTRIES, INC., COUNTRY-
WIDE HOME LOANS, INC., COUNTRYWIDE CAPITAL I OR THE UNDERWRITER. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF COUNTRYWIDE CREDIT INDUSTRIES,
INC., COUNTRYWIDE HOME LOANS, INC. OR COUNTRYWIDE CAPITAL I SINCE THE DATE
HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OF-
FER TO SELL OR SOLICITATION OF AN OFFER TO BUY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAK-
ING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Summary.................................................................. S-4
Risk Factors............................................................. S-9
ERISA Considerations .................................................... S-14
The Company.............................................................. S-15
Countrywide Credit Industries, Inc....................................... S-16
Countrywide Capital Trust................................................ S-16
Capitalization........................................................... S-17
Ratio of Earnings to Fixed Charges....................................... S-18
Accounting Treatment..................................................... S-18
Use of Proceeds.......................................................... S-18
Description of the Capital Securities.................................... S-18
Description of the Capital Securities Guarantee.......................... S-31
Description of the Subordinated Debt Securities and the Debt Guarantee... S-32
Effect of Obligations Under the Subordinated Debt Securities, the Debt
Guarantee and the Capital Securities Guarantee.......................... S-38
United States Federal Income Taxation.................................... S-40
Underwriting............................................................. S-45
Legal Matters............................................................ S-46
PROSPECTUS
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
The Company.............................................................. 5
The Trusts............................................................... 6
Countrywide Credit Industries, Inc....................................... 6
Ratio of Earnings to Fixed Charges....................................... 7
Use of Proceeds.......................................................... 7
Description of the Subordinated Debt Securities and the Debt Guarantees.. 8
Description of the Capital Securities.................................... 14
Description of the Capital Securities Guarantees......................... 16
Effect of Obligations Under the Subordinated Debt Securities, the Debt
Guarantees and the Capital Securities Guarantees........................ 19
Plan of Distribution..................................................... 21
Legal Matters............................................................ 21
Experts.................................................................. 21
</TABLE>
$
COUNTRYWIDE CAPITAL I
% CAPITAL TRUST PASS- THROUGH SECURITIES SM
(TRUPSSM)
(LIQUIDATION AMOUNT $1,000 PER SECURITY)
FULLY AND UNCONDITIONALLY
GUARANTEED AS TO DISTRIBUTIONS AND OTHER PAYMENTS BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
THE PROCEEDS OF WHICH ARE TO BE INVESTED IN % JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES DUE DECEMBER 1, 2026 OF
COUNTRYWIDE HOME LOANS, INC.
-----------------------------
SALOMON BROTHERS INC
-----------------------------------
PROSPECTUS SUPPLEMENT
DATED , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
<TABLE>
<S> <C>
SEC registration fee............................................ $ 90,909
Legal fees and expenses......................................... 340,000
Accounting fees and expenses.................................... 45,000
Printing and engraving expenses................................. 200,000
Trustees' fees and expenses..................................... 6,000
Rating agency fees.............................................. 200,000
Miscellaneous................................................... 18,091
--------
Total......................................................... $900,000
========
</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 CCI provides that CCI
may indemnify its directors and officers to the full extent permitted by the
laws of the State of Delaware. Article VIII of CCI's Bylaws provides that CCI
shall indemnify its directors and officers, and persons serving as directors
and officers of CHL at the request of CCI, 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 CCI; except that in the case of actions brought by or in the
right of CCI to procure a judgment in its favor, no indemnification is
permitted in respect of any claim, issue or matter as to which any such
director or officer shall have been adjudged to be liable to CCI unless the
court in which the action was brought determines that such person is entitled
to indemnification. CCI'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. CCI has entered into indemnity agreements with certain of its
directors and executive officers (including the directors and executive
officers of CHL), whereby such individuals are indemnified by CCI 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. CCI also maintains an insurance policy pursuant to
which its directors and officers (including the directors and executive
officers of CHL) are insured against certain liabilities which might arise out
of their relationship with CCI as directors and officers.
Article SEVENTH of the Certificate of Incorporation of CCI provides that a
director of CCI shall have no personal liability to CCI 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.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE NO.
------ ----------- --------
<C> <S> <C>
+1.1 Form of Underwriting Agreement for offering of Capital
Securities
+4.1 Certificate of Trust of Countrywide Capital I
+4.2 Certificate of Trust of Countrywide Capital II
+4.3 Declaration of Trust of Countrywide Capital I
+4.4 Declaration of Trust of Countrywide Capital II
+4.5 Form of Amended and Restated Declaration of Trust for
Countrywide Capital I
+4.6 Form of Indenture among Countrywide Home Loans, Inc., as
Issuer, Countrywide Credit Industries, Inc., as Guarantor,
and the Bank of New York, as Trustee
+4.7 Form of Supplemental Indenture to be used in connection with
the issuance of Subordinated Debt Securities
+4.8 Form of Capital Security (included in Exhibit 4.5 above)
+4.9 Form of Subordinated Debt Security (included in Exhibit 4.7
above)
+4.10 Form of Capital Securities Guarantee of Countrywide Credit
Industries, Inc. for the benefit of the holders of Capital
Securities
*5.1 Opinion of Morris, Nichols, Arsht & Tunnell as to the
validity of the Capital Securities
*5.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to
the validity of the Subordinated Debt Securities, Debt
Guarantee and Capital Securities Guarantee
*8.1 Forms of Opinions of Fried, Frank, Harris, Shriver &
Jacobson as to certain United States federal income taxation
matters
+12.1 Statement regarding computation of ratio of earnings to
fixed charges of Countrywide Credit Industries, Inc.
*23.1 Consent of Grant Thornton LLP
*23.2 Consent of Morris, Nichols, Arsht & Tunnell (included in
Exhibit 5.1)
*23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.2)
*23.4 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.1)
+24.1 Powers of Attorney
+25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as Debt
Trustee under the Indenture
+25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Institutional Trustee under the Amended and Restated
Declaration of Trust of Countrywide Capital I
+25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as Capital
Guarantee Trustee under the Capital Securities Guarantee of
Countrywide Credit Industries, Inc. for the benefit of the
holders of Capital Securities
</TABLE>
- --------
+ Previously filed.
* Filed herewith.
ITEM 17. UNDERTAKINGS
(a) The undersigned, Countrywide Capital I, Countrywide Capital II, CHL and
CCI (collectively, 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;
(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 hereof) 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
II-2
<PAGE>
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 a
prospectus filed with the Securities and Exchange Commission (the
"Commission") pursuant to Rule 424(b) under the Securities Act of 1933,
as amended (the "Securities Act") 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 CCI pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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, each filing of CCI's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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
Commission such indemnification is against public policy as expressed in the
Securities Act 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 and will be governed by the
final adjudication of such issue.
(d) The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information contained or omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time if was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, 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.
(e) The undersigned Registrants undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act of 1939, as amended ("Act") in
accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Act.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, COUNTRYWIDE
CAPITAL I CERTIFIES THAT IT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE
REGISTRATION STATEMENT (FILE NOS. 333-14111, 333-14111-01, 333-14111-02 AND
333-14111-03) TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PASADENA, STATE OF CALIFORNIA, ON THE 9TH DAY OF
DECEMBER, 1996.
Countrywide Capital I
By: Countrywide Credit Industries,
Inc., as Sponsor
/s/ Angelo R. Mozilo
By:__________________________________
ANGELO R. MOZILO EXECUTIVE VICE
PRESIDENT AND VICE CHAIRMAN OF THE
BOARD OF DIRECTORS
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, COUNTRYWIDE
CAPITAL II CERTIFIES THAT IT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE
REGISTRATION STATEMENT (FILE NOS. 333-14111, 333-14111-01, 333-14111-02 AND
333-14111-03) TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PASADENA, STATE OF CALIFORNIA, ON THE 9TH DAY OF
DECEMBER, 1996.
Countrywide Capital II
By: Countrywide Credit Industries,
Inc., as Sponsor
/s/ Angelo R. Mozilo
By: _________________________________
ANGELO R. MOZILO EXECUTIVE VICE
PRESIDENT AND VICE CHAIRMAN OF THE
BOARD OF DIRECTORS
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, COUNTRYWIDE HOME
LOANS, INC. CERTIFIES THAT IT HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE
REGISTRATION STATEMENT (FILE NOS. 333-14111, 333-14111-01, 333-14111-02 AND
333-14111-03) TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PASADENA, STATE OF CALIFORNIA, ON THE 9TH DAY OF
DECEMBER, 1996.
Countrywide Home Loans, Inc.
/s/ Angelo R. Mozilo
By: _________________________________
ANGELO R. MOZILO
CHAIRMAN OF THE BOARD OF DIRECTORS
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT (FILE NOS. 333-14111, 333-14111-01, 333-
14111-02 AND 333-14111-03) HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
* Director
- ------------------------------------- December 9,
DAVID S. LOEB 1996
/s/ Angelo R. Mozilo
- ------------------------------------- Chairman of the
ANGELO R. MOZILO Board of Directors December 9,
and Chief Executive 1996
Officer (Principal
Executive Officer);
Director
* President and Chief
- ------------------------------------- Operating Officer; December 9,
STANFORD L. KURLAND Director 1996
*
- ------------------------------------- Executive Vice
THOMAS K. MCLAUGHLIN President and Chief December 9,
Financial Officer 1996
(Principal
Financial and
Accounting Officer)
/s/ Angelo R. Mozilo
By: _________________________________
ANGELO R. MOZILO
ATTORNEY-IN-FACT
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, COUNTRYWIDE
CREDIT INDUSTRIES, INC. CERTIFIES THAT IT HAS DULY CAUSED THIS AMENDMENT NO. 4
TO THE REGISTRATION STATEMENT (FILE NOS. 333-14111, 333-14111-01, 333-14111-02
AND 333-14111-03) TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF PASADENA, STATE OF CALIFORNIA, ON THE 9TH DAY
OF DECEMBER, 1996.
Countrywide Credit Industries, Inc.
*
By: _________________________________
DAVID S. LOEB
CHAIRMAN OF THE BOARD OF DIRECTORS
AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT (FILE NOS. 333-14111, 333-14111-01, 333-
14111-02 AND 333-14111-03) HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
* Chairman of the
- ------------------------------------- Board of Directors December 9,
DAVID S. LOEB and President 1996
(Principal
Executive Officer);
Director
/s/ Angelo R. Mozilo Executive Vice
- ------------------------------------- President and Vice December 9,
ANGELO R. MOZILO Chairman of the 1996
Board of Directors;
Director
* Managing Director--
- ------------------------------------- Finance, Chief December 9,
CARLOS M. GARCIA Financial Officer 1996
and Chief
Accounting Officer
(Principal
Financial and
Accounting Officer)
II-7
<PAGE>
SIGNATURE TITLE DATE
* Director
- ------------------------------------- December 9,
ROBERT J. DONATO 1996
* Director
- ------------------------------------- December 9,
BEN M. ENIS 1996
* Director
- ------------------------------------- December 9,
EDWIN HELLER 1996
* Director
December 9,
1996
- -------------------------------------
*By: /s/ Angelo R. Mozilo
HARLEY W. SNYDER
- -------------------------------------
ANGELO R. MOZILO
ATTORNEY-IN-FACT
II-8
<PAGE>
EXHIBIT INDEX
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE NO.
------ ----------- --------
<C> <S> <C>
+1.1 Form of Underwriting Agreement for offering of Capital
Securities
+4.1 Certificate of Trust of Countrywide Capital I
+4.2 Certificate of Trust of Countrywide Capital II
+4.3 Declaration of Trust of Countrywide Capital I
+4.4 Declaration of Trust of Countrywide Capital II
+4.5 Form of Amended and Restated Declaration of Trust for
Countrywide Capital I
+4.6 Form of Indenture among Countrywide Home Loans, Inc., as
Issuer, Countrywide Credit Industries, Inc., as Guarantor,
and the Bank of New York, as Trustee
+4.7 Form of Supplemental Indenture to be used in connection with
the issuance of Subordinated Debt Securities
+4.8 Form of Capital Security (included in Exhibit 4.5 above)
+4.9 Form of Subordinated Debt Security (included in Exhibit 4.7
above)
+4.10 Form of Capital Securities Guarantee of Countrywide Credit
Industries, Inc. for the benefit of the holders of Capital
Securities
*5.1 Opinion of Morris, Nichols, Arsht & Tunnell as to the
validity of the Capital Securities
*5.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson as to
the validity of the Subordinated Debt Securities, Debt
Guarantee and Capital Securities Guarantee
*8.1 Forms of Opinions of Fried, Frank, Harris, Shriver &
Jacobson as to certain United States federal income taxation
matters
+12.1 Statement regarding computation of ratio of earnings to
fixed charges of Countrywide Credit Industries, Inc.
*23.1 Consent of Grant Thornton LLP
*23.2 Consent of Morris, Nichols, Arsht & Tunnell (included in
Exhibit 5.1)
*23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.2)
*23.4 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.1)
+24.1 Powers of Attorney
+25.1 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as Debt
Trustee under the Indenture
+25.2 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as
Institutional Trustee under the Amended and Restated
Declaration of Trust of Countrywide Capital I
+25.3 Form T-1 Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Bank of New York, as Capital
Guarantee Trustee under the Capital Securities Guarantee of
Countrywide Credit Industries, Inc. for the benefit of the
holders of Capital Securities
</TABLE>
- --------
+ Previously filed.
* Filed herewith.
<PAGE>
EXHIBIT 5.1
[Letterhead of Morris, Nichols, Arsht & Tunnell]
December 9, 1996
Countrywide Capital I
c/o Countrywide Credit Industries, Inc.
155 North Lake Avenue
Pasadena, California 91101
Re: Countrywide Capital I
---------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to Countrywide Capital I, a
Delaware statutory business trust (the "Trust"), in connection with certain
matters relating to the organization of the Trust and the proposed issuance of
Capital Securities to beneficial owners pursuant to and as described in
Registration Statement No. 333-14111 (and the Prospectus forming a part thereof)
on Form S-3 filed with the Securities and Exchange Commission on October 15,
1996, as amended by Pre-Effective Amendments Nos. 1, 2, 3 and 4 thereto (as so
amended, the "Registration Statement"). Capitalized terms used herein and not
otherwise herein defined are used as defined in the Amended and Restated
Declaration of Trust of the Trust in the form attached as an exhibit to the
Registration Statement (the "Governing Instrument").
In rendering this opinion, we have examined copies of the following
documents in the forms provided to us: the Certificate of Trust of the Trust as
filed in the Office of the Secretary of State of the State of Delaware (the
"State Office") on October 15, 1996 (the "Certificate"); a Declaration of Trust
of the Trust dated as of October 14, 1996 (the "Original Governing Instrument");
the Governing Instrument; the Indenture to be entered into between Countrywide
Home Loans, Inc. ("CHL"), as Issuer, Countrywide Credit Industries, Inc.
("CCI"), as Guarantor, and The Bank of New York, as Trustee, and the form of
First Supplemental Indenture to be entered into in connection therewith; the
Capital Securities Guarantee Agreement to be made by CCI; the Common Securities
Guarantee Agreement to be made by CCI; the Underwriting Agreement relating to
the Capital Securities between the Trust, CHL, CCI and Salomon Brothers Inc (the
"Underwriting Agreement") and the related Pricing Agreement; the Registration
Statement; and a certification
<PAGE>
Countrywide Capital I
c/o Countrywide Credit Industries, Inc.
December 9, 1996
Page 2
of good standing of the Trust obtained as of a recent date from the State
Office. In such examinations, we have assumed the genuineness of all signatures,
the conformity to original documents of all documents submitted to us as drafts
or copies or forms of documents to be executed and the legal capacity of natural
persons to complete the execution of documents. We have further assumed for
purposes of this opinion: (i) the due formation or organization, valid existence
and good standing of each entity that is a party to any of the documents
reviewed by us under the laws of the jurisdiction of its respective formation or
organization; (ii) the due authorization, execution and delivery by, or on
behalf of, each of the parties thereto of the above-referenced documents
(including, without limitation, the due authorization, execution and delivery of
the Governing Instrument and the Underwriting Agreement and related Pricing
Agreement prior to the first issuance of Capital Securities); (iii) that no
event has occurred subsequent to the filing of the Certificate, or will occur
prior to the issuance of the Capital Securities, that would cause a dissolution
or liquidation of the Trust under the Original Governing Instrument or the
Governing Instrument, as applicable; (iv) that the activities of the Trust have
been and will be conducted in accordance with the Original Governing Instrument
or the Governing Instrument, as applicable, and the Delaware Business Trust Act,
12 Del. C. (S)(S) 3801 et seq. (the "Delaware Act"); (v) that each Holder of
---- -- -- ----
Capital Securities has, or prior to the first issuance of Capital Securities
will have, made payment of the required consideration therefor and received a
Capital Securities Certificate in consideration thereof in accordance with the
terms and conditions of the Governing Instrument, the Registration Statement and
the Underwriting Agreement and that the Capital Securities are otherwise issued
and sold to the Capital Securities Holders in accordance with the terms,
conditions, requirements and procedures set forth in the Governing Instrument,
the Registration Statement and the Underwriting Agreement and related Pricing
Agreement; and (vi) that the documents examined by us are in full force and
effect, express the entire understanding of the parties thereto with respect to
the subject matter thereof and have not been modified, supplemented or otherwise
amended, except as herein referenced. No opinion is expressed with respect to
the requirements of, or compliance with, federal or state securities or blue sky
laws. Further, we express no opinion with respect to the Registration Statement
or any other offering materials relating to the Capital Securities and we assume
no responsibility for their contents. As to any fact material to our opinion,
other than those assumed, we have relied without independent investigation on
the above-referenced documents and on the accuracy, as of the date hereof, of
the matters therein contained.
Based on and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that, upon
<PAGE>
Countrywide Capital I
c/o Countrywide Credit Industries, Inc.
December 9, 1996
Page 3
issuance, the Capital Securities will constitute validly-issued and, subject to
the terms of the Governing Instrument, fully-paid and non-assessable beneficial
interests in the assets of the Trust. We note that pursuant to Section 11.4 of
the Governing Instrument, the Trust may withhold amounts otherwise distributable
to a Holder and pay over such amounts to the applicable jurisdictions in
accordance with federal, state and local law and any amount withheld will be
deemed to have been distributed to such Holder and that, pursuant to the
Governing Instrument, the Capital Security Holders may be obligated to make
payments or provide indemnity or security under the circumstances set forth
therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "LEGAL
MATTERS" in the Prospectus forming a part thereof. In giving this consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
This opinion speaks only as of the date hereof and is based on our
understandings and assumptions as to present facts, and on our review of the
above-referenced documents and the application of Delaware law as the same exist
on the date hereof, and we undertake no obligation to update or supplement this
opinion after the date hereof for the benefit of any person or entity with
respect to any facts or circumstances that may hereafter come to our attention
or any changes in facts or law that may hereafter occur or take effect.
Very truly yours,
/S/ MORRIS, NICHOLS, ARSHT & TUNNELL
MORRIS, NICHOLS, ARSHT & TUNNELL
<PAGE>
Exhibit 5.2
[FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LETTERHEAD]
212-859-8280
December 9, 1996 (FAX: 212-859-8586)
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I
Countrywide Capital II
155 North Lake Avenue
Pasadena, CA 91101
Ladies and Gentlemen:
We are acting as special counsel to Countrywide Credit Industries,
Inc., a Delaware corporation (the "Guarantor"), its wholly-owned subsidiary
Countrywide Home Loans, Inc., a New York corporation (the "Company"), and
Countrywide Capital I and Countrywide Capital II, both Delaware statutory
business trusts (together, the "Trusts"), in connection with the preparation of
a Registration Statement on Form S-3 (File Nos. 333-14111, 333-14111-01, 333-
14111-02 and 333-14111-03) of the Company, the Guarantor and the Trusts under
the Securities Act of 1933, as amended (the "Securities Act") (together with any
amendments thereto, and any registration statement that may be filed pursuant to
Rule 462(b) promulgated under the Securities Act, the "Registration Statement")
with respect to the contemplated issuance from time to time of (i) up to
$300,000,000 aggregate principal amount of the Company's Subordinated Debt
Securities (the "Debt Securities") which shall be guaranteed as to payment of
principal, premium, if any, and interest by the Guarantor (the "Debt
Guarantees") and (ii) the guarantees to be issued by the Guarantor to one or
more Trusts in connection with the issuance by such Trust or Trusts of Capital
Securities representing undivided beneficial interests in the assets of such
Trust or Trusts (the "Capital Guarantees"). The Debt Securities and the Debt
Guarantees, if issued, will be issued to one or more Trusts pursuant to an
Indenture, to be dated as of ________, 1996 (the "Base Indenture"), as
supplemented by one or more supplemental indentures thereto among the Company,
the Guarantor and The Bank of New York, as trustee. The Capital Guarantees are
to be issued to The Bank of New York, as trustee for the benefit of the holders
of the Capital Securities,
<PAGE>
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I
Countrywide Capital II -2- December 9, 1996
pursuant to one or more Capital Securities Guarantees between the Guarantor and
The Bank of New York. Without limiting the generality of the foregoing, it is
specifically contemplated that the Company will issue up to $300,000,000
aggregate principal amount of ___% Junior Subordinated Deferrable Interest
Debentures due December 1, 2026 (the "Debentures"), which Debentures will be
guaranteed by a Debt Guarantee (the "Capital I Debt Guarantee") under the Base
Indenture, as supplemented by a First Supplemental Indenture to be dated as of
__________, 1996 (the "Supplemental Indenture"; the Base Indenture, as so
supplemented, being referred to herein as the "Indenture"). The Debentures and
the Capital I Debt Guarantee will be issued and sold to Countrywide Capital I in
connection with its proposed issuance of ___% Capital Trust Pass-through
Securities (the "Capital I Securities"), which Capital I Securities will have
the benefit of a Capital Guarantee (the "Capital I Guarantee").
We have examined the originals, or certified, conformed or
reproduction copies, of all such records, agreements, instruments and documents
as we have deemed relevant or necessary as the basis for the opinion hereinafter
expressed. In all such examinations, we have assumed the genuineness of all
signatures, the authenticity of all original or certified copies and the
conformity to original or certified copies of all copies submitted to us as
conformed or reproduction copies. We also have assumed, with respect to all
parties to agreements or instruments relevant hereto other than the Company and
the Guarantor, that such parties have the requisite power and authority
(corporate or otherwise) to execute, deliver and perform such agreements or
instruments, that such agreements or instruments have been duly authorized by
all requisite action (corporate or otherwise), and that when executed and
delivered by such parties, such agreements or instruments will be the valid,
binding and enforceable obligations of such parties. As to various questions of
fact relevant to such opinions, we have relied upon, and have assumed the
accuracy of, certificates and oral or written statements and other information
of or from public officials, officers or representatives of the Company, the
Guarantor, the Trusts and others. With respect to the opinion expressed in
paragraph 2 below, we have relied with your permission on the opinion of Morris,
Nichols, Arsht & Tunnell of even date herewith with respect to matters of
Delaware trust law. To the extent that such opinion contains qualifications,
assumptions and exceptions, we are incorporating such qualifications,
assumptions and exceptions herein.
<PAGE>
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I
Countrywide Capital II -3- December 9, 1996
Based upon the foregoing and subject to the limitations set forth
herein, we are of the opinion that:
1. The Base Indenture has been duly authorized by the Company and the
Guarantor, and when (i) the Base Indenture has been executed and delivered by
the Company and the Guarantor, (ii) the Supplemental Indenture has been duly
authorized, executed and delivered by the Company and the Guarantor, (iii) the
terms of the Debentures and their issue and sale and the related Capital I Debt
Guarantee has been duly established in conformity with the Base Indenture so as
not to violate any applicable law or agreement or instrument then binding on the
Company or the Guarantor, (iv) the Capital I Debt Guarantee has been endorsed on
the Debentures and executed in accordance with the terms of the Indenture and
(v) the Debentures have been duly executed and authenticated in accordance with
the terms of the Indenture and issued and sold as contemplated in the
Registration Statement, the Debentures will constitute valid and binding
obligations of the Company and the Capital I Debt Guarantee will constitute a
valid and binding obligation of the Guarantor, subject in each case to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
laws now or hereafter in effect affecting creditors' rights generally and
general principles of equity (including, without limitation, standards of
materiality, good faith, fair dealing and reasonableness), whether considered in
a proceeding in equity or at law.
2. The Capital I Guarantee has been duly authorized by the Guarantor
and, when executed and delivered by the Guarantor, will constitute a valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with their respective terms, subject to (i) bankruptcy, insolvency,
reorganization, fraudulent transfer, 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 considered in
a proceeding in equity or at law.
This opinion is expressly limited to the laws of the State of New York
and, to the extent required by the foregoing opinions, the General Corporation
Law of the State of Delaware, each as currently in effect.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the captions
"Legal
<PAGE>
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I
Countrywide Capital II -4- December 9, 1996
Matters" in the Prospectus and "Legal Matters" in any Prospectus Supplement
forming a part of the Registration Statement. In giving these consents, we do
not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Kenneth R. Blackman
------------------------------------
Kenneth R. Blackman
<PAGE>
EXHIBIT 8.1
[FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LETTERHEAD]
December 9, 1996 212-859-8171
(FAX: 212-859-8588)
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: COUNTRYWIDE CAPITAL I
COUNTRYWIDE CAPITAL II
COUNTRYWIDE HOME LOANS, INC.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
REGISTRATION STATEMENT ON FORM S-3, AS AMENDED
(FILE NOS. 333-14111, 333-14111-01, 333-14111-02
AND 333-14111-03)
Ladies and Gentlemen:
In connection with the above-referenced registration statement (the
"Registration Statement"), we hereby attach the form of tax opinion that we
propose to deliver prior to the issuance of the Capital Securities (as defined
in the Registration Statement). When such opinion is delivered, it and our
related consent will be filed as part of a Current Report on Form 8-K of
Countrywide Credit Industries, Inc. prior to the issuance of such securities.
We hereby consent to the filing of the attached form of opinion as an
exhibit to the Registration Statement and to the use of our name under the
heading "Legal Matters" in the Prospectus Supplement and Prospectus forming a
part thereof. In giving this consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: /s/ Lee S. Parker
----------------------------------
Lee S. Parker
<PAGE>
DRAFT -- 12/9/96
212-859-8171
December __, 1996 (Fax: 212-859-8588)
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I
155 North Lake Avenue
Pasadena, California 91101
Ladies and Gentlemen:
We are acting as special counsel to Countrywide Home Loans, Inc., a
New York corporation (the "Company") and a wholly owned subsidiary of
Countrywide Credit Industries, Inc., a Delaware corporation ("CCI"), CCI and
Countrywide Capital I, a statutory business trust formed under the laws of the
State of Delaware (the "Trust"), in connection with the proposed issuance by the
Company of ___% Junior Subordinated Deferrable Interest Debentures due December
1, 2026 (the "Subordinated Debt Securities"), and the proposed purchase of the
Subordinated Debt Securities by the Trust with the proceeds of its issuance of
___% Capital Trust Pass-through Securities/SM/ (the "Capital Securities"),
all as contemplated by the joint Registration Statement on Form S-3 (File Nos.
333-14111, 333-14111-01, 333-14111-02 and 333-14111-03) (as amended by Amendment
No. 4 thereto) of the Company, CCI, the Trust and Countrywide Capital II,
another statutory business trust formed under the laws of the State of Delaware
(the "Registration Statement"). Terms with initial capitals used in this letter
and not otherwise defined herein have the meanings set forth in the Registration
Statement.
You have requested our opinion concerning (a) the characterization of
the Trust and the Subordinated Debt Securities for United States federal income
tax purposes and (b) the section of the Registration Statement captioned
"United States Federal Income Taxation." In expressing our opinion, we have
examined and relied upon the Registration Statement, the Declaration and the
Indenture (each, in the form filed as an Exhibit to the Registration Statement),
certain representations of officers of CCI and the Company (the
"Representations"), and such other materials as we have deemed necessary or
appropriate.
- ----------
/SM/ Salomon Brothers Inc has filed applications with the United States Patent
and Trademark Office for the registration of the Capital Trust Pass-through
Securities service mark.
<PAGE>
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I -3- December ___, 1996
We have assumed, with your permission, that the facts stated in the Registration
Statement and the Representations are true and complete, that the Indenture and
the Declaration will be executed in the forms filed as Exhibits to the
Registration Statement, that the Trust will be administered in accordance with
the terms of the Declaration, that the Subordinated Debt Securities will be
issued and administered in accordance with the terms of the Indenture and that
the Capital Securities will be issued and administered in accordance with the
terms of the Declaration.
Our opinion is based upon the provisions of the United States Internal
Revenue Code of 1986, as amended, existing and proposed Treasury regulations
promulgated thereunder, judicial decisions and rulings and other pronouncements
of the Internal Revenue Service (the "Service"), all as in effect on the date
hereof. The application of some of these provisions, regulations, decisions,
rulings and other pronouncements is uncertain in the absence of definitive
guidance and may be subject to differing interpretations. Our opinion does not
bind the Service and there can be no assurance that the Service or a court of
law would agree with the conclusions expressed in our opinion. Further, all
such provisions, regulations, decisions, rulings and other pronouncements are
subject to change, possibly with retroactive effect. Accordingly, there can be
no assurance that future changes in law will not affect the conclusion set forth
herein.
In particular, on March 19, 1996, President Clinton announced a
proposal which would treat as equity for federal income tax purposes securities
like the Subordinated Debt Securities that are issued on or after December 7,
1995. On March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr.
and House Ways and Means Committee Chairman Bill Archer issued a joint statement
indicating their intent that this proposal would have an effective date no
earlier than the date of "appropriate Congressional action." If such a proposal
is enacted, there is no assurance that the effective date guidance contained in
the joint statement will be incorporated into the proposal.
Characterization of the Trust. Based upon and subject to the
foregoing, it is our opinion that, for federal income tax purposes, the Trust
will be characterized as a grantor trust, and will not be characterized as an
association taxable as a corporation. Accordingly, for income tax purposes,
each holder of Capital Securities generally will be considered the owner of an
undivided interest in the Subordinated Debt Securities owned by the Trust, and
each US Holder will be required to include all income or gain recognized for
income tax purposes with respect to its allocable share of the Subordinated Debt
Securities on its own income tax return.
<PAGE>
Countrywide Credit Industries, Inc.
Countrywide Home Loans, Inc.
Countrywide Capital I -4- December ___, 1996
Characterization of the Subordinated Debt Securities. Based upon and
subject to the foregoing, and although there is no controlling authority
directly on point, it is our opinion that the Subordinated Debt Securities
will be characterized as indebtedness of the Company for federal income tax
purposes.
"United States Federal Income Taxation" Section. Based upon and
subject to the foregoing, and based upon the assumptions and subject to the
qualifications and limitations set forth in such section, we hereby affirm that
(a) it is our opinion, as of the date hereof, that the statements in the section
of the Registration Statement captioned "United States Federal Income Taxation"
summarize the material federal income tax consequences of the purchase,
ownership and disposition of the Capital Securities, and (b) to the extent such
statements constitute statements of law or legal conclusions with respect
thereto, such statements represent our opinion, as of the date hereof, with
respect to the matters set forth therein.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the captions
"United States Federal Income Taxation" and "Legal Matters" therein. 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 of 1933, as
amended.
No opinion is expressed on any matter other than that specifically
referred to herein.
Very truly yours,
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
By: ____________________________________
Lee S. Parker
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated April 23, 1996, 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 29, 1996, which is incorporated by reference in this Amendment No. 4 to
the Registration Statement on Form S-3 (Registration Nos. 333-14111, 333-14111-
01, 333-14111-02, 333-14111-03) (the "Amendment"). We consent to the
incorporation by reference in this Amendment 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
December 9, 1996
