<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-38545
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 30, 1997)
HELLER FINANCIAL, INC.
$300,000,000
6.25% Notes due March 1, 2001
Interest payable March 1 and September 1
ISSUE PRICE: 99.95%
Interest on the 6.25% Notes due March 1, 2001 (the "Notes") of Heller Finan-
cial, Inc., a Delaware corporation (the "Company"), offered hereby will be pay-
able on March 1 and September 1 of each year, beginning September 1, 1998. The
Notes will mature on March 1, 2001. The Notes will not be redeemable prior to
maturity and will not be entitled to any sinking fund. See "Description of the
Notes."
The Notes will be issued in fully registered form and will be represented by
one or more global certificates (the "Global Securities") registered in the
name of a nominee of The Depository Trust Company ("DTC") or other successor
depositary appointed by the Company (DTC or such other depositary is herein
referred to as the "Depositary"). Beneficial interests in the Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to participants' interests) and its
participants. See "Description of Debt Securities--Provisions Applicable to
Senior, Subordinated and Junior Subordinated Debt Securities--Book Entry,
Delivery and Form" in the accompanying Prospectus. The Notes will be issued
only in denominations of $1,000 and integral multiples thereof. See
"Description of the Notes." Settlement for the Notes will be made in
immediately available funds. The Notes will trade in the Depositary's Same-Day
Funds Settlement System until maturity, and secondary market trading activity
in the Notes will therefore settle in immediately available funds. See
"Description of Debt Securities--Provisions Applicable to Senior, Subordinated
and Junior Subordinated Debt Securities--Same-Day Settlement" in the
accompanying Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (1)(3)
- -----------------------------------------------------
<S> <C> <C> <C>
Per Note 99.95% .35% 99.60%
- -----------------------------------------------------
Total $299,850,000 $1,050,000 $298,800,000
- -----------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from March 5, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $150,000.
The Notes are offered, subject to prior sale, when, as and if delivered to and
accepted by the Underwriters and subject to their right to reject any order in
whole or in part and to approval of certain legal matters. It is expected that
delivery of the Notes will be made on or about March 5, 1998, through the
facilities of the Depositary in New York, New York against payment therefor in
immediately available funds.
J.P. MORGAN & CO.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
March 2, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFI-
CALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY
BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT
OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Use of Proceeds........................................................... S-3
Ratio of Earnings to Fixed Charges........................................ S-3
Company Recent Developments............................................... S-3
Fuji Bank Recent Developments............................................. S-4
Description of the Notes.................................................. S-4
Underwriting.............................................................. S-6
Validity of the Notes..................................................... S-6
Independent Public Accountants............................................ S-6
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
Safe Harbor for Forward-Looking Statements................................ 3
The Company............................................................... 4
Use of Proceeds........................................................... 9
Selected Financial Data................................................... 10
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends............................................ 11
Description of Debt Securities............................................ 11
Description of Warrants................................................... 21
Description of Capital Stock.............................................. 22
Plan of Distribution...................................................... 26
Legal Matters............................................................. 27
Independent Public Accountants............................................ 27
</TABLE>
S-2
<PAGE>
USE OF PROCEEDS
The Company will utilize the net proceeds from the Notes to repay certain
indebtedness incurred for working capital purposes. Such indebtedness is of
varying maturities of less than nine months and bears interest at rates within
the range of 5.5% to 6.6% per annum.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the Company for the periods
indicated below was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
1.44 1.40 1.38 1.51 1.49
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, "earnings"
includes income before income taxes, the minority interest in Heller
International Group, Inc. income and fixed charges. "Fixed charges" includes
interest on all indebtedness and one third of annual rentals (approximate
portion representing interest).
COMPANY RECENT DEVELOPMENTS
On February 26, 1998, the Company announced that it had filed a Registration
Statement with the Securities and Exchange Commission (the "Commission") in
connection with an initial public offering ("IPO") of its Class A Common
Stock. The size and timing of the IPO have not yet been determined. The
Company intends to use the proceeds of the IPO to repay indebtedness
consisting of a subordinated note in the principal amount of $450 million
issued on February 24, 1998 as a dividend to the Company's direct parent, Fuji
America Holdings, Inc. ("FAHI"), and to pay an additional cash dividend to
FAHI following the consummation of the IPO.
Prior to the consummation of the IPO, the Company and The Fuji Bank, Limited
(the "Fuji Bank"), the indirect parent of the Company, expect to amend the
Keep Well Agreement, dated April 23, 1983, as amended, between the Company and
Fuji Bank, to allow the Company or Fuji Bank or any of its affiliates to sell
or dispose of the Company's common stock to any person or entity, provided
that after any such sale or disposition, Fuji Bank will continue to directly
or indirectly hold more than 50% of the combined voting power of the
outstanding common stock of the Company. See "Item 13. Certain Relationships
and Related Transactions--Keep Well Agreement" of the Company's Annual Report
on Form 10-K for the Fiscal Year Ended December 31, 1997, which is
incorporated by reference herein.
S-3
<PAGE>
FUJI BANK RECENT DEVELOPMENTS
The following table summarizes selected financial data derived from Fuji
Bank's Report to Stockholders for the period ended September 30, 1997. These
financial statements were prepared in accordance with accounting principles
generally accepted in Japan, which differ from generally accepted accounting
principles in the United States.
<TABLE>
<CAPTION>
THE FUJI BANK, LIMITED
(NON-CONSOLIDATED FINANCIAL STATEMENTS)
---------------------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 MARCH 31, 1997 MARCH 31, 1996
--------------------- --------------------- --------------------- ---------------------
YEN DOLLARS YEN DOLLARS YEN DOLLARS YEN DOLLARS
(BILLIONS) (MILLIONS) (BILLIONS) (MILLIONS) (BILLIONS) (MILLIONS) (BILLIONS) (MILLIONS)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Assets............ 52,105.5 430,268.2 50,196.3 452,218.5 52,066.8 419,555.4 50,952.0 479,097.4
Total Deposits.......... 36,464.8 301,113.0 37,737.6 339,978.8 38,279.1 308,454.0 36,965.1 347,579.7
Total Liabilities....... 50,435.2 416,475.7 48,718.7 438,907.3 50,394.8 406,081.9 49,522.6 465,657.1
Total Stockholders'
Equity................. 1,670.3 13,792.5 1,477.5 13,311.2 1,672.1 13,473.5 1,429.4 13,440.3
Net Income.............. 10.8 89.1 57.2 514.9 54.0 435.1 (429.8) (4,040.9)
</TABLE>
- --------
Rates of Exchange: 9/30/97 (Yen)121.10 = U.S. $1
9/30/96 (Yen)111.00 = U.S. $1
3/31/97 (Yen)124.10 = U.S. $1
3/31/96 (Yen)106.35 = U.S. $1
If the financial statements from which the numbers in the foregoing table
were taken had been prepared in accordance with accounting principles
generally accepted in the United States, some of the amounts shown might have
been materially different. The Company currently understands that the
accounting principles generally accepted in Japan differ from generally
accepted accounting principles in the United States in various areas,
including without limitation the following: valuation of securities,
accounting treatment of guarantees, commitments, unearned income, deferred
taxes, leases, depreciation, foreign currency transactions and investments in
subsidiaries, and creation and maintenance of optional and required reserves.
In its Report to Stockholders for the period ended September 30, 1997, Fuji
Bank stated that, during the second half of its fiscal year ending on March
31, 1998, it will complete a self-assessment of its entire loan portfolio and
make provisions for potential losses in line with the so-called Prompt
Corrective Action system which will be introduced by the Japanese Ministry of
Finance in April 1998. As a result of the self-assessment, Fuji Bank is
expecting to effect substantial credit costs of (Yen)650 billion (US$5,367
million). Fuji Bank stated that, as a result, it expects its net business
profit to be (Yen)300 billion (US$2,477 million), which translates into a
deficit on its "bottom line" of (Yen)440 billion (US$3,633 million). U.S.
Dollar figures set forth in this paragraph are at the September 30, 1997
exchange rate set forth above.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the accompanying Prospectus, to which description reference is hereby
made. The statements herein concerning the Notes and the Indenture (as defined
below) do not purport to be complete. All such statements are qualified in
their entirety by reference to the accompanying Prospectus and the provisions
of the Indenture, the form of which has been filed with the Commission.
The Notes offered hereby constitute a single series of Senior Securities to
be issued under an Indenture dated as of September 1, 1995, as amended (the
"Indenture"), between the Company and State Street Bank and Trust Company, as
Trustee, and will be limited to $300,000,000 aggregate principal
S-4
<PAGE>
amount. State Street Bank and Trust Company will initially be the Securities
Registrar and Paying Agent (the "Paying Agent"). The Notes will be issued only
in fully registered form without coupons in denominations of $1,000 and
integral multiples thereof.
The Notes will mature on March 1, 2001. Interest on the Notes will be
payable semi-annually on each March 1 and September 1 (each an "Interest
Payment Date"), commencing September 1, 1998. Interest payable on each
Interest Payment Date will include interest accrued from March 5, 1998 or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for. Interest payable on any Interest Payment Date will be payable to
the person in whose name a Note (or any predecessor Note) is registered at the
close of business on February 15 or August 15, as the case may be, next
preceding such Interest Payment Date. Principal of and interest on the Notes
will be payable at the office or agency of the Company maintained for such
purpose in the Borough of Manhattan, The City of New York, which initially
will be the office of an affiliate of the Paying Agent, provided that payment
of interest may be made, at the option of the Company, by check mailed to the
person entitled thereto. Interest shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Notes are not redeemable or repayable prior to maturity and are not
entitled to the benefits of any sinking fund.
The Notes will initially be represented by Global Securities registered in
the name of a nominee of the Depositary. See "Description of Debt Securities--
Provisions Applicable to Senior, Subordinated and Junior Debt Securities--Book
Entry, Delivery and Form" in the accompanying Prospectus. A Global Security
will be exchangeable for definitive Notes registered in the names of persons
other than the Depositary or its nominee only if (i) the Depositary notifies
the Company that it is unwilling or unable to continue as depository for the
Global Securities or if at any time the Depositary ceases to be a clearing
agency registered under the Securities Exchange Act of 1934 at a time when the
Depositary is required to be so registered in order to act as such depository,
(ii) the Company in its sole discretion determines that the Global Securities
are to be so exchangeable or (iii) an Event of Default, or an event which with
the passage of time or the giving of notice would become an Event of Default,
with respect to the Notes has occurred and is continuing. Any Global Security
that is exchangeable pursuant to the preceding sentence will be exchangeable
for Notes registered in such names as the Depositary may direct.
Under the terms of the Indenture, the Company, the Trustee and any paying
agent or other agent of the Company or the Trustee may treat the Depositary
(or its nominee), as the person in whose name the Notes are registered, as the
owners of the Notes for the purposes of receiving payments, giving consents,
giving and receiving notices, and for all other purposes whatsoever.
Accordingly, unless and until definitive Notes are issued under the limited
circumstances described above, all references to consents or other actions by
Holders of Notes held in book-entry form shall refer to actions taken by the
Depositary upon instructions from its Participants, and all references herein
to payments and notices to Holders shall refer to payment and notices to the
Depositary (or its nominee), as the registered holder of such Notes, for
distribution to Holders in accordance with the Depositary's procedures. The
Depositary has advised the Company that the Depositary will take any action
permitted to be taken by a registered holder of any Notes under the Indenture
only at the direction of one or more Participants to whose accounts with the
Depositary such Notes are credited; beneficial owners who hold through
Participants (or indirect participants) will not be entitled to take any such
action directly.
S-5
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, severally, and each of the Underwriters has
severally agreed to purchase, the principal amount of the Notes set forth
opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
NAME OF NOTES
---- ----------------
<S> <C>
J.P. Morgan Securities Inc............................... $ 75,000,000
Goldman, Sachs & Co...................................... 75,000,000
Lehman Brothers Inc. .................................... 75,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated....... 75,000,000
------------
Total................................................ $300,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are obligated to take and pay for all of the Notes if any are
taken.
The Underwriters initially propose to offer the Notes directly to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and to certain dealers at such price less a concession not in
excess of .20% of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of .10% of the
principal amount of the Notes to certain other dealers. After the initial
public offering, the public offering price and such concessions may be
changed.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Underwriters that they intend
to make a market in the Notes. The Underwriters are not obligated, however, to
make a market in the Notes and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of, or trading
market for, the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
In the ordinary course of their respective businesses, the Underwriters or
their affiliates have engaged, are engaging and may in the future engage in
investment banking, financial advisory and/or commercial banking transactions
with the Company and its affiliates.
In connection with the offering of the Notes, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may overallot in connection with the
offerings of the Notes, creating a syndicate short position. In addition, the
Underwriters may bid for, and purchase, Notes in the open market to cover
syndicate shorts or to stabilize the price of the Notes. Finally, the
underwriting syndicate may reclaim selling concessions allowed for
distributing the Notes in the offering of the Notes, if the syndicate
repurchases previously distributed Notes in syndicate covering transactions,
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Notes above independent market levels. The
Underwriters are not required to engage in any of these activities, and may
end any of them at any time.
VALIDITY OF THE NOTES
The validity of the Notes offered hereby will be passed upon for the Company
by Mark J. Ohringer, Associate General Counsel of the Company, and for the
Underwriters by Sullivan & Cromwell, New York, New York.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements and schedules included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997, incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus and
elsewhere in the Registration Statement of which the Prospectus is a part,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
S-6
<PAGE>
PROSPECTUS
HELLER FINANCIAL, INC.
[LOGO]
DEBT SECURITIES
WARRANTS TO PURCHASE DEBT SECURITIES
SENIOR PREFERRED STOCK
----------------
Heller Financial, Inc. (the "Company") may from time to time offer unsecured
debt securities (the "Debt Securities") consisting of debentures, notes and/or
other evidences of unsecured indebtedness, in one or more series, or warrants
to purchase Debt Securities ("Warrants"), or shares of senior preferred stock,
$.01 par value per share (the "Senior Preferred Stock"), in one or more series
(the Debt Securities, Warrants and Senior Preferred Stock being hereinafter
collectively referred to as the "Securities"), or any combination of the
foregoing, at an aggregate initial offering price not to exceed
$3,000,000,000, or the equivalent thereof if any of the Securities are
designated in a foreign currency or foreign currency unit, at prices and on
terms to be determined at or prior to the time of sale. The Debt Securities
and Warrants may be sold for U.S. dollars, foreign currencies or foreign
currency units, and the principal of, and premium, if any, and interest, if
any, on, the Debt Securities may be payable in U.S. dollars, foreign
currencies or foreign currency units.
Specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement
(the "Prospectus Supplement"), together with the terms of the offering of such
Securities, the initial price of such Securities and the net proceeds to the
Company from their sale. Without limitation, the Prospectus Supplement will
set forth the following: (i) in the case of Debt Securities, the specific
designation, ranking as senior, subordinated or junior subordinated debt,
aggregate principal amount, maturity, rate (or method of calculation) of any
interest and dates for payment thereof, currency or currencies or currency
unit or currency units for which the Debt Securities may be purchased,
currency or currencies or currency unit or currency units in which principal,
premium, if any, and interest, if any, is payable, authorized denominations,
tax consequences, any exchangeability, conversion, redemption, prepayment or
sinking fund provisions and additional covenants, conditions and events of
default, if any; (ii) in the case of Warrants, the designation and terms of
the Debt Securities purchasable upon exercise of the Warrants, the designation
and terms of any Debt Securities with which the Warrants are issued, the
exercise price, the duration and detachability from any related Debt
Securities; and (iii) in the case of Senior Preferred Stock, the designation,
number of shares, liquidation preference per share, dividend rate (or method
of calculation thereof), dates on which dividends, if any, shall be payable
and from which dividends shall accrue, voting rights, if any, any redemption
or sinking fund provisions, and any conversion or exchange rights.
The Company has not yet determined whether any Securities offered hereby
will be listed on any exchange or over-the-counter market. If the Company
decides to seek listing of any such Securities, the Prospectus Supplement
relating thereto will disclose such exchange or market.
The Securities may be offered directly to purchasers, to or through
underwriters, dealers or agents, as designated from time to time, or through a
combination of any such methods. If any underwriters, dealers or agents are
involved in the offering of the Securities, then the names of such
underwriters, dealers or agents and any applicable fee, commission or discount
arrangements with them will be set forth in the Prospectus Supplement. See
"Plan of Distribution." Except as otherwise provided in a Prospectus
Supplement, the net proceeds to the Company from any offering will be added to
the general funds of the Company. See "Use of Proceeds."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 30, 1997.
<PAGE>
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
In this Prospectus and any Prospectus Supplement references to "dollar" and
"$" are to United States dollars, and the term "United States" or "U.S." means
the United States of America, its states, its territories, its possessions and
all areas subject to its jurisdiction.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (herein, together with all
amendments and exhibits, referred to as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
certain parts of which are omitted as permitted by the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus, or in the
documents incorporated by reference herein, as to the contents of any
contract, agreement or other document are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission,
reference is made to the copy so filed, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement, as well as such reports and other information filed by
the Company with the Commission, can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission at 7
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Certain securities of the Company are listed on the New York Stock Exchange,
and reports and other information concerning the Company may be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005. Copies of reports, proxy and information statements and other
information regarding registrants that file electronically (including the
Company) are available on the Commission's Web Site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) The Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997 and June 30, 1997; and
(3) The Company's Current Reports on Form 8-K dated January 27, 1997,
April 3, 1997, April 22, 1997, July 24, 1997 and October 22, 1997.
2
<PAGE>
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of any offering of the Securities shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of each such document. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have
been incorporated in this Prospectus by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates). Requests for such
copies should be directed to: Treasurer, Heller Financial, Inc., 500 West
Monroe Street, Chicago, Illinois 60661 (telephone (312) 441-7000).
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This Prospectus contains, any Prospectus Supplement will contain, and the
documents incorporated by reference herein contain or will contain certain
"forward-looking statements" (as defined in Section 27A of the Securities Act)
that are based on the beliefs of the Company's management, as well as
assumptions made by, and information currently available to, the Company's
management. Wherever possible, the Company has identified these forward-
looking statements by using words such as "anticipates," "believes,"
"estimates," "expects" and similar expressions. These forward-looking
statements are subject to risks and uncertainties which could cause the
Company's actual results, performance or achievements to differ materially
from those expressed in, or implied by, these statements. These risks and
uncertainties include, but are not limited to, the following: (1) the results
of the Company's efforts to implement its business strategy; (2) the effect of
economic conditions and the performance of borrowers; (3) actions of the
Company's competitors and the Company's ability to respond to such actions;
(4) the cost of the Company's capital, which depends in part on the Company's
portfolio quality, ratings, prospects and outlook; and (5) changes in
governmental regulations, tax rates and similar matters. The Company assumes
no obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
3
<PAGE>
THE COMPANY
GENERAL
The Company was incorporated in 1919 under the laws of the State of Delaware
and is engaged in various aspects of the commercial finance business. The
Company and its consolidated subsidiaries employ approximately 2,300 people.
The Company's executive offices are located at 500 West Monroe Street,
Chicago, Illinois 60661 (telephone: (312) 441-7000). Unless the context
indicates otherwise, references to the Company include Heller Financial, Inc.
and its consolidated subsidiaries.
The Company is a diversified financial services company which provides a
broad array of commercial financial products and services primarily to middle-
market companies in the United States and internationally. The Company
provides its products and services through five product categories: (i) asset
based finance, (ii) cash flow lending, (iii) real estate finance, (iv)
international asset based finance and factoring and (v) specialized finance.
The middle-market segment served includes entities primarily in the
manufacturing and service sectors with annual sales in the range of $15
million to $200 million and in the real estate sector with property values
generally in the range of $5 million to $40 million.
The Company's emphasis has been to grow the lower risk asset based finance
businesses, maintain significant franchises in corporate finance and real
estate finance and continue to grow its international asset based lending
businesses. The asset based businesses have developed to become the largest
product category in assets and revenues. Earnings quality has been
strengthened through the growth in the asset based businesses, which provide
more consistent revenue streams and produce lower and less volatile credit
quality costs. The Company manages asset quality through the use of
disciplined underwriting standards and aggressive account management
techniques. The underwriting standards and credit disciplines employed on the
post-1990 corporate finance and real estate finance portfolios have resulted
in strong credit quality for these portfolios. In addition, the Company
continues to significantly reduce its pre-1990 corporate finance and real
estate finance portfolios. The Company has maintained a conservative capital
structure with substantial equity, low leverage and moderate reliance for
funding on the commercial paper market.
PRODUCT CATEGORIES
The Company offers a wide range of financial products and services to its
customers through five product categories.
Asset Based Finance
Asset based financing is offered by six distinct product groups: Heller
Current Asset Management ("Current Asset Management"), Heller Business Credit
("Business Credit"), Heller Equipment Finance and Leasing ("Equipment Finance
and Leasing"), Heller Vendor Finance ("Vendor Finance"), Heller First Capital
("First Capital") and Heller Sales Finance ("Sales Finance").
Current Asset Management provides working capital financing, receivables
management and credit protection to companies in a broad range of industries.
Current Asset Management is the fourth largest domestic factor in the United
States and is the Company's oldest business with over 50 years of operations.
The group offers factoring services to over 600 clients and 80,000 customers,
primarily in the apparel, textile, houseware, transportation and home
furnishings industries. In return for a commission, the group purchases the
client's accounts receivables and provides collection, credit protection and
management information services. Working capital is provided by advancing on a
formula basis a percentage of the purchase price of the client's factored
accounts receivables. Current Asset Management also provides advances against
inventory on a formula basis.
Business Credit provides asset based working capital and term financing to
middle market companies for refinancings, recapitalizations, acquisitions,
seasonal borrowing, debtor-in-possession (DIP) and post-DIP
4
<PAGE>
transactions through senior loans secured primarily by accounts receivable and
inventory. The group provides financing to manufacturers, retailers,
wholesalers, distributors, exporters and service firms. The group also serves
as co-lender or participant in transactions agented by other asset-based
lenders. Revolving credit facilities and term loans are generally cross-
collateralized. The Company protects its position against deterioration of a
borrower's performance by using established advance rates against eligible
collateral. Transaction sizes range from $5 million to $75 million, and the
group utilizes syndication capabilities to lower the average retained
transaction size to approximately $20 million in commitments and $10 million
in fundings.
Equipment Finance and Leasing is comprised of four direct origination
finance divisions: Heller Commercial Equipment Finance ("Commercial Equipment
Finance"), Heller Aircraft Finance ("Aircraft Finance"), Heller Public Finance
("Public Finance") and Heller Industrial Equipment Finance ("Industrial
Equipment Finance"). Commercial Equipment Finance provides leasing and
financing programs to a diverse group of middle market companies
collateralized by equipment for expansion, replacement or modernization or to
refinance existing equipment obligations. Typically, the equipment is
essential to the operations of the borrower, and the amount financed is
generally not a substantial part of the borrower's capital structure.
Commercial Equipment Finance serves various markets, including transportation,
supermarket, manufacturing, energy, restaurant and food processing.
Transaction sizes generally range from $500,000 to $15 million, with terms
ranging from three to ten years and an average transaction size in 1996 of
approximately $4 million. Aircraft Finance offers financing for commercial
aircraft and aircraft engines through operating leases and senior and junior
secured loans. Transaction sizes range from $5 million to $40 million, with
terms ranging from five to fifteen years and an average transaction size in
1996 of approximately $13 million. During 1996, the Company formed Public
Finance to provide equipment and project/facility financing to state and local
governments and Industrial Equipment Finance to provide collateral based
equipment financing to smaller middle market companies in the machine tool,
construction, printing and trucking industries. The targeted average
transaction size is approximately $2 million for Public Finance and less than
$1 million for Industrial Equipment Finance.
Vendor Finance provides customized equipment leasing and financing programs
to manufacturers and distributors of a wide variety of commercial, industrial
and technology based products. These services, offered through approximately
75 programs with manufacturers and vendors, are established to finance sales
to end users. Transactions under these programs generally have partial or in
some cases full recourse to the vendor. The group serves the financing needs
of the machining, graphic arts, information technology, energy management,
healthcare, communication and food processing markets. Transaction sizes range
from $50,000 to approximately $3 million, with an average transaction size in
1996 of approximately $150,000. The group also provides capital to independent
finance and leasing companies.
First Capital provides long-term financing to independent small businesses
and franchises under the United States Small Business Administration ("SBA")
loan programs. First Capital is one of the largest participants in the SBA's
7(A) loan program under which up to 80% of each loan is guaranteed by the SBA.
The Company also makes loans under the SBA's 504 program. These loans are
senior to an accompanying SBA loan and have an average loan to collateral
value of 50%. First Capital's SBA 7(A) and 504 loans include financing for
real estate acquisition, refinancing or construction financing, equipment or
business acquisition, permanent working capital for expansion efforts and debt
consolidation. The guaranteed portions of the SBA 7(A) loans are sometimes
sold in the secondary market, with servicing rights retained by First Capital.
Transaction sizes generally range from $50,000 to $2 million, with an average
transaction size in 1996 of approximately $400,000.
Sales Finance provides financing, primarily through senior lines and, to a
lesser extent, subordinated debt to originators of consumer receivables.
Financing is primarily provided for vacation ownership, home equity and
improvement, non-prime auto, security alarm monitoring contracts and municipal
tax liens. Sales Finance is a major capital source in the United States in the
vacation ownership industry. Transaction sizes generally range from $3 million
to $25 million, with an average transaction size in 1996 of approximately $7
million.
5
<PAGE>
Cash Flow Lending
Heller Corporate Finance ("Corporate Finance") is a leading provider of
middle market financing based on the cash flows underlying a client's
business. This lending is generally provided through coordination with private
equity sponsors and includes the financing of corporate recapitalizations,
refinancings, expansions, acquisitions and buy-outs of publicly and privately
held entities in a wide variety of industries. Loans are provided on both a
term and revolving basis for periods of up to ten years and are typically
collateralized by senior liens on the borrower's stock or assets or both.
Transactions may also include some unsecured or subordinated financings or
modest non-voting equity investments. The group also serves as co-lender or
participant in transactions agented by other asset based lenders. Transaction
sizes range from $5 million to $50 million, and the group utilizes syndication
capabilities to lower the average retained transaction size to approximately
$16 million in commitments and $9 million in fundings for 1996. Corporate
Finance also invests in equity funds generally originated by equity sponsors.
Real Estate Finance
Heller Real Estate Financial Services ("Real Estate Finance") specializes in
providing financing products to real estate owners, investors and developers,
primarily for the acquisition, refinancing and renovation of commercial
income-producing properties in a wide range of property types and geographic
areas. The group is one of the nation's largest providers of loans secured by
manufactured housing communities and self-storage facility property types to
be sold in the capital markets through a commercial mortgage securitization.
The group also offers financing for discounted loan portfolio acquisitions,
single family housing developments, credit sale-leasebacks and to be built
properties with credit tenants. The group also holds investments in
acquisition, development and construction transactions, as well as certain
available for sale debt securities. Loans generally have terms ranging from
one to five years and are principally collateralized by first mortgages.
Transaction sizes generally range from $1 million to $15 million, with an
average transaction size in 1996 of approximately $3 million.
International Asset Based Finance and Factoring
Heller International Group, Inc. ("Heller International") offers financial
products through commercial finance subsidiaries and joint ventures in 18
countries in Europe, Asia/Pacific and Latin America. The joint ventures and
subsidiaries primarily provide factoring, asset based financing and
receivables management services, and also make loans for acquisition
financing, leasing, vendor finance and/or trade finance programs, primarily to
small and mid-sized businesses outside the United States. Heller International
also makes modest investments in international equity funds.
On April 2, 1997, Heller International purchased the interest of its joint
venture partner in Factofrance Heller S.A. ("Factofrance") for $174 million.
As a result, Heller International increased its ownership interest in
Factofrance from 48.8% to 97.6%. Heller International has held an interest in
Factofrance for over 30 years, using the equity method of accounting for its
previous ownership position. Factofrance, founded in 1965, is the leading
factoring company in the French marketplace. Factofrance is headquartered in
Paris and has seven regional sales offices covering local markets.
Specialized Finance
Heller Project Finance, formerly known as Project Investment and Advisory
Division, consists of transactions in project finance offering financing to
independent power producers and industrial projects in the oil and gas, coal,
mining, paper and environmental industries. Financing is provided in the form
of senior and junior secured loans and equity investments. Transaction sizes
generally range from $5 million to $25 million, and terms range from seven to
15 years.
6
<PAGE>
SYNDICATION, SECURITIZATION AND LOAN SALE ACTIVITIES
A key element of the Company maintaining strong asset quality is its focus
on managing exposure to individual credits and industry concentrations. A
major part of the effort is syndicating loans or selling participations to
control the concentration of credit risk. The Company has established
syndication programs in most of its businesses, with receivable syndications
and participations totaling $453 million during 1996. In addition, Real Estate
Finance originates loans to manufactured housing communities, self storage
facilities and multi-tenant industrial property types, which may be sold as
whole loans or in the capital markets through a commercial mortgage
securitization. Other business groups also originate receivables which may be
sold as whole loans or through a securitization to take advantage of market
pricing and to reduce concentrations of credit risk. During 1996, the Company
had loan sales totaling $304 million. Through September 30, 1997, the Company
sold through securitization $268 million of loans and leases originated in its
Equipment Finance and Leasing and Vendor Finance businesses and $505 million
of mortgage loans originated in its Real Estate Finance business.
OWNERSHIP
All of the outstanding Common Stock of the Company is owned by Heller
International Corporation (the "Parent"), a wholly-owned subsidiary of The
Fuji Bank, Limited ("Fuji Bank"), headquartered in Tokyo, Japan. Fuji Bank
also directly owns 21% of the outstanding shares of Heller International, a
consolidated subsidiary of the Company engaged in international factoring and
asset based financing activities. Fuji Bank is one of the largest banks in the
world, with total deposits of approximately $311.4 billion at March 31, 1997.
For a discussion of the Keep Well Agreement between Fuji Bank and the Company,
see "Keep Well Agreement with Fuji Bank" below.
The following table summarizes selected financial data obtained from Fuji
Bank's most recent available financial statements, as prepared in accordance
with accounting principles generally accepted in Japan, which differ from
generally accepted accounting principles in the United States.
THE FUJI BANK, LIMITED
(CONSOLIDATED FINANCIAL STATEMENTS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------
1997 1996
------------------------ -------------------------
YEN DOLLARS* YEN DOLLARS*
(BILLIONS) (MILLIONS) (BILLIONS) (MILLIONS)
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Total Assets............ (Yen)56,211.2 $452,950.5 (Yen)54,401.4 $511,531.8
Total Deposits.......... 38,649.5 311,438.2 37,280.4 350,544.2
Total Liabilities....... 54,276.8 437,363.5 52,764.8 496,142.9
Total Stockholders'
Equity................. 1,934.3 15,587.0 1,636.1 15,388.9
Net Income.............. 109.0 878.7 (325.4) (3,059.9)
</TABLE>
- --------
*Rates of Exchange: 3/31/97 (Yen) 124.10 = U.S. $1.00
3/31/96 (Yen) 106.35 = U.S. $1.00
If the financial statements from which the numbers in the foregoing table were
taken had been prepared in accordance with accounting principles generally
accepted in the United States, some of the amounts shown might have been
materially different. The Company currently understands that accounting
principles generally accepted in Japan differ from generally accepted
accounting principles in the United States in various areas including the
following: valuation of securities; accounting treatment of guarantees,
commitments, unearned income, deferred taxes, leases, depreciation, foreign
currency transactions and investments in subsidiaries, and creation and
maintenance of optional and required reserves.
7
<PAGE>
KEEP WELL AGREEMENT WITH FUJI BANK
The Company entered into a Keep Well Agreement (as amended from time to
time, the "Keep Well Agreement") with Fuji Bank on April 23, 1983 in order to
assist the Company in maintaining its credit rating. The Keep Well Agreement
was amended and supplemented on January 26, 1984, in connection with the
consummation of the purchase of the Company by Fuji Bank and has been amended
since that date from time to time. Most recently, on June 17, 1997, the Keep
Well Agreement was amended in connection with the Company's offering of its
Fixed Rate Noncumulative Perpetual Senior Preferred Stock, Series B, $.01 par
value ("Series B Preferred Stock"). The Keep Well Agreement shall not be
terminated prior to the date (the "Termination Date") which is the earlier of
(i) December 31, 2007 and (ii) the date on which the Company has received
written certifications from Moody's Investor Service, Inc. ("Moody's") and
Standard & Poor's Corporation ("S&P") that, upon termination of the Keep Well
Agreement, the ratings on the Company's senior unsecured indebtedness without
the support provided by the Keep Well Agreement will be no lower than such
ratings with the support of the Keep Well Agreement, but in no event shall the
Termination Date be earlier than December 31, 2002. In addition, the Keep Well
Agreement includes certain restrictions on termination relating to the
Company's 8 1/8% Cumulative Perpetual Senior Preferred Stock, Series A, $.01
par value ("Series A Preferred Stock"), the Series B Preferred Stock and any
fixed rate noncumulative perpetual Senior Preferred Stock issued in exchange
for the Series B Preferred Stock ("B Exchange Preferred Stock"), which
restrictions are discussed below.
The Keep Well Agreement provides that Fuji Bank will maintain the Company's
net worth in an amount equal to $500 million. Accordingly, if the Company
should determine, at the close of any month, that its net worth is less than
$500 million, then Fuji Bank will purchase, or cause one of its subsidiaries
to purchase, shares of the Company's NW Preferred Stock, Class B, no par value
("NW Preferred Stock"), in an amount necessary to increase the Company's net
worth to $500 million. The NW Preferred Stock is a series of the Company's
preferred stock, no par value per share ("Junior Preferred Stock"), and,
accordingly, if and when issued will rank junior to the Series A Preferred
Stock, Series B Preferred Stock, any B Exchange Preferred Stock and any other
Senior Preferred Stock issued by the Company in the future (including any
Senior Preferred Stock offered hereby) as to payment of dividends, and in all
other respects. If and when the NW Preferred Stock is issued, dividends
thereon will be noncumulative and will be payable (if declared) quarterly at a
rate per annum equal to 1% over the three-month London Inter-bank Offered
Rate. Such dividends will not be paid during a default in the payment of
principal or interest on any of the outstanding indebtedness for money
borrowed by the Company. Subject to certain conditions, the NW Preferred Stock
will be redeemable, at the option of the holder, within a specified period of
time after the end of a calendar quarter in an aggregate amount not greater
than the excess of the net worth of the Company as of the end of such calendar
quarter over $500 million. See "Description of Existing Preferred Stock--NW
Preferred Stock."
The Keep Well Agreement further provides that if the Company should lack
sufficient cash, other liquid assets or credit facilities to meet its payment
obligations on its commercial paper, then Fuji Bank will lend the Company up
to $500 million (the "Liquidity Commitment"), payable on demand, which the
Company may use only for the purpose of meeting such payment obligations. Any
such loan by Fuji Bank to the Company (a "Liquidity Advance") will bear
interest at a fluctuating interest rate per annum equal to the announced prime
commercial lending rate of Morgan Guaranty Trust Company of New York plus
0.25% per annum. Each Liquidity Advance will be repayable on demand at any
time after the business day following the 29th day after such Liquidity
Advance was made. No repayment of the Liquidity Advance will be made during a
period of default in the payment of the Company's senior indebtedness for
borrowed money.
No Liquidity Advances or purchases of NW Preferred Stock have been made by
Fuji Bank under the Keep Well Agreement; other infusions of capital in the
Company have been made by the Parent, the last one of which occurred in 1992.
Under the Keep Well Agreement, the Company has covenanted to maintain, and
Fuji Bank has undertaken to assure that the Company will maintain, unused
short-term lines of credit, asset sales facilities and committed
8
<PAGE>
credit facilities in an amount approximately equal to 75% of the amount of its
commercial paper obligations from time to time outstanding. In addition, under
the Keep Well Agreement, neither Fuji Bank nor any of its subsidiaries can
sell, pledge or otherwise dispose of shares of Common Stock of the Company, or
permit the Company to issue shares of its Common Stock, except to Fuji Bank or
a Fuji Bank affiliate.
Neither Fuji Bank nor the Company is permitted to terminate the Keep Well
Agreement for any reason prior to the Termination Date. After the Termination
Date, either Fuji Bank or the Company may terminate the Keep Well Agreement
upon 30 business days' prior written notice, except as set forth below. So
long as the Series A Preferred Stock is outstanding and held by third parties
other than Fuji Bank, the Keep Well Agreement may not be terminated by either
party unless the Company has received written certifications from Moody's and
S&P that upon such termination the Series A Preferred Stock will be rated by
them no lower than "a3" and "A-1," respectively. Additionally, so long as the
Series B Preferred Stock or B Exchange Preferred Stock is outstanding and held
by third parties other than Fuji Bank, the Keep Well Agreement may not be
terminated by either party unless the Company has received written
certifications from Moody's and S&P that upon such termination the Series B
Preferred Stock or B Exchange Preferred Stock, as the case may be (or both the
Series B Preferred Stock and B Exchange Preferred Stock if both are then
outstanding), will be rated no lower than "baa1" and "BBB" by Moody's and S&P,
respectively. For these purposes, the Series A Preferred Stock, Series B
Preferred Stock or B Exchange Preferred Stock will no longer be deemed
outstanding at such time as an effective notice of redemption of all of the
Series A Preferred Stock, Series B Preferred Stock or B Exchange Preferred
Stock, as the case may be, shall have been given by the Company and funds
sufficient to effectuate such redemption shall have been deposited with the
party designated for such purpose in the notice. So long as the Series A
Preferred Stock is outstanding, if both Moody's and S&P shall discontinue
rating the Series A Preferred Stock, then Goldman, Sachs & Co., or its
successor, shall, within 30 days, select a nationally recognized substitute
rating agency and identify the comparable ratings from such agency. So long as
the Series A Preferred Stock is no longer outstanding but the Series B
Preferred Stock or B Exchange Preferred Stock is outstanding, if both Moody's
and S&P shall discontinue rating the Series B Preferred Stock or B Exchange
Preferred Stock, as the case may be, then Lehman Brothers Inc., or its
successor, shall, within 30 days, select a nationally recognized substitute
rating agency and identify the comparable ratings from such agency. Any
termination of the Keep Well Agreement by the Company must be consented to by
Fuji Bank. Any such termination will not relieve the Company of its
obligations in respect of any NW Preferred Stock outstanding on the date of
termination or the dividends thereon, any amounts owed in respect of Liquidity
Advances on the date of termination or the unpaid principal or interest on
those Liquidity Advances or Fuji Bank's fee relating to the Liquidity
Commitment. Any such termination will not adversely affect the Company's
commercial paper obligations outstanding on the date of termination. The Keep
Well Agreement can be modified or amended by a written agreement of Fuji Bank
and the Company. However, no such modification or amendment may change the
prohibition against termination before the Termination Date or the other
restrictions on termination or adversely affect the Company's then-outstanding
commercial paper obligations.
Under the Keep Well Agreement, the Company's commercial paper obligations
and any other debt instruments are solely the obligations of the Company. The
Keep Well Agreement is not a guarantee by Fuji Bank of the payment of the
Company's commercial paper obligations, indebtedness, liabilities or
obligations of any kind.
USE OF PROCEEDS
Except as otherwise provided in a Prospectus Supplement, the net proceeds
from the sale of the Securities will be added to the general funds of the
Company and will be available for the repayment of short-term borrowings and
for other corporate purposes. From time to time, the Company may engage in
additional public or private financings of a character and amount that the
Company may deem appropriate.
9
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data of the Company and its consolidated
subsidiaries have been derived from information contained in, and should be
read in conjunction with, the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and the Company's Quarterly Report on Form
10-Q for the six months ended June 30, 1997. The data presented below for, and
as of the end of, each of the years in the five-year period ended December 31,
1996 are derived from the audited consolidated financial statements of the
Company and its subsidiaries. The data presented below for, and as of the end
of, the six months ended June 30, 1997 and 1996 are derived from unaudited
financial statements and include, in the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the data for the periods.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
-------------- ----------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income............ $ 446 $ 400 $ 807 $ 851 $ 702 $ 620 $ 634
Interest expense........... 247 223 452 464 336 264 295
------- ------ ------ ------ ------ ------ ------
Net interest income...... 199 177 355 387 366 356 339
Fees and other income...... 79 37 79 148 117 88 52
Factoring commissions...... 43 26 55 50 53 50 49
Income of international
joint ventures............ 19 20 44 35 21 23 26
------- ------ ------ ------ ------ ------ ------
Operating revenues....... 340 260 533 620 557 517 466
Operating expenses......... 152 119 247 216 195 174 169
Provision for losses....... 56 49 103 223 188 210 252
------- ------ ------ ------ ------ ------ ------
Income before income
taxes, minority interest
and change in accounting
principle............... 132 92 183 181 174 133 45
Income tax
provision/(benefit)....... 45 21 43 49 51 11 (5)
Minority interest in
income of Heller
International Group,
Inc....................... 4 2 7 7 5 5 3
------- ------ ------ ------ ------ ------ ------
Income before change in
accounting principle.... 83 69 133 125 118 117 47
Cumulative effect of a
change in accounting
principle for income
taxes..................... -- -- -- -- -- -- 41
------- ------ ------ ------ ------ ------ ------
Net income............... $ 83 $ 69 $ 133 $ 125 $ 118 $ 117 $ 88
======= ====== ====== ====== ====== ====== ======
Common dividends paid.... $ 28 $ 24 $ 56 $ 52 $ 20 $ -- $ --
======= ====== ====== ====== ====== ====== ======
<CAPTION>
JUNE 30, DECEMBER 31,
-------------- ----------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Receivables................ $10,109 $8,167 $8,529 $8,085 $7,616 $7,062 $7,465
Allowance for losses of
receivables............... 250 230 225 229 231 221 224
Investments................ 881 771 805 693 634 370 280
Investment in
international joint
ventures.................. 193 235 272 233 174 144 140
Total assets............... $11,608 $9,475 $9,926 $9,638 $8,476 $7,913 $7,952
======= ====== ====== ====== ====== ====== ======
Senior debt:
Commercial paper and
short-term borrowings... $ 3,826 $2,440 $2,745 $2,223 $2,451 $1,981 $2,422
Notes and debentures..... 4,600 4,768 4,761 5,145 3,930 3,893 3,521
Junior subordinated debt... -- -- -- -- -- 75 225
------- ------ ------ ------ ------ ------ ------
Total debt............... $ 8,426 $7,208 $7,506 $7,368 $6,381 $5,949 $6,168
======= ====== ====== ====== ====== ====== ======
Total liabilities.......... $ 9,907 $7,997 $8,402 $8,208 $7,107 $6,625 $6,777
Preferred stock............ 275 150 150 150 150 150 150
Common equity.............. 1,368 1,276 1,317 1,234 1,180 1,103 994
------- ------ ------ ------ ------ ------ ------
Total stockholders'
equity.................. $ 1,643 $1,426 $1,467 $1,384 $1,330 $1,253 $1,144
======= ====== ====== ====== ====== ====== ======
Ratio of commercial paper
and short-term borrowings
to total debt............. 45% 34% 37% 30% 38% 33% 39%
======= ====== ====== ====== ====== ====== ======
Ratio of debt (net of
short-term investments)
to total stockholders'
equity.................... 5.0x 4.8x 5.0x 5.0x 4.7x 4.7x 5.4x
======= ====== ====== ====== ====== ====== ======
</TABLE>
10
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratios of earnings to fixed charges and
earnings to combined fixed charges and preferred stock dividends for the
Company and its consolidated subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED JUNE FOR THE YEAR ENDED DECEMBER
30, 31,
----------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(1).......................... 1.53x 1.41x 1.40x 1.38x 1.51x 1.49x 1.15x
Ratio of earnings to combined fixed
charges and preferred stock
dividends(2)........................ 1.48x 1.36x 1.35x 1.34x 1.44x 1.43x 1.14x
</TABLE>
- --------
(1) The ratio of earnings to fixed charges is calculated by dividing (i)
income before income taxes, the minority interest in Heller International
income and fixed charges by (ii) fixed charges. Fixed charges consist of
interest on all indebtedness and one-third of annual rentals (approximate
portion representing interest).
(2) The ratio of earnings to combined fixed charges and preferred stock
dividends is calculated by dividing (i) income before income taxes, the
minority interest in Heller International income and fixed charges by (ii)
fixed charges plus preferred stock dividends.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of
the indentures under which the Debt Securities are to be issued. The
particular terms of each issue of Debt Securities (the "Offered Debt
Securities"), as well as any modifications or additions to such general terms
that may apply in the case of such Offered Debt Securities, will be described
in the Prospectus Supplement relating to such Offered Debt Securities and will
be set forth in a filing with the Commission. Accordingly, for a description
of the terms of a particular issue of Debt Securities, reference must be made
to both the Prospectus Supplement relating thereto and to the following
description.
The Debt Securities will be unsecured general obligations of the Company,
and may be senior Debt Securities ("Senior Debt Securities"), subordinated
Debt Securities ("Subordinated Debt Securities") or junior subordinated Debt
Securities ("Junior Subordinated Debt Securities"). None of the Company's
outstanding Debt Securities are, and none of the Debt Securities will be,
guaranteed by Fuji Bank. The Senior Debt Securities will be issued under an
indenture dated as of September 1, 1995, as amended, between the Company and
State Street Bank and Trust Company ("State Street"), as successor to Shawmut
Bank Connecticut, National Association ("Shawmut"), as trustee (such
indenture, as at any time amended, being referred to herein as the "Senior
Indenture"); the Subordinated Debt Securities will be issued under an
indenture dated as of September 1, 1995, as amended, between the Company and
State Street, as successor to Shawmut, as trustee (such indenture, as at any
time amended, being referred to herein as the "Subordinated Indenture"); and
the Junior Subordinated Debt Securities will be issued under an indenture
dated as of September 1, 1995, as amended, between the Company and State
Street, as successor to Shawmut, as trustee (such indenture being referred to
as the "Junior Subordinated Indenture"). The Senior Indenture, the
Subordinated Indenture and the Junior Subordinated Indenture are sometimes
hereinafter referred to individually as an "Indenture" and collectively as the
"Indentures." The trustee under each Indenture (and any successor thereto
under each Indenture) is referred to herein as the "Trustee." The statements
under this caption relating to the Debt Securities and the Indentures are
summaries only and do not purport to be complete. All section references
appearing herein are to sections of the applicable Indenture or Indentures,
and capitalized terms not defined herein shall have the meanings ascribed to
them in the applicable Indenture or Indentures. Wherever particular provisions
of the Indentures are referred to, such provisions are incorporated by
reference as part of the statements made herein, and such statements are
qualified in their entirety by such reference. Copies of the Senior Indenture,
the Subordinated Indenture and the
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Junior Subordinated Indenture have been filed with the Commission as exhibits
to the Registration Statement and are available from the offices of the
Commission as referred to under "Available Information."
There is no requirement that future issues of debt securities of the Company
be issued under any of the Indentures, and the Company will be free to employ
other indentures or documentation containing provisions different from those
included in the Indentures or applicable to one or more issues of Offered Debt
Securities, in connection with future issues of such other debt securities.
PROVISIONS APPLICABLE TO SENIOR, SUBORDINATED AND JUNIOR SUBORDINATED DEBT
SECURITIES
General
Each Indenture provides that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series,
and may be denominated in any currency or currency unit, in each case as
established from time to time in, or pursuant to authority granted by, a
resolution of the Board of Directors of the Company or as established in one
or more indentures supplemental to such Indenture. (Section 3.01). Each
Indenture also provides that there may be more than one Trustee under such
Indenture, each with respect to one or more series of Debt Securities. The
Trustee under any Indenture may resign or be removed with respect to one or
more series of Debt Securities issued under such Indenture, and a successor
Trustee may be appointed to act with respect to such series. (Section 8.10).
If two or more persons are acting as Trustee with respect to different series
of Debt Securities issued under the same Indenture, each such Trustee shall be
a Trustee of a trust under such Indenture separate and apart from the trust
administered by any other such Trustee (Section 8.11), and any action
described herein to be taken by the "Trustee" may then be taken by each such
Trustee with respect to, and only with respect to, the one or more series of
Debt Securities for which it is Trustee under such Indenture.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered hereby for the following terms of the
Offered Debt Securities: (i) the title of the Offered Debt Securities and
whether such Offered Debt Securities will be Senior Debt, Subordinated Debt or
Junior Subordinated Debt; (ii) any limit on the aggregate principal amount of
the Offered Debt Securities; (iii) the percentage of their principal amount
for which the Offered Debt Securities will be issued; (iv) the date or dates
on which the principal of (and premium, if any, on) the Offered Debt
Securities will be payable; (v) the rate or rates (which may be fixed or
variable) per annum, or the method by which such rate or rates shall be
determined, at which the Offered Debt Securities will bear interest, if any;
(vi) if other than U.S. Dollars, the currency or currencies or currency unit
or units for which the Offered Debt Securities may be purchased and the
currency or currencies or currency unit or units in which the principal of,
and premium, if any, and interest, if any, on, such Offered Debt Securities
may be payable; (vii) the date or dates from which any such interest will
accrue, the date or dates on which any such interest will be payable and the
regular record dates for such interest payments; (viii) the place or places
where the principal of, and premium, if any, and interest, if any, on, the
Offered Debt Securities will be payable; (ix) the period or periods within
which, the price or prices at which and the terms and conditions upon which
the Offered Debt Securities may be redeemed, in whole or in part, at the
option of the Company, pursuant to any sinking fund or otherwise, if the
Company is to have such an option, and whether any special terms and
conditions of redemption shall apply if the Offered Debt Securities are
Registered Securities (as hereinafter defined) or Unregistered Securities (as
hereinafter defined); (x) the obligation, if any, of the Company to redeem,
repay or purchase the Offered Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and the period or
periods within which, the price or prices at which and the terms and
conditions upon which the Offered Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation; (xi) the terms
for conversion or exchange, if any; (xii) any Events of Default with respect
to the Offered Debt Securities in addition to those set forth under "Events of
Default, Notice and Waiver" below; (xiii) the securities exchange or market,
if any, on which the Offered Debt Securities will be listed; and (xiv) any
other terms of the Offered Debt Securities not inconsistent with the
provisions of the respective Indenture.
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The Company will comply with Rule 14e-1 promulgated under the Exchange Act,
and any other tender offer rules under the 1934 Act which may then be
applicable in connection with any obligation of the Company to purchase
Offered Debt Securities at the option of the Holders thereof. Any such
obligation applicable to an issue of Securities will be described in the
Prospectus Supplement relating thereto.
The Debt Securities may be issued in fully registered form without coupons
("Fully Registered Securities"), or in a form registered as to principal only
with coupons ("Registered Securities") or in bearer form with or without
coupons ("Unregistered Securities"). The Debt Securities of a series may be
issued 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
applicable Prospectus Supplement. The specific depositary arrangement with
respect to a series of Offered Debt Securities or any part thereof will be
described in the applicable Prospectus Supplement. Unless otherwise specified
in the Prospectus Supplement, the Offered Debt Securities will be issued only
as Fully Registered Securities in denominations of $1,000 and any integral
multiple thereof and will be payable in U.S. dollars. (Section 3.02).
An investment in Offered Debt Securities indexed, as to principal or
interest or both, to one or more values of currencies (including exchange
rates between currencies), commodities or interest rate indices entails
significant risks that are not associated with similar investments in a
conventional fixed-rate debt security. If the interest rate of such an Offered
Debt Security is so indexed, it may result in an interest rate that is less
than that payable on a conventional fixed-rate debt security issued at the
same time, including the possibility that no interest will be paid, and, if
the principal amount of such an Offered Debt Security is so indexed, the
principal amount payable at maturity may be less than the original purchase
price of such Offered Debt Security if allowed pursuant to the terms of such
Offered Debt Security, including the possibility that no principal will be
paid. The secondary market for such Offered Debt Securities will be affected
by a number of factors, independent of the creditworthiness of the Company and
the value of the applicable currency, commodity or interest rate index,
including the volatility of the applicable currency, commodity or interest
rate index, the time remaining to the maturity of such Offered Debt
Securities, the amount outstanding of such Offered Debt Securities and market
interest rates. The value of the applicable currency, commodity or interest
rate index depends on a number of interrelated factors, including economic,
financial and political events, over which the Company has no control.
Additionally, if the formula used to determine the principal amount or
interest payable with respect to such Offered Debt Securities contains a
multiple or leverage factor, the effect of any change in the applicable
currency, commodity or interest rate index will be increased. The historical
experience of the relevant currencies, commodities or interest rate indices
should not be taken as an indication of future performance of such currencies,
commodities or interest rate indices during the term of any Offered Debt
Security. Accordingly, prospective investors should consult their own
financial and legal advisors as to the risks entailed by an investment in such
Offered Debt Securities and the suitability of such Offered Debt Securities in
light of their particular circumstances.
One or more series of Offered Debt Securities may be sold at a discount
(which may be substantial) below their stated principal amount or bear no
interest or interest at a rate which at the time of issuance is below market
rates ("Original Issue Discount Securities"). Special federal income tax,
accounting and other considerations applicable thereto will be described in
the Prospectus Supplement relating to any such Offered Debt Securities.
If any of the Offered Debt Securities are sold for any foreign currency or
foreign currency unit or if the principal of, and premium, if any, and
interest, if any, on, any series of Offered Debt Securities are payable in any
foreign currency or foreign currency unit, the restrictions, elections, tax
consequences, specific terms and other information with respect to such issue
of Offered Debt Securities and such foreign currency or currency unit will be
set forth in the Prospectus Supplement relating thereto.
The Debt Securities will be unsecured obligations of the Company. None of
the Company's outstanding debt securities are, and none of the Debt Securities
will be, guaranteed by Fuji Bank.
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Certain Definitions
The following terms are defined in each Indenture. (Sections 1.01 and
12.07).
The term "Consolidated Net Tangible Assets" is defined to mean the total of
all assets reflected on a consolidated balance sheet of the Company and its
consolidated Subsidiaries, prepared in accordance with generally accepted
accounting principles, at their net book values (after deducting related
depreciation, depletion, amortization and all other valuation reserves which,
in accordance with such principles, should be set aside in connection with the
business conducted), but excluding goodwill, unamortized debt discount and all
other like segregated intangible assets, and amounts on the asset side of such
balance sheet for capital stock of the Company, all as determined in
accordance with such principles, less the aggregate of the current liabilities
of the Company and its consolidated Subsidiaries reflected on such balance
sheet, all as determined in accordance with such principles. For purposes of
this definition, "current liabilities" include all indebtedness for money
borrowed, incurred, issued, assumed or guaranteed by the Company and its
consolidated Subsidiaries, credit balances of factoring clients and other
payables and accruals, in each case payable on demand or due within one year
of the date of determination of Consolidated Net Tangible Assets, all as
reflected on such consolidated balance sheet of the Company and its
consolidated Subsidiaries, prepared in accordance with generally accepted
accounting principles.
The term "Debt" is defined to mean all liabilities, whether issued or
assumed, in respect of money borrowed, whether or not evidenced by notes,
debentures or other like written obligations to pay money, and all guarantees
in respect of money borrowed by third persons, whether or not evidenced by
notes, debentures or other like written obligations of such third persons to
pay money.
The term "Finance Business" is defined to mean the business of making loans,
extending credit, or providing financial accommodations to any person and such
activities as may be incidental thereto, including, but not limited to: the
purchase of obligations growing out of the sale or lease of all types of
consumer, commercial and industrial property; the making of loans to
individuals and business enterprises, including the extension of wholesale or
floor plan accommodations to permit distributors and dealers to carry
inventories for resale; factoring; leasing of tangible personal property to
others; mortgage brokerage and servicing; and other business of a similar
character to the extent that other companies similarly situated, within the
limits of sound trade practice, may have heretofore engaged or may hereafter
engage in such other business.
The term "Junior Subordinated Debt" is defined to mean all Debt of the
Company which is by its terms made subordinate and junior to Senior Debt and
Subordinated Debt.
The term "Lien" is defined to mean any mortgage, pledge, security interest
or lien.
The term "Restricted Subsidiary" is defined to mean any Subsidiary of the
Company or of a Restricted Subsidiary (i) which is primarily engaged in the
Finance Business, (ii) which conducts such Finance Business primarily in the
United States and (iii) of which the Company and/or a Restricted Subsidiary
owns 51% or more of each class of its Voting Stock.
The term "Senior Debt" is defined to mean all Debt of the Company which is
not by its terms made subordinate or junior in right of payment with respect
to the general assets of the Company to any other Debt of the Company.
The term "Subordinated Debt" is defined to mean all Debt of the Company
which is by its terms made subordinate or junior in right of payment to any
other Debt of the Company, except Junior Subordinated Debt.
The term "Subsidiary" is defined to mean any corporation of which more than
50% of the Voting Stock, other than directors' qualifying shares (if any),
shall at the time be owned by the Company and/or one or more Subsidiaries.
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The term "Voting Stock" is defined to mean stock of the class or classes
having general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such corporation
(irrespective of whether or not at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency).
Certain Restrictions
The Company agrees in each Indenture that it will not, and will not permit
any Restricted Subsidiary to, create, incur or assume any Lien on property of
any character of the Company or any Restricted Subsidiary to secure
indebtedness for money borrowed, incurred, issued, assumed or guaranteed by
the Company or any Restricted Subsidiary ("indebtedness") unless: (i) the Lien
equally and ratably secures the Debt Securities and the indebtedness (subject,
in the case of Debt Securities constituting either Subordinated Debt or Junior
Subordinated Debt, to subordination of respective rights of payment as
provided in the Subordinated Indenture or the Junior Subordinated Indenture,
as the case may be); or (ii) the Lien is on property or shares of stock of a
corporation at the time the corporation becomes a Restricted Subsidiary or
merges into or consolidates with the Company or a Restricted Subsidiary; or
(iii) the Lien is on property at the time the Company or a Restricted
Subsidiary acquires the property; or (iv) the Lien secures indebtedness
incurred to finance all or part of the purchase price or cost of construction
of property of the Company or a Restricted Subsidiary; or (v) the Lien secures
indebtedness of a Restricted Subsidiary owing to the Company or another
Restricted Subsidiary; or (vi) the Lien is on property of a person at the time
the person transfers or leases all or substantially all of its assets to the
Company or a Restricted Subsidiary; or (vii) the Lien is in favor of a
government or governmental entity and is for taxes or assessments or secures
payments pursuant to a contract or statute; or (viii) the Lien arises out of a
judgment, decree or court order or the Lien arises in connection with other
proceedings or actions at law or in equity; or (ix) the Lien is on receivables
of the Company, or cash, deposited or otherwise subjected to a Lien as a basis
for the issuance of bankers' acceptances or letters of credit in connection
with any financing of customers' operations by the Company or any Restricted
Subsidiary; or (x) the Lien is on property (or any receivables arising in
connection with the lease thereof) acquired by the Company or a Restricted
Subsidiary through repossession, foreclosure or like proceeding and secures
indebtedness incurred at the time of such acquisition or at any time
thereafter to finance all or part of the cost of maintenance, improvement or
construction relating thereto; or (xi) the Lien is created in favor of the
Small Business Administration on property owned by a Restricted Subsidiary
which is organized as a small business investment company under Title 15, 681,
of the United States Code; or (xii) the Lien extends, renews or replaces in
whole or in part a Lien enumerated in clauses (i) through (xi) above; or
(xiii) the Lien secures indebtedness of the Company or a Restricted Subsidiary
and the sum of the following does not exceed 10% of Consolidated Net Tangible
Assets: (x) such indebtedness plus (y) other indebtedness of the Company and
its Restricted Subsidiaries secured by Liens on property of the Company and
its Restricted Subsidiaries, excluding indebtedness secured by a Lien existing
as of the date of the Indenture and excluding indebtedness secured by a Lien
permitted by one of clauses (i) through (xii) above. (Section 12.07).
Each Indenture provides that the Company may omit in any particular instance
to comply with any part or the entirety of the foregoing restriction on Liens
if the Holders of at least a majority in principal amount of the Offered Debt
Securities at the time Outstanding of each series that is affected thereby
shall either waive such compliance in such instance or generally waive
compliance. (Section 12.08).
None of the Indentures limits the amount of Senior Debt, Subordinated Debt
or Junior Subordinated Debt that may be incurred by the Company. However,
under certain restrictive provisions of other indentures and agreements, the
Company has covenanted that it will not at any time permit the aggregate
principal amount of all Debt which is reflected on the consolidated balance
sheets of the Company to exceed 10 times consolidated stockholders' equity,
determined in accordance with generally accepted accounting principles. The
foregoing provisions are contained in certain indentures and agreements of
varying terms, the longest of which is currently scheduled to expire on May
15, 2002. None of the Indentures affects the Company's ability to terminate or
amend such provisions prior to such date.
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Mergers, Consolidations and Transfers of Assets
Each Indenture provides that the Company will not consolidate with or merge
into any other corporation or convey, transfer or lease its properties and
assets substantially as an entirety to any person, unless (a) the corporation
formed by such consolidation or into which the Company is merged or the person
which shall have acquired by conveyance or transfer, or which leases such
properties and assets is a corporation, partnership, limited liability company
or trust organized and existing under the laws of any United States
jurisdiction, and shall assume payment of the principal of, and premium, if
any, and interest, if any, on, the Debt Securities and the performance or
observance of every covenant to be performed or observed by the Company under
the Indentures, (b) immediately thereafter, no Event of Default (or event
which, with notice or lapse of time, or both, would be such) shall have
occurred and be continuing and (c) certain other conditions have been met.
(Section 10.01). If any such transaction were to occur, then, provided that
all such conditions were satisfied, the Company would (except in the case of a
lease) be discharged from all of its obligations and covenants under the
Indenture and the Debt Securities. (Section 10.02).
Payment and Transfer
Principal of, and premium, if any, and interest, if any, on, Fully
Registered Securities is to be payable at the Corporate Trust Office of the
Trustee under the applicable Indenture or any other office maintained by the
Company for such purposes, provided that payment of interest, if any, on Fully
Registered Securities may be made at the option of the Company by check mailed
to the persons in whose names such Debt Securities are registered at the close
of business on the day or days specified in the applicable Prospectus
Supplement. (Sections 3.08, 3.12). The principal of, and premium, if any, and
interest, if any, on, Offered Debt Securities in other forms will be payable
in such manner and at such place or places as may be designated by the Company
and specified in the applicable Prospectus Supplement. (Section 3.12).
Fully Registered Securities may be transferred or exchanged at the Corporate
Trust Office of the Trustee under the applicable Indenture or at any other
office or agency maintained by the Company for such purposes, subject to the
limitations in the applicable Indenture, without the payment of any service
charge except for any tax or governmental charge incidental thereto.
Provisions with respect to the transfer and exchange of Offered Debt
Securities in other forms will be set forth in the applicable Prospectus
Supplement. (Section 3.05).
Book Entry, Delivery and Form
If the accompanying Prospectus Supplement so indicates, the Offered Debt
Securities will be represented by one or more certificates in registered,
global form (the "Global Securities"). The Global Security representing
Offered Debt Securities will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") in New York, New York or other successor
depositary appointed by the Company (DTC or such other depositary is herein
referred to as the "Depositary") and registered in the name of the Depositary
or its nominee.
DTC currently limits the maximum denomination of any single Global Security
to $200,000,000. Therefore, for purposes hereof, "Global Security" refers to
the Global Security or Global Securities representing the entire issue of
Offered Debt Securities.
DTC has advised the Company and any underwriters, dealers or agents named in
the accompanying Prospectus Supplement as follows: DTC is a limited-purpose
trust company organized under the laws of the State of New York, 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 Exchange Act. DTC was created to hold
securities of its participants (the "Participants") and to facilitate the
clearance and settlement of securities transactions among its Participants in
such securities through electronic book-entry changes in accounts of the
Participants, thereby eliminating the need for physical movement of securities
certificates. The Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's book-entry system is also available to other entities, such as banks,
brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
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Ownership of beneficial interests in Debt Securities represented by a Global
Security (each, a "Book-Entry Debt Security") will be limited to Participants
or persons that may hold interests through Participants. Upon deposit of a
Global Debt Security, the Depositary will credit, on its book-entry
registration and transfer system, the Participants' accounts with the
respective principal amounts of the Book-Entry Debt Securities represented by
such Global Debt Security beneficially owned by such Participants. The
accounts to be credited shall be designated by any dealers, underwriters or
agents participating in the distribution of such Book-Entry Debt Securities.
Ownership of Book-Entry Debt Securities will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Depositary for the related Global Debt Security (with respect to interests
of Participants) and on the records of Participants (with respect to interests
of persons holding through Participants). The laws of some states may require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interest in Book-Entry Debt
Securities.
So long as the Depositary for a Global Debt Security, or its nominee, is the
registered owner of such Global Debt Security, the Depositary or such nominee,
as the case may be, will be considered the sole owner or Holder of the Book-
Entry Debt Securities represented by such Global Debt Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in Book-Entry Debt Securities will not be entitled to have such
securities registered in their names, will not receive or be entitled to
receive physical delivery of a certificate in definitive form representing
such securities and will not be considered the owners or Holders thereof under
the Indenture for any purpose, including with respect to the giving of any
directions, approvals or instructions to the Trustee thereunder. As a result,
the ability of a person having a beneficial interest in Book-Entry Securities
represented by a Global Debt Security to pledge such interest to persons or
entities that do not participate in the Depositary's system, or to otherwise
take actions with respect to such interest, may be affected by the lack of a
physical certificate evidencing such interest. Accordingly, each person owning
Book-Entry Debt Securities must rely on the procedures of the Depositary for
the related Global Debt Security and, if such person is not a Participant, on
the procedures of the Participant through which such person owns its interest,
to exercise any rights of a Holder under the Indenture.
The Company understands that, under existing industry practice, if a Company
requests any action of Holders or an owner of a beneficial interest in a
Global Debt Security desires to give any notice or take any action a Holder is
entitled to give or take under the Indenture, the Depositary will authorize
the Participants on whose behalf it holds a Global Debt Security to give such
notice or take such action, and Participants will authorize beneficial owners
owning through such Participants to give such notice or take such action or
will otherwise act upon the instructions of beneficial owners owning through
them. The Indentures provide that the Company, the Trustee and their
respective agents will treat as the Holders of a Debt Security the persons
specified in a written statement of the Depositary with respect to such Global
Debt Security for purposes of obtaining any consents or directions required to
be given by Holders of the Debt Securities pursuant to the Indentures.
Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Debt Securities will be made by the Company through the Trustee
under the applicable Indenture, or a paying agent (the "Paying Agent"), which
may also be the Trustee under the applicable Indenture, to the Depositary or
its nominee, as the case may be, as the registered Holder of the related
Global Debt Security. Under the terms of the Indentures, the Company and the
Trustee may treat the persons in whose names the Offered Debt Securities,
including the Global Debt Security, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, none of the Company, the Trustee or the Paying Agent
or any agent of the Trustee will have any responsibility or liability for any
aspect of the records relating to, or payments made on account of beneficial
ownership interests in, such Global Debt Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary, upon receipt of any payment of
principal of, or premium or interest, if any, on, a Global Debt Security, will
immediately credit Participants' accounts with payments in
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amounts proportionate to the respective amounts of Book-Entry Debt Securities
held by each such Participant as shown on the records of the Depositary. The
Company also expects that payments by Participants to owners of beneficial
interests in Book-Entry Debt Securities held through such Participants will be
governed by standing customer instructions and customary practices, as is now
the case with the securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of the
Participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange
Act, and a successor depositary registered as a clearing agency under the
Exchange Act is not appointed by the Company within 90 days, certificates
representing the Offered Debt Securities in definitive form will be issued to
each person that the Depositary identifies as the beneficial owner of the
Book-Entry Debt Securities represented by the Global Debt Security.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or any person that may hold interests through a
Participant in identifying the beneficial owners of the Book-Entry Debt
Securities, and the Company and the Trustee may conclusively rely on, and
shall be protected in relying on, instructions from the Depositary for all
purposes (including with respect to the registration and delivery, and the
respective principal amounts, of the Book-Entry Debt Securities to be issued).
The foregoing information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
believes to be reliable. The Company takes no responsibility for the accuracy
of such information or the performance by the Depositary or its Participants
of their respective obligations as described hereunder or under the rules and
procedures governing their respective operations.
Same-Day Settlement
If the accompanying Prospectus Supplement so indicates, settlement for
Offered Debt Securities will be made by the underwriters, dealers or agents in
immediately available funds and all applicable payments of principal and
interest on Offered Debt Securities will be made by the Company in immediately
available funds. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearinghouse or next-day funds. In
contrast, Debt Securities subject to settlement in immediately available funds
will trade in the Depositary's Same-Day Funds Settlement System until
maturity, and secondary market trading activity in Offered Debt Securities
will therefore be required by the Depositary to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in Offered Debt
Securities.
Events of Default, Notice and Waiver
Except as may otherwise be set forth in the applicable Prospectus Supplement
with respect to any series of Offered Debt Securities, each Indenture provides
that the following events are Events of Default with respect to any series of
Offered Debt Securities issued thereunder: (a) default in the payment of the
principal of (or premium, if any, on) any Offered Debt Security of such series
at its maturity, upon redemption (if applicable) or otherwise; (b) default for
30 days in the payment of any installment of interest on any Offered Debt
Security of such series; (c) default for 60 days after written notice in the
performance of any other covenant in respect of the Offered Debt Securities of
such series contained in such Indenture or in such Offered Debt Securities;
(d) (i) an Event of Default with respect to any other series of Offered Debt
Securities issued pursuant to such Indenture, or (ii) a default under any
bond, debenture, note or other evidence of indebtedness for money borrowed,
issued, assumed or guaranteed by the Company having unpaid principal in excess
of $2,000,000 or under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any such
indebtedness for money borrowed, whether such indebtedness now exists or shall
hereafter be created, which Event of Default or default, as the case may be,
in either such case, shall have resulted in such other series of Offered Debt
Securities or such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise have become due and payable,
without such other series of Offered Debt Securities or such indebtedness
having been discharged or such declaration of acceleration having been
rescinded
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or annulled within a period of 60 days after there shall have been given, by
registered or certified mail, to the Company by the Trustee, or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount
of the outstanding Securities of such series, a written notice specifying such
Event of Default or default, as the case may be, and requiring the Company to
cause such indebtedness to be discharged or cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
under the Indenture, unless at the end of such 60-day period and thereafter
the Event of Default or default is being contested in good faith by the
Company; (e) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or its
property; and (f) any other Event of Default provided in, or pursuant to, the
applicable resolution of the Board of Directors of the Company, or established
in the supplemental indenture under which such series of Offered Debt
Securities is issued. (Section 7.01). No Event of Default with respect to a
particular series of Offered Debt Securities necessarily constitutes an Event
of Default with respect to any other series of Offered Debt Securities issued
under the same or another Indenture.
Within 90 days after the occurrence of any default with respect to any
series of Debt Securities, the Trustee for such series must give the Holders
of such Debt Securities notice of all defaults of which it has knowledge and
that have not been cured or waived. Nevertheless, the Trustee may withhold
notice to the Holders of any series of Debt Securities of any default with
respect to such series (except a default in the payment of principal, premium
or interest) if and so long as it determines in good faith that the
withholding of such notice is in the best interest of such Holders. (Section
8.02).
If an Event of Default with respect to any series of Debt Securities occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Debt Securities of such series may declare
the principal thereof and accrued but unpaid interest thereon (or, in the case
of a series of Original Issue Discount Securities, such portion of the
principal amount as may be specified in the Prospectus Supplement respecting
the offer and sale of such Debt Securities) to be due and payable immediately.
(Section 7.02).
Each Indenture contains a provision entitling the Trustee to be indemnified
by the Holders of Offered Debt Securities issued thereunder before proceeding
to exercise any right or power under such Indenture at the request of any
Holders. (Section 8.03). Each Indenture provides that the Holders of a
majority in principal amount of the outstanding Debt Securities of any series
issued thereunder may, with certain exceptions, direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, with respect to the
Debt Securities of such series. (Section 7.12). The right of a Holder to
institute a proceeding with respect to the applicable Indenture is subject to
certain conditions precedent, including notice and indemnity to the applicable
Trustee, but each Holder has an absolute right to the receipt of principal,
premium, if any, and interest, if any, at the respective Stated Maturities of
the Debt Securities (or, in the case of a redemption, on the Redemption Date)
or to institute suit for the enforcement thereof. (Sections 7.07 and 7.08).
The Holders of at least a majority in principal amount of the outstanding
Debt Securities of any series may, on behalf of the Holders of all such Debt
Securities, waive any past default, except (a) a default in the payment of the
principal of, or premium, if any, or interest, if any, on, any Debt Security
of such series at maturity, upon redemption or otherwise, and (b) a default in
respect of any covenant or provision of the applicable Indenture that cannot
be amended or modified without the consent of the Holder of each of the
outstanding Debt Securities affected. (Section 7.13).
Each Indenture requires the Company to furnish to the applicable Trustee
annual statements as to the fulfillment by the Company of its obligations
under such Indenture. (Section 12.05).
Modification of the Indentures
The Company and the applicable Trustee, with the consent of the Holders of a
majority in principal amount of each series of the Debt Securities at the time
outstanding under the Indenture that is affected thereby, may enter into
supplemental indentures for the purpose of amending or modifying, provisions
of such Indenture or any indenture supplemental thereto; provided, however,
that no such modification or amendment may, without the consent of the Holder
of each of the outstanding Debt Securities affected thereby: (i) modify the
terms of
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payment of principal or interest; (ii) reduce the above-stated percentage of
Holders of outstanding Securities necessary to modify or amend such Indenture
or to waive compliance by the Company with any restrictive covenant; or (iii)
subordinate the indebtedness evidenced by the Debt Securities to any
indebtedness of the Company other than to subordinate Subordinated Debt to
Senior Debt or to subordinate Junior Subordinated Debt to Senior Debt and
Subordinated Debt. (Section 11.02).
Satisfaction and Discharge
Each Indenture provides that the Company shall be discharged from its
obligations under the Debt Securities of a series at any time prior to the
Stated Maturity or redemption thereof when (a) the Company has irrevocably
deposited with the Trustee, in trust, (i) sufficient funds in the currency or
currency unit in which the Debt Securities are denominated to pay the
principal of, and premium, if any, and interest, if any, to Stated Maturity
(or redemption) on, the Debt Securities of such series, or (ii) such amount of
direct obligations of, or obligations the principal of, and interest on, which
are fully guaranteed by, the government which issued the currency in which the
Debt Securities are denominated, and which are not subject to prepayment,
redemption or call, as will, together with the predetermined and certain
income to accrue thereon without consideration of any reinvestment thereof, be
sufficient to pay when due the principal of, and premium, if any, and
interest, if any, to Stated Maturity (or redemption) on, the Debt Securities
of such series, (b) the Company has paid all other sums payable with respect
to the Debt Securities of such series, (c) if the deposit occurs more than one
year prior to the Stated Maturity or redemption of the Debt Securities of such
series, the Company has delivered to the Trustee an opinion of recognized tax
counsel to the effect that such deposit and discharge will not result in
recognition by the Holders of the Debt Securities of such series of income,
gain or loss for Federal income tax purposes (other than income, gain or loss
which would have been recognized in like amount and at a like time absent such
deposit and discharge) and (d) the Company has delivered to the Trustee an
Opinion of Counsel as to certain other matters. Upon such discharge, the
Holders of the Debt Securities of such series shall no longer be entitled to
the benefits of the Indenture, except for the purposes of registration of
transfer and exchange of the Debt Securities of such series, and replacement
of lost, stolen or mutilated Debt Securities and shall look only to such
deposited funds or obligations for payment. (Sections 6.01 and 6.03). However,
each Indenture provides that, if the Trustee is unable to apply any money or
obligations deposited with the Trustee by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, or by reason
of the Trustee's inability to convert any such money or Government Obligations
into the currency or currency unit required to be paid with respect to the
Debt Securities of such series, the Company's obligations under the Indenture
will be reinstated until such time as the Trustee is permitted to apply all
such money and obligations in accordance with the provisions of such
Indenture. (Section 6.04).
The Trustee
State Street Bank and Trust Company will serve as Trustee under the Senior
Indenture, the Subordinated Indenture and the Junior Subordinated Indenture.
Each Indenture contains certain limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. The Trustee is permitted to engage in other
transactions, except that, if it acquires any conflicting interest (as
defined), it must eliminate such conflict or resign. The Trustee is trustee
with respect to outstanding senior or subordinated unsecured debt securities
of the Company previously issued under the Indentures and may from time to
time perform certain other services for, including extending lines of credit
to, the Company in the ordinary course of business.
PROVISIONS APPLICABLE SOLELY TO THE SENIOR DEBT SECURITIES
The Senior Debt Securities will be issued under the Senior Indenture. Each
series of Senior Debt Securities will constitute Senior Debt and will rank
pari passu with each other series of Senior Debt Securities. All Subordinated
Debt (including, but not limited to, all Subordinated Debt Securities) and all
Junior Subordinated Debt (including, but not limited to, all Junior
Subordinated Debt Securities) will be subordinated to the Senior Debt
Securities.
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PROVISIONS APPLICABLE SOLELY TO THE SUBORDINATED DEBT SECURITIES
The Subordinated Debt Securities will be issued under the Subordinated
Indenture. Each series of Subordinated Debt Securities will constitute
Subordinated Debt and will rank pari passu with each other series of
Subordinated Debt Securities. All Junior Subordinated Debt (including, but not
limited to, all Junior Subordinated Debt Securities) will be subordinated to
the Subordinated Debt Securities, and the Subordinated Debt Securities will be
subordinated to all Senior Debt (including, but not limited to, all Senior
Debt Securities).
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its property, or if any
Subordinated Debt Security is declared due and payable because of the
occurrence of an Event of Default, then, in either event, all principal of,
and premium, if any, and interest, if any, on, all Senior Debt will be paid in
full before any payment is made on such Subordinated Debt Security. (Section
14.01 of the Subordinated Indenture).
If Subordinated Debt Securities are issued under the Subordinated Indenture,
the aggregate principal amount of Senior Debt outstanding as of a recent date
will be set forth in the applicable Prospectus Supplement. The applicable
Prospectus Supplement will also set forth any limitation on the issuance by
the Company of any additional Senior Debt.
PROVISIONS APPLICABLE SOLELY TO THE JUNIOR SUBORDINATED DEBT SECURITIES
The Junior Debt Subordinated Securities will be issued under the Junior
Subordinated Indenture. Each series of Junior Subordinated Securities will
rank pari passu with each other series of Junior Debt Subordinated Securities.
The Junior Subordinated Debt Securities will be subordinated to all Senior
Debt (including, but not limited to, all Senior Debt Securities) and all
Subordinated Debt (including, but not limited to, all Subordinated Debt
Securities).
In the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or to its property, or if any
Junior Subordinated Debt Security is declared due and payable because of the
occurrence of an Event of Default, then, in either event, all principal of,
and premium, if any, and interest, if any, on, all Senior Debt and all
Subordinated Debt will be paid in full before any payment is made on such
Junior Subordinated Debt Security. (Section 14.01 of the Junior Subordinated
Indenture).
If Junior Subordinated Debt Securities are issued under the Junior
Subordinated Indenture, the aggregate principal amount of Senior Debt and
Subordinated Debt outstanding as of a recent date will be set forth in the
applicable Prospectus Supplement. The applicable Prospectus Supplement will
also set forth any limitation on the issuance by the Company of any additional
Senior Debt or Subordinated Debt.
As of June 30, 1997, the aggregate principal amount of Senior Debt
outstanding was $8.4 billion, and there was no outstanding Subordinated Debt
or Junior Subordinated Debt.
DESCRIPTION OF WARRANTS
The following statements with respect to the Warrants are summaries of, and
subject to, the detailed provisions of a Warrant Agreement (the "Warrant
Agreement") to be entered into by the Company and a warrant agent to be
selected at the time of issue (the "Warrant Agent"), a form of which is filed
with the Commission as an exhibit to the Registration Statement.
GENERAL
The Warrants, evidenced by Warrant certificates (the "Warrant
Certificates"), may be issued under the Warrant Agreement independently or
together with any Debt Securities offered by any Prospectus Supplement and may
be attached to or separate from such Debt Securities. If Warrants are offered,
the Prospectus Supplement
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will describe the terms of the Warrants, including the following: (i) the
offering price, if any; (ii) the designation, aggregate principal amount and
terms of the Debt Securities purchasable upon exercise of the Warrants; (iii)
if applicable, the designation and terms of the Debt Securities with which the
Warrants are issued and the number of Warrants issued with each such Debt
Security; (iv) if applicable, the date on and after which the Warrants and the
related Debt Securities will be separately transferable; (v) the principal
amount of Debt Securities purchasable upon exercise of one Warrant and the
price at which such principal amount of Debt Securities may be purchased upon
such exercise; (vi) the date on which the right to exercise the Warrants shall
commence and the date on which such right shall expire; (vii) federal income
tax consequences; (viii) whether the Warrants represented by the Warrant
Certificates will be issued in registered or bearer form; and (ix) any other
terms of the Warrants.
Warrant Certificates may be exchanged for new Warrant Certificates of
different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Warrant Agent or
any co-Warrant Agent, which will be listed in the Prospectus Supplement, or at
such other office as may be set forth therein. Warrant holders do not have any
of the rights of Holders of Debt Securities and are not entitled to payments
of principal of, and premium, if any, and interest, if any, on, such Debt
Securities.
EXERCISE OF WARRANTS
Warrants may be exercised by surrendering the Warrant Certificate at the
corporate trust office of the Warrant Agent or at the corporate trust office
of the co-Warrant Agent, if any, with the form of election to purchase on the
reverse side of the Warrant Certificate properly completed and executed, and
by payment in full of the exercise price, as set forth in the Prospectus
Supplement. Upon the exercise of Warrants, the Warrant Agent or co-Warrant
Agent, if any, will, as soon as practicable, deliver the Debt Securities in
authorized denominations in accordance with the instructions of the exercising
Warrantholder and at the sole cost and risk of such Holder. If less than all
of the Warrants evidenced by the Warrant Certificate are exercised, a new
Warrant Certificate will be issued for the remaining amount of Warrants.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of the capital stock of the Company is qualified
in its entirety by reference to the Company's Amended and Restated Certificate
of Incorporation, as amended (the "Restated Certificate"), which is filed with
the Commission as an exhibit to the Registration Statement, and to the
Certificates of Designation, Preferences and Rights relating to the Series A
Preferred Stock and the Series B Preferred Stock, which have been filed with,
and are available from the offices of, the Commission as referred to under
"Available Information."
The Restated Certificate authorizes the Company to issue 22,000,000 shares
of capital stock, of which 1,999,000 shares shall be designated preferred
stock, no par value per share ("Junior Preferred Stock"), 20,000,000 shares
shall be designated senior preferred stock, $.01 par value per share ("Senior
Preferred Stock" and, together with the Junior Preferred Stock, "Preferred
Stock") and 1,000 shares shall be designated common stock, $.025 par value per
share ("Common Stock"). As of October 1, 1997, there were 6,600,000 shares of
Preferred Stock authorized and issued or reserved for issuance as follows:
5,000,000 shares of Series A Preferred Stock, a series of Senior Preferred
Stock, 1,500,000 shares of Series B Preferred Stock, a series of Senior
Preferred Stock, and 100,000 shares of NW Preferred Stock, a series of Junior
Preferred Stock. As of October 1, 1997, 5,000,000 shares of Series A Preferred
Stock, 1,500,000 shares of Series B Preferred Stock, no shares of NW Preferred
Stock and 105 shares of Common Stock were issued and outstanding. All
outstanding shares of Common Stock and Preferred Stock are fully paid and
nonassessable, and any Senior Preferred Stock offered hereby will, upon full
payment of the purchase price therefor, likewise be fully paid and
nonassessable.
Under the Restated Certificate, the Board of Directors of the Company may
provide for the issuance of Senior or Junior Preferred Stock in one or more
series from time to time, and the rights, preferences, privileges
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and restrictions, including dividend rights, voting rights, conversion rights,
terms of redemption and liquidation preferences, of the Senior Preferred Stock
or Junior Preferred Stock of each series will be fixed or designated by the
Board of Directors pursuant to a certificate of designation, preferences and
rights without any further vote or action by the Company's stockholders,
except as required pursuant to the terms of the Series A Preferred Stock and
Series B Preferred Stock (and any fixed rate noncumulative perpetual Senior
Preferred Stock issued in exchange therefor) as described below.
The description of Senior Preferred Stock set forth below and the
description of the terms of a particular series of Senior Preferred Stock that
will be set forth in a Prospectus Supplement do not purport to be complete and
are qualified in their entirety by reference to the Restated Certificate and
the certificate of designation relating to such series, a form of which will
be filed with the Commission. The specific terms of a particular series of
Senior Preferred Stock offered hereby will be described in a Prospectus
Supplement relating to such series and will include the following:
(i) the maximum number of shares to constitute the series and the
distinctive designation thereof;
(ii) the annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate and whether dividends will be
cumulative;
(iii) whether the shares of the series will be redeemable and, if so, the
price at and the terms and conditions on which the shares of the series may
be redeemed, including the time during which shares of the series may be
redeemed and any accumulated dividends thereon that the holders of shares
of the series shall be entitled to receive upon the redemption thereof;
(iv) the liquidation preference, if any, applicable to shares of the
series;
(v) whether the shares of the series will be subject to operation of a
retirement or sinking fund and, if so, the extent and manner in which any
such fund shall be applied to the purchase or redemption of the shares of
the series for retirement or for other corporate purposes, and the terms
and provisions relating to the operation of such fund;
(vi) the terms and conditions, if any, on which the shares of the series
shall be convertible into, or exchangeable for, shares of any other class
or classes of Senior Preferred Stock of the Company, or of any other series
of the same class, including the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same;
(vii) the voting rights, if any, of the shares of the series; and
(viii) any other preferences and relative, participating, optional or
other special rights or qualifications, limitations or restrictions
thereof.
EXISTING PREFERRED STOCK
Series A Preferred Stock
The Series A Preferred Stock has an annual dividend rate of 8.125%.
Dividends are cumulative and payable quarterly. The Company is prohibited from
declaring or paying cash dividends on Common Stock, Junior Preferred Stock or
other series of Senior Preferred Stock on parity with the Series A Preferred
Stock unless full cumulative dividends on all outstanding shares of Series A
Preferred Stock for all past dividend periods have been paid. The Series A
Preferred Stock is not redeemable prior to September 22, 2000. On or after
that date, the Series A Preferred Stock will be redeemable at the option of
the Company, in whole or in part, at a redemption price of $25 per share, plus
accrued and unpaid dividends. Except as required by law and as set forth
herein, the holders of Series A Preferred Stock have no voting rights. In case
the Company shall be in arrears in the payment of six consecutive quarterly
dividends on the outstanding Series A Preferred Stock, the holders of Series A
Preferred Stock, voting separately as a class and in addition to any voting
rights that holders of the Series A Preferred Stock shall have as required by
law, shall have the exclusive right to elect two additional directors beyond
the number to be elected by the stockholders at the next annual meeting of the
stockholders called for the election of directors, and at every subsequent
such meeting at which the terms of office of the directors so elected by the
Series A Preferred Stock expire, provided such arrearage exists on the date of
such
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meeting or subsequent meetings, as the case may be. Any such elected directors
shall serve until the dividend default shall cease to exist. In addition,
without the vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, the Company shall not (i) issue, from any
class or series of stock now existing or to be created in the future, any
shares of stock ranking senior to the outstanding shares of Series A Preferred
Stock as to the payment of dividends and upon liquidation or (ii) amend the
Restated Certificate or the Company's By-laws, as amended, if such amendment
would increase or decrease the aggregate number of authorized shares of Series
A Preferred Stock, increase or decrease the par value of the shares of Series
A Preferred Stock or alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect the holders of the Series A
Preferred Stock adversely. The Series A Preferred Stock carries a liquidation
preference of $25 per share, plus accrued and unpaid dividends. The Series A
Preferred Stock ranks senior with respect to payment of dividends and
liquidation preferences to the Common Stock and Junior Preferred Stock.
Series B Preferred Stock
On June 17, 1997 (the "Issuance Date"), the Company issued 1,500,000 shares
of Series B Preferred Stock at an offering price of $100.00 per share.
Dividends on the Series B Preferred Stock are noncumulative and, if declared,
will be payable at an annual rate of 6.687%. If one or more amendments to the
Internal Revenue Code of 1986, as amended (the "Code"), are enacted that
reduce the percentage of the dividends received reduction (currently 70%) as
specified in Section 243(a)(1) of the Code or any successor provision, the
amount of each dividend payable (if declared) per share of the Series B
Preferred Stock shall be increased according to a formula set forth in the
Certificate of Designation, Preferences and Rights relating to the Series B
Preferred Stock. The Series B Preferred Stock is not redeemable prior to
August 15, 2007. On and after such date, the Series B Preferred Stock is
redeemable, in whole or in part, at the option of the Company, at $100.00 per
share, plus an amount equal to the sum of all accrued and unpaid dividends
(whether or not declared) for the then-current dividend period to the
Redemption Date (without accumulation of accrued and unpaid dividends for
prior dividend periods unless previously declared). The Series B Preferred
Stock is not entitled to the benefit of any sinking fund. Except as required
by law and as set forth herein, the holders of Series B Preferred Stock have
no voting rights. If dividends payable on any share or shares of the Series B
Preferred Stock or on any other class or series of Senior Preferred Stock for
which dividends are noncumulative ("Noncumulative Preferred Stock") ranking on
a parity with the Series B Preferred Stock and upon which like voting rights
have been conferred and are exercisable (excluding any class or series of
Noncumulative Preferred Stock entitled to elect additional directors by a
separate vote, "Voting Preferred Stock") have not been paid or declared and
set aside for payment for the equivalent of six full quarterly dividend
periods (whether or not consecutive), the number of directors of the Company
will be increased by two (without duplication of any increase made pursuant to
the terms of any other class or series of Voting Preferred Stock), and the
holders of the Series B Preferred Stock, voting as a single class with the
holders of the Voting Preferred Stock, will be entitled to elect such two
directors to fill such newly-created directorships. Such right of the holders
of the Series B Preferred Stock and the Voting Preferred Stock shall continue
until dividends on the Series B Preferred Stock and the Voting Preferred Stock
have been paid or declared and set apart for payment regularly for at least
one year (i.e., four consecutive full quarterly dividend periods). Any such
elected directors shall serve until the Company's next annual meeting of
stockholders and until their respective successors are elected and qualified
(notwithstanding that prior to the end of such term the dividend default shall
cease to exist). In addition, the affirmative vote or consent of the holders
of at least 66 2/3% of the outstanding shares of the Series B Preferred Stock
will be required for any amendment, alteration or repeal of any provisions of
the Restated Certificate, of the Offered Preferred Certificate or of any other
certificate amendatory of or supplemental to the Restated Certificate which
would adversely affect the powers, preferences, privileges or rights of the
Series B Preferred Stock. The affirmative vote or consent of the holders of at
least 66 2/3% of the outstanding shares of the Series B Preferred Stock and
any other series of Noncumulative Preferred Stock ranking on a parity with the
Series B Preferred Stock either as to dividends or upon liquidation, voting as
a single class without regard to series, will be required to issue, authorize
or increase the authorized amount of, or issue or authorize any obligation or
security convertible into or evidencing a right to purchase, any additional
class or series of stock ranking prior to the Series B Preferred Stock as to
dividends or upon liquidation, or to reclassify any authorized stock of the
Company into such prior shares, but such vote will not be required for the
Company to take any such actions with respect to any stock ranking on a parity
with
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or junior to the Series B Preferred Stock. The Series B Preferred Stock is
entitled to a liquidation preference of $100.00 per share, plus an amount
equal to the sum of all accrued and unpaid dividends (whether or not earned or
declared) for the then-current dividend period to the date of final
distribution (without accumulation of accrued and unpaid dividends for prior
dividend periods unless previously declared), that is senior to payments to
holders of the Common Stock, the Junior Preferred Stock or any other class or
series of stock of the Company ranking junior to the Series B Preferred Stock
and pari passu with payments to holders of each other series of Senior
Preferred Stock outstanding on the date of original issue of the Series B
Preferred Stock.
The Series B Preferred Stock has not been registered under the Securities
Act or any applicable state securities law. Pursuant to a Registration Rights
Agreement (the "Registration Rights Agreement") between the Company and the
initial purchasers of the Series B Preferred Stock, the Company has agreed (i)
to use its reasonable best efforts to file, within 150 days after the Issuance
Date, a registration statement with respect to an offer to exchange (the
"Exchange Offer") shares of Series B Preferred Stock for shares of fixed rate
noncumulative perpetual Senior Preferred Stock of the Company with
substantially identical terms to the Series B Preferred Stock and (ii) to use
its reasonable best efforts to cause such registration statement to become
effective under the Securities Act within 180 days after the Issuance Date. In
the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer, or in
certain other circumstances, the Company will use its reasonable best efforts
to cause to become effective a shelf registration statement with respect to
the resale of the Series B Preferred Stock and to keep such shelf registration
statement effective for up to two years after the Issuance Date.
NW Preferred Stock
The Company has authorized the issuance of 100,000 shares of NW Preferred
Stock pursuant to the Keep Well Agreement wherein, among other things, Fuji
Bank has agreed to purchase NW Preferred Stock in an amount required to
maintain the Company's net worth at $500 million. The Company's net worth was
approximately $1.5 billion at December 31, 1996. If and when issued, the NW
Preferred Stock will have an annual dividend rate equal to 1% per annum above
the three-month rate at which deposits in United States dollars are offered by
The Fuji Bank, Limited in London, England to prime banks in the London
interbank market. Dividends on the NW Preferred Stock will be noncumulative
and payable (if declared) quarterly, and the Company will be prohibited from
paying cash dividends on Common Stock unless full dividends for the then-
current dividend period (without accumulation of accrued and unpaid dividends
for prior dividend periods unless previously declared) on all outstanding
shares of NW Preferred Stock have been declared and paid or declared and a sum
sufficient set aside for such payment. Subject to certain conditions, NW
Preferred Stock will be redeemable at the option of the holder, in whole or in
part, within a specified period of time after the end of a calendar quarter in
an aggregate amount not greater than the excess of the net worth of the
Company as of the end of such calendar quarter over $500 million and at a
redemption price equal to the price paid to the Company upon the issuance
thereof, plus accrued and unpaid dividends for the then-current dividend
period (without accumulation of accrued and unpaid dividends for prior
dividend periods unless previously declared). Except as required by law, the
holders of NW Preferred Stock will have no voting rights. The NW Preferred
Stock will carry a liquidation preference equal to the price paid for each
share upon issuance thereof, plus accrued and unpaid dividends for the then-
current dividend period (without accumulation of accrued and unpaid dividends
for prior dividend periods unless previously declared). The NW Preferred Stock
will rank senior with respect to payment of dividends and liquidation
preference to the Common Stock and junior to the Senior Preferred Stock. No
purchases of NW Preferred Stock have been made by Fuji Bank under the Keep
Well Agreement.
COMMON STOCK
All outstanding shares of the Common Stock are held by the Parent. Subject
to the rights of holders of the Senior Preferred Stock and Junior Senior
Preferred Stock, including any Senior Preferred Stock offered hereby, the
holders of outstanding shares of Common Stock are entitled to share ratably in
dividends declared out of assets legally available therefor at such time and
in such amounts as the Board of Directors of the Company may from time to time
lawfully determine. Each holder of Common Stock is entitled to one vote for
each share held.
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All shares of Common Stock currently outstanding are fully paid and
nonassessable, not subject to redemption and assessment and without
conversion, preemptive or other rights to subscribe for or purchase any
proportionate part of any new or additional issues of any class or of
securities convertible into stock of any class.
PLAN OF DISTRIBUTION
The Company may offer the Securities directly to purchasers, to or through
underwriters, through dealers or agents or through a combination of any such
methods. Any such underwriter(s), dealer(s) or agent(s) involved in the offer
and sale of the Securities in respect of which this Prospectus is delivered
will be named in a Prospectus Supplement. The Prospectus Supplement with
respect to such Securities also will set forth the terms of the offering of
such Securities, including the purchase price of such Securities and the
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
and any securities exchanges or markets on which such Securities may be
listed.
If underwriters are used in an offering of Securities, the Company will
execute an underwriting agreement with such underwriters, and the name of each
underwriter and the terms of the transaction, including any underwriting
discounts and other items constituting compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement relating to
such offering, and, if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover of such Prospectus
Supplement. Such Securities will be acquired by the underwriters for their own
accounts and may be resold from time to time in one or more transactions, (i)
at a fixed price or prices, which may be changed, (ii) at market prices
prevailing at the time of sale, (iii) at prices relating to such prevailing
market price or (iv) at negotiated prices. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase all of
the Securities offered will be subject to certain conditions precedent, and
the underwriters will be obligated to purchase all of the Securities offered
if any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time
to time.
If a dealer is used in an offering of Securities, the Company will sell such
Securities to the dealer, as principal. The dealer then may resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale. The name of the dealer and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
If an agent is used in an offering of Securities, the agent will be named,
and the terms of the agency will be set forth, in the Prospectus Supplement
relating thereto. Unless otherwise indicated in such Prospectus Supplement, an
agent will act on a best efforts basis for the period of its appointment.
Dealers and agents named in a Prospectus Supplement may be deemed to be
underwriters (within the meaning of the Securities Act) of the Securities
described therein. Underwriters, dealers and agents, under underwriting
agreements and other agreements which may be entered into with the Company,
may be entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Offers to purchase Securities may be solicited, and sales thereof may be
made, by the Company directly to institutional investors or others who may be
deemed to be underwriters within the meaning of the Securities Act with
respect to any resales thereof. The terms of any such offer will be set forth
in the Prospectus Supplement relating thereto.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters, dealers or other agents of the Company to solicit offers by
certain institutional investors to purchase Securities from the Company
pursuant to contracts providing for payment and delivery at a future date.
Institutional investors with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all
cases such purchasers must be approved
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by the Company. The obligations of any purchaser under any such contract will
not be subject to any conditions except that (i) the purchase of the
Securities shall not at the time of delivery be prohibited under the laws of
any jurisdiction to which such purchaser is subject and (ii) if the Securities
also are being sold to underwriters, the Company shall have sold to such
underwriters the Securities not subject to delayed delivery. Underwriters and
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
The anticipated date of delivery of Securities will be set forth in the
Prospectus Supplement relating to each applicable offering.
There can be no assurance that a secondary market will be created for the
Securities, or if it is created, that it will continue.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with, serve as financial advisors to, and perform other
general financing and bank services for, the Company and its affiliates in the
ordinary course of business.
To facilitate an offering of a series of Securities, certain persons
participating in the offering may engage in transactions that stabilize,
maintain or otherwise affect the price of the Securities. This may include
over-allotments or short sales of the Securities, which involves the sale by
persons participating in the offering of more Securities than have been sold
to them by the Company. In such circumstances, such persons would cover such
over-allotments or short positions by purchasing in the open market or by
exercising the over-allotment option granted to such persons. In addition,
such persons may stabilize or maintain the price of the Securities by bidding
for or purchasing Securities in the open market or by imposing penalty bids,
whereby selling concessions allowed to dealers participating in any such
offering may be reclaimed if Securities sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions
may be to stabilize or maintain the market price of the Securities at a level
above that which might otherwise prevail in the open market. Such
transactions, if commencement, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the Securities offered hereby will
be passed upon for the Company by Mark J. Ohringer, Esq., Associate General
Counsel of the Company. Certain legal matters will be passed upon for any
agents or underwriters by Katten Muchin & Zavis, a partnership including
professional corporations, 525 West Monroe Street, Suite 1600, Chicago,
Illinois 60661-3693. Katten Muchin & Zavis from time to time acts as counsel
in certain matters for the Company and certain of its subsidiaries.
INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements and schedules incorporated in this Prospectus and
elsewhere in the Registration Statement by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 and the financial
statements for the five years ended December 31, 1996 from which the five-year
selected financial data included in this Prospectus have been derived, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto. These financial statements,
schedules and five-year selected financial data forming a part of this
Prospectus and Registration Statement have been included or incorporated by
reference, as the case may be, herein in reliance upon the authority of said
firm as experts in giving such reports. The interim financial statements for
the periods ended June 30, 1996 and June 30, 1997 have not been audited.
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