AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1999
REGISTRATION NOS. 333- AND 333-
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------------
COUNTRYWIDE CREDIT INDUSTRIES, INC.
COUNTRYWIDE HOME LOANS, INC.
(Exact name of registrants as specified in their charters)
-----------------------------------
DELAWARE NEW YORK
(State or other (State or other
jurisdiction of jurisdiction of
incorporation or incorporation or
organization) organization)
13-2641992 13-2631719
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
4500 PARK GRANADA
CALABASAS, CA 91302
(818) 225-3000
(Address, including zip code, and
telephone number, including area
code, of registrants' principal
executive offices)
ANGELO R. MOZILO
Chairman of the Board and Chief
Executive Officer
Countrywide Credit Industries, Inc.
and Chairman of the Board
COUNTRYWIDE HOME LOANS, INC.
4500 PARK GRANADA
CALABASAS, CA 91302
(818) 225-3000
(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 (212) 839-5300
(212) 859-8000
-----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement, as
determined by market conditions.
-----------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. |X|
(Continued on next page)
-----------------------------------
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.
===========================================================================
<PAGE>
(Continued from previous page)
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. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
============================================================================================================
MAXIMUM PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE AMOUNT OF
TO BE REGISTERED(1) REGISTERED(2)(3) PRICE PER UNIT OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.05 per
share(5)
Preferred Stock, par value
$.05 per share
Stock Purchase Contracts
Debt Securities.......... $3,000,000,000 (6) $3,000,000,000(4) $834,000
- ------------------------------------------------------------------------------------------------------------
Guarantees of Debt Securities...... $3,000,000,000 (7) (7) None
- ------------------------------------------------------------------------------------------------------------
Debt Securities and Guarantees to be
sold in market-making transactions(8) -- -- -- --
============================================================================================================
</TABLE>
(1) Also includes (i) such indeterminate number of shares of Common Stock
and Preferred Stock as may be issued upon (a) conversion of or
exchange for other shares of Preferred Stock or Debt Securities to the
extent such other shares of Preferred Stock or Debt Securities provide
for conversion into or exchange for shares of Common Stock or
Preferred Stock, or (b) exercise of any Stock Purchase Contracts, (ii)
such indeterminate principal amount of Debt Securities and related
Guarantees of such Debt Securities as may be issued upon conversion of
or exchange for shares of Preferred Stock or other Debt Securities and
related Guarantees of such Debt Securities to the extent such shares
of Preferred Stock and other Debt Securities and related Guarantees of
such Debt Securities provide for conversion into or exchange for Debt
Securities and related Guarantees of such Debt Securities and (iii)
Stock Purchase Contracts which may be offered as part of Units of
Stock Purchase Contracts and other Securities registered hereby.
(2) Or, if any Debt Securities are issued at an Original Issue Discount,
such greater amount as shall result in an aggregate public offering
price not in excess of $3,000,000,000.
(3) In U.S. dollars or the equivalent thereof in one or more foreign
currencies or currency units or composite currencies.
(4) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(5) This Registration Statement also applies to associated Preferred Stock
purchase rights under the stockholders' rights agreement of
Countrywide Credit Industries, Inc., which, prior to the occurrence of
certain events, are attached to and tradable only with the shares of
Common Stock registered hereby. No registration fee is required for
such Preferred Stock purchase rights, as they will be issued for no
additional consideration.
(6) Not specified as to each class of Securities to be registered pursuant
to General Instruction II-D of Form S-3.
(7) No separate consideration will be received for the Guarantees of Debt
Securities.
(8) This Registration Statement registers an indeterminate principal
amount of Debt Securities and related Guarantees of such Debt
Securities to be sold by Countrywide Securities Corporation in
market-making transactions where required.
-----------------------------------
<PAGE>
(REDHEARING)
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES
AND THEY ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION. DATED JULY 9, 1999.
Prospectus Supplement to Prospectus dated [ ], 1999.
Units
[LOGO] COUNTRYWIDE CREDIT INDUSTRIES, INC.
% Adjustable Conversion-rate Equity Security Units
-----------------
Each unit consists of a contract to purchase shares of common stock
and a subordinated deferrable note of Countrywide Credit Industries, Inc.
The note is subject to a call option granted to Goldman, Sachs & Co.
Investors will receive from each unit:
o interest payments at the rate of [ ]% per year, paid quarterly;
and
o on [ ], between [ ] and one share of common stock of Countrywide
Credit Industries, Inc., depending on the average trading price
of the shares of common stock at that time.
In addition, investors will be entitled to receive from Countrywide
Credit Industries, Inc. contract fees of [ ]% per year or investors will be
required to pay to Countrywide Credit Industries, Inc. contract fees of
[ ]% per year, as Countrywide Credit Industries, Inc. will specify in the
final prospectus supplement.
Countrywide Credit Industries, Inc. can defer payments of contract
fees and quarterly interest payments on the notes, but deferrals will bear
additional interest of [ ]%. Investors will pledge their notes to secure
their obligations under the purchase contracts and the call options.
Investors may not separate the notes from the purchase contracts,
unless they pledge alternative collateral as described below. The notes and
the purchase contracts will therefore trade together as units.
Countrywide Credit Industries, Inc. will apply to list the units on
the New York Stock Exchange under the symbol "[ ]." Countrywide Credit
Industries, Inc.'s common stock is listed on the New York Stock Exchange
under the symbol "CCR." The last reported sale price of Countrywide Credit
Industries, Inc.'s common stock on the New York Stock Exchange on July 8,
1999 was $43 per share.
Investing in the units involves risks that are described in this
prospectus supplement beginning on page S-6.
-----------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------
Per Unit Total
-------- -----
Initial public offering price.................... $ $
Proceeds from sale of call options remitted to $ $
Countrywide Credit Industries, Inc............
Underwriting discount............................ $ $
Proceeds to Countrywide Credit Industries, Inc.,
before expenses............................... $ $
The underwriters may, under the terms of the underwriting agreement,
purchase up to an additional [ ] units from us at the initial public
offering price less the underwriting discount.
-----------------
The underwriters expect to deliver the units against payment in New
York, New York on [ ], 1999.
-----------------
GOLDMAN, SACHS & CO. [OTHER UNDERWRITERS]
------------------
Prospectus Supplement dated [ ], 1999.
<PAGE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus.
Countrywide Credit Industries, Inc. has not, and the underwriters have not,
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should
not rely on it. Countrywide Credit Industries, Inc. is not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus
supplement and the accompanying prospectus is accurate as of the date on
the front cover of this prospectus supplement and the accompanying
prospectus, respectively. The business, financial condition, results of
operations and prospects of Countrywide Credit Industries, Inc. may have
changed since those dates.
References in this prospectus supplement to "Countrywide Credit
Industries," "we," "us" and "our" are to Countrywide Credit Industries,
Inc.
References in this prospectus supplement to "Countrywide Home Loans"
are to Countrywide Home Loans, Inc.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary may not contain all of the information that you
should consider before investing in the units. You should read this entire
prospectus supplement and the accompanying prospectus carefully.
THE OFFERING
THE UNITS
COMPONENTS OF THE UNITS
Each unit consists of a contract to purchase shares of our common
stock and one of our subordinated deferrable notes. You will receive from
each unit:
o interest payments at the rate of [ ]% per year, paid quarterly;
and
o on [ ], between [ ] and one share of our common stock, depending
on the average trading price of the shares of our common stock at
that time.
In addition, you will be entitled to receive from us contract fees of
[ ]% per year or you will be required to pay to us contract fees of [ ]%
per year, as we will specify in the final prospectus supplement.
The note is subject to a call option granted to Goldman, Sachs & Co.,
whom we refer to as the call option holder. Under the call option, the call
option holder is entitled to acquire, on or before the last quarterly
payment date before the stock purchase date, the notes underlying the
units.
The notes will be pledged to secure the unit holder's obligations to
us to purchase shares of our common stock under the purchase contracts and
to the call option holder to deliver the notes upon the call option
holder's exercise of the call options.
You may elect to substitute treasury securities as pledged securities
in exchange for the notes underlying the units. If you elect to substitute
treasury securities as pledged securities, the notes will no longer secure
your obligations to purchase our common stock under the purchase contracts
but will continue to secure your obligations to deliver the notes to the
call option holder upon exercise of the call option. The units will then
become "stripped units" that no longer generate cash payments, other than
any contract fees payable by us, if required, under the terms of the
underlying purchase contracts. Stripped units will not be interchangeable
with units. We will endeavor to list the stripped units on the New York
Stock Exchange if a sufficient number of stripped units are created.
You may not separate the notes from the purchase contracts, unless you
pledge alternative collateral as summarized above. The notes and the purchase
contracts will therefore trade together as units.
SETTLEMENT RATE
The number of shares of our common stock that you will receive for
each unit will be determined by one of the following settlement rates:
o If the average trading price equals or exceeds $[ ], you will
receive [ ] shares of our common stock.
o If the average trading price is less than $[ ] but greater than
$[ ], you will receive shares of our common stock having a value,
based on the average trading price, equal to $[ ].
o If the average trading price is less than or equal to $[ ], you
will receive one share of our common stock.
The average trading price used to determine the settlement rate will
be the average closing price of our common stock during the 20-trading day
period ending before [ ]. The settlement rate will be subject to
anti-dilution adjustment in the case of stock splits, stock dividends or
other events affecting our common stock. You can find more information
about the settlement rate starting on page S-[ ].
SETTLEMENT MECHANICS
On the stock purchase date, each unit holder will be required to
purchase, for the stated amount of $[ ] per unit, a number of shares of our
common stock, or fraction of a share, equal to the settlement rate.
THE NOTES
The notes will:
o bear interest at an annual rate of [ ]%. Interest will be paid
quarterly on [ ], [ ], [ ] and [ ], subject to the deferral
provisions described below;
o mature on [ ]; and
o not be redeemable prior to maturity.
On [insert call option expiration date], a nationally recognized
investment banking firm chosen by us (the "rate increase agent") may decide
to increase the interest rate on the notes after analyzing the then current
total market value of the notes and the total consideration to be paid in
exchange for the acquisition of the notes under the terms of the call
options.
We may defer payments of interest on the notes. Any deferred payments
of interest will bear additional interest at an annual rate equal to the
deferral rate of [ ]% until paid.
Each holder of notes may elect to require us to repurchase its notes
on the stock purchase date or in the event we become involved in certain
cash mergers, at a price equal to their principal amount plus accrued
interest, but only if the cash received on the exercise of the election is
used to settle the related purchase contract.
OTHER TERMS OF THE UNITS
CONTRACT FEES
We may be required to pay contract fees of [ ]% to the holders of
units or the holders of units may be required to pay contract fees of [ ]%
to us, as specified in the final prospectus supplement. Any obligation of
the holders of units to pay contract fees to us will be funded out of
interest payments that will be made on the pledged securities. If those
payments are insufficient to cover the obligation of the holders to pay
contract fees, that obligation will be deferred until the earlier of the
date enough cash is available and the stock purchase date. Any deferred
contract fees will bear additional contract fees at an annual rate of [ ]%
(compounding on each succeeding quarterly payment date).
LISTING
We will apply to list the units on the New York Stock Exchange under
the symbol "[ ]".
<PAGE>
RISK FACTORS
Before purchasing units, you should carefully consider the following
risk factors relating to the units.
YOU WILL BEAR THE ENTIRE RISK OF A DECLINE IN THE PRICE OF OUR COMMON STOCK
The market value of the shares of our common stock you receive on [ ]
(which we refer to as the "stock purchase date") may be materially
different from the price you pay for the shares of our common stock. If the
average trading price of our common stock on the stock purchase date is
less than $[ ] (that is, less than the closing price of our common stock on
the date of this prospectus supplement), you will on the stock purchase
date, be required to purchase shares of our common stock at a loss.
Accordingly, a holder of units assumes the entire risk that the market
value of our common stock may decline. Any such decline could be
substantial.
YOU WILL RECEIVE ONLY A PORTION OF ANY APPRECIATION IN OUR COMMON STOCK PRICE
The number of shares of our common stock that will be issued upon
settlement may decline by up to [ ]% as the market value of our common
stock increases. Therefore, your opportunity for equity appreciation will
be less than if you invested directly in our common stock. In addition, if
the average trading price of our common stock at the stock purchase date
exceeds $[ ] but falls below $[ ], you will receive no equity appreciation
in our common stock.
THE MARKET PRICE FOR OUR COMMON STOCK IS UNPREDICTABLE
It is impossible to predict whether the market price of our common
stock will rise or fall. Many factors influence the trading price of our
common stock. These factors include changes in our financial condition,
results of operations and prospects and complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges on which our common stock trades and the
market segments of which we are a part.
YOU MAY SUFFER DILUTION OF THE SHARES OF OUR COMMON STOCK ISSUABLE UPON
SETTLEMENT OF PURCHASE CONTRACTS
The number of shares of our common stock issuable upon settlement is
subject to adjustment only for stock splits and combinations, stock
dividends and certain other specified transactions. The number of shares of
our common stock issuable upon settlement of each purchase contract is not
subject to adjustment for other events, such as employee stock option
grants, offerings of our common stock for cash or in connection with
acquisitions or certain other transactions, which may adversely affect the
price of our common stock. The terms of the units do not restrict our
ability to offer our common stock in the future or to engage in other
transactions that could dilute our common stock. We have no obligation to
consider the interests of the holders of the units for any reason.
YOU HAVE NO RIGHTS AS COMMON STOCKHOLDERS
Until you acquire shares of our common stock upon settlement of your
purchase contract, you will have no rights with respect to our common
stock, including voting rights, rights to respond to tender offers and
rights to receive any dividends or other distributions on our common stock.
Upon settlement of your purchase contract, you will be entitled to exercise
the rights of a holder of our common stock only as to actions for which the
record date occurs after the settlement date.
YOUR NOTES WILL BE SUBORDINATED
Our obligations under the notes will be unsecured and subordinated and
rank junior in right of payment to all of our present and future senior
indebtedness. We cannot make payments of principal of interest on the notes
if:
o We are in default under any payment obligation with respect to
senior indebtedness beyond any applicable grace period;
o We are otherwise in default with respect to any senior
indebtedness permitting the holders of that senior indebtedness
to accelerate the maturity of that senior indebtedness; or
o any judicial proceeding is pending with respect to any default
affecting the senior indebtedness.
Neither the indenture nor the master unit agreement, which governs the
terms of the units, places any limitation on the amount of additional
secured or unsecured debt, including senior indebtedness, that may be
incurred by us or any of our subsidiaries.
YOUR PLEDGED SECURITIES WILL BE ENCUMBERED
Although holders of units will be beneficial owners of the underlying
pledged securities, those pledged securities will be pledged with the
collateral agent to secure the obligations of the holders under the
purchase contracts. Therefore, for so long as the purchase contracts remain
in effect, holders will not be allowed withdraw their pledged securities
from the pledge agreement, except in the limited circumstances described in
this prospectus supplement.
WE WILL HAVE THE OPTION TO DEFER PAYMENTS
We have the right to defer interest payments on the notes at any time
or from time to time. We cannot defer interest payments beyond the maturity
date. However, deferred payments of interest on the notes will bear
additional interest at an effective rate per year of [ ]% until paid.
If we are required to pay contract fees on the purchase contracts, we
will have the right to defer the payment of these fees at any time or from
time to time. We cannot defer payments of contract fees beyond the stock
purchase date. However, deferred payments of contract fees will bear
additional contract fees at an effective rate per year of [ ]% until paid.
If we exercise our right to defer interest or, to the extent we are
required to pay contract fees, we exercise our right to defer contract fee
payments, the market price of the units is likely to decrease. In addition,
the mere existence of the right to defer payments may cause the market
price of the units to be more volatile than the market prices of other
securities that are not subject to such deferrals.
LIMITATION ON VALUE OF NOTES AS A RESULT OF CALL OPTIONS
If the value of the notes underlying the units is greater than the
value of the total consideration to be paid upon exercise of the call
options (as expected), it is likely that the call option holder will
exercise its call options. In that case, the call option holder, rather
than holders of units, will realize the benefit of that greater value. The
notes may increase in value due to, among other things, a decrease in
market interest rates or an increase in the perceived credit quality of the
notes or as a result of the interest rate adjustment described under
"Description of the Notes--Interest Rate Increases."
MASTER UNIT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF UNIT AGENT
Although the notes included in the units will be issued under the
terms of an indenture qualified under the Trust Indenture Act, the master
unit agreement relating to the units will not be qualified under the Trust
Indenture Act. The unit agent under the master unit agreement, who will act
as the agent and the attorney-in-fact for the holders of the units, will
not be qualified as a trustee under the Trust Indenture Act. Accordingly,
holders of the units will not have the benefit of the protections of the
Trust Indenture Act. Under the terms of the master unit agreement, the unit
agent will have only limited obligations to the holders of the units.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
The units are securities for which there is currently no secondary
market. It is not possible to predict how the units will trade in the
secondary market or whether the market for the units will be liquid or
illiquid. We will apply to list the units on the New York Stock Exchange.
The underwriters have advised us that they intend to make a market for the
units and thus facilitate trading in the units. However, the underwriters
are not obligated to make a market and may discontinue market-making at any
time.
YOU WILL HAVE OID INCOME
For U.S. federal income tax purposes, the notes will be classified as
contingent payment debt instruments. As a result, they will be considered
to be issued with original issue discount or OID, which you will be
required to include in income during your period of ownership of the notes,
subject to certain adjustments. Additionally, any gain realized on a sale
of notes or any gain attributable to notes on a sale of units before
maturity will be treated as ordinary interest income.
YOU WILL NOT BE PERMITTED TO DEDUCT CONTRACT FEES
If you are required to pay contract fees to us, it is unlikely that
those fees will be deductible by you for United States federal income tax
purposes. As a result, although the amount of cash distributions made to
you will be reduced by the amount of any contract fees payable to us, you
will nevertheless recognize ordinary income each quarter equal to the full
amount of OID required to be accrued with respect to the notes or treasury
securities without a deduction for the contract fees.
COUNTRYWIDE CREDIT INDUSTRIES
Through Countrywide Home Loans, our principal subsidiary, we
originate, purchase, securitize, sell and service mortgage loans. Our
mortgage loans are principally prime credit quality first-lien mortgage
loans secured by single- (one- to four-) family residences ("Prime
mortgages"). We also offer home equity loans either with newly produced
Prime mortgages or as a separate product. In addition, we offer sub-prime
credit quality first-lien single-family mortgage loans. Our other
subsidiaries offer products and services that complement our mortgage
banking business.
RECENT DEVELOPMENTS
On June 12, 1999, we agreed to purchase Balboa Life Insurance Company
and Balboa Insurance Company from Associates First Capital Corporation for
$425 million, payable in cash, subject to adjustment. Balboa Life Insurance
Company underwrites life insurance policies, and Balboa Insurance Company
underwrites credit-related insurance and specializes in creditor-placed
auto and homeowners insurance. Completion of the acquisition is subject to
regulatory approval and customary closing conditions. Assuming we receive
the necessary regulatory approvals and satisfy other closing conditions, we
anticipate closing the acquisition during our fiscal quarter ending
November 30, 1999, but we can not assure you that the acquisition will
close.
USE OF PROCEEDS
We estimate that we will receive approximately $[ ] from the sale of
the units after deducting our estimated expenses for the offering. We plan
to use the net proceeds from the offering to partially finance the
acquisition of the Balboa companies as described in "Countrywide Credit
Industries --Recent Developments." We intend to fund the balance of the
purchase price for the Balboa companies with funds obtained through other
financing sources.
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization (1) at
February 28, 1999 and (2) as adjusted to reflect the sale and the
application of the net proceeds of the units. The table should be read
together with our consolidated financial statements and related notes
incorporated by reference in this prospectus supplement. See "Additional
Information" in the accompanying prospectus.
FEBRUARY 28, 1999
ACTUAL AS ADJUSTED
(IN THOUSANDS)
DEBT:
Commercial paper ............................... $ 176,559
Medium-term notes .............................. 8,039,824
Repurchase agreements .......................... 1,517,405
Subordinated notes ............................. 200,000
__% Subordinated deferrable
notes due 20__ .............................. --
Unsecured notes payable ........................ --
Other notes payable ............................ 1,971
Drafts payable in connection with
mortgage loan closings ....................... 1,083,499
-----------
Total debt ................................ 11,019,258
Accounts payable and accrued ................... 517,937
liabilities
Deferred income taxes .......................... 1,092,176
------------ -----------
Total debt and liabilities ..................... $12,629,371
------------ -----------
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trust holding a
company-guaranteed related
subordinated debt(1) ...................... 300,000
Company-obligated
mandatorily redeemable
subordinated capital
income securities of
subsidiary trust holding a
company-guaranteed related
subordinated debt(2) ..................... 200,000
SHAREHOLDERS' EQUITY:
Preferred stock -- authorized
1,500,000 shares of $.05
par value; issued and
outstanding, none ...................... --
Common stock-- authorized,
240,000,000 shares of $.05
par value; 112,619,313
issued and outstanding shares(3)........ 5,631
Additional paid-in capital ............... 1,153,673
Accumulated other
comprehensive (loss) income ............ (19,593)
Retained earnings ........................ 1,379,174
------------ -----------
Total shareholders' equity .................. $ 2,518,885
------------ -----------
Total capitalization ........................ $ 15,648,256
============ ===========
- -----------------
(1) Represents the 8% Capital Trust Pass-through Securities of Countrywide
Capital I, a Delaware business trust.
(2) Represents the 8.05% Subordinated Capital Income Securities of
Countrywide Capital III, a Delaware business trust.
(3) Does not include 11,497,044 shares reserved for issuance upon exercise
of stock options of which options for 6,514,039 shares were
exercisable as of February 28, 1999.
<PAGE>
DESCRIPTION OF UNITS
The summaries of the documents described below are not necessarily
complete. Copies of those documents are on file with the SEC as part of our
registration statement. See "Additional Information" on page 2 of the
accompanying prospectus for information on how to obtain copies of those
documents. Because this section is a summary, it does not describe every
aspect of the units. This summary is subject to and qualified in its
entirety by reference to all the provisions of each of the underlying
agreements.
You should also review the description of the stock purchase contracts
and the stock purchase units beginning on page 9 in the accompanying
prospectus.
GENERAL
Each unit will have a stated amount of $[ ]. Each unit will initially
consist of:
a purchase contract under which
o the holder will purchase from us on the stock purchase date of
[ ], for cash in an amount equal to the stated amount, between [ ]
of a share and one share of our common stock (depending upon the
average trading price of our common stock on the stock purchase
date, as described below); and
o we will pay the holder or the holder will pay us, as specified in
the final prospectus supplement, contract fees at the contract
fee rate of [ ]% of the stated amount per year, each as described
below; and
one of our subordinated deferrable notes
o having a principal amount equal to the stated amount; and
o bearing interest at a rate of [ ]%, subject to a call option
granted to Goldman, Sachs & Co., whom we refer to as the call
option holder, that (when added to the call options underlying
all other units) will entitle the call option holder to acquire
the notes underlying the units on or before the last quarterly
payment date before the stock purchase date in exchange for the
total call option exercise consideration as described below.
As long as a purchase contract remains in effect, the purchase
contract, and the note or other pledged securities securing it (and, for so
long as the call option relating to those pledged securities is
exercisable, the obligations of the holder to the call option holder),
cannot be separated and the holder may transfer them only as an integrated
unit, unless the holder pledges alternative collateral as described below.
Between the date the units are issued and the stock purchase date, the
holder will be entitled to receive cash payments totaling [ ]% of the
stated amount per year, payable in arrears on the [ ], [ ], [ ] and [ ] of
each year beginning on [ ] (unless deferred as described below). Those
payments will consist of interest payments on the notes or other pledged
securities plus any contract fees payable by us or net of the contract fees
payable by the holder, as applicable. If the holder does not provide cash
as substitute collateral to settle the underlying purchase contract, in the
manner described below, cash proceeds received from the sale of the note or
other pledged securities will be applied on the stock purchase date to your
purchase of shares of our common stock under the terms of the purchase
contract.
You will pledge the note underlying a unit to the collateral agent to
secure your obligations to us under the purchase contract and the call
option holder under the call option. If treasury securities are exchanged
for pledged securities, upon exercise of the call options, the treasury
securities will automatically be substituted as pledged securities.
Each holder, by accepting the units, will be considered to have
o irrevocably agreed to be bound by the terms of the master unit
agreement, pledge agreement, call option agreement, purchase
contracts and call options, for so long as the holder remains a
holder of those units, and
o appointed the unit agent under the master unit agreement as the
holder's agent to enter into and perform the purchase contracts
and call options on behalf of the holder.
FORMATION OF THE UNITS
At the closing of the offering of the units, the underwriters will (1)
enter into purchase contracts with us and (2) purchase notes from us for
cash. The underwriters will fund that cash payment partially by the sale of
the units to the initial investors and partially by the sale of call
options (on behalf of the initial investors) to the call option holder. The
notes will then be pledged to the collateral agent to secure the
obligations owed to us under the purchase contracts and the obligations
owed to the call option holder under the call options. The right to
purchase shares of our common stock under a purchase contract, together
with the notes or other pledged securities, subject to (1) the obligations
owed to us under that purchase contract, (2) the obligations owed to the
call option holder under the call option relating to the notes or other
pledged securities and (3) the pledge arrangements securing the foregoing
obligations, are collectively referred to in this prospectus supplement as
a "unit."
Each holder of units will have the right, at any time on or before the
second business day before the stock purchase date, to substitute for the
then existing pledged securities treasury securities that will generate
payments to satisfy the holder's obligations under the underlying purchase
contracts. If a holder of units exercises its right to substitute treasury
securities for the notes as pledged securities, the notes will no longer
secure the holder's obligations to purchase our common stock under the
purchase contracts but will continue to secure the holder's obligations to
deliver the notes to the call option holder upon exercise of the call
option. The units will then become "stripped units" that will no longer
generate cash payments, other than contract fees payable by us, if
required, under the terms of the underlying purchase contracts or be
interchangeable with the units. We will endeavor to list the stripped units
on the New York Stock Exchange if a sufficient number of stripped units are
created.
A holder of units may exercise the right referred to in the preceding
paragraph by presenting and surrendering at the offices of the unit agent
the certificate evidencing the units, together with the completed and
executed request form to create stripped units, and concurrently delivering
to the collateral agent treasury securities that will generate, on the
stock purchase date, an amount of cash equal to the total stated amount of
the units. If treasury securities are the pledged securities underlying the
units, the right must be exercised with respect to a number of units that
will result in the release of treasury securities in denominations of
$1,000 and integral multiples of $1,000. A certificate representing the
newly created stripped units to replace the surrendered units will then be
issued and delivered to the holder or its designee. In addition, the
pledged securities previously underlying the units will then be released
from the pledge under the pledge agreement and delivered to the holder or
its designee, upon payment by the holder of any transfer or similar taxes
payable in connection with the transfer of units or previously pledged
securities to any person other than the holder.
We will enter into:
o a master unit agreement with [ ], as unit agent, governing the
appointment of the unit agent as the agent and attorney-in-fact
for the holders of the units, the purchase contracts, the
transfer, exchange or replacement of certificates representing
the units and certain other matters relating to the units and
o a pledge agreement with [ ], as collateral agent, and Goldman,
Sachs & Co., as the call option holder, creating a pledge and
security interest for our benefit to secure the obligations of
holders of units under the purchase contracts and a pledge and
security interest for the benefit of the call option holder to
secure the obligations of the holders of units under the call
options.
In addition, the unit agent will enter into a call option agreement
with the call option holder governing the call options.
DESCRIPTION OF THE PURCHASE CONTRACTS
The purchase contracts will be governed by the master unit agreement.
Each purchase contract underlying a unit will require the holder of that
unit to purchase from us, and us to sell to the holder, on the stock
purchase date, for cash in an amount equal to $[ ], a number of shares of
our common stock equal to the settlement rate. The settlement rate will be
calculated as follows (subject to adjustment as described below under
"--Anti-Dilution Adjustments"):
(1) if the average trading price is greater than or equal to the
threshold appreciation price of $[ ] (that is, [ ]% higher than
the stated amount), the settlement rate will be [ ];
(2) if the average trading price is between the threshold
appreciation price and the stated amount, the settlement rate
will equal the stated amount divided by the average trading price
(that is, the shares deliverable under the contract will have a
value, based on the average trading price of our common stock,
equal to the stated amount); and
(3) if the average trading price is less than or equal to the stated
amount, the settlement rate will be one.
"Average trading price" means the average of the closing prices per
share of our common stock on each of the 20 consecutive trading days ending
on the last trading day before the stock purchase date.
"Closing price" of a share of our common stock on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of our common stock on the New York
Stock Exchange on that date, or if our common stock is not listed for
trading on the New York Stock Exchange on that date, as reported in the
composite transactions for the principal U.S. securities exchange on which
our common stock is so listed, or if our common stock is not so listed on a
U.S. national or regional securities exchange, as reported by The Nasdaq
Stock Market, or if our common stock is not so reported, the last quoted
bid price of our common stock in the over-the-counter market as reported by
the National Quotation Bureau or similar organization, or if that bid price
is not available, the market value of our common stock on that date as
determined by a nationally recognized investment banking firm retained by
us for this purpose.
"Trading day" means a day on which our common stock (1) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (2) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of our common stock.
We will not issue any fractional shares under the purchase contracts.
In place of a fraction of a share otherwise issuable in respect of purchase
contracts being settled by a holder of units, the holder will be entitled
to receive an amount of cash equal to that fraction times the average
closing price.
Cash payments on the units will accrue at a rate per year that is
greater than the current dividend yield on our common stock. However, since
the number of shares of our common stock issuable upon settlement of each
purchase contract may decline by up to approximately [ ]% as the average
closing price increases, the opportunity for equity appreciation afforded
by an investment in the units is less than that afforded by a direct
investment in our common stock.
Prior to the stock purchase date, the shares of our common stock
purchasable on settlement of purchase contracts will not be considered to
be outstanding for any purpose, and you will not have any voting rights,
rights to dividends or other distributions or other rights or privileges of
our stockholders by virtue of holding units.
SETTLEMENT
In order to settle the purchase contracts underlying the units, the
holder of the units, by no later than 10:00 a.m., New York City time, on
the stock purchase date, will be required to deliver payment, at the
offices of the unit agent, of an amount equal to the total stated amount of
such units; provided, however, that the holder's obligation to satisfy the
purchase contracts may be offset by any amounts due and owing by us to the
holder. The shares of our common stock purchased on settlement of the
purchase contracts will then be issued and delivered to the holder or its
designee and the pledged securities securing the purchase contracts (or, in
the case of treasury securities, the proceeds from the payment of those
treasury securities at maturity) will then be released from the pledge
under the pledge agreement and delivered to the holder or its designee,
upon presentation and surrender of the certificate evidencing those units
and payment by the holder of any transfer or similar taxes payable in
connection with the issuance of shares of our common stock or the transfer
of pledged securities to any person other than the holder.
On the stock purchase date, if a holder of units has not delivered
cash to settle the underlying purchase contracts in the manner described
above and no event described under "--Termination" below has occurred, then
o the unit agent will notify the collateral agent and the
collateral agent, on behalf of the holder, will, as put agent,
exercise the note put option as described below,
o a portion of the proceeds from the exercise of the note put
option (or, if treasury securities underlie the units, a portion
of the proceeds from the payment of the treasury securities at
maturity) will be applied to satisfy in full the holder's
obligation to purchase shares of our common stock under the
purchase contracts,
o the remainder of the proceeds, if any, will be paid to the holder
and
o shares of our common stock will be issued and delivered to the
holder or its designee, upon presentation and surrender of the
certificate evidencing the units and payment by the holder of any
transfer or similar taxes payable in connection with the issuance
of our common stock to any person other than the holder.
EARLY SETTLEMENT
Prior to the stock purchase date, if we are involved in a merger in
which at least 30% of the consideration for shares of our common stock
consists of cash or cash equivalents ("cash merger"), on or after the date
of the cash merger each holder of the units has the right to accelerate and
settle the underlying purchase contracts. We refer to this right as the
"early settlement right." We will provide each of the holders with a notice
of the completion of a cash merger. The notice will specify a date on which
the optional early settlement will occur and a date by which each holder's
early settlement right must be exercised. The notice will set forth, among
other things, the applicable settlement rate and the amount of the cash,
securities and other consideration receivable by the holder upon
settlement. To exercise your early settlement right, you must deliver to
the unit agent, on or before the early settlement date, the certificate
evidencing your units and payment of the applicable purchase price in the
form of a certified or cashier's check. If you exercise your early
settlement right, we will deliver or cause to be delivered to you the cash,
securities and other property as set forth in the notice.
CONTRACT FEES
We may be required to pay contract fees to the holders of units or the
holders of the units may be required to pay contract fees to us.
Any obligation of the holders of units to pay contract fees to us will
be funded out of interest payments that will be made on the pledged
securities. If those payments are insufficient to cover the obligation of
the holders to pay contract fees, that obligation will be deferred until
the earlier of the date enough cash is available and the stock purchase
date.
Our obligation to pay contract fees to the holder of units is
subordinated and junior in right of payment to our obligations under our
senior indebtedness as defined below, in a manner substantially similar to
the manner in which the notes are subordinated as described under
"Description of the Notes" below.
So long as no default in our obligations under the master unit
agreement, pledge agreement and call option agreement has occurred and is
continuing, we will have the right to defer the payment of contract fees at
any time or from time to time for a period not extending beyond the stock
purchase date. To exercise this right, we must give the holders and the
unit agent notice at least five business days before the earliest of
(1) the date the payment would otherwise have been payable,
(2) the date we are required to give notice to any securities
exchange or to holders of units of the record date or the date
the payment is payable and
(3) the record date.
During any deferral period, neither we nor Countrywide Home Loans may
take any of the actions that we or Countrywide Home Loans would be
prohibited from taking during an extension period as described below.
Any deferred contract fees will bear additional contract fees at [ ]%
(the "deferral rate") (compounding on each succeeding quarterly payment
date) until paid. Contract fees payable for any period will be computed on
the basis of a 360-day year consisting of twelve 30-day months. Contract
fees will accrue from the date of issuance of the units to the stock
purchase date and will be payable in arrears on the quarterly payment dates
(unless deferred as described above). If the purchase contracts are
terminated, the right of holders of units to receive contract fees
(including any deferred contract fees) will also terminate.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the settlement rate may be adjusted if
certain events occur, including:
(1) the payment of a stock dividend or other distributions on our
common stock;
(2) the issuance to all holders of our common stock of rights or
warrants entitling them to subscribe for or purchase shares of
our common stock at less than the current market price, as
defined below;
(3) subdivisions of shares of our common stock (including an
effective subdivision of the shares through reclassification of
our common stock);
(4) distributions to all holders of our common stock of evidences of
indebtedness, other securities, cash or other assets (excluding
any dividend or distribution covered by clause (1) or (2) above
and any dividend or distribution paid exclusively in cash);
(5) distributions consisting exclusively of cash to all holders of
our common stock in a total amount that, when combined with (a)
other all-cash distributions made within the preceding 12 months
and (b) the cash and the fair market value, as of the date of
expiration of the tender or exchange offer referred to below, of
the consideration paid in respect of any tender or exchange offer
by us or a subsidiary for our common stock concluded within the
preceding 12 months, exceeds 15% of our total market
capitalization (the total market capitalization being the product
of the current market price of our common stock multiplied by the
number of shares of our common stock then outstanding) on the
date fixed for the determination of stockholders entitled to
receive such distribution; and
(6) the successful completion of a tender or exchange offer made by
us or any subsidiary for our common stock which involves a total
consideration that, when combined with (a) any cash and the fair
market value of other consideration payable in respect of any
other tender or exchange offer by us or a subsidiary for our
common stock concluded within the preceding 12 months and (b) the
total amount of any all-cash distributions to all holders of our
common stock made within the preceding 12 months, exceeds 15% of
our total market capitalization on the date of expiration of that
tender or exchange offer.
The "current market price" per share of our common stock on any day
means the average of the daily closing prices for the five consecutive
trading days selected by us commencing not more than 20 trading days
before, and ending not later than, the earlier of the day in question and
the day before the "ex date" regarding the issuance or distribution
requiring the computation. For purposes of this paragraph, the term "ex
date," when used regarding any issuance or distribution, shall mean the
first date on which our common stock trades without the right to receive
that issuance or distribution.
Some reclassifications, consolidations, mergers, sales or transfers of
assets or other transactions may cause shares of our common stock to be
converted into the right to receive other securities, cash or property. If
this happens, each purchase contract would, without the consent of the
holders of units, become a contract to purchase only the kind and amount of
securities, cash or other property that the holder would be entitled to
receive if the holder had settled its purchase contract immediately before
that transaction.
If at any time we make a distribution of property to our stockholders
which would be taxable to our stockholders as a dividend for U.S. federal
income tax purposes (that is, distributions of evidences of our
indebtedness or our assets, but generally not stock dividends or rights to
subscribe for capital stock) and, under the terms of the settlement rate
adjustment provisions of the master unit agreement, the settlement rate is
increased, that increase may be considered to be the receipt of taxable
income to holders of units. See "U.S. Federal Income Tax
Consequences--Adjustment of Settlement Rate."
In addition, we may increase the settlement rate if our board of
directors deems it advisable to avoid or diminish any income tax to holders
of shares of our common stock resulting from any dividend or distribution
of shares (or rights to acquire shares) or from any event treated as a
dividend or distribution for income tax purposes or for any other reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate will be
required unless the adjustment would require an increase or decrease of at
least one percent in the settlement rate. If any adjustment is not required
to be made because it would not change the settlement rate by at least one
percent, then the adjustment will be carried forward and taken into account
in any subsequent adjustment.
We will be required, as soon as practicable, following the occurrence
of an event that requires or permits an adjustment in the settlement rate,
to provide written notice to the holders of units of the occurrence of that
event. We will also be required to deliver a statement in reasonable detail
setting forth the method by which the adjustment to the settlement rate was
determined and setting forth the revised settlement rate.
TERMINATION
The purchase contracts, and our rights and obligations and the rights
and obligations of the holders of the units under the purchase contracts
(including the right to receive or obligation to pay contract fees or
deferred contract fees and the right and obligation of the holders to
purchase and us to sell shares of our common stock), will automatically
terminate if we become subject to certain events of bankruptcy, insolvency
or reorganization. Upon any termination, the call options will terminate
and the pledged securities will be distributed in the manner described
below.
DESCRIPTION OF THE CALL OPTIONS
At the closing of the offering of the units, the underwriters (on
behalf of the initial investors in the units) will sell the call options to
the call option holder at a price equal to $[ ] per call option. The call
options will be governed by the call option agreement.
Each call option underlying a unit, when combined with the call
options underlying all other units, will entitle the call option holder to
acquire the notes underlying the units, on or before the date the call
options expire, defined as the "call option expiration date," in exchange
for the total call option exercise consideration. The total call option
exercise consideration will consist of:
(1) treasury securities that will generate, by each quarterly payment
date falling after the settlement date for the call options,
defined as the "call settlement date," and on or before the stock
purchase date, an amount of cash equal to the aggregate interest
payments that are scheduled to be payable on the notes underlying
the units on that quarterly payment date (assuming for this
purpose, even if not true, that (a) no interest payments will
then have been deferred and (b) the interest rate on the notes
remains at the initial note rate);
(2) treasury securities that will generate, by the stock purchase
date, an amount of cash equal to the total stated amount of the
units; and
(3) if we are, at the call settlement date, deferring interest
payments on the notes as described below, an amount in cash equal
to (a) the total unpaid interest payments on the notes underlying
the units accrued to the call settlement date, if the call
settlement date is a quarterly payment date, and (b) the total
unpaid interest payments on the notes underlying the units
accrued to the quarterly payment date before the call settlement
date plus interest on the notes at the deferral rate for the
period from and including the quarterly payment date to, but
excluding, the call settlement date, if the call settlement date
is not a quarterly payment date.
The call option holder may exercise all of its call options (but not
less than all) by (1) delivering to the unit agent and the collateral
agent, on or before the call settlement date, a notice stating that the
call option holder is exercising its call options and specifying the call
settlement date (which may not be after the call option expiration date)
and (2) delivering to the collateral agent, by noon, New York City time, on
the call settlement date, the total call option exercise consideration.
Under the terms of the pledge agreement, when the collateral agent receives
the total call option exercise consideration, the collateral agent will
transfer the notes underlying the units to the call option holder or its
designee free and clear of the pledge and security interest created by the
pledge agreement. In addition, the treasury securities included in the
total call option exercise consideration will automatically be substituted
for the notes as pledged securities, and the call option holder will cease
to have a security interest in the pledged securities.
If the call options are exercised, the unit agent will, not later than
three business days after the call settlement date, mail notice of the
exercise to the holders of the units.
The call options, and the rights and obligations of the call option
holder and of the holders of the units under the call options, will
automatically terminate if we become subject to certain events of
bankruptcy, insolvency or reorganization.
THE PLEDGED SECURITIES AND THE PLEDGE AGREEMENT
GENERAL
Under the pledge agreement, the pledged securities will be pledged to
the collateral agent, for our benefit and the benefit of the call option
holder, to secure (1) the obligations of holders of units to purchase our
common stock under the purchase contracts and (2) the obligations of
holders of units to deliver the underlying notes to the call option holder
if the call options are exercised. The pledged securities will initially
consist of the notes. If treasury securities are exchanged for pledged
securities upon exercise of the call options or in connection with the
creation of stripped units, the treasury securities will automatically be
substituted as pledged securities and the former pledged securities will
automatically be released from the pledge and security interest created by
the pledge agreement.
The rights of the holders of the units to the underlying pledged
securities will be subject to the pledge and security interest created by
the pledge agreement. No holder of units will be permitted to withdraw the
pledged securities underlying the units from the pledged arrangement except
upon the settlement or termination of the purchase contracts or as
described under "-- Formation of the Units" above. Subject to the pledge
and security interest, however, each holder of units will have full
beneficial ownership of the underlying pledged securities and will be
entitled (directly or through the collateral agent) to all of the rights
provided by the pledged securities. We and the call option holder will have
no rights in pledged securities other than our respective security
interests.
QUARTERLY PAYMENTS ON PLEDGED SECURITIES
The collateral agent, upon receipt of any payments of interest on the
pledged securities, will distribute those payments to the unit agent, which
will, in turn, distribute that amount together with the contract fees to
the holders of units on the record date. As long as the units remain in
book-entry only form, the record date for any payment will be one business
day before the payment date.
SETTLEMENT OF PURCHASE CONTRACTS
On the stock purchase date, the pledged securities (or, if treasury
securities have been exchanged for the pledged securities, the amount paid
on those treasury securities at maturity) will be released from the pledge
and security interest created by the pledge agreement and distributed or
delivered as specified under "Description of the Purchase
Contracts--Settlement."
TERMINATION OF PURCHASE CONTRACTS
Upon termination of the purchase contracts (see "Description of the
Purchase Contracts--Termination"), the collateral agent will release the
pledged securities underlying the units to the unit agent for distribution
to the holders of the units, upon presentation and surrender of the
certificates evidencing those units. If upon that termination any holder
would otherwise be entitled to receive a principal amount of treasury
securities of any series that is not an integral multiple of $1,000, the
unit agent will distribute to that holder treasury securities of the series
in a principal amount equal to the next lower integral multiple of $1,000.
The unit agent will sell the treasury securities not otherwise distributed
to the holder (together with the treasury securities of that series not
otherwise distributed to other holders) and will distribute the net
proceeds to all the holders (in accordance with their respective interests
in those treasury securities).
CERTAIN PROVISIONS OF THE MASTER UNIT AGREEMENT, PLEDGE AGREEMENT
AND CALL OPTION AGREEMENT
Distributions on the units will be payable, purchase contracts (and
related documents) will be settled and transfers of the units will be
registrable at the office of the unit agent in the Borough of Manhattan,
The City of New York. In addition, in the event that the units do not
remain in book-entry form, payment of distributions on the units may be
made, at our option, by check mailed to the address of the persons shown on
the unit register.
If any quarterly payment date, the stock purchase date or any put date
is not a business day, then any payment required to be made on that date
must be made on the next business day (and so long as such payment is made
on the next business day, without any interest or other payment on account
of any such delay), except that if the next business day is in the next
calendar year, payment or settlement will be made on the prior business day
with the same force and effect as if made on the payment date. A "business
day" means any day other than Saturday, Sunday or any other day on which
banking institutions in The City of New York or the State of California are
authorized or obligated by law or executive order to be closed.
If you fail to surrender the certificate evidencing your units to the
unit agent on the stock purchase date, the shares of our common stock
issuable in settlement of the related purchase contracts will be registered
in the name of the unit agent. These shares of our common stock, together
with any distributions on them, will be held by the unit agent, as agent
for your benefit, until the certificate is presented and surrendered or you
provide satisfactory evidence that the certificate has been destroyed, lost
or stolen, together with any indemnity that may be required by the unit
agent and us.
If the purchase contracts have terminated before the stock purchase
date, the related pledged securities have been transferred to the unit
agent for distribution to the holders and you as a holder of units fail to
present and surrender the certificate evidencing your units to the unit
agent, the pledged securities that would otherwise be delivered to you and
any related payments will be held by the unit agent as agent for your
benefit, until you present and surrender the certificate or provide the
evidence and indemnity described above.
The unit agent will not be required to invest or to pay interest on
any amounts held by it before distribution.
No service charge will be made for any registration of transfer or
exchange of the units, except for any applicable tax or other governmental
charge.
MODIFICATION
The master unit agreement, the pledge agreement and the call option
agreement will contain provisions permitting the relevant parties to modify
the terms of those agreements, the purchase contracts and the call options
with the consent of the holders of a majority of the units at the time
outstanding (or, in the case of modifications affecting only holders of
units or stripped units, the consent of the holders of a majority of the
units or stripped units, as the case may be). However, no modification may,
without the consent of the holder of each outstanding unit affected by the
modification:
(1) change any payment date;
(2) change the amount or type of pledged securities required to be
pledged to secure obligations under the units, impair the right
of the holder of any units to receive distributions on the
pledged securities underlying those units or otherwise adversely
affect the holder's rights in or to pledged securities;
(3) change the place or currency of payment for any amounts payable
in respect of the units, increase any amounts payable by holders
in respect of units or decrease any other amounts receivable by
holders in respect of units;
(4) impair the right to institute suit for the enforcement of any
purchase contract;
(5) reduce the amount of shares of our common stock purchasable under
any purchase contract, increase the price to purchase shares of
our common stock on settlement of any purchase contract, change
the stock purchase date or otherwise adversely affect the
holder's rights under any purchase contract;
(6) reduce the amount payable on exercise of any call option, extend
the call option expiration date or otherwise adversely affect the
holder's rights under any call option; or
(7) reduce the above-stated percentage of outstanding units the
consent of whose holders is required for the modification or
amendment of the provisions of the master unit agreement, the
pledge agreement, the call option agreement, the purchase
contracts or the call options.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
We will agree in the master unit agreement that we will not merge with
or into or consolidate with any other entity or sell, assign, transfer,
lease or convey all or substantially all of our properties and assets to
any person, firm or corporation unless:
(1) we are the continuing corporation or the successor corporation is
a corporation organized under the laws of the United States of
America or a state thereof;
(2) the successor corporation expressly assumes our obligations under
the master unit agreement, the pledge agreement and the purchase
contracts; and
(3) we or the successor corporation is not, immediately after the
merger, consolidation, sale, assignment, transfer, lease or
conveyance, in default in the performance of any of our or its
obligations under the purchase contracts and the master unit
agreement or the pledge agreement.
TITLE
We, the unit agent, the collateral agent and the call option holder
may treat the registered holder of any units as the absolute owner of those
units for the purpose of making payment and settling the related purchase
contracts or call options and for all other purposes.
REPLACEMENT OF UNITS CERTIFICATES
If physical certificates are issued, any mutilated certificate will be
replaced by us at the expense of the holder when that certificate is
surrendered to the unit agent. We will replace certificates that are
destroyed, lost or stolen at your expense upon delivery to us and the unit
agent of satisfactory evidence that the certificate has been destroyed,
lost or stolen, together with any indemnity that may be required by the
unit agent and us.
We, however, are not required to issue any certificates representing
units on or after the stock purchase date or after the purchase contracts
have terminated. In place of the delivery of a replacement certificate
following the stock purchase date, the unit agent, upon delivery of the
evidence and indemnity described above, will deliver the shares of our
common stock issuable under the purchase contracts included in the units
evidenced by that certificate, or, if the purchase contracts have
terminated prior to the stock purchase date, transfer the pledged
securities related to the units evidenced by that certificate.
GOVERNING LAW
The master unit agreement, the pledge agreement, the call option
agreement, the purchase contracts and the call options will be governed by,
and construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE UNIT AGENT
[ ] will initially act as unit agent. The unit agent will act as the
agent for the holders of units from time to time. The master unit agreement
will not obligate the unit agent to exercise any discretionary actions in
connection with a default under the terms of the master unit agreement, the
pledge agreement, the call option agreement, the purchase contracts, the
call options or the pledged securities.
The master unit agreement will contain provisions limiting the
liability of the unit agent. The master unit agreement will contain
provisions under which the unit agent may resign or be replaced.
Resignation or replacement of the unit agent will be effective upon
appointment of a successor.
The unit agent is one of a number of banks with which we maintain
ordinary banking and trust relationships.
INFORMATION CONCERNING THE COLLATERAL AGENT
[ ] will initially act as collateral agent. The collateral agent will
act solely as our agent or agent of the call option holder and will not
assume any obligation or relationship of agency or trust for or with any of
the holders of the units except for the obligations owed by a pledgee of
property to the owner of the property under the pledge agreement and
applicable law.
The pledge agreement will contain provisions limiting the liability of
the collateral agent. The pledge agreement will contain provisions under
which the collateral agent may resign or be replaced. Resignation or
replacement of the collateral agent will be effective upon the appointment
of a successor.
The collateral agent is one of a number of banks with which we
maintain ordinary banking and trust relationships.
DESCRIPTION OF THE NOTES
The notes are to be issued under an indenture between us and The Bank
of New York, as trustee. The indenture will be qualified under the Trust
Indenture Act.
The notes will be subordinated to our senior indebtedness.
The notes will mature on [ ]. The notes will not be redeemable at our
option before the maturity date.
INTEREST
Interest on the notes will accrue from the first date of issuance of
the notes at an initial rate of [ ]% per year (the "note rate") and will be
payable quarterly in arrears on each quarterly payment date (each, an
"interest payment date"), subject to the deferral provisions described
below. Interest will be payable to the holders of the notes on each record
date, which will be one business day before the relevant interest payment
date. The amount of interest payable for any period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. If any date on
which interest is payable on the notes is not a business day, then payment
of the interest payable on that date will be on the next business day (and
if payment is made on the next business day, without any interest or other
payment as a result of such delay), except that if that business day is in
the next succeeding calendar year, the payment will be made on the prior
business day, in each case with the same force and effect as if made on the
date that payment was originally payable.
INTEREST RATE INCREASES
By 9:30 a.m., New York City time, on the call option expiration date,
the rate increase agent will determine whether the then current total
market value of the notes underlying the units is at least equal to 100.25%
of the cash equivalent of the total call option exercise consideration (as
defined below). If the rate increase agent determines that it is (or the
notes rate is already equal to or greater than the maximum note rate, as
defined below), interest on the notes will continue to accrue at the
initial note rate. If the rate increase agent determines that it is not
(and the note rate is less than the maximum note rate), the rate increase
agent will, by 9:30 a.m., New York City time, on the call option expiration
date, select an increased interest rate equal to the lower of (1) the rate
that it determines is sufficient to cause the then current total market
value of such notes to be at least equal to 100.25% of the cash equivalent
of the total call option exercise consideration and (2) the maximum note
rate (and notify us and the call option holder of such increased rate). The
note rate will then become that increased rate.
The "cash equivalent of the total call option exercise consideration"
means the cash value on the call option expiration date of the total call
option exercise consideration, assuming for this purpose, even if not true,
that the call options are exercised on the call option expiration date, and
further assuming that (1) the treasury securities included in the total
call option exercise consideration are highly liquid treasury securities
maturing on or within 35 days before the stock purchase date (as designated
in good faith by the call option holder in a notice delivered to the rate
increase agent by 8:30 a.m., New York City time, on the call option
expiration date or, if the call option holder fails to so designate those
treasury securities, as designated in good faith by the rate increase
agent, in either case in a manner intended to minimize the cash equivalent
of the total call option exercise consideration) and (2) those treasury
securities are valued based on the ask-side price of the treasury
securities at 9:00 a.m., New York City time, on the call option expiration
date (as determined on a same day settlement basis by a reasonable and
customary means selected in good faith by the rate increase agent and
notified to the call option holder before that time) plus accrued interest
to that date.
"Maximum note rate" means (1) the yield to maturity (calculated in
accordance with standard market practice) corresponding to the bid-side
price at 9:00 a.m., New York City time, on the call option expiration date
(as determined by a reasonable and customary means selected in good faith
by the rate increase agent and notified to the call option holder before
that time) of highly liquid treasury securities maturing on or around the
note maturity date as selected in good faith by the rate increase agent
plus (2) [ ] basis points ([ %]).
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no event of default has occurred and is continuing, we will
have the right under the indenture at any time during the term of the notes
to defer the payment of interest for a period not extending beyond the
maturity date (any such period of deferral shall be referred to as an
"extension period"). At the end of an extension period, we must pay all
interest then accrued and unpaid (together with accrued interest at the
deferral rate compounded on each succeeding interest payment date). During
an extension period, interest will continue to accrue on the notes and
holders of notes will be required to accrue interest income for U.S.
federal income tax purposes before the receipt of cash attributable to that
income. See "U.S. Federal Income Tax Consequences--Interest Received on the
Notes".
During any extension period, we may not take any of the prohibited
actions described under "--Certain Covenants of Countrywide Credit
Industries."
Prior to the expiration of any extension period, we may further extend
the extension period, but not beyond the maturity date of the notes. Upon
the termination of any extension period and the payment of all amounts then
due on any interest payment date, we may elect to begin a new extension
period, subject to the same requirements as described above. No interest
will be due and payable during an extension period. We must give the
trustee written notice of our election of any extension period (or its
further extension) at least five business days prior to the earlier of:
(1) the date the interest on the notes would have been payable except
for the election to begin or extend the extension period;
(2) the date the trustee is required to give notice to any securities
exchange or to holders of notes of the record date or the date
the interest is payable; and
(3) the record date.
The trustee must give notice of our election to begin or extend an
extension period to the holders of the notes. There is no limitation on the
number of times that we may elect to begin an extension period.
NOTE PUT OPTIONS
Each holder of notes will have the right, defined as a "note put
option," to require us to repurchase our notes, on the stock purchase date
or, in the event we become involved in a cash merger before the stock
purchase date, on or after the date of the cash merger, for a purchase
price, defined as the "put price," equal to the principal amount of the
notes plus unpaid interest accrued, to but not including, the stock
purchase date, but only if the cash received on the exercise of the option
is used to settle the related purchase contracts.
Each holder of notes or the put agent on behalf of the holder may
exercise the note put option related to its securities by presenting and
surrendering the certificate evidencing those securities, at the offices of
the trustee, with the form of "Notice of Exercise of Put Right" on the
reverse side of the certificate completed and executed as indicated, by
10:00 a.m., New York City time, on the stock purchase date.
CERTAIN COVENANTS OF COUNTRYWIDE CREDIT INDUSTRIES
We will covenant that, during an extension period or during the
continuance of an event of default, we will not
(1) declare or pay dividends on, or make a distribution on, or
redeem, purchase or acquire, or make a liquidation payment with
respect to, any of our capital stock, other than
(a) purchases or acquisitions of shares of our capital stock or
rights to acquire our capital stock in connection with the
satisfaction by us of our obligations under any of our
benefit plans for our and our subsidiaries' directors,
officers or employees or dividend reinvestment plans,
(b) as a result of a reclassification of our capital stock or
rights to acquire our capital stock or the exchange or
conversion of one class or series of our capital stock or
rights to acquire our capital stock for another class or
series of our capital stock or rights to acquire our capital
stock,
(c) the purchase of fractional interests in shares of our
capital stock pursuant to the conversion or exchange
provisions of our capital stock or the security being
converted or exchanged,
(d) dividends and distributions made on our capital stock or
rights to acquire our capital stock with our capital stock
or rights to acquire our capital stock, and
(e) any declaration of a dividend in connection with the
implementation of any stockholders' rights plan, or the
redemption of rights under any such plan in the future,
or make any guarantee payments with respect to any of the foregoing,
and
(2) make any payment of interest, principal or any premium on or
repay, repurchase or redeem any of debt securities, including any
guarantees, issued by us that rank equally with or junior to the
notes.
EVENTS OF DEFAULT
The indenture provides that the events of default for the notes will
be:
(a) failure to pay principal on any notes when due;
(b) failure to pay interest within 30 days of the date when due;
(c) failure to perform for 90 days after notice any other covenant in
the indenture;
(d) certain events of bankruptcy, insolvency or reorganization; and
(e) failure to pay the put price when due upon exercise of a note put
option.
If any event of default occurs and is continuing, either the trustee
or the holders of at least 25% in principal amount of the outstanding notes
may declare the notes due and payable immediately, but upon certain
conditions the declaration may be annulled and past defaults may be waived
by holders of a majority in principal amount of the notes on behalf of the
holders of all the notes.
The trustee will, within 90 days after the occurrence of an event of
default, give the holders of the notes notice of that event of default
known to it if uncured or not waived, provided that, except in the case of
an event of default in the payment of principal of or interest on the
notes, notice shall not be given until 30 days after the occurrence of an
event of default. Except in the case of an event of default in the payment
of principal of or interest on the notes, the trustee may withhold notice
of the event of default if it determines in good faith that withholding
that notice is in the interest of the holders of the notes.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture permits us, without the consent of the holders of the
notes, to consolidate with or merge into any other corporation or transfer
or lease our assets substantially as an entirety to any person provided
that:
(1) the successor is a corporation organized under the laws of any
domestic jurisdiction;
(2) the successor corporation assumes our obligations on the notes
and under the indenture;
(3) after giving effect to the transaction no event of default, and
no event which, after notice or lapse of time, would become an
event of default, shall have happened and be continuing; and
(4) certain other conditions are met.
The general provisions of the indenture do not afford holders of the
notes protection in the event of a highly leveraged or other transaction
involving us that may adversely affect holders of the notes.
MODIFICATION OF THE INDENTURE
We and the trustee may, with the consent of the holders of a majority
in aggregate principal amount of the notes, modify the indenture or the
rights of the holders of notes. However, no modifications may, without the
consent of the holder of each note:
(1) change the maturity date, or reduce the principal amount or the
rate of payment of interest of the notes;
(2) reduce the percentage of notes indicated above, the consent of
the holders of which is required for any supplemental indenture
or for waiver of compliance with certain provisions of the
indenture or certain defaults thereunder; or
(3) effect certain other changes.
The indenture also permits us to omit compliance with certain
covenants in the indenture upon waiver by the holders of a majority in
principal amount of notes.
SATISFACTION AND DISCHARGE
The indenture provides that we will be discharged from any and all
obligations related to the notes (except for certain obligations to
register the transfer or exchange of notes, to replace stolen, lost or
mutilated notes, to maintain paying agencies and hold moneys for payment in
trust) upon the deposit with the trustee, in trust, of money and/or U.S.
government obligations that, through the payment of interest and principal
in accordance with their terms, will provide money in an amount sufficient
to pay and discharge the principal of and interest on the notes on their
maturity date in accordance with the terms of the indenture and the notes.
This discharge may only occur if, among other things, we have delivered to
the trustee an opinion of counsel to the effect that we have received from,
or there has been published by, the United States Internal Revenue Service
("IRS") a ruling, or there has been a change in tax law, in either case to
the effect that the discharge will not be deemed, or result in, a taxable
event with respect to holders of the notes.
The indenture provides us with the option to omit to comply with
certain restrictive covenants. In order to exercise such option, we will be
required to deposit with the trustee money and/or U.S. government
obligations, that, through the payment of interest and principal in
accordance with their terms, will provide money in an amount sufficient to
pay the principal of and interest on the notes on their maturity date in
accordance with the terms of the indenture and the notes. We will also be
required to deliver to the trustee an opinion of counsel to the effect that
the deposit and related covenant defeasance will not cause the holders of
the notes to recognize income, gain or loss for federal income tax
purposes. If we exercise this option and the notes are declared due and
payable because of the occurrence of any event of default, the amount of
money and U.S. government obligations, as the case may be, on deposit with
the trustee will be sufficient to pay amounts due on the notes at their
maturity date but may not be sufficient to pay amounts due on the notes at
the time of the acceleration resulting from the event of default. However,
we shall remain liable for such payments.
SUBORDINATION
Our obligations under the notes will be subordinate in right of
payment to all present and future senior indebtedness to the extent
provided in the indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with our insolvency or bankruptcy, the holders of senior
indebtedness will first be entitled to receive payment in full of all
senior indebtedness before the holders of notes will be entitled to receive
or retain any payment.
No payments on account of principal of or any premium or interest on
the notes (including payments on exercise of note put options) may be made
if a default in any payment on senior indebtedness has occurred and is
continuing, or an event of default on any senior indebtedness resulting in
the acceleration of its maturity has occurred, or if any judicial
proceeding is pending with respect to any such default.
In the event the maturity of notes is accelerated, the holders of all
senior indebtedness outstanding at the time of the acceleration will first
be entitled to receive payment in full of all amounts due in respect of
such senior indebtedness before the holders of notes will be entitled to
receive or retain any payment related to the notes.
Amounts that would be due and payable by us to holders of units in the
absence of the foregoing subordination provisions, however, may be applied
by those holders to offset their obligations under their respective
purchase contracts.
"Senior indebtedness" means:
(1) the principal and any premium and interest in respect of
indebtedness for money borrowed and indebtedness evidenced by
securities, debentures, bonds or other similar instruments;
(2) all capital lease obligations;
(3) all obligations issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all obligations
under any title retention agreement, excluding trade accounts
payable arising in the ordinary course of business;
(4) all obligations 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;
(5) all obligations of the type referred to in clauses (1) through
(4) above of others, the payment of which we are responsible or
liable as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through
(5) above of others secured by any lien on any of our properties
or assets, whether or not the obligation is assumed by us,
except for:
(a) any indebtedness that states, or is issued under a deed,
indenture or other instrument that states, that it is subordinate
to or ranks equally with the notes;
(b) any indebtedness between or among us and any of our affiliates;
(c) the indebtedness represented by our guarantee of the 8% Junior
Subordinated Deferrable Interest Debentures due December 15, 2026
of Countrywide Home Loans; and
(d) the indebtedness represented by our guarantee of the 8.05% Junior
Subordinated Debentures due June 15, 2027 of Countrywide Home
Loans.
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. Substantially all of the indebtedness set forth under
"Capitalization" constitutes senior indebtedness.
The indenture does not limit our ability to issue additional senior
indebtedness.
FORM AND BOOK-ENTRY PROCEDURES
As long as the notes constitute pledged securities with respect to the
units, the notes will be represented by a single certificate and held for
the benefit of the unit holders. If the notes no longer constitute pledged
securities with respect to the units, the notes may be represented by one
or more global certificates registered in the name of the depositary or its
nominee. The depositary arrangements for those notes are expected to be
substantially similar to those for the units. For a description of the
depositary and the terms of the depositary arrangements for the units, see
"--Book-Entry System."
PAYMENT AND PAYING AGENTS
Payment of principal of and any premium and interest on notes will be
made at the office of the trustee in The City of New York or at the office
of the paying agent or paying agents that we may designate from time to
time, except that at our option we may make payments of interest (1) by
check mailed to the address of the holder as that address appears in the
register for notes or (2) by transfer to an account maintained by the
holder as specified in that register, provided that proper payment
instructions have been received by the relevant record date. Payment of any
interest on any notes will be made to the person in whose name the notes
are registered at the close of business on the record date for the
interest, except in the case of defaulted interest. We may at any time
designate additional paying agents or rescind the designation of any paying
agent. We will at all times, however, be required to maintain a paying
agent in each place of payment for the notes.
Any money deposited with the trustee or any paying agent, or then held
by us in trust, for the payment of the principal of and any premium or
interest on any note (or its put price) that remains unclaimed for two
years after the principal and any premium or interest (or put price) has
become due and payable will, at our request, be repaid to us. After that,
the holder of such notes must look, as a general unsecured creditor, only
to us for payment.
GOVERNING LAW
The indenture and the note will be governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
Except as described above, the trustee is not required to exercise any
of the powers vested in it by the indenture at the request of any holder of
notes, unless the holder offers reasonable indemnity against any costs,
expenses and liabilities. The trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of its duties if the trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
The trustee is one of a number of banks with which we maintain
ordinary banking and trust relationships.
BOOK-ENTRY SYSTEM
The Depository Trust Company (the "depositary") will act as securities
depositary for the units. The units will be issued only as fully-registered
securities registered in the name of Cede & Co. or another nominee of the
depositary. Fully-registered global security certificates representing the
total number of units, will be issued, will be deposited with the
depositary and will bear a legend regarding restrictions on their exchanges
and registration of transfer as described below.
The laws of some jurisdictions require that some purchasers of
securities take physical delivery of securities in definitive form. These
laws may impair the ability to transfer beneficial interests in the units
as long as the units are represented by global security certificates.
The depositary 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. The depositary holds securities that
its participants deposit with it. The depositary also facilitates the
settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("direct participants"). The
depositary is owned by a number of its direct participants and by the New
York Stock Exchange, the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the depositary 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 an
indirect custodial relationship with a direct participant either directly
or indirectly ("indirect participants"). The rules applicable to the
depositary and its participants are on file with the SEC.
No transfer of global security certificates, in whole or in part, may
be registered in the name of any person other than the depositary or a
nominee of the depositary unless the depositary has notified us that it is
unwilling or unable to continue as depositary for those global security
certificates or has ceased to be qualified to act as depositary under the
master unit agreement or if there occurs and continues a default by us
under the master unit agreement or the pledge agreement. All units and
portions of units represented by global security certificates will be
registered in the names as the depositary may direct.
As long as the depositary or its nominee is the registered owner of
the global security certificates, that depositary or that nominee, as the
case may be, will be considered the sole owner and holder of the global
security certificates and all units represented by them for all purposes
under the units, purchase contracts, call options, the master unit
agreement, the pledge agreement and the call option agreement. Except in
the limited circumstances referred to in the paragraph above, owners of
beneficial interests in global security certificates will not be entitled
to have the global security certificates or the underlying units registered
in their names, will not receive or be entitled to receive physical
delivery of certificates and will not be considered to be owners or holders
of those global security certificates or any underlying units for any
purpose under the units, purchase contracts, call options, the master unit
agreement, the pledge agreement and the call option agreement. All payments
on the units represented by the global security certificates and all
deliveries of pledged securities or shares of common stock to the holders
thereof will be made to the depositary or its nominee, as the case may be,
as the holder of the global security certificates.
Ownership of beneficial interests in the global security certificates
will be limited to participants or persons that may hold beneficial
interests through institutions that have accounts with the depositary.
Ownership of beneficial interests in global security certificates will be
shown only on, and the transfer of those ownership interests will be
effected only through, records maintained by the depositary or its nominee
(with respect to participants' interests) or any such participant (with
respect to interests of persons held by such participants on their behalf).
Procedures for settlement of purchase contracts on the stock purchase date
will be governed by arrangements among the depositary, participants and
persons that may hold beneficial interests through participants designed to
permit such settlement without the physical movement of certificates.
Payments, transfers, deliveries, exchanges and other matters relating to
beneficial interests in global security certificates may be subject to
various policies and procedures adopted by the depositary from time to
time. The depositary has advised us that it will not take any action
permitted to be taken by a holder of units unless directed to do so by one
or more participants to whose account the depositary interests in the
global security certificates are credited and only for the number of units
as to which the participant or participants has or have given such
direction. None of us, the unit agent nor any of our or its agents will
have any responsibility or liability for any aspect of the depositary's or
any participant's records relating to, or for payments made on account of,
beneficial interests in global security certificates, or for maintaining,
supervising or reviewing any of the depositary's records or any
participant's records relating to those beneficial ownership interests.
The information in this section concerning the depositary and its
book-entry system has been obtained from sources that we believe to be
reliable, but we do not take responsibility for its accuracy.
ACCOUNTING TREATMENT
The purchase contracts are forward transactions in our common stock.
Under generally accepted accounting principles, the purchase contracts will
not be recorded on our consolidated balance sheets but will be disclosed in
the notes to our consolidated financial statements. Upon settlement of a
purchase contract, we will receive the stated amount of that purchase
contract and will issue the requisite number of shares of our common stock.
The stated amount received will be credited to stockholders' equity
allocated between the common stock and additional paid-in capital accounts.
Before the issuance of shares of our common stock upon settlement of
the purchase contracts, we anticipate that we will reflect the units in our
diluted earnings per share calculations using the treasury stock method.
Under this method, the number of shares of our common stock used in
calculating diluted earnings per share is considered to be increased by any
excess of the number of shares issuable upon settlement of the purchase
contracts over the number of shares that could be purchased by us in the
market (at the average market price during the period) using the proceeds
received upon settlement. Consequently, we anticipate there will be no
dilutive effect on our diluted earnings per share except during periods
when the average market price of our common stock is above the threshold
appreciation price.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of units, notes
and common stock is based on the views of Fried, Frank, Harris, Shriver &
Jacobson. This summary deals only with units, notes and common stock held
as capital assets by the beneficial owners of the units, notes and common
stock (referred to as "holders") that purchase units in the initial
offering at the issue price and that are
(1) citizens or individual residents of the United States,
(2) corporations, partnerships or other entities created or organized
in or under the laws of the United States, any state thereof, or the
District of Columbia (other than a partnership that is not treated as a
U.S. person under any applicable Treasury regulations),
(3) estates the income of which is subject to United States federal
income taxation regardless of its source, or
(4) trusts if, in general, a court within the United States is able to
exercise primary supervision over the administration of the trust and one
or more United States persons have the authority to control all substantial
decisions of the trust.
In addition, this summary does not discuss all aspects of federal income
taxation that may be relevant to a particular holder in light of the
holder's particular circumstances, or to certain types of holders subject
to special treatment under United States federal income tax laws including,
but not limited to the following:
o financial institutions;
o tax-exempt organizations;
o insurance companies;
o taxpayers subject to the alternative minimum tax;
o brokers;
o dealers in securities or currencies;
o traders in securities;
o foreign persons and entities;
o certain U.S. expatriates;
o persons holding purchase contracts, notes or common stock as part
of a "straddle", "conversion" or hedging transaction; or
o persons whose functional currency (as defined in section 985 of
the Internal Revenue Code of 1986, as amended (the "Code")) is
not the U.S. dollar.
Moreover, the effect of any applicable estate and gift tax laws or state,
local or foreign tax laws is not discussed.
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY ADDRESSES
THE TAX TREATMENT OF UNITS OR INSTRUMENTS SIMILAR TO UNITS FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES. AS A RESULT, NO ASSURANCE CAN BE GIVEN
THAT THE IRS WILL AGREE WITH THE TAX CONSEQUENCES DESCRIBED IN THIS SECTION
OR THAT THESE CONSEQUENCES WILL NOT BE SUCCESSFULLY CHALLENGED. PROSPECTIVE
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE UNITS, INCLUDING THE APPLICATION OF
STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL OR OTHER TAX LAWS.
This summary is for general information only and is based upon the
Code, applicable Treasury regulations, published rulings, administrative
pronouncements and court decisions, all as in effect on the date of this
prospectus supplement and all of which are subject to change or differing
interpretations at any time and in some circumstances with retroactive
effect.
This discussion assumes that, in connection with the formation of the
units, the underwriters will be acting on behalf of the holders and will
(a) sell the call options to the call option holder and apply the proceeds
from that sale in an amount equal to $[ ] per note (the "call premium")
together with the amount of $[ ] per unit paid directly by the holders to
the underwriters (the "purchase price") to the purchase of the units and
(b) enter into the purchase contracts with Countrywide Credit Industries,
and that holders will assume the rights and obligations arising from these
actions undertaken on their behalf. This discussion also assumes that the
call options will be exercised on the call option expiration date.
Accordingly, this discussion does not address the tax consequences of
holding notes after the call option expiration date or of recognition of
gain or loss on a disposition of the notes after that date.
Because we will be prohibited from declaring or paying dividends if we
exercise our right to defer the payment of interest on the notes or the
payment of contract fees, we do not expect to, and the following discussion
assumes that we will not, exercise our right to defer those payments.
TREATMENT OF THE CALL PREMIUM
A holder will not be subject to tax by reason of the receipt of the
call premium at the time the call premium is received. Rather, the amount
of the call premium will be included in the amount realized by a holder
when the call option is exercised (see "--Exercise of the Call Option and
Ownership of Treasury Securities," below) or the units are sold (see
"--Sale or Disposition of Units," below).
INITIAL TAX BASIS OF NOTES
The amount paid by a holder for a unit, which, for United States
federal income tax purposes, will equal the sum of the purchase price plus
the amount of the call premium deemed to have been received by the holder
and paid to us in partial payment for the units, will be allocated between
the notes and the purchase contract included in such unit in proportion to
their respective fair market values at the time of purchase. That
allocation will establish the respective issue price of, and each holder's
initial tax basis in, the notes and the purchase contract. Consistent with
the documentation, and reasonably consistent with the facts and
circumstances, we intend to take the position that, at the time of issuance
of the unit, the fair market value of the purchase contract (including the
holder's right to receive contract fees from us) equals zero, and the
entire amount paid for the unit, including the call premium, is allocable
to the notes. Under Treasury regulations dealing with determination of the
issue price of a debt instrument that is part of an investment unit, our
position will be binding upon each holder unless the holder explicitly
discloses a contrary position on a statement attached to the holder's
timely filed United States federal income tax return for the taxable year
in which units are acquired by that holder.
Assuming the above allocation, the issue price of, and each holder's
initial tax basis in, the notes will exceed the amount payable at maturity
with respect to the notes by the amount of the call premium. Because the
notes will be classified as contingent debt instruments for United States
federal income tax purposes, this excess will not be treated as "bond
premium" that is amortizable at the holder's election. Instead, this excess
will be taken into account in determining the yield at which holders will
be required to accrue income. See "--Interest Received on the Notes,"
below.
INTEREST RECEIVED ON THE NOTES
Because of the ability of the rate increase agent to increase the note
rate, the notes will be classified as contingent debt instruments subject
to the "noncontingent bond method" as set forth in applicable Treasury
regulations. As discussed below, we do not believe that classification of
the notes as contingent debt instruments will require holders to recognize
taxable income that differs materially from the cash payments of interest
on the notes. As discussed below, however, as a result of classification of
the notes as contingent debt instruments, any gain realized on the sale or
exchange of the notes will be treated as ordinary income. See "--Sale or
Disposition of Units," below.
Under the noncontingent bond method, the yield on the notes is
projected based on the yield on a hypothetical noncontingent bond issued by
us with similar terms and conditions. Based on that yield (the "comparable
yield"), a projected schedule of payments is determined. In general,
holders of notes will be required to accrue interest income from the notes
under the rules applicable to debt instruments with original issue discount
("OID"), on the assumption that the projected amounts will actually be
paid. Under these rules, none of the stated interest on the notes will be
"qualified stated interest" as defined in the applicable Treasury
regulations and, accordingly, all payments of stated interest will be
treated as payments of OID or as return of principal.
Under the noncontingent bond method, holders of a contingent debt
instrument generally must take into account adjustments if contingent
payments are fixed at amounts that differ from their projected amounts.
Holders will not be required to take into account any such adjustments
after the call option expiration date.
Applying the noncontingent bond method, we have determined the
comparable yield and a projected payment schedule for the notes. The
projected payment, per $[ ] of stated amount, is $[ ] (which is the stated
interest payment) for each quarter ending on or prior to the call option
expiration date, and is $[ ] for each quarter ending after the option
expiration date and prior to the maturity date. The projected payment, per
$[ ] of stated amount, at the maturity date is $[ ] (which includes the
stated principal amount of the notes as well as the projected amount of the
final interest payment).
The comparable yield is [ ]%. Applied to the issue price of the notes
([ ]% of their principal amount), this comparable yield results in interest
income to holders of $[ ], per $[ ] of stated amount, for each quarter
ending on or prior to the call option expiration date. Thus, the amount of
interest income to holders for each quarter (other than during extension
periods) generally is expected to equal the amount of the cash payment due
to holders for each quarter.
The foregoing comparable yield and projected payment schedule will be
used by us for purposes of determining our own taxable income and for any
required information reporting.
If a holder of notes does not use this projected payment schedule to
determine interest accruals, holder must apply the foregoing rules using
its own projected payment schedule. A holder that determines its own
projected payment schedule must explicitly disclose this fact and the
reason why the holder has used its own schedule (that is, why our projected
payment schedule is unreasonable). In general, this disclosure must be made
on a statement attached to the timely filed federal income tax return of
the holder for the taxable year that includes the date of its acquisition
of the notes.
The foregoing projected payment schedule is supplied by us solely for
computing income under the noncontingent bond method for federal income tax
purposes, and does not constitute a projection or representation as to the
amounts that holders of notes will actually receive.
Because income with respect to the notes will constitute interest for
United States federal income tax purposes, corporate holders of units will
not be entitled to a dividends-received deduction in respect of that
income.
ADJUSTMENTS TO TAX BASIS IN NOTES
During the period ending on the call option expiration date, the
initial tax basis of a holder of notes (See "--Initial Tax Basis of Notes,"
above) will be increased by the amount of any interest recognized under the
noncontingent bond method and reduced by payments projected to be made with
respect to the notes (See "--Interest Received on the Notes," above). Based
on our belief (See "--Interest Received on the Notes," above) that the
taxable income from the notes will equal cash payments of interest during
this period, we believe that the adjusted tax basis of a holder in the
notes as of the call option expiration date will equal the initial tax
basis.
CONTRACT FEES
There is no authority describing the tax treatment of the contract
fees under current law.
If we are required to pay contract fees to the holders of the units,
we intend to file information returns on the basis that the contract fees
will be taxable currently as ordinary income to holders. Because any
contract fees received by a holder will not constitute dividends for United
States federal income tax purposes, corporate holders will not be entitled
to a dividends-received deduction as a result of receiving those fees.
Holders should consult their own tax advisors concerning the treatment of
the contract fees, including the possibility that the contract fees may not
be treated as current income to holders, but would instead reduce a
holder's basis in the common stock received upon exercise of the purchase
contracts, by analogy to the treatment of rebates. We do not intend to
deduct any contract fees we are required to pay, because we view them as a
cost of issuing the common stock. If they are treated as items of ordinary
income, contract fees received by a regulated investment company should be
treated as income derived with respect to that company's business of
investing in stock and securities.
If holders are required to pay contract fees to us, it is unlikely
that the contract fees will be deductible for United States federal income
tax purposes. Therefore, although the amount of cash interest received by
holders will be reduced by the amount of contract fees payable to us,
holders most likely will include in income the full amount of OID on the
notes (or interest or OID on other pledged securities) without a deduction
for payment of contract fees. Payment of the contract fees should increase
the holder's basis in the purchase contracts and be included in the basis
of the common stock received under the purchase contracts. See "--Purchase
of Common Stock under the Purchase Contract" below.
EXERCISE OF THE CALL OPTION AND OWNERSHIP OF TREASURY SECURITIES
Exercise of the call option by the call option holder will be a
taxable event to holders of the units. As a result, holders will recognize
gain or loss equal to the difference between the amount realized from
exercise of the call option and their adjusted tax basis in the notes. The
amount treated as the amount realized from exercise of the call option will
equal the sum of the call premium and the fair market value of the treasury
securities received, determined as of the call settlement date. The rules
that govern determination of the character of gain or loss on sale of the
notes (including pursuant to the exercise of the call option) are
summarized under "--Sale or Disposition of Units," below.
A holder's initial basis in the treasury securities received as a
result of the exercise of the call option will be equal to the fair market
value of the treasury securities, determined as of the call settlement
date. Except to the extent the treasury securities are "stripped" treasury
securities, the treatment of which is discussed in the next paragraph, (a)
interest with respect to the treasury securities will be taxable as
ordinary income to the holder as it is received or accrued, in accordance
with the holder's normal method of accounting for United States federal
income tax purposes, (b) any excess of a holder's basis in the treasury
securities over the amount payable at maturity may be amortized at the
holder's election over the remaining term as a reduction of interest income
and (c) any gain realized by a holder at maturity of the treasury
securities will generally be treated as capital gain, unless the treasury
securities are considered to have more than a "de minimis" amount of market
discount.
A holder will be required to treat a stripped treasury security
received by the holder as a bond that was originally issued on the date
received by the holder. Stripped treasury securities (other than stripped
treasury securities with a remaining term of one year or less) will be
considered to have OID in an amount equal to the difference between the
amount payable on such security and the holder's initial basis in that
security (determined as described in the immediately preceding paragraph).
As a result, a holder that receives a stripped treasury security (other
than a stripped treasury security with a remaining term of one year or
less) will be required to include OID in income as ordinary income under a
constant yield method over the remaining term of the stripped treasury
security (regardless of the holder's normal method of accounting for United
States federal income tax purposes) and will increase its basis in the
stripped treasury security by the amount of OID included in income with
respect to the stripped treasury security.
Stripped treasury securities with a remaining term of one year or less
("short-term stripped treasury securities") generally should be considered
to have "acquisition discount" in an amount equal to the difference between
the principal amount of the short-term stripped treasury security and the
holder's basis in the short-term stripped treasury security. A holder using
the cash method of accounting that has not elected to accrue acquisition
discount generally will recognize ordinary income upon maturity of the
short-term stripped treasury security equal to the amount of that
acquisition discount.
SALE OR DISPOSITION OF UNITS
A holder generally will recognize gain or loss upon the sale or other
disposition of units. This gain or loss will be calculated separately with
respect to the notes or treasury securities, as the case may be, and the
related purchase contract composing the units by allocating the sum of any
cash and the fair market value of any property received between the two
components in proportion to their respective fair market values. The amount
considered to be received by a holder with respect to the sale of the notes
will include the value of the assumption of the holder's obligations under
the call option, which, in the absence of any means of independent
valuation, will likely be deemed to equal the amount of the call premium
previously received by that holder. See "--Treatment of the Call Premium,"
above.
The amount of gain or loss with respect to each component will equal
the difference between the consideration so allocated to each component
(reduced, in the case of certain treasury securities (that is, treasury
securities that are not stripped treasury securities), by any amount
attributable to accrued but unpaid interest, which will be taxable as
ordinary income) and the holder's adjusted tax basis in the respective
components. Except in the case of gain or loss with respect to notes and
certain short-term stripped treasury securities, that gain or loss will be
capital gain or loss.
If a holder sells or disposes of notes pursuant to the call option or
otherwise, the rules governing contingent debt instruments treat any gain
recognized as ordinary interest income and treat any loss recognized as
ordinary to the extent of prior interest inclusions.
PURCHASE OF COMMON STOCK UNDER THE PURCHASE CONTRACT
Assuming that the initial basis of the purchase contract will be zero
(see "--Initial Tax Basis of Notes" above), the tax basis of the common
stock acquired under a purchase contract should equal the amount of cash
paid to purchase the common stock (including cash applied by the collateral
agent upon maturity of the treasury securities), increased by the amount of
any contract fees paid by the holder to us, and decreased by (a) the amount
of any contract fees received by the holder and not previously included in
income and (b) the amount of any cash received in place of fractional
shares of common stock. A holder will recognize capital gain or loss upon
receipt of cash in place of fractional shares of common stock equal to the
difference between the amount of cash received and the holder's basis in
those fractional shares. A holder's holding period in the common stock
purchased pursuant to the purchase contract will begin on the day after the
purchase of that common stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT
Assuming that we have current or accumulated earnings and profits at
least equal to the amount of the dividends, a holder will include a
dividend on the common stock in income when paid, and the dividend will be
eligible for the dividends-received deduction if received by an otherwise
qualifying corporate holder that meets the holding period and other
requirements for such deduction. Upon the sale, exchange or other
disposition of common stock, the holder will recognize gain or loss equal
to the difference between the holder's tax basis in the common stock and
the amount realized on the disposition. The gain or loss will be capital
gain or loss.
ADJUSTMENT OF SETTLEMENT RATE
Holders may be treated as receiving a constructive distribution from
us if (a) the settlement rate is adjusted and, as a result of such
adjustment, the proportionate interest of holders in our assets or earnings
and profits is increased, and (b) the adjustment is not made pursuant to a
reasonable antidilution formula. An adjustment in the settlement rate would
not be considered made pursuant to such a formula if the adjustment were
made to compensate for certain taxable distributions with respect to common
stock. Thus, under certain circumstances, an increase in the settlement
rate is likely to be taxable to holders of units as a dividend to the
extent of the current or accumulated earnings and profits of Countrywide
Credit Industries. Holders of units would be required to include their
allocable share of those constructive dividends in gross income but would
not receive any cash by reason of the constructive dividends.
<PAGE>
UNDERWRITING
Countrywide Credit Industries, Inc. and the underwriters for the
offering named below have entered into an underwriting agreement with
respect to the units being offered. Subject to certain conditions, (1)
Countrywide Credit Industries, Inc. has agreed to enter into the purchase
contracts with each of the underwriters named below underlying the
respective number of units indicated opposite its name below, (2)
Countrywide Credit Industries, Inc. has agreed to sell to each of the
underwriters the notes underlying the respective number of units indicated
opposite its name below, and (3) each of the underwriters has severally
agreed to enter into the purchase contracts with Countrywide Credit
Industries, Inc., purchase the notes from Countrywide Credit Industries,
Inc., pledge under the pledge agreement such notes and sell (on behalf of
the initial investors in the units) to the call option holder the call
options with respect to such units.
Underwriter Number of Units
----------- ---------------
Goldman, Sachs & Co.........................................
[Other Underwriters]........................................
---------------
Total.......................................
===============
If the underwriters sell more units than the total number set forth in
the table above, the underwriters have an option to buy up to an additional
[ ] units to cover such sales. The underwriters may exercise that option
for 30 days. If any units are purchased pursuant to this option, the
underwriters will severally purchase units in approximately the same
proportion as set forth in the table above.
The following table shows the per unit and total underwriting
discounts and commissions to be paid to the underwriters by Countrywide
Credit Industries, Inc. These amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase [ ] additional
units.
Paid by
Countrywide Credit
Industries, Inc.
---------------------------
No Exercise Full Exercise
----------- -------------
Per unit......................... $[ ] $[ ]
Total............................ $[ ] $[ ]
Units sold by the underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this
prospectus supplement. Any units sold by the underwriters to securities
dealers may be sold at a discount of up to $[ ] per unit from the initial
public offering price. Any such securities dealers may resell any units
purchased from the underwriters to certain other brokers or dealers at a
discount of up to $[ ] per unit from the initial public offering price. If
all the units are not sold at the initial public offering price, the
underwriters may change the offering price and the other selling terms.
Countrywide Credit Industries, Inc. has agreed with the underwriters
not to dispose of or hedge any of Countrywide Credit Industries, Inc.'s
units, notes or its shares of common stock or any of Countrywide Credit
Industries, Inc.'s securities which are substantially similar to its common
stock, or securities convertible into or exchangeable for shares of its
common stock (other than the units offered in this offering) during the
period from the date of this prospectus supplement continuing through the
date 90 days after the date of this prospectus supplement, except with the
prior written consent of Goldman, Sachs & Co. This agreement does not apply
to any existing employee benefit plans or employee stock purchase plans.
The units will be a new issue of securities with no established
trading market. Countrywide Credit Industries, Inc. will apply to list the
units on the New York Stock Exchange under the symbol "[ ] ." Countrywide
Credit Industries, Inc. has been advised by the underwriters that the
underwriters intend to make a market in the units, but they are 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
for the units.
In connection with the offering, the underwriters may purchase and
sell the units or shares of Countrywide Credit Industries, Inc.'s common
stock in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number
of units than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the units or the
common stock while the offering pursuant to this prospectus supplement is
in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the underwriters have
repurchased units sold by or for the account of such underwriter in
stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or
otherwise affect the market price of the units or the common stock. As a
result, the price of the units or the common stock may be higher than the
price that otherwise might exist in the open market. If these activities
are commenced, they may be discontinued by the underwriters at any time.
These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
Countrywide Credit Industries, Inc. estimates that its share of the
total expenses of the offering, excluding underwriting discounts and
commissions, will be approximately $[ ].
Countrywide Credit Industries, Inc. has agreed to indemnify the
several underwriters against certain liabilities, including liabilities
under the Securities Act.
Certain of the underwriters have in the past performed investment
banking services for Countrywide Credit Industries, Inc. and have received
compensation for these services.
VALIDITY OF SECURITIES
The validity of the notes and the purchase contracts will be passed
upon for us by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), New York, New York. Edwin Heller
(whose professional corporation retired as partner of Fried, Frank, Harris,
Shriver & Jacobson in September 1996) is Of Counsel to Fried, Frank,
Harris, Shriver & Jacobson and one of our directors. Brown & Wood LLP, New
York, New York, will serve as counsel for the underwriters. Brown & Wood
LLP also serves as counsel for CWMBS, Inc. and CWABS, Inc., each one of our
wholly owned subsidiaries, in connection with offerings of mortgage-backed
and asset-backed securities, and from time to time also serves as our
counsel on other matters.
<PAGE>
(REDHERRING)
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES
AND THEY ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION. DATED JULY 9, 1999.
Prospectus Supplement to Prospectus dated [ ], 1999.
Units
[LOGO] COUNTRYWIDE CREDIT INDUSTRIES, INC.
% Adjustable Conversion-rate Equity Security Units
-----------------
Each unit consists of a contract to purchase shares of common stock of
Countrywide Credit Industries, Inc. and a subordinated deferrable note of
its subsidiary, Countrywide Home Loans, Inc. that is guaranteed by
Countrywide Credit Industries, Inc. The note is subject to a call option
granted to Goldman, Sachs & Co. Investors will receive from each unit:
o interest payments at the rate of [ ]% per year, paid quarterly;
and
o on [ ], between [ ] and one share of common stock of Countrywide
Credit Industries, Inc., depending on the average trading price
of the shares of common stock at that time.
In addition, investors will be entitled to receive from Countrywide
Credit Industries, Inc. contract fees of [ ]% per year or investors will be
required to pay to Countrywide Credit Industries, Inc. contract fees of [
]% per year, as Countrywide Credit Industries, Inc. will specify in the
final prospectus supplement.
Countrywide Credit Industries, Inc. can defer payments of contract
fees and Countrywide Home Loans, Inc. can defer quarterly interest payments
on the notes, but deferrals will bear additional interest of [ ]%.
Investors will pledge their notes to secure their obligations under the
purchase contracts and the call options.
Investors may not separate the notes from the purchase contracts,
unless they pledge alternative collateral as described below. The notes and
the purchase contracts will therefore trade together as units.
Countrywide Credit Industries, Inc. will apply to list the units on
the New York Stock Exchange under the symbol "[ ]." Countrywide Credit
Industries, Inc.'s common stock is listed on the New York Stock Exchange
under the symbol "CCR." The last reported sale price of Countrywide Credit
Industries, Inc.'s common stock on the New York Stock Exchange on July 8,
1999 was $43 per share.
Investing in the units involves risks that are described in this
prospectus supplement beginning on page S-6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER
REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------
Per Unit Total
Initial public offering price.................... $ $
Proceeds from sale of call options remitted to
Countrywide Credit Industries, Inc........... $ $
Underwriting discount............................ $ $
Proceeds to Countrywide Credit Industries, Inc.,
before expenses.............................. $ $
The underwriters may, under the terms of the underwriting agreement,
purchase up to an additional [ ] units from us at the initial public
offering price less the underwriting discount.
-----------------
The underwriters expect to deliver the units against payment in New
York, New York on [ ], 1999.
-----------------
GOLDMAN, SACHS & CO. [OTHER UNDERWRITERS]
------------------
Prospectus Supplement dated [ ], 1999.
<PAGE>
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus.
Countrywide Credit Industries, Inc. and Countrywide Home Loans, Inc. have
not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. Countrywide Credit
Industries, Inc. and Countrywide Home Loans, Inc. are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus
supplement and the accompanying prospectus is accurate as of the date on
the front cover of this prospectus supplement and the accompanying
prospectus, respectively. The business, financial condition, results of
operations and prospects of Countrywide Credit Industries, Inc. and
Countrywide Home Loans, Inc. may have changed since those dates.
References in this prospectus supplement to "Countrywide Credit
Industries," "we," "us" and "our" are to Countrywide Credit Industries,
Inc.
References in this prospectus supplement to "Countrywide Home Loans"
are to Countrywide Home Loans, Inc.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary may not contain all of the information that you
should consider before investing in the units. You should read this entire
prospectus supplement and the accompanying prospectus carefully.
THE OFFERING
THE UNITS
COMPONENTS OF THE UNITS
Each unit consists of a contract to purchase shares of our common
stock and a subordinated deferrable note of Countrywide Home Loans, one of
our subsidiaries. The notes are guaranteed by us. You will receive from
each unit:
o interest payments at the rate of [ ]% per year, paid quarterly;
and
o on [ ], between [ ] and one share of our common stock, depending
on the average trading price of the shares of our common stock at
that time.
In addition, you will be entitled to receive from us contract fees of
[ ]% per year or you will be required to pay to us contract fees of [ ]%
per year, as we will specify in the final prospectus supplement.
The note is subject to a call option granted to Goldman, Sachs & Co.,
whom we refer to as the call option holder. Under the call option, the call
option holder is entitled to acquire, on or before the last quarterly
payment date before the stock purchase date, the notes underlying the
units.
The notes will be pledged to secure the unit holder's obligations to
us to purchase shares of our common stock under the purchase contracts and
to the call option holder to deliver the notes upon the call option
holder's exercise of the call options.
You may elect to substitute treasury securities as pledged securities
in exchange for the notes underlying the units. If you elect to substitute
treasury securities as pledged securities, the notes will no longer secure
your obligations to purchase our common stock under the purchase contracts
but will continue to secure your obligations to deliver the notes to the
call option holder upon exercise of the call option. The units will then
become "stripped units" that no longer generate cash payments, other than
any contract fees payable by us, if required, under the terms of the
underlying purchase contracts. Stripped units will not be interchangeable
with units. We will endeavor to list the stripped units on the New York
Stock Exchange if a sufficient number of stripped units are created.
You may not separate the notes from the purchase contracts, unless you
pledge alternative collateral as summarized above. The notes and the purchase
contracts will therefore trade together as units.
SETTLEMENT RATE
The number of shares of our common stock that you will receive for
each unit will be determined by one of the following settlement rates:
o If the average trading price equals or exceeds $[ ], you will
receive [ ] shares of our common stock.
o If the average trading price is less than $[ ] but greater than
$[ ], you will receive shares of our common stock having a value,
based on the average trading price, equal to $[ ].
o If the average trading price is less than or equal to $[ ], you
will receive one share of our common stock.
The average trading price used to determine the settlement rate will
be the average closing price of our common stock during the 20-trading day
period ending before [ ]. The settlement rate will be subject to
anti-dilution adjustment in the case of stock splits, stock dividends or
other events affecting our common stock. You can find more information
about the settlement rate starting on page S-[ ].
SETTLEMENT MECHANICS
On the stock purchase date, each unit holder will be required to
purchase, for the stated amount of $[ ] per unit, a number of shares of our
common stock, or fraction of a share, equal to the settlement rate.
THE NOTES
The notes will:
o bear interest at an annual rate of [ ]%. Interest will be paid
quarterly on [ ], [ ], [ ] and [ ], subject to the deferral
provisions described below;
o mature on [ ]; and
o not be redeemable prior to maturity.
On [insert call option expiration date], a nationally recognized
investment banking firm chosen by us (the "rate increase agent") may decide
to increase the interest rate on the notes after analyzing the then current
total market value of the notes and the total consideration to be paid in
exchange for the acquisition of the notes under the terms of the call
options.
Countrywide Home Loans may defer payments of interest on the notes.
Any deferred payments of interest will bear additional interest at an
annual rate equal to the deferral rate of [ ]% until paid.
Each holder of notes may elect to require Countrywide Home Loans to
repurchase its notes on the stock purchase date or in the event Countrywide
Credit Industries becomes involved in certain cash mergers, at a price
equal to their principal amount plus accrued interest, but only if the cash
received on the exercise of the election is used to settle the related
purchase contract.
OTHER TERMS OF THE UNITS
CONTRACT FEES
We may be required to pay contract fees of [ ]% to the holders of
units or the holders of units may be required to pay contract fees of [ ]%
to us, as specified in the final prospectus supplement. Any obligation of
the holders of units to pay contract fees to us will be funded out of
interest payments that will be made on the pledged securities. If those
payments are insufficient to cover the obligation of the holders to pay
contract fees, that obligation will be deferred until the earlier of the
date enough cash is available and the stock purchase date. Any deferred
contract fees will bear additional contract fees at an annual rate of [ ]%
(compounding on each succeeding quarterly payment date).
LISTING
We will apply to list the units on the New York Stock Exchange under
the symbol "[ ]".
<PAGE>
RISK FACTORS
Before purchasing units, you should carefully consider the following
risk factors relating to the units.
YOU WILL BEAR THE ENTIRE RISK OF A DECLINE IN THE PRICE OF OUR COMMON STOCK
The market value of the shares of our common stock you receive on [ ]
(which we refer to as the "stock purchase date") may be materially
different from the price you pay for the shares of our common stock. If the
average trading price of our common stock on the stock purchase date is
less than $[ ] (that is, less than the closing price of our common stock on
the date of this prospectus supplement), you will on the stock purchase
date, be required to purchase shares of our common stock at a loss.
Accordingly, a holder of units assumes the entire risk that the market
value of our common stock may decline. Any such decline could be
substantial.
YOU WILL RECEIVE ONLY A PORTION OF ANY APPRECIATION IN OUR COMMON STOCK PRICE
The number of shares of our common stock that will be issued upon
settlement may decline by up to [ ]% as the market value of our common
stock increases. Therefore, your opportunity for equity appreciation will
be less than if you invested directly in our common stock. In addition, if
the average trading price of our common stock at the stock purchase date
exceeds $[ ] but falls below $[ ], you will receive no equity appreciation
in our common stock.
THE MARKET PRICE FOR OUR COMMON STOCK IS UNPREDICTABLE
It is impossible to predict whether the market price of our common
stock will rise or fall. Many factors influence the trading price of our
common stock. These factors include changes in our financial condition,
results of operations and prospects and complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally, the stock exchanges on which our common stock trades and the
market segments of which we are a part.
YOU MAY SUFFER DILUTION OF THE SHARES OF OUR COMMON STOCK ISSUABLE UPON
SETTLEMENT OF PURCHASE CONTRACTS
The number of shares of our common stock issuable upon settlement is
subject to adjustment only for stock splits and combinations, stock
dividends and certain other specified transactions. The number of shares of
our common stock issuable upon settlement of each purchase contract is not
subject to adjustment for other events, such as employee stock option
grants, offerings of our common stock for cash or in connection with
acquisitions or certain other transactions, which may adversely affect the
price of our common stock. The terms of the units do not restrict our
ability to offer our common stock in the future or to engage in other
transactions that could dilute our common stock. We have no obligation to
consider the interests of the holders of the units for any reason.
YOU HAVE NO RIGHTS AS COMMON STOCKHOLDERS
Until you acquire shares of our common stock upon settlement of your
purchase contract, you will have no rights with respect to our common
stock, including voting rights, rights to respond to tender offers and
rights to receive any dividends or other distributions on our common stock.
Upon settlement of your purchase contract, you will be entitled to exercise
the rights of a holder of our common stock only as to actions for which the
record date occurs after the settlement date.
YOUR NOTES WILL BE SUBORDINATED
The obligations of Countrywide Home Loans under the notes will be
unsecured and subordinated and rank junior in right of payment to all
present and future senior indebtedness of Countrywide Home Loans.
Countrywide Home Loans cannot make payments of principal of or interest on
the notes if:
o Countrywide Home Loans is in default under any payment obligation
with respect to senior indebtedness beyond any applicable grace
period;
o Countrywide Home Loans is otherwise in default with respect to
any senior indebtedness permitting the holders of that senior
indebtedness to accelerate the maturity of that senior
indebtedness; or
o any judicial proceeding is pending with respect to any default
affecting the senior indebtedness.
Our guarantees of the notes will be subordinated to our present and
future senior indebtedness in the same manner.
Neither the indenture nor the master unit agreement, which governs the
terms of the units, places any limitation on the amount of additional
secured or unsecured debt, including senior indebtedness, that may be
incurred by us, Countrywide Home Loans or any of our respective
subsidiaries.
YOUR PLEDGED SECURITIES WILL BE ENCUMBERED
Although holders of units will be beneficial owners of the underlying
pledged securities, those pledged securities will be pledged with the
collateral agent to secure the obligations of the holders under the
purchase contracts. Therefore, for so long as the purchase contracts remain
in effect, holders will not be allowed withdraw their pledged securities
from the pledge agreement, except in the limited circumstances described in
this prospectus supplement.
WE WILL HAVE THE OPTION TO DEFER PAYMENTS
Countrywide Home Loans has the right to defer interest payments on the
notes at any time or from time to time. Countrywide Home Loans cannot defer
interest payments beyond the maturity date. However, deferred payments of
interest on the notes will bear additional interest at an effective rate
per year of [ ]% until paid.
If we are required to pay contract fees under the purchase contracts,
we will have the right to defer the payment of these fees at any time or
from time to time. We cannot defer payments of contract fees beyond the
stock purchase date. However, deferred payments of contract fees will bear
additional contract fees at an effective rate per year of [ ]% until paid.
If Countrywide Home Loans exercises its right to defer interest or, to
the extent we are required to pay contract fees, we exercise our right to
defer contract fee payments, the market price of the units is likely to
decrease. In addition, the mere existence of the right to defer payments
may cause the market price of the units to be more volatile than the market
prices of other securities that are not subject to such deferrals.
LIMITATION ON VALUE OF NOTES AS A RESULT OF CALL OPTIONS
If the value of the notes underlying the units is greater than the
value of the total consideration to be paid upon exercise of the call
options (as expected), it is likely that the call option holder will
exercise its call options. In that case, the call option holder, rather
than holders of units, will realize the benefit of that greater value. The
notes may increase in value due to, among other things, a decrease in
market interest rates or an increase in the perceived credit quality of the
notes or as a result of the interest rate adjustment described under
"Description of the Notes--Interest Rate Increases."
MASTER UNIT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF UNIT AGENT
Although the notes included in the units will be issued under the
terms of an indenture qualified under the Trust Indenture Act, the master
unit agreement relating to the units will not be qualified under the Trust
Indenture Act. The unit agent under the master unit agreement, who will act
as the agent and the attorney-in-fact for the holders of the units, will
not be qualified as a trustee under the Trust Indenture Act. Accordingly,
holders of the units will not have the benefit of the protections of the
Trust Indenture Act. Under the terms of the master unit agreement, the unit
agent will have only limited obligations to the holders of the units.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
The units are securities for which there is currently no secondary
market. It is not possible to predict how the units will trade in the
secondary market or whether the market for the units will be liquid or
illiquid. We will apply to list the units on the New York Stock Exchange.
The underwriters have advised us that they intend to make a market for the
units and thus facilitate trading in the units. However, the underwriters
are not obligated to make a market and may discontinue market-making at any
time.
YOU WILL HAVE OID INCOME
For U.S. federal income tax purposes, the notes will be classified as
contingent payment debt instruments. As a result, they will be considered
to be issued with original issue discount or OID, which you will be
required to include in income during your period of ownership of the notes,
subject to certain adjustments. Additionally, any gain realized on a sale
of notes or any gain attributable to notes on a sale of units before
maturity will be treated as ordinary interest income.
YOU WILL NOT BE PERMITTED TO DEDUCT CONTRACT FEES
If you are required to pay contract fees to us, it is unlikely that
those fees will be deductible by you for United States federal income tax
purposes. As a result, although the amount of cash distributions made to
you will be reduced by the amount of any contract fees payable to us, you
will nevertheless recognize ordinary income each quarter equal to the full
amount of OID required to be accrued with respect to the notes or treasury
securities without a deduction for the contract fees.
COUNTRYWIDE CREDIT INDUSTRIES
Through Countrywide Home Loans, our principal subsidiary, we
originate, purchase, securitize, sell and service mortgage loans. Our
mortgage loans are principally prime credit quality first-lien mortgage
loans secured by single- (one- to four-) family residences ("Prime
mortgages"). We also offer home equity loans either with newly produced
Prime mortgages or as a separate product. In addition, we offer sub-prime
credit quality first-lien single-family mortgage loans. Our other
subsidiaries offer products and services that complement our mortgage
banking business.
RECENT DEVELOPMENTS
On June 12, 1999, we agreed to purchase Balboa Life Insurance Company
and Balboa Insurance Company from Associates First Capital Corporation for
$425 million, payable in cash, subject to adjustment. Balboa Life Insurance
Company underwrites life insurance policies, and Balboa Insurance Company
underwrites credit-related insurance and specializes in creditor-placed
auto and homeowners insurance. Completion of the acquisition is subject to
regulatory approval and customary closing conditions. Assuming we receive
the necessary regulatory approvals and satisfy other closing conditions, we
anticipate closing the acquisition during our fiscal quarter ending
November 30, 1999, but we can not assure you that the acquisition will
close.
USE OF PROCEEDS
We estimate that Countrywide Home Loans will receive approximately $[
] from the sale of the units after deducting the estimated expenses of the
offering. We plan to use the net proceeds from the offering to partially
finance the acquisition of the Balboa companies as described in
"Countrywide Credit Industries -- Recent Developments." We intend to fund
the balance of the purchase price for the Balboa companies with funds
obtained through other financing sources.
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization (1) at
February 28, 1999 and (2) as adjusted to reflect the sale and the
application of the net proceeds of the units. The table should be read
together with our consolidated financial statements and related notes
incorporated by reference in this prospectus supplement. See "Additional
Information" in the accompanying prospectus.
FEBRUARY 28, 1999
-----------------
ACTUAL AS ADJUSTED
------ -----------
(IN THOUSANDS)
DEBT:
Commercial paper ....................... $ 176,559
Medium-term notes ...................... 8,039,824
Repurchase agreements .................. 1,517,405
Subordinated notes ..................... 200,000
__% Subordinated deferrable
notes due 20__.......................... --
Unsecured notes payable ................ --
Other notes payable .................... 1,971
Drafts payable in connection with
mortgage loan closings................ 1,083,499
------------
Total debt ........................ 11,019,258
Accounts payable and accrued ........... 517,937
liabilities
Deferred income taxes .................. 1,092,176
------------ ------------
Total debt and liabilities ............. $ 12,629,371
------------ ------------
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trust holding a company-guaranteed
related subordinated debt(1).......... 300,000
Company-obligated
mandatorily redeemable
subordinated capital
income securities of
subsidiary trust holding a
company-guaranteed related
subordinated debt(2)................. 200,000
SHAREHOLDERS' EQUITY:
Preferred stock -- authorized
1,500,000 shares of $.05
par value; issued and
outstanding, none ................... --
Common stock-- authorized,
240,000,000 shares of $.05
par value; 112,619,313
issued and outstanding shares(3)..... 5,631
Additional paid-in capital ............ 1,153,673
Accumulated other
comprehensive (loss) income ......... (19,593)
Retained earnings ..................... 1,379,174
------------ ------------
Total shareholders' equity ............... $ 2,518,885
------------ ------------
Total capitalization ..................... $ 15,648,256
============ ============
- ---------------
(1) Represents the 8% Capital Trust Pass-through Securities of Countrywide
Capital I, a Delaware business trust.
(2) Represents the 8.05% Subordinated Capital Income Securities of
Countrywide Capital III, a Delaware business trust.
(3) Does not include 11,497,044 shares reserved for issuance upon exercise
of stock options of which options for 6,514,039 shares were
exercisable as of February 28, 1999.
<PAGE>
DESCRIPTION OF UNITS
The summaries of the documents described below are not necessarily
complete. Copies of those documents are on file with the SEC as part of our
registration statement. See "Additional Information" on page 2 of the
accompanying prospectus for information on how to obtain copies of those
documents. Because this section is a summary, it does not describe every
aspect of the units. This summary is subject to and qualified in its
entirety by reference to all the provisions of each of the underlying
agreements.
You should also review the description of the stock purchase contracts
and the stock purchase units beginning on page 9 in the accompanying
prospectus.
GENERAL
Each unit will have a stated amount of $[ ]. Each unit will initially
consist of:
a purchase contract under which
o the holder will purchase from us on the stock purchase date of [
], for cash in an amount equal to the stated amount, between [ ]
of a share and one share of our common stock (depending upon the
average trading price of our common stock on the stock purchase
date, as described below); and
o we will pay the holder or the holder will pay us, as specified in
the final prospectus supplement, contract fees at the contract
fee rate of [ ]% of the stated amount per year, each as described
below; and
a subordinated deferrable note of Countrywide Home Loans that is
guaranteed by us on a subordinated basis
o having a principal amount equal to the stated amount; and
o bearing interest at a rate of [ ]%, subject to a call option
granted to Goldman, Sachs & Co., whom we refer to as the call
option holder, that (when added to the call options underlying
all other units) will entitle the call option holder to acquire
the notes underlying the units on or before the last quarterly
payment date before the stock purchase date in exchange for the
total call option exercise consideration as described below.
As long as a purchase contract remains in effect, the purchase
contract, and the note or other pledged securities securing it (and, for so
long as the call option relating to those pledged securities is
exercisable, the obligations of the holder to the call option holder),
cannot be separated and the holder may transfer them only as an integrated
unit, unless the holder pledges alternative collateral as described below.
Between the date the units are issued and the stock purchase date, the
holder will be entitled to receive cash payments totaling [ ]% of the
stated amount per year, payable in arrears on the [ ], [ ], [ ] and [ ] of
each year beginning on [ ] (unless deferred as described below). Those
payments will consist of interest payments on the notes or other pledged
securities plus any contract fees payable by us or net of the contract fees
payable by the holder, as applicable. If the holder does not provide cash
as substitute collateral to settle the underlying purchase contract, in the
manner described below, cash proceeds received from the sale of the note or
other pledged securities will be applied on the stock purchase date to your
purchase of shares of our common stock under the terms of the purchase
contract.
You will pledge the note underlying a unit to the collateral agent to
secure your obligations to us under the purchase contract and the call
option holder under the call option. If treasury securities are exchanged
for pledged securities, upon exercise of the call options, the treasury
securities will automatically be substituted as pledged securities.
Each holder, by accepting the units, will be considered to have
o irrevocably agreed to be bound by the terms of the master unit
agreement, pledge agreement, call option agreement, purchase
contracts and call options, for so long as the holder remains a
holder of those units, and
o appointed the unit agent under the master unit agreement as the
holder's agent to enter into and perform the purchase contracts
and call options on behalf of the holder.
FORMATION OF THE UNITS
At the closing of the offering of the units, the underwriters will (1)
enter into purchase contracts with us and (2) purchase notes from
Countrywide Home Loans for cash. The underwriters will fund that cash
payment partially by the sale of the units to the initial investors and
partially by the sale of call options (on behalf of the initial investors)
to the call option holder. The notes will then be pledged to the collateral
agent to secure the obligations owed to us under the purchase contracts and
the obligations owed to the call option holder under the call options. The
right to purchase shares of our common stock under a purchase contract,
together with the notes or other pledged securities, subject to (1) the
obligations owed to us under that purchase contract, (2) the obligations
owed to the call option holder under the call option relating to the notes
or other pledged securities and (3) the pledge arrangements securing the
foregoing obligations, are collectively referred to in this prospectus
supplement as a "unit."
Each holder of units will have the right, at any time on or before the
second business day before the stock purchase date, to substitute for the
then existing pledged securities treasury securities that will generate
payments to satisfy the holder's obligations under the underlying purchase
contracts. If a holder of units exercises its right to substitute treasury
securities for the notes as pledged securities, the notes will no longer
secure the holder's obligations to purchase our common stock under the
purchase contracts but will continue to secure the holder's obligations to
deliver the notes to the call option holder upon exercise of the call
option. The units will then become "stripped units" that will no longer
generate cash payments, other than contract fees payable by us, if
required, under the terms of the underlying purchase contracts or be
interchangeable with the units. We will endeavor to list the stripped units
on the New York Stock Exchange if a sufficient number of stripped units are
created.
A holder of units may exercise the right referred to in the preceding
paragraph by presenting and surrendering at the offices of the unit agent
the certificate evidencing the units, together with the completed and
executed request form to create stripped units, and concurrently delivering
to the collateral agent treasury securities that will generate, on the
stock purchase date, an amount of cash equal to the total stated amount of
the units. If treasury securities are the pledged securities underlying the
units, the right must be exercised with respect to a number of units that
will result in the release of treasury securities in denominations of
$1,000 and integral multiples of $1,000. A certificate representing the
newly created stripped units to replace the surrendered units will then be
issued and delivered to the holder or its designee. In addition, the
pledged securities previously underlying the units will then be released
from the pledge under the pledge agreement and delivered to the holder or
its designee, upon payment by the holder of any transfer or similar taxes
payable in connection with the transfer of units or previously pledged
securities to any person other than the holder.
We will enter into:
o a master unit agreement with [ ], as unit agent, governing the
appointment of the unit agent as the agent and attorney-in-fact
for the holders of the units, the purchase contracts, the
transfer, exchange or replacement of certificates representing
the units and certain other matters relating to the units and
o a pledge agreement with [ ], as collateral agent, and Goldman,
Sachs & Co., as the call option holder, creating a pledge and
security interest for our benefit to secure the obligations of
holders of units under the purchase contracts and a pledge and
security interest for the benefit of the call option holder to
secure the obligations of the holders of units under the call
options.
In addition, the unit agent will enter into a call option agreement
with the call option holder governing the call options.
DESCRIPTION OF THE PURCHASE CONTRACTS
The purchase contracts will be governed by the master unit agreement.
Each purchase contract underlying a unit will require the holder of that
unit to purchase from us, and us to sell to the holder, on the stock
purchase date, for cash in an amount equal to $[ ], a number of shares of
our common stock equal to the settlement rate. The settlement rate will be
calculated as follows (subject to adjustment as described below under
"--Anti-Dilution Adjustments"):
(1) if the average trading price is greater than or equal to the
threshold appreciation price of $[ ] (that is, [ ]% higher than
the stated amount), the settlement rate will be [ ];
(2) if the average trading price is between the threshold
appreciation price and the stated amount, the settlement rate
will equal the stated amount divided by the average trading price
(that is, the shares deliverable under the contract will have a
value, based on the average trading price of our common stock,
equal to the stated amount); and
(3) if the average trading price is less than or equal to the stated
amount, the settlement rate will be one.
"Average trading price" means the average of the closing prices per
share of our common stock on each of the 20 consecutive trading days ending
on the last trading day before the stock purchase date.
"Closing price" of a share of our common stock on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of our common stock on the New York
Stock Exchange on that date, or if our common stock is not listed for
trading on the New York Stock Exchange on that date, as reported in the
composite transactions for the principal U.S. securities exchange on which
our common stock is so listed, or if our common stock is not so listed on a
U.S. national or regional securities exchange, as reported by The Nasdaq
Stock Market, or if our common stock is not so reported, the last quoted
bid price of our common stock in the over-the-counter market as reported by
the National Quotation Bureau or similar organization, or if that bid price
is not available, the market value of our common stock on that date as
determined by a nationally recognized investment banking firm retained by
us for this purpose.
"Trading day" means a day on which our common stock (1) is not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business and (2) has
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of our common stock.
We will not issue any fractional shares under the purchase contracts.
In place of a fraction of a share otherwise issuable in respect of purchase
contracts being settled by a holder of units, the holder will be entitled
to receive an amount of cash equal to that fraction times the average
closing price.
Cash payments on the units will accrue at a rate per year that is
greater than the current dividend yield on our common stock. However, since
the number of shares of our common stock issuable upon settlement of each
purchase contract may decline by up to approximately [ ]% as the average
closing price increases, the opportunity for equity appreciation afforded
by an investment in the units is less than that afforded by a direct
investment in our common stock.
Prior to the stock purchase date, the shares of our common stock
purchasable on settlement of purchase contracts will not be considered to
be outstanding for any purpose, and you will not have any voting rights,
rights to dividends or other distributions or other rights or privileges of
our stockholders by virtue of holding units.
SETTLEMENT
In order to settle the purchase contracts underlying the units, the
holder of the units, by no later than 10:00 a.m., New York City time, on
the stock purchase date, will be required to deliver payment, at the
offices of the unit agent, of an amount equal to the total stated amount of
such units; provided, however, that the holder's obligation to satisfy the
purchase contracts may be offset by any amounts due and owing by us to the
holder. The shares of our common stock purchased on settlement of the
purchase contracts will then be issued and delivered to the holder or its
designee and the pledged securities securing the purchase contracts (or, in
the case of treasury securities, the proceeds from the payment of those
treasury securities at maturity) will then be released from the pledge
under the pledge agreement and delivered to the holder or its designee,
upon presentation and surrender of the certificate evidencing those units
and payment by the holder of any transfer or similar taxes payable in
connection with the issuance of shares of our common stock or the transfer
of pledged securities to any person other than the holder.
On the stock purchase date, if a holder of units has not delivered
cash to settle the underlying purchase contracts in the manner described
above and no event described under "--Termination" below has occurred, then
o the unit agent will notify the collateral agent and the
collateral agent, on behalf of the holder, will, as put agent,
exercise the note put option as described below,
o a portion of the proceeds from the exercise of the note put
option (or, if treasury securities underlie the units, a portion
of the proceeds from the payment of the treasury securities at
maturity) will be applied to satisfy in full the holder's
obligation to purchase shares of our common stock under the
purchase contracts,
o the remainder of the proceeds, if any, will be paid to the holder
and
o shares of our common stock will be issued and delivered to the
holder or its designee, upon presentation and surrender of the
certificate evidencing the units and payment by the holder of any
transfer or similar taxes payable in connection with the issuance
of our common stock to any person other than the holder.
EARLY SETTLEMENT
Prior to the stock purchase date, if we are involved in a merger in
which at least 30% of the consideration for shares of our common stock
consists of cash or cash equivalents ("cash merger"), on or after the date
of the cash merger each holder of the units has the right to accelerate and
settle the underlying purchase contracts. We refer to this right as the
"early settlement right." We will provide each of the holders with a notice
of the completion of a cash merger. The notice will specify a date on which
the optional early settlement will occur and a date by which each holder's
early settlement right must be exercised. The notice will set forth, among
other things, the applicable settlement rate and the amount of the cash,
securities and other consideration receivable by the holder upon
settlement. To exercise your early settlement right, you must deliver to
the unit agent, on or before the early settlement date, the certificate
evidencing your units and payment of the applicable purchase price in the
form of a certified or cashier's check. If you exercise your early
settlement right, we will deliver or cause to be delivered to you the cash,
securities and other property as set forth in the notice.
CONTRACT FEES
We may be required to pay contract fees to the holders of units or the
holders of the units may be required to pay contract fees to us.
Any obligation of the holders of units to pay contract fees to us will
be funded out of interest payments that will be made on the pledged
securities. If those payments are insufficient to cover the obligation of
the holders to pay contract fees, that obligation will be deferred until
the earlier of the date enough cash is available and the stock purchase
date.
Our obligation to pay contract fees to the holder of units is
subordinated and junior in right of payment to our obligations under our
senior indebtedness as defined below, in a manner substantially similar to
the manner in which the notes are subordinated as described under
"Description of the Notes" below.
So long as no default in our obligations under the master unit
agreement, pledge agreement and call option agreement has occurred and is
continuing, we will have the right to defer the payment of contract fees at
any time or from time to time for a period not extending beyond the stock
purchase date. To exercise this right, we must give the holders and the
unit agent notice at least five business days before the earliest of
(1) the date the payment would otherwise have been payable,
(2) the date we are required to give notice to any securities
exchange or to holders of units of the record date or the date
the payment is payable and
(3) the record date.
During any deferral period, neither we nor Countrywide Home Loans may
take any of the actions that we or Countrywide Home Loans would be
prohibited from taking during an extension period as described below.
Any deferred contract fees will bear additional contract fees at [ ]%
(the "deferral rate") (compounding on each succeeding quarterly payment
date) until paid. Contract fees payable for any period will be computed on
the basis of a 360-day year consisting of twelve 30-day months. Contract
fees will accrue from the date of issuance of the units to the stock
purchase date and will be payable in arrears on the quarterly payment dates
(unless deferred as described above). If the purchase contracts are
terminated, the right of holders of units to receive contract fees
(including any deferred contract fees) will also terminate.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the settlement rate may be adjusted if
certain events occur, including:
(1) the payment of a stock dividend or other distributions on our
common stock;
(2) the issuance to all holders of our common stock of rights or
warrants entitling them to subscribe for or purchase shares of
our common stock at less than the current market price, as
defined below;
(3) subdivisions of shares of our common stock (including an
effective subdivision of the shares through reclassification of
our common stock);
(4) distributions to all holders of our common stock of evidences of
indebtedness, other securities, cash or other assets (excluding
any dividend or distribution covered by clause (1) or (2) above
and any dividend or distribution paid exclusively in cash);
(5) distributions consisting exclusively of cash to all holders of
our common stock in a total amount that, when combined with (a)
other all-cash distributions made within the preceding 12 months
and (b) the cash and the fair market value, as of the date of
expiration of the tender or exchange offer referred to below, of
the consideration paid in respect of any tender or exchange offer
by us or a subsidiary for our common stock concluded within the
preceding 12 months, exceeds 15% of our total market
capitalization (the total market capitalization being the product
of the current market price of our common stock multiplied by the
number of shares of our common stock then outstanding) on the
date fixed for the determination of stockholders entitled to
receive such distribution; and
(6) the successful completion of a tender or exchange offer made by
us or any subsidiary for our common stock which involves a total
consideration that, when combined with (a) any cash and the fair
market value of other consideration payable in respect of any
other tender or exchange offer by us or a subsidiary for our
common stock concluded within the preceding 12 months and (b) the
total amount of any all-cash distributions to all holders of our
common stock made within the preceding 12 months, exceeds 15% of
our total market capitalization on the date of expiration of that
tender or exchange offer.
The "current market price" per share of our common stock on any day
means the average of the daily closing prices for the five consecutive
trading days selected by us commencing not more than 20 trading days
before, and ending not later than, the earlier of the day in question and
the day before the "ex date" regarding the issuance or distribution
requiring the computation. For purposes of this paragraph, the term "ex
date," when used regarding any issuance or distribution, shall mean the
first date on which our common stock trades without the right to receive
that issuance or distribution.
Some reclassifications, consolidations, mergers, sales or transfers of
assets or other transactions may cause shares of our common stock to be
converted into the right to receive other securities, cash or property. If
this happens, each purchase contract would, without the consent of the
holders of units, become a contract to purchase only the kind and amount of
securities, cash or other property that the holder would be entitled to
receive if the holder had settled its purchase contract immediately before
that transaction.
If at any time we make a distribution of property to our stockholders
which would be taxable to our stockholders as a dividend for U.S. federal
income tax purposes (that is, distributions of evidences of our
indebtedness or our assets, but generally not stock dividends or rights to
subscribe for capital stock) and, under the terms of the settlement rate
adjustment provisions of the master unit agreement, the settlement rate is
increased, that increase may be considered to be the receipt of taxable
income to holders of units. See "U.S. Federal Income Tax
Consequences--Adjustment of Settlement Rate."
In addition, we may increase the settlement rate if our board of
directors deems it advisable to avoid or diminish any income tax to holders
of shares of our common stock resulting from any dividend or distribution
of shares (or rights to acquire shares) or from any event treated as a
dividend or distribution for income tax purposes or for any other reasons.
Adjustments to the settlement rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the settlement rate will be
required unless the adjustment would require an increase or decrease of at
least one percent in the settlement rate. If any adjustment is not required
to be made because it would not change the settlement rate by at least one
percent, then the adjustment will be carried forward and taken into account
in any subsequent adjustment.
We will be required, as soon as practicable, following the occurrence
of an event that requires or permits an adjustment in the settlement rate,
to provide written notice to the holders of units of the occurrence of that
event. We will also be required to deliver a statement in reasonable detail
setting forth the method by which the adjustment to the settlement rate was
determined and setting forth the revised settlement rate.
TERMINATION
The purchase contracts, and our rights and obligations and the rights
and obligations of the holders of the units under the purchase contracts
(including the right to receive or obligation to pay contract fees or
deferred contract fees and the right and obligation of the holders to
purchase and us to sell shares of our common stock), will automatically
terminate if we become subject to certain events of bankruptcy, insolvency
or reorganization. Upon any termination, the call options will terminate
and the pledged securities will be distributed in the manner described
below.
DESCRIPTION OF THE CALL OPTIONS
At the closing of the offering of the units, the underwriters (on
behalf of the initial investors in the units) will sell the call options to
the call option holder at a price equal to $[ ] per call option. The call
options will be governed by the call option agreement.
Each call option underlying a unit, when combined with the call
options underlying all other units, will entitle the call option holder to
acquire the notes underlying the units, on or before the date the call
options expire, defined as the "call option expiration date," in exchange
for the total call option exercise consideration. The total call option
exercise consideration will consist of:
(1) treasury securities that will generate, by each quarterly payment
date falling after the settlement date for the call options,
defined as the "call settlement date," and on or before the stock
purchase date, an amount of cash equal to the aggregate interest
payments that are scheduled to be payable on the notes underlying
the units on that quarterly payment date (assuming for this
purpose, even if not true, that (a) no interest payments will
then have been deferred and (b) the interest rate on the notes
remains at the initial note rate);
(2) treasury securities that will generate, by the stock purchase
date, an amount of cash equal to the total stated amount of the
units; and
(3) if Countrywide Home Loans is, at the call settlement date,
deferring interest payments on the notes as described below, an
amount in cash equal to (a) the total unpaid interest payments on
the notes underlying the units accrued to the call settlement
date, if the call settlement date is a quarterly payment date,
and (b) the total unpaid interest payments on the notes
underlying the units accrued to the quarterly payment date before
the call settlement date plus interest on the notes at the
deferral rate for the period from and including the quarterly
payment date to, but excluding, the call settlement date, if the
call settlement date is not a quarterly payment date.
The call option holder may exercise all of its call options (but not
less than all) by (1) delivering to the unit agent and the collateral
agent, on or before the call settlement date, a notice stating that the
call option holder is exercising its call options and specifying the call
settlement date (which may not be after the call option expiration date)
and (2) delivering to the collateral agent, by noon, New York City time, on
the call settlement date, the total call option exercise consideration.
Under the terms of the pledge agreement, when the collateral agent receives
the total call option exercise consideration, the collateral agent will
transfer the notes underlying the units to the call option holder or its
designee free and clear of the pledge and security interest created by the
pledge agreement. In addition, the treasury securities included in the
total call option exercise consideration will automatically be substituted
for the notes as pledged securities, and the call option holder will cease
to have a security interest in the pledged securities.
If the call options are exercised, the unit agent will, not later than
three business days after the call settlement date, mail notice of the
exercise to the holders of the units.
The call options, and the rights and obligations of the call option
holder and of the holders of the units under the call options, will
automatically terminate if we become subject to certain events of
bankruptcy, insolvency or reorganization.
THE PLEDGED SECURITIES AND THE PLEDGE AGREEMENT
GENERAL
Under the pledge agreement, the pledged securities will be pledged to
the collateral agent, for our benefit and the benefit of the call option
holder, to secure (1) the obligations of holders of units to purchase our
common stock under the purchase contracts and (2) the obligations of
holders of units to deliver the underlying notes to the call option holder
if the call options are exercised. The pledged securities will initially
consist of the notes. If treasury securities are exchanged for pledged
securities upon exercise of the call options or in connection with the
creation of stripped units, the treasury securities will automatically be
substituted as pledged securities and the former pledged securities will
automatically be released from the pledge and security interest created by
the pledge agreement.
The rights of the holders of the units to the underlying pledged
securities will be subject to the pledge and security interest created by
the pledge agreement. No holder of units will be permitted to withdraw the
pledged securities underlying the units from the pledged arrangement except
upon the settlement or termination of the purchase contracts or as
described under "-- Formation of the Units" above. Subject to the pledge
and security interest, however, each holder of units will have full
beneficial ownership of the underlying pledged securities and will be
entitled (directly or through the collateral agent) to all of the rights
provided by the pledged securities. We and the call option holder will have
no rights in pledged securities other than our respective security
interests.
QUARTERLY PAYMENTS ON PLEDGED SECURITIES
The collateral agent, upon receipt of any payments of interest on the
pledged securities, will distribute those payments to the unit agent, which
will, in turn, distribute that amount together with the contract fees to
the holders of units on the record date. As long as the units remain in
book-entry only form, the record date for any payment will be one business
day before the payment date.
SETTLEMENT OF PURCHASE CONTRACTS
On the stock purchase date, the pledged securities (or, if treasury
securities have been exchanged for the pledged securities, the amount paid
on those treasury securities at maturity) will be released from the pledge
and security interest created by the pledge agreement and distributed or
delivered as specified under "Description of the Purchase
Contracts--Settlement."
TERMINATION OF PURCHASE CONTRACTS
Upon termination of the purchase contracts (see "Description of the
Purchase Contracts--Termination"), the collateral agent will release the
pledged securities underlying the units to the unit agent for distribution
to the holders of the units, upon presentation and surrender of the
certificates evidencing those units. If upon that termination any holder
would otherwise be entitled to receive a principal amount of treasury
securities of any series that is not an integral multiple of $1,000, the
unit agent will distribute to that holder treasury securities of the series
in a principal amount equal to the next lower integral multiple of $1,000.
The unit agent will sell the treasury securities not otherwise distributed
to the holder (together with the treasury securities of that series not
otherwise distributed to other holders) and will distribute the net
proceeds to all the holders (in accordance with their respective interests
in those treasury securities).
CERTAIN PROVISIONS OF THE MASTER UNIT AGREEMENT, PLEDGE AGREEMENT
AND CALL OPTION AGREEMENT
Distributions on the units will be payable, purchase contracts (and
related documents) will be settled and transfers of the units will be
registrable at the office of the unit agent in the Borough of Manhattan,
The City of New York. In addition, in the event that the units do not
remain in book-entry form, payment of distributions on the units may be
made, at our option, by check mailed to the address of the persons shown on
the unit register.
If any quarterly payment date, the stock purchase date or any put date
is not a business day, then any payment required to be made on that date
must be made on the next business day (and so long as such payment is made
on the next business day, without any interest or other payment on account
of any such delay), except that if the next business day is in the next
calendar year, payment or settlement will be made on the prior business day
with the same force and effect as if made on the payment date. A "business
day" means any day other than Saturday, Sunday or any other day on which
banking institutions in The City of New York or the State of California are
authorized or obligated by law or executive order to be closed.
If you fail to surrender the certificate evidencing your units to the
unit agent on the stock purchase date, the shares of our common stock
issuable in settlement of the related purchase contracts will be registered
in the name of the unit agent. These shares of our common stock, together
with any distributions on them, will be held by the unit agent, as agent
for your benefit, until the certificate is presented and surrendered or you
provide satisfactory evidence that the certificate has been destroyed, lost
or stolen, together with any indemnity that may be required by the unit
agent and us.
If the purchase contracts have terminated before the stock purchase
date, the related pledged securities have been transferred to the unit
agent for distribution to the holders and you as a holder of units fail to
present and surrender the certificate evidencing your units to the unit
agent, the pledged securities that would otherwise be delivered to you and
any related payments will be held by the unit agent as agent for your
benefit, until you present and surrender the certificate or provide the
evidence and indemnity described above.
The unit agent will not be required to invest or to pay interest on
any amounts held by it before distribution.
No service charge will be made for any registration of transfer or
exchange of the units, except for any applicable tax or other governmental
charge.
MODIFICATION
The master unit agreement, the pledge agreement and the call option
agreement will contain provisions permitting the relevant parties to modify
the terms of those agreements, the purchase contracts and the call options
with the consent of the holders of a majority of the units at the time
outstanding (or, in the case of modifications affecting only holders of
units or stripped units, the consent of the holders of a majority of the
units or stripped units, as the case may be). However, no modification may,
without the consent of the holder of each outstanding unit affected by the
modification:
(1) change any payment date;
(2) change the amount or type of pledged securities required to be
pledged to secure obligations under the units, impair the right
of the holder of any units to receive distributions on the
pledged securities underlying those units or otherwise adversely
affect the holder's rights in or to pledged securities;
(3) change the place or currency of payment for any amounts payable
in respect of the units, increase any amounts payable by holders
in respect of units or decrease any other amounts receivable by
holders in respect of units;
(4) impair the right to institute suit for the enforcement of any
purchase contract;
(5) reduce the amount of shares of our common stock purchasable under
any purchase contract, increase the price to purchase shares of
our common stock on settlement of any purchase contract, change
the stock purchase date or otherwise adversely affect the
holder's rights under any purchase contract;
(6) reduce the amount payable on exercise of any call option, extend
the call option expiration date or otherwise adversely affect the
holder's rights under any call option; or
(7) reduce the above-stated percentage of outstanding units the
consent of whose holders is required for the modification or
amendment of the provisions of the master unit agreement, the
pledge agreement, the call option agreement, the purchase
contracts or the call options.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
We will agree in the master unit agreement that we will not merge with
or into or consolidate with any other entity or sell, assign, transfer,
lease or convey all or substantially all of our properties and assets to
any person, firm or corporation unless:
(1) we are the continuing corporation or the successor corporation is
a corporation organized under the laws of the United States of
America or a state thereof;
(2) the successor corporation expressly assumes our obligations under
the master unit agreement, the pledge agreement and the purchase
contracts; and
(3) we or the successor corporation is not, immediately after the
merger, consolidation, sale, assignment, transfer, lease or
conveyance, in default in the performance of any of our or its
obligations under the purchase contracts and the master unit
agreement or the pledge agreement.
TITLE
We, the unit agent, the collateral agent and the call option holder
may treat the registered holder of any units as the absolute owner of those
units for the purpose of making payment and settling the related purchase
contracts or call options and for all other purposes.
REPLACEMENT OF UNITS CERTIFICATES
If physical certificates are issued, any mutilated certificate will be
replaced by us at the expense of the holder when that certificate is
surrendered to the unit agent. We will replace certificates that are
destroyed, lost or stolen at your expense upon delivery to us and the unit
agent of satisfactory evidence that the certificate has been destroyed,
lost or stolen, together with any indemnity that may be required by the
unit agent and us.
We, however, are not required to issue any certificates representing
units on or after the stock purchase date or after the purchase contracts
have terminated. In place of the delivery of a replacement certificate
following the stock purchase date, the unit agent, upon delivery of the
evidence and indemnity described above, will deliver the shares of our
common stock issuable under the purchase contracts included in the units
evidenced by that certificate, or, if the purchase contracts have
terminated prior to the stock purchase date, transfer the pledged
securities related to the units evidenced by that certificate.
GOVERNING LAW
The master unit agreement, the pledge agreement, the call option
agreement, the purchase contracts and the call options will be governed by,
and construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE UNIT AGENT
[ ] will initially act as unit agent. The unit agent will act as the
agent for the holders of units from time to time. The master unit agreement
will not obligate the unit agent to exercise any discretionary actions in
connection with a default under the terms of the master unit agreement, the
pledge agreement, the call option agreement, the purchase contracts, the
call options or the pledged securities.
The master unit agreement will contain provisions limiting the
liability of the unit agent. The master unit agreement will contain
provisions under which the unit agent may resign or be replaced.
Resignation or replacement of the unit agent will be effective upon
appointment of a successor.
The unit agent is one of a number of banks with which we maintain
ordinary banking and trust relationships.
INFORMATION CONCERNING THE COLLATERAL AGENT
[ ] will initially act as collateral agent. The collateral agent will
act solely as our agent or agent of the call option holder and will not
assume any obligation or relationship of agency or trust for or with any of
the holders of the units except for the obligations owed by a pledgee of
property to the owner of the property under the pledge agreement and
applicable law.
The pledge agreement will contain provisions limiting the liability of
the collateral agent. The pledge agreement will contain provisions under
which the collateral agent may resign or be replaced. Resignation or
replacement of the collateral agent will be effective upon the appointment
of a successor.
The collateral agent is one of a number of banks with which we
maintain ordinary banking and trust relationships.
DESCRIPTION OF THE NOTES
The notes are to be issued under an indenture among Countrywide Home
Loans, us, as guarantor, and The Bank of New York, as trustee under the
indenture. The indenture will be qualified under the Trust Indenture Act.
The notes will be subordinated to the senior indebtedness of
Countrywide Home Loans.
The notes will mature on [ ]. The notes will not be redeemable at the
option of Countrywide Home Loans before the maturity date.
INTEREST
Interest on the notes will accrue from the first date of issuance of
the notes at an initial rate of [ ]% per year (the "note rate") and will be
payable quarterly in arrears on each quarterly payment date (each, an
"interest payment date"), subject to the deferral provisions described
below. Interest will be payable to the holders of the notes on each record
date, which will be one business day before the relevant interest payment
date. The amount of interest payable for any period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. If any date on
which interest is payable on the notes is not a business day, then payment
of the interest payable on that date will be on the next business day (and
if payment is made on the next business day, without any interest or other
payment as a result of such delay), except that if that business day is in
the next succeeding calendar year, the payment will be made on the prior
business day, in each case with the same force and effect as if made on the
date that payment was originally payable.
INTEREST RATE INCREASES
By 9:30 a.m., New York City time, on the call option expiration date,
the rate increase agent will determine whether the then current total
market value of the notes underlying the units is at least equal to 100.25%
of the cash equivalent of the total call option exercise consideration (as
defined below). If the rate increase agent determines that it is (or the
notes rate is already equal to or greater than the maximum note rate, as
defined below), interest on the notes will continue to accrue at the
initial note rate. If the rate increase agent determines that it is not
(and the note rate is less than the maximum note rate), the rate increase
agent will, by 9:30 a.m., New York City time, on the call option expiration
date, select an increased interest rate equal to the lower of (1) the rate
that it determines is sufficient to cause the then current total market
value of such notes to be at least equal to 100.25% of the cash equivalent
of the total call option exercise consideration and (2) the maximum note
rate (and notify us and the call option holder of such increased rate). The
note rate will then become that increased rate.
The "cash equivalent of the total call option exercise consideration"
means the cash value on the call option expiration date of the total call
option exercise consideration, assuming for this purpose, even if not true,
that the call options are exercised on the call option expiration date, and
further assuming that (1) the treasury securities included in the total
call option exercise consideration are highly liquid treasury securities
maturing on or within 35 days before the stock purchase date (as designated
in good faith by the call option holder in a notice delivered to the rate
increase agent by 8:30 a.m., New York City time, on the call option
expiration date or, if the call option holder fails to so designate those
treasury securities, as designated in good faith by the rate increase
agent, in either case in a manner intended to minimize the cash equivalent
of the total call option exercise consideration) and (2) those treasury
securities are valued based on the ask-side price of the treasury
securities at 9:00 a.m., New York City time, on the call option expiration
date (as determined on a same day settlement basis by a reasonable and
customary means selected in good faith by the rate increase agent and
notified to the call option holder before that time) plus accrued interest
to that date.
"Maximum note rate" means (1) the yield to maturity (calculated in
accordance with standard market practice) corresponding to the bid-side
price at 9:00 a.m., New York City time, on the call option expiration date
(as determined by a reasonable and customary means selected in good faith
by the rate increase agent and notified to the call option holder before
that time) of highly liquid treasury securities maturing on or around the
note maturity date as selected in good faith by the rate increase agent
plus (2) [ ] basis points ([ %]).
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no event of default has occurred and is continuing,
Countrywide Home Loans will have the right under the indenture at any time
during the term of the notes to defer the payment of interest for a period
not extending beyond the maturity date (any such period of deferral shall
be referred to as an "extension period"). At the end of an extension
period, Countrywide Home Loans must pay all interest then accrued and
unpaid (together with accrued interest at the deferral rate compounded on
each succeeding interest payment date). During an extension period,
interest will continue to accrue on the notes and holders of notes will be
required to accrue interest income for U.S. federal income tax purposes
before the receipt of cash attributable to that income. See "U.S. Federal
Income Tax Consequences--Interest Received on the Notes".
During any extension period, we and Countrywide Home Loans may not
take any of the prohibited actions described under "--Certain Covenants of
Countrywide Credit Industries and Countrywide Home Loans."
Prior to the expiration of any extension period, Countrywide Home
Loans may further extend the extension period, but not beyond the maturity
date of the notes. Upon the termination of any extension period and the
payment of all amounts then due on any interest payment date, Countrywide
Home Loans may elect to begin a new extension period, subject to the same
requirements as described above. No interest will be due and payable during
an extension period. Countrywide Home Loans must give the trustee written
notice of its election of any extension period (or its further extension)
at least five business days prior to the earlier of:
(1) the date the interest on the notes would have been payable except
for the election to begin or extend the extension period;
(2) the date the trustee is required to give notice to any securities
exchange or to holders of notes of the record date or the date
the interest is payable; and
(3) the record date.
The trustee must give notice of Countrywide Home Loans' election to
begin or extend an extension period to the holders of the notes. There is
no limitation on the number of times that Countrywide Home Loans may elect
to begin an extension period.
NOTE PUT OPTIONS
Each holder of notes will have the right, defined as a "note put
option," to require Countrywide Home Loans to repurchase its notes, on the
stock purchase date or, in the event Countrywide Credit Industries becomes
involved in a cash merger before the stock purchase date, on or after the
date of the cash merger, for a purchase price, defined as the "put price,"
equal to the principal amount of the notes plus unpaid interest accrued, to
but not including, the stock purchase date, but only if the cash received
on the exercise of the option is used to settle the related purchase
contracts.
Each holder of notes or the put agent on behalf of the holder may
exercise the note put option related to its securities by presenting and
surrendering the certificate evidencing those securities, at the offices of
the trustee, with the form of "Notice of Exercise of Put Right" on the
reverse side of the certificate completed and executed as indicated, by
10:00 a.m., New York City time, on the stock purchase date.
CERTAIN COVENANTS OF COUNTRYWIDE CREDIT INDUSTRIES AND COUNTRYWIDE HOME LOANS
We and Countrywide Home Loans will covenant that, during an extension
period or during the continuance of an event of default, we will not
(1) declare or pay dividends on, or make a distribution on, or
redeem, purchase or acquire, or make a liquidation payment with
respect to, any of our respective capital stock, other than
(a) purchases or acquisitions of shares of that capital stock or
rights to acquire that capital stock in connection with the
satisfaction by us and Countrywide Home Loans of our
respective obligations under any of our benefit plans for
our and our subsidiaries' directors, officers or employees
or dividend reinvestment plans,
(b) as a result of a reclassification of that capital stock or
rights to acquire that capital stock or the exchange or
conversion of one class or series of that capital stock or
rights to acquire that capital stock for another class or
series of that capital stock or rights to acquire that
capital stock,
(c) the purchase of fractional interests in shares of that
capital stock pursuant to the conversion or exchange
provisions of that capital stock or the security being
converted or exchanged,
(d) dividends and distributions made on that capital stock or
rights to acquire that capital stock with that capital stock
or rights to acquire that capital stock, and
(e) any declaration of a dividend in connection with the
implementation of any stockholders' rights plan, or the
redemption of rights under any such plan in the future,
or make any guarantee payments with respect to any of the foregoing,
and
(2) make any payment of interest, principal or any premium on or
repay, repurchase or redeem any debt securities, including any
guarantees, issued by us or Countrywide Home Loans that rank
equally with or junior to the guarantees of the notes or the
notes.
GUARANTEES
We will unconditionally guarantee, on a subordinated basis, the due
and punctual payment of principal of and interest on the notes, when and as
the same shall become due and payable, whether at the maturity, by
declaration of acceleration or otherwise.
EVENTS OF DEFAULT
The indenture provides that the events of default for the notes will
be:
(a) failure to pay principal on any notes when due;
(b) failure to pay interest within 30 days of the date when due;
(c) failure to perform for 90 days after notice any other covenant in
the indenture;
(d) certain events of bankruptcy, insolvency or reorganization; and
(e) failure to pay the put price when due upon exercise of a note put
option.
If any event of default occurs and is continuing, either the trustee
or the holders of at least 25% in principal amount of the outstanding notes
may declare the notes due and payable immediately, but upon certain
conditions the declaration may be annulled and past defaults may be waived
by holders of a majority in principal amount of the notes on behalf of the
holders of all the notes.
The trustee will, within 90 days after the occurrence of an event of
default, give the holders of the notes notice of that event of default
known to it if uncured or not waived, provided that, except in the case of
an event of default in the payment of principal of or interest on the
notes, notice shall not be given until 30 days after the occurrence of an
event of default. Except in the case of an event of default in the payment
of principal of or interest on the notes, the trustee may withhold notice
of the event of default if it determines in good faith that withholding
that notice is in the interest of the holders of the notes.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The indenture permits us and Countrywide Home Loans, without the
consent of the holders of the notes, to consolidate with or merge into any
other corporation or transfer or lease our respective assets substantially
as an entirety to any person provided that:
(1) the successor is a corporation organized under the laws of any
domestic jurisdiction;
(2) the successor corporation assumes our or Countrywide Home Loans'
obligations, as applicable, on the notes and the guarantees and
under the indenture;
(3) after giving effect to the transaction no event of default, and
no event which, after notice or lapse of time, would become an
event of default, shall have happened and be continuing; and
(4) certain other conditions are met.
The general provisions of the indenture do not afford holders of the
notes protection in the event of a highly leveraged or other transaction
involving us or Countrywide Home Loans that may adversely affect holders of
the notes.
MODIFICATION OF THE INDENTURE
Countrywide Home Loans and the trustee may, with the consent of the
holders of a majority in aggregate principal amount of the notes, modify
the indenture or the rights of the holders of notes. However, no
modifications may, without the consent of the holder of each note:
(1) change the maturity date, or reduce the principal amount or the
rate of payment of interest of the notes;
(2) reduce the percentage of notes indicated above, the consent of
the holders of which is required for any supplemental indenture
or for waiver of compliance with certain provisions of the
indenture or certain defaults thereunder; or
(3) effect certain other changes.
The indenture also permits Countrywide Home Loans to omit compliance
with certain covenants in the indenture upon waiver by the holders of a
majority in principal amount of notes.
SATISFACTION AND DISCHARGE
The indenture provides that Countrywide Home Loans will be discharged
from any and all obligations related to the notes (except for certain
obligations to register the transfer or exchange of notes, to replace
stolen, lost or mutilated notes, to maintain paying agencies and hold
moneys for payment in trust) upon the deposit with the trustee, in trust,
of money and/or U.S. government obligations that, through the payment of
interest and principal in accordance with their terms, will provide money
in an amount sufficient to pay and discharge the principal of and interest
on the notes on their maturity date in accordance with the terms of the
indenture and the notes. This discharge may only occur if, among other
things, Countrywide Home Loans has delivered to the trustee an opinion of
counsel to the effect that Countrywide Home Loans has received from, or
there has been published by, the United States Internal Revenue Service
("IRS") a ruling, or there has been a change in tax law, in either case to
the effect that the discharge will not be deemed, or result in, a taxable
event with respect to holders of the notes.
The indenture provides Countrywide Home Loans with the option to omit
to comply with certain restrictive covenants. In order to exercise such
option, Countrywide Home Loans will be required to deposit with the trustee
money and/or U.S. government obligations, that, through the payment of
interest and principal in accordance with their terms, will provide money
in an amount sufficient to pay the principal of and interest on the notes
on their maturity date in accordance with the terms of the indenture and
the notes. Countrywide Home Loans will also be required to deliver to the
trustee an opinion of counsel to the effect that the deposit and related
covenant defeasance will not cause the holders of the notes to recognize
income, gain or loss for federal income tax purposes. If Countrywide Home
Loans exercises this option and the notes are declared due and payable
because of the occurrence of any event of default, the amount of money and
U.S. government obligations, as the case may be, on deposit with the
trustee will be sufficient to pay amounts due on the notes at their
maturity date but may not be sufficient to pay amounts due on the notes at
the time of the acceleration resulting from the event of default. However,
Countrywide Home Loans shall remain liable for such payments.
SUBORDINATION
Countrywide Home Loans' obligations under the notes will be
subordinate in right of payment to all of its present and future senior
indebtedness to the extent provided in the indenture. Upon any payment or
distribution of assets to creditors upon any liquidation, dissolution,
winding up, reorganization, assignment for the benefit of creditors,
marshaling of assets or any bankruptcy, insolvency, debt restructuring or
similar proceedings in connection with the insolvency or bankruptcy of
Countrywide Home Loans, the holders of senior indebtedness will first be
entitled to receive payment in full of all senior indebtedness before the
holders of notes will be entitled to receive or retain any payment.
No payments on account of principal of or any premium or interest on
the notes (including payments on exercise of note put options) may be made
if a default in any payment on senior indebtedness has occurred and is
continuing, or an event of default on any senior indebtedness resulting in
the acceleration of its maturity has occurred, or if any judicial
proceeding is pending with respect to any such default.
In the event the maturity of notes is accelerated, the holders of all
senior indebtedness outstanding at the time of the acceleration will first
be entitled to receive payment in full of all amounts due in respect of
such senior indebtedness before the holders of notes will be entitled to
receive or retain any payment related to the notes.
Amounts that would be due and payable by Countrywide Home Loans to
holders of units in the absence of the foregoing subordination provisions,
however, may be applied by those holders to offset their obligations under
their respective purchase contracts.
Our guarantees of the notes will be subordinated in right of payment
to our present and future senior indebtedness on terms comparable to the
subordination of the notes.
"Senior indebtedness" means:
(1) the principal and any premium and interest in respect of
indebtedness for money borrowed and indebtedness evidenced by
securities, debentures, bonds or other similar instruments;
(2) all capital lease obligations;
(3) all obligations issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all obligations
under any title retention agreement, excluding trade accounts
payable arising in the ordinary course of business;
(4) all obligations 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;
(5) all obligations of the type referred to in clauses (1) through
(4) above of others, the payment of which Countrywide Home Loans
is responsible or liable as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through
(5) above of others secured by any lien on any of our properties
or assets, whether or not the obligation is assumed by
Countrywide Home Loans,
except for:
(a) any indebtedness that states, or is issued under a deed,
indenture or other instrument that states, that it is subordinate
to or ranks equally with the notes;
(b) any indebtedness between or among Countrywide Home Loans and any
of its affiliates;
(c) the indebtedness represented by the 8% Junior Subordinated
Deferrable Interest Debentures due December 15, 2026 of
Countrywide Home Loans; and
(d) the indebtedness represented by the 8.05% Junior Subordinated
Debentures due June 15, 2027 of Countrywide Home Loans.
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. Substantially all of the indebtedness set forth under
"Capitalization" constitutes senior indebtedness.
The indenture does not limit our ability to issue additional senior
indebtedness.
FORM AND BOOK-ENTRY PROCEDURES
As long as the notes constitute pledged securities with respect to the
units, the notes will be represented by a single certificate and held for
the benefit of the unit holders. If the notes no longer constitute pledged
securities with respect to the units, the notes may be represented by one
or more global certificates registered in the name of the depositary or its
nominee. The depositary arrangements for those notes are expected to be
substantially similar to those for the units. For a description of the
depositary and the terms of the depositary arrangements for the units, see
"--Book-Entry System."
PAYMENT AND PAYING AGENTS
Payment of principal of and any premium and interest on notes will be
made at the office of the trustee in The City of New York or at the office
of the paying agent or paying agents that we may designate from time to
time, except that at Countrywide Home Loans' option Countrywide Home Loans
may make payments of interest (1) by check mailed to the address of the
holder as that address appears in the register for notes or (2) by transfer
to an account maintained by the holder as specified in that register,
provided that proper payment instructions have been received by the
relevant record date. Payment of any interest on any notes will be made to
the person in whose name the notes are registered at the close of business
on the record date for the interest, except in the case of defaulted
interest. Countrywide Home Loans may at any time designate additional
paying agents or rescind the designation of any paying agent. Countrywide
Home Loans will at all times, however, be required to maintain a paying
agent in each place of payment for the notes.
Any money deposited with the trustee or any paying agent, or then held
by us in trust, for the payment of the principal of and any premium or
interest on any note (or its put price) that remains unclaimed for two
years after the principal and any premium or interest (or put price) has
become due and payable will, at Countrywide Home Loans' request, be repaid
to Countrywide Home Loans. After that, the holder of such notes must look,
as a general unsecured creditor, only to Countrywide Home Loans for
payment.
GOVERNING LAW
The indenture and the note will be governed by and construed in
accordance with the laws of the State of New York.
INFORMATION CONCERNING THE TRUSTEE
Except as described above, the trustee is not required to exercise any
of the powers vested in it by the indenture at the request of any holder of
notes, unless the holder offers reasonable indemnity against any costs,
expenses and liabilities. The trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the
performance of its duties if the trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
The trustee is one of a number of banks with which Countrywide Home
Loans maintains ordinary banking and trust relationships.
BOOK-ENTRY SYSTEM
The Depository Trust Company (the "depositary") will act as securities
depositary for the units. The units will be issued only as fully-registered
securities registered in the name of Cede & Co. or another nominee of the
depositary. Fully-registered global security certificates representing the
total number of units, will be issued, will be deposited with the
depositary and will bear a legend regarding restrictions on their exchanges
and registration of transfer as described below.
The laws of some jurisdictions require that some purchasers of
securities take physical delivery of securities in definitive form. These
laws may impair the ability to transfer beneficial interests in the units
as long as the units are represented by global security certificates.
The depositary 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. The depositary holds securities that
its participants deposit with it. The depositary also facilitates the
settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized
book-entry changes in participants' accounts, thereby eliminating the need
for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("direct participants"). The
depositary is owned by a number of its direct participants and by the New
York Stock Exchange, the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. Access to the depositary 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 an
indirect custodial relationship with a direct participant either directly
or indirectly ("indirect participants"). The rules applicable to the
depositary and its participants are on file with the SEC.
No transfer of global security certificates, in whole or in part, may
be registered in the name of any person other than the depositary or a
nominee of the depositary unless the depositary has notified us that it is
unwilling or unable to continue as depositary for those global security
certificates or has ceased to be qualified to act as depositary under the
master unit agreement or if there occurs and continues a default by us
under the master unit agreement or the pledge agreement. All units and
portions of units represented by global security certificates will be
registered in the names as the depositary may direct.
As long as the depositary or its nominee is the registered owner of
the global security certificates, that depositary or that nominee, as the
case may be, will be considered the sole owner and holder of the global
security certificates and all units represented by them for all purposes
under the units, purchase contracts, call options, the master unit
agreement, the pledge agreement and the call option agreement. Except in
the limited circumstances referred to in the paragraph above, owners of
beneficial interests in global security certificates will not be entitled
to have the global security certificates or the underlying units registered
in their names, will not receive or be entitled to receive physical
delivery of certificates and will not be considered to be owners or holders
of those global security certificates or any underlying units for any
purpose under the units, purchase contracts, call options, the master unit
agreement, the pledge agreement and the call option agreement. All payments
on the units represented by the global security certificates and all
deliveries of pledged securities or shares of common stock to the holders
thereof will be made to the depositary or its nominee, as the case may be,
as the holder of the global security certificates.
Ownership of beneficial interests in the global security certificates
will be limited to participants or persons that may hold beneficial
interests through institutions that have accounts with the depositary.
Ownership of beneficial interests in global security certificates will be
shown only on, and the transfer of those ownership interests will be
effected only through, records maintained by the depositary or its nominee
(with respect to participants' interests) or any such participant (with
respect to interests of persons held by such participants on their behalf).
Procedures for settlement of purchase contracts on the stock purchase date
will be governed by arrangements among the depositary, participants and
persons that may hold beneficial interests through participants designed to
permit such settlement without the physical movement of certificates.
Payments, transfers, deliveries, exchanges and other matters relating to
beneficial interests in global security certificates may be subject to
various policies and procedures adopted by the depositary from time to
time. The depositary has advised us that it will not take any action
permitted to be taken by a holder of units unless directed to do so by one
or more participants to whose account the depositary interests in the
global security certificates are credited and only for the number of units
as to which the participant or participants has or have given such
direction. None of us, the unit agent nor any of our or its agents will
have any responsibility or liability for any aspect of the depositary's or
any participant's records relating to, or for payments made on account of,
beneficial interests in global security certificates, or for maintaining,
supervising or reviewing any of the depositary's records or any
participant's records relating to those beneficial ownership interests.
The information in this section concerning the depositary and its
book-entry system has been obtained from sources that we believe to be
reliable, but we do not take responsibility for its accuracy.
ACCOUNTING TREATMENT
The purchase contracts are forward transactions in our common stock.
Under generally accepted accounting principles, the purchase contracts will
not be recorded on our consolidated balance sheets but will be disclosed in
the notes to our consolidated financial statements. Upon settlement of a
purchase contract, we will receive the stated amount of that purchase
contract and will issue the requisite number of shares of our common stock.
The stated amount received will be credited to stockholders' equity
allocated between the common stock and additional paid-in capital accounts.
Before the issuance of shares of our common stock upon settlement of
the purchase contracts, we anticipate that we will reflect the units in our
diluted earnings per share calculations using the treasury stock method.
Under this method, the number of shares of our common stock used in
calculating diluted earnings per share is considered to be increased by any
excess of the number of shares issuable upon settlement of the purchase
contracts over the number of shares that could be purchased by us in the
market (at the average market price during the period) using the proceeds
received upon settlement. Consequently, we anticipate there will be no
dilutive effect on our diluted earnings per share except during periods
when the average market price of our common stock is above the threshold
appreciation price.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the principal United States federal income
tax consequences of the purchase, ownership and disposition of units, notes
and common stock is based on the views of Fried, Frank, Harris, Shriver &
Jacobson. This summary deals only with units, notes and common stock held
as capital assets by the beneficial owners of the units, notes and common
stock (referred to as "holders") that purchase units in the initial
offering at the issue price and that are
(1) citizens or individual residents of the United States,
(2) corporations, partnerships or other entities created or organized
in or under the laws of the United States, any state thereof, or
the District of Columbia (other than a partnership that is not
treated as a U.S. person under any applicable Treasury
regulations),
(3) estates the income of which is subject to United States federal
income taxation regardless of its source, or
(4) trusts if, in general, a court within the United States is able
to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to
control all substantial decisions of the trust.
In addition, this summary does not discuss all aspects of federal income
taxation that may be relevant to a particular holder in light of the
holder's particular circumstances, or to certain types of holders subject
to special treatment under United States federal income tax laws including,
but not limited to the following:
o financial institutions;
o tax-exempt organizations;
o insurance companies;
o taxpayers subject to the alternative minimum tax;
o brokers;
o dealers in securities or currencies;
o traders in securities;
o foreign persons and entities;
o certain U.S. expatriates;
o persons holding purchase contracts, notes or common stock as part
of a "straddle", "conversion" or hedging transaction; or
o persons whose functional currency (as defined in section 985 of
the Internal Revenue Code of 1986, as amended (the "Code")) is
not the U.S. dollar.
Moreover, the effect of any applicable estate and gift tax laws or state,
local or foreign tax laws is not discussed.
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY ADDRESSES
THE TAX TREATMENT OF UNITS OR INSTRUMENTS SIMILAR TO UNITS FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES. AS A RESULT, NO ASSURANCE CAN BE GIVEN
THAT THE IRS WILL AGREE WITH THE TAX CONSEQUENCES DESCRIBED IN THIS SECTION
OR THAT THESE CONSEQUENCES WILL NOT BE SUCCESSFULLY CHALLENGED. PROSPECTIVE
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE TAX
CONSEQUENCES OF AN INVESTMENT IN THE UNITS, INCLUDING THE APPLICATION OF
STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN FEDERAL OR OTHER TAX LAWS.
This summary is for general information only and is based upon the
Code, applicable Treasury regulations, published rulings, administrative
pronouncements and court decisions, all as in effect on the date of this
prospectus supplement and all of which are subject to change or differing
interpretations at any time and in some circumstances with retroactive
effect.
This discussion assumes that, in connection with the formation of the
units, the underwriters will be acting on behalf of the holders and will
(a) sell the call options to the call option holder and apply the proceeds
from that sale in an amount equal to $[ ] per note (the "call premium")
together with the amount of $[ ] per unit paid directly by the holders to
the underwriters (the "purchase price") to the purchase of the units and
(b) enter into the purchase contracts with Countrywide Credit Industries,
and that holders will assume the rights and obligations arising from these
actions undertaken on their behalf. This discussion also assumes that the
call options will be exercised on the call option expiration date.
Accordingly, this discussion does not address the tax consequences of
holding notes after the call option expiration date or of recognition of
gain or loss on a disposition of the notes after that date.
Because we will be prohibited from declaring or paying dividends if
Countrywide Home Loans exercises its right to defer the payment of interest
on the notes or if we exercise our right to defer the payment of contract
fees, we do not expect that either we or Countrywide Home Loans will
exercise our respective rights to defer those payments. Accordingly, the
following discussion assumes those payments will not be deferred.
TREATMENT OF THE CALL PREMIUM
A holder will not be subject to tax by reason of the receipt of the
call premium at the time the call premium is received. Rather, the amount
of the call premium will be included in the amount realized by a holder
when the call option is exercised (see "--Exercise of the Call Option and
Ownership of Treasury Securities," below) or the units are sold (see
"--Sale or Disposition of Units," below).
INITIAL TAX BASIS OF NOTES
The amount paid by a holder for a unit, which, for United States
federal income tax purposes, will equal the sum of the purchase price plus
the amount of the call premium deemed to have been received by the holder
and paid to Countrywide Home Loans in partial payment for the units, will
be allocated between the notes and the purchase contract included in such
unit in proportion to their respective fair market values at the time of
purchase. That allocation will establish the respective issue price of, and
each holder's initial tax basis in, the notes and the purchase contract.
Consistent with the documentation, and reasonably consistent with the facts
and circumstances, we and Countrywide Home Loans intend to take the
position that, at the time of issuance of the unit, the fair market value
of the purchase contract (including the holder's right to receive contract
fees from us) equals zero, and the entire amount paid for the unit,
including the call premium, is allocable to the notes. Under Treasury
regulations dealing with determination of the issue price of a debt
instrument that is part of an investment unit, this position will be
binding upon each holder unless the holder explicitly discloses a contrary
position on a statement attached to the holder's timely filed United States
federal income tax return for the taxable year in which units are acquired
by that holder.
Assuming the above allocation, the issue price of, and each holder's
initial tax basis in, the notes will exceed the amount payable at maturity
with respect to the notes by the amount of the call premium. Because the
notes will be classified as contingent debt instruments for United States
federal income tax purposes, this excess will not be treated as "bond
premium" that is amortizable at the holder's election. Instead, this excess
will be taken into account in determining the yield at which holders will
be required to accrue income. See "--Interest Received on the Notes,"
below.
INTEREST RECEIVED ON THE NOTES
Because of the ability of the rate increase agent to increase the note
rate, the notes will be classified as contingent debt instruments subject
to the "noncontingent bond method" as set forth in applicable Treasury
regulations. As discussed below, Countrywide Home Loans does not believe
that classification of the notes as contingent debt instruments will
require holders to recognize taxable income that differs materially from
the cash payments of interest on the notes. As discussed below, however, as
a result of classification of the notes as contingent debt instruments, any
gain realized on the sale or exchange of the notes will be treated as
ordinary income. See "--Sale or Disposition of Units," below.
Under the noncontingent bond method, the yield on the notes is
projected based on the yield on a hypothetical noncontingent bond issued by
Countrywide Home Loans with similar terms and conditions. Based on that
yield (the "comparable yield"), a projected schedule of payments is
determined. In general, holders of notes will be required to accrue
interest income from the notes under the rules applicable to debt
instruments with original issue discount ("OID"), on the assumption that
the projected amounts will actually be paid. Under these rules, none of the
stated interest on the notes will be "qualified stated interest" as defined
in the applicable Treasury regulations and, accordingly, all payments of
stated interest will be treated as payments of OID or as return of
principal.
Under the noncontingent bond method, holders of a contingent debt
instrument generally must take into account adjustments if contingent
payments are fixed at amounts that differ from their projected amounts.
Holders will not be required to take into account any such adjustments
after the call option expiration date.
Applying the noncontingent bond method, Countrywide Home Loans has
determined the comparable yield and a projected payment schedule for the
notes. The projected payment, per $[ ] of stated amount, is $[ ] (which is
the stated interest payment) for each quarter ending on or prior to the
call option expiration date, and is $[ ] for each quarter ending after the
option expiration date and prior to the maturity date. The projected
payment, per $[ ] of stated amount, at the maturity date is $[ ] (which
includes the stated principal amount of the notes as well as the projected
amount of the final interest payment).
The comparable yield is [ ]%. Applied to the issue price of the notes
([ ]% of their principal amount), this comparable yield results in interest
income to holders of $[ ], per $[ ] of stated amount, for each quarter
ending on or prior to the call option expiration date. Thus, the amount of
interest income to holders for each quarter (other than during extension
periods) generally is expected to equal the amount of the cash payment due
to holders for each quarter.
The foregoing comparable yield and projected payment schedule will be
used by Countrywide Home Loans for purposes of determining its own taxable
income and for any required information reporting.
If a holder of notes does not use this projected payment schedule to
determine interest accruals, the holder must apply the foregoing rules
using its own projected payment schedule. A holder that determines its own
projected payment schedule must explicitly disclose this fact and the
reason why the holder has used its own schedule (that is, why Countrywide
Home Loans' projected payment schedule is unreasonable). In general, this
disclosure must be made on a statement attached to the timely filed federal
income tax return of the holder for the taxable year that includes the date
of its acquisition of the notes.
The foregoing projected payment schedule is supplied by Countrywide
Home Loans solely for computing income under the noncontingent bond method
for federal income tax purposes, and does not constitute a projection or
representation as to the amounts that holders of notes will actually
receive.
Because income with respect to the notes will constitute interest for
United States federal income tax purposes, corporate holders of units will
not be entitled to a dividends-received deduction in respect of that
income.
ADJUSTMENTS TO TAX BASIS IN NOTES
During the period ending on the call option expiration date, the
initial tax basis of a holder of notes (See "--Initial Tax Basis of Notes,"
above) will be increased by the amount of any interest recognized under the
noncontingent bond method and reduced by payments projected to be made with
respect to the notes (See "--Interest Received on the Notes," above). Based
on Countrywide Home Loans' belief (See "--Interest Received on the Notes,"
above) that the taxable income from the notes will equal cash payments of
interest during this period, Countrywide Home Loans believes that the
adjusted tax basis of a holder in the notes as of the call option
expiration date will equal the initial tax basis.
CONTRACT FEES
There is no authority describing the tax treatment of the contract
fees under current law.
If we are required to pay contract fees to the holders of the units,
we intend to file information returns on the basis that the contract fees
will be taxable currently as ordinary income to holders. Because any
contract fees received by a holder will not constitute dividends for United
States federal income tax purposes, corporate holders will not be entitled
to a dividends-received deduction as a result of receiving those fees.
Holders should consult their own tax advisors concerning the treatment of
the contract fees, including the possibility that the contract fees may not
be treated as current income to holders, but would instead reduce a
holder's basis in the common stock received upon exercise of the purchase
contracts, by analogy to the treatment of rebates. We do not intend to
deduct any contract fees we are required to pay, because we view them as a
cost of issuing the common stock. If they are treated as items of ordinary
income, contract fees received by a regulated investment company should be
treated as income derived with respect to that company's business of
investing in stock and securities.
If holders are required to pay contract fees to us, it is unlikely
that the contract fees will be deductible for United States federal income
tax purposes. Therefore, although the amount of cash interest received by
holders will be reduced by the amount of contract fees payable to us,
holders most likely will include in income the full amount of OID on the
notes (or interest or OID on other pledged securities) without a deduction
for payment of contract fees. Payment of the contract fees should increase
the holder's basis in the purchase contracts and be included in the basis
of the common stock received under the purchase contracts. See "--Purchase
of Common Stock under the Purchase Contract" below.
EXERCISE OF THE CALL OPTION AND OWNERSHIP OF TREASURY SECURITIES
Exercise of the call option by the call option holder will be a
taxable event to holders of the units. As a result, holders will recognize
gain or loss equal to the difference between the amount realized from
exercise of the call option and their adjusted tax basis in the notes. The
amount treated as the amount realized from exercise of the call option will
equal the sum of the call premium and the fair market value of the treasury
securities received, determined as of the call settlement date. The rules
that govern determination of the character of gain or loss on sale of the
notes (including pursuant to the exercise of the call option) are
summarized under "--Sale or Disposition of Units," below.
A holder's initial basis in the treasury securities received as a
result of the exercise of the call option will be equal to the fair market
value of the treasury securities, determined as of the call settlement
date. Except to the extent the treasury securities are "stripped" treasury
securities, the treatment of which is discussed in the next paragraph, (a)
interest with respect to the treasury securities will be taxable as
ordinary income to the holder as it is received or accrued, in accordance
with the holder's normal method of accounting for United States federal
income tax purposes, (b) any excess of a holder's basis in the treasury
securities over the amount payable at maturity may be amortized at the
holder's election over the remaining term as a reduction of interest income
and (c) any gain realized by a holder at maturity of the treasury
securities will generally be treated as capital gain, unless the treasury
securities are considered to have more than a "de minimis" amount of market
discount.
A holder will be required to treat a stripped treasury security
received by the holder as a bond that was originally issued on the date
received by the holder. Stripped treasury securities (other than stripped
treasury securities with a remaining term of one year or less) will be
considered to have OID in an amount equal to the difference between the
amount payable on such security and the holder's initial basis in that
security (determined as described in the immediately preceding paragraph).
As a result, a holder that receives a stripped treasury security (other
than a stripped treasury security with a remaining term of one year or
less) will be required to include OID in income as ordinary income under a
constant yield method over the remaining term of the stripped treasury
security (regardless of the holder's normal method of accounting for United
States federal income tax purposes) and will increase its basis in the
stripped treasury security by the amount of OID included in income with
respect to the stripped treasury security.
Stripped treasury securities with a remaining term of one year or less
("short-term stripped treasury securities") generally should be considered
to have "acquisition discount" in an amount equal to the difference between
the principal amount of the short-term stripped treasury security and the
holder's basis in the short-term stripped treasury security. A holder using
the cash method of accounting that has not elected to accrue acquisition
discount generally will recognize ordinary income upon maturity of the
short-term stripped treasury security equal to the amount of that
acquisition discount.
SALE OR DISPOSITION OF UNITS
A holder generally will recognize gain or loss upon the sale or other
disposition of units. This gain or loss will be calculated separately with
respect to the notes or treasury securities, as the case may be, and the
related purchase contract composing the units by allocating the sum of any
cash and the fair market value of any property received between the two
components in proportion to their respective fair market values. The amount
considered to be received by a holder with respect to the sale of the notes
will include the value of the assumption of the holder's obligations under
the call option, which, in the absence of any means of independent
valuation, will likely be deemed to equal the amount of the call premium
previously received by that holder. See "--Treatment of the Call Premium,"
above.
The amount of gain or loss with respect to each component will equal
the difference between the consideration so allocated to each component
(reduced, in the case of certain treasury securities (that is, treasury
securities that are not stripped treasury securities), by any amount
attributable to accrued but unpaid interest, which will be taxable as
ordinary income) and the holder's adjusted tax basis in the respective
components. Except in the case of gain or loss with respect to notes and
certain short-term stripped treasury securities, that gain or loss will be
capital gain or loss.
If a holder sells or disposes of notes pursuant to the call option or
otherwise, the rules governing contingent debt instruments treat any gain
recognized as ordinary interest income and treat any loss recognized as
ordinary to the extent of prior interest inclusions.
PURCHASE OF COMMON STOCK UNDER THE PURCHASE CONTRACT
Assuming that the initial basis of the purchase contract will be zero
(see "--Initial Tax Basis of Notes" above), the tax basis of the common
stock acquired under a purchase contract should equal the amount of cash
paid to purchase the common stock (including cash applied by the collateral
agent upon maturity of the treasury securities), increased by the amount of
any contract fees paid by the holder to us, and decreased by (a) the amount
of any contract fees received by the holder and not previously included in
income and (b) the amount of any cash received in place of fractional
shares of common stock. A holder will recognize capital gain or loss upon
receipt of cash in place of fractional shares of common stock equal to the
difference between the amount of cash received and the holder's basis in
those fractional shares. A holder's holding period in the common stock
purchased pursuant to the purchase contract will begin on the day after the
purchase of that common stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT
Assuming that we have current or accumulated earnings and profits at
least equal to the amount of the dividends, a holder will include a
dividend on the common stock in income when paid, and the dividend will be
eligible for the dividends-received deduction if received by an otherwise
qualifying corporate holder that meets the holding period and other
requirements for such deduction. Upon the sale, exchange or other
disposition of common stock, the holder will recognize gain or loss equal
to the difference between the holder's tax basis in the common stock and
the amount realized on the disposition. The gain or loss will be capital
gain or loss.
ADJUSTMENT OF SETTLEMENT RATE
Holders may be treated as receiving a constructive distribution from
us if (a) the settlement rate is adjusted and, as a result of such
adjustment, the proportionate interest of holders in our assets or earnings
and profits is increased, and (b) the adjustment is not made pursuant to a
reasonable antidilution formula. An adjustment in the settlement rate would
not be considered made pursuant to such a formula if the adjustment were
made to compensate for certain taxable distributions with respect to common
stock. Thus, under certain circumstances, an increase in the settlement
rate is likely to be taxable to holders of units as a dividend to the
extent of the current or accumulated earnings and profits of Countrywide
Credit Industries. Holders of units would be required to include their
allocable share of those constructive dividends in gross income but would
not receive any cash by reason of the constructive dividends.
<PAGE>
UNDERWRITING
Countrywide Credit Industries, Inc., Countrywide Home Loans, Inc. and
the underwriters for the offering named below have entered into an
underwriting agreement with respect to the units being offered. Subject to
certain conditions, (1) Countrywide Credit Industries, Inc. has agreed to
enter into the purchase contracts with each of the underwriters named below
underlying the respective number of units indicated opposite its name
below, (2) Countrywide Home Loans, Inc. has agreed to sell to each of the
underwriters the notes underlying the respective number of units indicated
opposite its name below, and (3) each of the underwriters has severally
agreed to enter into the purchase contracts with Countrywide Credit
Industries, Inc., purchase the notes from Countrywide Home Loans, Inc.,
pledge under the pledge agreement such notes and sell (on behalf of the
initial investors in the units) to the call option holder the call options
with respect to such units.
Underwriter Number of Units
----------- ---------------
Goldman, Sachs & Co.........................................
[Other Underwriters]........................................
-------- --------
Total.......................................
======== ========
If the underwriters sell more units than the total number set forth in
the table above, the underwriters have an option to buy up to an additional
[ ] units to cover such sales. The underwriters may exercise that option
for 30 days. If any units are purchased pursuant to this option, the
underwriters will severally purchase units in approximately the same
proportion as set forth in the table above.
The following table shows the per unit and total underwriting
discounts and commissions to be paid to the underwriters by Countrywide
Credit Industries, Inc. and Countrywide Home Loans, Inc. These amounts are
shown assuming both no exercise and full exercise of the underwriters'
option to purchase [ ] additional units.
Paid by Countrywide
-------------------
No Exercise Full Exercise
----------- -------------
Per unit......................... $[ ] $[ ]
Total............................ $[ ] $[ ]
Units sold by the underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this
prospectus supplement. Any units sold by the underwriters to securities
dealers may be sold at a discount of up to $[ ] per unit from the initial
public offering price. Any such securities dealers may resell any units
purchased from the underwriters to certain other brokers or dealers at a
discount of up to $[ ] per unit from the initial public offering price. If
all the units are not sold at the initial public offering price, the
underwriters may change the offering price and the other selling terms.
Countrywide Credit Industries, Inc. and Countrywide Home Loans, Inc.
have agreed with the underwriters not to dispose of or hedge any of the
units or shares of common stock of Countrywide Credit Industries, Inc. or
notes of Countrywide Home Loans, Inc. or any of the securities which are
substantially similar to the common stock of Countrywide Credit Industries,
Inc. or securities convertible into or exchangeable for shares of the
common stock of Countrywide Credit Industries, Inc. (other than the units
offered in this offering) during the period from the date of this
prospectus supplement continuing through the date 90 days after the date of
this prospectus supplement, except with the prior written consent of
Goldman, Sachs & Co. This agreement does not apply to any existing employee
benefit plans or employee stock purchase plans.
The units will be a new issue of securities with no established
trading market. Countrywide Credit Industries, Inc. will apply to list the
units on the New York Stock Exchange under the symbol "[ ]." Countrywide
Credit Industries, Inc. and Countrywide Home Loans, Inc. have been advised
by the underwriters that the underwriters intend to make a market in the
units, but they are 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 for the units.
In connection with the offering, the underwriters may purchase and
sell the units or shares of Countrwide Credit Industries, Inc.'s common
stock in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number
of units than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the units or the
common stock while the offering pursuant to this prospectus supplement is
in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the underwriters have
repurchased units sold by or for the account of such underwriter in
stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or
otherwise affect the market price of the units or the common stock. As a
result, the price of the units or the common stock may be higher than the
price that otherwise might exist in the open market. If these activities
are commenced, they may be discontinued by the underwriters at any time.
These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
Countrywide Credit Industries, Inc. and Countrywide Home Loans, Inc.
estimate that their share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $[ ].
Countrywide Credit Industries, Inc. and Countrywide Home Loans, Inc.
have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
Certain of the underwriters have in the past performed investment
banking services for Countrywide Credit Industries, Inc. and Countrywide Home
Loans, Inc. and have received compensation for these services.
VALIDITY OF SECURITIES
The validity of the purchase contracts and the guarantees will be
passed upon for us and the validity of the notes will be passed upon for
Countrywide Home Loans by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations), New York, New York. Edwin
Heller (whose professional corporation retired as partner of Fried, Frank,
Harris, Shriver & Jacobson in September 1996) is Of Counsel to Fried,
Frank, Harris, Shriver & Jacobson and one of our directors. Brown & Wood
LLP, New York, New York, will serve as counsel for the underwriters. Brown
& Wood LLP also serves as counsel for CWMBS, Inc. and CWABS, Inc., each one
of our wholly owned subsidiaries, in connection with offerings of
mortgage-backed and asset-backed securities, and from time to time also
serves as our counsel on other matters.
<PAGE>
(REDHERRING) THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION DATED JULY 9, 1999
PROSPECTUS
COUNTRYWIDE CREDIT INDUSTRIES, INC. [LOGO]
COMMON STOCK, PREFERRED STOCK, STOCK PURCHASE CONTRACTS
AND DEBT SECURITIES
COUNTRYWIDE HOME LOANS, INC.
DEBT SECURITIES
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST UNCONDITIONALLY
GUARANTEED BY
COUNTRYWIDE CREDIT INDUSTRIES, INC.
------------------
Through this prospectus, we may periodically offer:
o shares of our common stock;
o shares of our preferred stock;
o contracts to purchase shares of our common stock or preferred
stock; and/or
o our debt securities,
and our subsidiary, Countrywide Home Loans, may periodically offer its debt
securities.
The prices and other terms of the securities that we or Countrywide
Home Loans will offer will be determined at the time of their offering.
We will guarantee all payments of principal of and any premium and
interest on any debt securities offered by Countrywide Home Loans.
The offering price of all securities issued under this prospectus may
not exceed $3,000,000,000.
Our common stock trades on the New York Stock Exchange under the
symbol "CCR." We will list any shares of our common stock sold under this
prospectus on the New York Stock Exchange.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these securities, or
determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
------------------
The date of this prospectus is [ ], 1999.
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND IN ANY PROSPECTUS SUPPLEMENT ACCOMPANYING
THIS PROSPECTUS AND THAT WE OR COUNTRYWIDE HOME LOANS HAVE REFERRED YOU TO.
NEITHER WE NOR COUNTRYWIDE HOME LOANS HAS AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR IN ANY PROSPECTUS SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
------------------
References in this prospectus supplement to "Countrywide Credit
Industries," "we," "us" and "our" are to Countrywide Credit Industries,
Inc.
------------------
References in this prospectus supplement to "Countrywide Home Loans"
are to Countrywide Home Loans, Inc.
ADDITIONAL INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file
at the SEC's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also
available to the public at the SEC's web site at http://www.sec.gov and at
the public reference rooms of the New York Stock Exchange, 20 Broad Street,
New York, New York and the Pacific Stock Exchange, 115 Sansome Street, San
Francisco, California.
The SEC allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and later
information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference the documents
listed below and any future filings we make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until all
the securities offered under this prospectus are sold. This prospectus is
part of the registration statement we filed with the SEC.
1. Annual Report on Form 10-K for the year ended February 28, 1999.
2. Current Report on Form 8-K, dated June 21, 1999.
You may request a copy of these filings, at no cost, by writing or
telephoning us at Countrywide Credit Industries, Inc., 4500 Park Granada,
Calabasas, California 91302, telephone (818) 225-3000, Attention: Investor
Relations.
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES AND COUNTRYWIDE HOME LOANS
COUNTRYWIDE CREDIT INDUSTRIES, INC.
Through Countrywide Home Loans, our principal subsidiary, we
originate, purchase, securitize, sell and service mortgage loans. Our
mortgage loans are principally prime credit quality first-lien mortgage
loans secured by single- (one- to four-) family residences ("Prime
mortgages"). We also offer home equity loans either with newly produced
Prime mortgages or as a separate product. In addition, we offer sub-prime
credit quality first-lien single-family mortgage loans ("Sub-prime loans").
Through our other subsidiaries, we also offer products and services
that complement our mortgage banking business. Through Countrywide
Insurance Services, Inc., we act as an agent for the sale of homeowners,
fire, flood, earthquake, life, disability and other types of insurance.
Through LandSafe, Inc., we act as a title insurance agent and provide
settlement, escrow, appraisal, credit reporting, flood zone determination
and home appraisal services, and we also provide property profiles to
realtors, builders, consumers, mortgage brokers and other financial
institutions. Through Second Charter Reinsurance Corporation, we partially
reinsure some mortgage loans originated by Countrywide Home Loans and
insured by mortgage insurance companies. Through CTC Real Estate Services,
we serve as trustee under deeds of trust in connection with foreclosures on
loans in our servicing portfolio. We also provide services through
Countrywide Tax Services Corporation to ensure that property taxes are paid
when due during the terms of the loans that we originate and/or service.
Through Countrywide Servicing Exchange, a national servicing brokerage and
consulting firm, we facilitate transactions between buyers and sellers of
bulk servicing contracts. We also trade securities, including
mortgage-backed securities and other mortgage-related assets, with
broker-dealers and institutional investors through Countrywide Securities
Corporation, a registered securities broker-dealer. Through Countrywide
Financial Services, Inc. (formerly Leshner Financial Services, Inc.), we
act as a fund manager and service provider for unaffiliated mutual funds,
broker-dealers, investment advisors and fund managers. We also have two
subsidiaries, CWMBS, Inc. and CWABS, Inc., through which we issue mortgage-
and asset-backed securities that are backed by Prime mortgage loans,
Sub-prime loans or home equity loans.
We are a Delaware corporation, originally incorporated in New York
under the name of OLM Credit Industries, Inc. Our principal executive
offices are located at 4500 Park Granada, Calabasas, California 91302, and
our telephone number is (818) 225-3000.
COUNTRYWIDE HOME LOANS, INC.
As described above in "-- Countrywide Credit Industries," Countrywide
Home Loans originates, purchases, securitizes, sells and services mortgage
loans that are principally Prime mortgages. Countrywide Home Loans also
offers home equity loans and Sub-prime loans. The principal sources of
Countrywide Home Loans' revenue are: (1) loan origination fees; (2) any
gains from the sale of loans; (3) interest earned on mortgage loans during
the period that they are held by Countrywide Home Loans pending sale, net
of interest paid on funds borrowed to finance those mortgage loans; (4)
loan servicing fees; and (5) interest benefit derived from the custodial
balances associated with Countrywide Home Loans' servicing portfolio.
Countrywide Home Loans produces mortgage loans through three separate
divisions. The Consumer Markets Division originates Prime mortgages and
home equity loans through referrals from real estate agents and using
direct contact with consumers through its nationwide network of retail
branch offices, its telemarketing systems and its site on the World Wide
Web. The Wholesale Division produces Prime mortgages and home equity loans
through mortgage brokers and other financial intermediaries. Through the
Correspondent Division, Countrywide Home Loans purchases loans from other
mortgage bankers, commercial banks, savings and loan associations, credit
unions and other financial intermediaries. Countrywide Home Loans
customarily sells substantially all loans that it originates or purchases.
To guarantee timely and full payment of principal and interest on Federal
National Mortgage Association ("Fannie Mae") securities, Federal Home Loan
Mortgage Corporation ("Freddie Mac") securities and Government National
Mortgage Association ("Ginnie Mae") securities and to transfer credit risk
of the loans, Countrywide Home Loans pays guarantee fees to these agencies.
Countrywide Home Loans services on a non-recourse basis substantially
all of the mortgage loans that it originates or purchases under servicing
agreements with Fannie Mae, Freddie Mac, Ginnie Mae and various investors.
In addition, Countrywide Home Loans 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, answering questions from customers,
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.
Countrywide Home Loans receives a fee for servicing mortgage loans ranging
generally from 1/4% to 1/2% annually on the declining principal balances of
the loans. Countrywide Home Loans has sold, and may sell in the future, a
portion of its portfolio of loan servicing rights to other mortgage
servicers.
Countrywide Home Loans' principal financing needs are the financing of
its mortgage loan inventory and the investment in mortgage servicing
rights. To meet these needs, Countrywide Home Loans currently utilizes
commercial paper supported by its revolving credit facility, medium-term
notes, mortgage repurchase agreements, pre-sale funding facilities, an
optional cash purchase feature in the dividend reinvestment plan,
redeemable capital trust pass-through securities and cash flows from
operations. In the past, Countrywide Home Loans has utilized whole loan
repurchase agreements, servicing-secured bank facilities, private
placements of unsecured notes and other financings, direct borrowings from
its revolving credit facility and public offerings of preferred and common
stock.
Countrywide Home Loans is a New York corporation, originally
incorporated in 1969. Its principal executive offices are located at 4500
Park Granada, Calabasas, California 91302, and its telephone number is
(818) 225-3000.
USE OF PROCEEDS
Except as we may otherwise state in any prospectus supplement, we
and/or Countrywide Home Loans intend to use the net proceeds from the sale
of the securities described in this prospectus for general corporate
purposes, including the retirement of debt and the investment in servicing
rights through the current production of loans and the bulk acquisition of
contracts to service loans, and for acquisitions.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
Our selected consolidated financial data set forth below as of the end
of and for each of the five fiscal years in the period ended February 28,
1999 have been derived from, and should be read together with, our related
audited financial statements and accompanying notes incorporated by
reference in this prospectus. See "Additional Information."
<TABLE>
<CAPTION>
YEARS ENDED FEBRUARY 28 (29)
----------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF EARNINGS
DATA(1):
Revenues:
Loan origination fees......... $ 623,531 $ 301,389 $ 193,079 $ 199,724 $ 203,426
Gain (loss) on sale of loans.. 699,433 417,427 247,450 92,341 (41,342)
---------- ---------- ---------- ---------- ----------
Loan production revenue...... 1,322,964 718,816 440,529 292,065 162,084
Interest earned............... 1,029,066 584,076 457,005 364,531 311,781
Interest charges.............. (983,829) (568,359) (423,447) (337,655) (267,685)
----------- ----------- ----------- ----------- -----------
Net interest income.......... 45,237 15,717 33,558 26,876 44,096
Loan servicing income......... 1,023,700 907,674 773,715 620,835 460,351
Amortization and
impairment/recovery of mortgage (1,013,578) (561,804) (101,380) (342,811) (95,768)
servicing rights............
Servicing hedge benefit (expense) 412,812 232,959 (125,306) 200,135 (40,030)
Less write-off of servicing hedge. -- -- -- -- (25,600)
----------- ----------- ----------- ----------- -----------
Net loan administration income... 422,934 578,829 547,029 478,159 298,953
Commissions, fees and other income 187,867 138,217 91,346 63,642 40,650
Gain on sale of subsidiary.... -- 57,381 -- -- --
Gain on sale of servicing..... -- -- -- -- 56,880
---------- ---------- ---------- ---------- ----------
Total revenues.............. $1,979,002 $1,508,960 $1,112,462 $ 860,742 $ 602,663
---------- ----------- ---------- ---------- ----------
Expenses:
Salaries and related expenses. 669,686 424,321 286,884 229,668 199,061
Occupancy and other office 277,921 184,338 129,877 106,298 102,193
expenses....................
Guarantee fees................ 181,117 172,692 159,360 121,197 85,831
Marketing expenses............ 64,510 42,320 34,255 27,115 23,217
Other operating expenses...... 153,963 119,743 80,188 50,264 37,016
Branch and administrative office
consolidation costs........... -- -- -- -- 8,000
---------- ---------- ---------- ---------- ----------
Total expenses.............. 1,347,197 943,414 690,564 534,542 455,318
---------- ---------- ---------- ---------- ----------
Earnings before income taxes.... 631,805 565,546 421,898 326,200 147,345
Provision for income taxes...... 246,404 220,563 164,540 130,480 58,938
---------- ---------- ---------- ---------- ----------
Net earnings.................... $ 385,401 $ 344,983 $ 257,358 $ 195,720 $ 88,407
========= ========== ========== ========== ==========
Per Share Data(2):
Basic(3)...................... $ 3.46 $ 3.21 $ 2.50 $ 1.99 $ 0.97
Diluted(3).................... $ 3.29 $ 3.09 $ 2.44 $ 1.95 $ 0.96
Cash dividends per share...... $ 0.32 $ 0.32 $ 0.32 $ 0.32 $ 0.32
Weighted Average Shares Outstanding:
Basic............................. 111,414,000 107,491,000 103,112,000 98,352,000 91,240,000
Diluted....................... 117,045,000 111,526,000 105,677,000 100,270,000 92,087,000
SELECTED BALANCE SHEET DATA AT END
OF PERIOD(1):
Mortgage loans and
mortgage-backed securities
shipped and held for sale... $ 6,231,220 $ 5,292,191 $2,579,972 $4,740,087 $2,898,825
Total assets.................. $15,648,256 $12,183,211 $7,689,090 $8,321,652 $5,589,138
Short-term debt............... $ 5,065,934 $ 4,043,774 $2,567,420 $4,423,738 $2,664,006
Long-term debt................ $ 5,953,324 $ 4,195,732 $2,367,661 $1,911,800 $1,499,306
Common shareholders' equity... $ 2,518,885 $ 2,087,943 $1,611,531 $1,319,755 $ 942,558
OPERATING DATA (DOLLAR AMOUNTS IN
MILLIONS):
Loan servicing portfolio (4).. $ 215,489 $ 182,889 $ 158,585 $ 136,835 $ 113,111
Volume of loans originated.... $ 92,881 $ 48,772 $ 37,811 $ 34,584 $ 27,866
Ratio of earnings to fixed
charges(5)...................... 1.63 1.98 1.98 1.95 1.54
</TABLE>
- ------------------------------------
(1) Certain amounts in the consolidated financial statements of
Countrywide Credit Industries have been reclassified to conform to the
fiscal year February 28, 1999 presentation.
(2) Adjusted to reflect the subsequent stock dividends and splits.
(3) Earnings per share for the fiscal year ended February 28, 1998 include
a $57.4 million gain on sale of subsidiary. Excluding the
non-recurring gain on sale of subsidiary, basic and diluted earnings
per share would have been $2.88 and $2.78, respectively.
(4) Includes warehoused loans and loans under subservicing agreements. (5)
For purposes of calculating the ratio of earnings to fixed charges,
earnings consist of income before U.S. 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).
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock is not complete and is
qualified in its entirety by reference to our restated certificate of
incorporation and to any certificate of designations that we will file with
the SEC if we offer preferred stock under this prospectus. We have filed a
copy of our restated certificate of incorporation as an exhibit to the
registration statement of which this prospectus is part.
COMMON STOCK
We have authorized under our restated certificate of incorporation
240,000,000 shares of common stock, par value $.05 per share. As of [ ],
1999, [ ] shares of our common stock were issued and outstanding and were
held by [ ] record holders. Each record holder of our common stock is
entitled to cast one vote per share on all matters submitted to a vote of
our stockholders. We may pay dividends to the record holders of our common
stock only when, as and if declared by our board of directors, out of funds
legally available for those dividends. Each share of our common stock
shares equally in those dividends and in other distributions to holders of
our common stock, including distributions made if we liquidate, dissolve or
wind up our affairs. Our common stock carries no preemptive, conversion,
subscription, redemption, sinking fund or cumulative voting rights.
PREFERRED STOCK PURCHASE RIGHTS
In February 1988, our board of directors declared a dividend of one
preferred stock purchase right for each outstanding share of our common
stock. As the result of stock splits and stock dividends, 0.399 of a stock
purchase right is presently associated with each outstanding share of our
common stock, and 0.399 of a stock purchase right will be associated with
each share of our common stock that is issued prior to the Distribution
Date (as defined below). Each stock purchase right, when exercisable,
allows its holder to purchase from us one one-hundredth of a share of our
Series A Participating Preferred Stock, par value $0.05 per share, at a
price of $145, subject to adjustments in some instances to prevent
dilution.
These stock purchase rights are evidenced by our common stock
certificates and may not be exercised or transferred apart from our common
stock until of the earlier of the date (the "Distribution Date") of a
public announcement that a person or group without our prior consent has
acquired 20% or more of our common stock (an "Acquiring Person") or the
date that is ten days (subject to extension by our board of directors)
after a tender offer for our common stock is commenced without our prior
consent.
If any person becomes an Acquiring Person, each stock purchase right
(except those owned by the Acquiring Person) will allow its holder to
purchase, at the then current exercise price of the stock purchase right,
the number of shares of our common stock, or their equivalent, that, at the
time of the transaction, would have a market value of two times the
exercise price of the stock purchase right. Our board of directors may
delay the exercisability of the stock purchase rights during the period in
which they are exercisable only for our Series A Participating Preferred
Stock (and not our common stock).
If after a person has become an Acquiring Person we are acquired in a
merger or other business combination, each stock purchase right (except
those held by the Acquiring Person) will entitle its holder to purchase, at
the then current exercise price of the stock purchase right, the number of
shares of our common stock, or their equivalent, of the other party (or its
publicly traded parent company) to the merger or business combination that
at the time of the transaction would have a market value of two times the
exercise price of the stock purchase right. The stock purchase rights
expire on the earliest of February 28, 2002, the date certain merger
transactions close or the date we elect to redeem the stock purchase rights
before any person becomes an Acquiring Person.
PREFERRED STOCK
We have authorized under our restated certificate of incorporation
1,500,000 shares of preferred stock, par value $.05 per share. We will
describe the specific terms of any series of preferred stock we offer under
this prospectus in a prospectus supplement relating to that series of
preferred stock. Our board of directors is authorized to provide for the
issuance of preferred stock in one or more series with the distinctive
designations as may be stated in the resolution or resolutions providing
for the issuance of that preferred stock. At the time that it authorizes
any series of preferred stock, our board of directors will determine the
number of shares constituting that series and its designation and fix the
dividend rights, any conversion rights, any voting rights, redemption
provisions, liquidation preferences and any other rights, preferences,
privileges and restrictions of that series.
At this time, our board of directors has authorized only one series of
preferred stock for issuance, and that series has been designated our
Series A Preferred Stock which is issuable upon the exercise of our stock
purchase rights. See "--Preferred Stock Purchase Rights" above. Our board
of directors could, without stockholder approval, cause us to issue
preferred stock that has voting, conversion and other rights that could
adversely affect the holders of our common stock or make it more difficult
to cause a change in control of our company. The preferred stock could be
used to dilute the stock ownership of persons seeking to obtain control of
our company and thereby hinder a possible takeover attempt which, if
stockholders were offered a premium over the market value of their shares,
might be viewed as being beneficial to our stockholders. In addition, the
preferred stock could be issued with voting, conversion and other rights
and preferences that would adversely affect the voting power and other
rights of holders of our common stock.
OTHER PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION AND OUR BYLAWS
In addition to the stock purchase rights described above under
"--Preferred Stock Purchase Rights" and the terms of any preferred stock
that we may determine to issue as described above under "--Preferred
Stock," other provisions of our restated certificate of incorporation and
our bylaws may make it more difficult for a third party to acquire, or may
discourage a third party from attempting to acquire, control of our
company. Our restated certificate of incorporation includes the following
provisions:
(1) It provides for a three-year staggered board of directors,
vacancies on which may be filled by the board of directors and
whose members may be removed only for cause and only by the vote
of the holders of two-thirds of the outstanding shares of our
common stock.
(2) It limits our power to purchase shares of our voting stock from a
five percent holder at a price exceeding its fair market value,
unless the purchase is approved by holders of a majority of those
voting shares (unless applicable law requires a greater vote),
without the vote of that five percent holder. Voting stock is
defined as capital stock that has the right to vote generally on
matters relating to our company and any security which is
convertible into that stock.
(3) It prohibits action by written consent of our stockholders.
(4) It provides that our bylaws may be amended by our board of
directors or, with some exceptions, by a vote of two-thirds of
our voting shares and further provides that a two-thirds vote of
all of our voting shares is required to amend the provisions of
our restated certificate of incorporation that are described in
this section, unless the amendment has been approved by
two-thirds of our board of directors and a majority of our
continuing directors. Continuing directors are directors who
became members of our board of directors before any stockholder
who beneficially owns ten percent of the outstanding shares first
became a ten percent stockholder.
Our bylaws provide that special meetings of the stockholders may be
called only by our directors and limits the business that may be transacted
at those meetings to those matters set forth in the request of the proposed
meeting.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is The Bank of
New York.
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
Unless we otherwise indicate in the applicable prospectus supplement,
we may issue stock purchase contracts, including contracts that would
require holders to purchase from us and for us to sell to them, a specified
number of shares of our common stock or preferred stock at a future date or
dates. We may fix what the consideration per share of common stock or
preferred stock will be when we issue the stock purchase contracts, and
this consideration may be determined by a formula that is described in the
stock purchase contracts. We may issue the stock purchase contracts
separately or as part of stock purchase units consisting of a stock
purchase contract and debt securities, preferred stock or debt obligations
of third parties, including U.S. Treasury securities, that secure the
holders' obligations to purchase our common stock or preferred stock under
the stock purchase contracts. The stock purchase contracts may require us
to make periodic payments to the holders of the stock purchase units or
vice versa, and those payments may be unsecured or prefunded on some basis.
The stock purchase contracts may require holders to secure their
obligations under the stock purchase contracts in a specified manner.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The securities subject to the stock purchase contracts (the "Pledged
Securities") will be pledged to a collateral agent, for our benefit, under
the terms of a pledge agreement. The Pledged Securities will secure the
obligations of holders of stock purchase contracts to purchase shares of
our common stock or preferred stock under the stock purchase contracts. The
rights of holders of stock purchase contracts to the related Pledged
Securities will be subject to our security interest therein created by the
pledge agreement. No holder of stock purchase contracts may withdraw the
underlying pledged securities from the pledge arrangement except upon the
termination or early settlement of the stock purchase contracts. Subject to
that security interest and the terms of a purchase contract agreement and
the pledge agreement, each holder of a stock purchase contract will keep
full beneficial ownership of the related pledged securities.
Except as we may describe in the applicable prospectus supplement, the
collateral agent will, upon receipt of distributions on the pledged
securities, distribute those payments to us or to the purchase contract
agent, as provided in the pledge agreement. The purchase contract agent
will in turn distribute payments it receives as provided in the purchase
contract agreement.
We will describe the terms of any stock purchase contracts or stock
purchase units that we offer under this prospectus in a prospectus
supplement. The description in the prospectus supplement will not
necessarily be complete and will be qualified in its entirety by reference
to the stock purchase contracts and, if applicable, collateral arrangements
and depositary arrangements, relating to such stock purchase contracts or
stock purchase units.
DESCRIPTION OF DEBT SECURITIES OF COUNTRYWIDE CREDIT INDUSTRIES
The following description summarizes some of the general terms and
conditions of the debt securities that we may issue under this prospectus.
We will describe the particular terms of any debt securities that we offer
and the extent to which the general provisions below will apply to those
debt securities in a prospectus supplement relating to those debt
securities.
We will issue these debt securities under a senior debt indenture or a
subordinated debt indenture. The Bank of New York will serve as the trustee
under both indentures. The terms of the debt securities will include those
stated in the applicable indenture and those made part of that indenture by
reference to the Trust Indenture Act. The debt securities will be subject
to all those terms, and we refer the holders of the debt securities to the
applicable indenture and the Trust Indenture Act for a statement of those
terms. Unless we otherwise indicate, capitalized terms have the meanings
given them in that indenture.
The applicable prospectus supplement will specify whether the debt
securities we issue will be senior, senior subordinated or subordinated
(including, if applicable, junior subordinated) debt. The debt securities
may be convertible into shares of our preferred stock or common stock or
may be issued as part of units of debt securities and other securities that
we may offer under this prospectus. If we issue debt securities as part of
units consisting of debt securities and other securities we may issue under
this prospectus or in exchange for shares of our preferred stock, we will
describe any applicable material federal income tax consequences to holders
in the applicable prospectus supplement.
The following summaries of various provisions of the indentures and
the debt securities are not complete. Except to the extent we specify in
the prospectus supplement relating to a particular issue of debt
securities, the indentures are substantially identical, except for the
subordination provisions, including the provision that the debt securities
issued under the senior debt indenture ("senior debt securities") will rank
senior to the debt securities issued under the subordinated debt indenture
("subordinated debt securities").
GENERAL
The indentures will not limit the amount of additional indebtedness
that we or any of our subsidiaries may incur, except as we may provide in
the applicable prospectus supplement. The debt securities will be senior or
subordinated obligations as described in the applicable prospectus
supplement.
We will indicate in the applicable prospectus supplement the following
terms of and information concerning any debt securities we issue (to the
extent those terms apply to those debt securities and have not been
otherwise described):
(1) the specific title, aggregate principal amount, denomination and
form;
(2) the date of maturity (or the method by which that date may be
determined or extended);
(3) any interest rate or rates, whether fixed or floating (or the
method by which that rate or those rates will be determined);
(4) the date from which interest will accrue (or the method by which
that date may be determined or reset), the dates on which that
interest will be payable and the record date for any interest
payable on the interest payment date and the basis upon which
interest will be calculated if other than that of a 360-day year
of twelve 30-day months;
(5) the place or places where the principal of and any premium and
any interest on the debt securities will be payable, or where
those debt securities may be surrendered for registration of
transfer or exchange, if not the corporate trust office of the
trustee for those debt securities;
(6) the portion of the principal amount of debt securities of the
series payable upon certain declarations of acceleration or the
method by which that portion shall be determined;
(7) the denominations and the currency, currencies, currency units or
composite currencies in which the debt securities will be
issuable;
(8) the currency, currencies, currency units or composite currencies
in which payments on the debt securities will be made, if not
U.S. dollars;
(9) whether the debt securities are senior debt securities or
subordinated debt securities, and if subordinated debt
securities, the terms of the subordination;
(10) any redemption, repayment or sinking fund provisions, including
the period or periods within which, the currency, currencies,
currency units or composite currencies in which and the other
terms and conditions upon which we may redeem the debt
securities;
(11) the ability of a holder of a debt security to renew all or any
portion of a debt security;
(12) whether the debt securities are convertible into or exchangeable
for our common stock or preferred stock and the terms of the
security into which they are convertible or exchangeable (see
"Description of Capital Stock"), the conversion price or exchange
ratio, other terms related to conversion and exchange and any
anti-dilution protections;
(13) whether the debt securities will be sold as part of units
consisting of debt securities and other securities that we may
offer under this prospectus;
(14) if the amount of payments of principal of or any premium or
interest on any debt securities of the series may be determined
by reference to an index, formula or other method, the index,
formula or other method by which those amounts will be
determined;
(15) whether and by what method the debt securities of the series (or
certain covenants under the related indenture) may be defeased
and discharged by us;
(16) whether the debt securities of the series shall be issued in
whole or in part as book-entry securities;
(17) any applicable material federal income tax consequences; and
(18) any other material specific terms of the debt securities,
including any material additional events of default or covenants
provided for and any material terms that may be required by or
advisable under applicable laws or regulations.
Unless we otherwise indicate in the applicable prospectus supplement,
we will issue debt securities only in fully registered form without
coupons. The debt securities denominated in U.S. dollars will be issued in
denominations of $1,000 or integral multiples of $1,000 unless we otherwise
provide in the applicable prospectus supplement. The prospectus supplement
relating to a series of debt securities denominated in a foreign currency
or currency unit will specify the denominations in which those debt
securities may be issued.
The indentures do not contain any provisions that would limit our
ability or the ability of any of our affiliates to incur indebtedness
(secured or unsecured) or that would afford holders of the debt securities
protection in the event of a highly leveraged transaction, restructuring,
change in control, merger or similar transaction involving us that may
adversely affect holders of the debt securities.
Unless we otherwise indicate in the applicable prospectus supplement,
the principal of, and any premium or interest on, any series of debt
securities will be payable, and those debt securities will be exchangeable
and transfers of them will be registerable, at the corporate trust office
of the trustee, initially at 101 Barclay Street, New York, New York 10286.
However, we may elect to make interest payments by check mailed to the
address of the person entitled to them as that address appears in the
security register for those debt securities.
None of the debt securities will be entitled to any benefit under the
applicable indenture or be valid or obligatory for any purpose unless there
appears on the debt security a certificate of authentication substantially
in the form provided in that indenture that is duly executed by the
trustee, and that certificate will be conclusive evidence and the only
evidence that the debt security has been duly authenticated and delivered
under and is entitled to the benefits of that indenture.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Our obligations under the debt securities will be subordinate in right
of payment to all present and future senior indebtedness to the extent
provided in the indenture. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors, marshaling of assets or any
bankruptcy, insolvency, debt restructuring or similar proceedings in
connection with our insolvency or bankruptcy, the holders of senior
indebtedness will first be entitled to receive payment in full of that
senior indebtedness before the holders of the debt securities will be
entitled to receive or retain any payment.
No payments on account of principal of or any premium or interest on
the debt securities (including payments on exercise of debt security put
options) may be made if a default in any payment on senior indebtedness has
occurred and is continuing, or an event of default on any senior
indebtedness resulting in the acceleration of its maturity has occurred, or
if any judicial proceeding is pending with respect to any such default.
In the event the maturity of the debt securities is accelerated, the
holders of all senior indebtedness outstanding at the time of the
acceleration will first be entitled to receive payment in full of all
amounts due in respect of that senior indebtedness before the holders of
the debt securities will be entitled to receive or retain any payment
related to the debt securities.
Amounts that would be due and payable by us to holders of units in the
absence of the foregoing subordination provisions, however, may be applied
by those holders to offset their obligations under their respective
purchase contracts.
Any subordinated debt securities will be subordinate and junior in
right of payment, to the extent and in the manner described in the
indenture, to all of our, "senior indebtedness." Unless we otherwise
indicate in the prospectus supplement, "senior indebtedness" means:
(1) the principal, premium, if any, and interest in respect of
indebtedness for money borrowed and indebtedness evidenced by
securities, debentures, bonds or other similar instruments;
(2) all capital lease obligations;
(3) all obligations issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all obligations
under any title retention agreement, excluding trade accounts
payable arising in the ordinary course of business;
(4) all obligations 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;
(5) all obligations of the type referred to in clauses (1) through
(4) above of others, the payment of which we are responsible or
liable as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through
(5) above of others secured by any lien on any of our properties
or assets, whether or not the obligation is assumed by us,
except for:
(a) any indebtedness that states, or is issued under a deed,
indenture or other instrument that states, that it is subordinate
to or ranks equally with the debt securities;
(b) any indebtedness between or among us and any of our affiliates;
(c) the indebtedness represented by our guarantee of the 8% Junior
Subordinated Deferrable Interest Debentures due December 15, 2026
of Countrywide Home Loans; and
(d) the indebtedness represented by our guarantee of the 8.05% Junior
Subordinated Debentures due June 15, 2027 of Countrywide Home
Loans.
REDEMPTION
If and to the extent we provide in the applicable prospectus
supplement, we will have the right to redeem the debt securities, in whole
or from time to time in part, after the date and at the redemption prices
set forth in the applicable prospectus supplement.
EVENTS OF DEFAULT
The indentures define an event of default for the debt securities of
any series as:
(1) failure to pay principal (or premium) on any debt security of
that series at maturity;
(2) failure to pay interest on any debt security of that series
within 30 days of the date when due;
(3) failure to deposit any sinking fund payment when due for that
series within 30 days of the date when due;
(4) failure to perform for 90 days after notice any of the other
covenants in the indentures;
(5) certain events of bankruptcy, insolvency or reorganization;
(6) failure to pay the put price when due upon exercise of a debt
security put option;
(7) default resulting in the acceleration of maturity of any other
indebtedness for money borrowed by us or by any of our direct or
indirect subsidiaries in an amount exceeding $10,000,000 and that
acceleration not being rescinded or annulled for a period of 10
days after written notice of the default by the trustee or the
holders of at least 25% in aggregate principal amount of the then
outstanding debt securities of that series; and
(8) any other event of default provided for debt securities of that
series.
The indentures provide that if any event of default affecting
outstanding debt securities of any series occurs and is continuing, either
the trustee or the holders of at least 25% in principal amount of the
outstanding debt securities of that series may declare the principal amount
(or, if the debt securities of that series are original issue discount
securities or indexed securities, the portion of the principal amount of
those debt securities as specified by their terms) of all debt securities
of that series to be due and payable immediately. However, under certain
circumstances the holders of a majority in principal amount of the
outstanding debt securities of that series on behalf of the holders of all
debt securities of that series may annul a declaration and waive past
defaults (except, unless previously cured, a default in payment of
principal of or any premium or any interest on the debt securities of that
series and other specified defaults).
We refer you to the prospectus supplement relating to each series of
debt securities that are original issue discount securities for the
particular provisions regarding acceleration of the maturity of a portion
of the principal amount of those original issue discount securities if an
event of default occurs and continues.
The agreements governing our outstanding indebtedness contain
provisions that would characterize some events of default under the
indentures as "events of default" under those agreements that could in turn
result in, among other things, an acceleration of indebtedness under those
agreements.
The indentures contain a provision entitling the trustee, subject to
its duty to act with the required standard of care during a default under
any series of debt securities, to be indemnified by the holders of debt
securities of that series before exercising any right or power under the
indentures at the request of the holders of the debt securities of that
series.
The indentures provide that no holder of debt securities of any series
may institute proceedings, judicial or otherwise, to enforce the applicable
indenture except if the trustee fails to act for 60 days after it receives
a written request to enforce that indenture by the holders of at least 25%
in aggregate principal amount of the then outstanding debt securities of
that series and an offer of reasonable indemnity. This provision will not
prevent any holder of debt securities from enforcing payment of the
principal of and any premium and interest on those debt securities when
due. The holders of a majority in aggregate principal amount of the debt
securities of any series outstanding may direct the time, method and place
of conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred on it with respect to those debt
securities. However, the trustee may refuse to follow any direction that it
determines would be illegal or would conflict with the indentures or
involve it in personal liability or which would unjustly prejudice holders
of the debt securities of that series not joining the proceeding.
The indentures provide that the trustee will, within 90 days after a
default occurs that affects the outstanding debt securities of any series,
give to the holders of those debt securities notice of that default, unless
that default has been cured or waived. Except in the case of a default in
the payment of principal of, or any premium or interest on, any debt
securities or payment of any sinking fund installment, the trustee will be
protected in withholding of that notice if it determines in good faith that
the withholding of that notice is in the interest of the holders of the
debt securities of that series.
We will be required to file with the trustee annually an officers'
certificate as to the absence of certain defaults under the terms of the
indenture.
DEFEASANCE OF DEBT SECURITIES OR SOME COVENANTS
DEFEASANCE AND DISCHARGE. Unless we otherwise indicate in the
applicable prospectus supplement, the debt securities of any series will
provide that we will be discharged from all obligations under the debt
securities of that series (except for obligations to register the transfer
or exchange of debt securities of that series, to replace stolen, lost or
mutilated debt securities of that series, to maintain paying agencies and
to hold moneys for payment in trust) once we deposit with the trustee, in
trust, money and/or U.S. government obligations, which through the payment
of interest and principal, will provide a sufficient amount of money to pay
and discharge the principal of (and any premium) and any interest on, and
any mandatory sinking fund payments that apply to, the debt securities of
that series on the stated maturity of those payments. This discharge may
occur only if, among other things, we deliver to the trustee an opinion of
counsel stating that we have received from, or there has been published by,
the IRS a ruling, or there has been a change in tax law, that would cause
the discharge not to be deemed, or result in, a taxable event for the
holders of the debt securities of that series.
DEFEASANCE OF SOME COVENANTS. Unless we otherwise provide in the
applicable prospectus supplement, the debt securities of any series will
permit us not to comply with some restrictive covenants, including those
relating to consolidation and merger in the indentures, if we satisfy
certain conditions. We will be able to defease those covenants if, among
other things:
(1) we deposit with the trustee money and/or U.S. government
obligations, which, through the payment of interest and
principal, will provide a sufficient amount of money to pay the
principal of (and any premium) and any interest on, and any
mandatory sinking fund payments applicable to, the debt
securities of that series on the stated maturity of those
payments; and
(2) we deliver to the trustee an opinion of counsel stating that the
deposit and related covenant defeasance will not cause the
holders of the debt securities of that series to recognize
income, gain or loss for federal income tax purposes.
If we elect to defease the covenants of a series of debt securities
and those debt securities are declared due and payable because an event of
default has occurred, the amount of money and/or U.S. government
obligations on deposit with the trustee will be sufficient to pay amounts
due on those debt securities at their stated maturity but may not be
sufficient to pay amounts due on those debt securities at the time of the
acceleration. However, we will remain liable for those payments.
We will state in the prospectus supplement for any particular series
of debt securities if any defeasance provisions will apply to those debt
securities.
MODIFICATION OF THE INDENTURE AND WAIVER OF COVENANTS
The indentures permit us and the trustee, with the consent of the
holders of at least a majority in principal amount of outstanding debt
securities of each series affected, to execute supplemental indentures
adding provisions to or changing or eliminating provisions of the
indentures or modifying the rights of the holders of outstanding debt
securities of that series, except that no supplemental indenture may,
without the consent of the holder of each outstanding debt security
affected:
(1) change the stated maturity, or reduce the principal amount, any
premium on or the rate of payment of any interest on, of any debt
security of any series;
(2) reduce the percentage of outstanding debt securities of any
series, the consent of the holders of which is required for any
supplemental indenture or for waiver of compliance with certain
provisions of the indenture or certain defaults thereunder; or
(3) effect various other changes.
The indentures also allow us not to comply with certain covenants in
the indentures upon waiver by the holders of a majority in principal amount
of outstanding debt securities of the series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The indentures allow us, without the consent of the holders of any of
the outstanding debt securities, to consolidate with or merge into any
other corporation or transfer or lease our assets substantially as an
entirety to any person if:
(1) the successor is a corporation organized under the laws of any
domestic jurisdiction;
(2) the successor corporation assumes our obligations on the debt
securities and under the indentures;
(3) after giving effect to the transaction no event of default, and
no event which, after notice or lapse of time, would become an
event of default, shall have happened and be continuing; and
(4) certain other conditions are met.
CONCERNING THE TRUSTEE
The Bank of New York is the trustee under each of the senior debt
indenture and the subordinated debt indenture. We and Countrywide Home
Loans maintain banking relationships in the ordinary course of business
with the trustee. Among other things, The Bank of New York is a lending
bank under an existing revolving credit facility of Countrywide Home Loans.
GOVERNING LAW
Unless we otherwise specify in the applicable prospectus supplement,
the indentures for the debt securities and the debt securities will be
governed by New York law.
DESCRIPTION OF DEBT SECURITIES OF COUNTRYWIDE HOME LOANS AND RELATED
GUARANTEES OF COUNTRYWIDE CREDIT INDUSTRIES
The following description summarizes some of the general terms and
conditions of the debt securities that Countrywide Home Loans may issue
under this prospectus (the "CHL debt securities"). Countrywide Home Loans
will describe the particular terms of any CHL debt securities that it
offers and the extent to which the general provisions below will apply to
those CHL debt securities in a prospectus supplement relating to those CHL
debt securities.
Countrywide Home Loans will issue CHL debt securities either (1) under
an Indenture, dated as of January 1, 1992, as amended by Supplemental
Indenture No. 1, dated as of June 15, 1995 (as it may be further amended or
supplemented, the "CHL senior indenture"), among Countrywide Home Loans,
Countrywide Credit Industries, as guarantor (the "Guarantor"), and The Bank
of New York, as trustee ( the "CHL senior trustee"), or (2) under a
subordinated debt indenture (the "CHL subordinated indenture") to be
entered into among Countrywide Home Loans, the Guarantor and The Bank of
New York, as trustee (the "CHL subordinated trustee"). Any series of CHL
debt securities that Countrywide Home Loans issues under the CHL senior
indenture will constitute unsubordinated debt of Countrywide Home Loans
("CHL senior debt securities") and will rank senior to any series of CHL
debt securities that Countrywide Home Loans issues under the CHL
subordinated indenture ("CHL subordinated debt securities").
Countrywide Home Loans will issue each series of CHL debt securities
under the terms of an amendment or supplement to the applicable CHL
indenture that takes the form of a supplemental indenture or an officers'
certificate delivered under the authority of resolutions adopted by
Countrywide Home Loans' board of directors and the terms of that CHL
indenture. The terms of any CHL debt securities will include those stated
in the applicable CHL indenture and those made part of that CHL indenture
by reference to the Trust Indenture Act. The CHL debt securities will be
subject to all those terms, and we refer the holders of CHL debt securities
to the applicable CHL indenture and the Trust Indenture Act for a statement
of those terms.
The following summaries of various provisions of the CHL indentures
and the CHL debt securities are not complete and are qualified in their
entirety by reference to the provisions of the CHL indentures, including
the definitions of capitalized terms used in this section without
definition. Unless we otherwise indicate, capitalized terms have the
meanings given them in the applicable CHL indenture.
The applicable prospectus supplement will specify whether the CHL debt
securities that Countrywide Home Loans issues will be senior, senior
subordinated or subordinated (including, if applicable, junior
subordinated) debt. The CHL debt securities may be issued as part of units
consisting of CHL debt securities and securities that we may offer under
this prospectus. If Countrywide Home Loans issues debt securities as part
of units of CHL debt securities and securities that we may issue under this
prospectus, we and Countrywide Home Loans will describe any applicable
material federal income tax consequences to holders in the applicable
prospectus supplement.
SENIOR INDENTURE
GENERAL
The CHL senior indenture does not limit the aggregate principal amount
of CHL senior debt securities that Countrywide Home Loans may issue
periodically in series.
The CHL senior debt securities will be unsecured and unsubordinated
indebtedness of Countrywide Home Loans and will rank equally in right of
payment with Countrywide Home Loans' other unsecured and unsubordinated
indebtedness. A substantial portion of the assets of Countrywide Home Loans
may be pledged under various credit agreements among Countrywide Home Loans
and various lending institutions.
We refer you to the prospectus supplement and any pricing supplement
relating to any particular series of CHL senior debt securities offered by
Countrywide Home Loans for a description of the terms of those CHL senior
debt securities, including, where applicable:
(1) the title of those CHL senior debt securities;
(2) any limit on the aggregate principal amount of those CHL senior
debt securities;
(3) the date or dates (or any method or methods by which that date or
those dates will be determined or extended) on which the
principal of those CHL senior debt securities is payable;
(4) any places other than the Countrywide Home Loans' office or
agency in The City of New York where those CHL senior debt
securities will be payable or surrendered for registration of
transfer or exchange;
(5) the denominations in which those CHL senior debt securities will
be issuable;
(6) the currency in which those CHL senior debt securities may be
denominated, which may be U.S. dollars or any foreign currency or
currency unit, and, if applicable, other information regarding
that foreign currency or currency unit;
(7) the designation of the currency or currencies in which payment of
the principal of and any premium and interest on those CHL senior
debt securities will be made and whether payment of the principal
of or any premium or the interest on CHL senior debt securities
designated in a foreign currency or currency unit, at the
holder's election, may instead be payable in U.S. dollars and the
terms and conditions upon which that election may be made;
(8) any rate or rates (which may be fixed or floating) at which those
CHL senior debt securities will bear interest (or any method or
methods by which that rate or those rates are to be determined or
reset), any date or dates from which that interest will accrue
(or any method or methods by which that date or those dates will
be determined or reset), the dates on which that interest will be
payable, the record date for the interest payable on any interest
payment date, and the basis upon which interest will be
calculated if other than that of a 360-day year of twelve 30-day
months;
(9) any terms and conditions on which those CHL senior debt
securities may be redeemed at Countrywide Home Loans' option or
repaid at the holders' option;
(10) any obligation of Countrywide Home Loans to redeem, repay or
purchase those CHL senior debt securities under the terms of any
sinking fund or analogous provisions, and the terms and
conditions on which those CHL senior debt securities will be
redeemed, repaid or purchased, in whole or in part, under the
terms of that obligation;
(11) if other than the principal amount, the portion of the principal
amount of those CHL senior debt securities that will be payable
upon declaration of acceleration of the maturity of those CHL
senior debt securities;
(12) any provisions for the defeasance of those debt securities;
(13) any ability a holder of a CHL senior debt security may have to
renew all or any portion of a CHL senior debt security;
(14) any additional Events of Default or restrictive covenants
applicable to those CHL senior debt securities;
(15) any other terms not inconsistent with the CHL senior indenture,
including any terms which may be required by or advisable under
United States laws or regulations;
(16) if those CHL senior debt securities are denominated or payable in
a currency or currency unit other than U.S. dollars, the
designation of the initial Exchange Rate Agent and, if other than
as set forth in the CHL Indenture, the definition of the
"Exchange Rate"; and
(17) the form of those CHL senior debt securities and, if in global
form, the name of the depositary and the terms upon which and the
circumstances under which those CHL senior debt securities may be
exchanged.
Unless Countrywide Home Loans otherwise indicates in the applicable
prospectus supplement, Countrywide Home Loans will issue CHL senior debt
securities only in fully registered form without coupons. CHL senior debt
securities denominated in U.S. dollars will be issued in denominations of
$1,000 or integral multiples of $1,000 unless Countrywide Home Loans
otherwise provides in the applicable prospectus supplement. The prospectus
supplement relating to a series of CHL senior debt securities denominated
in a foreign currency or currency unit will specify the denominations in
which those CHL senior debt securities may be issued.
The CHL senior indenture does not contain any provisions that would
limit the ability of Countrywide Home Loans or any of its affiliates to
incur indebtedness (secured or unsecured) or that would afford holders of
CHL senior debt securities protection in the event of a highly leveraged
transaction, restructuring, change in control, merger or similar
transaction involving Countrywide Home Loans that may adversely affect
holders of the CHL senior debt securities.
Countrywide Home Loans may sell one or more series of CHL senior debt
securities at a substantial discount below their stated principal amount,
and those CHL senior debt securities may bear no interest or interest at a
rate that at the time of issuance is below market rate. One or more series
of CHL senior debt securities may be floating rate debt securities and may
be exchangeable for fixed rate debt securities. Countrywide Home Loans will
describe any federal income tax consequences and special considerations
applicable to any particular series in the applicable prospectus
supplement.
Unless Countrywide Home Loans otherwise indicates in the applicable
prospectus supplement, the principal of, and any premium or interest on,
any series of CHL senior debt securities will be payable, and those CHL
senior debt securities will be exchangeable and transfers of them will be
registerable, at the Corporate Trust Office of the CHL senior trustee,
initially at 101 Barclay Street, New York, New York 10286. However,
Countrywide Home Loans may elect to make interest payments by check mailed
to the address of the person entitled to them as that address appears in
the security register for those CHL senior debt securities.
No CHL senior debt security will be entitled to any benefit under the
CHL senior indenture or be valid or obligatory for any purpose unless there
appears on that CHL senior debt security a certificate of authentication
substantially in the form provided in the CHL senior indenture that is duly
executed by the CHL senior trustee, and that certificate will be conclusive
evidence and the only evidence that that CHL senior debt security has been
duly authenticated and delivered under and is entitled to the benefits of
the CHL senior indenture.
EVENTS OF DEFAULT
The CHL senior indenture provides that the following are "Events of
Default" that apply to any series of CHL senior debt securities:
(1) default in payment of principal of (or any premium on) any CHL
senior debt security of that series at maturity;
(2) default for 30 days in payment of interest on any CHL senior debt
security of that series when due;
(3) default in the deposit of any sinking fund payment on any CHL
senior debt security of that series when due;
(4) default in the performance or breach of any other covenant or
warranty of Countrywide Home Loans or the Guarantor in the CHL
senior indenture, the CHL senior debt securities or the related
Guarantees, continued for 60 days after written notice of default
by the CHL senior trustee or the holders of at least 25% in
aggregate principal amount of the then outstanding CHL senior
debt securities of that series;
(5) default resulting in acceleration of maturity of any other
indebtedness for borrowed money of Countrywide Home Loans, the
Guarantor or any direct or indirect subsidiary of the Guarantor
in an amount exceeding $10,000,000 and that acceleration shall
not be rescinded or annulled for a period of 10 days after
written notice of the default by the CHL senior trustee or the
holders of at least 25% in aggregate principal amount of the then
outstanding CHL senior debt securities of that series;
(6) certain events of bankruptcy, insolvency or reorganization; and
(7) any other Event of Default applicable to that series of CHL
senior debt securities.
No Event of Default applicable to a particular series of CHL senior
debt securities necessarily constitutes an Event of Default applicable to
any other series of CHL senior debt securities.
The CHL senior indenture provides that if an Event of Default occurs
and continues, either the CHL senior trustee or the holders of at least 25%
in aggregate principal amount of the CHL senior debt securities of that
series then outstanding may declare the principal amount of those CHL
senior debt securities (or, if they are Original Issue Discount Securities,
the amount as provided in the terms of those Original Issue Discount
Securities) to be due and payable immediately upon written notice of
acceleration to Countrywide Home Loans. In some cases, the holders of a
majority in aggregate principal amount of the outstanding CHL senior debt
securities of that series may, on behalf of the holders of all those CHL
senior debt securities, rescind and annul that declaration of acceleration.
"Original Issue Discount Security" means, except as otherwise defined in a
CHL senior debt security, any CHL senior debt security that is issued with
original issue discount within the meaning of Section 1273(a) of the
Internal Revenue Code of 1986 and related regulations.
The agreements governing certain of Countrywide Home Loans'
outstanding indebtedness contain provisions that would characterize some
Events of Default under the CHL senior indenture as events of default under
those agreements that could in turn result in, among other things, an
acceleration of the indebtedness under those agreements.
The CHL senior indenture contains a provision entitling the CHL senior
trustee, subject to its duty to act with the required standard of care
during default under any series of CHL senior debt securities, to be
indemnified by the holders of the CHL senior debt securities of that series
before exercising any right or power under the CHL senior indenture at the
request of the holders of CHL senior debt securities of that series. The
CHL senior indenture provides that no holders of CHL senior debt securities
of any series may institute any proceedings, judicial or otherwise, to
enforce the CHL senior indenture except if the CHL senior trustee fails to
act for 60 days after it receives a written request to enforce the CHL
senior indenture by the holders of at least 25% in aggregate principal
amount of the then outstanding CHL senior debt securities of that series
and an offer of reasonable indemnity. This provision will not prevent any
holder of CHL senior debt securities from enforcing payment of the
principal thereof and any premium and interest on those CHL senior debt
securities when due. The holders of a majority in aggregate principal
amount of the CHL senior debt securities of any series then outstanding may
direct the time, method and place of conducting any proceeding for any
remedy available to the CHL senior trustee or exercising any trust or power
conferred on it with respect to those CHL senior debt securities. However,
the CHL senior trustee may refuse to follow any direction that it
determines would be illegal or would conflict with the CHL senior indenture
or involve it in personal liability or that would unjustly prejudice
holders of the CHL senior debt securities of that series not joining the
proceeding.
The CHL senior indenture provides that the CHL senior trustee will,
within 90 days after a default occurs that affects the outstanding CHL
senior debt securities of any series, give to the holders of those CHL
senior debt securities notice of that default, unless that default has been
cured or waived. Except in the case of a default in the payment of
principal of, or any premium or interest on any CHL senior debt securities
or payment of any sinking fund installment, the CHL senior trustee will be
protected in the withholding of that notice if it determines in good faith
that the withholding of that notice is in the interest of the holders of
the CHL senior debt securities of that series.
Countrywide Home Loans will be required to file with the CHL senior
trustee annually an officers' certificate as to the absence of certain
defaults under the terms of the CHL senior indenture.
MODIFICATION AND WAIVER
Countrywide Home Loans, the Guarantor and the CHL senior trustee may
modify or amend the CHL senior indenture with the consent of the holders of
a majority in aggregate principal amount of the outstanding CHL senior debt
securities of each series affected by that modification or amendment;
provided, however, that no modification or amendment may, without the
consent of the holder of each outstanding CHL senior debt security
affected:
(1) except as the CHL Indenture otherwise permits for CHL senior debt
securities for which the Stated Maturity is extendible, change
the Stated Maturity of the principal of, or any installment of
interest on, that CHL senior debt security;
(2) reduce the principal amount of, or, except as the CHL Indenture
otherwise permits for CHL senior debt securities for which the
interest rate may be reset, interest on, or any premium payable
upon redemption or repayment of, that CHL senior debt security;
(3) reduce the amount of the principal of an Original Issue Discount
Security that would be due and payable upon a declaration of
acceleration of its Maturity;
(4) adversely affect the right of repayment at the option of a holder
of that CHL senior debt security;
(5) reduce the amount of, or postpone the date fixed for, any payment
under any sinking fund or analogous provisions of that CHL senior
debt security;
(6) change the place or currency or currency unit of payment of the
principal of or any premium or interest on that CHL senior debt
security;
(7) change or eliminate the rights of a holder to receive payment in
a designated currency;
(8) impair the right to institute suit for the enforcement of any
required payment on or with respect to that CHL senior debt
security;
(9) reduce the percentage of the aggregate principal amount of the
outstanding CHL senior debt securities of any series the consent
of whose holders is required to modify or amend the CHL senior
indenture, to waive compliance with certain provisions of the CHL
senior indenture, or to waive certain defaults;
(10) modify any of the provisions of Section 613 (described below)
except to increase the percentage or to provide that some other
provisions of the CHL Indenture cannot be modified or waived
without the consent of the holder of each outstanding CHL senior
debt security affected by the modification or waiver; or
(11) modify or affect the terms and conditions of the related
Guarantees in a manner adverse to the interests of the holders of
the CHL senior debt securities.
The CHL senior indenture also contains provisions permitting
Countrywide Home Loans, the Guarantor and the CHL senior trustee, without
the consent of any holders of CHL senior debt securities, to enter into
supplemental indentures for any of the following purposes:
(1) to evidence the succession of another corporation to Countrywide
Home Loans or the Guarantor and the assumption by that successor
of the obligations and covenants of Countrywide Home Loans or the
Guarantor contained in the CHL senior indenture, the CHL senior
debt securities and the related Guarantees;
(2) to add to the covenants of Countrywide Home Loans or the
Guarantor for the benefit of the holders of all or any series of
CHL senior debt securities (and if those covenants are to be for
the benefit of less than all series of CHL senior debt
securities, stating that those covenants are expressly being
included solely for the benefit of that series), or to surrender
any right or power in the CHL senior indenture conferred upon
Countrywide Home Loans or the Guarantor;
(3) to add any additional Events of Default (and if those Events of
Default will be applied to less than all series of CHL senior
debt securities, stating that those Events of Default are
expressly being included solely to be applied to that series);
(4) to add or change any of the provisions of the CHL senior
indenture to the extent necessary to permit or facilitate the
issuance of CHL senior debt securities in bearer form,
registrable or not registrable as to principal, and with or
without interest coupons;
(5) to change or eliminate any provisions of the CHL senior
indenture, provided that any of those changes or eliminations
will become effective only when there is no CHL senior debt
security outstanding of any series created before that
supplemental indenture is executed which is entitled to the
benefit of that provision;
(6) to establish the form or terms of CHL senior debt securities of
any series as otherwise permitted by the CHL senior indenture;
(7) to evidence and provide for the acceptance of appointment under
the CHL senior indenture by a successor CHL senior trustee for
the CHL senior debt securities of one or more series issued under
the CHL Indenture and to add to or change any of the provisions
of the CHL senior indenture necessary to provide for or
facilitate the administration of the trusts under the CHL senior
indenture by more than one CHL senior trustee consistent with the
requirements of the CHL senior indenture;
(8) to secure the CHL senior debt securities issued under the CHL
senior indenture;
(9) to cure any ambiguity, to correct or supplement any provision in
the CHL senior indenture which may be defective or inconsistent
with any other provision of the CHL senior indenture, or to make
any other provisions regarding matters or questions arising under
the CHL senior indenture which will not be inconsistent with any
provision of the CHL senior indenture, provided those other
provisions will not adversely affect the interests of the holders
of CHL senior debt securities of any series issued under the CHL
senior indenture in any material respect;
(10) to modify, eliminate or add to the provisions of the CHL senior
indenture to the extent necessary to qualify the CHL senior
indenture under the Trust Indenture Act or under any similar
federal statute subsequently enacted and to add to the CHL senior
indenture other provisions as may be expressly required under the
Trust Indenture Act; or
(11) to enable the Guarantor or one of its subsidiaries to assume the
payment obligations under the CHL senior debt securities and the
performance of every covenant to be performed or observed by
Countrywide Home Loans under the CHL senior indenture.
The holders of a majority in aggregate principal amount of the
outstanding CHL senior debt securities of each series may, on behalf of all
holders of CHL senior debt securities of that series, waive any past
default under the CHL senior indenture affecting the CHL senior debt
securities of that series except a default in the payment of the principal
of (or any premium), or interest on, any CHL senior debt security of that
series and a default in the compliance of a covenant or provision if the
consent of the holder of each outstanding CHL senior debt security of that
series would be required to modify or amend that covenant or provision.
CONSOLIDATION, MERGER AND TRANSFER OF ASSETS
Under the CHL senior indenture, neither Countrywide Home Loans nor the
Guarantor may consolidate with or merge into any corporation, or transfer
its assets substantially as an entirety to any person, unless:
(1) the successor corporation or transferee assumes Countrywide Home
Loans' or the Guarantor's obligations on the CHL senior debt
securities or the related Guarantees, as applicable, and under
the CHL senior indenture, and in the case of a consolidation or
merger of Countrywide Home Loans, the Guarantor delivers an
affirmation of the continuance of its obligations to the CHL
senior trustee;
(2) after giving effect to the transaction, no Event of Default and
no event that, after notice or lapse of time or both, would
become an Event of Default will have occurred and be continuing;
and
(3) some other conditions are met.
SATISFACTION, DISCHARGE AND DEFEASANCE
The CHL senior indenture, with respect to any series of CHL senior
debt securities (except for some specified surviving obligations, including
(1) any rights of registration of transfer and exchange and (2) rights to
receive the principal, any premium and interest on the CHL senior debt
securities), will be discharged and cancelled upon the satisfaction of
certain conditions, including the following:
(1) all CHL senior debt securities of that series not previously
delivered to the CHL senior trustee for cancellation have become
due or payable, will become due and payable at their Stated
Maturity within one year, or are to be called for redemption
within one year; and
(2) the deposit with the CHL senior trustee of an amount in the
Specified Currency sufficient to pay the principal, any premium
and interest to the Maturity of all CHL senior debt securities of
that series.
If Countrywide Home Loans so specifies in the prospectus supplement
relating to CHL senior debt securities of any series, Countrywide Home
Loans at its option:
(1) will be discharged from any and all obligations under the CHL
senior debt securities of that series (except for obligations to
register the transfer or exchange of CHL senior debt securities
of that series, replace stolen, lost or mutilated CHL senior debt
securities of that series, maintain offices or agencies in each
Place of Payment and hold moneys for payment in trust); or
(2) will not be subject to provisions of the CHL Indenture described
above under "--Consolidation, Merger and Transfer of Assets" for
the debt securities of that series,
if Countrywide Home Loans irrevocably deposits with the CHL senior trustee,
in trust, money or U.S. government obligations, which through interest and
principal payments will provide a sufficient amount of money (in the
opinion of independent public accountants) to pay all the principal
(including any mandatory sinking fund payments) of, and any premium and
interest on, the CHL senior debt securities of that series on the dates
those payments are due consistent with the terms of those CHL senior debt
securities. To exercise either option, Countrywide Home Loans must deliver
to the CHL senior trustee:
(1) an opinion of counsel stating that;
(a) the deposit and related defeasance would not cause the
holders of the CHL senior debt securities of that series to
recognize income, gain or loss for federal income tax
purposes;
(b) the exercise of that option will not cause any violation of
the Investment Company Act of 1940; and
(c) if the CHL senior debt securities of that series are then
listed on the New York Stock Exchange, those CHL senior debt
securities would not be delisted as a result of the exercise
of that option; and
(2) if CHL senior debt securities of that series are being
discharged, a ruling received from or published by the United
States Internal Revenue Service to the effect that the deposit
and related defeasance would not cause the holders of the CHL
senior debt securities of that series to recognize income, gain
or loss for federal income tax purposes.
GUARANTEES
The Guarantor will unconditionally guarantee (the "Guarantees") the
payment of principal of and any premium and interest on the CHL senior debt
securities when due and payable, whether at their Stated Maturity or upon
redemption, repayment or otherwise. The Guarantees will rank equally in
right of payment with all other unsecured and unsubordinated obligations of
the Guarantor, including any debt securities issued by the Guarantor under
this prospectus.
The obligations of the Guarantor under the Guarantees will be
unconditional regardless of the enforceability of the CHL senior debt
securities or the CHL senior indenture and will not be discharged until all
obligations under those CHL senior debt securities and the CHL senior
indenture are satisfied. Holders of the CHL senior debt securities may
proceed directly against the Guarantor if an Event of Default affecting
those CHL senior debt securities occurs without first proceeding against
Countrywide Home Loans.
Because the Guarantor is a holding company, the rights of its
creditors (including the holders of the CHL senior debt securities if the
Guarantees are enforced) to share in the distribution of the assets of any
subsidiary upon that subsidiary's liquidation or recapitalization will be
subject to the prior claims of the subsidiary's creditors, except to the
extent the Guarantor may itself be a creditor with recognized claims
against the subsidiary.
GLOBAL SECURITIES
Countrywide Home Loans may issue CHL senior debt securities of any
series in whole or in part in the form of one or more global securities
that will be deposited with, or on behalf of, a depositary identified in
the prospectus supplement relating to that series. Global securities may be
issued in either registered or bearer form and in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for
individual certificates evidencing CHL senior debt securities in definitive
form, a global security may not be transferred except as a whole by the
depositary for that global security to a nominee of that depositary or by a
nominee of that depositary to that depositary or another nominee of that
depositary or by that depositary or that nominee to a successor of that
depositary or a nominee of that successor. Countrywide Home Loans will
describe the specific terms of the depositary arrangement for a series of
CHL senior debt securities in the prospectus supplement relating to that
series.
CONCERNING THE TRUSTEE
The Bank of New York is the trustee under the CHL senior indenture.
Countrywide Home Loans and the Guarantor maintain banking relationships in
the ordinary course of business with the CHL senior trustee. Among other
things, The Bank of New York is a lending bank under an existing revolving
credit facility of Countrywide Home Loans.
GOVERNING LAW
Unless Countrywide Home Loans otherwise specifies in the applicable
prospectus supplement, the CHL senior indenture and the CHL senior debt
securities will be governed by New York law.
SUBORDINATED INDENTURE
GENERAL
The CHL subordinated indenture will not limit the amount of additional
indebtedness that Countrywide Home Loans or any of its subsidiaries may
incur, except as Countrywide Home Loans may provide in the applicable
prospectus supplement. The CHL debt securities issued under the CHL
subordinated indenture will be subordinated obligations as described in the
applicable prospectus supplement.
Countrywide Home Loans will indicate in the applicable prospectus
supplement the following terms of and information concerning any CHL
subordinated debt securities that Countrywide Home Loans issues (to the
extent those terms apply to those CHL subordinated debt securities and have
not been otherwise described):
(1) the specific title, aggregate principal amount, denomination and
form;
(2) the date of maturity (or the method by which that date may be
determined or extended);
(3) any interest rate or rates, whether fixed or floating (or the
method by which that rate or those rates will be determined);
(4) the date from which interest will accrue (or the method by which
that date may be determined or reset), the dates on which that
interest will be payable and the record date for any interest
payable on the interest payment date and the basis upon which
interest will be calculated if other than that of a 360-day year
of twelve 30-day months;
(5) the place or places where the principal of and any premium and
any interest on the CHL subordinated debt securities will be
payable, or where those CHL subordinated debt securities may be
surrendered for registration of transfer or exchange, if not the
corporate trust office of the CHL subordinated trustee for those
CHL subordinated debt securities;
(6) the portion of the principal amount of CHL subordinated debt
securities of the series payable upon certain declarations of
acceleration or the method by which that portion shall be
determined;
(7) the denominations and the currency, currencies, currency units or
composite currencies in which the CHL subordinated debt
securities will be issuable;
(8) the currency, currencies, currency units or composite currencies
in which payments on the CHL subordinated debt securities will be
made, if not U.S. dollars;
(9) additional or different subordination terms of the CHL
subordinated debt securities;
(10) any redemption, repayment or sinking fund provisions, including
the period or periods within which, the currency, currencies,
currency units or composite currencies in which and the other
terms and conditions upon which Countrywide Home Loans may redeem
the CHL subordinated debt securities;
(11) the ability of a holder of a CHL subordinated debt security to
renew all or any portion of a CHL subordinated debt security;
(12) whether the CHL subordinated debt securities are convertible into
or exchangeable for other securities of Countrywide Home Loans
and the terms of the security into which they are convertible or
exchangeable, the conversion price or exchange ratio, other terms
related to conversion and exchange and any anti-dilution
protections;
(13) whether the CHL subordinated debt securities will be sold as part
of units consisting of CHL subordinated debt securities and
securities that Countrywide Credit Industries may offer under
this prospectus;
(14) if the amount of payments of principal of or any premium or
interest on any CHL subordinated debt securities of the series
may be determined by reference to an index, formula or other
method, the index, formula or other method by which those amounts
will be determined;
(15) whether and by what method the CHL subordinated debt securities
of the series (or certain covenants under the related CHL
subordinated indenture) may be defeased and discharged by
Countrywide Home Loans;
(16) whether the CHL subordinated debt securities of the series shall
be issued in whole or in part as book-entry securities;
(17) any applicable material federal income tax consequences; and
(18) any other material specific terms of the CHL subordinated debt
securities, including any material additional events of default
or covenants provided for and any material terms that may be
required by or advisable under applicable laws or regulations.
Unless Countrywide Home Loans otherwise indicates in the applicable
prospectus supplement, Countrywide Home Loans will issue CHL subordinated
debt securities only in fully registered form without coupons. The CHL
subordinated debt securities denominated in U.S. dollars will be issued in
denominations of $1,000 or integral multiples of $1,000 unless Countrywide
Home Loans otherwise provides in the applicable prospectus supplement. The
prospectus supplement relating to a series of CHL subordinated debt
securities denominated in a foreign currency or currency unit will specify
the denominations in which those CHL subordinated debt securities may be
issued.
The CHL subordinated indenture does not contain any provisions that
would limit Countrywide Home Loans' ability or the ability of any of its
affiliates to incur indebtedness (secured or unsecured) or that would
afford holders of the CHL subordinated debt securities protection in the
event of a highly leveraged transaction, restructuring, change in control,
merger or similar transaction involving Countrywide Home Loans that may
adversely affect holders of the CHL subordinated debt securities.
Unless Countrywide Home Loans otherwise indicates in the applicable
prospectus supplement, the principal of, and any premium or interest on,
any series of CHL subordinated debt securities will be payable, and those
CHL subordinated debt securities will be exchangeable and transfers of them
will be registerable, at the corporate trust office of the CHL subordinated
trustee, initially at 101 Barclay Street, New York, New York 10286.
However, Countrywide Home Loans may elect to make interest payments by
check mailed to the address of the person entitled to them as that address
appears in the security register for those CHL subordinated debt
securities.
None of the CHL subordinated debt securities will be entitled to any
benefit under the CHL subordinated indenture or be valid or obligatory for
any purpose unless there appears on the CHL subordinated debt security a
certificate of authentication substantially in the form provided in that
CHL subordinated indenture that is duly executed by the trustee, and that
certificate will be conclusive evidence and the only evidence that the CHL
subordinated debt security has been duly authenticated and delivered under
and is entitled to the benefits of the CHL subordinated indenture.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Countrywide Home Loans' obligations under the CHL subordinated debt
securities will be subordinate in right of payment to all present and
future senior indebtedness of Countrywide Home Loans to the extent provided
in the CHL subordinated indenture. Upon any payment or distribution of
assets to creditors upon any liquidation, dissolution, winding up,
reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar
proceedings in connection with the insolvency or bankruptcy of Countrywide
Home Loans, the holders of senior indebtedness of Countrywide Home Loans
will first be entitled to receive payment in full of senior indebtedness
before the holders of the CHL subordinated debt securities will be entitled
to receive or retain any payment.
No payments on account of principal of or any premium or interest on
the CHL subordinated debt securities (including payments on exercise of CHL
subordinated debt security put options) may be made if a default in any
payment on senior indebtedness has occurred and is continuing, or an event
of default on any senior indebtedness resulting in the acceleration of its
maturity has occurred, or if any judicial proceeding is pending with
respect to any such default.
In the event the maturity of the CHL subordinated debt securities is
accelerated, the holders of all senior indebtedness of Countrywide Home
Loans outstanding at the time of the acceleration will first be entitled to
receive payment in full of all amounts due in respect of that senior
indebtedness before the holders of the CHL subordinated debt securities
will be entitled to receive or retain any payment related to the CHL
subordinated debt securities.
Amounts that would be due and payable by Countrywide Home Loans to
holders of units in the absence of the foregoing subordination provisions,
however, may be applied by those holders to offset their obligations under
their respective purchase contracts.
Any subordinated CHL subordinated debt securities will be subordinate
and junior in right of payment, to the extent and in the manner described
in the CHL subordinated indenture, to all "senior indebtedness" of
Countrywide Home Loans. Unless Countrywide Home Loans otherwise indicates
in the prospectus supplement, "senior indebtedness" means:
(1) the principal, premium, if any, and interest in respect of
indebtedness for money borrowed and indebtedness evidenced by
securities, debentures, bonds or other similar instruments;
(2) all capital lease obligations;
(3) all obligations issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all obligations
under any title retention agreement, excluding trade accounts
payable arising in the ordinary course of business;
(4) all obligations 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;
(5) all obligations of the type referred to in clauses (1) through
(4) above of others, the payment of which Countrywide Home Loans
is responsible or liable as obligor, guarantor or otherwise; and
(6) all obligations of the type referred to in clauses (1) through
(5) above of others secured by any lien on any of the properties
or assets of Countrywide Home Loans, whether or not the
obligation is assumed by Countrywide Home Loans,
except for:
(a) any indebtedness that states, or is issued under a deed,
indenture or other instrument that states, that it is subordinate
to or ranks equally with the CHL subordinated debt securities;
(b) any indebtedness between or among Countrywide Home Loans and any
of its affiliates;
(c) the indebtedness represented by the 8% Junior Subordinated
Deferrable Interest Debentures due December 15, 2026 of
Countrywide Home Loans; and
(d) the indebtedness represented by the 8.05% Junior Subordinated
Debentures due June 15, 2027 of Countrywide Home Loans.
REDEMPTION
If and to the extent Countrywide Home Loans provides in the applicable
prospectus supplement, Countrywide Home Loans will have the right to redeem
the CHL subordinated debt securities, in whole or from time to time in
part, after the date and at the redemption prices set forth in the
applicable prospectus supplement.
EVENTS OF DEFAULT
The CHL subordinated indenture defines an event of default for the CHL
subordinated debt securities of any series as:
(1) failure to pay principal (or premium) on any CHL subordinated
debt security of that series at maturity;
(2) failure to pay interest on any CHL subordinated debt security of
that series within 30 days of the date when due;
(3) failure to deposit any sinking fund payment when due for that
series within 30 days of the date when due;
(4) failure to perform for 90 days after notice any of the other
covenants in the CHL subordinated indenture;
(5) certain events of bankruptcy, insolvency or reorganization;
(6) failure to pay the put price when due upon exercise of a CHL
subordinated debt security put option;
(7) default resulting in the acceleration of maturity of any other
indebtedness for money borrowed by Countrywide Home Loans or by
any direct or indirect subsidiary of Countrywide Home Loans in an
amount exceeding $10,000,000 and that acceleration not being
rescinded or annulled for a period of 10 days after written
notice of the default by the trustee or the holders of at least
25% in aggregate principal amount of the then outstanding CHL
subordinated debt securities of that series; and
(8) any other event of default provided for CHL subordinated debt
securities of that series.
The CHL subordinated indenture provides that if any event of default
affecting outstanding CHL subordinated debt securities of any series occurs
and is continuing, either the CHL subordinated trustee or the holders of at
least 25% in principal amount of the outstanding CHL subordinated debt
securities of that series may declare the principal amount (or, if the CHL
subordinated debt securities of that series are original issue discount
securities or indexed securities, the portion of the principal amount of
those CHL subordinated debt securities as specified by their terms) of all
CHL subordinated debt securities of that series to be due and payable
immediately. However, under certain circumstances the holders of a majority
in principal amount of the outstanding CHL subordinated debt securities of
that series on behalf of the holders of all CHL subordinated debt
securities of that series may annul a declaration and waive past defaults
(except, unless previously cured, a default in payment of principal of or
any premium or any interest on the CHL subordinated debt securities of that
series and other specified defaults).
Countrywide Home Loans refers you to the prospectus supplement
relating to each series of CHL subordinated debt securities that are
original issue discount securities for the particular provisions regarding
acceleration of the maturity of a portion of the principal amount of those
original issue discount securities if an event of default occurs and
continues.
The agreements governing the outstanding indebtedness of Countrywide
Home Loans contain provisions that would characterize some events of
default under the CHL subordinated indenture as "events of default" under
those agreements that could in turn result in, among other things, an
acceleration of indebtedness under those agreements.
The CHL subordinated indenture contains a provision entitling the CHL
subordinated trustee, subject to its duty to act with the required standard
of care during a default under any series of CHL subordinated debt
securities, to be indemnified by the holders of CHL subordinated debt
securities of that series before exercising any right or power under the
CHL subordinated indenture at the request of the holders of the CHL
subordinated debt securities of that series.
The CHL subordinated indenture provides that no holder of CHL
subordinated debt securities of any series may institute proceedings,
judicial or otherwise, to enforce the CHL subordinated indenture except if
the CHL subordinated trustee fails to act for 60 days after it receives a
written request to enforce the CHL subordinated indenture by the holders of
at least 25% in aggregate principal amount of the then outstanding CHL
subordinated debt securities of that series and an offer of reasonable
indemnity. This provision will not prevent any holder of CHL subordinated
debt securities from enforcing payment of the principal of and any premium
and interest on those CHL subordinated debt securities when due. The
holders of a majority in aggregate principal amount of the CHL subordinated
debt securities of any series outstanding may direct the time, method and
place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on it with respect to those CHL
subordinated debt securities. However, the CHL subordinated trustee may
refuse to follow any direction that it determines would be illegal or would
conflict with the CHL subordinated indenture or involve it in personal
liability or which would unjustly prejudice holders of the CHL subordinated
debt securities of that series not joining the proceeding.
The CHL subordinated indenture provides that the trustee will, within
90 days after a default occurs that affects the outstanding CHL
subordinated debt securities of any series, give to the holders of those
CHL subordinated debt securities notice of that default, unless that
default has been cured or waived. Except in the case of a default in the
payment of principal of, or any premium or interest on, any CHL
subordinated debt securities or payment of any sinking fund installment,
the CHL subordinated trustee will be protected in withholding of that
notice if it determines in good faith that the withholding of that notice
is in the interest of the holders of the CHL subordinated debt securities
of that series.
Countrywide Home Loans will be required to file with the CHL
subordinated trustee annually an officers' certificate as to the absence of
certain defaults under the terms of the CHL subordinated indenture.
DEFEASANCE OF DEBT SECURITIES OR SOME COVENANTS
DEFEASANCE AND DISCHARGE. Unless Countrywide Home Loans otherwise
indicates in the applicable prospectus supplement, the CHL subordinated
debt securities of any series will provide that Countrywide Home Loans will
be discharged from all obligations under the CHL subordinated debt
securities of that series (except for obligations to register the transfer
or exchange of CHL subordinated debt securities of that series, to replace
stolen, lost or mutilated CHL subordinated debt securities of that series,
to maintain paying agencies and to hold moneys for payment in trust) once
Countrywide Home Loans deposits with the CHL subordinated trustee, in
trust, money and/or U.S. government obligations, which through the payment
of interest and principal, will provide a sufficient amount of money to pay
and discharge the principal of (and any premium) and any interest on, and
any mandatory sinking fund payments that apply to, the CHL subordinated
debt securities of that series on the stated maturity of those payments.
This discharge may occur only if, among other things, Countrywide Home
Loans delivers to the CHL subordinated trustee an opinion of counsel
stating that Countrywide Home Loans has received from, or there has been
published by, the IRS a ruling, or there has been a change in tax law, that
would cause the discharge not to be deemed, or result in, a taxable event
for the holders of the CHL subordinated debt securities of that series.
DEFEASANCE OF SOME COVENANTS. Unless Countrywide Home Loans otherwise
provides in the applicable prospectus supplement, the CHL subordinated debt
securities of any series will permit Countrywide Home Loans not to comply
with some restrictive covenants, including those relating to consolidation
and merger in the CHL subordinated indenture, if Countrywide Home Loans
satisfies certain conditions. Countrywide Home Loans will be able to
defease those covenants if, among other things:
(1) Countrywide Home Loans deposits with the CHL subordinated trustee
money and/or U.S. government obligations, which, through the
payment of interest and principal, will provide a sufficient
amount of money to pay the principal of (and any premium) and any
interest on, and any mandatory sinking fund payments applicable
to, the CHL subordinated debt securities of that series on the
stated maturity of those payments; and
(2) Countrywide Home Loans delivers to the CHL subordinated trustee
an opinion of counsel stating that the deposit and related
covenant defeasance will not cause the holders of the CHL
subordinated debt securities of that series to recognize income,
gain or loss for federal income tax purposes.
If Countrywide Home Loans elects to defease the covenants of a series
of CHL subordinated debt securities and those CHL subordinated debt
securities are declared due and payable because an event of default has
occurred, the amount of money and/or U.S. government obligations on deposit
with the CHL subordinated trustee will be sufficient to pay amounts due on
those CHL subordinated debt securities at their stated maturity but may not
be sufficient to pay amounts due on those CHL subordinated debt securities
at the time of the acceleration. However, Countrywide Home Loans will
remain liable for those payments.
Countrywide Home Loans will state in the prospectus supplement for any
particular series of CHL subordinated debt securities if any defeasance
provisions will apply to those CHL subordinated debt securities.
MODIFICATION OF THE INDENTURE AND WAIVER OF COVENANTS
The CHL subordinated indenture permits Countrywide Home Loans and the
CHL subordinated trustee, with the consent of the holders of at least a
majority in principal amount of outstanding CHL subordinated debt
securities of each series affected, to execute supplemental indentures
adding provisions to or changing or eliminating provisions of the CHL
subordinated indenture or modifying the rights of the holders of
outstanding CHL subordinated debt securities of that series, except that no
supplemental CHL subordinated indenture may, without the consent of the
holder of each outstanding CHL subordinated debt security affected:
(1) change the stated maturity, or reduce the principal amount, any
premium on or the rate of payment of any interest on, of any CHL
subordinated debt security of any series;
(2) reduce the percentage of outstanding CHL subordinated debt
securities of any series, the consent of the holders of which is
required for any supplemental indenture or for waiver of
compliance with certain provisions of the CHL subordinated
indenture or certain defaults thereunder; or
(3) effect various other changes.
The CHL subordinated indenture also allows Countrywide Home Loans not
to comply with certain covenants in the CHL subordinated indenture upon
waiver by the holders of a majority in principal amount of outstanding CHL
subordinated debt securities of the series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The CHL subordinated indenture allows Countrywide Home Loans, without
the consent of the holders of any of the outstanding CHL subordinated debt
securities, to consolidate with or merge into any other corporation or
transfer or lease Countrywide Home Loans' assets substantially as an
entirety to any person if:
(1) the successor is a corporation organized under the laws of any
domestic jurisdiction;
(2) the successor corporation assumes Countrywide Home Loans'
obligations on the CHL subordinated debt securities and under the
CHL subordinated indenture;
(3) after giving effect to the transaction no event of default, and
no event which, after notice or lapse of time, would become an
event of default, shall have happened and be continuing; and
(4) certain other conditions are met.
GUARANTEES
The Guarantor will unconditionally guarantee (the "subordinated
guarantees") the payment of principal of and any premium and interest on
the CHL subordinated debt securities when due and payable, whether at their
stated maturity or upon redemption, repayment or otherwise. The
subordinated guarantees will be subordinated in right of payment to all
present and future senior indebtedness of the Guarantor on terms comparable
to the subordination of the CHL subordinated debt securities.
The obligations of the Guarantor under the subordinated guarantees
will be unconditional regardless of the enforceability of the CHL
subordinated debt securities or the CHL subordinated indenture and will not
be discharged until all obligations under those CHL subordinated debt
securities and the CHL subordinated indenture are satisfied. Holders of the
CHL subordinated debt securities may proceed directly against the Guarantor
if an event of default affecting those CHL subordinated debt securities
occurs without first proceeding against Countrywide Home Loans.
Because the Guarantor is a holding company, the rights of its
creditors (including the holders of the CHL subordinated debt securities if
the subordinated guarantees are enforced) to share in the distribution of
the assets of any subsidiary upon that subsidiary's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors, except to the extent the Guarantor may itself be a creditor with
recognized claims against the subsidiary.
GLOBAL SECURITIES
Countrywide Home Loans may issue CHL subordinated debt securities of
any series in whole or in part in the form of one or more global securities
that will be deposited with, or on behalf of, a depositary identified in
the prospectus supplement relating to that series. Global securities may be
issued in either registered or bearer form and in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for
individual certificates evidencing CHL subordinated debt securities in
definitive form, a global security may not be transferred except as a whole
by the depositary for that global security to a nominee of that depositary
or by a nominee of that depositary to that depositary or another nominee of
that depositary or by that depositary or that nominee to a successor of
that depositary or a nominee of that successor. Countrywide Home Loans will
describe the specific terms of the depositary arrangement for a series of
CHL subordinated debt securities in the prospectus supplement relating to
that series.
CONCERNING THE TRUSTEE
The Bank of New York is the trustee under each of the CHL senior
indenture and the CHL subordinated indenture. Countrywide Home Loans
maintains banking relationships in the ordinary course of business with the
CHL trustee. Among other things, The Bank of New York is a lending bank
under an existing revolving credit facility of Countrywide Home Loans.
GOVERNING LAW
Unless Countrywide Home Loans otherwise specifies in the applicable
prospectus supplement, the CHL subordinated indenture and the CHL
subordinated debt securities will be governed by New York law.
PLAN OF DISTRIBUTION
We or Countrywide Home Loans may sell securities issuable under this
prospectus to or through one or more underwriters or dealers and also may
sell those securities directly to institutional investors or other
purchasers, or through agents.
We or Countrywide Home Loans may distribute the securities
periodically in one or more transactions at a fixed price or prices, which
may be changed, or at market prices prevailing at the time of sale, at
prices related to those prevailing market prices or at negotiated prices.
In connection with the sale of any securities under this prospectus,
underwriters or agents may receive compensation from us or Countrywide Home
Loans or from purchasers of securities for whom they may act as agents in
the form of discounts, concessions or commissions. Underwriters may sell
the securities to or through dealers, and those dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act
as agents. Underwriters, dealers and agents that participate in the
distribution of the securities may be deemed to be underwriters, and any
discounts or commissions received by them from us or Countrywide Home Loans
and any profit on the resale of those securities by them may be deemed to
be underwriting discounts and commissions under the Securities Act. Any of
those underwriters or agents will be identified, and any compensation
received from us or Countrywide Home Loans will be described, in the
related prospectus supplement.
Under agreements that we and/or Countrywide Home Loans may enter into,
underwriters and agents who participate in the distribution of securities
issuable under this prospectus may be entitled to indemnification by us
and/or Countrywide Home Loans against certain liabilities, including
liabilities under the Securities Act.
If we or Countrywide Home Loans so indicate in the related prospectus
supplement, we or Countrywide Home Loans will authorize underwriters or
other persons acting as our or Countrywide Home Loans' agents to solicit
offers by some institutions to purchase securities from us or Countrywide
Home Loans under contracts providing for payment and delivery on a future
date. Institutions with whom we or Countrywide Home Loans would enter into
those contracts include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable
institutions and others, but in all cases those institutions must be
approved by us or Countrywide Home Loans. The obligations of any purchaser
under a contract will be subject to the condition that the purchase of the
securities will not at the time of delivery be prohibited under the laws of
the jurisdiction to which that purchaser is subject. The underwriters and
those other agents will not have any responsibility as to the validity or
performance of those contracts.
If underwriters or dealers are used in the sale, until the
distribution of the securities is completed, rules of the SEC may limit the
ability of underwriters and some selling group members to bid for and
purchase the securities. As an exception to these rules, underwriters may
engage in some transactions that stabilize the price of the securities.
Those transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the securities.
If any underwriters create a short position in the securities in
connection with any offering, that is, if they sell more securities than
are set forth on the cover page of any prospectus supplement accompanying
this prospectus, the underwriters may reduce that short position by
purchasing securities in the open market.
Underwriters may also impose a penalty bid on some selling group
members. This means that if the underwriters purchase securities in the
open market to reduce the underwriters' short position or to stabilize the
price of the securities, they may reclaim the amount of the selling
concession from the selling group members that sold those securities as
part of that offering. In general, purchases of a security for the purpose
of stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases.
The imposition of a penalty bid may also affect the price of the securities
to the extent that it discourages resales of the securities.
Some of the underwriters or agents and their associates may engage in
transactions with and perform services for us, Countrywide Home Loans or
our or Countrywide Home Loans' affiliates in the ordinary course of
business.
The securities may or may not be listed on a national securities
exchange (other than our common stock, which is listed on the New York
Stock Exchange and the Pacific Stock Exchange). Any shares of our common
stock sold under a prospectus supplement will be listed on the New York
Stock Exchange and the Pacific Stock Exchange, subject to official notice
of issuance. Neither we nor Countrywide Home Loans can assure you that
there will be an active trading market for any of the securities sold under
this prospectus.
We or Countrywide Home Loans may designate Countrywide Securities
Corporation to be an underwriter, agent or dealer of one or more series of
the securities issuable under this prospectus. The distribution of
securities of any series will conform to the requirements set forth in the
applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
VALIDITY OF SECURITIES
The validity of the securities issuable under this prospectus will be
passed upon for us and Countrywide Home Loans 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 one of our
directors. Brown & Wood LLP, New York, New York will serve as counsel for
any underwriters and agents. Brown & Wood LLP also serves as counsel for
CWMBS, Inc. and CWABS, Inc., each one of our wholly owned subsidiaries, in
connection with offerings of mortgage-backed and asset-backed securities,
and from time to time also serves as our counsel on other matters.
EXPERTS
Our consolidated financial statements 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 said firm as
experts in accounting and auditing.
<PAGE>
======================================= =====================================
No dealer, salesperson or other
person is authorized to give any
information or to represent anything
not contained in this prospectus. You
must not rely on any unauthorized
information or representations. This
prospectus is an offer to sell only the Units
Units offered hereby, but only under
circumstances and in jurisdictions
where it is lawful to do so. The
information contained in this
prospectus is current only as of its
date.
------------------
TABLE OF CONTENTS COUNTRYWIDE CREDIT
INDUSTRIES, INC.
PAGE
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary....S-3
Risk Factors.....................S-6
Countrywide Credit Industries....S-8
Use of Proceeds..................S-9 % Adjustable
Capitalization...................S-10 Conversion-rate
Description of Units.............S-12 Equity Security Units
Description of the Purchase
Contracts.....................S-14
Description of the Call Options..S-18
The Pledged Securities and the
Pledge Agreement..............S-19
Certain Provisions of the Master Unit
Agreement, Pledge Agreement ------------------
and Call Option Agreement.....S-20
Description of the Notes.........S-22
Accounting Treatment.............S-30
U.S. Federal Income Tax
Consequences..................S-30 [LOGO]
Underwriting.....................S-37
Validity of Securities...........S-38
PROSPECTUS ------------------
Additional Information...........2
Countrywide Credit Industries and
Countrywide Home Loans........3
Use of Proceeds..................4
Selected Consolidated Financial
Data.........................5
Description of Capital Stock.....7
Description of Stock Purchase GOLDMAN, SACHS & CO.
Contracts and Stock Purchase [OTHER UNDERWRITERS]
Units.........................9
Description of Debt Securities
of Countrywide Credit
Industries....................9
Description of Debt Securities of
Countrywide Home Loans and
Related Guarantees of
Countrywide Credit
Industries....................16
Plan of Distribution.............30
Validity of Securities...........32
Experts..........................32
======================================= =====================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
SEC registration fee $834,000
NASD fee
Stock exchange listing fees
Blue sky fees and expenses
Legal fees and expenses
Accounting fees and expenses
Printing and engraving expenses
Trustees' fees and expenses
Rating agency fees
Miscellaneous
===========
Total $
===========
- -----------------
*Except for the SEC registration fee and the NASD 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 Countrywide
Credit Industries provides that Countrywide Credit Industries may indemnify
its directors and officers to the full extent permitted by the laws of the
State of Delaware. Article VIII of Countrywide Credit Industries' Bylaws
provides that Countrywide Credit Industries shall indemnify its directors
and officers, and persons serving as directors and officers of Countrywide
Home Loans at the request of Countrywide Credit Industries, 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 Countrywide Credit
Industries; except that in the case of actions brought by or in the right
of Countrywide Credit Industries to procure a judgment in its favor, no
indemnification is permitted in respect to any claim, issue or matter as to
which any such director or officer shall have been adjudged to be liable to
Countrywide Credit Industries unless the court in which the action was
brought determines that such person is entitled to indemnification.
Countrywide Credit Industries' 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. Countrywide Credit Industries has
entered into indemnity agreements with certain of its directors and
executive officers (including the directors and executive officers of
Countrywide Home Loans), whereby such individuals are indemnified by
Countrywide Credit Industries 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. Countrywide Credit Industries also maintains an insurance policy
pursuant to which its directors and officers (including the directors and
executive officers of Countrywide Home Loans) are insured against certain
liabilities which might arise out of their relationship with Countrywide
Credit Industries as directors and officers.
Article SEVENTH of the Certificate of Incorporation provides that a
director of Countrywide Credit Industries shall have no personal liability
to Countrywide Credit Industries or its stockholders for monetary damages
for breach of his fiduciary duty of care as a director to the full extent
permitted by the Delaware General Corporation Law, as it may be amended
from time to time.
ITEM 16. EXHIBITS
1.1* --Form of Underwriting Agreement (for equity securities
of Countrywide Credit Industries)
1.2* --Form of Underwriting Agreement (for debt securities
of Countrywide Credit Industries)
1.3** --Form of Underwriting Agreement (for units consisting
of stock purchase contracts and debt securities of
Countrywide Credit Industries)
1.4* --Form of Selling Agency Agreement (for debt securities
of Countrywide Home Loans)
4.1 --Specimen Certificate of Countrywide Credit
Industries' Common Stock (incorporated by reference to
Exhibit 4.2 to Countrywide Credit Industries' Current
Report on Form 8-K dated February 6, 1987)
4.2 --Certificate of Amendment of Restated Certificate of
Incorporation of Countrywide Credit Industries
(incorporated by reference to Exhibit 4.1 to
Countrywide Credit Industries' Quarterly Report on Form
10-Q dated August 31, 1987)
4.3 --Restated Certificate of Incorporation of Countrywide
Credit Industries (incorporated by reference to Exhibit
4.2 to Countrywide Credit Industries' Quarterly Report
on Form 10-Q dated August 31, 1987)
4.4 --Bylaws of Countrywide Credit Industries, as amended
and restated (incorporated by reference to Countrywide
Credit Industries' Current Report on Form 8-K dated
February 10, 1988)
4.5 --Rights Agreement, dated as of February 10, 1988,
between Countrywide Credit Industries and Bank of
America NT & SA, as Rights Agent (incorporated by
reference to Exhibit 4 to Countrywide Credit
Industries' Form 8-A filed on February 12, 1988)
4.6 --Amendment No. 1 to Rights Agreement, dated as of
March 24, 1992, between Countrywide Credit Industries
and Bank of America NT & SA, as Rights Agent
(incorporated by reference to Exhibit 1 to Countrywide
Credit Industries' Form 8 filed on March 27, 1992)
4.7** --Form of Indenture between Countrywide Credit
Industries and The Bank of New York, as trustee,
providing for the issuance of senior debt securities
4.8** --Form of Indenture between Countrywide Credit
Industries and The Bank of New York, as trustee,
providing for the issuance of subordinated debt
securities
4.9 --Indenture, dated as of January 1, 1992, among
Countrywide Home Loans, Countrywide Credit Industries
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.1 to the Registration Statement
on Form S-3 of Countrywide Home Loans and Countrywide
Credit Industries (File Nos. 33-50661 and 33-50661-01)
filed on October 19, 1993))
4.10 --Supplemental Indenture No. 1, dated as of June 15,
1995, to the Indenture dated as of January 1, 1992,
among Countrywide Home Loans, Countrywide Credit
Industries and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.9 to the
Registration Statement on Form S-3 of Countrywide Home
Loans and Countrywide Credit Industries (File Nos.
33-59559 and 33-59559-01))
4.11** --Form of Indenture among Countrywide Home Loans,
Countrywide Credit Industries and The Bank of New York,
as trustee, providing for the issuance of subordinated
debt securities.
4.12** --Form of Master Unit Agreement, between Countrywide
Credit Industries and The Bank of New York, as agent.
4.13** --Form of Purchase Contract between Countrywide Credit
Industries and , as purchase contract agent
4.14** --Form of Pledge Agreement, among Countrywide Credit
Industries, , as collateral agent, and , as
purchase contract agent
4.15* --Form of Fixed Rate Medium-Term Note
4.16* --Form of Floating Rate Medium-Term Note
5.1** --Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to Countrywide Credit Industries and
Countrywide Home Loans, as to the legality of the
securities being offered
8.1** --Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to Countrywide Credit Industries and
Countrywide Home Loans, as to certain tax matters
12.1 --Statement regarding computation of ratio of earnings
to fixed charges (incorporated by reference to Exhibit
12.1 to Countrywide Credit Industries' Annual Report on
Form 10-K for the year ended February 28, 1999)
23.1 --Consent of Grant Thornton LLP
23.2 --Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1)
23.3 --Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.1)
24 --Powers of Attorney for Countrywide Credit Industries
and Countrywide Home Loans relating to subsequent
amendments (included on pages II-6, II-7 and II-8)
25.1** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to senior debt securities of Countrywide Credit
Industries (separately bound)
25.2** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to subordinated debt securities of Countrywide Credit
Industries (separately bound)
25.3** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to senior debt securities of Countrywide Home Loans
(separately bound)
25.4** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to subordinated debt securities of Countrywide Home
Loans (separately bound)
- --------------
* To be filed as an exhibit to a Current Report on Form 8-K of
Countrywide Credit Industries at such time as an underwritten issuance
of such securities is contemplated.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Countrywide Credit Industries and Countrywide
Home Loans (the "Registrants") hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) 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 paragraphs (a)(1)(i) and (a)(1)(ii) above
do not apply if the Registration Statement is on Form S-3 and the
information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrants pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Each of the undersigned Registrants hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933,
each filing of Countrywide Credit Industries' annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in this Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 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 by
such director, officer or controlling person in connection with the
securities being registered, 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 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 of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the
Registrants pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(e) The undersigned Registrants hereby 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
("Act") in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Countrywide Credit Industries, Inc. certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Calabasas, State of California, on the 9th day of July, 1999.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
By: /s/ ANGELO R. MOZILO
------------------------------------
Angelo R. Mozilo
Chairman of the Board
of Directors and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David S. Loeb, Angelo R. Mozilo,
Stanford L. Kurland and Carlos M. Garcia, and each of them, his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
related to the offering contemplated by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as might or could be done in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANGELO R. MOZILO
- ----------------------------------- Chairman of the Board of July 9, 1999
ANGELO R. MOZILO Directors and Chief
Executive Officer
(Principal Executive
Officer); Director
/s/ DAVID S. LOEB President; Director July 9, 1999
- -----------------------------------
DAVID S. LOEB
/s/ CARLOS M. GARCIA
- ----------------------------------- Managing Director, Finance, July 9, 1999
CARLOS M. GARCIA Chief Financial Officer
and Chief Accounting
Officer (Principal
Financial and Accounting
Officer)
/s/ JEFFREY M. CUNNINGHAM Director July 9, 1999
- -----------------------------------
JEFFREY M. CUNNINGHAM
/s/ ROBERT J. DONATO Director July 9, 1999
- -----------------------------------
ROBERT J. DONATO
/s/ MICHAEL E. DOUGHERTY Director July 9, 1999
- -----------------------------------
MICHAEL E. DOUGHERTY
/s/ BEN M. ENIS Director July 9, 1999
- -----------------------------------
BEN M. ENIS
/s/ EDWIN HELLER Director July 9, 1999
- -----------------------------------
EDWIN HELLER
/s/ HARLEY W. SNYDER Director July 9, 1999
- -----------------------------------
HARLEY W. SNYDER
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Countrywide Home Loans, Inc. certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Calabasas, State
of California, on the 9th day of July, 1999.
By: /s/ ANGELO R. MOZILO
------------------------------------
Angelo R. Mozilo
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David S. Loeb, Angelo R. Mozilo,
Stanford L. Kurland and Carlos M. Garcia, and each of them, his true and
lawful attorneys-in-fact and agents, with full powers of substitution and
resubstitution, for and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and any registration statement
related to the offering contemplated by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as might or could be done in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ANGELO R. MOZILO Chairman of the Board of July 9, 1999
- ----------------------------------- Directors; Director
ANGELO R. MOZILO
/s/ DAVID S. LOEB Director July 9, 1999
- -----------------------------------
DAVID S. LOEB
/s/ STANFORD L. KURLAND Chief Executive Officer July 9, 1999
- ----------------------------------- and President (Principal
STANFORD L. KURLAND Executive Officer);
Director
/s/ THOMAS K. MCLAUGHLIN Managing Director and July 9, 1999
- ----------------------------------- Chief Financial Officer
THOMAS K. MCLAUGHLIN (Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT INDEX
-------------
1.1* --Form of Underwriting Agreement (for equity securities
of Countrywide Credit Industries)
1.2* --Form of Underwriting Agreement (for debt securities
of Countrywide Credit Industries)
1.3** --Form of Underwriting Agreement (for units consisting
of stock purchase contracts and debt securities of
Countrywide Credit Industries)
1.4* --Form of Selling Agency Agreement (for debt securities
of Countrywide Home Loans)
4.1 --Specimen Certificate of Countrywide Credit
Industries' Common Stock (incorporated by reference to
Exhibit 4.2 to Countrywide Credit Industries' Current
Report on Form 8-K dated February 6, 1987)
4.2 --Certificate of Amendment of Restated Certificate of
Incorporation of Countrywide Credit Industries
(incorporated by reference to Exhibit 4.1 to
Countrywide Credit Industries' Quarterly Report on Form
10-Q dated August 31, 1987)
4.3 --Restated Certificate of Incorporation of Countrywide
Credit Industries (incorporated by reference to Exhibit
4.2 to Countrywide Credit Industries' Quarterly Report
on Form 10-Q dated August 31, 1987)
4.4 --Bylaws of Countrywide Credit Industries, as amended
and restated (incorporated by reference to Countrywide
Credit Industries' Current Report on Form 8-K dated
February 10, 1988)
4.5 --Rights Agreement, dated as of February 10, 1988,
between Countrywide Credit Industries and Bank of
America NT & SA, as Rights Agent (incorporated by
reference to Exhibit 4 to Countrywide Credit
Industries' Form 8-A filed on February 12, 1988)
4.6 --Amendment No. 1 to Rights Agreement, dated as of
March 24, 1992, between Countrywide Credit Industries
and Bank of America NT & SA, as Rights Agent
(incorporated by reference to Exhibit 1 to Countrywide
Credit Industries' Form 8 filed on March 27, 1992)
4.7** --Form of Indenture between Countrywide Credit
Industries and The Bank of New York, as trustee,
providing for the issuance of senior debt securities
4.8** --Form of Indenture between Countrywide Credit
Industries and The Bank of New York, as trustee,
providing for the issuance of subordinated debt
securities
4.9 --Indenture, dated as of January 1, 1992, among
Countrywide Home Loans, Countrywide Credit Industries
and The Bank of New York, as trustee (incorporated by
reference to Exhibit 4.1 to the Registration Statement
on Form S-3 of Countrywide Home Loans and Countrywide
Credit Industries (File Nos. 33-50661 and 33-50661-01)
filed on October 19, 1993))
4.10 --Supplemental Indenture No. 1, dated as of June 15,
1995, to the Indenture dated as of January 1, 1992,
among Countrywide Home Loans, Countrywide Credit
Industries and The Bank of New York, as trustee
(incorporated by reference to Exhibit 4.9 to the
Registration Statement on Form S-3 of Countrywide Home
Loans and Countrywide Credit Industries (File Nos.
33-59559 and 33-59559-01))
4.11** --Form of Indenture among Countrywide Home Loans,
Countrywide Credit Industries and The Bank of New York,
as trustee, providing for the issuance of subordinated
debt securities.
4.12** --Form of Master Unit Agreement, between Countrywide
Credit Industries and The Bank of New York, as agent.
4.13** --Form of Purchase Contract between Countrywide Credit
Industries and , as purchase contract agent
4.14** --Form of Pledge Agreement, among Countrywide Credit
Industries, , as collateral agent, and , as
purchase contract agent
4.15* --Form of Fixed Rate Medium-Term Note
4.16* --Form of Floating Rate Medium-Term Note
5.1** --Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to Countrywide Credit Industries and
Countrywide Home Loans, as to the legality of the
securities being offered
8.1** --Opinion of Fried, Frank, Harris, Shriver & Jacobson,
counsel to Countrywide Credit Industries and
Countrywide Home Loans, as to certain tax matters
12.1 --Statement regarding computation of ratio of earnings
to fixed charges (incorporated by reference to Exhibit
12.1 to Countrywide Credit Industries' Annual Report on
Form 10-K for the year ended February 28, 1999)
23.1 --Consent of Grant Thornton LLP
23.2 --Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 5.1)
23.3 --Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.1)
24 --Powers of Attorney for Countrywide Credit Industries
and Countrywide Home Loans relating to subsequent
amendments (included on pages II-6, II-7 and II-8)
25.1** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to senior debt securities of Countrywide Credit
Industries (separately bound)
25.2** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to subordinated debt securities of Countrywide Credit
Industries (separately bound)
25.3** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to senior debt securities of Countrywide Home Loans
(separately bound)
25.4** --Form T-1 Statement of Eligibility Under Trust
Indenture Act of 1939 of The Bank of New York relating
to subordinated debt securities of Countrywide Home
Loans (separately bound)
- --------------
* To be filed as an exhibit to a Current Report on Form 8-K of
Countrywide Credit Industries at such time as an underwritten issuance
of such securities is contemplated.
** To be filed by amendment.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACOUNTANTS
We have issued our report dated April 21, 1999, accompanying the
consolidated financial statements and schedules of Countrywide Credit
Industries, Inc. and Subsidiaries appearing in the Annual Report on Form
10-K for the year ended February 28, 1999, which is incorporated by
reference in this Registration Statement on Form S-3 (the "Registration
Statement"). We consent to the incorporation by reference in this
Registration Statement of the aforementioned report and to the use of our
name as it appears under the caption "Experts."
GRANT THORNTON LLP
Los Angeles, California
July 9, 1999
