<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1997
REGISTRATION NO. 333-24153
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AHL FINANCING
(Exact Name of Registrants as Specified in their Charters)
<TABLE>
<S> <C>
FLORIDA 59-1219710
DELAWARE APPLIED FOR
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.)
Organization)
</TABLE>
1776 AMERICAN HERITAGE LIFE DRIVE, JACKSONVILLE, FLORIDA 32224, (904) 992-1776
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrants' Principal Executive Offices)
------------------------
W. MICHAEL HEEKIN, ESQ.
SENIOR VICE PRESIDENT AND CORPORATE SECRETARY
1776 AMERICAN HERITAGE LIFE DRIVE
JACKSONVILLE, FLORIDA 32224
(904) 992-1776
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service for Each Registrant)
Copies to:
<TABLE>
<C> <C>
JOHN R. BYERS, ESQ. JOHN W. OSBORN, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
50 NORTH LAURA STREET, SUITE 2800 919 THIRD AVENUE
JACKSONVILLE, FLORIDA 32202 NEW YORK, NEW YORK 10022
(904) 354-8000 (212) 735-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box: []
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box: []
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number or the earlier
effective registration statement of the same offering: []
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number or the earlier effective registration statement
for the same offering: []
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: []
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================================
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TO BE OFFERING PRICE OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1)(3) PRICE(1)(2)(3) FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FELINE PRIDES(4)...................................... 1,725,000 $50.00 $86,250,000 $26,136.50
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $1.00 par value, of AHLIC(5)............ $86,250,000 $26,136.50
- ------------------------------------------------------------------------------------------------------------------------------
Total........................................ $172,500,000 $52,273.00
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</TABLE>
(1) Such indeterminate number of Trust Preferred Securities of AHL Financing and
such indeterminate principal amount of Purchase Contracts, and Common Stock
of American Heritage Life Investment Corporation, a Florida corporation
("AHLIC"), as may from time to time be issued at indeterminate prices. %
Junior Subordinated Debentures will be issued and sold by AHLIC to AHL
Financing, which may later be distributed to the holders of Trust Preferred
Securities upon a dissolution of AHL Financing and the distribution of the
assets thereof.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(3) Exclusive of accrued interest and distributions, if any.
(4) Each FELINE PRIDES is a unit that consists initially of a Purchase Contract
and a Trust Preferred Security. Each Purchase Contract obligates AHLIC to
sell, and the registered owner thereof to purchase, on or before the
Purchase Contract Settlement Date, certain shares of Common Stock of AHLIC.
AHLIC has issued a Guarantee of the Trust Preferred Securities.
(5) Such indeterminate number of shares of Common Stock to be issued by AHLIC
upon settlement of the Purchase Contracts.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 3, 1997
PROSPECTUS
1,500,000 FELINE PRIDES(SM) [AHL LOGO]
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AHL FINANCING
The securities offered hereby are 1,500,000 FELINE PRIDES(SM) (the
"Securities") of American Heritage Life Investment Corporation, a Florida
corporation ("AHLIC" or the "Company"), and AHL Financing, a Delaware statutory
business trust (the "Trust"). Each FELINE PRIDES offered hereby initially will
consist of a unit (referred to as an Income PRIDES(SM)) with a Stated Amount of
$50 (the "Stated Amount") comprised of (a) a stock purchase contract (the
"Purchase Contract") under which (i) the holder will purchase from the Company
on , 2000 (the "Purchase Contract Settlement Date"), for an amount
in cash equal to the Stated Amount, a number of shares of common stock, $1.00
par value, of the Company (the "Common Stock") equal to the Settlement Rate or
Cash Settlement Rate described herein, as applicable, and (ii) the Company will
pay the holder unsecured, subordinated contract adjustment payments ("Contract
Adjustment Payments"), and (b) beneficial ownership of a % Trust Originated
Preferred Security (a "Trust Preferred Security"), having a stated liquidation
amount per Trust Preferred Security equal to the Stated Amount, representing a
preferred undivided beneficial interest in the assets of the Trust. The Company
will, directly or indirectly, own all of the common securities (the "Common
Securities") representing undivided beneficial interests in the assets of the
Trust. The Trust exists for the sole purpose of issuing the Trust Preferred
Securities and Common Securities and investing the proceeds thereof in an
equivalent amount of % Junior Subordinated Debentures of the Company, due
, 2002 (the "Junior Subordinated Debentures"). As long as the FELINE
PRIDES are in the form of Income PRIDES, the Trust Preferred Securities will be
pledged to the Collateral Agent (as defined herein), to secure the holder's
obligation to purchase Common Stock under the Purchase Contract.
(Continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING
AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE SECURITIES MAY BE DEFERRED AND
THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
------------------------
Prior to the offering made hereby there has been no public market for the
Securities. The Income PRIDES have been approved for listing on the New York
Stock Exchange ("NYSE") under the symbol "AHL prI", subject to official notice
of issuance. The Growth PRIDES (as defined herein) and the Trust Preferred
Securities will not be listed or traded on any securities exchange. On June 2,
1997, the last reported sale price of the Common Stock on the NYSE was $28.25
per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) COMMISSION(2) COMPANY(3)
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<S> <C> <C> <C>
Per Income PRIDES...................... $50.00 $ $
- ------------------------------------------------------------------------------------------------------------------
Total(4)............................... $75,000,000 $ $
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</TABLE>
(1) Plus accrued distributions on the Trust Preferred Securities and Contract
Adjustment Payments, if any, from , 1997.
(2) The Company and the Trust have agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting estimated expenses payable by the Company estimated at
$ .
(4) The Company and the Trust have granted the Underwriters a 30-day option to
purchase up to an additional 225,000 Income PRIDES to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public will
be $ , Underwriting Commission will be $ and Proceeds to the Company
will be $ . See "Underwriting."
------------------------
The Securities are offered by the several Underwriters, subject to prior
sale, when as and if issued to and accepted by them, and subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Securities offered hereby will be made in New York, New York on
or about , 1997.
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1997.
- ---------------
(SM) Service Mark of Merrill Lynch & Co. Inc.
<PAGE> 3
Payments of % of the Stated Amount per annum will be made or accrue on
each Income PRIDES quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing September 30, 1997, until the Purchase
Contract Settlement Date. These payments will consist of cumulative cash
distributions on the Trust Preferred Securities payable by the Trust at the rate
of % of the Stated Amount per annum, and Contract Adjustment Payments payable
by the Company at the rate of % of the Stated Amount per annum. The ability of
the Trust to make the quarterly distributions on the Trust Preferred Securities
is solely dependent upon the receipt of corresponding interest payments from the
Company on the Junior Subordinated Debentures. The Company has the right at any
time, and from time to time, limited to a period not extending beyond the
maturity date of the Junior Subordinated Debentures, to defer the interest
payments due on the Junior Subordinated Debentures and to defer Contract
Adjustment Payments until the Purchase Contract Settlement Date. As a
consequence of such deferral, quarterly distributions on the Income PRIDES would
be deferred, but would continue to accrue with interest compounded quarterly.
The payment of distributions out of moneys held by the Trust and payments
on liquidation of the Trust are guaranteed by the Company (the "Guarantee") to
the extent described herein and under "Description of the Guarantee." The
Guarantee covers payments of distributions and other payments on the Trust
Preferred Securities only if and to the extent the Trust has funds available
therefor, which will not be the case unless the Company has made a payment of
principal or interest on the Junior Subordinated Debentures held by the Trust as
its sole asset. The Guarantee, when taken together with the Company's
obligations under the Junior Subordinated Debentures, the Indenture (as defined
below) and the Company's obligations under the Declaration (as defined below),
provides a full and unconditional guarantee on a subordinated basis by the
Company of amounts due on the Trust Preferred Securities. The Guarantee is
subordinate and junior in right of payment to all other liabilities of the
Company and ranks pari passu with the most senior preferred stock, if any,
issued from time to time by the Company.
Each holder will have the right, at any time after issuance of the Income
PRIDES, to substitute for any Trust Preferred Securities held by the Collateral
Agent zero-coupon U.S. Treasury Securities (CUSIP No. 912820 AX5) which are
principal strips of the 8.75% U.S. Treasury Securities which mature on August 15
, 2000 (the "Treasury Securities") in a principal amount per Purchase Contract
equal to the Stated Amount per Trust Preferred Security. Holders may make such
substitution only in integral multiples of 20 Income PRIDES. Securities with
respect to which Treasury Securities have been substituted for Trust Preferred
Securities as collateral to secure a holder's obligation under the Purchase
Contracts, are referred to herein as Growth PRIDES(SM). Each Growth PRIDES will
consist of a unit with a face amount of $1,000 comprised of (a) 20 Purchase
Contracts under which for each Purchase Contract (i) the holder will purchase
from the Company on the Purchase Contract Settlement Date or earlier for an
amount of cash equal to the Stated Amount, a number of shares of Common Stock of
the Company equal to the Cash Settlement Rate described herein, and (ii) the
Company will pay the holder Contract Adjustment Payments, and (b) beneficial
ownership of a Treasury Security having a principal amount at maturity equal to
$1,000. Upon the substitution of Treasury Securities for Trust Preferred
Securities as collateral, such Trust Preferred Securities will be released to
the holder as described herein and thereafter will trade separately from the
resulting Growth PRIDES. Contract Adjustment Payments will be payable by the
Company on the Growth PRIDES on March 31, June 30, September 30 and December 31
of each year. In addition, interest will accrete on the underlying Treasury
Securities. Distributions on any Trust Preferred Securities still outstanding
after the Purchase Contract Settlement Date or after a substitution of
collateral resulting in the creation of Growth PRIDES will continue to be
payable by the Trust at the rate of % of the Stated Amount per annum, subject
to the deferral right described above. A holder of Growth PRIDES will have the
right to subsequently recreate Income PRIDES by delivering a Growth PRIDES to
the Purchase Contract Agent plus 20 Trust Preferred Securities per Growth PRIDES
to the Collateral Agent in exchange for 20 Income PRIDES and the release of the
underlying Treasury Securities to such holder.
On the Purchase Contract Settlement Date, unless a holder of the Income
PRIDES (i) has settled the underlying Purchase Contract either through the early
delivery of cash to the Purchase Contract Agent in the manner described herein
or otherwise or (ii) has notified the Purchase Contract Agent of its intention
to settle the related Purchase Contract with separate cash on the Purchase
Contract Settlement Date and has so settled the related Purchase Contract, such
holder will be deemed to have requested the Trust to put the related
2
<PAGE> 4
Junior Subordinated Debenture to the Company, and the principal amount of such
Junior Subordinated Debenture equal to the Stated Amount per Purchase Contract
will automatically be applied to satisfy in full such holder's obligation to
purchase Common Stock under the Purchase Contract. To the extent that holders of
Income PRIDES settle the related Contracts as described in (i) or (ii) above,
the related Trust Preferred Securities will not be redeemed on the Purchase
Contract Settlement Date as stated above and the holders of such Trust Preferred
Securities will have the right on the Contract Purchase Settlement Date and for
a period of ninety days thereafter to require the Trust to put to the Company,
and the Company to repurchase, the related Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures -- Put Option."
With respect to each Growth PRIDES outstanding on the Purchase Contract
Settlement Date, the principal amount of the Treasury Securities underlying each
Growth PRIDES, when paid at maturity, will be automatically applied to satisfy
in full the holder's obligation to purchase Common Stock under the 20 Purchase
Contracts per Growth PRIDES.
In the event that a holder of either an Income PRIDES or Growth PRIDES
effects the early settlement of a related Purchase Contract through the delivery
of cash or the holder of an Income PRIDES settles a Purchase Contract with cash
on the Purchase Contract Settlement Date, the underlying Trust Preferred
Securities or Treasury Securities, as the case may be, will be released to the
holder as described herein.
A holder of Income PRIDES whose Purchase Contract has been settled with
cash, or a holder of Growth PRIDES whose Purchase Contract has been settled
through application of the principal amount of the related Treasury Securities,
on the Purchase Contract Settlement Date, will receive 0.125% more shares of
Common Stock per Purchase Contract than will be received by a holder of Income
PRIDES whose Purchase Contracts are settled through the put of the related
Junior Subordinated Debentures to the Company, and the redemption of the related
Trust Preferred Securities, on the Purchase Contract Settlement Date. A holder
of FELINE PRIDES whose Purchase Contract has settled through Early Settlement
will receive 0.125% more shares of Common Stock per Purchase Contract than would
be received by a holder of Income PRIDES who receives the Settlement Rate on the
Purchase Contract Settlement Date if the Applicable Market Value was then equal
to or greater than the Threshold Appreciation Price.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES AND
THE SHARES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
SECURITIES AND THE SHARES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THE STATES IN WHICH THE COMPANY'S INSURANCE SUBSIDIARIES ARE DOMICILED HAVE
ENACTED LEGISLATION OR ADOPTED ADMINISTRATIVE REGULATIONS AFFECTING THE
ACQUISITION OF CONTROL OF INSURANCE COMPANIES AS WELL AS TRANSACTIONS BETWEEN
INSURANCE COMPANIES AND PERSONS CONTROLLING THEM. MOST STATES REQUIRE
ADMINISTRATIVE APPROVAL OF THE ACQUISITION OF CONTROL OF AN INSURANCE COMPANY
INCORPORATED IN THE STATE OR THE ACQUISITION OF CONTROL OF AN INSURANCE HOLDING
COMPANY WHOSE INSURANCE SUBSIDIARY IS INCORPORATED IN THE STATE. IN FLORIDA, THE
ACQUISITION OF 5% AND IN TEXAS, THE ACQUISITION OF 10% OF SUCH SHARES IS
GENERALLY DEEMED TO BE THE ACQUISITION OF "CONTROL" FOR THE PURPOSE OF THE
HOLDING COMPANY STATUTES AND REQUIRES NOT ONLY FILING OF DETAILED INFORMATION
CONCERNING THE ACQUIRING PARTIES AND THE PLAN OF ACQUISITION, BUT ALSO
ADMINISTRATIVE APPROVAL PRIOR TO THE ACQUISITION. HOWEVER, IN LIEU OF OBTAINING
SUCH APPROVAL, THE FLORIDA AND TEXAS DEPARTMENTS OF INSURANCE PROVIDE PROCEDURES
FOR OBTAINING GREATER PERCENTAGES OF SUCH SHARES BY FILING DISCLAIMERS, SEEKING
WAIVERS OR OTHER SIMILAR PROCEDURES.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR
THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
TRUST OR BY ANY AGENT,
3
<PAGE> 5
DEALER OR UNDERWRITER. THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY THE SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY
TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
NO EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR INDIVIDUAL RETIREMENT
ACCOUNT OR PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "ARC") (EACH, A "PLAN"), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE
"PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A "PLAN ASSET
ENTITY"), AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR
SHOULD HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR
HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF
LABOR PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1
OR 84-14. ANY PURCHASER OR HOLDER OF THE SECURITIES OR ANY INTEREST THEREIN WILL
BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT IT EITHER
(A) IS NOT A PLAN OR A PLAN ASSET ENTITY AND IS NOT PURCHASING SUCH SECURITIES
ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO SUCH PURCHASE AND HOLDING. SEE "ERISA CONSIDERATIONS."
------------------------
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 which are not historical
facts, and involve risks and uncertainties that could cause actual results to
differ materially from those expected, projected, estimated or budgeted. Such
risks and uncertainties include, but are not limited to, the following: (i)
heightened competition, including specifically the intensification of price
competition, the entry of new competitors and the formation of new products by
new and existing competitors, (ii) adverse state and federal legislation and
regulation, including limitations on premium levels, increases in minimum
capital and reserves, and other financial viability requirements, benefit
mandates, limitations on the ability to manage health care and utilization, and
tax treatment of insurance products, (iii) failure to obtain new customers or
retain existing customers, (iv) inability to carry out marketing and sales
plans, (v) loss of key executives, (vi) changes in interest rates causing a
reduction of investment income, (vii) general economic and business conditions
which are less favorable than expected, (viii) unanticipated changes in industry
trends, (ix) failure to maintain adequate reinsurance, (x) possible claims
relating to sales practices for insurance products and claim denials, (xi)
adverse changes in the ratings obtained by independent rating agencies, and
(xii) inaccuracies in assumptions regarding future morbidity, persistency,
mortality and interest rates used in calculating reserve amounts. In addition,
factors that could cause actual results of the Company to differ materially from
those contemplated by or projected, forecast, estimated or budgeted in forward
looking statements relating to the results of operations and business of the
Company following the acquisition of Columbia Universal Corporation and its
insurance subsidiary include the following possibilities: (i) the expected cost
savings to be realized are not made or unanticipated offsetting costs are
incurred, and (ii) costs or difficulties related to the integration of the
businesses of the Company and Columbia Universal Corporation are greater than
expected. Accordingly, there can be no assurance that the actual results will
conform to the forward-looking statements in this Prospectus.
------------------------
4
<PAGE> 6
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Reports, proxy statements and other information
concerning the Company can be inspected and copied at the SEC's Public Reference
Room, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, as well as
the following Regional Offices of the SEC: 7 World Trade Center, Suite 1300, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the SEC at Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, at prescribed rates. The SEC also
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of such site is http://www.sec.gov. Such reports, proxy statements
and other information may also be inspected at the offices of the NYSE, on which
the Company's Common Stock is traded, at 20 Broad Street, New York, New York
10005.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company and the Trust with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Securities.
This Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. Reference is made to such Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company, the Trust and the Securities. Any statements contained
herein concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC or incorporated by
reference herein are not necessarily complete, and in each instance reference is
made to the copy of such document so filed for a more complete description of
the matter involved. Each such statement is qualified in its entirety by such
reference.
No separate financial statements of the Trust have been included herein.
The Company does not consider that such financial statements would be material
to holders of the Securities because (i) all of the voting securities of the
Trust will be owned, directly or indirectly, by the Company, a reporting company
under the Exchange Act, (ii) the Trust has no independent operations but exists
for the sole purpose of issuing securities representing undivided beneficial
interests in the assets of such Trust and investing the proceeds thereof in %
Junior Subordinated Debentures issued by the Company, and (iii) the Company's
obligations described herein and in any accompanying prospectus supplement under
the Declaration of Trust, the Guarantee issued with respect to Trust Preferred
Securities issued by the Trust, the % Junior Subordinated Debentures
purchased by the Trust and the Indenture, taken together, constitute a full and
unconditional guarantee of payments due on the Trust's Securities. See
"Description of the % Junior Subordinated Debentures" and "Description of the
Guarantee."
The Trust is not currently subject to the information reporting
requirements of the 1934 Act. The Trust will become subject to such requirements
upon the effectiveness of the Registration Statement, although the Trust intends
to seek and expects to receive an exemption therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 1-7255) with the SEC
pursuant to the 1934 Act are incorporated by reference herein and made a part
hereof:
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Quarterly Report on Form 10-Q for the period ended March 31, 1997.
3. Current Report on Form 8-K dated January 2, 1997.
4. Current Report on Form 8-K dated March 3, 1997 as amended by
Current Report on Form 8-K/A dated March 3, 1997.
5
<PAGE> 7
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the 1934 Act subsequent to the date hereof and prior to the termination
of the offering of the Securities pursuant hereto shall be deemed to be
incorporated by reference in this Prospectus or in any Prospectus Supplement and
to be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference in this Prospectus or in any Prospectus Supplement shall be deemed to
be modified or superseded for purposes of this Prospectus or any Prospectus
Supplement to the extent that a statement contained in this Prospectus or in any
Prospectus Supplement or in any other subsequently filed document which also is
or is deemed to be incorporated by reference in this Prospectus or in any
Prospectus Supplement modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or any Prospectus Supplement.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the foregoing documents incorporated
herein by reference, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference into such documents). Such requests
should be directed to: Corporate Secretary, American Heritage Life Investment
Corporation, 1776 American Heritage Life Drive, Jacksonville, Florida 32224;
Telephone: (904) 992-1776.
6
<PAGE> 8
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus or incorporated herein by reference. Except as otherwise noted, all
information in this Prospectus assumes no exercise of the Underwriters'
over-allotment option. Except as otherwise indicated, all financial information
regarding the Company and its insurance subsidiaries has been prepared in
accordance with generally accepted accounting principles rather than statutory
accounting principles.
THE COMPANY
American Heritage Life Investment Corporation is a holding company whose
principal subsidiaries are American Heritage Life Insurance Company, a Florida
life insurance company ("AHL"), and Columbia Universal Life Insurance Company, a
Texas life insurance company ("Columbia Universal"). The Company is engaged in
the business of underwriting life and accident and health insurance on an
individual, group and credit basis. The Company is a leading marketer of life
and supplemental health insurance products through payroll allotment, a
specialized distribution method on which it has focused since its inception.
Payroll allotment is an efficient way to distribute most products to employees
on the job by conveniently deducting the premium from their paychecks. The
Company was organized on September 11, 1956 and is presently authorized to do
business as a life insurance company in all states, other than New York, and in
the District of Columbia, U.S. Virgin Islands and Puerto Rico.
The Company entered into an agreement in principle on December 10, 1996 to
acquire Columbia Universal Corporation and its principal subsidiary, Columbia
Universal Life Insurance Company (collectively, "Columbia Universal"), for a
purchase price of $44.0 million. The acquisition was closed on March 3, 1997. On
April 16, 1997 the Company announced an agreement in principle to acquire
Concord General Life Insurance Company ("Concord") for total consideration of
$7.5 million in cash, which is expected to close in the second quarter of 1997.
The Company has reported increased operating earnings for 21 consecutive
years and has increased dividends to shareholders for 28 consecutive years. The
following chart presents the Company's consolidated operating earnings for the
last ten years. Operating earnings are defined as net earnings excluding
realized investment gains and losses, net of income taxes, and non-recurring
gains related to the sale of home office property.
OPERATING EARNINGS HISTORY(1)
<TABLE>
<CAPTION>
YEAR ENDED % INCREASE
DECEMBER 31 OPERATING EARNINGS FROM PRIOR YEAR
----------- ------------------ ---------------
(IN THOUSANDS)
<S> <C> <C>
1987................................................... $ 9,637 6.5%
1988................................................... 10,649 10.5
1989................................................... 11,920 11.9
1990................................................... 13,409 12.5
1991................................................... 15,019 12.0
1992................................................... 16,739 11.5
1993................................................... 18,945 13.2
1994................................................... 22,334 17.9
1995................................................... 24,174 8.2
1996................................................... 26,759 10.7
</TABLE>
- ---------------
(1) Excluding investment income on the net proceeds of $33.5 million from a
secondary public stock offering in 1993, the percentage increase in
operating earnings was 11.9% and 11.4% for 1994 and 1993, respectively, and
the average annual percentage increase in earnings from operations for the
period 1987-1996 was 10.7%.
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<PAGE> 9
AHL is rated "A (Excellent)" by A. M. Best Company ("A. M. Best"), an
independent nationally recognized insurance publishing and rating service.
During the second quarter of 1997, Columbia Universal's A.M. Best rating was
upgraded from "B (Adequate)" to "A- (Excellent)". Standard & Poor's Insurance
Rating Services ("S&P") has given AHL an insurer claims-paying ability rating of
"AA". At March 31, 1997, the Company had $1.7 billion of total assets, $225.7
million of stockholders' equity and more than $22.1 billion of gross life
insurance volume in force. Also, approximately 96% of the $803.4 million of debt
securities held by the Company had investment grade ratings.
The Company operates in three marketing areas -- ordinary, group and
credit -- which accounted for 82%, 11% and 7%, respectively, of the Company's
pre-tax operating earnings for the three months ended March 31, 1997.
ORDINARY OPERATIONS provide interest-sensitive products (universal life,
single and flexible premium deferred annuities and excess-interest whole life),
single premium immediate annuities, level and decreasing term products and
supplemental accident and health insurance products to individuals. The largest
portion (76.7% for the three months ended March 31, 1997) of new annualized
sales was produced on a payroll allotment basis with the remainder produced by a
variety of direct billing methods through individual agents. The Company's
strategy in its ordinary operations is to offer a broader product mix than its
competitors in the payroll allotment area and to solicit all of the employee
base by targeting direct sales of insurance products to higher income employees
in addition to payroll allotment sales. Recent life insurance studies published
by LIMRA International, a prominent industry market research organization,
indicate that the Company is one of only four life insurance companies that sell
in excess of $40 million of voluntary payroll life and payroll health insurance
premiums per year. To describe the Company's differentiation in the marketplace,
the Company has coined the following descriptive phrase: "AHL -- The Workplace
Marketer(R) -- the Company that serves the life and supplemental health
insurance needs of the American worker -- from the lunchroom to the board room."
GROUP OPERATIONS distribute insurance products and related services to
large employers for their employee benefit plans. The Company provides life,
disability, medical and dental insurance programs, which constitute the
foundation of any employer's package of group benefits. The Company furnishes
all components necessary to effectively manage program costs for the client
companies including a provider network, managed care program and benefits
determination. Group products include group term life insurance, accidental
death and dismemberment, short-term disability, long-term disability, dental and
major medical coverage. In offering these product lines, the Company provides a
wide range of funding vehicles from fully insured to employer funded products,
which the Company tailors to the particular needs of its employer clients. The
Company's strategy in the group market is to focus on southeastern employers
with 500 to 5,000 employees. The Company formed a health maintenance
organization subsidiary in 1996 which was licensed in the second quarter of
1997.
CREDIT OPERATIONS consist of life and accident and health insurance
coverages offered to consumer debtors, chiefly through banks, automobile
dealers, finance companies and retailers. The Company currently offers credit
insurance products in 44 states and ranks among the top 15 credit life insurance
providers in the country. Typically, this insurance will pay outstanding loan
obligations in the event of an insured loss. This coverage is issued on either
the single-premium or outstanding loan balance basis. Credit life is sold on a
reducing or level-term basis. Credit accident and health insurance will normally
only be written in conjunction with credit life insurance. To complement credit
life and accident and health sales, First Colonial Insurance Company, a
subsidiary of the Company ("FCIC") and a Florida insurance company, offers
credit property insurance coverage.
BUSINESS STRATEGIES
The Company's objective is to continue its record of increased operating
earnings by following the strategies set forth below:
COMMITMENT TO CORE BUSINESSES. The Company's primary focus will
continue to be on its core businesses. Additionally, the Company will
continue to evaluate opportunities to grow from internal
8
<PAGE> 10
expansion as well as by acquisitions of blocks of business and/or companies
that are compatible with the Company's core businesses.
CONCENTRATION ON MARKET NICHE. The Company believes it has a
competitive advantage in the payroll allotment marketplace based upon its
commitment to provide quality service, its offering of an expanding
portfolio of products, and its development of processes and technology that
are unique to servicing and administering that marketplace.
SYNERGISTIC MARKETING AND STRATEGIC ALLIANCES. The Company's three
marketing areas -- ordinary, group and credit -- provide opportunities for
cross-selling the Company's products. The Company's group operations in
particular provide the Company's ordinary operations access to sell payroll
allotment products. The Company also has and is continuing to develop
strategic alliances with other insurers to cross-sell such entities'
products and to allow each entity access to the other's distribution
channels. The Company presently has strategic alliance partnerships in
various stages of development with several major life insurance companies
which are expected to provide access to significant distribution systems
during 1997.
FOCUS ON EXPENSE CONTROL. The Company believes that its record of
profitable growth has resulted from a combination of revenue growth and
focus on expense control. The Company's ratio of general insurance expenses
to total revenue (defined for this purpose as including premiums, premium
equivalents and investment income and excluding realized investment gains
and losses) has been recognized as being low as compared to industry norms.
General insurance expenses as a percentage of total revenues for the years
ended December 31, 1987 through 1996 and for the three months ended March
31, 1997 ranged from a high of 6.2% to a low of 4.9%.
ACQUISITIONS
The Company entered into an agreement in principle on December 10, 1996 to
acquire Columbia Universal for a purchase price of $44.0 million. The
acquisition was closed on March 3, 1997. Columbia Universal markets individual
life, annuity and supplemental health products to selected markets. Columbia
Universal had premiums and premium equivalents of $36.4 million for the year
ended December 31, 1996, and total assets of $368.5 million at December 31,
1996. The acquisition provides new distribution channels for the Company's
ordinary payroll products and sales opportunities for both the Company and
Columbia Universal and is projected to have a positive impact on the Company's
future operating earnings.
On April 16, 1997, the Company announced an agreement in principle to
acquire Concord, a subsidiary of Concord General Mutual Insurance Company of
Concord, New Hampshire, for total consideration of $7.5 million in cash. The
transaction, which is subject to regulatory approval and the execution of a
definitive agreement, is expected to be completed in the second quarter of 1997.
Concord primarily markets supplemental life and health insurance products
through worksite marketing and will increase the Company's presence in the
Northeast.
Effective December 31, 1996, the Company acquired a block of payroll
deduction interest-sensitive whole life business from Kentucky Home Mutual Life
Insurance Company. Additionally, during the past six years, the Company has
acquired three other blocks of business. Excluding the Columbia Universal and
Concord acquisitions, these four acquisitions aggregated $23.4 million in
additional annualized premiums and $155.4 million in total assets and have
provided new distribution channels for the Company's ordinary payroll products.
9
<PAGE> 11
SUMMARY FINANCIAL INFORMATION
The following summary consolidated financial data have been derived from
the consolidated financial statements of the Company and should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT LIFE INSURANCE VOLUME IN FORCE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Insurance revenues................. $ 65,048 $ 61,187 $ 258,519 $ 247,251 $ 230,589 $ 227,376 $ 212,062
Net investment income.............. 25,223 19,070 77,035 70,601 66,706 63,875 59,721
Realized investment gains
(losses)......................... 103 105 420 6,003 2,011 1,184 237
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total income................. $ 90,374 $ 80,362 $ 335,974 $ 323,855 $ 299,306 $ 292,435 $ 272,020
========== ========== ========== ========== ========== ========== ==========
Operating earnings................. $ 7,678 $ 6,661 $ 26,759 $ 24,174 $ 22,334 $ 18,945 $ 16,739
========== ========== ========== ========== ========== ========== ==========
Net earnings....................... $ 7,745 $ 6,729 $ 27,032 $ 28,075 $ 23,641 $ 19,715 $ 16,896
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA:
Operating earnings................. $ .56 $ .48 $ 1.94 $ 1.74 $ 1.61 $ 1.53 $ 1.41
Net earnings....................... .56 .49 1.96 2.02 1.71 1.59 1.42
Cash dividends paid................ .19 .18 .74 .70 .64 .59 .56
SEGMENT DATA:
Insurance revenues and premium
equivalents(1):
Ordinary........................... $ 53,147 $ 40,319 $ 181,469 $ 167,328 $ 161,612 $ 149,106 $ 138,241
Group.............................. 50,201 48,502 214,933 206,354 167,520 158,188 163,701
Credit............................. 40,517 33,177 171,209 138,134 116,318 103,113 93,027
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total........................ $ 143,865 $ 121,998 $ 567,611 $ 511,816 $ 445,450 $ 410,407 $ 394,969
========== ========== ========== ========== ========== ========== ==========
Pre-tax operating earnings:
Ordinary........................... $ 10,185 $ 8,359 $ 35,070 $ 28,935 $ 26,049 $ 21,798 $ 17,322
Group.............................. 1,419 1,696 4,513 7,470 7,323 6,042 5,269
Credit............................. 881 631 3,750 2,739 1,754 1,720 2,969
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total........................ $ 12,485 $ 10,686 $ 43,333 $ 39,144 $ 35,126 $ 29,560 $ 25,560
========== ========== ========== ========== ========== ========== ==========
OTHER DATA:
Consolidated return on
stockholders' equity(2).......... 13.1% 12.5% 12.8% 12.4% 12.6% 13.8% 14.2%
Life insurance volume in force (in
millions)........................ $ 22,134 $ 18,725 $ 20,523 $ 18,384 $ 16,816 $ 15,601 $ 15,468
BALANCE SHEET DATA:
Total investments.................. $1,325,727 $ 975,002 $1,011,449 $ 979,603 $ 845,729 $ 854,363 $ 766,871
Total assets....................... 1,738,090 1,329,077 1,370,117 1,317,896 1,179,257 1,138,578 1,016,984
Notes payable...................... 116,019 95,974 85,459 94,994 84,201 72,481 62,102
Stockholders' equity............... 225,726 216,881 228,943 219,329 173,360 183,930 147,965
</TABLE>
- ---------------
(1) For an explanation of insurance revenues and premium equivalents refer to
Footnote (1) on page 39.
(2) Based on operating earnings for the prior twelve month period divided by
average stockholders' equity for the prior twelve month period which
excludes any unrealized investment gains (losses).
10
<PAGE> 12
THE TRUST
AHL Financing is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of March 20, 1997, executed by
the Company, as sponsor (the "Sponsor"), and the trustees of the Trust (the "AHL
Trustees") and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on March 20, 1997. Such declaration will be
amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Declaration will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Trust exists for the exclusive purposes of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the Trust Securities
in the Junior Subordinated Debentures and (iii) engaging in only those other
activities necessary or incidental thereto. See "The Trust."
THE OFFERING
Securities Offered......... 1,500,000 Income PRIDES.
Issuers.................... American Heritage Life Investment Corporation
("AHLIC" or the "Company") and AHL Financing (the
"Trust").
Stated Amount.............. $50 per Income PRIDES.
Components of FELINE
PRIDES................... Each FELINE PRIDES offered hereby initially will
consist of a unit (referred to as an Income PRIDES)
comprised of (a) a stock purchase contract (the
"Purchase Contract") under which (i) the holder
will purchase from the Company on ,
2000 (the "Purchase Contract Settlement Date"), for
an amount equal to the Stated Amount, a number of
new shares of common stock, par value $1.00 per
share (the "Common Stock"), of the Company equal to
the Settlement Rate or the Cash Settlement Rate
(each as defined herein), as applicable, and (ii)
the Company will pay Contract Adjustment Payments
to the holder, and (b) beneficial ownership of a
% Trust Preferred Security, having a stated
liquidation amount equal to the Stated Amount,
representing a preferred, undivided beneficial
interest in the assets of the Trust.
The Company will, directly or indirectly, own all
of the Common Securities. The Trust exists for the
sole purpose of issuing the Trust Preferred
Securities and the Common Securities and investing
the proceeds thereof in an equivalent amount of
% Junior Subordinated Debentures of the
Company, due , 2002 (the "Junior
Subordinated Debentures"). Upon the occurrence of a
Tax Event or an Investment Company Event, as
described below, the Junior Subordinated Debentures
would be substituted for the Trust Preferred
Securities. References herein to Trust Preferred
Securities, unless the context otherwise requires,
mean the (i) Trust Preferred Securities or (ii) the
Junior Subordinated Debentures which have been
delivered to holders in the case of a Tax Event or
an Investment Company Event. The distribution rate
and the payment dates for the Trust Preferred
Securities will correspond to the interest rate and
the payment dates for the Junior Subordinated
Debentures, which will be the sole assets of the
Trust. As long as the FELINE PRIDES are in the form
of Income PRIDES, the Trust Preferred Securities
will be pledged with The Chase Manhattan Bank as
collateral agent for the Company (together with any
successor thereto in such capacity, the "Collateral
Agent"), to secure the holders' obligations to
purchase Common Stock under the Purchase Contracts.
See "Risk Factors."
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<PAGE> 13
Purchase Contract
Agreement.................. The FELINE PRIDES will be issued under a Purchase
Contract Agreement, dated as of , 1997
(the "Purchase Contract Agreement"), between the
Company and The First National Bank of Chicago, as
agent for the holders of the FELINE PRIDES
(together with any successor thereto in such
capacity, the "Purchase Contract Agent").
Substitution of Pledged
Securities............... Each holder will have the right, at any time after
issuance of the Income PRIDES, to substitute for
any Trust Preferred Securities held by the
Collateral Agent zero-coupon U.S. Treasury
Securities (CUSIP No. 912820 AX5) which are
principal strips of the 8.75% U.S. Treasury
Securities which mature on August 15, 2000 (the
"Treasury Securities") in a principal amount per
Purchase Contract equal to the Stated Amount per
Trust Preferred Security. Holders may make such
substitution only in integral multiples of 20
Income PRIDES. Securities with respect to which
Treasury Securities have been substituted for Trust
Preferred Securities as collateral to secure a
holder's obligation under the Purchase Contracts
will be referred to as Growth PRIDES(SM). Each
Growth PRIDES will consist of a unit with a face
amount of $1000 comprised of (a) 20 Purchase
Contracts under which for each Purchase Contract
(i) the holder will purchase from the Company on
the Purchase Contract Settlement Date or earlier
for an amount of cash equal to the Stated Amount, a
number of shares of Common Stock of the Company
equal to the Cash Settlement Rate described herein,
and (ii) the Company will pay the holder Contract
Adjustment Payments, and (b) beneficial ownership
of a Treasury Security having a principal amount at
maturity equal to $1,000. Upon the substitution of
Treasury Securities for Trust Preferred Securities
as collateral, such Trust Preferred Securities will
be released to the holder as described herein and
thereafter will trade separately from the resulting
Growth PRIDES. See "Description of the FELINE
PRIDES -- Substitution of Pledged Securities."
Holders who elect to substitute Pledged Securities
(as defined in "Description of the Purchase
Contracts -- Pledged Securities and Pledge
Agreement"), thereby creating Growth PRIDES or
recreating Income PRIDES (as discussed below), will
be responsible for any fees or expenses payable in
connection therewith. See "Certain Provisions of
the Purchase Contract Agreement and the Pledge
Agreement -- Miscellaneous."
Recreating Income PRIDES... A holder of Growth PRIDES will have the right to
subsequently recreate an Income PRIDES by
delivering a Growth PRIDES to the Purchase Contract
Agent plus 20 Trust Preferred Securities to the
Collateral Agent in exchange for 20 Income PRIDES
and the release of the underlying Treasury Security
to such holder. See "Description of the FELINE
PRIDES -- Recreating Income PRIDES."
Current Payments........... Holders of Income PRIDES are entitled to receive
cash distributions at a rate of % of the
Stated Amount per annum payable quarterly in
arrears. The quarterly payments will consist of
cumulative cash distributions on the Trust
Preferred Securities payable by the Trust at the
rate of % of the Stated Amount per annum, and
Contract Adjustment Payments, payable by the
Company, until the Purchase Contract Settlement
Date, at the rate of % of the Stated Amount
per annum. The ability of the Trust to make the
quarterly distributions on the Trust
12
<PAGE> 14
Preferred Securities is solely dependent upon the
receipt of corresponding interest payments from the
Company on the Junior Subordinated Debentures. The
Company's obligations with respect to the Contract
Adjustment Payments are subordinate and junior in
right of payment to all liabilities of the Company
(other than the Company's guarantee of junior
subordinated debentures with which they rank pari
passu). See "Risk Factors -- Ranking of Contract
Adjustment Payments and Subordinate Obligations
Under the Guarantee and Junior Subordinated
Debentures."
Subject to the Company's rights of deferral
described herein, in the event holders of Income
PRIDES elect to substitute Treasury Securities for
the Trust Preferred Securities, holders of Growth
PRIDES would receive the quarterly distributions of
Contract Adjustment Payments and, to the extent
that they continue to hold any Trust Preferred
Securities, the quarterly distributions on the
Trust Preferred Securities. In addition, interest
would continue to accrete on the Treasury
Securities. See "Risk Factors -- Right to Defer
Current Payments."
Option to Extend
Distribution Payment
Periods.................. The Company has the right at any time, and from
time to time, limited to a period not extending
beyond the maturity date of the Junior Subordinated
Debentures, to defer the interest payments due on
the Junior Subordinated Debentures. As a
consequence of such deferral, quarterly
distributions to holders of Income PRIDES (or any
Trust Preferred Securities outstanding after the
Purchase Contract Settlement Date or after a
substitution of collateral resulting in the
creation of Growth PRIDES) would be deferred (but
despite such deferral, would continue to accumulate
quarterly and would accrue interest thereon
compounded quarterly at the same rate as interest
on the Junior Subordinated Debentures). The Company
also has the right to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until
no later than the Purchase Contract Settlement
Date; however, deferred Contract Adjustment
Payments will bear additional Contract Adjustment
Payments at the rate of % per annum (such
deferred installments of Contract Adjustment
Payments together with the additional Contract
Adjustment Payments shall be referred to as the
"Deferred Contract Adjustment Payments"). See
"Description of the Purchase Contracts -- Contract
Adjustment Payments." If interest payments on the
Junior Subordinated Debentures or the Contract
Adjustment Payments are deferred, the Company has
agreed, among other things, not to declare or pay
any dividend on or repurchase its capital stock
during the period of such deferral.
In the event that the Company elects to defer the
payment of Contract Adjustment Payments on the
Purchase Contracts until the Purchase Contract
Settlement Date, each holder of Income PRIDES or
Growth PRIDES will receive on the Purchase Contract
Settlement Date, in lieu of a cash payment, a
number of shares of Common Stock (in addition to a
number of shares of Common Stock equal to the
Settlement Rate or the Cash Settlement Rate) equal
to (x) the aggregate amount of Deferred Contract
Adjustment Payments payable to a holder of either
Income PRIDES or Growth PRIDES divided by (y) the
Applicable Market Value. See "Description of the
Purchase Contracts -- Option to Defer Contract
Adjustment Payments."
13
<PAGE> 15
Payment Dates.............. Subject to the distribution deferral provisions
described herein, the current payments described
above will be payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each
year, commencing September 30, 1997, through and
including (i) in the case of the Contract
Adjustment Payments, the Purchase Contract
Settlement Date or the most recent such quarterly
date on or prior to the early settlement of the
Purchase Contracts and (ii) in the case of Trust
Preferred Securities, through and including the
most recent such quarterly date on or prior to the
date a Junior Subordinated Debenture represented by
a Trust Preferred Security is put to the Company,
as described under "Description of the Junior
Subordinated Debenture -- Put Option", or the date
the stated amount of a Trust Preferred Security,
together with all accrued and unpaid distributions
thereon, is paid in full (each, a "Payment Date").
Purchase Contract
Settlement Date.......... On the Purchase Contract Settlement Date, unless a
holder of the Income PRIDES (i) has settled the
underlying Purchase Contract either through the
early delivery of cash to the Purchase Contract
Agent in the manner described herein or otherwise,
or (ii) has notified the Purchase Contract Agent of
its intention to settle the related Purchase
Contract with separate cash on the Purchase
Contract Settlement Date and has so settled the
related Purchase Contract, or an event described
under "Description of the Purchase
Contracts -- Termination" occurs, such holder will
be deemed to have requested the Trust to put the
related Junior Subordinated Debenture to the
Company, and the principal amount of such Junior
Subordinated Debenture equal to the Stated Amount
per Purchase Contract will automatically be applied
to satisfy in full such holder's obligation to
purchase Common Stock under the Purchase Contract.
See "Description of the Junior Subordinated
Debentures -- Put Option."
With respect to each Growth PRIDES outstanding on
the Purchase Contract Settlement Date, the
principal amount of the Treasury Securities
underlying each Growth PRIDES, when paid at
maturity, will be automatically applied to satisfy
in full the holder's obligation to purchase Common
Stock under the 20 Purchase Contracts per Growth
PRIDES.
In the event that a holder of either an Income
PRIDES or Growth PRIDES effects the early
settlement of a related Purchase Contract through
the delivery of cash or settles a Purchase Contract
with cash on the Purchase Contract Settlement Date,
the underlying Trust Preferred Securities or
Treasury Securities, as the case may be, will be
released to the holder as described herein.
Settlement Rate and Cash
Settlement Rate.......... The number of new shares of Common Stock issuable
upon settlement of each Purchase Contract through
the put of the related Junior Subordinated
Debentures to the Company, and the redemption of
the related Trust Preferred Securities, on the
Purchase Contract Settlement Date (the "Settlement
Rate") will be calculated as follows (subject to
adjustment under certain circumstances): (a) if the
Applicable Market Value (as defined below) is equal
to or greater than $ (the "Threshold
Appreciation Price"), the Settlement Rate will be
, (b) if the Applicable Market Value is
less than the Threshold Appreciation Price, but
greater than $ the Settlement Rate will
equal the Stated Amount divided by the Applicable
Market Value, and (c) if
14
<PAGE> 16
the Applicable Market Value is less than or equal
to $ , the Settlement Rate will be
. "Applicable Market Value" means the
average of the Closing Price (as defined) per share
of Common Stock on each of the thirty consecutive
Trading Days (as defined) ending on the second
Trading Day immediately preceding the Purchase
Contract Settlement Date.
The number of new shares of Common Stock issuable
upon settlement of each Purchase Contract through
Early Settlement of FELINE PRIDES, cash settlement
of the Income Prides on the Purchase Contract
Settlement Date and settlement of Growth PRIDES
through application of the related Treasury
Securities on the Purchase Contract Settlement Date
(the "Cash Settlement Rate") will be calculated as
(a) shares, in the case of Early Settlement
(which is equivalent to the number of shares of
Common Stock that would be received upon Cash
Settlement of Income PRIDES on the Purchase
Contract Settlement Date where the Applicable
Market Value is equal to or greater than the
Threshold Appreciation Price), or (b) 1.00125 times
the Settlement Rate, in those other cases.
A holder of Income PRIDES whose Purchase Contract
has been settled with cash, or a holder of Growth
PRIDES whose Purchase Contract has been settled
through application of the principal amount of the
related Treasury Securities, on the Purchase
Contract Settlement Date, will receive 0.125% more
shares of Common Stock per Purchase Contract than
will be received by a holder of Income PRIDES whose
Purchase Contracts are settled through the put of
the related Junior Subordinated Debentures to the
Company, and the redemption of the related Trust
Preferred Securities, on the Purchase Contract
Settlement Date. A holder of FELINE PRIDES whose
Purchase Contract has settled through Early
Settlement will receive 0.125% more shares of
Common Stock per Purchase Contract than would be
received by a holder of Income PRIDES who receives
the Settlement Rate on the Purchase Contract
Settlement Date if the Applicable Market Value was
then equal to or greater than the Threshold
Appreciation Price.
Early Settlement........... A holder of Income PRIDES or Growth PRIDES may
settle (an "Early Settlement") the underlying
Purchase Contracts prior to the Purchase Contract
Settlement Date in the manner described herein, but
only in integral multiples of 20 Income PRIDES or
one Growth PRIDES. Upon such Early Settlement, (a)
the holder will pay to the Company through the
Purchase Contract Agent in immediately available
funds an amount equal to the Stated Amount per
Purchase Contract and deliver the Income PRIDES or
Growth PRIDES, as the case may be, to the Purchase
Contract Agent, (b) the Trust Preferred Securities
underlying such Income PRIDES or, if substituted,
the Treasury Securities underlying such Growth
PRIDES will, within three Business Days of the date
of Early Settlement, be transferred to the holder
free and clear of the Company's security interest
therein, and (c) the Company will, within three
Business Days of the date of Early Settlement,
deliver newly issued shares of Common Stock to the
holder under the Purchase Contract Agreement. Upon
Early Settlement, (i) the holder's rights to
receive Deferred Contract Adjustment Payments, if
any, on the Purchase Contracts being settled will
be forfeited, and (ii) the holder's right to
receive additional Contract Adjustment Payments
will terminate and, except as contemplated by
clause (c) above, no adjustment will be made
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to or for the holder on account of current or
deferred amounts accrued in respect thereof.
Termination................ The Purchase Contracts (including the right to
receive accrued or Deferred Contract Adjustment
Payments and the obligation to purchase Common
Stock) will automatically terminate upon the
occurrence of certain events of bankruptcy,
insolvency or reorganization with respect to the
Company. Upon such termination, the Collateral
Agent will release the Trust Preferred Securities,
or if substituted, the Treasury Securities, held by
it to the Purchase Contract Agent for distribution
to the holders, although there may be a limited
delay before such release and distribution.
Voting Rights.............. Holders of Trust Preferred Securities will not be
entitled to vote to appoint, remove or replace, or
to increase or decrease the number of Regular
Trustees and will generally have no voting rights
except in the limited circumstances described under
"Description of Trust Preferred
Securities -- Voting Rights." Holders of Purchase
Contracts forming part of the Income PRIDES or
Growth PRIDES will have no voting rights.
Listing of the Income
PRIDES................... The Income PRIDES have been approved for listing on
the New York Stock Exchange (the "NYSE" ) under the
symbol "AHL prI", subject to official notice of
issuance. The Growth PRIDES and the Trust Preferred
Securities will not be listed or traded on any
securities exchange. See "Underwriting."
NYSE Symbol of Common
Stock.................... "AHL"
TRUST PREFERRED SECURITIES
The Trust.................. AHL Financing, a Delaware business trust (the
"Trust"). The sole assets of the Trust will consist
of the Junior Subordinated Debentures of the
Company. The Company will directly or indirectly
own all of the Common Securities (the "Common
Securities" and, together with the Trust Preferred
Securities, the "Trust Securities") representing
undivided beneficial interests in the assets of the
Trust.
Trust Preferred
Securities................. 1,500,000 of % Trust Preferred Securities
(liquidation amount $50 per Trust Preferred
Security), representing preferred, undivided
beneficial interests in the assets of the Trust.
Distributions.............. Distributions on the Trust Preferred Securities,
which constitute a portion of the distributions on
the Income PRIDES, will be cumulative, will accrue
from the first date of issuance of the Trust
Preferred Securities and will be payable at the
annual rate of % of the liquidation amount of
$50 per Trust Preferred Security when, as and if
funds are available for payment. Subject to the
distribution deferral provisions, distributions
will be payable quarterly in arrears on each March
31, June 30, September 30 and December 31,
commencing September 30, 1997.
Distribution Deferral
Provisions................. The ability of the Trust to pay distributions on
the Trust Preferred Securities is solely dependent
on the receipt of interest payments from the
Company on the Junior Subordinated Debentures. The
Company has the right at any time, and from time to
time, to defer the interest
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<PAGE> 18
payments due on the Junior Subordinated Debentures
for successive extension periods (the "Extension
Periods"), limited, in the aggregate, to a period
not extending beyond the maturity date of the
Junior Subordinated Debentures. Quarterly
distributions on the Trust Preferred Securities
would be deferred by the Trust (but would continue
to accumulate quarterly and would accrue interest,
compounded quarterly, at the same rates as interest
on the Junior Subordinated Debentures) until the
end of any such Extension Period. If a deferral of
an interest payment occurs, the holders of the
Trust Preferred Securities will accrue interest
income for United States federal income tax
purposes in advance of the receipt of any
corresponding cash distribution with respect to
such deferred interest payments. See "Risk
Factors -- Right to Defer Current Payments,"
"Description of the Trust Preferred
Securities -- Distributions" and "Certain Federal
Income Tax Consequences -- Distributions on Trust
Preferred Securities."
Rights Upon Deferral of
Distribution............. During any period in which interest payments on the
Junior Subordinated Debentures are deferred,
interest will accrue on the Junior Subordinated
Debentures (compounded quarterly) and quarterly
distributions on the Trust Preferred Securities
will continue to accumulate with interest thereon
at the distribution rate, compounded quarterly.
Liquidation Preference..... In the event of any liquidation of the Trust,
holders will be entitled to receive Junior
Subordinated Debentures in an aggregate stated
principal amount equal to the aggregate stated
liquidation amount of the Trust Preferred
Securities.
Put Option................. On the Purchase Contract Settlement Date, each
holder of Income PRIDES that has neither previously
exercised its option of Early Settlement nor
settled its Purchase Contract with cash will be
deemed to have requested the Trust to put the
aggregate principal amount of its Junior
Subordinated Debentures to the Company in an amount
per Junior Subordinated Debenture equal to $50,
plus accumulated and unpaid distributions, if any
(a "Put Option"). Upon the repurchase of the Junior
Subordinated Debentures by the Company pursuant to
such Put Option, (i) the proceeds from such
repurchase shall simultaneously be applied to
redeem Trust Preferred Securities of such holder
having an aggregate Stated Amount equal to the
aggregate principal amount of the Junior
Subordinated Debentures so repurchased and will be
applied to satisfy in full such holder's obligation
to purchase Common Stock under the Purchase
Contract as described herein and (ii) any
accumulated and unpaid distributions with respect
to the Junior Subordinated Debentures so
repurchased will be paid to such holder in cash.
To the extent that holders of Income PRIDES
exercise their right of Early Settlement or settle
their Purchase Contracts with cash on the Purchase
Contract Settlement Date, the related Trust
Preferred Securities will not be redeemed on the
Purchase Contract Settlement Date as stated above.
All holders of Trust Preferred Securities that are
not redeemed on the Purchase Contract Settlement
Date will have the option on the Purchase Contract
Settlement Date and for a period of ninety days
thereafter to require the Trust to put to the
Company, and the Company to repurchase, the related
Junior Subordinated Debentures for an amount equal
to $50, plus accumulated and unpaid distributions,
if
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<PAGE> 19
any. Upon such repurchase by the Company, the Trust
shall simultaneously use the proceeds from such
repurchase to redeem in cash the Trust Preferred
Securities of such holders having an aggregate
stated amount equal to $50 per Trust Preferred
Security and to pay in cash any accumulated and
unpaid distributions to the holders thereof.
Tax Event or Investment
Company Event
Distribution............. In certain circumstances involving a Tax Event
(which event will generally be triggered upon the
occurrence of certain adverse tax consequences or
the denial of an interest deduction to the Company
on the Junior Subordinated Debentures held by the
Trust) or an Investment Company Event (which event
will generally be triggered if the Trust is
considered an "investment company" under the
Investment Company Act of 1940, as amended), the
Trust would be dissolved, with the result that the
Junior Subordinated Debentures with an aggregate
principal amount equal to the aggregate stated
liquidation amount of the Trust Preferred
Securities, would be distributed to the holders of
the Trust Preferred Securities on a pro rata basis.
In such event, an Income PRIDES would thereafter
consist of a Junior Subordinated Debenture with a
principal amount equal to the Stated Amount and the
related Purchase Contract and a holder could, on
the Purchase Contract Settlement Date, cause the
Junior Subordinated Debenture to be repaid and the
proceeds thereof applied to satisfy in full such
holder's obligation to purchase Common Stock under
the Purchase Contract as described herein.
Redemption................. The Company will not have the ability to redeem the
Junior Subordinated Debentures prior to the stated
maturity date.
Guarantee.................. The Company will irrevocably and unconditionally
guarantee (the "Guarantee"), on a subordinated
basis and to the extent described herein, the
payment in full of (i) distributions on the Trust
Preferred Securities to the extent the Trust has
funds available therefor, and (ii) generally, the
liquidation amount of the Trust Preferred
Securities to the extent the Trust has assets
available for distribution to holders of Trust
Preferred Securities in the event of a dissolution,
winding up or termination of the Trust. The
Guarantee will be unsecured and will be subordinate
and junior in right of payment to all other
liabilities of the Company and will rank pari passu
in right of payment with the most senior preferred
stock issued, from time to time, if any, by the
Company and with any guarantee entered into by the
Company in respect of any preferred or preference
stock of any affiliate of the Company. See "Risk
Factors -- Ranking of Contact Adjustment Payments
and Subordinate Obligations Under the Guarantee and
Junior Subordinated Debentures."
Junior Subordinated
Debentures............... The Junior Subordinated Debentures will mature on
, 2002, and will bear interest at the
rate of % per annum, payable quarterly in
arrears on each March 31, June 30, September 30 and
December 31 commencing September 30, 1997. Interest
payments may be deferred from time to time by the
Company for successive Extension Periods not
extending, in the aggregate, beyond the stated
maturity date of the Junior Subordinated
Debentures. During any Extension Period, interest
would continue to accrue and compound quarterly.
Upon the termination of any Extension Period and
the payment of all amounts then due, the
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<PAGE> 20
Company may commence a new Extension Period,
provided such extended Extension Period does not
extend beyond the stated maturity date of the
Junior Subordinated Debentures. No interest shall
be due during an Extension Period until the end of
such period. During an Extension Period, the
Company will be prohibited from paying dividends on
or purchasing any of its capital stock and making
certain other restricted payments until quarterly
interest payments are resumed and all amounts due
on the Junior Subordinated Debentures are made
current. The Junior Subordinated Debentures will be
subordinate in right of payment of principal and
interest to all Senior Indebtedness (as defined
herein) of the Company and will rank pari passu in
right of payment with other subordinated debentures
issued by the Company and with all unsecured trade
creditors of the Company. See "Description of the
Junior Subordinated Debentures."
Federal Income Tax
Consequences............. Provided the Company does not exercise its right to
defer interest on the Junior Subordinated
Debentures, holders of Income PRIDES and Trust
Preferred Securities will include in income their
allocable share of interest with respect to the
Junior Subordinated Debentures when paid or
accrued, in accordance with their regular method of
accounting. The Company intends to report the
Contract Adjustment Payments as income to holders
of Income PRIDES and Growth PRIDES, but holders
should consult their tax advisors concerning the
possibility that the Contract Adjustment Payments
may be treated as loans, purchase price
adjustments, rebates or option premiums rather than
being includible in income on a current basis.
Holders of Growth PRIDES will continue to include
in income any original issue discount ("OID") or
market discount or amortize any bond premium
otherwise includible or deductible, respectively,
with respect to the Treasury Securities posted with
the Collateral Agent. See "Certain Federal Income
Tax Consequences."
Use of Proceeds............ All of the proceeds from the sale of the Income
PRIDES, of which the Trust Preferred Securities are
a component, will be invested by the Trust in
Junior Subordinated Debentures of the Company and
the net proceeds of approximately $ million
ultimately will be used by the Company for the
repayment of bank debt and for general corporate
purposes. Repayment of bank debt will increase the
available funding under the Company's existing
lines of credit. Any additional amounts received by
the Company upon settlement of the Purchase
Contracts, whether on the Purchase Contract
Settlement Date or an Early Settlement Date, are
expected to be used for the repayment of bank debt
or general corporate purposes. See "Use of
Proceeds."
RISK FACTORS
Potential purchasers of the Securities offered hereby should carefully
consider the risk factors set forth herein under "Risk Factors" as well as other
information contained in this Prospectus.
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<PAGE> 21
RISK FACTORS
Prospective purchasers of Securities should consider, in addition to the
other information contained or incorporated by reference in this Prospectus, the
following information relating to the Securities and to the Company and the
industry in which it operates.
RISK FACTORS -- THE SECURITIES
LIMITATIONS ON OPPORTUNITY FOR EQUITY APPRECIATION; RISK OF DECLINE IN EQUITY
VALUE
The opportunity for equity appreciation afforded by an investment in the
FELINE PRIDES is less than the opportunity for equity appreciation afforded by a
direct investment in the Common Stock, because the value of Common Stock to be
received by a holder of Purchase Contracts on the Purchase Contract Settlement
Date will only exceed the Stated Amount if the Applicable Market Value of the
Common Stock exceeds the Threshold Appreciation Price (which represents an
appreciation of % over the closing price of the Common Stock on the date
hereof). If the Applicable Market Value of the Common Stock is less than the
closing price of the Common Stock on the date hereof, such value to be received
by the holder on the Purchase Contract Settlement Date will be less than the
Stated Amount paid for the Income PRIDES, in which case an investment in the
Income PRIDES will result in a loss. Accordingly, a holder of the Purchase
Contracts assumes the risk that the market value of the Common Stock may
decline, and that such decline could be substantial.
FACTORS AFFECTING TRADING PRICES
The trading prices of the Income PRIDES and the Growth PRIDES in the
secondary market will be directly affected by the trading prices of the Common
Stock in the secondary market, the general level of interest rates and the
credit quality of the Company. It is impossible to predict whether the price of
Common Stock or interest rates generally will rise or fall. Trading prices of
Common Stock will be influenced by the Company's operating results and prospects
and by economic, financial and other factors and market conditions that can
affect the capital markets generally, including the level of, and fluctuations
in, the trading prices of stocks generally and sales of substantial amounts of
Common Stock in the market subsequent to the offering of the Securities or the
perception that such sales could occur. Fluctuations in interest rates may give
rise to opportunities for arbitrage based upon changes in the relative value of
the Common Stock underlying the Purchase Contracts and of the other components
of the FELINE PRIDES. Any such arbitrage could, in turn, affect the trading
prices of the Income PRIDES, Growth PRIDES, Trust Preferred Securities and
Common Stock.
VOTING RIGHTS
Holders of Trust Preferred Securities will not be entitled to vote to
appoint, remove or replace, or to increase or decrease the number of Regular
Trustees and will generally have no voting rights except in the limited
circumstances described under "Description of Trust Preferred
Securities -- Voting Rights." Holders of Purchase Contracts underlying the
Income PRIDES or Growth PRIDES will have no voting rights.
DILUTION OF COMMON STOCK
The number of shares of Common Stock that holders of the FELINE PRIDES are
entitled to receive on the Purchase Contract Settlement Date is subject to
adjustment for certain events arising from stock splits and combinations, stock
dividends and certain other actions of the Company that modify its capital
structure. See "Description of the Purchase Contracts -- Anti-Dilution
Adjustments." Such number of shares of Common Stock to be received by such
holders on the Purchase Contract Settlement Date will not be adjusted for other
events, such as offerings of Common Stock for cash or in connection with
acquisitions. The Company is not restricted from issuing additional Common Stock
during the term of either the Purchase Contracts or the Trust Preferred
Securities. Additional issuances may materially and adversely affect the price
of the Common Stock and, because of the relationship of the number of shares to
be received on the Purchase Contract
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<PAGE> 22
Settlement Date to the price of the Common Stock, such other events may
adversely affect the trading price of the Income PRIDES or Growth PRIDES.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the Income PRIDES, the Growth PRIDES or
the Trust Preferred Securities will trade in the secondary market or whether the
market for any such securities will be liquid or illiquid. The Income PRIDES and
the Growth PRIDES are novel securities and there is currently no secondary
market for either the Income PRIDES or Growth PRIDES. The Income PRIDES have
been approved for listing on the NYSE, subject to official notice of issuance.
The Growth PRIDES and the Trust Preferred Securities will not be listed or
traded on any securities exchange. The Company and the Trust have been advised
by the Underwriters that they presently intend to make a market for the Growth
PRIDES and the Trust Preferred Securities; however, they are not obligated to do
so and any market making may be discontinued at any time. There can be no
assurance as to the liquidity of any such market that may develop for the Income
PRIDES, the Growth PRIDES or the Trust Preferred Securities, the ability of
holders to sell such securities, the price at which holders would be able to
sell such securities or whether a trading market, if it develops, will continue.
In addition, in the event that holders of Income PRIDES were to substitute
Treasury Securities for the Trust Preferred Securities, thereby converting their
Income PRIDES to Growth PRIDES, the liquidity of Income PRIDES could be
adversely affected. There can be no assurance that the Income PRIDES will not be
delisted from the NYSE or that trading in the Income PRIDES will not be
suspended as a result of the election by holders to create Growth PRIDES through
the substitution of collateral, which could cause the number of Income PRIDES to
fall below the minimum requirements for listing the securities on the NYSE.
PLEDGED SECURITIES ENCUMBERED
Although holders of FELINE PRIDES will be beneficial owners of the
underlying Trust Preferred Securities or the Treasury Securities (together, the
"Pledged Securities"), as the case may be, those Pledged Securities will be
pledged with the Collateral Agent to secure the obligations of the holders under
the Purchase Contracts. Thus, rights of the holders to their Pledged Securities
will be subject to the Company's security interest. Additionally,
notwithstanding the automatic termination of the Purchase Contracts, in the
event that the Company becomes the subject of a case under the United States
Bankruptcy Code (the "Bankruptcy Code"), the delivery of the Pledged Securities
to holders of the Securities may be delayed by the imposition of the automatic
stay of Section 362 of the Bankruptcy Code.
TAX EVENT OR INVESTMENT COMPANY EVENT DISTRIBUTION
Upon the occurrence of a Tax Event or an Investment Company Event, the
Trust will be dissolved (except in the limited circumstances described in the
following sentence) with the result that the Junior Subordinated Debentures with
an aggregate principal amount equal to the aggregate stated liquidation amount
of the Trust Preferred Securities would be distributed to the holders of the
Trust Preferred Securities on a pro rata basis. In the case of the occurrence of
a Tax Event, such dissolution and distribution shall be conditioned on the
Company being unable to avoid such Tax Event within a 90 day period by taking
some ministerial action or pursuing some other reasonable measure that will have
no adverse effect on the Trust, the Company or the holders of the Trust
Preferred Securities, and will involve no material cost. See "Description of the
Trust -- Trust Preferred Securities -- Special Event Distribution."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of the Trust would not be a
taxable event to holders of the Trust Preferred Securities including the
Collateral Agent. See "Certain Federal Income Tax Consequences -- Receipt of
Junior Subordinated Debentures upon Liquidation of the Trust."
There can be no assurance as to the impact on the market prices for the
Income PRIDES of a distribution of the Junior Subordinated Debentures in
exchange for Trust Preferred Securities upon a dissolution or liquidation of the
Trust. Because the Income PRIDES will consist of Junior Subordinated
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<PAGE> 23
Debentures and related Purchase Contracts upon the occurrence of an Investment
Company Event, or, in certain circumstances, a Tax Event or liquidation of the
Trust, prospective purchasers of Income PRIDES are also making an investment
decision with regard to the Junior Subordinated Debentures and should carefully
review all the information regarding the Junior Subordinated Debentures
contained herein. See "Description of the Trust Preferred Securities -- Special
Event Distribution" and "Description of the Junior Subordinated
Debentures -- General."
RIGHT TO DEFER CURRENT PAYMENTS
The Company may, at its option, defer the payment of Contract Adjustment
Payments on the Purchase Contracts until the Purchase Contract Settlement Date.
However, deferred installments of Contract Adjustment Payments will bear
additional Contract Adjustment Payments at the rate of % per annum
(compounding on each succeeding Payment Date) until paid (such deferred
installments of Contract Adjustment Payments together with the additional
Contract Adjustment Payments shall be referred to herein as the "Deferred
Contract Adjustment Payments"). If the Purchase Contracts are settled early or
terminated (upon the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company), the right to receive Contract
Adjustment Payments, and Deferred Contract Adjustment Payments, will terminate.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, each holder of Purchase Contracts will receive on the Purchase
Contract Settlement Date, in lieu of a cash payment, a number of shares of
Common Stock (in addition to a number of shares of Common Stock equal to the
Settlement Rate or the Cash Settlement Rate) equal to (x) the aggregate amount
of Deferred Contract Adjustment Payments payable to a holder of Securities
divided by (y) the Applicable Market Value. See "Description of the Purchase
Contracts -- Contract Adjustment Payments."
The Company also has the right under the Indenture (as such term is defined
in "Description of Junior Subordinated Debentures" herein) to defer payments of
interest on the Junior Subordinated Debentures by extending the interest payment
period at any time, and from time to time, on the Junior Subordinated
Debentures. As a consequence of such an extension, quarterly distributions on
the Trust Preferred Securities, held either as a component of the Income PRIDES
or held separately, would be deferred (but despite such deferrals would accrue
interest compounded on a quarterly basis) by the Trust during any such extended
interest payment period. Such right to extend the interest payment period for
the Junior Subordinated Debentures is limited to a period, in the aggregate, not
extending beyond the maturity date of the Junior Subordinated Debentures. See
"Description of the Trust Preferred Securities -- Distributions" and
"Description of the Junior Subordinated Debentures -- Option to Extend Interest
Payment Period."
The Company believes that the likelihood that it will exercise its right to
defer payments of interest on the Junior Subordinated Debentures is remote and
that, therefore, the Junior Subordinated Debentures should not be considered to
be issued with OID unless it actually exercises such deferral right. There is no
assurance that the Internal Revenue Service (the "IRS") will agree with such
position. See "Certain Federal Income Tax Consequences -- Distributions on Trust
Preferred Securities."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Trust Preferred Securities
held either as a component of the Income PRIDES or held separately will accrue
income (as OID) in respect of the deferred interest allocable to its Trust
Preferred Securities for United States federal income tax purposes, which will
be allocated but not distributed to holders of record of Trust Preferred
Securities. As a result, each such holder of Trust Preferred Securities will
recognize income for United States federal income tax purposes in advance of the
receipt of cash and will not receive the cash from the Trust related to such
income if such holder disposes of its Trust Preferred Securities prior to the
record date for the date on which distributions of such amounts are made. The
Company has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debentures. However, should the Company determine to exercise such right in the
future, the market price of the Trust Preferred Securities is likely to be
affected. A holder that disposes of
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<PAGE> 24
its Trust Preferred Securities during an Extension Period, therefore, might not
receive the same return on its investment as a holder that continues to hold its
Trust Preferred Securities. In addition, as a result of the existence of the
Company's right to defer interest payments, the market price of the Trust
Preferred Securities (which represent an undivided beneficial interest in the
assets of the Trust) may be more volatile than the market price of other
securities that are not subject to such deferral. See "Certain Federal Income
Taxation -- Distributions on Trust Preferred Securities."
RANKING OF CONTRACT ADJUSTMENT PAYMENTS AND SUBORDINATE OBLIGATIONS UNDER THE
GUARANTEE AND JUNIOR SUBORDINATED DEBENTURES
The Company's obligations with respect to the Contract Adjustment Payments
and the Guarantee are subordinate and junior in right of payment to all
liabilities of the Company (other than the Company's guarantee of its other
subordinated debentures, if any, with which they rank pari passu). The
obligations of the Company under the Junior Subordinated Debentures are
subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company and pari passu with other subordinated debentures
issued by the Company and obligations to or rights of the Company's other
general unsecured creditors and other junior subordinated debentures issued
hereafter. No payment of principal of (including redemption payments, if any),
premium, if any, or interest on the Junior Subordinated Debentures may be made
if (i) any Senior Indebtedness of the Company is not paid when due and any
applicable grace period with respect to such default has ended with such default
not having been cured or waived or ceasing to exist, or (ii) the maturity of any
Senior Indebtedness has been accelerated because of a default. As of March 31,
1997, Senior Indebtedness aggregated approximately $116.0 million. There are no
terms in the Trust Preferred Securities, the Junior Subordinated Debentures or
the Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Contract Adjustment Payments,
the Junior Subordinated Debentures and the Guarantee. See "Description of the
Guarantee," "Description of the Purchase Contracts -- Contract Adjustment
Payments" and "Description of the Junior Subordinated
Debentures -- Subordination."
PURCHASE CONTRACT AGREEMENT NOT QUALIFIED UNDER TRUST INDENTURE ACT; LIMITED
OBLIGATIONS OF PURCHASE CONTRACT AGENT
Although the Trust Preferred Securities constituting a part of the Income
PRIDES will be issued pursuant to a Declaration (as defined herein) qualified
under the Trust Indenture Act, the Purchase Contract Agreement will not be
qualified as an indenture under the Trust Indenture Act, and the Purchase
Contract Agent will not be required to qualify as a trustee thereunder.
Accordingly, holders will not have the benefit of the protection of the Trust
Indenture Act. The protections generally afforded the holder of a security
issued under an indenture that has been qualified under the Trust Indenture Act
include disqualification of the indenture trustee for "conflicting interests" as
defined under the Trust Indenture Act, provisions preventing a trustee that is
also a creditor of the issuer from improving its own credit position at the
expense of the security holders immediately prior to or after a default under
the Indenture and the requirement that the indenture trustee deliver reports at
least annually with respect to certain matters concerning the indenture trustee
and the securities. Under the terms of the Purchase Contract Agreement, the
Purchase Contract Agent will not be required to resign as agent in the event of
a "conflicting interest," will not be obligated to establish a separate account
for the benefit of holders in the case of a credit relationship with the Company
at the time of a default under the Purchase Contract Agreement and will not be
required to furnish any annual reports. A holder of a Trust Preferred Security,
as a part of an Income PRIDES or otherwise, will have the protections of the
Declaration, which will be qualified under the Trust Indenture Act.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal budget submitted to Congress,
the Clinton Administration proposed a number of changes to federal income tax
laws. One proposal would preclude the issuer from deducting interest on debt
instruments payable in stock of the issuer. A debt instrument would be treated
as payable in stock of the issuer if it were part of an arrangement designed to
result in payment of debt with such
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<PAGE> 25
stock, such as certain issuances of a forward contract in connection with the
issuance of debt. The effective date of the proposals is the date of first
Congressional committee action which could occur prior to the issuance of the
Junior Subordinated Debentures. If the proposals are enacted into law as
currently drafted, they should not apply to the Junior Subordinated Debentures
since the issuance of the Junior Subordinated Debentures and the issuance of the
Purchase Contract should not be considered as part of an arrangement designed to
result in the payment of the Junior Subordinated Debentures with stock of the
issuer. In addition, it is possible that the proposals as enacted into law may
contain transition rules for transactions which are currently underway, such as
transactions involving the offering of securities with respect to which a filing
with the Securities and Exchange Commission has been made. If the proposals were
enacted into law with such a transition rule, the proposals would not apply to
the Junior Subordinated Debentures. There can be no assurance, however, that the
proposals, if enacted, will be enacted as currently drafted or will include such
a transitional rule or that other legislation enacted after the date hereof will
not adversely affect the tax treatment of the Junior Subordinated Debentures or
cause a Tax Event, resulting in the distribution of the Junior Subordinated
Debentures to holders of Trust Preferred Securities. See "Description of the
Trust Preferred Securities -- Special Event Distribution."
RISK FACTORS -- THE INDUSTRY
RESERVES
The Company maintains reserves for future policy benefits and unpaid claims
expenses which include policy reserves and claims reserves established for its
insurance products. Policy reserves represent the portion of premiums received
which are reserved to provide for future claims. Claims reserves are established
for future payments not yet due on claims already incurred. Neither generally
accepted accounting principles nor statutory reserves represent an exact
calculation of future benefit liabilities but are instead estimates made by the
Company using actuarial and statistical procedures. However, there can be no
assurance that any such reserves would be sufficient to fund future liabilities
in all circumstances. Future loss development could require reserves for prior
periods to be increased, which would adversely affect earnings in future
periods. Adjustments to reserve amounts may be required in the event of changes
from the assumptions regarding future morbidity (the incidence of claims and the
rate of recovery, including the effects thereon of inflation, and other societal
and economic factors), persistency, mortality, and interest rates used in
calculating the reserve amounts.
COMPETITION
The Company's businesses are highly competitive. The Company's
profitability is affected by a number of factors, including rate competition,
mortality and morbidity experience, lapse rates, government regulation, interest
rates, and general business considerations. There are many insurance companies
which actively compete with the Company in its lines of businesses, some of
which are larger and have greater financial resources than the Company, and
there is no assurance that the Company will be able to compete effectively
against such companies in the future.
RATINGS
Claims-paying and financial strength ratings, such as those assigned by
A.M. Best, S&P and other independent insurance rating organizations, have become
an increasingly important factor in establishing the competitive position of
insurance companies. A.M. Best and S&P ratings are intended to provide an
independent opinion of an insurer's ability to meet its obligations to
policyholders and should not be considered an investment recommendation.
Management believes that such ratings held by the Company's insurance
subsidiaries are important credentials that allow and enhance marketing
opportunities. Lower ratings could adversely affect the ability of the insurance
subsidiaries to gain new business.
24
<PAGE> 26
RELIANCE ON DIVIDENDS AND OTHER PAYMENTS FROM INSURANCE SUBSIDIARIES
The Company is a holding company with no independent business operations.
Consequently, the Company's primary sources of cash to meet its debt service and
other obligations and to pay dividends on its capital stock are dividends,
management fees, surplus debenture payments and tax sharing payments from its
various subsidiaries. The ability of the Company's insurance subsidiaries to pay
dividends and make other payments is limited by the insurance laws of their
respective states of domicile. There can be no assurance that the Company's
insurance subsidiaries will continue to be able to make sufficient funds
available to the Company without regulatory approval or that the Company will be
able to obtain any regulatory approvals that may be required from time to time.
REGULATION
Insurance companies are subject to governmental regulation in each of the
jurisdictions in which they conduct business. Insurance regulatory agencies have
broad administrative power with respect to all aspects of an insurance company's
business, including rates, policy forms, dividend payments, capital adequacy and
the amount and type of investments it may have. These regulations are intended
primarily to protect policyholders rather than security holders.
25
<PAGE> 27
THE TRUST
AHL Financing is a statutory business trust formed under Delaware law
pursuant to (i) the Declaration, executed by the Company, as Sponsor, and the
AHL Trustees and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on March 20, 1997. The Declaration will be
qualified as an indenture under the Trust Indenture Act. Although upon issuance
of the Trust Preferred Securities, the holders of Income PRIDES will be
beneficial owners of the underlying Trust Preferred Securities, these Trust
Preferred Securities will be pledged with the Collateral Agent to secure the
obligations of the holders under the Purchase Contracts. See "Description of the
Purchase Contracts -- Pledged Securities and Pledge Agreement" and "Description
of the Trust Preferred Securities-Book-Entry Only Issuance -- The Depository
Trust Company." The Company will directly or indirectly acquire Common
Securities in an aggregate liquidation amount equal to 3% of the total capital
of the Trust. The Trust exists for the exclusive purposes of (i) issuing the
Trust Securities representing undivided beneficial interests in the assets of
the Trust, (ii) investing the gross proceeds of the Trust Securities in the
Junior Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto. The Trust has a term of approximately seven
years, but may terminate earlier as provided in the Declaration.
Pursuant to the Declaration, the number of trustees at the time of issuance
of the Trust Securities will be four. Two of the Trustees (the "Regular
Trustees") will be persons who are employees or officers of or who are
affiliated with the Company. A third trustee will be an entity that is
unaffiliated with the Company and that has its principal place of business in
the State of Delaware (the "Delaware Trustee"). Initially, The First National
Bank of Chicago, a national banking corporation, will serve as institutional
trustee and the fourth trustee under the Declaration and as Indenture Trustee
for the purposes of compliance with the provisions of the Trust Indenture Act
(the "Institutional Trustee"). The First National Bank of Chicago will be the
Institutional Trustee until removed or replaced by the holder of the Common
Securities. For the purpose of compliance with the provisions of the Trust
Indenture Act, The First National Bank of Chicago will also act as trustee (the
"Guarantee Trustee") under the Guarantee and an affiliate, First Chicago
Delaware Inc., will act as Delaware Trustee for the purposes of the Trust Act
(as defined herein), until removed or replaced by the holder of the Common
Securities. See "Description of the Trust Preferred Securities Guarantees" and
"Description of the Trust Preferred Securities -- Voting Rights."
The Institutional Trustee will hold title to the Junior Subordinated
Debentures for the benefit of the holders of the Trust Securities and the
Institutional Trustee will have the power to exercise all rights, powers and
privileges under the Indenture (as defined herein) as the holder of the Junior
Subordinated Debentures. In addition, the Institutional Trustee will maintain
exclusive control of a segregated non-interest bearing bank account (the
"Property Account") to hold all payments made in respect of the Junior
Subordinated Debentures for the benefit of the holders of the Trust Securities.
The Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities out
of funds from the Property Account. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Preferred Securities. The
Company, as the direct or indirect holder of all the Common Securities, will
have the right to appoint, remove or replace any trustee and to increase or
decrease the number of trustees; provided, that the number of trustees shall be
at least three, a majority of which shall be Regular Trustees. The Company will
pay all fees and expenses related to the Trust and the offering of the Trust
Securities. See "Description of the Junior Subordinated
Debentures -- Miscellaneous."
The rights of the holders of the Trust Preferred Securities, including
economic rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Trust Preferred Securities."
The trustee in the State of Delaware is First Chicago Delaware Inc. The
principal place of business of the Trust shall be c/o American Heritage Life
Investment Corporation, 1776 American Heritage Life Drive, Jacksonville, Florida
32224, and its telephone number is (904) 992-1776.
26
<PAGE> 28
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The high and low sales prices of the Common Stock of the Company, as
reported on the NYSE Composite Tape (ticker symbol: "AHL"), and the dividends
paid on the Common Stock during the fiscal years ended December 31, 1995 and
1996, and for the first and second quarters of fiscal 1997 are set out below:
<TABLE>
<CAPTION>
CASH DIVIDENDS
HIGH LOW PAID PER SHARE
------ ------ --------------
<S> <C> <C> <C>
1995:
First Quarter......................................... $19.75 $17.88 $.1650
Second Quarter........................................ 21.25 16.25 .1750
Third Quarter......................................... 21.50 18.88 .1800
Fourth Quarter........................................ 23.25 19.25 .1800
1996:
First Quarter......................................... $23.88 $20.50 $.1800
Second Quarter........................................ 24.25 19.88 .1800
Third Quarter......................................... 21.75 19.00 .1900
Fourth Quarter........................................ 27.75 19.75 .1900
1997:
First Quarter......................................... $27.00 $23.50 $.1900
Second Quarter (through June 2, 1997)................. 29.00 23.88 .1900
</TABLE>
On April 24, 1997, the Company declared a 5.3% quarterly dividend increase
to $.20 per share, payable in the third quarter of 1997, which marks the 28th
year of increased dividends to shareholders.
On June 2, 1997, the last reported sale price of the Common Stock on the
NYSE was $28.25 per share. As of April 30, 1997, the approximate number of
holders of record of Common Stock was 8,400.
The Company's Board of Directors currently intends to continue to declare a
quarterly cash dividend on each share. The amount of such dividend is intended
to be based on the Company's net income and cash flow. Each declaration of
dividends will be reviewed by the Board of Directors quarterly and will be
determined, at the discretion of the Board of Directors, in light of the
Company's results of operations, financial condition, capital requirements, and
other factors deemed relevant at that time by the Company's Board of Directors.
As an insurance holding company, the Company depends on dividends and other
permitted payments from its subsidiaries to pay cash dividends to shareholders.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources," "Business -- Government
Regulation," and "Business -- Dividend Regulation."
USE OF PROCEEDS
All of the proceeds from the sale of the Income PRIDES, of which the Trust
Preferred Securities are a component, will be invested by the Trust in Junior
Subordinated Debentures of the Company pursuant to the Indenture described
herein and the net proceeds of approximately $ million ultimately will be used
by the Company for the repayment of bank debt and for general corporate
purposes. Repayment of bank debt will increase the available funding under the
Company's existing lines of credit. Any additional amounts received by the
Company upon settlement of the Purchase Contracts, whether on the Purchase
Contract Settlement Date or Early Settlement Date, are expected to be used for
the repayment of bank debt or general corporate purposes. The Company's bank
debt consists of two components: (i) demand lines of credit and (ii) an
acquisition line of credit. The demand lines of credit have interest rates that
range primarily between LIBOR plus 50 basis points to LIBOR plus 55 basis
points. The acquisition line of credit has an interest rate of LIBOR plus 55
basis points. The acquisition line of credit is a revolving loan with a four
year maturity that converts to a two year term loan upon maturity. The
acquisition line of credit funded the acquisition of Columbia Universal.
27
<PAGE> 29
CAPITALIZATION
The following table sets forth the summary capitalization at March 31,
1997, of the Company and its consolidated subsidiaries on a historical basis and
on a pro forma basis after giving effect to the sale by the Company of the
FELINE PRIDES offered hereby and the application of the net proceeds therefrom.
See "Use of Proceeds." The table should be read in conjunction with the
Company's consolidated financial statements and notes thereto and other
financial data included elsewhere herein.
<TABLE>
<CAPTION>
AT MARCH 31, 1997
--------------------------
ACTUAL PRO FORMA(1)
----------- ------------
(UNAUDITED)
($ IN THOUSANDS EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Notes payable to banks...................................... $116,019 $
-------- --------
AHLIC-obligated mandatorily redeemable preferred securities
of subsidiaries holding solely subordinated debentures of
AHLIC(2).................................................. --
-------- --------
Stockholders' equity:
Common stock of $1.00 par value.
Authorized 35,000,000 shares; issued 13,990,371 shares.... 13,990 13,990
Additional paid-in capital.................................. 43,228 43,228
Retained earnings........................................... 168,582 168,582
Net unrealized investment gains (losses).................... 3,717 3,717
Less: Cost of 173,128 common shares in treasury............. (3,791) (3,791)
-------- --------
Total stockholders' equity........................ 225,726 225,726
-------- --------
Total capitalization.............................. $341,745 $
======== ========
Debt as a percentage of total capitalization...... 33.9% %
======== ========
</TABLE>
- ---------------
(1) Adjusted for the sale of Trust Preferred Securities, the application of the
estimated net proceeds to the purchase of the Junior Subordinated Debentures
and the application by the Company of all of the estimated net proceeds of
Junior Subordinated Debentures for the repayment of bank debt. See "Use of
Proceeds."
(2) The sole assets of the Trust will be % subordinated debentures of the
Company due 2002 with a principal amount of approximately $ .
Upon redemption of such debt, the Trust Preferred Securities of such
subsidiary will be mandatorily redeemable.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements with the $ Trust Preferred Securities
shown as AHLIC-obligated mandatorily redeemable preferred securities of
subsidiaries holding solely subordinated debentures of the Company. The notes to
the consolidated financial statements of the Company will reflect that the sole
asset of the Trust will be approximately $ principal amount of %
Junior Subordinated Debentures due , 2002 of the Company. See
"Capitalization." Under current generally accepted accounting principles, the
Purchase Contracts will not be recorded on the Company's consolidated balance
sheet but will be disclosed in the notes to the consolidated financial
statements.
28
<PAGE> 30
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following summary data should be read in conjunction with the Company's
consolidated financial statements and the notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations. The
annual income statement and balance sheet data set forth below for the years
1992 through 1996 have been derived from the consolidated financial statements
audited by KPMG Peat Marwick LLP, independent accountants. The audited
consolidated balance sheets at December 31, 1995 and 1996 and the related
audited consolidated statements of earnings and of cash flows for the three
years ended December 31, 1996, notes thereto and related Auditor's Report appear
elsewhere in this Prospectus. The unaudited financial information as of and for
the three months ended March 31, 1997 and 1996 has been derived from unaudited
financial statements which include, in the Company's opinion, all adjustments
(consisting of normal recurring adjustments) necessary for a fair statement of
the interim results. Interim results are not necessarily indicative of the
results to be expected for the full year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, AS OF OR FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT LIFE INSURANCE VOLUME IN FORCE AND SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Income:
Insurance revenues.......... $ 65,048 $ 61,187 $ 258,519 $ 247,251 $ 230,589 $ 227,376 $ 212,062
Net investment income....... 25,223 19,070 77,035 70,601 66,706 63,875 59,721
Realized investment gains,
net....................... 103 105 420 6,003 2,011 1,184 237
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total income.......... 90,374 80,362 335,974 323,855 299,306 292,435 272,020
----------- ----------- ----------- ----------- ----------- ----------- -----------
Benefits, claims and expenses:
Benefits and claims......... 41,618 35,929 148,887 148,581 146,146 159,335 155,722
Underwriting, acquisitions
and insurance expenses:
Taxes and commissions..... 19,324 19,785 85,690 77,697 67,164 54,657 42,969
General expenses.......... 9,363 7,390 31,724 28,702 28,162 27,641 28,043
Amortization of deferred
acquisition costs....... 6,937 6,403 25,628 23,744 20,758 20,091 19,450
Other operating expenses.... 1,582 954 4,186 3,694 2,413 1,806 1,685
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total benefits claims
and expenses........ 78,824 70,461 296,115 282,418 264,643 263,530 247,869
----------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings before income
taxes................... 11,550 9,901 39,859 41,437 34,663 28,905 24,151
Income taxes.................. 3,805 3,172 12,827 13,362 11,022 9,190 7,255
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net earnings............ $ 7,745 $ 6,729 $ 27,032 $ 28,075 $ 23,641 $ 19,715 $ 16,896
=========== =========== =========== =========== =========== =========== ===========
Operating earnings(3)......... $ 7,678 $ 6,661 $ 26,759 $ 24,174 $ 22,334 $ 18,945 $ 16,739
=========== =========== =========== =========== =========== =========== ===========
PER SHARE DATA:
Net earnings................ $ .56 $ .49 $ 1.96 $ 2.02 $ 1.71 $ 1.59 $ 1.42
Operating earnings(3)....... .56 .48 1.94 1.74 1.61 1.53 1.41
Cash dividends paid......... .19 .18 .74 .70 .64 .59 .56
Weighted average number of
shares outstanding........ 13,810,142 13,833,356 13,825,560 13,882,041 13,855,297 12,399,070 11,902,790
BALANCE SHEET DATA:
Total investments........... $ 1,325,727 $ 975,002 $ 1,011,449 $ 979,603 $ 845,729 $ 854,363 $ 766,871
Total assets................ 1,738,090 1,329,077 1,370,117 1,317,869 1,179,257 1,138,578 1,016,984
Notes payable............... 116,019 95,974 85,459 94,994 84,201 72,481 62,102
Stockholders' equity........ 225,726 216,881 228,943 219,329 173,360 183,930 147,965
OTHER DATA:
Consolidated return on
stockholders' equity(1)... 13.1% 12.5% 12.8% 12.4% 12.6% 13.8% 14.2%
First year annualized,
issued, delivered and paid
premiums on a weighted
basis..................... $ 65,399 $ 78,585 $ 290,173 $ 252,332 $ 221,502 $ 191,921 $ 160,892
Life insurance volume in
force (in millions)....... 22,134 18,725 20,523 18,384 16,816 15,601 15,468
Ratio of earnings to fixed
charges(2)................ 7.80x 7.41x 7.49x 7.38x 9.13x 8.76x 9.47x
</TABLE>
- ---------------
(1) Based on operating earnings for the prior twelve month period divided by
average stockholders' equity for the prior twelve month period which
excludes any unrealized investment gains (losses).
(2) For the purposes of the ratio of earnings to fixed charges, earnings were
calculated by adding interest expense to operating earnings before income
taxes and excluding any unrealized investment gains and losses. Fixed
charges consist of interest expense payable on bank debt and issuance of the
Junior Subordinated Debentures. The pro forma ratio of earnings to fixed
charges for the three months ended March 31, 1997, giving pro forma effect
to the sale of the Income PRIDES as if such sale and issuance had occurred
at January 1, 1997, assuming repayment of bank indebtedness from the net
proceeds, was 7.40x.
(3) The amounts exclude realized investment gains and losses.
29
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
American Heritage Life Investment Corporation and its subsidiaries are
engaged primarily in the life and health insurance business. The Company's
consolidated earnings are primarily attributable to its principal subsidiaries,
American Heritage Life Insurance Company ("AHL") and Columbia Universal.
Following is a discussion of the significant components of the consolidated
results of operations for the years ended December 31, 1996, 1995 and 1994 and
for the three months ended March 31, 1997 and 1996.
INSURANCE OPERATIONS
Insurance revenues pursuant to generally accepted accounting principles
("GAAP") include only the mortality, expense and surrender charges for
interest-sensitive products. Insurance revenues do not include group and credit
premium equivalents and cash deposits from interest-sensitive products.
As a result of more of the ordinary life business being interest-sensitive,
the group business being on a self-funded or split funded basis and the credit
business being written on an administrative services only basis, in which only
the fees charged are included in insurance revenues for GAAP purposes, it is
necessary to evaluate insurance revenues including premium equivalents.
For 1996, 1995 and 1994, insurance revenues were $258.5 million, $247.3
million and $230.6 million, respectively, while total insurance revenues
including premium equivalents were $567.6 million, $511.8 million and $445.5
million, respectively.
Insurance revenues for the three months ended March 31, 1997 were $65.0
million, an increase of 6.3% from the $61.2 million for the same period in 1996.
This increase was due primarily to an increase in ordinary accident and health
insurance revenues and the inclusion of Columbia Universal revenues of $3.5
million in 1997 with no comparable amount in 1996. Including premium equivalents
of $78.8 million and $60.8 million for the three months ended March 31, 1997 and
1996, respectively, insurance revenues, including premium equivalents, were
$143.9 million and $122.0 million, up 17.9% in 1997. These increases in
insurance revenues including premium equivalents were due to an increase in
long-term care revenues. Additionally, credit insurance revenues and premium
equivalents were up due to increased sales of reinsurance, which generally
provides less risk to the Company at an acceptable profit margin and an increase
in administrative services only business. Also, Columbia Universal revenues and
premium equivalents were $9.3 million in 1997 with no comparable amount in 1996.
Ordinary insurance revenues amounted to $137.4 million, $123.7 million and
$114.0 million, in 1996, 1995 and 1994, respectively. Premiums including
equivalents were $181.5 million, $167.3 million and $161.6 million for the years
ended December 31, 1996, 1995 and 1994, respectively. The increases in revenues
and premiums and premium equivalents in 1996 over 1995 and 1995 over 1994 were
due primarily to increased policy charges on interest-sensitive products due to
increased sales, increased sales of individual accident and health plans, and
rate increases on certain cancer/dread disease plans. The increase in individual
accident and health sales in 1996 compared to 1995 included for the first time a
full year of long-term care product sales that increased revenues approximately
$5.7 million.
Group insurance revenues in 1996, 1995 and 1994 totaled $35.5 million,
$39.9 million and $43.2 million, respectively. Premiums and premium equivalents
were $214.9 million, $206.4 million and $167.5 million for 1996, 1995 and 1994,
respectively. These increases in premiums and premium equivalents included the
sales to larger group cases that were sold on a self-funded basis.
Credit insurance revenues for 1996, 1995 and 1994 were $85.6 million, $83.6
million and $73.4 million, respectively. Credit premiums and premium equivalents
amounted to $171.2 million, $138.1 million and $116.3 million for the years
ended December 31, 1996, 1995 and 1994, respectively. Credit insurance revenues
and premiums and premium equivalents increased during these periods as a result
of geographic expansion and increased sales of reinsured business, which
generally provides less risk to the Company at an acceptable
30
<PAGE> 32
profit margin. The increase in 1996 over 1995 was also attributed to additional
fee income generated from administering the run-off of credit life and health
insurance for another insurance company, effective June 1996.
Benefits and claims were $41.6 million for the three months ended March 31,
1997, up 15.8% from the $35.9 million for the same period in 1996. The increase
for the three months ended March 31, 1997 versus 1996 was due primarily to
increased ordinary benefits, including increased dread disease claims and an
increase in reserves for long-term care business due to its growth. Also, 1997
included benefits and claims for Columbia Universal of $6.7 million with no
comparable amount for 1996.
Ordinary benefits and claims in 1996, 1995 and 1994 were $111.0 million,
$103.2 million and $95.6 million, respectively. The increase each year was the
result of growth in first year and renewal business, increased interest credited
to policyholder account balances and some increase in mortality and morbidity
experience.
Group benefits and claims in 1996, 1995 and 1994 totaled $24.0 million,
$25.6 million and $29.1 million, respectively. Group benefits have been reduced
as a result of a managed care program, the AHL Select Provider Network, and new
cases written on a self-funded or split-funded basis where claims are not
included in the Company's benefits and claims expense for financial statement
purposes.
Credit benefits and claims amounted to $13.9 million, $19.8 million and
$21.4 million in 1996, 1995 and 1994, respectively. These decreases were due, in
part, to a reduction in the change in unearned premiums which is included in
credit benefits and claims. These reductions were also the result of terminating
unprofitable accounts and certain previously retained business accounts
converting to reinsured accounts.
The Company's major operating costs consist of commissions, payroll,
premium taxes and administrative-related expenditures. Taxes, commissions, and
general expenses aggregated $28.7 million for the first three months of 1997
versus $27.2 million for the first three months of 1996, or an increase of 5.6%.
The increase was primarily due to Columbia Universal taxes, commissions and
general expenses of $1.5 million for 1997 with no comparable amount for 1996.
General insurance expenses as a percentage of total income, excluding
realized investment gains (losses) and including premium equivalents for the
years ended December 31, 1994 through 1996 and for the three months ended March
31, 1997 ranged from a high of 5.5% to a low of 4.9%. This demonstrates that the
Company has been able to control the level of general insurance expenses, which
in turn has been a significant factor in the Company's steady growth in
operating earnings.
Ordinary taxes, commissions and general expenses were $33.1 million, $29.4
million and $29.0 million for 1996, 1995 and 1994, respectively. The increase
each year was primarily the result of growth in ordinary business. Group taxes,
commissions and general expenses were $12.3 million, $12.2 million and $12.5
million, respectively. These expenses have remained relatively flat due to a
decrease in taxes and commissions offset by an increase in general expenses. The
decrease in commissions and taxes was the result of reduced premiums. The
increases in general insurance expenses in 1996 and 1995 were due to growth in
business, administration of larger group cases and the implementation of a new
local area network group system. Credit taxes, commissions and general expenses
were $72.3 million, $65.1 million and $54.1 million in 1996, 1995 and 1994,
respectively. The increase each year was primarily due to an increase in
commissions earned as a result of increased insurance revenues and a higher
effective commission rate, due to increased contingent commissions as a result
of improved claims experience.
Pursuant to GAAP, the initial costs directly associated with selling,
underwriting, and processing ordinary insurance are deferred and amortized over
the premium-paying period of the related policies for traditional products. For
interest-sensitive products, these costs are amortized over the lives of the
policies in relation to the present value of estimated gross profits from
surrender charges and investment, mortality, and expense margins. These costs
increase as the amount of sales and insurance in force increases. The charge to
earnings for acquisition costs of ordinary insurance is comprised of two
components: (1) the amortization of costs for policies which remain in force,
and (2) the write-off of unamortized costs related to policies which are
terminated. For the three months ended March 31, 1997, the amortization of
deferred acquisition costs was
31
<PAGE> 33
$6.9 million compared to $6.4 million for the comparable period in 1996. The
increase in amortization expense for the three months ended March 31, 1997 was
primarily due to increased amortization from the growth of business in force and
Columbia Universal amortization of $.9 million for 1997 with no comparable
amount for 1996.
Amortization of deferred acquisition costs was $25.6 million in 1996, $23.7
million in 1995 and $20.8 million in 1994. These increases were primarily due to
growth in business in force and an increase in lapses of individual health
business resulting from the implementation of rate increases, which increase the
write-off of the policies' deferred acquisition costs.
For the three months ended March 31, 1997, other operating expenses were
$1.6 million compared to $1.0 million for the same period in 1996, or an
increase of 65.8%. This increase was due primarily to an increase in interest
expense as a result of an increase in the amount of average outstanding bank
debt including increased debt related to the acquisition of Columbia Universal.
Non-segmented operating expenses in 1996, 1995 and 1994 were $3.9 million,
$3.4 million and $2.2 million, respectively. These expenses primarily relate to
non-life insurance operations, including interest expense. Interest expense is a
function of the average debt outstanding and interest rate charged. Interest
expense included in non-segmented operating expenses was $3.7 million, $3.3
million and $2.0 million for 1996, 1995 and 1994, respectively. These increases
were due primarily to additional bank debt outstanding in 1996 and 1995 and an
increase in interest rates in 1995 from 1994.
INCOME TAXES
Income taxes increased 20.0% for the three months ended March 31, 1997 from
the same period in 1996, primarily as a result of an increase in net earnings
and a higher effective tax rate. For the three months ended March 31, 1997 and
1996, the effective tax rate was 32.9% and 32.0%, respectively. The increase in
the effective tax rate was primarily due to Columbia Universal's earnings being
taxed at a rate of 35% in 1997.
Income tax expense was down in 1996 compared to 1995 due to a decrease in
pre-tax earnings and up in 1995 compared to 1994 due to increased pre-tax
earnings. The effective tax rates on net earnings were 32.2% in 1996 and 1995
and 31.8% in 1994.
NET INVESTMENT INCOME
For the three months ended March 31, 1997, net investment income was $25.2
million, an increase of 32.3% over the $19.1 million reported for the same
period in 1996. This increase in net investment income for the three months
ended March 31, 1997 compared to the same period in 1996 was due primarily to an
increase in invested assets, and $6.1 million of investment income for Columbia
Universal with no comparable amount in 1996, partially offset by a decrease in
Management Security Plan ("MSP") policy loan interest due to a decrease in the
average rate charged (7.98% in 1997 versus 9.36% in 1996) on increased policy
loan balances (see page 35 for discussion regarding MSP loans.) The effective
yield on invested assets for the three months ended March 31, 1997 was 7.50%
compared to 7.80% for the same period in 1996.
Net investment income was $77.0 million, $70.6 million and $66.7 million
for the years ended December 31, 1996, 1995 and 1994, respectively. These
increases were due primarily to an increase in invested assets and changes made
in the investment portfolio to improve the yield. The effective yield on
invested assets for the year ended December 31, 1996 was 7.72% compared to 7.64%
for the year ended December 31, 1995 and 7.87% for the year ended December 31,
1994. The increase in yield from 1995 to 1996 was due to changes made in the
investment portfolio including a reduction in lower yielding equity securities
and an increase in higher yielding corporate bonds and mortgage loans. The
reduction in yield from 1994 to 1995 was primarily the result of declining
interest rates during 1995.
PRE-TAX OPERATING EARNINGS
For the three months ended March 31, 1997, ordinary pre-tax operating
earnings were $10.2 million compared to $8.4 million for the three months ended
March 31, 1996. The increase in 1997 is the result of
32
<PAGE> 34
growth in business and additional earnings from Columbia Universal with no
comparable amount for 1996. Ordinary pre-tax operating earnings were $35.1
million, $28.9 million and $26.0 million for the years ended December 31, 1996,
1995 and 1994, respectively. The increase each year was primarily due to growth
in insurance revenues and investment income, less normal growth in benefits and
claims, and expenses.
For the three months ended March 31, 1997, group pre-tax operating earnings
were $1.4 million versus $1.7 million for the three months ended March 31, 1996.
Group pre-tax operating earnings were $4.5 million, $7.5 million and $7.3
million for the years ended December 31, 1996, 1995 and 1994, respectively. The
decreases in group pre-tax operating earnings in 1997 and 1996 were the result
of reduced margins on certain cases due to the competitive pricing in the group
marketplace on both administrative services only and insured business and
increased health claims on insured cases. The increase in group pre-tax
operating earnings from 1994 to 1995 was the result of necessary rate actions on
certain cases, the terminations of certain unprofitable cases.
For the three months ended March 31, 1997, credit pre-tax operating
earnings were $.9 million compared to $.6 million for the three months ended
March 31, 1996. Credit pre-tax operating earnings were $3.8 million, $2.7
million and $1.8 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The increases in credit pre-tax operating earnings for the periods
were the result of terminating certain unprofitable accounts and reducing the
commissions paid on accounts with unsatisfactory margins which negatively
impacted operations in 1994. Additionally, the Company is administering the
run-off of the credit life and health insurance business for another insurance
company, effective June 1996, which will increase fee income over a four-year
period. The Company is only responsible for administration of the run-off and
has no insurance risk.
OTHER ITEMS
Management is not aware of any pending regulation from the various state
insurance departments that would have a significant impact on the Company's
operations.
The Company's legal department includes a compliance area headed by an
officer who is a lawyer with regulatory experience. The compliance area reviews
and approves marketing material, policy filings and other areas which are the
subject of market conduct compliance requirements of the various state insurance
departments.
REALIZED INVESTMENT GAINS
Realized investment gains, net were $102,766 for the three months ended
March 31, 1997, consistent with the $105,472 reported for the three months ended
March 31, 1996. Realized investment gains, net were $419,511 for the year ended
December 31, 1996 compared to $6.0 million for the year ended December 31, 1995
and $2.0 million for the year ended December 31, 1994. The realized investment
gains for the respective periods were primarily the result of adjustments made
in the investment portfolio to increase the yield on invested assets less
recognizing any decline in value other than temporary in the value of certain
investments. The 1995 realized investment gains also included realized gains on
real estate.
LIQUIDITY AND CAPITAL RESOURCES
The Company is engaged primarily in the life and health insurance business.
The Company's insurance subsidiaries generate major sources of cash flow from
premiums collected for traditional insurance products, deposits and policy
charges for interest-sensitive products, and investment income attributable to
its life insurance operations and associated investment portfolio. This results
in a significant portion of the Company's assets being liquid.
As insurers, the Company's subsidiaries are required to maintain
substantial liabilities for future policy benefits and policyholders' account
balances. Since premiums and deposits received in anticipation of such benefits
are investable funds, it is expected that the Company's insurance subsidiaries
will continue to increase their investment portfolios using cash flow from
operations.
33
<PAGE> 35
OPERATING ACTIVITIES
The increase in net cash provided by operating activities of $24.9 million
for the three months ended March 31, 1997, compared to $4.2 million for the same
period in 1996, was due primarily to 1996 including the funding of surrenders of
certain ordinary life policies with no such comparable surrenders for 1997.
The increase in net cash used by investing activities of $49.7 million for
the first quarter of 1997 versus $1.9 million for the same period in 1996 was
due primarily to the acquisition of Columbia Universal.
The increase in net cash provided by financing activities of $21.1 million
for the three months ended March 31, 1997, compared to $1.7 million used for the
same period in 1996, was due primarily to increased borrowing on a line of
credit for the acquisition of Columbia Universal, which was partially offset
with the pay off of $20.0 million of debt related to certain investment
purchases in prior years.
The net cash provided by operating activities for the years ended December
31, 1996, 1995 and 1994 aggregated $66.5 million, $75.8 million and $48.5
million, respectively. The decrease in 1996 from 1995 was due primarily to (i)
the funding of surrenders and maturities of certain ordinary life policies in
1996 and (ii) an increase in reinsurance receivables primarily from the
increased sales from credit reinsured accounts. The increase in 1995 from 1994
was due primarily to (i) the funding in 1994 of the termination of certain
premium deposit accounts amounting to $16.4 million with no comparable
reductions in 1995 and (ii) an increase in accrued investment income and a
related decrease in unearned investment income due to changing policy loan
interest on certain plans from in advance to in arrears during 1994 discussed in
the following paragraph.
The net cash used by investing activities amounted to $45.1 million, $75.0
million and $51.3 million for 1996, 1995 and 1994, respectively. These changes
are consistent with the amounts available to invest as a result of the cash
provided by operating activities and borrowings.
Net cash of $20.5 million was used by financing activities in 1996 compared
to cash provided by financing activities of $.3 and $3.3 million in 1995 and
1994, respectively. The changes in these amounts are primarily related to
increases or payoffs of borrowings.
INVESTMENTS
The Company's balance sheet contains a high ratio of liquid assets. Such
assets are made up of cash, short-term investments and readily marketable
securities.
At March 31, 1997, the fair value of the Company's debt and equity security
portfolio aggregated $839.6 million compared with an amortized cost of $834.8
million, or an unrealized gain of $4.8 million. At December 31, 1996, the fair
value of the portfolio aggregated $556.4 million compared with an amortized cost
of $534.4 million, or an unrealized gain of $22.0 million. This change in the
unrealized gain was primarily due to changes in market conditions.
The Company's amortized cost of high-yield bonds (rated below BBB by
Standard & Poor's Corporation and excluding non-rated and private placements) at
March 31, 1997 aggregated $31.3 million with a market value of $30.5 million. At
market value, these investments represented 1.8% of total assets, or 2.3% of
total invested assets. The amortized cost of high yield bonds at December 31,
1996 aggregated $14.8 million with a market value of $15.0 million. At December
31, 1996 these investments represented only 1.1% of total assets or 1.5% of
invested assets.
At March 31, 1997, U. S. Treasury obligations and mortgage backed
securities at market value aggregated $195.7 million, or 25.3% of the total bond
portfolio of $774.5 million.
Financial Accounting Standard No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," requires that securities classified as
available-for-sale be reported at fair value and the related unrealized gain or
loss net of deferred income taxes be reported as a separate component of
stockholders' equity. Additionally, pursuant to GAAP, deferred acquisition costs
for interest-sensitive products, decreased $3.4 million at December 31, 1996 and
decreased $7.3 million at December 31, 1995 for the effect that would
34
<PAGE> 36
have been recognized had the unrealized gain/loss at December 31, 1996 and 1995
on debt securities actually been realized.
During 1996 and 1995, consistent with the Company's investment strategy,
certain changes were made in the investment portfolio to improve the overall
investment results. Changes to the investment portfolio in 1996 included sales
of GNMA's and purchases of corporate bonds and mortgage loans. During 1995, the
Company sold certain parcels of real estate, reduced common stock and GNMA
holdings, and increased investments in bonds and mortgage loans. The current
investment strategy includes increasing investments in corporate bonds and
mortgage loans while decreasing investments in GNMA's as they pay down.
The mortgage loan portfolio at December 31, 1996, which aggregated $53.7
million, consisted of residential mortgages of $1.2 million and commercial
mortgages of $52.5 million (with no concentration in any particular industry),
all of which were first mortgages on properties. There were no non-performing
mortgage loans in the portfolio at December 31, 1996.
The Company's policy loans are a higher percentage of invested and total
assets than industry norm as a result of a significant block of MSP business.
The MSP product is an interest-sensitive, deferred compensation/executive
benefit-type product with the policy loan feature being an integral part of the
product. A market rate of interest is charged on the policy loans, and a
predetermined built-in spread is achieved between the interest rate charged on
the policy loans and the interest rate credited on the loaned funds.
Accordingly, all MSP policy loans are completely collateralized by the
underlying policyholders' account balances. All policy loans are funded out of
cash provided by operating activities and do not represent a significant
restriction on the Company's liquidity.
Policy loans totaled $399.6 million at December 31, 1996, or 39.5% of total
invested assets. The significant amount of policy loans was attributable to the
policy loans associated with the MSP executive deferred compensation plan
offered by the Company which aggregated $370.7 million at December 31, 1996. As
discussed earlier, the policy loan feature is an integral part of the product.
MSP policy loans increased by approximately $22.1 million in 1996 over 1995.
The Company's investment strategy is to earn a favorable return on its
investments in excess of rates for which the Company is contractually obligated
to its policyholders. To achieve this policy, the Company maintains an
asset/liability matching program, monitoring the investment spread achieved on
each product. Targeted investment spreads have been maintained for all products
despite fluctuations in interest rates and an overall compression of market
rates.
NOTES PAYABLE TO BANKS
Notes payable to banks at March 31, 1997 were $116.0 million. The increase
in bank debt at March 31, 1997, compared to the amount at December 31, 1996,
reflected the cash needs for the Company including the acquisition of Columbia
Universal, stockholder dividends, federal income taxes, and interest expense on
outstanding debt partially offset by the payoff of $20.0 million of debt related
to investment purchases.
Notes payable to banks at December 31, 1996 were $85.5 million compared to
a balance of $95.0 million at December 31, 1995. The decrease in bank debt at
December 31, 1996 compared to the amount at December 31, 1995 reflected the 1996
payoff of a $20.0 million loan related to investment purchases. Partially
offsetting this reduction was an increase in bank debt for cash needs of the
Company including stockholder dividends, interest expense on outstanding debt
and federal income taxes during 1996.
Notes payable to banks at December 31, 1996 included $20.0 million related
to a $20.0 million investment purchase where the Company is earning a positive
spread on the invested assets acquired less the interest paid on the bank debt.
This loan was paid off in the first quarter of 1997. The weighted average
interest rate on the remaining $65.5 million of bank debt at December 31, 1996
was 6.12%. Also, the Company has an acquisition line of credit to be used to
fund acquisitions of blocks of business or other life and health insurance
companies. The Company borrowed $47.3 million on this acquisition line during
the first quarter of 1997 to fund the acquisition of Columbia Universal.
35
<PAGE> 37
ACQUISITIONS
On April 16, 1997, the Company announced an agreement in principle to
acquire Concord General Life Insurance Company for total consideration of $7.5
million in cash. The transaction, which is subject to regulatory approval and
the execution of a definitive agreement, is expected to be completed in the
second quarter of 1997. Concord primarily markets supplemental life and health
insurance products through worksite marketing and will increase the Company's
presence in the Northeast.
On December 10, 1996, the Company announced it had entered into an
agreement in principle to acquire Columbia Universal for $44 million in cash.
This acquisition closed on March 3, 1997. Columbia Universal had premiums and
premium equivalents of $36.4 million for the year ended December 31, 1996 and
total assets of $368.5 million at December 31, 1996. This acquisition was
reflected in the Company's financial statements in 1997. Effective December 31,
1996, the Company acquired a block of business from Kentucky Home Mutual Life
Insurance Company with approximately $1.8 million of premiums and premium
equivalents and $3.3 million of assets.
OTHER
The Company is a holding company and its liquidity is largely dependent on
the ability of its subsidiaries, primarily AHL, to pay dividends and on external
financing. In addition, the Company charges its subsidiaries a management fee to
cover its basic operating expenses.
The amount of dividends that AHL can pay to the Company is limited by
regulatory restriction to an annual amount equal to the greater of 10% of AHL's
statutory surplus, or its prior year's statutory gain from operations plus net
realized capital gains on a noncumulative basis if AHL will have surplus as to
policyholders equal to or exceeding 115% of the minimum required statutory
surplus as to policyholders after the dividend is paid. A dividend of
approximately $13.2 million, related to AHL's earnings in 1994, was paid to the
Company in 1995. AHL chose not to pay any dividends to the Company during 1996
and 1994. Approximately $20.8 million, related to 1996 earnings, is available to
dividend to the Company during 1997 without regulatory approval. The outstanding
bank debt of the Company is serviced through either dividends from AHL in excess
of the amount used to pay stockholder dividends or by replacement borrowing.
As a Texas domiciled insurance company, Columbia Universal is subject to
Texas law to the effect that its dividends are limited to the greater of the net
statutory gain from operations for the preceding year or 10% of net statutory
surplus at the end of the preceding year, as further restricted by the balance
of "unassigned surplus" from which dividends are paid. For 1997, the maximum
amount available for payment of dividends by Columbia Universal would be
approximately $2.9 million. Payment of dividends in excess of such amount would
require approval of the Texas Department of Insurance. Prior notification to the
Texas Department of Insurance is required before the payment of any dividends.
In the fourth quarter of 1995, the Company's Board of Directors authorized
management to repurchase from time to time up to 300,000 shares of the Company's
common stock. At December 31, 1996, 101,700 shares had been acquired and funded
by borrowings of $2.2 million.
The Risk-Based Capital for Life and/or Health Insurers Model Act was
adopted by the National Association of Insurance Commissioners ("NAIC") in 1992.
A similar act was adopted for property and casualty insurance companies in 1994.
The main purpose of these model acts was to provide a tool for insurance
regulators to evaluate the capital of insurers. Based on calculations using the
appropriate NAIC formula, AHL, Columbia Universal and FCIC exceeded the
Risk-Based Capital requirements at December 31, 1996 and 1995.
36
<PAGE> 38
BUSINESS
The Company is a holding company whose principal subsidiaries are AHL, a
Florida life insurance company, and Columbia Universal, a Texas life insurance
company. The Company is engaged in the business of underwriting life and
accident and health insurance on an individual, group and credit basis. The
Company is a leading marketer of life and supplemental health insurance products
through payroll allotment, a specialized distribution method on which it has
focused since its inception. Payroll allotment is an efficient way to distribute
most products to employees on the job by conveniently deducting the premium from
their paychecks. The Company was organized on September 11, 1956 and is
presently authorized to do business as a life insurance company in all states,
other than New York, and in the District of Columbia, U.S. Virgin Islands and
Puerto Rico.
The Company has reported increased operating earnings for 21 consecutive
years and has increased dividends to shareholders for 28 consecutive years. The
following chart presents the Company's consolidated operating earnings for the
last ten years. Operating earnings are defined as net earnings excluding
realized investment gains and losses, net of income taxes, and non-recurring
gains related to the sale of home office property.
OPERATING EARNINGS HISTORY(1)
<TABLE>
<CAPTION>
YEAR ENDED % INCREASE
DECEMBER 31 OPERATING EARNINGS FROM PRIOR YEAR
- ----------- ------------------ ---------------
(IN THOUSANDS)
<S> <C> <C>
1987...................................................... $ 9,637 6.5%
1988...................................................... 10,649 10.5
1989...................................................... 11,920 11.9
1990...................................................... 13,409 12.5
1991...................................................... 15,019 12.0
1992...................................................... 16,739 11.5
1993...................................................... 18,945 13.2
1994...................................................... 22,334 17.9
1995...................................................... 24,174 8.2
1996...................................................... 26,759 10.7
</TABLE>
- ---------------
(1) Excluding investment income on the net proceeds of $33.5 million from a
secondary public stock offering in 1993, the percentage increase in
operating earnings was 11.9% and 11.4% for 1994 and 1993, respectively, and
the average annual percentage increase in earnings from operations for the
period 1987-1996 was 10.7%.
AHL, is rated "A (Excellent)" by A. M. Best, an independent nationally
recognized insurance publishing and rating service and has an insurer claims
paying ability rating of "AA" from S&P. A.M. Best ratings for solvent insurance
companies range from "A++ (Superior)" to "D (Very Vulnerable)." During the
second quarter of 1997, Columbia Universal's A.M Best rating was upgraded from
"B (Adequate)" to "A- (Excellent)". An A.M. Best rating is intended to provide
an independent opinion of an insurer's ability to meet its obligations to
policyholders and should not be considered an investment recommendation. A
Standard & Poor's insurance claims paying ability rating is an assessment of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with its terms. Standard & Poor's ratings ranges
from "AAA (Extremely strong capacity to meet contractual policy obligations)" to
"D (Default, terms of the obligation will not be met)". AHL's "AA" rating, the
second highest major rating category, indicates a very strong capacity to meet
contractual policy obligations. At March 31, 1997, the Company had $1.7 billion
of total assets, $225.7 million of stockholders' equity, and more than $22.1
billion of gross life insurance volume in force. Also, approximately 96% of the
$803.4 million of debt securities held by the Company had investment grade
ratings.
The executive offices of the Company and its subsidiaries, other than
Columbia Universal, are located at the American Heritage Life Building, 1776
American Heritage Life Drive, Jacksonville, Florida 32224 and
37
<PAGE> 39
the Company's telephone number is (904) 992-1776. The executive offices of
Columbia Universal are located at 11044 Research Boulevard, Building A, 5th
Floor, Austin, Texas 78759 and its telephone number is (512) 345-3200.
BUSINESS STRATEGIES
The Company's objective is to continue its record of increased operating
earnings by following the strategies set forth below:
COMMITMENT TO CORE BUSINESSES. The Company's primary focus will
continue to be on its core businesses. Additionally, the Company will
continue to evaluate opportunities to grow from internal expansion as well
as by acquisitions of blocks of business and/or companies that are
compatible with the Company's core businesses.
CONCENTRATION ON MARKET NICHE. The Company believes it has a
competitive advantage in the payroll allotment marketplace based upon its
commitment to provide quality service, its offering of an expanding
portfolio of products, and its development of processes and technology that
are unique to servicing and administering that marketplace.
SYNERGISTIC MARKETING AND STRATEGIC ALLIANCES. The Company's three
marketing areas -- ordinary, group and credit -- provide opportunities for
cross-selling the Company's products. The Company's group operations in
particular provide the Company's ordinary operations access to sell payroll
allotment products. The Company also has and is continuing to develop
strategic alliances with other insurers to cross-sell such entities'
products and to allow each entity access to the other's distribution
channels.
FOCUS ON EXPENSE CONTROL. The Company believes that its record of
profitable growth has resulted from a combination of revenue growth and
focus on expense control. The Company's ratio of general insurance expenses
to total revenue (defined for this purpose as including premiums, premium
equivalents and investment income and excluding realized investment gains
and losses) has been recognized as being low as compared to industry norms.
General insurance expenses as a percentage of total revenues for the years
ended December 31, 1987 through 1996 and the three months ended March 31,
1997 ranged from a high of 6.2% to a low of 4.9%.
ACQUISITIONS
The Company entered into an agreement in principle on December 10, 1996 to
acquire Columbia Universal for a purchase price of $44.0 million. This
transaction closed on March 3, 1997. Columbia Universal markets individual life,
annuity and supplemental health products to selected markets. Columbia Universal
had premiums and premium equivalents of $36.4 million for the year ended
December 31, 1996, and total assets of $368.5 million at December 31, 1996. The
acquisition provides new distribution channels for the Company's ordinary
payroll products and sales opportunities for both companies and is projected to
have a positive impact on the Company's future operating earnings.
On April 16, 1997, the Company announced an agreement in principle to
acquire Concord General Life Insurance Company, for total consideration of $7.5
million in cash. The transaction, which is subject to regulatory approval and
the execution of a definitive agreement, is expected to be completed in the
second quarter of 1997. Concord primarily markets supplemental life and health
insurance products through worksite marketing and will increase the Company's
presence in the Northeast.
Effective December 31, 1996, the Company acquired a block of payroll
deduction interest-sensitive whole life business from Kentucky Home Mutual Life
Insurance Company. Additionally, during the past six years, the Company has
acquired three other blocks of business. Excluding the Columbia Universal and
Concord acquisitions, these four blocks of business aggregated $23.4 million in
additional annualized premiums and $155.4 million in assets and have provided
new distribution channels for the Company's ordinary payroll products.
The financial information included in this prospectus includes the balance
sheet information on the acquisition of Kentucky Home Mutual Life Insurance
Company as of December 31, 1996, the
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<PAGE> 40
effective date for the acquisition, and March 31, 1997. Amounts for Columbia
Universal are not reflected in the Company's December 31, 1996 financial
statements.
MARKETING AREAS
The Company has three primary marketing areas: ordinary, group and credit.
The following table sets forth the insurance revenues and pre-tax operating
earnings of the three marketing areas for each of the years in the five year
period ended December 31, 1996 and for the three months ended March 31, 1997 and
1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INSURANCE REVENUES(1):
Ordinary
Life................ $ 13,404 $ 9,233 $ 42,998 $ 40,173 $ 38,405 $ 37,000 $ 35,753
Accident and
health............ 25,845 22,796 94,423 83,545 75,588 71,975 65,464
-------- -------- -------- -------- -------- -------- --------
Total
ordinary..... $ 39,249 $ 32,029 $137,421 $123,718 $113,993 $108,975 $101,217
-------- -------- -------- -------- -------- -------- --------
Group
Life................ $ 1,878 $ 1,717 $ 10,482 $ 8,604 $ 7,719 $ 10,350 $ 10,832
Accident and
health............ 5,232 7,016 24,998 31,321 35,503 42,473 48,325
-------- -------- -------- -------- -------- -------- --------
Total group.... $ 7,110 $ 8,733 $ 35,480 $ 39,925 $ 43,222 $ 52,823 $ 59,157
-------- -------- -------- -------- -------- -------- --------
Credit
Life................ $ 7,155 $ 8,021 $ 36,650 $ 35,380 $ 29,516 $ 29,183 $ 25,053
Accident and
health............ 11,534 12,404 48,968 48,228 43,858 36,395 26,635
-------- -------- -------- -------- -------- -------- --------
Total credit... $ 18,689 $ 20,425 $ 85,618 $ 83,608 $ 73,374 $ 65,578 $ 51,688
-------- -------- -------- -------- -------- -------- --------
Total.......... $ 65,048 $ 61,187 $258,519 $247,251 $230,589 $227,376 $212,062
======== ======== ======== ======== ======== ======== ========
INSURANCE REVENUES AND
PREMIUM EQUIVALENTS(1):
Ordinary............... $ 53,147 $ 40,319 $181,469 $167,328 $161,612 $149,106 $138,241
Group.................. 50,201 48,502 214,933 206,354 167,520 158,188 163,701
Credit................. 40,517 33,177 171,209 138,134 116,318 103,113 93,027
-------- -------- -------- -------- -------- -------- --------
Total.......... $143,865 $121,998 $567,611 $511,816 $445,450 $410,407 $394,969
======== ======== ======== ======== ======== ======== ========
PRE-TAX OPERATING
EARNINGS(2):
Ordinary............... $ 10,185 $ 8,359 $ 35,070 $ 28,935 $ 26,049 $ 21,798 $ 17,322
Group.................. 1,419 1,696 4,513 7,470 7,323 6,042 5,269
Credit................. 881 631 3,750 2,739 1,754 1,720 2,969
-------- -------- -------- -------- -------- -------- --------
Total.......... $ 12,485 $ 10,686 $ 43,333 $ 39,144 $ 35,126 $ 29,560 $ 25,560
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Pursuant to generally accepted accounting principles, insurance revenues
include only the fees charged for interest-sensitive and administrative
services only business and do not include group and credit premium
equivalents and cash deposits from interest-sensitive products. Thus it is
necessary to evaluate insurance revenues including premium equivalents.
Ordinary insurance revenues for reporting purposes pursuant to generally
accepted accounting principles include only the cost of insurance, expense
and surrender charges for interest-sensitive products. Insurance revenues do
not include cash deposits from interest-sensitive products. Group and credit
insurance revenues do not include premium equivalents for the periods
presented. Group premium equivalents represent the claim costs paid for
split funded or self funded type plans which are paid with policyholder
funds as opposed to being paid by the Company. Under indemnity type plans
offered by the Company, claims are considered in determining the premiums
39
<PAGE> 41
to be paid by the policyholder. For split funded or self funded type plans,
the Company pays the claim costs with policyholder funds and such amounts
are not included in the premiums paid to the Company. Credit premium
equivalents represent reinsured premiums and earned premium equivalents
related to administrative services only business.
(2) Pre-tax operating earnings represent the pre-tax operating earnings of the
respective marketing areas excluding non-insurance related income and
expense and realized investment gains and losses.
ORDINARY DEPARTMENT
GENERAL. Ordinary operations provide interest-sensitive products
(universal life, single and flexible premium deferred annuities and
excess-interest whole life), single premium immediate annuities, level and
decreasing term products and supplemental accident and health insurance products
to individuals. The largest portion (76.7% for the three months ended March 31,
1997) of new annualized sales was produced on a payroll allotment basis with the
remainder produced by a variety of direct billing methods through individual
agents. The Company's strategy in its ordinary operations is to offer a broader
product mix than its competitors in the payroll allotment area and to solicit
all of the employee base by targeting direct sales of insurance products to
higher income employees in addition to payroll allotment sales. Recent life
insurance studies published by LIMRA International, a prominent industry market
research organization, indicate that the Company is one of only four life
insurance companies that sell in excess of $40 million of voluntary payroll life
and payroll health insurance premiums per year. To describe the Company's
differentiation in the marketplace, the Company has coined the following
descriptive phrase: "AHL -- The Workplace Marketer(R) -- the Company that serves
the life and supplemental health insurance needs of the American worker -- from
the lunchroom to the board room."
Distribution by payroll allotment requires a sophisticated data processing
capability which the Company has developed over the years. The Company believes
it has sufficient data processing capacity to accommodate future growth for the
foreseeable future without any significant additional capital expenditures.
The Ordinary Department has been a key component of the strategy and
profit-making ability of the Company since its founding. For the three months
ended March 31, 1997, the Ordinary Department accounted for approximately 82% of
the Company's pre-tax operating earnings, which excludes non-operating items not
allocated to the marketing areas.
Initially, ordinary operations consisted only of life insurance products.
In the mid-1970's, ordinary health insurance products were introduced into the
product portfolio in response to the Company's increasing sales opportunities
and successes in the payroll allotment market niche.
More recently, the Company has begun to recognize an adjunct market that is
available and very synergistic to the payroll deduction marketing
efforts -- that being the corporate life insurance needs of the payroll
deduction client companies and the personal life insurance needs of the owners,
executives and managers of those client companies. As a result, the strategic
marketing mission has been expanded to include this adjunct market niche in
addition to the more traditional rank and file worker market addressed by other
payroll deduction marketing life insurance companies.
MARKETS. Many ordinary life insurance companies focus on the upscale
market consisting of those individuals earning $80,000 or more. However, this
target market constitutes a small percentage of the buyer population. By
targeting the entire workplace, including the lower income worker earning under
$40,000 per year and the middle income worker earning $40,000-$80,000 per year,
the Company has increased its market to a majority of the buyer population.
Furthermore, the Company offers a multiple product line of life and supplemental
health products, rather than the more narrow product mix offered by some other
companies, thereby increasing its marketing opportunities.
The Company believes that by targeting a much larger market and offering
the workplace market a full range of life and supplemental health products
results in a stronger marketing strategy.
40
<PAGE> 42
TECHNOLOGY. The Company has introduced new state-of-the-art technology for
its agents during the first part of 1997. This new comprehensive system consists
of three components:
- An integrated software package that provides sales presentations,
proposal illustrations and computer enrollment capabilities of its entire
portfolio of life, health and annuity products.
- An "on-line" access that provides its agents 24 hours a day, seven days a
week access via modem to their in-force and pending policyholder data and
production information.
- An agent management software package specifically designed for the
payroll deduction marketplace that assists the Company's agents in
managing their business.
The Company believes that the new technology will allow its agency force to
operate more effectively and allow the Company to process new business more
efficiently.
PRODUCTS. The Company's strategy is to price its products at levels
competitive with those of comparable products in the market, so long as they
will provide an acceptable profit margin. Set forth below are the primary
products offered:
<TABLE>
<CAPTION>
PAYROLL ALLOTMENT PRODUCTS: UPSCALE PRODUCTS:
- --------------------------- -----------------
<S> <C>
Universal Life Universal Life
Term Life Term Life
Annuities Annuities
Cancer/Dread Disease Long Term Care
Accident Home Health Care
Disability Income
Hospital Indemnity
Long Term Care
</TABLE>
It is the general policy of the Company to declare the interest rate to be
credited on funds received from interest-sensitive products monthly with such
rates being guaranteed for one year for both first year and renewal funds during
a particular month. All interest-sensitive products are subject to surrender
charge provisions which vary depending upon the particular type of policy. For
universal life-type policies, the surrender charges generally range over a
period of 10-20 years at varying rates, depending upon the plan of insurance.
For annuities, the surrender charges generally range over a period of 7-10 years
with charges varying from 1% to 10% of the accumulated fund value over the
surrender charge period.
All ordinary accident and health products are guaranteed renewable, with
periodic rate increases permitted due to adverse claims experience with the
approval of the respective state insurance departments. Major health products
include cancer/dread disease, accident, disability income, long-term care, home
health care and hospital income. Premiums on ordinary policies are payable on a
monthly, quarterly, semi-annual, annual, single or flexible premium basis.
The Company's current practice dictates that unless the need for a medical
examination is indicated by the age and amount applied for or by an
investigation, the majority of ordinary life insurance is written without
requiring a medical examination in amounts up to $250,000 on applicants aged
0-35; up to $150,000 on applicants aged 36-40; up to $99,999 on applicants aged
41-50; up to $49,999 on applicants up to age 60. Somewhat higher limits are
permitted for certain agents with home office approval. A blood chemistry
profile is generally required for insurance amounts of $100,000 and greater.
DISTRIBUTION SYSTEM/STRATEGIC ALLIANCES. The Company's products are
marketed through the personal producing general agent ("PPGA") system in 49
states. The Company has found the PPGA system to be an efficient distribution
system. These agents are not exclusively AHL producers but may write business
for several insurance companies. Each PPGA's compensation is based only upon
production. Additionally, in 1996 AHL launched a strategic alliance initiative
by seeking targeted life insurance companies to offer AHL's workplace marketing
products through their existing distribution systems. The interest level
expressed by the targeted companies was high due to several factors, including
the promising potential of workplace marketing,
41
<PAGE> 43
the targeted companies' lack of one or more of the major components necessary
for success in workplace marketing, and the targeted companies' recognition of
AHL as a successful, quality company dedicated and committed to workplace
marketing. The Company presently has strategic alliance partnerships in various
stages of development with several major life insurance companies which are
expected to provide access to significant distribution systems during 1997.
The Ordinary Department distribution system operates with the efficiency
and effectiveness that are consistent with the Company's philosophy as a service
oriented, results driven organization. In addition to the Home Office, the
Company maintains regional offices located throughout the United States. The
Company has implemented plans to expand its national presence in 1997 by
establishing additional regional offices in Lacrosse, Wisconsin; Denver,
Colorado; and a site to be determined in New England. The decision to expand the
number of regional offices was influenced by the Company's desire to fully
support the evolving opportunities developing with strategic alliances and
national accounts.
GROUP DEPARTMENT
GENERAL. Group operations distribute insurance products and related
services to large employers for their employee benefit plans. The Company
provides life, disability, medical and dental insurance programs, which are the
foundation of any employer's package of group benefits. The Company furnishes
all components necessary to effectively manage program costs for the client
companies including a provider network, managed care program and benefits
determination. Group products include group term life insurance, accidental
death and dismemberment, short-term disability, long-term disability, dental and
major medical coverage. In offering these product lines, the Company provides a
wide range of funding vehicles from fully insured to employer funded products,
which the Company tailors to the particular needs of its employer clients.
MARKETS. Although the Company's Group Department focuses its efforts in
the southeastern United States, it has clients of national scope. The Company's
primary market for group life and health insurance is corporate employers that
have more than 100 employees located in the southeast. Employer groups range in
size from 100 to over 40,000 employees. The Company has focused on an integrated
approach to manage benefits. With health care being a locally delivered product,
it is important to establish close relations with providers and client
companies.
The Company's target market will continue to be corporate employers with
100 or more lives. Particular emphasis has been placed on direct marketing to
those employers having a home office or regional presence within the
southeastern United States employing between 500 and 5,000 employees. The
products offered by the Company's Group Department complement the individual
life and health products sold on a payroll deduction basis and provide the
Company's agents and brokers and the Company's client companies with a complete
portfolio of products and services.
PRODUCTS. The Company's group products include group term life insurance,
accidental death and dismemberment, short-term disability, long-term disability,
dental, and major medical coverage. A wide range of funding vehicles, including
fully insured, split funding and self-funded products, are sold within these
product lines. For the years ended December 31, 1996 and 1995, approximately 83%
and 81%, respectively, of group business (based on premiums and premiums
equivalents) was written on a self-funded or split funded basis. For the three
months ended March 31, 1997 and 1996, approximately 86% and 82%, respectively,
of group business was written on a self-funded or split funded basis.
The Company's group business has responded to the market by offering more
products which allow employers to share more of the risk for the financing of
their health benefit programs. There has been a shift in the Company's block of
business from traditionally funded products to split funded products and
administrative services only products which may be purchased with or without
specific and aggregate stop-loss coverage. The impact of this in the financial
statement presentation has been a reduction in traditional premium levels offset
by an increase in premium equivalents.
The Company has developed innovative new products and approaches to
controlling and reducing health care costs for its client companies.
Specifically, two areas that continue to enhance the products and services
42
<PAGE> 44
offered by the Group Department are the AHL Select Provider Network and its
managed care activities. Through the AHL Select Provider Network, AHL's
customers receive preferential pricing from hospitals, physicians, and other
providers of medical services and supplies. At March 31, 1997, there were 2,019
hospitals and 125,423 physicians included in the AHL Select Provider Network.
The Company's managed care activities, which utilize a professional staff with
diverse medical and clinical backgrounds to assist the Company's insureds in
obtaining quality medical care, include preadmission certification, prenatal,
cancer, psychiatric, substance abuse, and large case management programs.
The Company will continue to develop products and services to meet
employer/employee needs. As managed care has gained growing acceptance within
the Company's market, the Company has decided to complement its product line
with the introduction of health maintenance organization ("HMO") products. The
creation of a new HMO subsidiary and filing with Florida regulatory agencies
took place during 1996. The HMO subsidiary was licensed during the second
quarter of 1997 and initial product offerings will be within the North Florida
area with expansion to other Florida metropolitan areas.
DISTRIBUTION SYSTEM. The Company's group life and health products are
distributed through its regional group managers working with agents,
consultants, brokers and directly with policyholders.
The Company's strategy of focusing its marketing efforts on the brokerage
and consulting community has resulted in a significant portion of sales coming
from this important business segment. The Company has been successful in
demonstrating the value of its products and services to leading brokerage firms.
CREDIT DEPARTMENT
GENERAL. Credit operations consist of life and accident and health
insurance coverages offered to consumer debtors, primarily through banks,
automobiles dealers, finance companies and retailers. The Company currently
offers credit insurance products in 44 states and ranks among the top 15 credit
life insurance providers in the country. Typically, credit insurance will pay
outstanding loan obligations in the event of an insured loss. This coverage is
issued on either the single-premium or outstanding loan balance basis. Credit
life is sold on a reducing or level-term basis. Credit accident and health
insurance will normally only be written in conjunction with credit life
insurance.
MARKETS AND PRODUCTS. AHL is a full service credit insurance operation
(credit life, credit accident and health insurance) providing direct and
reinsured programs to a broad spectrum of the marketplace. In addition, credit
related property insurance coverage through its wholly-owned subsidiary, First
Colonial Insurance Company ("FCIC"), is offered.
The Credit Department tailors programs to meet specific consumer and
lending requirements. The Company's ability to offer property products, as well
as life and disability products, has contributed to its current growth and
should continue to enhance future growth as FCIC expands into new markets and
develops new products. FCIC is currently licensed in 13 states.
Credit operations consist of life, accident and health and property
insurance coverages offered to consumer debtors, primarily through banks,
automobiles dealers, finance companies and retailers. Typically, this insurance
will pay outstanding loan obligations in the event of an insured loss. This
coverage is issued on either a single-premium or outstanding loan balance basis.
Credit life is sold on a reducing or level-term basis and is available on a
single-life or, if permitted by state law, on a joint-life basis where the
related loan is co-signed.
FCIC's products are designed to address the additional needs of the clients
of the Credit Department. Collateral protection coverage is marketed to
financial institutions and installment floater and vendor's single interest
coverage are marketed to consumer finance companies and retail dealers. In
addition, unemployment insurance is offered where permitted. All of the
foregoing terms and limits are subject to statutory requirements which may vary
in individual states from those specified above.
COMPETITION. The credit insurance industry is well established and is
closely controlled by state regulation. Competition is still very strong even
though there has been some retrenchment in the industry.
43
<PAGE> 45
Several companies have restricted their marketing and several major providers
have withdrawn completely from the marketplace, which management believes has
provided significant opportunities for both new account sales and the
administration of runoff business for companies that have ceased writing credit
insurance.
The Company has successfully administered the run-off business of two
companies that had terminated their credit operations and is currently
administering the business of a large automobile credit insurance company that
ceased writing new business in 1995. The Company also has increased its writings
of reinsured business which currently accounts for 68% of total credit business
and which generally provides less risk to the Company than fully insured
programs. At December 31, 1996, the Company administered 134 reinsurance
companies compared to 10 in 1990 which with tight expense control allows the
Company to be very competitive in this market.
DISTRIBUTION SYSTEM. The distribution channels used by AHL and FCIC
include direct marketing by regional sales managers, home office-based marketing
staff and the general agency system. The credit marketing employees' primary
responsibilities are to attract new business, service accounts and support the
general agents. AHL and FCIC do not use direct mail or other mass
solicitation-type marketing.
INVESTMENTS
The Company's investment objective is to earn a favorable return on
invested assets in excess of contractual obligations through a diversified
portfolio of high-quality, income-producing assets including primarily bonds,
preferred stocks, common stocks and mortgages (residential and commercial). The
Company's current investment strategy includes increasing its investments in
corporate bonds and mortgage loans while decreasing its investments in GNMA's as
they pay down. The Company carefully matches the investment portfolio's assets
with its policy liabilities. A positive investment spread has been attained for
all products. The maturity of the investment portfolio is monitored so that the
Company will be able to fund its future expected cash obligations.
At March 31, 1997 and December 31, 1996, the Company had consolidated
invested assets of $1.3 billion and $1.0 billion, respectively. The following
tabulation sets forth the categories, amounts and percentages of these
investments.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 % OF TOTAL 1996 % OF TOTAL
---------- ---------- ------------ ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Debt securities available-for-sale.............. $ 803,415 60.6% $ 521,916 51.6%
Equity securities available-for-sale............ 36,202 2.7 34,520 3.4
Mortgage loans on real estate................... 60,663 4.6 53,736 5.3
Investment real estate.......................... 461 -- 453 --
Policy loans.................................... 423,078 31.9 399,608 39.5
Short-term investments.......................... 1,908 .2 1,216 .2
---------- ----- ---------- -----
Total................................. $1,325,727 100.0% $1,011,449 100.0%
========== ===== ========== =====
</TABLE>
44
<PAGE> 46
At March 31, 1997, the Company had consolidated debt securities
available-for-sale at an amortized cost of $812.7 million and a fair value of
$803.4 million. The following tabulation sets forth these investments by
Standard and Poor's rating categories.
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1997
RATING AMORTIZED COST FAIR VALUE
- ------ -------------- --------------
($ IN THOUSANDS)
<S> <C> <C>
AAA......................................................... $279,894 $273,184
AA.......................................................... 59,568 58,278
A,A-........................................................ 177,379 176,514
BBB+, BBB, BBB-............................................. 226,889 225,232
BB+ and lower............................................... 31,341 30,459
Non-rated................................................... 345 361
Private placements.......................................... 7,692 10,448
-------- --------
Total bonds................................................. 783,108 774,476
Redeemable preferred stocks................................. 29,598 28,939
-------- --------
Total debt securities available-for-sale.......... $812,706 $803,415
======== ========
</TABLE>
The amortized cost and estimated fair value of debt securities at March 31,
1997, by contractual maturity, were as follows. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
repay obligations with or without penalties.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------
AMORTIZED COST ESTIMATED FAIR VALUE
-------------- --------------------
($ IN THOUSANDS)
<S> <C> <C>
Due in one year or less..................................... $ 1,650 $ 1,657
Due after one year through five years....................... 30,481 31,402
Due after five years through ten years...................... 163,701 166,313
Due after ten years......................................... 348,083 341,768
Mortgage backed securities.................................. 239,193 233,336
Redeemable preferred stocks................................. 29,598 28,939
-------- --------
Total............................................. $812,706 $803,415
======== ========
</TABLE>
The following tabulation provides information with respect to the
investment results of the Company for the years ended December 31, 1996, 1995
and 1994 and for the three months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------------------- ------------------------------
1997 1996 1996 1995 1994
---------- -------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average invested assets,
weighted(1)...................... $1,345,939 $977,797 $997,599 $923,946 $848,012
Net investment income.............. 25,223 19,070 77,035 70,601 66,706
Realized investment gains.......... 103 105 420 6,003 2,011
Change in unrealized investment
gains (losses) on equity and debt
securities(2).................... (8,441) (6,464) (4,614) 27,664 (24,919)
Ratio of net investment income to
weighted average invested
assets(3)........................ 7.50% 7.80% 7.72% 7.64% 7.87%
</TABLE>
- ---------------
(1) Average invested assets are calculated using fair values for all securities
as required by Financial Accounting Standard No. 115 (FAS 115), "Accounting
for Certain Investments in Debt and Equity Securities."
(2) Unrealized gains and losses are calculated on both equity and debt
securities as prescribed by FAS 115.
(3) Since all securities are carried at fair values for all years presented, all
increases (decreases) in fair value result in a reduction (increase) of the
ratio calculated above.
45
<PAGE> 47
At March 31, 1997, U.S. Treasury obligations and mortgage backed
securities, aggregated at fair value $195.7 million or 25.3% of the total bond
portfolio of $774.5 million. The amortized cost of non-investment grade bonds
(rated below BBB by Standard & Poor's Corporation and excluding private
placements and non-rated securities) at March 31, 1997 was $31.3 million with a
fair value of $30.5 million. At fair value, these investments represented 1.8%
of total consolidated assets, or 2.3% of invested assets. The Company's holdings
of non-investment grade paper has been limited and will continue to be minimal
in the future.
The Company's mortgage loan portfolio aggregated $60.7 million at March 31,
1997. There were no non-performing mortgage loans at March 31, 1997.
ADDITIONAL INFORMATION REGARDING INSURANCE OPERATIONS
The following table sets forth the cash premiums and deposits received by
geographic region in the United States for the Company's insurance subsidiaries
for the three years ended December 31, 1996 and for the three months ended March
31, 1997 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Southeast........................... $60,313 $63,036 $265,784 $258,408 $252,531
Southwest........................... 19,573 9,618 45,307 43,804 41,863
Midwest............................. 5,172 3,565 16,204 14,185 13,007
Northeast........................... 2,350 2,122 12,920 8,220 6,934
Northwest........................... 2,924 2,525 14,699 12,523 8,586
------- ------- -------- -------- --------
Total..................... $90,332 $80,866 $354,914 $337,140 $322,921
======= ======= ======== ======== ========
</TABLE>
The following tabulation sets forth the amount of gross life insurance
volume in force by industry segment at December 31, 1996, 1995, and 1994 and at
March 31, 1997 and 1996:
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
----------------- ---------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
($ IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Type of Insurance:
Ordinary............................... $11,495 $ 9,272 $ 9,759 $ 9,167 $ 8,282
Credit................................. 4,485 4,255 4,590 4,138 3,578
Group.................................. 6,154 5,198 6,174 5,079 4,956
------- ------- ------- ------- -------
Total.......................... $22,134 $18,725 $20,523 $18,384 $16,816
======= ======= ======= ======= =======
</TABLE>
REINSURANCE
It is the general practice of the life insurance industry to reinsure
portions of life and accident and health insurance risks with other companies.
The maximum amount of ordinary insurance that AHL generally retains on any one
life currently insured under ordinary policies is $100,000 for policies issued
prior to July 1, 1994 and $200,000 for policies issued subsequent to July 1,
1994, with reductions for certain substandard, military and older age risks. The
major portion of reinsurance ceded on a GAAP basis is under agreements with
American United Life Insurance Company, Barnett Banks Insurance, Inc., General
Financial Life Insurance Company, Lincoln National Life Insurance Company,
Optimum Reassurance Life Insurance Company, RGA Reinsurance Company,
Southwestern Dealers Insurance Company, and Transamerica Occidental Life
Insurance Company. At December 31, 1996, the aggregate amount of life insurance
volume in force ceded under reinsurance agreements totaled $4.6 billion (22.4%
of the total in force at that date). For the year ended December 31, 1996, $50.1
million, or 22.9%, of the total accident and health insurance premiums written
were reinsured.
46
<PAGE> 48
Pursuant to GAAP and the terms and conditions of the reinsurance agreements
with the reinsurers, the Company has taken credit in its consolidated financial
statements for the portion ceded to the respective reinsurer.
Management reviews the financial condition of its reinsurers and monitors
concentrations of credit risk arising from similar geographic regions,
activities or economic characteristics of the reinsurers to minimize its
exposure to significant losses from reinsurer insolvencies. All receivables due
from the reinsurers have been settled in a timely manner.
GOVERNMENT REGULATION
The Company and its insurance subsidiaries are subject to regulation and
supervision by the states in which the insurance subsidiaries transact business.
The laws of the various states establish regulatory agencies with broad
administrative powers to grant and revoke licenses to transact business,
regulate rates on certain business prior to use, establish reserve requirements,
determine the form and content of required statutory financial statements,
determine the reasonableness and adequacy of statutory capital and surplus and
prescribe the types of permitted investments and the maximum concentrations of
certain classes of investments. As part of their routine regulatory oversight
process, approximately once every three years state insurance departments
conduct periodic detailed examinations of the books, records and accounts of
insurance companies domiciled in their states. Further, insurance companies are
subject to market conduct examinations by state insurance regulators. Such
examinations are not conducted according to any fixed schedule.
Insurance companies are required to file detailed annual and quarterly
statements with the state insurance regulators in each of the states in which
they do business, and their business and accounts are subject to examination by
such agencies at any time. State insurance receivership laws, rather than
federal bankruptcy laws, govern the liquidation or rehabilitation of insurance
companies.
This insurance regulation and supervision is designed primarily to ensure
the financial stability of insurance companies and to protect policyholders
rather than shareholders or general creditors.
FINANCIAL REGULATION
The Risk-Based Capital for Life and/or Health Insurers Model Act (the
"Model Act") was adopted by the National Association of Insurance Commissioners
("NAIC") in 1992. A similar model act was adopted for property and casualty
insurance companies in 1994. The main purpose of these model acts was to provide
a tool for insurance regulators to evaluate the capital of insurers with respect
to the risks assumed by them and determine whether there is a need for possible
corrective action.
These model acts provide for four different levels of regulatory action,
each of which may be triggered if an insurer's Total Adjusted Capital is less
than a corresponding "level" of Risk Based Capital ("RBC"). A modified phase-in
test is triggered if an insurer's Total Adjusted Capital is less than 200% of
its "Authorized Control Level RBC" (as defined in the Model Act), or less than
250% of its Authorized Control Level RBC and the insurer has a negative trend
("the Company Action Level"). At the Company Action Level, the insurer must
submit a comprehensive plan to the regulatory authority which discusses proposed
corrective actions to improve its capital position. The "Regulatory Action
Level" is triggered if an insurer's Total Adjusted Capital is less than 150% of
its Authorized Control Level RBC. At the Regulatory Action Level, the regulatory
authority will perform a special examination of the insurer and issue an order
specifying corrective actions that must be followed. The "Authorized Control
Level" is triggered if an insurer's Total Adjusted Capital is less than 100% of
its Authorized Control Level RBC, and at that level the regulatory authority is
authorized (although not mandated) to take regulatory control of the insurer.
The "Mandatory Control Level" is triggered if an insurer's Total Adjusted
Capital is less than 70% of its Authorized Control Level RBC, and at that level
the regulatory authority must take regulatory control of the insurer. Regulatory
control may lead to rehabilitation or liquidation of an insurer.
Based on calculations using the NAIC formula as of December 31, 1996, all
of the Company's insurance subsidiaries exceeded the required level for RBC at
such time.
47
<PAGE> 49
DIVIDEND REGULATION
The Company is a legal entity separate and distinct from its subsidiaries.
As a holding company with no other significant business operations, its primary
sources of cash to meet its obligations are borrowings, dividends and other
payments from its insurance subsidiaries.
The Company's insurance subsidiaries are subject to various regulatory
restrictions on the maximum amount of payments, including dividends and other
distributions, that they may make to the Company without obtaining prior
regulatory approval. As a Florida domiciled insurance company, AHL is subject to
Florida law, to the effect that life and health insurance company dividends may
be made without prior approval of the Florida Insurance Commissioner if the
dividend is equal to or less than the greater of: (a) 10% of AHL's surplus as to
policyholders derived from realized net operating profits on its business and
net realized capital gains; or (b) AHL's entire net operating profits and
realized net capital gains derived during the immediately preceding calendar
year, if AHL will have surplus as to policyholders equal to or exceeding 115% of
the minimum required statutory surplus as to policyholders after the dividend is
paid.
As a Texas domiciled insurance company, Columbia Universal is subject to
Texas law to the effect that its dividends are limited to the greater of the net
statutory gain from operations for the preceding year or 10% of net statutory
surplus at the end of the preceding year, as further restricted by the balance
of "unassigned surplus" from which dividends are paid. Payment of dividends in
excess of such amount would require approval of the Texas Department of
Insurance. Prior notification to the Texas Department of Insurance is required
before the payment of dividends of any lesser amount.
If insurance regulators determine that payment of a dividend or any other
payment to an affiliate (such as a payment under a tax allocation agreement or
for employee or other services or pursuant to a surplus debenture) would,
because of the financial condition of the paying insurance company or otherwise,
be hazardous to such insurance company's policyholders or creditors or to
certain other parties, the regulators may block payment of such dividends or
such other payment to the affiliates that would otherwise be permitted without
prior approval.
CHANGE OF CONTROL REGULATION
The states in which the Company's insurance subsidiaries are domiciled have
enacted legislation or adopted administrative regulations affecting the
acquisition of control of insurance companies as well as transactions between
insurance companies and persons controlling them. Most states require
administrative approval of the acquisition of control of an insurance company
incorporated in the state or the acquisition of control of an insurance holding
company whose insurance subsidiary is incorporated in the state. In Florida and
Texas, the acquisition of 5% and 10% of such shares, respectively, is generally
deemed to be the acquisition of "control" for the purpose of the holding company
statutes and requires not only filing of detailed information concerning the
acquiring parties and the plan of acquisition, but also administrative approval
prior to the acquisition.
LITIGATION
The Company's insurance subsidiaries, like other insurance companies, are
currently defendants in lawsuits that involve claims for punitive, exemplary or
other extracontractual damages, which are for amounts substantially in excess of
the actual damages sought. Management considers such litigation regrettably to
be of the type to which insurance companies are usually and customarily
subjected in the ordinary course of business and to date the settlements of such
claims of this nature have not been material to the financial position of the
Company. In the opinion of management, based on the currently ascertained facts
of the pending litigation, which the Company intends to vigorously defend, the
ultimate resolution of such litigation should not be material to the financial
position of the Company.
48
<PAGE> 50
COMPETITION
The life insurance industry is highly competitive. The competitors of the
Company consist of both stock and mutual companies, and in many instances they
have been in business for longer periods of time and may have greater financial
resources than the Company. However, management of the Company believes that its
policies are generally competitive with similar types of policies being offered
by other insurers doing business in the jurisdictions in which they operate.
In addition to life and health insurance companies which are competitors of
the Company, there are banks and other financial institutions that could be
permitted to sell life insurance products directly, thereby increasing
competition even more. However, there are a number of unresolved regulatory
issues related to the authority of banks located in the Company's major
marketing areas to compete directly with the Company in the sale of life
insurance products, including interest-sensitive products.
OTHER BUSINESS
The non-life insurance operations, excluding AHL, Columbia Universal and
FCIC, consisted primarily of intercompany operations which were eliminated in
consolidation and accordingly did not contribute materially to consolidated
operating earnings.
49
<PAGE> 51
MANAGEMENT
The following tabulation is a list of the names and ages as well as the
position held for the past five years by each executive officer and director of
the Company and certain executive officers of AHL, none of whom is related to
each other either by blood or marriage, except W. Ashley Verlander and Chris A.
Verlander, who are father and son, respectively, and A. Dano Davis and Robert D.
Davis, who are first cousins.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
T. O'Neal Douglas......................... 61 AHL and AHLIC -- Chairman of the Board and Chief
Executive Officer, Director
Chris A. Verlander........................ 49 AHL and AHLIC -- President and Chief Operating
Officer, Director
C. Richard Morehead....................... 50 AHL and AHLIC -- Executive Vice-President, Treasurer
and Chief Financial Officer
Charles C. Baggs.......................... 46 AHL -- Senior Vice-President, Administration
James H. Baum............................. 45 AHL -- Senior Vice-President Group Department
David A. Bird............................. 40 AHL -- Senior Vice-President Agency Department
W. Michael Heekin......................... 44 AHLIC -- Senior Vice-President and Corporate
Secretary; AHL -- Senior Vice-President, General
Counsel and Corporate Secretary
Elizabeth A. Mahin........................ 36 AHL -- Senior Vice-President and Chief Accounting
Officer
William J Thomas.......................... 52 AHL -- Senior Vice-President Credit Department
Curtiss S. Sheldon........................ 56 AHL -- Senior Vice-President and Chief Actuary
Edward L. Baker........................... 62 Director
A. Dano Davis............................. 51 Director
Robert D. Davis........................... 65 Director
H. Corbin Day............................. 59 Director
Radford D. Lovett......................... 63 Director
W. Ashley Verlander....................... 77 Director
</TABLE>
T. O'NEAL DOUGLAS' principal positions are those of: Chairman of the Board
of Directors of the Company, a position he has held since April, 1994; Chief
Executive Officer of the Company, a position he has held since February, 1990;
Director of the Company, a position he has held since July, 1987; Director of
AHL, a position he has held since January, 1984; Chief Executive Officer of AHL,
a position he has held since February, 1990; and Chairman of AHL, a position he
has held since April, 1994. From February, 1990 to April, 1996 he was President
of the Company. From July, 1986 to April, 1994 he was President of AHL. Mr.
Douglas is also a director of Physicians Sales and Service, Inc.
CHRIS A. VERLANDER'S principal positions are those of: President and Chief
Operating Officer of the Company, which he has held since April, 1996; Director
of the Company, a position he has held since July, 1987; Director of AHL which
he has held since April, 1985, Chief Operating Officer of the Company, which he
has held since April, 1996, and President of AHL, which he has held since April,
1994. Prior to April, 1996, and since April, 1990, he was Executive Vice
President of the Company. Prior to April, 1994 and since April, 1990, he was
Executive Vice President of AHL. Prior to April, 1994 and since September, 1985,
he was Corporate Secretary of the Company and AHL.
C. RICHARD MOREHEAD'S principal positions are those of Executive Vice
President of the Company and AHL, which he has held since April, 1994, Treasurer
and Chief Financial Officer and Chief Accounting Officer of the Company and
Chief Financial Officer of AHL, which he has held since July, 1986 and Director
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of AHL, which he has held since July, 1990. Prior to April, 1994 and since July,
1986, he was Senior Vice President and Chief Financial Officer of the Company
and AHL. Prior to July, 1986 and since 1983, he was a partner in the accounting
firm of Peat, Marwick, Mitchell & Co. (now KPMG Peat Marwick LLP) and had been
affiliated with that firm since 1976.
CHARLES C. BAGG'S principal position is that of Senior Vice President of
AHL, a position he has held since December, 1990. Prior to December, 1990 and
since November, 1988 he was Vice President of AHL.
JAMES H. BAUM'S principal position is that of Senior Vice President, Group
Department, of AHL, a position he has held since September, 1987.
DAVID A. BIRD'S principal position is that of Senior Vice President, Agency
Department of AHL, which he has held since May, 1994. Prior to May, 1994 and
since January, 1994 he was Vice-President of AHL. Prior to 1994 and since 1987,
he was a Regional Director of AHL.
W. MICHAEL HEEKIN'S principal positions are those of Senior Vice President
and Corporate Secretary of the Company, which he has held since April, 1994;
Senior Vice President and General Counsel of AHL, which he has held since March,
1993; and Corporate Secretary of AHL, which he has held since April, 1994. Prior
to March, 1993 and since July, 1991, he was engaged by the Florida State
Insurance Department as the Deputy Receiver of Guarantee Security Life Insurance
Company in Receivership in Jacksonville, Florida. Prior to July 1991 and since
October, 1988, Mr. Heekin was Associate Dean of Florida State University College
of Law in Tallahassee, Florida.
ELIZABETH A. MAHIN'S principal position is that of Senior Vice President
and Chief Accounting Officer of AHL, which she has held since April, 1994. Prior
to April, 1994 and since August, 1990 she was Vice President and Controller of
AHL.
WILLIAM J THOMAS' principal position is that of Senior Vice President of
AHL, a position he has held since July, 1995. Prior to July, 1995 and since
April, 1990, he was Vice President of AHL.
CURTISS S. SHELDON'S principal position is that of Senior Vice President
and Chief Actuary of AHL, which he has held since August, 1993. Prior to August,
1993 and since June, 1978, he was with Southern Farm Bureau Life Insurance
Company, serving as vice president and chief actuary since February, 1987.
EDWARD L. BAKER has served as a Director since 1994. Mr. Baker has been
Chairman of the Board of Florida Rock Industries, Inc., a construction products
company since February, 1989. Mr. Baker is also a director of FRP Properties,
Inc., Flowers Industries, Inc. and Regency Realty.
A. DANO DAVIS has served as a Director since June, 1993. Mr. Davis has been
Chairman of the Board and Principal Executive Officer of Winn-Dixie Stores,
Inc., a retail grocery chain, since 1988.
ROBERT D. DAVIS has served as a Director since 1968. Mr. Davis has been
Chairman of the Board of D.D.I., Inc., a private investment company, since 1984.
Prior to June, 1990 and since 1988 he was Vice Chairman of the Board of
Winn-Dixie Stores, Inc. Mr. Davis is also a director of Winn-Dixie Stores, Inc.,
and First Union Corporation, a bank holding company.
H. CORBIN DAY has served as a Director since June, 1993 and has served on
the board of AHL since 1989. Mr. Day has been Chairman of the Board of Jemison
Investment Co., Inc., an investment banking firm since May, 1988. Mr. Day is
also a director of Blount International, Inc., a construction and manufacturing
company and a limited partner of Goldman, Sachs & Co., one of the Underwriters.
RADFORD D. LOVETT has served as a Director since 1989. Mr. Lovett has been
Chairman of the Board of Commodores Point Terminal Corp., which operates a
marine terminal, since 1982. Mr. Lovett is also a director of First Union
Corporation, Winn-Dixie Stores, Inc., Florida Rock Industries, Inc., a
construction products company and FRP Properties, Inc., a trucking and real
estate company.
W. ASHLEY VERLANDER has served as a Director of the Company since its
organization in 1968. He served as Chairman of the Board of the Company from
February, 1990 to April, 1994. He was Chairman of the Board of AHL from July,
1986 to April, 1994.
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DIRECTORS OF AHL
The following are the members of the Board of Directors of AHL, the
Company's principal subsidiary.
F. DUANE ACKERMAN, President and Chief Executive Officer of BellSouth
Corporation, Atlanta, Georgia (Telecommunications).
EDWARD L. BAKER, Chairman of the Board of Florida Rock Industries, Inc.,
Jacksonville, Florida (Construction Products Company).
I. JON BRUMLEY, Chairman of the Board and Chief Executive Officer of Mesa,
Inc., Irving, Texas (Oil and Gas Production Company).
JOHN ELLIS "JEB" BUSH, President of Codina Group, Inc., Coral Gables,
Florida (Real Estate).
ALVIN R. "PETE" CARPENTER, President and Chief Executive Officer of CSX
Transportation, Inc., Jacksonville, Florida (Transportation).
A. DANO DAVIS, Chairman of the Board and Principal Executive Officer of
Winn-Dixie Stores, Inc., Jacksonville, Florida (Retail Grocery Chain).
ROBERT D. DAVIS, Chairman of the Board of D.D.I., Inc., Jacksonville,
Florida (Investments).
H. CORBIN DAY, Chairman of the Board of Jemison Investment Co., Inc.,
Birmingham, Alabama (Investment Banker).
T. O'NEAL DOUGLAS, Chairman of the Board and Chief Executive Officer of the
Company and AHL.
LANGDON S. FLOWERS, Retired Chairman of the Board of Flowers Industries,
Inc., Thomasville, Georgia (Food Manufacturing and Distribution).
RADFORD D. LOVETT, Chairman of the Board of Commodores Point Terminal
Corp., Jacksonville, Florida (Marine Terminal).
CLARENCE V. MCKEE, Chairman of the Board, Chief Executive Officer and
President, McKee Communications, Inc., Tampa, Florida (Broadcasting).
PATRICIA G. MORAN, President and Chief Executive Officer of JM Family
Enterprises, Inc., Deerfield Beach, Florida (Automobile Distribution).
C. RICHARD MOREHEAD, Executive Vice President, Treasurer and Chief
Financial Officer of the Company and AHL.
HERBERT H. PEYTON, President of Gate Petroleum Company, Jacksonville,
Florida (Petroleum Products Retailing).
FREDERICK H. SCHULTZ, Private Investor, Jacksonville, Florida. Former Vice
Chairman of the Board of Governors of the Federal Reserve System, Washington,
D.C.
JAY STEIN, Chairman of the Board and Chief Executive Officer of Stein Mart,
Inc., Jacksonville, Florida (Retail Department Store Chain).
ROLF H. TOWE, Senior Partner of The Clipper Group, L.P., New York, New York
(Investments).
CHRIS A. VERLANDER, President and Chief Operating Officer of the Company
and AHL.
W. ASHLEY VERLANDER, Retired Chairman of the Board of the Company and AHL.
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DESCRIPTION OF THE FELINE PRIDES
The summaries of certain provisions of documents described below do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of such documents (including the
definitions therein of certain terms), forms of which are on file with the
Commission. Wherever particular sections of, or terms defined in, such documents
are referred to herein, such sections or defined terms are incorporated by
reference herein.
Each FELINE PRIDES will be issued under a Purchase Contract Agreement
between the Company and the Purchase Contract Agent. Each FELINE PRIDES offered
hereby initially will consist of a unit (referred to as an Income PRIDE) with a
Stated Amount of $50 comprised of (a) a Purchase Contract under which (i) the
holder will purchase from the Company on the Purchase Contract Settlement Date
of , 2000, for an amount equal to the Stated Amount, a number of new
shares of Common Stock equal to the Settlement Rate or the Cash Settlement Rate,
as applicable, described below under "Description of the Purchase
Contracts-General," and (ii) the Company will pay Contract Adjustment Payments
to the holder, and (b) (i) beneficial ownership of a % Trust Preferred
Security, having a stated liquidation amount per Trust Preferred Security equal
to the Stated Amount, representing a preferred, undivided beneficial interest in
the assets of the Trust, which will consist solely of the Junior Subordinated
Debentures, or (ii) in the case of a Tax Event or an Investment Company Event,
as described below, Junior Subordinated Debentures of the Company having a
principal amount equal to the Stated Amount. As long as the FELINE PRIDES are in
the form of Income PRIDES, the Trust Preferred Securities will be pledged to the
Collateral Agent, to secure the holder's obligation to purchase Common Stock
under the Purchase Contract.
SUBSTITUTION OF PLEDGED SECURITIES
Each holder will have the right, at any time after issuance of the Income
PRIDES, to substitute for any Trust Preferred Securities held by the Collateral
Agent Treasury Securities, in a principal amount per Purchase Contract equal to
the Stated Amount per Trust Preferred Security. Holders may make such
substitution only in integral multiples of 20 Income PRIDES. Securities with
respect to which Treasury Securities have been substituted for Trust Preferred
Securities as collateral to secure a holder's obligation under the Purchase
Contracts will be referred to as Growth PRIDES(SM). To create each Growth
PRIDES, the Income PRIDES holder will (a) deposit with the Collateral Agent a
Treasury Security and (b) transfer 20 Income PRIDES to the Purchase Contract
Agent accompanied by a notice stating that the Income PRIDES holder has
deposited a Treasury Security with the Collateral Agent and requesting that the
Purchase Contract Agent instruct the Collateral Agent to release to such holder
the 20 Trust Preferred Securities underlying such Income PRIDES. Upon such
deposit and receipt of an instruction from the Purchase Contract Agent, the
Collateral Agent will effect the release of the 20 Trust Preferred Securities
from the pledge under the Pledge Agreement free and clear of the Company's
security interest therein to the Purchase Contract Agent, which will (i) cancel
the 20 Income PRIDES, (ii) transfer the 20 Trust Preferred Securities to such
holder and (iii) deliver one Growth PRIDES to the holder. Each Growth PRIDES
will therefore consist of a unit with a face amount of $1,000 comprised of (a)
20 Purchase Contracts with respect to which (i) the holder will purchase from
the Company on the Purchase Contract Settlement Date or earlier for an amount of
cash equal to the Stated Amount, a number of shares of Common Stock of the
Company equal to the Cash Settlement Rate described herein, and (ii) the Company
will pay the holder Contract Adjustment Payments, and (b) beneficial ownership
of a Treasury Security having a principal amount at maturity equal to $1,000.
The Trust Preferred Securities released to the holder thereafter will trade
separately from the resulting Growth PRIDES. Contract Adjustment Payments will
be payable by the Company on the Growth PRIDES on March 31, June 30, September
30 and December 31 of each year from the time each Growth PRIDES was created. In
addition, interest would accrete on the underlying Treasury Securities.
Distributions on any Trust Preferred Securities still outstanding after the
Purchase Contract Settlement Date or after a substitution of collateral
resulting in the creation of Growth PRIDES will continue to be payable by the
Trust at the rate of % of the Stated Amount per annum, subject to the
Company's deferral rights described in "-- Current Payments."
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Holders who elect to substitute Pledged Securities, thereby creating Growth
PRIDES or recreating Income PRIDES (as discussed below), shall be responsible
for any fees or expenses payable in connection therewith. See "Certain
Provisions of the Purchase Contract Agreement and the Pledge Agreement --
Miscellaneous."
RECREATING INCOME PRIDES
A holder of each Growth PRIDES may recreate 20 Income PRIDES by (a)
depositing with the Collateral Agent 20 Trust Preferred Securities and (b)
transferring a Growth PRIDES to the Purchase Contract Agent accompanied by a
notice stating that the Growth PRIDES holder has deposited 20 Trust Preferred
Securities with the Collateral Agent and requesting that the Purchase Contract
Agent instruct the Collateral Agent to release to such holder the Treasury
Security related to such Growth PRIDES. Upon such deposit and receipt of
instructions from the Purchase Contract Agent, the Collateral Agent will effect
the release of the Treasury Security from the pledge of the Pledge Agreement
free and clear of the Company's security interest therein to the Purchase
Contract Agent which will (i) cancel the Growth PRIDES, (ii) transfer the
Treasury Security to such holder and (iii) deliver 20 Income PRIDES to the
holder.
CURRENT PAYMENTS
Holders of Income PRIDES are entitled to receive cash distributions at a
rate of % of the Stated Amount per annum, payable quarterly in arrears. The
quarterly payments on the Income PRIDES set forth on the cover page of this
Prospectus will consist of (i) cumulative cash distributions on the Trust
Preferred Securities payable by the Trust at the rate of % of the Stated
Amount per annum and (ii) Contract Adjustment Payments, payable by the Company,
until the Purchase Contract Settlement Date, at the rate of % of the Stated
Amount per annum.
The ability of the Trust to make the quarterly distributions on the Trust
Preferred Securities is solely dependent upon the receipt of corresponding
interest payments from the Company on the Junior Subordinated Debentures. The
Company has the right at any time, and from time to time, limited to a period
not extending beyond the maturity of the Junior Subordinated Debentures, to
defer the interest payments on the Junior Subordinated Debentures. As a
consequence of such deferral, quarterly distributions to holders of Income
PRIDES (or any Trust Preferred Securities outstanding after the Purchase
Contract Settlement Date or after a substitution of collateral resulting in the
creation of Growth PRIDES) would be deferred (but despite such deferral, would
continue to accumulate quarterly and would accrue interest thereon compounded
quarterly at the same rate as interest on the Junior Subordinated Debentures).
The Company also has the right to defer the payment of Contract Adjustment
Payments on the Purchase Contracts until the Purchase Contract Settlement Date;
however, deferred Contract Adjustment Payments will bear additional Contract
Adjustment Payments at the rate of % per annum (such deferred installments of
Contract Adjustment Payments together with the additional Contract Adjustment
Payments shall be referred to as the "Deferred Contract Adjustment Payments").
See "Description of the Purchase Contracts-Contract Adjustment Payments" and
"Description of the Trust Preferred Securities -- Distributions."
Subject to the Company's rights of deferral, in the event a holder of
Income PRIDES substituted Treasury Securities for the Trust Preferred
Securities, such holder would still receive quarterly Contract Adjustment
Payments. In addition, interest would accrete on the underlying Treasury
Securities.
VOTING RIGHTS
Holders of Trust Preferred Securities will not be entitled to vote to
appoint, remove or replace, or to increase or decrease the number of Regular
Trustees and will generally have no voting rights except in the limited
circumstances described under "Description of Trust Preferred
Securities -- Voting Rights." Holders of Purchase Contracts underlying the
Income PRIDES or Growth PRIDES will have no voting rights.
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LISTING OF THE SECURITIES
The Income PRIDES have been approved for listing on the NYSE under the
symbol "AHL prI," subject to official notice of issuance. The Growth PRIDES and
the Trust Preferred Securities will not be listed or traded on any securities
exchange.
NYSE SYMBOL OF COMMON STOCK
The Common Stock of the Company is listed on the NYSE under the symbol
"AHL."
DESCRIPTION OF THE PURCHASE CONTRACTS
GENERAL
Each Purchase Contract underlying a FELINE PRIDES (unless earlier
terminated, or earlier settled at the holder's option) will obligate the holder
of such Purchase Contract to purchase, and the Company to sell, on the Purchase
Contract Settlement Date, for an amount in cash equal to the Stated Amount, a
number of new shares of Common Stock, in the case of Income PRIDES, equal to the
Settlement Rate or Cash Settlement Rate, as applicable, or in the case of Growth
PRIDES, equal to the Cash Settlement Rate. The Settlement Rate will be
calculated as follows (subject to adjustment under certain circumstances): (a)
if the Applicable Market Value is equal to or greater than the Threshold
Appreciation Price, the Settlement Rate will be , (b) if the
Applicable Market Value is less than the Threshold Appreciation Price but
greater than $ , the Settlement Rate will equal the Stated Amount
divided by the Applicable Market Value, and (c) if the Applicable Market Value
is less than or equal to $ , the Settlement Rate will be
. "Applicable Market Value" means the average of the Closing
Prices (as defined) per share of Common Stock on each of the thirty consecutive
Trading Days (as defined) ending on the second Trading Day immediately preceding
the Purchase Contract Settlement Date.
The number of new shares of Common Stock issuable upon settlement of each
Purchase Contract through Early Settlement of FELINE PRIDES, cash settlement of
the Income PRIDES on the Purchase Contract Settlement Date and settlement of the
Growth PRIDES through application of the related Treasury Securities on the
Purchase Contract Settlement Date (the "Cash Settlement Rate") will be
calculated as (a) shares, in the case of Early Settlement (which is
equivalent to the number of shares that would be received upon Cash Settlement
of Income PRIDES on the Purchase Contract Settlement Date where the Applicable
Market Value is equal to or greater than the Threshold Appreciation Price), or
(b) 1.00125 times the Settlement Rate, in those other cases.
A holder of Income PRIDES whose Purchase Contract has been settled with
cash, or a holder of Growth PRIDES whose Purchase Contract has been settled
through application of the principal amount of the related Treasury Securities,
on the Purchase Contract Settlement Date, will receive 0.125% more shares of
Common Stock per Purchase Contract than will be received by a holder of Income
PRIDES whose Purchase Contracts are settled through the put of the related
Junior Subordinated Debentures to the Company, and the redemption of the related
Trust Preferred Securities, on the Purchase Contract Settlement Date. A holder
of FELINE PRIDES whose Purchase Contract has settled through Early Settlement
will receive 0.125% more shares of Common Stock per Purchase Contract than would
be received by a holder of Income PRIDES who receives the Settlement Rate on the
Purchase Contract Settlement Date if the Applicable Market Value was then equal
to or greater than the Threshold Appreciation Price.
No fractional shares of Common Stock will be issued by the Company pursuant
to the Purchase Contracts. In lieu of fractional shares otherwise issuable in
respect of Purchase Contracts being settled by a holder of Income PRIDES or
Growth PRIDES the holder will be entitled to receive an amount of cash equal to
such fraction of a share times the Applicable Market Value.
On the Purchase Contract Settlement Date, unless a holder of Income PRIDES
(i) has settled the underlying Purchase Contracts prior to the Purchase Contract
Settlement Date through the early delivery of cash to the Purchase Contract
Agent or (ii) has notified the Purchase Contract Agent of its intention to
settle the related Purchase Contract with separate cash on the Purchase Contract
Settlement Date in the manner described under "-- Early Settlement" and under
"-- Notice to Settle with Cash," respectively, and has so settled the Purchase
Contract or an event described under "-- Termination" below occurs, such holder
will be
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deemed to have requested the Trust to put the aggregate principal amount of its
Junior Subordinated Debenture to the Company, in return for an amount per Junior
Subordinated Debenture equal to $50, plus accumulated and unpaid distributions,
if any. Upon the repurchase of the Junior Subordinated Debentures by the Company
pursuant to a Put Option (as defined herein), (i) the proceeds from such
repurchase shall simultaneously be applied to redeem Trust Preferred Securities
of such holder having an aggregate Stated Amount equal to the aggregate
principal amount of the Junior Subordinated Debentures so repurchased and will
be automatically applied to satisfy in full such holder's obligation to purchase
Common Stock under the Purchase Contract and (ii) any accumulated and unpaid
distributions with respect to Junior Subordinated Debentures so repurchased will
be paid to such holder in cash. See "Description of the Junior Subordinated
Debentures -- Put Option." With respect to each Growth PRIDES outstanding on the
Purchase Contract Settlement Date, the principal amount of the Treasury
Securities underlying each Growth PRIDES, when paid at maturity, will be
automatically transferred to the Company to satisfy in full the holder's
obligation to purchase Common Stock under the 20 Purchase Contracts per Growth
PRIDES. Such Common Stock will then be issued and delivered to such holder or
such holder's designee, upon presentation and surrender of the certificate
evidencing such FELINE PRIDES (a "FELINE PRIDES Certificate") and payment by the
holder of any transfer or similar taxes payable in connection with the issuance
of the Common Stock to any person other than such holder. In the event that a
holder of either an Income PRIDES or Growth PRIDES effects the early settlement
of a Purchase Contract through the delivery of cash or a holder of Income PRIDES
settles a Purchase Contract with cash on the Purchase Contract Settlement Date,
the underlying Trust Preferred Securities or Treasury Securities, as the case
may be, will be released to the holder as described herein.
Prior to the date on which shares of Common Stock are issued in settlement
of Purchase Contracts, the Common Stock underlying the related Purchase
Contracts will not be deemed to be outstanding for any purpose and the holder
thereof will generally not have any voting rights, rights to dividends or other
distributions or other rights or privileges of a stockholder by virtue of
holding such Purchase Contracts. See "Description of Trust Preferred
Securities -- Voting Rights."
Each holder of Income PRIDES or Growth PRIDES, by acceptance thereof, will
under the terms of the Purchase Contract Agreement and the Purchase Contracts be
deemed to have (a) irrevocably agreed to be bound by the terms of the Purchase
Contracts and the Pledge Agreement for so long as such holder remains a holder
of such FELINE PRIDES and (b) duly appointed the Purchase Contract Agent as such
holder's attorney-in-fact to enter into and perform the related Purchase
Contracts on behalf of and in the name of such holder.
EARLY SETTLEMENT
A holder of Income PRIDES or Growth PRIDES may settle the underlying
Purchase Contracts prior to the Purchase Contract Settlement Date by presenting
and surrendering the FELINE PRIDES certificate evidencing such Income PRIDES or
Growth PRIDES at the offices of the Purchase Contract Agent with the form of
"Election to Settle Early" on the reverse side of the certificate completed and
executed as indicated, accompanied by payment (in the form of a certified or
cashier's check payable to the order of the Company) of an amount equal to the
Stated Amount times the number of Purchase Contracts being settled. So long as
the FELINE PRIDES are evidenced by one or more global security certificates
deposited with the Depositary (as defined below), procedures for early
settlement will also be governed by standing arrangements between the Depositary
and the Purchase Contract Agent. HOLDERS MAY SETTLE SECURITIES EARLY ONLY IN
INTEGRAL MULTIPLES OF 20 Income PRIDES or one Growth PRIDES.
Upon Early Settlement of Purchase Contracts underlying any Income PRIDES or
Growth PRIDES, (a) the holder will receive shares of Common Stock per
Income PRIDES having a Stated Amount of $50 or shares of Common Stock per
Growth PRIDES having a face amount of $1,000 (regardless of the market price of
the Common Stock on the date of purchase), subject to adjustment under certain
circumstances, (b) the Trust Preferred Securities underlying such Income PRIDES
or, if substituted, the Treasury Securities underlying such Growth PRIDES, will
thereupon be transferred to the holder free and clear of the Company's security
interest therein, (c) the holder's right to receive Deferred Contract Adjustment
Payments (as defined below), if any, on the Purchase Contracts being settled
will be forfeited and
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(d) the holder's right to receive future Contract Adjustment Payments will
terminate and, except as contemplated by clause (a) above, no adjustment will be
made to or for the holder on account of current or deferred amounts accrued in
respect thereof.
If the Purchase Contract Agent receives the FELINE PRIDES Certificate,
accompanied by the completed "Election to Settle Early" and requisite check,
from a holder of Securities by 5:00 p.m., New York City time, on a Business Day,
that day will be considered the settlement date. If the Purchase Contract Agent
receives the foregoing after 5:00 p.m., New York City time, on a Business Day or
at any time on a day that is not a Business Day, the next Business Day will be
considered the settlement date.
Upon Early Settlement of Purchase Contracts in the manner described above,
presentation and surrender of the FELINE PRIDES Certificate evidencing the
related Income PRIDES or Growth PRIDES and payment of any transfer or similar
taxes payable by the holder in connection with the issuance of the Common Stock
to any person other than the holder of such Income PRIDES or Growth PRIDES, the
Company will cause the shares of Common Stock being purchased to be issued, and
the Trust Preferred Securities or, if substituted, the Treasury Securities
securing such Purchase Contracts, to be released from the pledge under the
Pledge Agreement (described in "-- Pledged Securities and Pledge Agreement") and
transferred, within three Business Days following the settlement date, to the
purchasing holder or such holder's designee.
NOTICE TO SETTLE WITH CASH
A holder of an Income PRIDES wishing to settle the related Purchase
Contract with separate cash on the Purchase Contract Settlement Date must notify
the Purchase Contract Agent by presenting and surrendering the FELINE PRIDES
Certificate evidencing such Income PRIDES at the offices of the Purchase
Contract Agent with the form of "Notice to Settle by Separate Cash" on the
reverse side of the certificate completed and executed as indicated on or prior
to 5:00 p.m., New York city time, on the second Business Day immediately
preceding the Purchase Contract Settlement Date. Such form must be accompanied
by payment (in the form of a certified or cashier's check payable to the order
of the Company) of an amount equal to the Stated Amount times the number of
Purchase Contracts being settled.
CONTRACT ADJUSTMENT PAYMENTS
Contract Adjustment Payments will be fixed at a rate per annum of % of
the Stated Amount per Purchase Contract. Contract Adjustment Payments in arrears
for more than one quarter will bear interest thereon at the rate per annum of
% thereof compounded quarterly. Contract Adjustment Payments payable for
any period will be computed on the basis of a 360-day year of twelve 30
day-months. Contract Adjustment Payments will accrue from , 1997 and
will be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing September 30, 1997.
Contract Adjustment Payments will be payable to the holders thereof as they
appear on the books and records of the Purchase Contract Agent on the relevant
record dates, which, as long as the Income PRIDES or Growth PRIDES remain in
book-entry only form, will be one Business Day prior to the relevant payment
dates. Such distributions will be paid through the Purchase Contract Agent who
will hold amounts received in respect of the Contract Adjustment Payments for
the benefit of the holders of the Purchase Contracts underlying the Income
PRIDES or Growth PRIDES. Subject to any applicable laws and regulations, each
such payment will be made as described under "Book-Entry System" below. In the
event that the Income PRIDES or Growth PRIDES do not continue to remain in
book-entry only form, the Company shall have the right to select relevant record
dates, which shall be more than one Business Day but less than 60 Business Days
prior to the relevant payment dates. In the event that any date on which
Contract Adjustment Payments are to be made on the Purchase Contracts underlying
the Income PRIDES or Growth PRIDES is not a Business Day, then payment of the
Contract Adjustment Payments payable on such date will be made on the next
succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such payment date. A "Business Day" shall mean any day other than Saturday,
Sunday or any other day on which banking institutions in New York City (in the
State of New York) are permitted or required by any applicable law to close.
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The Company's obligations with respect to Contract Adjustment Payments are
subordinate and junior in right of payment to all liabilities of the Company
(other than the Company's guarantee of junior subordinated debentures, if any,
issued by the Company, with which they rank pari passu). See "Risk
Factors -- Ranking of Contract Adjustment Payments and Subordinated Obligations
Under the Guarantee and Junior Subordinated Debentures."
OPTION TO DEFER CONTRACT ADJUSTMENT PAYMENTS
The Company may, at its option and upon prior written notice to the holders
of the Income PRIDES or Growth PRIDES and the Purchase Contract Agent, defer the
payment of Contract Adjustment Payments on the Purchase Contracts until no later
than the Purchase Contract Settlement Date. However, Deferred Contract
Adjustment Payments will bear additional Contract Adjustment Payments at the
rate of % per annum (compounding on each succeeding Payment Date) until
paid. If the Purchase Contracts are terminated (upon the occurrence of certain
events of bankruptcy, insolvency or reorganization with respect to the Company),
the right to receive Contract Adjustment Payments and Deferred Contract
Adjustment Payments will terminate.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, each holder of Income PRIDES or Growth PRIDES will receive on
the Purchase Contract Settlement Date, in lieu of a cash payment, a number of
shares of Common Stock (in addition to a number of shares of Common Stock equal
to the Settlement Rate or the Cash Settlement Rate) equal to (x) the aggregate
amount of Deferred Contract Adjustment Payments payable to a holder of either
Income PRIDES or Growth PRIDES divided by (y) the Applicable Market Value.
No fractional shares of Common Stock will be issued by the Company with
respect to the payment of Deferred Contract Adjustment Payments on the Purchase
Contract Settlement Date. In lieu of fractional shares otherwise issuable with
respect to such payment of Deferred Contract Adjustment Payments, the holder
will be entitled to receive an amount in cash equal to such fraction of a share
times the Applicable Market Value.
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then, until the Deferred Contract Adjustment
Payments have been paid, the Company shall not declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security outstanding on the date of such event requiring the Company to
purchase shares of Common Stock, (ii) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's capital
stock or (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged) or make any guarantee
payments with respect to the foregoing.
ANTI-DILUTION ADJUSTMENTS
The formula for determining the Settlement Rate will be subject to
adjustment upon the occurrence of certain events, including: (a) the payment of
dividends (and other distributions) of Common Stock on Common Stock; (b) the
issuance to all holders of Common Stock of rights, warrants or options entitling
them, for a period of up to 45 days, to subscribe for or purchase Common Stock
at less than the Current Market Price (as defined) thereof; (c) subdivisions,
splits and combinations of Common Stock; (d) distributions to all holders of
Common Stock of evidences of indebtedness of the Company, shares of capital
stock, securities, cash or property (excluding any dividend or distribution
covered by clause (a) or (b) above and any dividend or distribution paid
exclusively in cash); (e) distributions consisting exclusively of cash to all
holders of Common Stock in an aggregate amount that, together with (i) other
all-cash distributions made within the
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preceding 12 months and (ii) any cash and the fair market value, as of the
expiration of the tender or exchange offer referred to below, of consideration
payable in respect of any tender or exchange offer by the Company or a
subsidiary for the Common Stock concluded within the preceding 12 months,
exceeds 15% of the Company's aggregate market capitalization (such aggregate
market capitalization being the product of the Current Market Price (as defined)
of the Common Stock multiplied by the number of shares of Common Stock then
outstanding) on the date of such distribution; and (f) the successful completion
of a tender or exchange offer made by the Company or any subsidiary for the
Common Stock which involves an aggregate consideration that, together with (i)
any cash and the fair market value of other consideration payable in respect of
any tender or exchange offer by the Company or a subsidiary for the Common Stock
concluded within the preceding 12 months and (ii) the aggregate amount of any
all-cash distributions to all holders of the Company's Common Stock made within
the preceding 12 months, exceeds 15% of the Company's aggregate market
capitalization on the expiration of such tender or exchange offer.
In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions pursuant to which the Common Stock is
converted into the right to receive other securities, cash or property, each
Purchase Contract then outstanding would, without the consent of the holders of
Income PRIDES or Growth PRIDES as the case may be, become a contract to purchase
only the kind and amount of securities, cash and other property receivable upon
consummation of the transaction by a holder of the number of shares of Common
Stock which would have been received by the holder of the related Income PRIDES
or Growth PRIDES immediately prior to the date of consummation of such
transaction if such holder had then settled such Purchase Contract.
If at any time the Company makes a distribution of property to its
stockholders which would be taxable to such stockholders as a dividend for
federal income tax purposes (i.e., distributions of evidences of indebtedness or
assets of the Company, but generally not stock dividends or rights to subscribe
to capital stock) and, pursuant to the Settlement Rate adjustment provisions of
the Purchase Contract Agreement, the Settlement Rate is increased, such increase
may be deemed to be the receipt of taxable income to holders of Securities. See
"Certain Federal Income Tax Consequences -- Adjustment of Settlement Rate."
In addition, the Company may make such increases in the Settlement Rate as
the Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of shares of Common Stock resulting from any dividend or
distribution of stock (or rights to acquire stock) or from any event treated as
such for income tax purposes or for any other reasons.
Adjustments to the Settlement Rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the Settlement Rate shall be required
unless such adjustment would require an increase or decrease of at least one
percent in the Settlement Rate; provided, however, that any adjustments which by
reason of the foregoing are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
The Company will be required, within ten Business Days following the
occurrence of an event that requires or permits an adjustment in the Settlement
Rate, to provide written notice to the Purchase Contract Agent of the occurrence
of such event and a statement in reasonable detail setting forth the method by
which the adjustment to the Settlement Rate was determined and setting forth the
revised Settlement Rate.
Each adjustment to the Settlement Rate will result in a corresponding
adjustment to the number of shares of Common Stock issuable upon early
settlement of a Purchase Contract.
TERMINATION
The Purchase Contracts, and the rights and obligations of the Company and
of the holders of the FELINE PRIDES thereunder (including the right to receive
accrued Contract Adjustment Payments or Deferred Contract Adjustment Payments
and the right and obligation to purchase Common Stock), will automatically
terminate upon the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company. Upon such termination, the
Collateral Agent will release the Trust Preferred Securities or, if substituted,
the Treasury Securities held by it to the Purchase Contract Agent for
distribution
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to the holders. Upon such termination, however, such release and termination may
be subject to a limited delay. In the event that the Company becomes the subject
of a case under the Bankruptcy Code, such delay may occur as a result of the
automatic stay under the Bankruptcy Code and continue until such automatic stay
has been lifted.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The Trust Preferred Securities underlying the Income PRIDES or, if
substituted, the Treasury Securities underlying the Growth PRIDES (together, the
"Pledged Securities") will be pledged to the Collateral Agent, for the benefit
of the Company, pursuant to a pledge agreement, to be dated as of ,
1997 (the "Pledge Agreement"), to secure the obligations of the holders to
purchase Common Stock under the Purchase Contracts. The rights of holders of
Income PRIDES or Growth PRIDES to the underlying Pledged Securities will be
subject to the Company's security interest therein created by the Pledge
Agreement. No holder of Income PRIDES or Growth PRIDES will be permitted to
withdraw the Pledged Securities underlying such Income PRIDES or Growth PRIDES
from the pledge arrangement except (i) to substitute Treasury Securities for
Trust Preferred Securities, (ii) to substitute Trust Preferred Securities for
Treasury Securities (for both (i) and (ii), as provided for under "Description
of the FELINE PRIDES -- Substitution of Pledged Securities") or (iii) upon the
termination or Early Settlement of the related Purchase Contracts. Subject to
such security interest and the terms of the Purchase Contract Agreement and the
Pledge Agreement, each holder of an Income PRIDES will be entitled through the
Purchase Contract Agent and the Collateral Agent to all of the proportional
rights and preferences of a Trust Preferred Security (including distribution,
voting, redemption, repayment and liquidation rights) and each holder of a
Growth PRIDES will retain beneficial ownership of the Treasury Securities
pledged in respect of such Purchase Contracts. The Company will have no interest
in the Pledged Securities other than its security interest.
The Collateral Agent will, upon receipt of distributions on the Pledged
Securities, distribute such payments to the Purchase Contract Agent, which will
in turn distribute those payments, together with Contract Adjustment Payments
received from the Company, to the persons in whose names the related Income
PRIDES or Growth PRIDES are registered at the close of business on the Record
Date immediately preceding the date of such distribution.
The quarterly payments on the Income PRIDES set forth on the cover page of
this Prospectus will consist of (i) cumulative cash distributions on the Trust
Preferred Securities payable by the Trust at the rate of % of the Stated
Amount per annum, and (ii) Contract Adjustment Payments, payable by the Company,
at the rate of % per annum.
The ability of the Trust to make quarterly distributions on the Trust
Preferred Securities is solely dependent upon the receipt of corresponding
interest payments from the Company on the Junior Subordinated Debentures. The
Company has the right at any time, and from time to time, limited to a period
not extending beyond the maturity of the Junior Subordinated Debentures, to
defer the interest payments on the Junior Subordinated Debentures and to defer
Contract Adjustment Payments. As a consequence of such deferral, quarterly
distributions to holders would be deferred (but despite such deferral, would
continue to accrue with interest thereon compounded quarterly at the same rate
as interest on the Junior Subordinated Debentures). See "Description of the
Purchase Contract -- Contract Adjustment Payments" and "Description of the Trust
Preferred Securities -- Distributions."
Subject to the Company's rights of deferral, in the event a holder of
Income PRIDES substituted Treasury Securities for the Trust Preferred
Securities, such holder would still receive quarterly Contract Adjustment
Payments. In addition, interest would acrete on the underlying Treasury
Securities.
BOOK-ENTRY SYSTEM
The Depository Trust Company (the "Depositary") will act as securities
depositary for the FELINE PRIDES. The FELINE PRIDES will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global security certificates
("Global Security Certificates"), representing the total aggregate number of
FELINE PRIDES, will be issued and will
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be deposited with the Depositary and will bear a legend regarding the
restrictions on exchanges and registration of transfer thereof referred to
below.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the FELINE PRIDES so
long as such FELINE PRIDES are represented by Global Security Certificates.
The Depositary is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
The Depositary is owned by a number of its Direct Participants and by the NYSE,
the American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary system is also available to others, such
as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to the Depositary and its Participants are
on file with the Commission.
No FELINE PRIDES represented by Global Security Certificates may be
exchanged in whole or in part for FELINE PRIDES registered, and no transfer of
Global Security Certificates in whole or in part may be registered, in the name
of any person other than the Depositary or any nominee of the Depositary unless
the Depositary has notified the Company that it is unwilling or unable to
continue as depositary for such Global Security Certificates or has ceased to be
qualified to act as such as required by the Purchase Contract Agreement or there
shall have occurred and be continuing a default by the Company in respect of its
obligations under one or more Purchase Contracts. All FELINE PRIDES represented
by one or more Global Security Certificates or any portion thereof will be
registered in such names as the Depositary may direct.
As long as the Depositary or its nominee is the registered owner of the
Global Security Certificates, such Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the Global Security
Certificates and all FELINE PRIDES represented thereby for all purposes under
the FELINE PRIDES and the Purchase Contract Agreement. Except in the limited
circumstances referred to above, owners of beneficial interests in Global
Security Certificates will not be entitled to have such Global Security
Certificates or the FELINE PRIDES represented thereby registered in their names,
will not receive or be entitled to receive physical delivery of FELINE PRIDES
Certificates in exchange therefor and will not be considered to be owners or
holders of such Global Security Certificates or any FELINE PRIDES represented
thereby for any purpose under the FELINE PRIDES or the Purchase Contract
Agreement. All payments on the FELINE PRIDES represented by the Global Security
Certificates and all transfers and deliveries of Trust Preferred Securities,
Treasury Securities and Common Stock with respect thereto will be made to the
Depositary or its nominee, as the case may be, as the holder thereof.
Ownership of beneficial interests in the Global Security Certificates will
be limited to Participants or persons that may hold beneficial interests through
institutions that have accounts with the Depositary or its nominee. Ownership of
beneficial interests in Global Security Certificates will be shown only on, and
the transfer of those ownership interests will be effected only through, records
maintained by the Depositary or its nominee (with respect to Participants'
interests) or any such Participant (with respect to interests of persons held by
such Participants on their behalf). Procedures for settlement of Purchase
Contracts on the Purchase Contract Settlement Date or upon Early Settlement will
be governed by arrangements among the Depositary, Participants and persons that
may hold beneficial interests through Participants designed to permit such
settlement without the physical movement of certificates. Payments, transfers,
deliveries, exchanges and other matters relating to beneficial interests in
Global Security Certificates may be subject to various policies and
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procedures adopted by the Depositary from time to time. None of the Company, the
Purchase Contract Agent or any agent of the Company or the Purchase Contract
Agent will have any responsibility or liability for any aspect of the
Depositary's or any Participant's records relating to, or for payments made on
account of, beneficial interests in Global Security Certificates, or for
maintaining, supervising or reviewing any of the Depositary's records or any
Participant's records relating to such beneficial ownership interests.
DESCRIPTION OF THE COMMON STOCK
The shares of the Company's Common Stock presently outstanding, including
those to be ultimately purchased in this offering, will be, legally issued,
fully paid and non-assessable. The shareholders are entitled to receive ratably
such dividends as may from time to time be declared by the Board of Directors.
Upon liquidation, the holders of the shares are entitled to share ratably in the
net assets of the Company. All voting rights are vested exclusively in the
holders of the shares and each shareholder is entitled to one vote for each
share held. The holders of the shares have no cumulative voting or preemptive
rights.
Under Florida law, the Company may pay dividends only out of net income,
retained earnings, and capital and surplus.
Article VI of the Articles of Incorporation of the Company provides for the
division of the Board of Directors of the Company as equally as possible into
three classes whose terms are staggered and each class is elected for a term of
three years. The By-Laws of the Company provide that its Board consist of eight
Directors as follows: three directors in Class I; two directors in Class II; and
three directors in Class III. Article VI also provides that (1) no class of
directors shall be subject to election by shareholders until all classes holding
office for terms of longer duration without being subject to election shall be
so subject and directors have been elected with respect thereto, and (2) no one
meeting of shareholders can consider or act upon the election of more than one
class of directors, except that shareholders can fill vacancies occurring in any
class as may be provided for in the By-laws. This Article also provides that no
amendment to the By-laws of the Company decreasing the number of directors shall
have the effect of shortening the term of any incumbent director and no action
shall be taken by the directors to increase the number of directors as provided
in the By-Laws unless at least 75% of the directors then in office concur. The
affirmative vote of the holders of at least 75% of the outstanding shares is
required to (a) amend Article VI, (b) remove a director with or without cause,
or (c) increase the number of directors as provided in the By-Laws of the
Company.
Article XI of the Articles of Incorporation of the Company provides that
the affirmative vote of at least 80% of the outstanding shares is required to
approve any merger or consolidation of the Company into another corporation or
other entity or any sale, lease, or exchange of all or substantially all of the
assets of the Company to or with another corporation, person, or any other
entity if such other corporation, person, or entity is the beneficial owner of
10% or more of the outstanding shares.
The Company is subject to several anti-takeover provisions under Florida
law. These provisions permit a corporation to elect to opt out of such provision
in its articles of incorporation or (depending on the provision in question) its
bylaws. The Company has not elected to opt out of these provisions. The Florida
Business Corporation Act (the "Florida Act") contains a provision that prohibits
the voting of shares in a publicly-held Florida corporation which are acquired
in a "control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
control share acquisition is defined as an acquisition that immediately
thereafter entitles the acquiring party to vote in the election of directors
within each of the following ranges of voting power: (i) one-fifth or more but
less than one-third of such voting power, (ii) one-third or more but less than a
majority of such voting power and (iii) a majority or more of such voting power.
The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder,
(ii) the interested shareholder has
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owned at least 80% of the corporation's outstanding voting shares for at least
five years, or (iii) the interested shareholder is the beneficial owner of at
least 90% of the outstanding voting shares of the Company, exclusive of shares
acquired directly from the Company in a transaction not approved by a majority
of the disinterested directors. An interested shareholder is defined as a person
who together with affiliates and associates beneficially owns more than 10% of
the corporation's outstanding voting shares.
SunTrust Bank, Atlanta, Georgia, is transfer agent and registrar of the
shares of the Company's Common Stock.
The Company sends to its shareholders annual reports including financial
statements audited by independent public accountants and quarterly unaudited
interim financial reports.
CERTAIN PROVISIONS OF THE PURCHASE CONTRACT
AGREEMENT AND THE PLEDGE AGREEMENT
GENERAL
Distributions on the FELINE PRIDES will be payable, Purchase Contracts (and
documents related thereto) will be settled and transfers of the FELINE PRIDES
will be registrable at the office of the Purchase Contract Agent in the Borough
of Manhattan, The City of New York. In addition, in the event that the FELINE
PRIDES do not remain in book-entry form, payment of distributions on the FELINE
PRIDES may be made, at the option of the Company, by check mailed to the address
of the person entitled thereto as shown on the Security Register.
On the Purchase Contract Settlement Date, shares of Common Stock will be
delivered, or, if the Purchase Contracts have terminated, Pledged Securities
will be delivered potentially after a limited delay (see "Description of the
Purchase Contracts -- Termination") in each case upon presentation and surrender
of the FELINE PRIDES Certificate at the office of the Purchase Contract Agent.
If a holder of outstanding Income PRIDES or Growth PRIDES fails to present
and surrender the FELINE PRIDES Certificate evidencing such Income PRIDES or
Growth PRIDES to the Purchase Contract Agent on the Purchase Contract Settlement
Date, the shares of Common Stock issuable in settlement of the applicable
Purchase Contract and in payment of any Deferred Contract Adjustment Payments
will be registered in the name of the Purchase Contract Agent and, together with
any distributions thereon, shall be held by the Purchase Contract Agent as agent
for the benefit of such holder, until such FELINE PRIDES Certificate is
presented and surrendered or the holder provides satisfactory evidence that such
certificate has been destroyed, lost or stolen, together with any indemnity that
may be required by the Purchase Contract Agent and the Company.
If the Purchase Contracts have terminated prior to the Purchase Contract
Settlement Date, the Pledged Securities have been transferred to the Purchase
Contract Agent for distribution to the holders entitled thereto and a holder
fails to present and surrender the FELINE PRIDES Certificate evidencing such
holder's Income PRIDES or Growth PRIDES to the Purchase Contract Agent, the
Pledged Securities delivered to the Purchase Contract Agent and payments thereon
shall be held by the Purchase Contract Agent as agent for the benefit of such
holder, until such FELINE PRIDES Certificate is presented or the holder provides
the evidence and indemnity described above.
The Purchase Contract Agent will have no obligation to invest or to pay
interest on any amounts held by the Purchase Contract Agent pending
distribution, as described above.
No service charge will be made for any registration of transfer or exchange
of the FELINE PRIDES, except for any tax or other governmental charge that may
be imposed in connection therewith.
MODIFICATION
The Purchase Contract Agreement and the Pledge Agreement will contain
provisions permitting the Company and the Purchase Contract Agent or Collateral
Agent, as the case may be, with the consent of the
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holders of not less than 66 2/3% of the Purchase Contracts at the time
outstanding, to modify the terms of the Purchase Contracts, the Purchase
Contract Agreement and the Pledge Agreement, except that no such modification
may, without the consent of the holder of each outstanding Purchase Contract
affected thereby, (a) change any Payment Date, (b) change the amount or type of
Pledged Securities underlying the Purchase Contract, impair the Right of the
holder of any Pledged Securities to receive distributions on the underlying
Pledged Securities (except for the rights of holders of Income PRIDES to
substitute the Treasury Securities for the Trust Preferred Securities or the
rights of holders of Growth PRIDES to substitute Trust Preferred Securities for
the Treasury Securities) or otherwise adversely affect the holder's rights in or
to such Pledged Securities, (c) change the place or currency of payment or
reduce any Contract Adjustment Payments or any Deferred Contract Adjustment
Payments, (d) impair the right to institute suit for the enforcement of any
Purchase Contract, (e) reduce the amount of Common Stock purchasable under any
Purchase Contract, increase the price to purchase Common Stock on settlement of
any Purchase Contract, change the Purchase Contract Settlement Date or otherwise
adversely affect the holder's rights under any Purchase Contract or (f) reduce
the above-stated percentage of outstanding Purchase Contracts the consent of
whose holders is required for the modification or amendment of the provisions of
the Purchase Contracts, the Purchase Contract Agreement or the Pledge Agreement;
provided, that if any amendment or proposal referred to above would adversely
affect only the Income PRIDES or the Growth PRIDES, then only the affected class
of holder will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the consent of the
holders of not less than 66 2/3% of such class.
NO CONSENT TO ASSUMPTION
Each holder of Income PRIDES or Growth PRIDES, by acceptance thereof, will
under the terms of the Purchase Contract Agreement and the Income PRIDES or
Growth PRIDES, be deemed expressly to have withheld any consent to the
assumption (i.e., affirmance) of the Purchase Contracts by the Company or its
trustee in the event that the Company becomes the subject of a case under the
Bankruptcy Code.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Company will covenant in the Purchase Contract Agreement that it will
not merge or consolidate with any other entity or sell, assign, transfer, lease
or convey all or substantially all of its properties and assets to any person,
firm or corporation unless the Company is the continuing corporation or the
successor corporation is a corporation organized under the laws of the United
States of America or a state thereof and such corporation expressly assumes the
obligations of the Company under the Purchase Contracts, the Junior Subordinated
Debentures, the Purchase Contract Agreement and the Pledge Agreement, and the
Company or such successor corporation is not, immediately after such merger,
consolidation, sale, assignment, transfer, lease or conveyance, in default in
the performance of any of its obligations thereunder.
TITLE
The Company, the Purchase Contract Agent and the Collateral Agent may treat
the registered owner of any FELINE PRIDES as the absolute owner thereof for the
purpose of making payment and settling the Purchase Contracts and for all other
purposes.
REPLACEMENT OF FELINE PRIDES CERTIFICATES
In the event that physical certificates have been issued, any mutilated
FELINE PRIDES Certificate will be replaced by the Company at the expense of the
holder upon surrender of such certificate to the Purchase Contract Agent. FELINE
PRIDES Certificates that become destroyed, lost or stolen will be replaced by
the Company at the expense of the holder upon delivery to the Company and the
Purchase Contract Agent of evidence of the destruction, loss or theft thereof
satisfactory to the Company and the Purchase Contract Agent. In the case of a
destroyed, lost or stolen FELINE PRIDES Certificate, an indemnity satisfactory
the Purchase Contract Agent and the Company may be required at the expense of
the holder of the FELINE PRIDES evidenced by such certificate before a
replacement will be issued.
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Notwithstanding the foregoing, the Company will not be obligated to issue
any Income PRIDES or Growth PRIDES on or after the Purchase Contract Settlement
Date or after the Purchase Contracts have terminated. The Purchase Contract
Agreement will provide that in lieu of the delivery of a replacement FELINE
PRIDES Certificate following the Purchase Contract Settlement Date, the Purchase
Contract Agent, upon delivery of the evidence and indemnity described above,
will deliver the Common Stock issuable pursuant to the Purchase Contracts
included in the Income PRIDES or Growth PRIDES evidenced by such certificate,
or, if the Purchase Contracts have terminated prior to the Purchase Contract
Settlement Date, transfer the principal amount of the Pledged Securities
included in the Income PRIDES or Growth PRIDES evidenced by such certificate.
GOVERNING LAW
The Purchase Contract Agreement, the Pledge Agreement and the Purchase
Contracts will be governed by, and construed in accordance with, the laws of the
State of New York.
INFORMATION CONCERNING THE PURCHASE CONTRACT AGENT
The First National Bank of Chicago will be the Purchase Contract Agent. The
Purchase Contract Agent will act as the agent for the holders of Income PRIDES
and Growth PRIDES from time to time. The Purchase Contract Agreement will not
obligate the Purchase Contract Agent to exercise any discretionary actions in
connection with a default under the terms of the Income PRIDES and Growth PRIDES
or the Purchase Contract Agreement.
The Purchase Contract will contain provisions limiting the liability of the
Purchase Contract Agent. The Purchase Contract Agreement will contain provisions
under which the Purchase Contract Agent may resign or be replaced. Such
resignation or replacement would be effective upon the appointment of a
successor.
INFORMATION CONCERNING THE COLLATERAL AGENT
The Chase Manhattan Bank will be the Collateral Agent. The Collateral Agent
will act solely as the agent of the Company and will not assume any obligation
or relationship of agency or trust for or with any of the holders of the Income
PRIDES and Growth PRIDES except for the obligations owed by a pledgee of
property to the owner thereof under the Pledge Agreement and applicable law.
The Pledge Agreement will contain provisions limiting the liability of the
Collateral Agent. The Pledge Agreement will contain provisions under which the
Collateral Agent may resign or be replaced. Such resignation or replacement
would be effective upon the appointment of a successor.
MISCELLANEOUS
The Purchase Contract Agreement will provide that the Company will pay all
fees and expenses related to (i) the offering of the FELINE PRIDES, (ii) the
retention of the Collateral Agent and (iii) the enforcement by the Purchase
Contract Agent of the rights of the holders; provided, however, that holders who
elect to substitute Pledged Securities, thereby creating Growth PRIDES or
recreating Income PRIDES, shall be responsible for any fees or expenses payable
to the Collateral Agent in connection therewith, as well as any commissions,
fees or other expenses incurred in acquiring the Pledged Securities to be
substituted, and the Company shall not be responsible for any such fees or
expenses.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities, which form a component of the Income
PRIDES, and which, under certain circumstances, will trade separately, will be
issued pursuant to the terms of the Declaration. See "Description of the FELINE
PRIDES -- Substitution of Pledged Securities." The Declaration will be qualified
as an indenture under the Trust Indenture Act. The Institutional Trustee, The
First National Bank of Chicago, an independent trustee, will act as indenture
trustee for the Trust Preferred Securities under the Declaration for purposes of
compliance with the provisions of the Trust Indenture Act. The terms of the
Trust Preferred
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Securities will include those stated in the Declaration and those made part of
the Declaration by the Trust Indenture Act. The following summary of the
material terms and provisions of the Trust Preferred Securities does not purport
to be complete and is subject to, and qualified in its entirety by reference to
the Declaration, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, the Trust Act and the Trust
Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of the
Trust the Trust Securities, which represent undivided beneficial interests in
the assets of the Trust. All of the Common Securities will be owned, directly or
indirectly by the Company. The Common Securities rank pari passu, and payments
will be made thereon on a pro rata basis, with the Trust Preferred Securities,
except that upon the occurrence and during the continuance of a Declaration
Event of Default, the rights of the holders of the Common Securities to receive
payment of periodic distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Trust
Preferred Securities. The Declaration does not permit the issuance by the Trust
of any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Institutional
Trustee will own the Junior Subordinated Debentures purchased by the Trust for
the benefit of the holders of the Trust Securities. The payment of distributions
out of money held by the Trust, and payments upon redemption of the Trust
Preferred Securities or liquidation of the Trust, are guaranteed by the Company
to the extent described under "Description of the Guarantee." The Guarantee,
when taken together with the Company's obligations under the Junior Subordinated
Debentures and the Indenture and its obligations under the Declaration,
including the obligations to pay costs, expenses, debts and liabilities of the
Trust (other than with respect to the Trust Preferred Securities), provides a
full and unconditional guarantee of amounts due on the Trust Preferred
Securities. The Guarantee will be held by The First National Bank of Chicago,
the Guarantee Trustee, for the benefit of the holders of the Trust Preferred
Securities. The Guarantee does not cover payment of distributions when the Trust
does not have sufficient available funds to pay such distributions. In such
event, the remedy of a holder of Trust Preferred Securities is to vote to direct
the Institutional Trustee to enforce the Institutional Trustee's rights under
the Junior-Subordinated Debentures (except in the limited circumstances in which
the holder may take direct action). See "-- Declaration Events of Default" and
"-- Voting Rights."
DISTRIBUTIONS
Distributions on the Trust Preferred Securities will be fixed at a rate per
annum of % of the stated liquidation amount of $50 per Trust Preferred
Security. Distributions in arrears for more than one quarter will bear interest
thereon at the rate per annum of % thereof compounded quarterly. The term
"distribution" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Trust Preferred Securities will be cumulative and will
accrue from June , 1997 and will be payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing September 30,
1997, when, as and if funds are available for payment. Distributions will be
made by the Institutional Trustee, except as otherwise described below.
The Company has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debentures by extending the interest payment period
from time to time on the Junior Subordinated Debentures, which right, if
exercised, would defer quarterly distributions on the Trust Preferred Securities
(though such distributions would continue to accrue with interest since interest
would continue to accrue on the Junior Subordinated Debentures) during any such
extended interest payment period. Such right to extend the interest payment
period for the Junior Subordinated Debentures is limited to a period, in the
aggregate, not extending beyond the maturity date of the Junior Subordinated
Debentures. In the event that the Company exercises this right, then (a) the
Company shall not declare or pay dividends on, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock (other than (i) purchases or acquisitions of shares
of the Company's Common Stock in connection with the satisfaction by the Company
of its obligations under any employee benefit plans or the
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satisfaction by the Company of its obligations pursuant to any contract or
security outstanding on the date of such event requiring the Company to purchase
shares of the Company's Common Stock, (ii) as a result of a reclassification of
the Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such Company capital stock or the security being converted or exchanged) or make
any guarantee payments with respect to the foregoing, (b) the Company shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank pari passu with or junior to such Junior Subordinated
Debentures, and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than pursuant to the Trust Preferred Securities
Guarantee). Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period; provided, that such Extension
Period, together with all such previous and further extensions thereof, may not
extend beyond the maturity date of the Junior Subordinated Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may select a new Extension Period, subject to the above requirements.
See "Description of the Junior Subordinated Debentures -- Interest" and
"-- Option to Extend Interest Payment Period." If distributions are deferred,
the deferred distributions and accrued interest thereon shall be paid to holders
of record of the Trust Preferred Securities as they appear on the books and
records of the Trust on the record date next following the termination of such
deferral period.
Distributions on the Trust Preferred Securities must be paid on the dates
payable to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Trust Preferred Securities will be limited to
payments received from the Company on the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures." The payment of
distributions out of moneys held by the Trust is guaranteed by the Company to
the extent set forth under "Description of the Guarantee."
Distributions on the Trust Preferred Securities will be payable to the
holders thereof, including the Collateral Agent, as they appear on the books and
records of the Trust on the relevant record dates, which, as long as the Trust
Preferred Securities remain in book-entry only form, will be one Business Day
prior to the relevant payment dates. Such distributions will be paid through the
Institutional Trustee which will hold amounts received in respect of the Junior
Subordinated Debentures in the Property Account for the benefit of the holders
of the Trust Preferred Securities. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment will be
made as described under "Book-Entry Only Issuance-The Depository Trust Company"
below. In the event that the Trust Preferred Securities do not continue to
remain in book-entry form, the Regular Trustees shall have the right to select
relevant record dates, which shall be more than one Business Day but less than
60 Business Days prior to the relevant payment dates. In the event that any date
on which distributions are to be made on the Trust Preferred Securities is not a
Business Day, then payment of the distributions payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such record date.
MATURITY
Subject to the holder's right to require the Trust to put the Junior
Subordinated Debentures to the Company on the Purchase Contract Settlement Date,
the Junior Subordinated Debentures will mature on , 2002. Upon the
repayment of the Junior Subordinated Debentures at maturity, the proceeds from
such repayment shall simultaneously be applied to redeem Trust Preferred
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Junior Subordinated Debentures so repaid. See
"Description of the Junior Subordinated Debentures."
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SPECIAL EVENT DISTRIBUTION
"Tax Event" means the Regular Trustees shall have received an opinion of a
nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any amendment to or change in an
interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after such date), which change or amendment, in
the ease of (a) or (b), becomes effective on or after the date of this
Prospectus, there is more than an insubstantial risk that (i) the Trust would be
subject to federal income tax with respect to income accrued or received on the
Junior Subordinated Debentures, (ii) interest payable to the Trust on the Junior
Subordinated Debentures would not be deductible by the Company for federal
income tax purposes or (iii) the Trust would be subject to more than a de
minimis amount of other taxes, duties or other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in practice under the
1940 Act (as defined below) to the effect that, as a result of the occurrence of
a change in law or regulation or a written change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act Law"), which Change in
1940 Act Law becomes effective on or after the date of this Prospectus, there is
more than an insubstantial risk that the Trust is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act") .
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust
shall, except in the limited circumstances described below, be dissolved, with
the result that the Junior Subordinated Debentures with an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, the Trust Securities, would be
distributed to the holders of the Trust Securities in liquidation of such
holders' interests in the Trust on a pro rata basis within 90 days following the
occurrence, of such Special Event; provided however, that in the case of the
occurrence of a Tax Event, such dissolution and distribution shall be
conditioned on the Company being unable to avoid such Tax Event within such 90
day period by taking some ministerial action or pursuing some other reasonable
measure that will have no adverse effect on the Trust, the Company or the
holders of the Trust Securities and will involve no material cost. If a Special
Event occurs, Junior Subordinated Debentures distributed to the Collateral Agent
in liquidation of such holder's interest in the Trust would continue to be
pledged to secure Income PRIDES holders' obligations to purchase Common Stock
under the Purchase Contracts.
After the date for any distribution of Junior Subordinated Debentures upon
dissolution of the Trust, (i) the Trust Preferred Securities will no longer be
deemed to be outstanding, (ii) the Depositary or its nominee, as the record
holder of the Trust Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debentures to
be delivered upon such distribution, and (iii) any certificates representing
Trust Preferred Securities not held by the Depositary or its nominee will be
deemed to represent Junior Subordinated Debentures having an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and accrued and unpaid interest
equal to accrued and unpaid distributions on, such Trust Preferred Securities
until such certificates are presented to the Company or its agent for transfer
or reissuance.
There can be no assurance as to the market prices for either the Trust
Preferred Securities or the Junior Subordinated Debentures that may be
distributed in exchange for the Trust Preferred Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Trust Preferred
Securities or the Junior Subordinated Debentures that an investor may receive if
a dissolution and liquidation of the Trust were to occur may trade at a discount
to the price that the investor paid to purchase the Trust Preferred Securities
forming a part of the Income PRIDES offered hereby.
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Subject to applicable law (including, without limitation, United States
federal securities laws), the Company or its subsidiaries may at any time, and
from time to time, purchase outstanding Trust Preferred Securities by tender, in
the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the then holders
of the Trust Preferred Securities will be entitled to receive out of the assets
of the Trust, after satisfaction of liabilities to creditors, Junior
Subordinated Debentures in an aggregate stated principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accrued and
unpaid distributions on, the Trust Preferred Securities on a pro rata basis in
exchange for such Trust Preferred Securities (the "Liquidation Distribution").
The holders of the Common Securities will be entitled to receive
distributions upon any such dissolution pro rata with the holders of the Trust
Preferred Securities, except that if a Declaration Event of Default has occurred
and is continuing, the Trust Preferred Securities shall have a preference over
the Trust Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on March 20,
2004, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the Company, the
filing of a certificate of cancellation with respect to the Trust after
obtaining the consent of the holders of at least a majority in liquidation
amount of the Trust Securities effected thereby voting together as a single
class to file such certificate of cancellation, or the revocation of the charter
of the Company and the expiration of 90 days after the date of revocation
without a reinstatement thereof, (iv) upon the distribution of Junior
Subordinated Debentures upon the occurrence of an Investment Company Event or a
Tax Event or (v) upon the entry of a decree of a judicial dissolution of the
holder of the Trust Common Securities, the Company or the Trust.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration, the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Trust Preferred Securities
have been cured, waived or otherwise eliminated. Until such Declaration Events
of Default with respect to the Trust Preferred Securities have been so cured,
waived or otherwise eliminated, the Institutional Trustee will be deemed to be
acting solely on behalf of the holders of the Trust Preferred Securities and
only the holders of the Trust Preferred Securities will have the right to direct
the Institutional Trustee with respect to certain matters under the Declaration
and, therefore, the Indenture. If a Declaration Event of Default with respect to
the Trust Preferred Securities is waived by holders of Trust Preferred
Securities, such waiver will also constitute the waiver of such Declaration
Event of Default with respect to the Common Securities without any further act,
vote or consent of the holders of the Common Securities. If the Institutional
Trustee fails to enforce its rights under the Junior Subordinated Debentures,
any holder of Trust Preferred Securities may institute a legal proceeding
against the Company to enforce the Institutional Trustee's rights under the
Junior Subordinated Debentures without first proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debentures, on the date such interest or
principal is otherwise payable, then a holder of Trust Preferred Securities may
directly institute a proceeding for enforcement of payment (a "Direct Action")
to such holder directly of the principal of or interest on the Junior
Subordinated Debentures having a principal amount equal to the aggregate
liquidation amount of the Trust Preferred Securities of such holder on or after
the respective due date specified in the Junior Subordinated Debentures. In
connection with such Direct Action, the Company will be subrogated to the rights
of such holder of Trust Preferred Securities under the Declaration to the extent
of any payment made by
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the Company to such holder of Trust Preferred Securities in such Direct Action.
The holders of Trust Preferred Securities will not be able to exercise directly
any other remedy available to the holders of the Junior Subordinated Debentures.
See "Effect of Obligations under the Junior Subordinated Debentures and the
Guarantee."
Upon the occurrence of a Declaration Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debentures will have the
Right under the Indenture to declare the principal of and interest on the Junior
Subordinated Debentures to be immediately due and payable. The Company and the
Trust are each required to file annually with the Institutional Trustee an
officer's certificate as to its compliance with all conditions and covenants
under the Declaration.
VOTING RIGHTS
Except as described herein, under the Trust Act and the Trust Indenture Act
and under "Description of the Guarantee -- Modification of the Guarantee;
Assignment", and as otherwise required by law and the Declarations the holders
of the Trust Preferred Securities will have no voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
Trust Preferred Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Institutional
Trustee, or direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration including the right to direct the
Institutional Trustee, as holder of the Junior Subordinated Debentures, to (i)
exercise the remedies available under the Indenture with respect to the Junior
Subordinated Debentures, (ii) waive any past Indenture Event of Default that is
available under Section 513 of the Indenture (as defined herein), (iii) exercise
any right to rescind or annul a declaration that the principal of all the Junior
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Junior
Subordinated Debentures where such consent shall be required; provided, however,
that, where a consent or action under the Indenture would require the consent or
act of holders of more than a majority in principal amount of the Junior
Subordinated Debentures (a "Super-Majority") affected thereby, only the holders
of at least such Super-Majority in aggregate liquidation amount of the Trust
Preferred Securities may direct the Institutional Trustee to give such consent
or take such action. If the Institutional Trustee fails to enforce its rights
under the Junior Subordinated Debentures or the Declaration, a record holder of
Trust Preferred Securities may after such holder's written request to the
Institutional Trustee to enforce such rights, institute a legal proceeding
directly against the Company to enforce the Institutional Trustee's rights under
the Junior Subordinated Debentures or the Declaration without first instituting
any legal proceeding against the Institutional Trustee or any other person or
entity. The Institutional Trustee shall notify all holders of the Trust
Preferred Securities of any notice of default received from the Debt Trustee (as
defined below) with respect to the Junior Subordinated Debentures. Such notice
shall state that such Indenture Event of Default also constitutes a Declaration
Event of Default. Except with respect to directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not fail to be classified as a
grantor trust for federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Junior Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Institutional
Trustee shall request the direction of the holders of the Trust Preferred
Securities and the Common Securities with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount of
the Trust Preferred Securities and the Common Securities voting together as a
single class; provided, however, that where a consent under the Indenture would
require the consent of a Super-Majority, the Institutional Trustee may only give
such consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Preferred Securities and the Trust Common
Securities which the relevant Super-Majority represents of the aggregate
principal amount of the Junior Subordinated Debentures
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outstanding. The Institutional Trustee shall be under no obligation to take any
such action in accordance with the directions of the holders of the Trust
Preferred Securities and the Trust Common Securities unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of federal income tax, the Trust will not be classified as other than a
grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Trust Preferred Securities
may be given at a separate meeting of holders of Trust Preferred Securities
convened for such purpose, at a meeting of all of the holders of Trust
Securities or pursuant to written consent. The Regular Trustees will cause a
notice of any meeting at which holders of Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be mailed to each holder of record of Trust Preferred
Securities. Each such notice will include a statement setting forth the
following information: (i) the date of such meeting or the date by which such
action is to be taken; (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of proxies or consents. No vote or consent of the holders of Trust
Preferred Securities will be required for the Trust to redeem and cancel Trust
Preferred Securities or distribute Junior Subordinated Debentures in accordance
with the Declaration.
Notwithstanding that holders of Trust Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the Trust
Preferred Securities that are owned at such time by the Company or any entity
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Company, shall not be entitled to vote or consent and
shall, for purposes of such vote or consent, be treated as if such Trust
Preferred Securities were not outstanding.
The procedures by which holders of Trust Preferred Securities may exercise
their voting rights are described below. See "-- Book-Entry Only Issuance The
Depository Trust Company" below.
Holders of the Trust Preferred Securities will have no rights to appoint or
remove the Company Trustees, who may be appointed, removed or replaced solely by
the Company as the indirect or direct holder of all of the Trust Common
Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee or the Delaware
Trustee), provided, that if any proposed amendment provides for, or the Regular
Trustees otherwise propose to effect, (i) any action that would adversely affect
the powers, preferences or special rights of the Trust Securities, whether by
way of amendment to the Declaration or otherwise or (ii) the dissolution,
winding-up or termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting together as a
single class will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of at
least a majority in liquidation amount of the Trust Securities affected thereby;
provided, that if any amendment or proposal referred to in clause (i) above
would adversely effect only the Trust Preferred Securities or the Trust Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee or (iii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
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MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (x)
expressly assumes all of the obligations of the Trust under the Trust Preferred
Securities or (y) substitutes for the Trust Preferred Securities other
securities having substantially the same terms as the Trust Securities (the
"Successor Securities"), so long as the Successor Securities rank the same as
the Trust Securities with respect to distributions and payments upon
liquidation, redemption and otherwise, (ii) the Company expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Institutional Trustee as the holder of the Junior Subordinated Debentures, (iii)
if the Trust Preferred Securities are listed any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
with another organization on which the Trust Preferred Securities are then
listed or quoted, (iv) such merger, consolidation, amalgamation or replacement
does not cause the Trust Preferred Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely effect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in the
new entity), (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, consolidation, amalgamation or replacement,
the Company has received an opinion of a nationally recognized independent
counsel to the Trust experienced in such matters to the effect that, (A) such
merger, consolidation, amalgamation or replacement does not adversely effect the
rights, preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new entity), (B)
following such merger, consolidation, amalgamation or replacement, neither the
Trust nor such successor entity will be required to register as an investment
company under the 1940 Act and (C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the successor entity) will continue
to be classified as a grantor trust for federal income tax purposes, and (viii)
the Company guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Guarantee and the
Common Securities Guarantee. Notwithstanding the foregoing the Trust shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified as
other than a grantor trust for federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depositary will act as securities depositary for the Trust Preferred
Securities. The Trust Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (the
Depositary's nominee). One or more fully-registered global Trust Preferred
Securities certificates, representing the total aggregate number of Trust
Preferred Securities, will be issued and will be deposited with the Depositary.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Trust
Preferred Securities as represented by a global certificate.
Purchases of Trust Preferred Securities within the Depositary's system must
be made by or through Direct Participants, which will receive a credit for the
Trust Preferred Securities on the Depositary's records. The ownership interest
of each actual purchaser of each Trust Preferred Security (a "Beneficial Owner")
is in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depositary of
their purchases, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the
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Direct or Indirect Participants through which the Beneficial Owners purchased
Trust Preferred Securities. Transfers of ownership interests in the Trust
Preferred Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial owners will not
receive certificates representing their ownership interests in the Trust
Preferred Securities, except in the event that use of the book-entry system for
the Trust Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Trust Preferred Securities
deposited by Participants with the Depositary are registered in the name of the
Depositary's nominee, Cede & Co. The deposit of Trust Preferred Securities with
the Depositary and their registration in the name of Cede & Co. effect no change
in beneficial ownership. The Depositary has no knowledge of the actual
Beneficial Owners of the Trust Preferred Securities. The Depositary's records
reflect only the identity of the Direct Participants to whose accounts such
Trust Preferred Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
So long as the Depositary or its nominee is the registered owner or holder
of a Global Certificate, the Depositary or such nominee, as the case may be,
will be considered the sole owner or holder of the Trust Preferred Securities
represented thereby for all purposes under the Declaration and the Trust
Preferred Securities. No beneficial owner of an interest in a Global Certificate
will be able to transfer that interest except in accordance with the Depositary
applicable procedures, in addition to those provided for under the Declaration.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Trust Preferred Securities (including the
presentation of Trust Preferred Securities for exchange as described below) only
at the direction of one or more Participants to whose account the Depositary's
interests in the Global Certificates are credited and only in respect of such
portion of the aggregate liquidation amount of Trust Preferred Securities as to
which such Participant or Participants has or have given such directions.
However, if there is an Event of Default under the Trust Preferred Securities,
the Depositary will exchange the Global Certificates for Certificated
Securities, which it will distribute to its Participants.
Conveyance of notices and other communications by the Depositary to Direct
Participants and Indirect Participants and by Direct Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in effect from
time to time.
Although voting with respect to the Trust Preferred Securities is limited,
in those cases where a vote is required, neither the Depositary nor Cede & Co.
will itself consent or vote with respect to Trust Preferred Securities. Under
its usual procedures, the Depositary would mail an Omnibus Proxy to the Trust as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.
consenting or voting rights to those Direct Participants to whose accounts the
Trust Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy). The Company and the Trust believe that
the arrangements among the Depositary, Direct and Indirect Participants, and
Beneficial Owners will enable the Beneficial Owners to exercise rights
equivalent in substance to the rights that can be directly exercised by a record
holder of a beneficial interest in the Trust.
Distribution payments on the Trust Preferred Securities will be made to the
Depositary in immediately available funds. The Depositary's practice is to
credit Direct Participants' accounts on the relevant payment date in accordance
with their respective holdings shown on the Depositary's records unless the
Depositary has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street name,"
and such payments will be the responsibility of such Participant and not of the
Depositary, the Trust or the Company, subject to any statutory or regulatory
requirements to the contrary that may be in effect from time to time. Payment of
distributions to the Depositary is the responsibility of the Trust, disbursement
of such payments to Direct Participants is the responsibility of the Depositary,
and disbursement of such payments to the Beneficial Owners is the responsibility
of Direct and Indirect Participants.
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Except as provided herein, a Beneficial Owner in a global Trust Preferred
Security certificate will not be entitled to receive physical delivery of Trust
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary to exercise any rights under the Trust Preferred
Securities.
Although the Depositary has agreed to the foregoing procedure in order to
facilitate transfer of interest in the Global Certificates among Participants of
the Depositary, the Depositary is under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
None of the Company, the Trust or any Trustee will have any responsibility for
the performance by the Depositary or its Participants or Indirect Participants
under the rules and procedures governing the Depositary. The Depositary may
discontinue providing its services as securities depositary with respect to the
Trust Preferred Securities at any time by giving reasonable notice to the Trust.
Under such circumstances, in the event that a successor securities depositary is
not obtained, Trust Preferred Securities certificates are required to be printed
and delivered to holders. Additionally, the Regular Trustees (with the consent
of the Company) may decide to discontinue use of the system of book-entry
transfers through the Depositary (or any successor depositary) with respect to
the Trust Preferred Securities. In that event, certificates for the Trust
Preferred Securities will be printed and delivered to holders. In each of the
above circumstances, the Company will, appoint a paying agent with respect to
the Trust Preferred Securities.
The information in this section concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that the Company
and the Trust believe to be reliable, but neither the Company nor the Trust
takes responsibility for the accuracy hereof.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
Payments in respect of the Trust Preferred Securities represented by the
Global Certificates shall be made to the Depositary, which shall credit the
relevant accounts at the Depositary on the applicable distribution dates or, in
the case of Certificated Securities, such payments shall be made by check mailed
to the address of the holder entitled thereto as such address shall appear on
the Register. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Regular Trustees. In the event that The First
National Bank of Chicago shall no longer be the Paying Agent, the Trustee shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company).
The Institutional Trustee will act as registrar, transfer agent and paying
agent for the Trust Preferred Securities.
Registration of transfers of Trust Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment (the giving of
such indemnity as the Trust or the Company may require) in respect of any tax or
other government charge which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Trust Preferred Securities after such Trust Preferred Securities
have been called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care as
a prudent individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Institutional Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Trust Preferred Securities, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The holders of Trust Preferred Securities will not be required to offer
such indemnity in the event such holders, by exercising their voting rights,
direct the Institutional Trustee to take any action it is empowered to take
under the Declaration following a Declaration Event of Default. The
Institutional Trustee also serves as trustee under the Guarantee.
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GOVERNING LAW
The Declaration and the Trust Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be required to register as an "investment
company" under the 1940 Act or characterized as other than a grantor trust for
federal income tax purposes. The Company is authorized and directed to conduct
its affairs so that the Junior Subordinated Debentures will be treated as
indebtedness of the Company for federal income tax purposes. In this connection,
the Company and the Regular Trustees are authorized to take any action not
inconsistent with applicable law, the certificate of trust of the Trust or the
certificate of incorporation of the Company, that each of the Company and the
Regular Trustees determines in its discretion to be necessary or desirable to
achieve such end, as long as such action does not adversely affect the interests
of the holders of the Trust Preferred Securities or vary the terms thereof.
Holders of the Trust Preferred Securities have no preemptive rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by AHL for the benefit of the holders from time
to time of Trust Preferred Securities. The Guarantee will be qualified as an
indenture under the Trust Indenture Act. The First National Bank of Chicago, an
independent trustee, will act as indenture trustee under the Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the provisions of the
Trust Indenture Act. The terms of the Guarantee will be those set forth in the
Guarantee and those made part of the Guarantee by the Trust Indenture Act. The
following summary does not purport to be complete and is subject in all respects
to the provisions of, and is qualified in its entirety by reference to, the form
of Guarantee, which is filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, and the Trust Indenture Act. The Guarantee
will be held by the Guarantee Trustee for the benefit of the holders of the
Trust Preferred Securities of the Trust.
GENERAL
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full, to the holders of the
Trust Preferred Securities issued by the Trust, the Guarantee Payments (as
defined herein) (except to the extent paid by the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert. The following payments or distributions with respect to Trust
Preferred Securities issued by the Trust to the extent not paid by the Trust
(the "Guarantee Payments"), will be subject to the Guarantee thereon (without
duplication): (i) any accrued and unpaid distributions which are required to be
paid on the Trust Preferred Securities, to the extent the Trust shall have funds
available therefor; and (ii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Trust (other than in connection with the
distribution of Subordinated Debt Securities to the holders of Trust Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on such Trust Preferred Securities to the date
of payment, to the extent the Trust has funds available therefor and (b) the
amount of assets of the Trust remaining available for distribution to holders of
the Trust Preferred Securities in liquidation of the Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of Trust Preferred Securities or
by causing the Trust to pay such amounts to such holders.
The Guarantee will be a guarantee with respect to the Trust Preferred
Securities issued by the Trust, but will not apply to any payment of
distributions except to the extent the Trust shall have funds available
therefor. If the Company does not make interest payments on the Junior
Subordinated Debentures purchased by the Trust, the Trust will not pay
distributions on the Trust Preferred Securities and will not have funds
available therefor. See "Effect of Obligations under the Junior Subordinated
Debentures and the Guarantee."
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The Guarantee, when taken together with the Company's obligations under the
Junior Subordinated Debentures, the Indenture, and the Declaration will provide
a full and unconditional guarantee on a subordinated basis by the Company of
payments due on the Trust Preferred Securities.
The Company has also agreed separately to irrevocably and unconditionally
guarantee the obligations of the Trust with respect to the Common Securities
(the "Common Securities Guarantee") to the same extent as the Guarantee, except
that upon an event of default under the Indenture, holders of Trust Preferred
Securities shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Trust
Preferred Securities issued by the Trust remain outstanding, if there shall have
occurred any event that would constitute an event of default under such
Guarantee or the Declaration, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of shares of Common Stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security outstanding on the date of such event
requiring the Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or, (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such Company capital stock or the security being converted or
exchanged), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company which rank pari passu with or
junior to the Junior Subordinated Debentures and (c) the Company shall not make
any guarantee payments with respect to the foregoing (other than pursuant to the
Guarantee).
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Trust Preferred Securities (in which case no vote will be
required), the Guarantee may be amended only with the prior approval of the
holders of not less than a majority in liquidation amount of the outstanding
Trust Preferred Securities issued by the Trust. All guarantees and agreements
contained in the Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Trust Preferred Securities then outstanding.
TERMINATION
The Guarantee will terminate (a) upon distribution of the Junior
Subordinated Debentures held by the Trust to the holders of the Trust Preferred
Securities or (b) upon full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Trust. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Trust Preferred Securities must restore payment of any sums paid under the
Trust Preferred Securities or the Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce
such Guarantee, any holder of Trust Preferred Securities to which the Guarantee
relates may institute a legal proceeding directly against the
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Company to enforce such holder's rights under the Guarantee, without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. Notwithstanding the foregoing, if the Company has failed
to make a guarantee payment, a holder of Trust Preferred Securities may directly
institute a proceeding against the Company for enforcement of the Guarantee for
such payment. The Company waives any right or remedy to require that any action
be brought first against the Trust or any other person or entity before
proceeding directly against the Company.
STATUS OF THE GUARANTEE
The Guarantee will constitute unsecured obligations of the Company and will
rank (i) subordinate and junior in right of payment to all other liabilities of
the Company, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock of
any affiliate of the Company; and (iii) senior to the Company's common stock.
The terms of the Trust Preferred Securities provide that each holder of Trust
Preferred Securities issued by the Trust by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without instituting a
legal proceeding against any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Trust Preferred Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby; but the foregoing shall not relieve the Guarantee Trustee, upon the
occurrence of an event of default under the Guarantee, from exercising the
rights and powers vested in it by the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
internal laws of the State of New York.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms of the Junior
Subordinated Debentures in which the Trust will invest the proceeds from the
issuance and sale of the Trust Securities. The following description does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture, dated as of , 1997 between the Company
and The First National Bank of Chicago, as Trustee (the "Debt Trustee"). Certain
capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of the Trust
following the occurrence of a Special Event, Junior Subordinated Debentures may
be distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description of the Trust Preferred Securities -- Special Event
Distribution."
GENERAL
The Junior Subordinated Debentures will be issued as unsecured debt under
the Indenture. The Junior Subordinated Debentures will be limited in aggregate
principal amount to $ , such amount being the sum of the aggregate
stated liquidation of the Trust Preferred Securities and the capital contributed
by the Company in exchange for the Common Securities (the "Company Payment").
Future subordinated debentures may be issued from time to time in one or more
series in accordance with the terms of the Indenture and with one or more
indentures supplemental to the Indenture.
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The Junior Subordinated Debentures are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debentures
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compound Interest (as defined herein) and Additional
Interest (as defined herein), if any, on , 2002.
If Junior Subordinated Debentures are distributed to holders of Trust
Preferred Securities in liquidation of such holders' interests in the Trust,
such Junior Subordinated Debentures will initially be issued as a Global
Security (as defined herein). As described herein, under certain limited
circumstances, Junior Subordinated Debentures may be issued in certificated form
in exchange for a Global Security. See "--Book-Entry and Settlement" below. In
the event that Junior Subordinated Debentures are issued in certificated form,
such Junior Subordinated Debentures will be in denominations of $50 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Junior Subordinated Debentures issued as a Global Security
will be made to the Depositary, a successor depositary or, in the event that no
depositary is used, to a Paying Agent for the Junior Subordinated Debentures. In
the event Junior Subordinated Debentures are issued in certificated form,
principal and interest will be payable, the transfer of the Junior Subordinated
Debentures will be registrable and Junior Subordinated Debentures will be
exchangeable for Junior Subordinated Debentures of other denominations of a like
aggregate principal amount at the corporate trust office or agency of the
Institutional Trustee in Chicago, Illinois; provided, that at the option of the
Company, payment of interest may be made by check mailed to the address of the
holder entitled thereto or by wire transfer to an account appropriately
designated by the holder entitled thereto. Notwithstanding the foregoing, so
long as the holder of any Junior Subordinated Debentures is the Institutional
Trustee, the payment of principal and interest on the Junior Subordinated
Debentures held by the Institutional Trustee will be made at such place and to
such account as may be designated by the Institutional Trustee.
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction involving the Company.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company and pari passu with Company trade creditors and other junior
subordinated debentures issued by the Company. No payment of principal, premium,
if any, or interest on the Junior Subordinated Debentures may be made if (i) any
Senior Indebtedness of the Company is not paid when due, (ii) any applicable
grace period with respect to such default has ended and such default has not
been cured or waived or ceased to exist, or (iii) the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default. Upon any
distribution of assets of the Company to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary, or
in bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest due or to become due on all Senior Indebtedness of
the Company must be paid in full before the holders of Junior Subordinated
Debentures are entitled to receive or retain any payment. Subject to the payment
in full of all Senior Indebtedness, the rights of the holders of the Junior
Subordinated Debentures will be subrogated to the rights of the holders of
Senior Indebtedness of the Company to receive payments or distributions
applicable to Senior Indebtedness until all amounts owing on the Junior
Subordinated Debentures are paid in full.
The term "Senior Indebtedness" means the principal of and premium, if any,
and interest on the following, whether outstanding on the date of execution of
the Indenture or thereafter incurred or created: (i) indebtedness of the Company
for money borrowed by the Company (including purchase money obligations with an
original maturity in excess of one year) or evidenced by debentures (other than
the Junior Subordinated Debentures), notes, bankers' acceptances or other
corporate debt securities or similar instruments issued by the Company; (ii)
obligations with respect to letters of credit; (iii) indebtedness of the Company
constituting a guarantee of indebtedness of others of the type referred to in
the preceding clauses (i) and (ii); or (iv) renewals, extensions or refundings
of any of the indebtedness referred to in the preceding clauses (i), (ii) and
(iii) unless, in the case of any particular indebtedness, renewal, extension or
refunding, under the express provisions of the instrument creating or evidencing
the same, or pursuant to which the same
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is outstanding, such indebtedness or such renewal extension or refunding thereof
is not superior in right of payment to the Junior Subordinated Debentures.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company. As of March 31, 1997, Senior Indebtedness of
the Company aggregated approximately $116.0 million.
INTEREST
Each Junior Subordinated Debenture shall bear interest at the rate of
% per annum from the original date of issuance, payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year (each an
"Interest Payment Date"), commencing September 30, 1997, to the person in whose
name such Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Junior Subordinated Debentures shall not
continue to remain in book-entry only form, the Company shall have the right to
select record dates, which shall be more than fifteen Business Days but less
than 60 Business Days prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year consisting of twelve 30-day months. The amount of interest
payable for any period shorter than a full quarterly period for which interest
is computed, will be computed on the basis of the actual number of days elapsed
in such a 90-day period. In the event that any date on which interest is payable
on the Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, then such payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal budget submitted to Congress,
the Clinton Administration proposed a number of changes to federal income tax
laws. One proposal would preclude the issuer from deducting interest on debt
instruments payable in stock of the issuer. A debt instrument would be treated
as payable in stock of the issuer if it were part of an arrangement designed to
result in payment of debt with such stock, such as certain issuances of a
forward contract in connection with the issuance of debt. The effective date of
the proposals is the date of first Congressional committee action which could
occur prior to the issuance of the Junior Subordinated Debentures. If the
proposals are enacted into law as currently drafted, they should not apply to
the Junior Subordinated Debentures since the issuance of the Junior Subordinated
Debentures and the issuance of the Purchase Contract should not be considered as
part of an arrangement designed to result in the payment of the Junior
Subordinated Debentures with stock of the issuer. In addition, it is possible
that the proposals as enacted into law may contain transition rules for
transactions which are currently underway, such as transactions involving the
offering of securities with respect to which a filing with the Securities and
Exchange Commission has been made. If the proposals were enacted into law with
such a transition rule, the proposals would not apply to the Junior Subordinated
Debentures. There can be no assurance, however, that the proposals, if enacted,
will be enacted as currently drafted or will include such a transitional rule or
that other legislation enacted after the date hereof will not adversely affect
the tax treatment of the Junior Subordinated Debentures or cause a Tax Event,
resulting in the distribution of the Junior Subordinated Debentures to holders
of Trust Preferred Securities. See "Description of the Trust Preferred
Securities -- Special Event Distribution."
REDEMPTION
The Company will not have the ability to redeem the Junior Subordinated
Debentures prior to the stated maturity date. However, the Company will be able
to defease the Junior Subordinated Debentures by making an irrevocable deposit
with the Debt Trustee of money and/or U.S. governmental obligations that will
provide money in an amount sufficient, in the opinion of a nationally recognized
independent accounting firm, to pay each payment of principal and interest on
the Junior Subordinated Debentures.
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PUT OPTION
In accordance with the terms of the Junior Subordinated Debentures,
holders, including the Institutional Trustee and the Collateral Agent, have the
right to require the Company to repurchase, on the Purchase Contract Settlement
Date and for a period of ninety days thereafter, either in whole or in part, the
Junior Subordinated Debentures at an amount per Junior Subordinated Debenture
equal to $50, plus accumulated and unpaid distributions, if any. See
"Description of Purchase Contracts -- General."
On the Purchase Contract Settlement Date, each holder of Income PRIDES that
has neither previously exercised its option of Early Settlement nor settled its
Purchase Contract with cash will be deemed to have requested the Trust to put
the aggregate principal amount of its Junior Subordinated Debentures to the
Company in an amount per Junior Subordinated Debenture equal to $50, plus
accumulated and unpaid distributions, if any. Upon the repurchase of the Junior
Subordinated Debentures by the Company pursuant to such Put Option, (i) the
proceeds from such repurchase shall simultaneously be applied to redeem Trust
Preferred Securities of such holder having an aggregate Stated Amount equal to
the aggregate principal amount of the Junior Subordinated Debentures so
repurchased and will be applied to satisfy in full such holder's obligation to
purchase Common Stock under the Purchase Contract as described herein and (ii)
any accumulated and unpaid distributions with respect to the Junior Subordinated
Debentures so repurchased will be paid to such holder in cash.
To the extent that holders of Income PRIDES exercise their right of Early
Settlement or settle their Purchase Contracts with cash on the Purchase Contract
Settlement Date, the related Trust Preferred Securities will not be redeemed on
the Purchase Contract Settlement Date as stated above. All holders of Trust
Preferred Securities that are not redeemed on the Purchase Contract Settlement
Date will have the option on the Purchase Contract Settlement Date and for a
period of ninety days thereafter to require the Trust to put to the Company, and
the Company to repurchase, the related Junior Subordinated Debentures for an
amount equal to $50, plus accumulated and unpaid distributions, if any. Upon
such repurchase by the Company, the Trust shall simultaneously use the proceeds
from such repurchase to redeem in cash the Trust Preferred Securities of such
holders having an aggregate Stated Amount equal to $50 per Trust Preferred
Security and to pay in cash any accumulated and unpaid distributions to the
holders thereof.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Debentures, to defer payments of interest by
extending the interest payment period for a period not extending, in the
aggregate, beyond the maturity date of the Junior Subordinated Debentures. At
the end of any Extension Period, the Company shall pay all interest then accrued
and unpaid (including any Additional Interest, as herein defined) together with
interest thereon compounded quarterly at the rate specified for the Junior
Subordinated Debentures to the extent permitted by applicable law ("Compound
Interest"); provided, that during any such Extension Period, (a) the Company
shall not declare or pay dividends or make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock (other than (i) purchases or acquisitions of shares of the
Company Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security outstanding on the date
of such event requiring the Company to purchase shares of AHL Common Stock, (ii)
as a result of a reclassification of the Company capital stock or the exchange
or conversion of one class or series of the Company's capital stock for another
class or series of the Company capital stock or (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such Company capital stock (or the security being
converted or exchanged) or make any guarantee payments with respect to the
foregoing), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank pari passu with or junior
to the Junior Subordinated Debentures, and (c) the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Trust Preferred Securities Guarantee). Prior to the termination of any such
Extension Period, the Company may further defer payments of interest by
extending the interest payment
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period; provided, however, that such Extension Period, including all such
previous and further extensions, may not extend beyond the maturity date of the
Junior Subordinated Debentures. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new Extension
Period, subject to the terms set forth in this section. No interest shall be due
and payable during an Extension Period, except at the end thereof. The Company
has no present intention of exercising its right to defer payments of interest
by extending the interest payment period on the Junior Subordinated Debentures.
If the Institutional Trustee shall be the sole holder of the Junior Subordinated
Debentures, the Company shall give the Regular Trustees and the Institutional
Trustee notice of its selection of such Extension Period one Business Day prior
to the earlier of (i) the date distributions on the Trust Preferred Securities
are payable or (ii) the date the Regular Trustees are required to give notice,
if applicable, to the New York Stock Exchange (or other applicable
self-regulatory organization) or to holders of the Trust Preferred Securities of
the record date or the date such distribution is payable. The Regular Trustees
shall give notice of the Company's selection of such Extension Period to the
holders of the Trust Preferred Securities. If the Institutional Trustee shall
not be the sole holder of the Junior Subordinated Debentures, the Company shall
give the holders of the Junior Subordinated Debentures notice of its selection
of such Extension Period ten Business Days prior to the earlier of (i) the
Interest Payment Date or (ii) the date upon which the Company is required to
give notice, if applicable, to the New York Stock Exchange (or other applicable
self-regulatory organization) or to holders of the Junior Subordinated
Debentures of the record or payment date of such related interest payment.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Junior Subordinated Debentures such additional amounts as shall be
required so that the net amounts received and retained by the Trust after paying
any such taxes, duties, assessments or other governmental charges will be not
less than the amounts the Trust would have received had no such taxes, duties,
assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Junior Subordinated Debentures, will
have the right to declare the principal of and the interest on the Junior
Subordinated Debentures (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debentures.
The following are Events of Default under the Indenture with respect to the
Junior Subordinated Debentures: (1) failure to pay interest on the Junior
Subordinated Debentures when due, continued for 30 days; however, if the Company
is permitted by the terms of the Junior Subordinated Debentures to defer the
payment in question, the date on which such payment is due and payable shall be
the date on which the Company is required to make payment following such
deferral, if such deferral has been elected pursuant to the terms of the Junior
Subordinated Debentures; (2) failure to pay the principal of (or premium, if
any, on) the Junior Subordinated Debentures when due and payable at Maturity,
upon redemption or otherwise; however, if the Company is permitted by the terms
of the Junior Subordinated Debentures to defer the payment in question, the date
on which such payment is due and payable shall be the date on which the Company
is required to make payment following such deferral, if such deferral has been
elected pursuant to the terms of the Junior Subordinated Debentures; (3) failure
to observe or perform any other covenant, warranty or agreement contained in the
Junior Subordinated Debentures or in the Indenture, continued for a period of 60
days after notice has been given to the Company by the Trustee or Holders of at
least 25% in aggregate principal amount of the Outstanding Junior Subordinated
Debentures; (4) failure to pay at final maturity, or acceleration of,
Indebtedness of the Company, having an aggregate principal amount of more than
1% of the Company's consolidated total assets (determined as of its most recent
fiscal year-end), unless cured within 10 days after notice has been given to the
Company by the Trustee or Holders of at least 10% in
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aggregate principal amount of the Outstanding Junior Subordinated Debentures;
and (5) certain events of bankruptcy, insolvency or reorganization relating to
the Company.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Junior
Subordinated Debentures, give the Holders of the Junior Subordinated Debentures
notice of all uncured Defaults or Events of Default known to it (the term
"Default" includes any event which after notice or passage of time or both would
be an Event of Default); provided, however, that, except in the case of an Event
of Default or a Default in a payment on the Junior Subordinated Debentures, the
Trustee shall be protected in withholding such notice of and so long as the
board of directors, the executive committee or directors or responsible officers
of the Trustee in good faith determine that the withholding of such notice is in
the interest of the Holders of the Junior Subordinated Debentures.
If an Event of Default with respect to the Junior Subordinated Debentures
(other than due to events of bankruptcy, insolvency or reorganization) occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Outstanding Junior Subordinated Debentures, by notice in
writing to the Company (and to the Trustee if given by the Holders of at least
25% in aggregate principal amount of the Junior Subordinated Debentures), may
declare the unpaid principal of and accrued interest to the date of acceleration
on all the Outstanding Junior Subordinated Debentures to be due and payable
immediately and, upon any such declaration, the Junior Subordinated Debentures
shall become immediately due and payable.
In addition, in the case of the Junior Subordinated Debentures held by the
Trust, if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal, then a
holder of Preferred Trust Securities may directly institute a proceeding against
the Company for payment.
If an Event of Default occurs due to bankruptcy, insolvency or
reorganization, all unpaid principal of and accrued interest on the Outstanding
Junior Subordinated Debentures will become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder of the
Junior Subordinated Debentures.
Any such declaration with respect to the Junior Subordinated Debentures may
be annulled and past Events of Default and Defaults (except, unless theretofore
cured, an Event of Default or a Default in payment of principal of or interest
on the Junior Subordinated Debentures) may be waived by the Holders of a
majority of the principal amount of the Outstanding Junior Subordinated
Debentures, upon the conditions provided in the Indenture.
The Indenture provides that the Company shall periodically file statements
with the Trustee regarding compliance by the Company with certain of the
respective covenants thereof and shall specify any Event of Default or Defaults
with respect to the Junior Subordinated Debentures, in performing such
covenants, of which the signers may have knowledge.
An Indenture Event of Default also constitutes a Declaration Event of
Default. The holders of Trust Preferred Securities in certain circumstances have
the right to direct the Institutional Trustee to exercise its rights as the
holder of the Junior Subordinated Debentures. See "Description of the Trust
Preferred Securities -- Declaration Events of Default" and "-- Voting Rights."
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable, the Company acknowledges that a
holder of Trust Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder directly of the principal of and interest
on the Junior Subordinated Debentures having a principal amount equal to the
aggregate liquidation amount of the Trust Preferred Securities of such holder on
or after the respective due date specified in the Junior Subordinated
Debentures. Notwithstanding any payments made to such holder of Trust Preferred
Securities by the Company in connection with a Direct Action, the Company shall
remain obligated to pay the principal of or interest on the Junior Subordinated
Debt Securities held by the Trust or the Institutional Trustee of the Trust, and
the Company shall be subrogated to the rights of the holder of such Trust
Preferred Securities with respect to payments on the Trust Preferred Securities
to the extent of any payments made by the Company to
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such holder in any Direct Action. The holders of Trust Preferred Securities will
not be able to exercise directly any other remedy available to the holders of
the Junior Subordinated Debentures.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Trust Preferred Securities in connection with
the involuntary or voluntary dissolution, winding-up or liquidation of the Trust
as a result of the occurrence and continuation of a Special Event, the Junior
Subordinated Debentures will be issued in the form of one or more global
certificates (each a "Global Security") registered in the name of the Depositary
or its nominee. Except under the limited circumstances described below, Junior
Subordinated Debentures represented by the Global Security will not be
exchangeable for, and will not otherwise be issuable as, Junior Subordinated
Debentures in definitive form. The Global Securities described above may not be
transferred except by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debentures in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debentures
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each Beneficial Owner must
rely on the procedures of the Depositary or if such person is not a Participant,
on the procedures of the Participant through which such person owns its interest
to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Junior Subordinated Debentures are distributed to holders of Trust
Preferred Securities in liquidation of such holders' interests in the Trust, the
Depositary will act as securities depositary for the Junior Subordinated
Debentures. For a description of the Depositary and the specific terms of the
depositary arrangements, see "Description of the Trust Preferred
Securities -- Book-Entry Only Issuance The Depository Trust Company." As of the
date of this Prospectus, the description therein of the Depositary's book-entry
system and the Depositary's practices as they relate to purchases, transfers,
notices and payments with respect to the Trust Preferred Securities apply in all
material respects to any debt obligations represented by one or more Global
Securities held by the Depositary. The Company may appoint a successor to the
Depositary or any successor depositary in the event the Depositary or such
successor depositary is unable or unwilling to continue as a depositary for the
Global Securities.
None of the Company, the Trust, the Institutional Trustee, any paying agent
and any other agent of the Company or the Debt Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Junior Subordinated Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Junior Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the Depositary at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the depositary
is required to be so registered to act as such depositary and no successor
depositary shall have been appointed, (iii) the Company, in its sole discretion,
determines that such Global Security shall be so exchangeable or (iv) there
shall have occurred an Event of Default with respect to such Junior Subordinated
Debentures. Any Global Security that is exchangeable pursuant to the preceding
sentence shall be exchangeable for Junior Subordinated Debentures registered in
such names as the
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Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Company will pay all fees and expenses related to (i) the offering of
the Trust Securities and the Junior Subordinated Debentures, (ii) the
organization, maintenance and dissolution of the Trust, (iii) the retention of
the Company Trustees and (iv) the enforcement by the Institutional Trustee of
the rights of the holders of the Trust Preferred Securities. The payment of such
fees and expenses will be fully and unconditionally guaranteed by the Company.
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
the Trust, and to invest the proceeds from such issuance and sale in the Junior
Subordinated Debentures and engage in only those other activities necessary or
incidental thereto.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Junior Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Junior Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Trust Preferred Securities; (iii)
the Company shall pay, and the Trust shall not be obligated to pay, directly or
indirectly, all costs, expenses, debts, and obligations of the Trust (other than
with respect to the Trust Securities); and (iv) the Declaration further provides
that the Company trustees shall not take or cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes of
the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Trust Preferred Securities (to the extent funds
therefor are available) are guaranteed by the Company as and to the extent set
forth under "Description of the Guarantee." If the Company does not make
interest payments on the Junior Subordinated Debentures purchased by the Trust,
it is expected that the Trust will not have sufficient funds to pay
distributions on the Trust Preferred Securities. The Guarantee does not apply to
any payment of distributions unless and until the Trust has sufficient funds for
the payment of such distributions. The Guarantee covers the payment of
distributions and other payments on the Trust Preferred Securities only if and
to the extent that the Company has made a payment of interest or principal on
the Junior Subordinated Debentures held by the Trust as its sole asset.
If the Company fails to make interest or other payments on the Junior
Subordinated Debentures when due (taking account of any Extension Period), the
Declaration provides a mechanism whereby the holders of the Trust Preferred
Securities, using the procedures described in "Description of the Trust
Preferred Securities -- Book-Entry Only Issuance -- The Depository Trust
Company" and "-- Voting Rights," may direct the Institutional Trustee to enforce
its rights under the Junior Subordinated Debentures. If the Institutional
Trustee fails to enforce its rights under the Junior Subordinated Debentures, a
holder of Trust Preferred Securities may institute a legal proceeding against
the Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debentures without first instituting any legal proceeding against
the Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to
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pay interest or principal on the Junior Subordinated Debentures on the date such
interest or principal is otherwise payable, then a holder of Trust Preferred
Securities may directly institute a proceeding against the Company for payment.
The Company, under the Guarantee, acknowledges that the Guarantee Trustee shall
enforce the Guarantee on behalf of the holders of the Trust Preferred
Securities. If the Company fails to make payments under the Guarantee, the
Guarantee provides a mechanism whereby the holders of the Trust Preferred
Securities may direct the Guarantee Trustee to enforce its rights thereunder.
Notwithstanding the foregoing, if the Company has failed to make a payment under
the Guarantee, any holder of Trust Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee, or any other person or entity.
The Guarantee, when taken together with the Company's obligations under the
Junior Subordinated Debentures and the Indenture and its obligations under the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of the Trust (other than with respect to the Trust Securities),
provide a full and unconditional guarantee of amounts due on the Trust Preferred
Securities. See "Description of Guarantee."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the material United States
("U.S.") federal income tax consequences of the purchase, ownership and
disposition of Income PRIDES, Trust Preferred Securities and Growth PRIDES. The
summary represents the opinion of LeBoeuf, Lamb, Green & MacRae, L.L.P.
("Special Tax Counsel"), special tax counsel to the Company, insofar as it
relates to matters of law and legal conclusions. Unless otherwise stated, the
summary deals only with holders who purchase Income PRIDES upon their original
issuance for an amount equal to the Stated Amount of the Trust Preferred
Securities and who hold the Income PRIDES, or upon the substitution of Treasury
Securities, the Growth PRIDES and Trust Preferred Securities, as capital assets.
The summary does not address the federal income tax consequences of the
purchase, ownership or disposition of Treasury Securities. The summary deals
only with holders who are citizens or residents of the U.S., corporations,
partnerships or other entities organized in or under the laws of the U.S. or any
political subdivision thereof, or estates or trusts defined in Section
7701(a)(30) of the Internal Revenue Code of 1986, as amended (the "Code"). The
summary does not address the tax considerations applicable to investors that may
be subject to special U.S. federal income tax treatment, such as dealers in
securities, persons holding the Income PRIDES, Growth PRIDES or Trust Preferred
Securities as part of a "straddle" or a "conversion transaction" for U.S.
federal income tax purposes or as part of a synthetic security or other
integrated investment, or persons who have a functional currency other than the
U.S. dollar, and does not address the tax consequences under state, local or
foreign law. The summary is based upon the Code, Treasury regulations thereunder
and administrative and judicial interpretations thereof as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
No statutory, judicial or administrative authority directly addresses the
characterization of the FELINE PRIDES or instruments similar to the FELINE
PRIDES for U.S. federal income tax purposes. As a result no assurance can be
given that the IRS will agree with the tax consequences described herein.
ACCORDINGLY, A PROSPECTIVE INVESTOR (INCLUDING A TAX-EXEMPT INVESTOR) IN THE
FELINE PRIDES SHOULD CONSULT ITS TAX ADVISOR IN DETERMINING THE TAX CONSEQUENCES
OF AN INVESTMENT IN THE FELINE PRIDES, INCLUDING THE APPLICATION OF STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL
OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Trust Preferred Securities, Special
Tax Counsel will render an opinion generally to the effect that, under current
law and assuming full compliance with the terms of the Trust Agreement, the
Indenture, and certain other documents, and based upon certain facts and
assumptions contained in such opinion, the Trust will be classified, for U.S.
federal income tax purposes, as a grantor trust and not as an association
taxable as a corporation. Accordingly, for U.S. federal income tax purposes,
each
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holder of Trust Preferred Securities generally will be treated as the owner of
an undivided beneficial interest in the Junior Subordinated Debentures and as
further discussed below, will be required to include in ordinary income such
holder's allocable share of interest or OID paid or accrued on the Junior
Subordinated Debentures.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Junior Subordinated Debentures,
Special Tax Counsel will render an opinion generally to the effect that, under
current law and assuming full compliance with the terms of the Indenture and
certain other documents, and based upon certain facts and assumptions contained
in such opinion, the Junior Subordinated Debentures to be held by the Trust will
be classified, for U.S. federal income tax purposes, as indebtedness of the
Company.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of the fiscal budget submitted to Congress,
the Clinton Administration proposed a number of changes to federal income tax
laws. One proposal would preclude the issuer from deducting interest on debt
instruments payable in stock of the issuer. A debt instrument would be treated
as payable in stock of the issuer if it were part of an arrangement designed to
result in payment of debt with such stock such as certain issuances of a forward
contract in connection with the issuance of debt. The effective date of the
proposals is the date of first Congressional committee action which could occur
prior to the issuance of the Junior Subordinated Debentures. If the proposals
are enacted into law as currently drafted, they should not apply to the Junior
Subordinated Debentures since the issuance of the Junior Subordinated Debentures
and the issuance of the Purchase Contract should not be considered as part of an
arrangement designed to result in the payment of the Junior Subordinated
Debentures with stock of the issuer. In addition, it is possible that the
proposals as enacted into law may contain transition rules for transactions
which are currently underway, such as transactions involving the offering of
securities with respect to which a filing with the Securities and Exchange
Commission has been made. If the proposals were enacted into law with such a
transition rule, the proposals would not apply to the Junior Subordinated
Debentures. There can be no assurance, however, that the proposals, if enacted,
will be enacted as currently drafted or will include such a transitional rule or
that other legislation enacted after the date hereof will not adversely affect
the tax treatment of the Junior Subordinated Debentures or cause a Tax Event,
resulting in the distribution of the Junior Subordinated Debentures to holders
of Trust Preferred Securities. See "Description of the Trust Preferred
Securities -- Special Event Distribution."
INITIAL TAX BASIS IN TRUST PREFERRED SECURITY AND PURCHASE CONTRACT
The purchase price of each Income PRIDES will be allocated between the
Trust Preferred Security and the Purchase Contract included in an Income PRIDES
in proportion to their respective fair market values at the time of purchase.
Such allocation will establish the Holder's initial tax basis in the Trust
Preferred Security and Purchase Contract.
The Company intends to take the position that, at the time of issuance of
the Income PRIDES, the fair market value of each Trust Preferred Security equals
its Stated Amount and the fair market value of each Purchase Contract equals
zero. As a result, a holder should allocate the entire purchase price for an
Income PRIDES (i.e., the Stated Amount of a Trust Preferred Security) to the
Trust Preferred Security and should not allocate any portion of the purchase
price to the Purchase Contract. The Company's position will be binding upon each
holder unless the holder explicitly discloses a contrary position on a statement
attached to the holder's timely filed U.S. federal income tax return for the
taxable year in which the Income PRIDES is acquired.
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DISTRIBUTIONS ON TRUST PREFERRED SECURITIES
Under applicable Treasury regulations, a debt instrument will be issued
with OID if there is more than a remote contingency that periodic stated
interest payments due on the instrument will not be timely paid. Because the
exercise by the Company of its option to defer the payment of stated interest on
the Junior Subordinated Debentures would, among other things, prevent the
Company from declaring dividends on any of its capital stock, the Company
believes that the likelihood of its exercising the option is remote within the
meaning of such regulations. As a result, the Company intends to take the
position, based upon the advice of Special Tax Counsel, that the Junior
Subordinated Debentures will not be issued with OID. Accordingly, based upon
this position, a holder of Trust Preferred Securities will include stated
interest payments on the Junior Subordinated Debentures in ordinary income at
the time that such payments are paid or accrued, in accordance with such
holder's regular method of accounting. Because such regulations have not yet
been addressed in any published rulings or other published interpretations
issued by the IRS, it is possible that the IRS could take a position contrary to
the position taken by the Company.
If the Company were to exercise its option to defer the payment of stated
interest on the Junior Subordinated Debentures, the Junior Subordinated
Debentures would be treated, solely for purposes of the OID rules, as being
re-issued at such time with OID. Under these rules, a holder of Trust Preferred
Securities would be required to include OID in ordinary income, on a current
basis, over the period that the Trust Preferred Securities are held even though
the Company would not make actual cash payments during the extended interest
payment period. The amount of OID includible in the taxable income of a holder
of Trust Preferred Securities would be determined on the basis of a constant
yield method over the remaining term of the instrument, and the actual payment
of stated interest on the Junior Subordinated Debentures would not be separately
reported as taxable income. The amount of OID that would accrue, in the
aggregate, during an extended interest payment period would approximately equal
the amount of the cash payment due at the end of such period. Any OID included
in income would increase such holder's tax basis in the Trust Preferred Security
and actual payments of stated interest would reduce such tax basis.
Because income on the Trust Preferred Securities will constitute interest
for U.S. federal income tax purposes, corporate holders of Trust Preferred
Securities will not be entitled to a dividends-received deduction in respect of
such income.
CONTRACT ADJUSTMENT PAYMENTS
There is no authority for the treatment of the Contract Adjustment Payments
under current law. For federal income tax information reporting purposes, the
Company intends to report the Contract Adjustment Payments and the Deferred
Contract Adjustment Payments (if any) to holders in the taxable year in which
they are paid. The Company intends to take the position that the Contract
Adjustment Payments constitute taxable income to holders when received or
accrued, in accordance with the holder's regular method of accounting. Holders
should consult their respective tax advisors concerning the treatment of the
Contract Adjustment Payments and Deferred Contract Adjustment Payments,
including the possibility that the receipt of a Contract Adjustment Payment may
be treated as a loan, purchase price adjustment, rebate or option premium rather
than being includible in income on a current basis. The Company does not intend
to deduct the Contract Adjustment Payments or Deferred Contract Adjustment
Payments because it views them as a cost of issuing the Common Stock. Contract
Adjustment Payments and Deferred Contract Adjustment Payments received by a
regulated investment company should be treated as income derived with respect to
such company's business of investing in stocks and securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES UPON LIQUIDATION OF THE TRUST
If the Company exercises its right to liquidate the Trust and cause the
Junior Subordinated Debentures to be distributed, on a pro rata basis, to
holders of Trust Preferred Securities (or to the Collateral Agent on behalf of
such holders), such distribution would not be taxable to such holders. In such
event, each holder of Trust Preferred Securities would have a tax basis in the
Junior Subordinated Debentures received in the liquidation equal to the tax
basis in the holder's Trust Preferred Securities surrendered therefor, and the
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holding period of such Junior Subordinated Debentures would include the period
during which the holder had held the Trust Preferred Securities. If, however,
the Trust is classified, for U.S. federal income tax purposes, as an association
taxable as a corporation at the time of such liquidation, the distribution of
Junior Subordinated Debentures would constitute a taxable event to holders of
Trust Preferred Securities.
POSTING OF TREASURY SECURITIES TO CREATE GROWTH PRIDES
A holder of an Income PRIDES that chooses to substitute a Treasury Security
for Trust Preferred Securities held by the Collateral Agent generally will not
recognize taxable gain or loss upon release of the Trust Preferred Securities to
the holder, and the holder's tax basis in the Trust Preferred Securities and
Purchase Contract will remain unchanged. In general the substitution of the
Treasury Security should not constitute a taxable event (except with respect to
a holder who, because of the holder's particular tax status or the circumstances
under which the holder holds the Treasury Security, may be subject to tax, such
as a person who holds the Treasury Security as part of a "straddle" or a
"conversion transaction" for U.S. federal income tax purposes). Such holder will
continue to include in income any OID or market discount or amortize any bond
premium otherwise includible or deductible, respectively, by such holder with
respect to such Treasury Security. Holders should consult their respective tax
advisors concerning the tax consequences of purchasing, owning and disposing of
Treasury Securities.
POSTING OF TRUST PREFERRED SECURITIES TO RECREATE INCOME PRIDES
A holder of a Growth PRIDES that delivers Trust Preferred Securities to the
Collateral Agent generally will not recognize taxable gain or loss upon release
of the Treasury Security to the holder.
SALE OR DISPOSITION
A holder generally will recognize gain or loss upon the sale or other
disposition of an Income PRIDES, a Growth PRIDES or a Trust Preferred Security
(including a redemption of a Trust Preferred Security by the Trust). In the case
of an Income PRIDES or a Growth PRIDES, such gain or loss will be separately
calculated with respect to the Trust Preferred Security or Treasury Security, as
the case may be, and the related Purchase Contract by allocating the sum of any
cash and the fair market value of any property received upon the sale or other
disposition between the two components in proportion to their respective fair
market values. The amount of gain or loss with respect to each component
generally should equal the difference between the consideration so allocated to
each component (reduced by any amount attributable to accrued interest or
Contract Adjustment Payments, which will be taxable as described above) and the
holder's tax basis in the respective components. In the case of a Trust
Preferred Security, the amount of gain or loss will equal the difference between
the sum of any cash and the fair market value of any property received upon the
sale or other disposition of such Trust Preferred Security (reduced by any
amount attributable to accrued interest or Contract Adjustment Payments, which
will be taxable as described above) and the holder's tax basis in the Trust
Preferred Security. Any such gain or loss generally will be capital gain or loss
and will be long-term capital gain or loss (determined separately for each
component of an Income PRIDES or a Growth PRIDES and for a Trust Preferred
Security) if the holder held the respective component of the Income PRIDES or
Growth PRIDES or the Trust Preferred Security, as the case may be, for more than
one year at the time of such sale or disposition.
PURCHASE OF COMMON STOCK UNDER PURCHASE CONTRACT
A holder of an Income PRIDES that directs the Trust to put its Junior
Subordinated Debenture to the Company on the Purchase Contract Settlement Date
will not recognize taxable gain or loss upon the exercise of such Put Option
because the holder's tax basis in its Trust Preferred Security should equal the
amount received (the Stated Amount) and be automatically applied to the holder's
purchase of the Common Stock. A holder of an Income PRIDES will not recognize
taxable gain or loss upon the tender of cash to settle the Purchase Contract and
the release of the Trust Preferred Security to such holder. A holder of a Growth
PRIDES will not recognize taxable gain or loss upon the tender of cash to settle
the Purchase Contract early and the release of the Treasury Securities to such
holder. A holder of a Growth PRIDES will recognize
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taxable gain or loss upon the automatic application of the Treasury Security to
settle the Purchase Contract on the Purchase Contract Settlement Date equal to
the difference, if any, between the fair market value of the Treasury Security
automatically applied to purchase the Common Stock and the holder's tax basis in
such Treasury Security.
A holder's tax basis in the Common Stock will equal the purchase price for
such Common Stock plus the holder's tax basis, if any, in the Purchase Contract.
The holding period for the Common Stock will begin on the day after the purchase
of such Common Stock.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER PURCHASE CONTRACT
Assuming that the Company has current or accumulated earnings and profits,
for U.S. federal income tax purposes, at least equal to the amount of any
dividend, a holder of Common Stock will include such a dividend in income when
paid, and the dividend will be eligible for the dividends-received deduction if
received by an otherwise qualifying corporate holder that meets the holding
period and other requirements for such deduction.
Upon the sale or other disposition of the Common Stock, a holder will
recognize gain or loss equal to the difference between the amount of cash and
fair market value of any property received and the holder's tax basis in such
Common Stock. Any such gain or loss generally will be capital gain or loss and
will be long-term capital gain or loss if the holder held the Common Stock for
more than one year at the time of such sale or disposition.
ADJUSTMENT OF SETTLEMENT RATE
Holders of Income PRIDES or Growth PRIDES might be treated as receiving a
constructive distribution from the Company if (i) the Settlement Rate is
adjusted and, as a result of such adjustment, the proportionate interest of such
holders in the assets or earnings and profits of the Company is increased, and
(ii) the adjustment is not made pursuant to a bona fide, reasonable antidilution
formula. An adjustment in the Settlement Rate would not be considered made
pursuant to such a formula if the adjustment were made to compensate for certain
taxable distributions with respect to the Common Stock. Thus, although not
currently anticipated, under certain circumstances, an increase in the
Settlement Rate may be taxable to holders of Income PRIDES and Growth PRIDES as
a dividend to the extent of the current accumulated earnings and profits of the
Company. Each Holder would be required to include its allocable share of such
constructive dividend in gross income but would not receive any cash related
thereto.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to ERISA, plans and
individual retirement accounts that are subject to Section 4975 of the IRC and
entities whose assets are considered assets of such plans ("Plans"), may
purchase the Securities subject to the investing fiduciary's determination that
the investment in the Securities satisfies ERISA's fiduciary standards and other
requirements applicable to investments by Plans. Accordingly, among other
factors, the fiduciary should consider whether the investment would satisfy the
prudence and diversification requirements of ERISA and would be consistent with
the documents and instruments governing the Plans.
Under regulations issued by the U.S. Department of Labor (the "DOL"), a
Plan that owns the Securities may be deemed to own a portion of the assets held
in the Trust, including a portion of the Junior Subordinated Debentures held in
the Trust. In addition, the Company and its affiliates may be "parties in
interest" (within the meaning of ERISA) or "disqualified persons" (within the
meaning of Section 4975 of the IRC) with respect to certain Plans (generally,
Plans maintained or sponsored by, or contributed to by, any such persons or
Plans with respect to which any such persons are fiduciaries or service
providers). The acquisition and ownership of the Securities and a deemed
acquisition and ownership of an interest in the Junior Subordinated Debentures
by a Plan with respect to which the Company or any of its affiliates is
considered a party in interest or a disqualified person may constitute or result
in a prohibited transaction under ERISA or Section 4975 of
89
<PAGE> 91
the IRC, unless such securities are acquired and are held pursuant to and in
accordance with an applicable exemption. In this regard, the DOL has issued
PTCEs that may apply to the acquisition and holding of the Securities. These
class exemptions are PTCE 84-14 (respecting transactions determined by
independent qualified professional asset managers), PTCE 90-1 (respecting
insurance company separate accounts), PTCE 91-38 (respecting bank collective
trust funds), PTCE 95-60 (respecting insurance company general accounts) and
PTCE 96-23 (respecting transactions determined by in-house asset managers).
Any fiduciary proposing to acquire the Securities on behalf of a Plan
should consult with ERISA counsel for the Plan and should not acquire the
Securities unless it is determined that such acquisition and holding does not
and will not constitute a prohibited transaction and will satisfy the applicable
fiduciary requirements imposed under ERISA. Any such acquisition by a Plan shall
be deemed a representation by the Plan and the fiduciary effecting the
investment on behalf of the Plan that such acquisition and holding satisfies the
applicable fiduciary requirements of ERISA, and is entitled to exemptive relief
from the prohibited transaction provisions of ERISA and the IRC in accordance
with one or more of the foregoing PTCEs or another available prohibited
transaction exemption.
90
<PAGE> 92
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Trust and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., Oppenheimer & Co.,
Inc. and The Robinson-Humphrey Company, Inc. (the "Underwriters"), the Company
and the Trust have agreed to sell to the Underwriters, and each of the
Underwriters severally has agreed to purchase from the Company and the Trust,
the number of Income PRIDES set forth opposite each Underwriter's name. In the
Underwriting Agreement, the several Underwriters severally have agreed, subject
to the terms and conditions set forth therein, to purchase all of the Income
PRIDES offered hereby if any of the Income PRIDES are purchased. In the event of
default by an Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS INCOME PRIDES
------------ -------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Goldman, Sachs & Co. .......................................
Oppenheimer & Co., Inc......................................
The Robinson-Humphrey Company, Inc. ........................
---------
Total.......................................... 1,500,000
=========
</TABLE>
The Underwriters have advised the Company and the Trust that they propose
initially to offer the Income PRIDES to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per Income PRIDES. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per Income PRIDES on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
Until the distribution of the Securities is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
any selling group members to bid for and purchase the Securities or shares of
Common Stock. As an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Securities or the
Common Stock. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Securities or the Common Stock.
If the Underwriters create a short position in the Securities in connection
with the Offering, i.e., if they sell more Securities than are set forth on the
cover page of this Prospectus, the Underwriters may reduce that short position
by purchasing Securities in the open market. The Underwriters may also elect to
reduce any short position by exercising all or part of the over-allotment option
described below.
The Underwriters may also impose a penalty bid on certain Underwriters and
selling group members. This means that if the Underwriters purchase Securities
in the open market to reduce the Underwriters' short position or to stabilize
the price of the Securities, they may reclaim the amount of the selling
concession from any Underwriter and any selling group members who sold those
Securities as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company, the Trust nor any of the Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Securities or the
Common Stock. In addition, neither the Company, the Trust nor any of the
Underwriters makes any representation that the Underwriters will engage in such
transaction or that such transactions, once commenced, will not be discontinued
without notice.
91
<PAGE> 93
The Company and the Trust have granted to the Underwriters an option,
exercisable for 30 days following the date of this Prospectus, to purchase up to
an aggregate of additional 225,000 Income PRIDES from the Company and the Trust,
at the price to the public set forth on the cover page of this Prospectus, less
the underwriting discount. The Underwriters may exercise this option only to
cover over-allotments, if any, made on the sale of the Income PRIDES offered
hereby. If the Underwriters exercise their over-allotment option, each of the
Underwriters has severally agreed, subject to certain conditions, to effect the
foregoing transactions with respect to approximately the same percentage of such
Income PRIDES that the respective number of Income PRIDES set forth opposite its
name in the foregoing table bears to the Income PRIDES offered hereby.
The Company and the Trust have agreed, for a period of 180 days after the
date of this Prospectus, to not, without the prior written consent of Merrill
Lynch, Pierce, Fenner and Smith Incorporated, directly or indirectly, sell,
offer to sell, grant any option for the sale of, or otherwise dispose of, or
enter into any agreement to sell, any Income PRIDES, Purchase Contracts, Trust
Originated Trust Preferred Securities or Common Stock, as the case may be, or
any securities of the Company similar to the Income PRIDES, Purchase Contracts,
Trust Originated Trust Preferred Securities or Common Stock or any security
convertible into or exchangeable or exercisable for Income PRIDES, Purchase
Contracts, Trust Originated Trust Preferred Securities or Common Stock other
than to the Underwriters pursuant to the Underwriting Agreement, other than
shares of Common Stock or options for shares of Common Stock issued pursuant to
or sold in connection with any employee benefit, dividend reinvestment and stock
option and stock purchase plans of the Company and its subsidiaries and other
than the Growth PRIDES or shares of Common Stock issuable upon early settlement
of the Income PRIDES or exercise of stock options.
Prior to this offering, there has been no public market for the Income
PRIDES. The public offering price for the Income PRIDES was determined in
negotiations between the Company, the Trust and the Underwriters. In determining
the terms of the Income PRIDES, including the public offering price, the
Company, the Trust and the Underwriters considered the market price of the
Company's Common Stock and also considered the Company's recent results of
operations, the future prospects of the Company and the industry in general,
market prices and terms of, and yields on, securities of other companies
considered to be comparable to the Company and prevailing conditions in the
securities markets. The Income PRIDES have been approved for listing on the NYSE
under the symbol "AHL prI", subject to official notice of issuance. The Growth
PRIDES and the Trust Preferred Securities will not be listed or traded on any
securities exchange. The Company and the Trust have been advised by the
Underwriters that they presently intend to make a market for the Growth PRIDES
and the Trust Preferred Securities; however, they are not obligated to do so and
any market making may be discontinued at any time. There can be no assurance
that an active trading market will develop for the Income PRIDES, the Growth
PRIDES or the Trust Preferred Securities or that the Income PRIDES will trade in
the public market subsequent to the offering at or above the initial public
offering price.
The Company and the Trust have agreed to indemnify the Underwriters
against, or to contribute to payments that the Underwriters may be required to
make in respect of, certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business. H. Corbin Day, a director of the Company, is also a
limited partner of Goldman, Sachs & Co., one of the Underwriters of this
offering.
LEGAL MATTERS
The validity of the Purchase Contracts, the Common Stock issuable upon
settlement thereof, the Indenture, the Guarantee, the Junior Subordinated
Debentures and certain other matters will be passed upon for the Company and the
Trust by W. Michael Heekin, Senior Vice President and Corporate Secretary of the
Company. Certain matters will be passed upon for the Company and the Trust by
LeBoeuf, Lamb, Greene & MacRae, L.L.P., New York, New York, as special tax
counsel for the Company in connection with the Securities. Certain legal matters
will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher
92
<PAGE> 94
& Flom LLP, New York, New York. Mr. Heekin is a full-time employee and officer
of the Company and owned 3,148 shares of the Company's Common Stock as of April
30, 1997. LeBoeuf, Lamb, Greene & MacRae, L.L.P., from time to time renders
legal services to the Company.
EXPERTS
The consolidated financial statements and the financial statement schedules
of the Company and its subsidiaries as of December 31, 1996 and 1995, and for
each of the years in the three-year period ended December 31, 1996 included
herein and elsewhere in this Registration Statement have been included herein
and elsewhere in this Registration Statement in reliance on the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements of Columbia Universal and its
subsidiaries as of December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996 which report is included in the Company's
current report on Form 8-K dated March 3, 1997 and incorporated by reference
into this Registration Statement in reliance on the report of Coopers & Lybrand
L.L.P., independent certified public accountants, and upon the authority of said
firm as experts in accounting and auditing.
93
<PAGE> 95
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Accountants' Report............................. F-2
Consolidated Statements of Earnings for the Years Ended
December 31, 1996, 1995 and 1994.......................... F-3
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1996, 1995 and 1994.............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Consolidated Statements of Earnings (Unaudited) for the
Three Months Ended March 31, 1997 and 1996................ F-21
Consolidated Balance Sheets (Unaudited) as of March 31, 1997
and 1996.................................................. F-22
Consolidated Statements of Stockholders' Equity (Unaudited)
for the Three Months Ended March 31, 1997 and 1996........ F-23
Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended March 31, 1997 and 1996................ F-24
Notes to Consolidated Financial Statements (Unaudited) for
the Three Months Ended March 31, 1997 and 1996............ F-25
Schedule I -- Summary of Investments........................ S-1
Schedule II -- Condensed Financial Information of
Registrant................................................ S-2
Schedule III -- Supplementary Insurance Information......... S-6
Schedule IV -- Reinsurance.................................. S-7
</TABLE>
F-1
<PAGE> 96
INDEPENDENT ACCOUNTANTS' REPORT
The Stockholders and Board of Directors
American Heritage Life Investment Corporation
We have audited the consolidated financial statements of American Heritage
Life Investment Corporation and subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated financial statements,
we have also audited the financial statement schedules as listed in the
accompanying index. These consolidated financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Heritage Life Investment Corporation and subsidiaries at December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also in our opinion, the related
financial statement schedules when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG Peat Marwick LLP
January 29, 1997
F-2
<PAGE> 97
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Income:
Insurance revenues........................................ $258,519 $247,251 $230,589
Net investment income..................................... 77,035 70,601 66,706
Realized investment gains, net............................ 420 6,003 2,011
-------- -------- --------
Total income...................................... 335,974 323,855 299,306
-------- -------- --------
Benefits, claims and expenses:
Benefits and claims....................................... 148,887 148,581 146,146
Underwriting, acquisition and insurance expenses:
Taxes, commissions and general expenses................ 117,414 106,399 95,326
Amortization of deferred acquisition costs............. 25,628 23,744 20,758
Other operating expenses.................................. 4,186 3,694 2,413
-------- -------- --------
Total benefits, claims and expenses............... 296,115 282,418 264,643
-------- -------- --------
Earnings before income taxes...................... 39,859 41,437 34,663
Income taxes................................................ 12,827 13,362 11,022
-------- -------- --------
Net earnings...................................... $ 27,032 $ 28,075 $ 23,641
-------- -------- --------
Net earnings per share of common stock...................... $ 1.96 $ 2.02 $ 1.71
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 98
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ----------
(IN THOUSANDS EXCEPT
SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
ASSETS
Investments:
Debt securities, available-for-sale, at fair value
(amortized cost of $512,900 in 1996 and $493,814 in
1995).................................................. $ 521,916 $ 515,429
Equity securities, available-for-sale, at fair value (cost
of $21,465 in 1996 and $23,209 in 1995)................ 34,520 34,735
Mortgage loans on real estate............................. 53,736 29,506
Investment real estate, at cost........................... 453 375
Policy loans.............................................. 399,608 376,672
Short-term investments.................................... 1,216 22,886
---------- ----------
Total investments................................. 1,011,449 979,603
---------- ----------
Cash........................................................ 21,672 20,682
Agents' balances and prepaid commissions.................... 35,730 39,077
Premiums receivable......................................... 40,989 41,816
Accrued investment income................................... 24,958 24,274
Deferred acquisition costs.................................. 173,699 158,250
Property and equipment, at cost, less accumulated
depreciation of $11,825 in 1996 and $10,337 in 1995....... 28,926 27,830
Reinsurance receivables..................................... 13,423 9,231
Other assets................................................ 19,271 17,133
---------- ----------
Total assets...................................... $1,370,117 $1,317,896
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities:
Future policy benefits.................................... $ 203,396 $ 205,088
Policyholders' account balances........................... 681,098 635,670
Unearned premiums......................................... 52,279 53,317
Policy and contract claims................................ 51,261 50,375
---------- ----------
Total policy liabilities.......................... 988,034 944,450
---------- ----------
Notes payable to banks...................................... 85,459 94,994
Deferred income taxes....................................... 32,344 28,882
Other liabilities........................................... 35,337 30,241
---------- ----------
Total liabilities................................. 1,141,174 1,098,567
---------- ----------
Stockholders' equity:
Common stock of $1.00 par value:
Authorized 35,000,000 shares in 1996 and 20,000,000
shares in 1995; issued 13,967,253 in 1996 and
13,933,206 in 1995.................................... 13,967 13,933
Preferred stock:
Convertible of $10.00 par value: Authorized 500,000
shares; none issued................................... -- --
Non-convertible of $10.00 par value: Authorized 500,000
shares; none issued................................... -- --
Additional paid-in capital................................ 42,644 42,215
Retained earnings......................................... 163,460 148,454
Net unrealized investment gains (losses).................. 12,158 16,772
---------- ----------
232,229 221,374
Less cost of 153,728 in 1996 and 97,277 in 1995 common
shares in treasury........................................ 3,286 2,045
---------- ----------
Total stockholders' equity........................ 228,943 219,329
---------- ----------
Total liabilities and stockholders' equity........ $1,370,117 $1,317,896
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 99
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS EXCEPT SHARE
AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year......................... $ 13,933 $ 13,906 $ 13,880
Add shares issued on exercise of stock options....... 20 5 2
Other shares issued (surrendered), net............... 14 22 24
-------- -------- --------
Balance at end of year............................... 13,967 13,933 13,906
-------- -------- --------
Additional paid-in capital:
Balance at beginning of year......................... 42,215 41,866 41,483
Addition (deduction) related to exercise of stock
options........................................... 112 (54) (22)
Excess over par value on other shares issued......... 317 403 405
-------- -------- --------
Balance at end of year............................... 42,644 42,215 41,866
-------- -------- --------
Retained earnings:
Balance at beginning of year......................... 148,454 129,406 115,465
Add net earnings..................................... 27,032 28,075 23,641
Deduct cash dividends declared on common stock ($.87
per share in 1996, $.65 per share in 1995 and $.70
per share in 1994)................................ (12,026) (9,027) (9,700)
-------- -------- --------
Balance at end of year............................... 163,460 148,454 129,406
-------- -------- --------
Net unrealized investment gains (losses):
Balance at beginning of year......................... 16,772 (10,892) 14,027
Unrealized gain upon adoption of FAS 115 at beginning
of year........................................... -- -- 3,855
Change during the year............................... (4,614) 27,664 (28,774)
-------- -------- --------
Balance at end of year............................... 12,158 16,772 (10,892)
-------- -------- --------
Treasury stock:
Balance at beginning of year......................... 2,045 926 925
Add treasury shares purchased (56,451 shares in 1996,
51,323 shares in 1995 and 127 shares in 1994)..... 1,241 1,119 1
-------- -------- --------
Balance at end of year............................... 3,286 2,045 926
-------- -------- --------
Total stockholders' equity................... $228,943 $219,329 $173,360
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 100
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities:
Net earnings............................................. $ 27,032 $ 28,075 $ 23,641
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for depreciation and amortization........... 2,613 1,706 1,908
Amortization of deferred acquisition costs............ 25,628 23,744 20,758
Acquisition costs deferred............................ (36,018) (33,067) (27,154)
Change in agents' balances and prepaid commissions.... 3,346 70 (1,685)
Change in premiums receivable......................... 878 1,618 (1,119)
Change in accrued investment income................... (683) (8,072) (10,106)
Change in reinsurance receivables..................... (4,192) 2,500 (4,373)
Change in future policy benefits...................... (4,833) 12,576 8,168
Change in policyholders' account balances............. 45,410 49,147 45,244
Change in unearned premiums........................... (1,039) 1,713 4,726
Change in policy and contract claims liability........ 885 (3,433) (3,106)
Change in income taxes................................ 5,846 3,171 5,764
Change in unearned investment income.................. (301) (804) (16,237)
Other, net............................................ 1,974 (3,110) 2,080
-------- --------- ---------
Net cash provided by operating activities........ 66,546 75,834 48,509
-------- --------- ---------
Investing activities:
Sales of debt securities................................. 14,718 46,210 32,103
Maturities of debt securities............................ 46,109 32,026 65,019
Sales of equity securities............................... 5,968 13,951 2,577
Maturities of mortgage loans on real estate.............. 3,479 2,033 2,019
Policy loans paid........................................ 25,372 18,124 18,565
Sales of property and equipment and investment real
estate................................................ 17 1,296 13
Acquisition of block of business......................... 1,561 6,047 --
Purchases of debt securities............................. (80,010) (121,355) (104,742)
Purchases of equity securities........................... (5,239) (2,437) (5,818)
Origination of mortgage loans on real estate............. (27,709) (10,913) (4,727)
Sales (purchases) of short-term investments, net......... 21,669 (15,188) (5,039)
Policy loans made........................................ (48,129) (42,737) (35,055)
Purchases of property and equipment and investment real
estate................................................ (2,789) (2,030) (13,063)
Other, net............................................... (26) -- (3,116)
-------- --------- ---------
Net cash used by investing activities............ (45,009) (74,973) (51,264)
-------- --------- ---------
Financing activities:
Net proceeds (paydowns) on borrowings.................... (9,535) 10,793 11,720
Dividends to stockholders................................ (12,026) (9,027) (9,700)
Purchase of treasury stock............................... (1,241) (1,119) (1)
Other, net............................................... 2,255 (316) 1,241
-------- --------- ---------
Net cash provided (used) by financing
activities..................................... (20,547) 331 3,260
-------- --------- ---------
Increase in cash................................. 990 1,192 505
Cash at beginning of year.................................. 20,682 19,490 18,985
-------- --------- ---------
Cash at end of year........................................ $ 21,672 $ 20,682 $ 19,490
======== ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................. $ 6,325 $ 5,721 $ 4,040
Federal income taxes..................................... 6,550 9,650 4,800
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 101
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Consolidation Policy
The accompanying consolidated financial statements include the accounts of
American Heritage Life Investment Corporation (AHLIC) and its subsidiaries. All
significant intercompany accounts have been eliminated in consolidation. The
term "Company" as used herein includes AHLIC and its subsidiaries.
AHLIC is a holding company whose principal subsidiary is American Heritage
Life Insurance Company (AHL). AHL is licensed to do business as a life insurance
company in 49 states, Puerto Rico, the District of Columbia and the U.S. Virgin
Islands. It markets life and accident and health insurance on an individual,
group and credit basis through licensed agents and brokers. First Colonial
Insurance Company, a subsidiary of AHL, markets credit property insurance and is
currently licensed in twelve states.
(b) Basis of Presentation
The accompanying consolidated financial statements are presented on the
basis of generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Such principles differ in some respects from those followed in preparing
statutory reports filed with various insurance departments. Under GAAP:
(1) Insurance Revenue and Expense Recognition: For traditional
insurance products, premiums, benefits and expenses are reported in a
manner which results in the recognition of profits over the life of the
policies. For interest-sensitive products, premiums received are recognized
as deposits; revenues consist of surrender, mortality and expense charges;
and profits are recognized as earned.
(2) Investments: Bonds and redeemable preferred stocks, which are
classified as debt securities available-for-sale, are stated at fair value.
(3) Deferred Acquisition Costs: The costs (principally commissions)
of acquiring traditional life, interest-sensitive products and accident and
health contracts, certain expenses of the policy issue and underwriting
department, and certain agency expenses, all of which vary with and are
primarily related to the production of new business, have been deferred.
Deferred acquisition costs of traditional life and accident and health
contracts are being amortized over the premium payment period of the
related policies using the same assumptions as were used for computing
liabilities for future policy benefits, together with appropriate expense
assumptions. For interest-sensitive life products, deferred acquisition
costs are being amortized over the lives of the policies in relation to the
present value of estimated gross profits from surrender charges and
investment, mortality and expense margins. Assumptions used for estimating
the related gross profits are evaluated regularly (at least annually) and
amortization is appropriately modified.
(4) Insurance Liabilities: The liabilities for future policy benefits
(which represent the excess of the present value of future benefits to be
paid on behalf of or to policyholders over the present value of future net
premiums, except for interest-sensitive products) are computed by a net
level premium method using estimated future investment yields from 3.75% to
8.00%; withdrawals based on Company experience; mortality, and morbidity
from recognized morbidity and mortality tables modified for anticipated
company experience, with reasonable provisions for possible future adverse
experience deviations. Policyholders' account balances represent premiums
received plus interest credited during the contract accumulation period,
less contract charges for mortality and expenses. For the years ended
December 31, 1996 and 1995, the weighted average interest rates credited to
the policyholders' account balances were 5.37% and 6.28%, respectively; and
the related interest credited to the policyholders'
F-7
<PAGE> 102
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
account balances was $36.9 million and $35.2 million. The surrender charge
provisions for interest-sensitive policies vary depending upon the type of
policy. For universal life-type policies, the surrender charges generally
range over a period of 10-20 years at varying rates depending upon the plan
of insurance. For annuities, the surrender charges generally range over a
period of 7-10 years with charges varying from 1% to 10% of the accumulated
fund value over the surrender charge period.
(c) Valuation of Certain Investments
Debt securities are investments which mature at a specified future date
more than one year after they were issued. Equity securities include common
stocks. During the year ended December 31, 1994, the Company adopted the
provisions of Financial Accounting Standard Board's Statement of the Financial
Accounting Standard No. 115, "Accounting for Investments in Certain Debt and
Equity Securities." Under these provisions, investments are required to be
categorized as (1) held to maturity, (2) available-for-sale, or (3) trading. All
debt and equity securities have been classified by the Company as
available-for-sale and are stated at fair value. Unrealized gains or losses on
debt and equity securities available-for-sale resulting from fluctuations in
fair values were recorded, net of deferred income taxes and adjustments to the
deferred acquisition costs for interest-sensitive insurance products, directly
to a separate component of stockholders' equity. Realized investment gains or
losses are calculated on the basis of specific identification and include
writedowns on those investments where the decline in value below its cost or
amortized cost is considered to be other than temporary.
Policy loans are carried at the actual amount loaned to the policyholder.
No policy loans are made for amounts in excess of the cash surrender value of
the related policy. Accordingly, in all instances, the policy loans are fully
collateralized by the related liability for future policy benefits for
traditional insurance policies and by the policyholders' account balance for
interest-sensitive policies.
Mortgage loans are reported at amortized cost, less an allowance for
possible losses.
(d) Property and Equipment
Depreciation of property and equipment is computed on the straight-line
method over the estimated useful lives of the respective assets.
(e) Policy and Contract Claims
Accruals are provided to cover the cost of reported claims not paid and for
claims incurred but not reported to the Company. The accruals are computed based
on historical claims experience modified for variations in expected future
benefits.
(f) Other Operating Expenses
Other operating expenses include primarily interest expense related to bank
borrowings and other general corporate expenses of AHLIC.
(g) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income tax expense in the period that includes the enactment date.
F-8
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(h) Earnings Per Share
Earnings per share of common stock are based on the weighted average number
of shares outstanding during each year, excluding treasury shares. Options
outstanding to purchase common stock had no significant dilutive effect on
earnings per share.
(i) Reclassifications
Certain amounts for 1995 and 1994 have been reclassified to conform with
the presentation adopted in 1996.
(2) INCOME TAXES
The effective federal income tax rates on earnings before income taxes were
lower than the maximum statutory rates as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
AMT.(*) % AMT.(*) % AMT.(*) %
------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense..... $13,951 35 $14,503 35 $12,132 35
Dividends received deduction........ (324) (1) (448) (1) (570) (2)
Tax exempt interest................. (5) -- (8) -- (13) --
Credits from oil and gas
investments....................... (788) (2) (677) (2) (523) (1)
Other, net.......................... (7) -- (8) -- (4) --
------- -- ------- -- ------- --
Effective income tax expense........ $12,827 32 $13,362 32 $11,022 32
======= == ======= == ======= ==
</TABLE>
- ---------------
* Presented in thousands.
Deferred income taxes reflect the impact of temporary differences between
the financial statement and tax basis carrying values of assets and liabilities.
The temporary differences that gave rise to significant portions of the deferred
tax liability and the effect on deferred income tax expense of changes in those
temporary differences (in thousands) for the years ended December 31, 1996, 1995
and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Excess of GAAP earnings over statutory earnings of
life insurance operations........................... $ 4,726 $ 3,571 $ 6,248
Difference in tax and statutory policy liabilities.... (986) (450) (1,494)
Unearned investment income............................ 2 149 4,683
Deferred acquisition costs tax........................ (2,533) (2,573) (2,157)
Deferred gain on real estate.......................... -- 2,286 --
Miscellaneous items, net.............................. 1,795 252 (338)
------- ------- -------
Deferred income tax expense........................... $ 3,004 $ 3,235 $ 6,942
======= ======= =======
</TABLE>
The components of income tax expense (in thousands) for each of the three
years ended December 31 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current............................................... $ 9,823 $10,127 $ 4,080
Deferred.............................................. 3,004 3,235 6,942
------- ------- -------
Total....................................... $12,827 $13,362 $11,022
======= ======= =======
</TABLE>
F-9
<PAGE> 104
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that gave rise to significant
portions of the deferred tax liabilities and deferred tax assets at December 31,
1996 and December 31, 1995 (in thousands) were as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets:
Insurance reserves........................................ $21,320 $23,081
Unearned investment income................................ 299 400
Other..................................................... -- 304
------- -------
Total deferred tax assets......................... 21,619 23,785
------- -------
Deferred tax liabilities:
Deferred acquisition costs................................ 44,412 41,350
Unrealized investment gains on securities
available-for-sale..................................... 6,546 9,031
Deferred gain on real estate.............................. 1,738 2,286
Other..................................................... 1,267 --
------- -------
Total deferred tax liabilities.................... 53,963 52,667
------- -------
Net deferred tax liability................................ 32,344 28,882
Current tax liability (asset)............................. 100 100
------- -------
Accrued and deferred income taxes................. $32,444 $28,982
======= =======
</TABLE>
No valuation allowance was recorded at December 31, 1996 or 1995.
Prior to 1985, certain life insurance company income was not subject to
federal income tax until distributed. For tax purposes such income was
accumulated in a memorandum "policyholders' surplus account" and taxed upon
distribution. At December 31, 1996, the policyholders' surplus account was $8.8
million.
(3) INVESTMENTS
For the years ended December 31, 1996, 1995 and 1994, net investment income
(in thousands) was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Investment income:
Debt securities....................................... $41,573 $38,676 $37,387
Equity securities..................................... 809 1,679 1,746
Mortgage loans on real estate......................... 3,657 2,290 1,921
Investment real estate................................ 54 43 52
Policy loans.......................................... 33,496 30,231 27,554
Short-term investments................................ 2,928 2,776 2,855
Other................................................. 4 4 8
------- ------- -------
Gross investment income....................... 82,521 75,699 71,523
Investment expenses..................................... 5,486 5,098 4,817
------- ------- -------
Net investment income......................... $77,035 $70,601 $66,706
======= ======= =======
</TABLE>
F-10
<PAGE> 105
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Proceeds from sales and maturities of investments in debt securities during
1996, 1995 and 1994 were $59.1 million, $69.3 million and $97.2 million,
respectively. Gross gains and losses on those sales, and net gains and losses on
sales of other investments (in thousands), were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Debt securities -- gains............................... $ 794 $ 898 $ 2,578
Debt securities -- losses.............................. (2,683) (14,709) (2,305)
------- -------- -------
Debt securities, net................................... (1,889) (13,811) 273
Equity securities, net................................. 2,309 13,187 1,750
Real estate............................................ -- 7,127 (12)
Other, net............................................. -- (500) --
------- -------- -------
Realized investment gains, net............... $ 420 $ 6,003 $ 2,011
======= ======== =======
</TABLE>
Stockholders' equity included the following unrealized investment gains
(losses) (in thousands) at December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Equity securities available-for-sale:
Gross unrealized investment gains.................... $13,434 $12,068 $ 18,717
Gross unrealized investment losses................... (379) (542) (1,825)
------- ------- --------
13,055 11,526 16,892
------- ------- --------
Debt securities available-for-sale:
Gross unrealized investment gains.................... 12,583 23,966 2,034
Gross unrealized investment losses................... (3,567) (2,351) (39,957)
------- ------- --------
9,016 21,615 (37,923)
------- ------- --------
Gross unrealized investment gains (losses)... 22,071 33,141 (21,031)
Increase (decrease)in deferred acquisition costs for
interest-sensitive insurance products................ (3,367) (7,338) 10,139
Deferred federal income tax (benefit).................. (6,546) (9,031) --
------- ------- --------
Net unrealized investment gains (losses)..... $12,158 $16,772 $(10,892)
======= ======= ========
</TABLE>
F-11
<PAGE> 106
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The amortized cost and fair values of debt securities available-for-sale by
category of securities (in thousands) were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAIN LOSS VALUE
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
December 31, 1996:
Obligations of U.S. government
corporations and agencies............. $ 17,339 $ 759 $ 80 $ 18,018
Obligations of state and local
governments........................... 345 20 -- 365
Public utilities......................... 53,344 392 285 53,451
Corporate securities..................... 289,076 10,944 155 299,865
Mortgage backed securities............... 152,796 468 3,047 150,217
-------- ------- ------ --------
Total............................ $512,900 $12,583 $3,567 $521,916
======== ======= ====== ========
December 31, 1995:
Obligations of U.S. government
corporations and agencies............. $ 13,932 $ 1,330 $ -- $ 15,262
Obligations of state and local
governments........................... 345 28 -- 373
Public utilities......................... 35,189 963 75 36,077
Corporate securities..................... 247,857 20,142 638 267,361
Mortgage backed securities............... 196,491 1,503 1,638 196,356
-------- ------- ------ --------
Total............................ $493,814 $23,966 $2,351 $515,429
======== ======= ====== ========
</TABLE>
The amortized cost and fair value of debt securities available-for-sale (in
thousands) at December 31, 1996, by contractual maturity, were as follows.
Expected maturities will differ from contractual maturities because borrowers
may have the right to call or repay obligations with or without penalties.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
AMORTIZED FAIR
COST VALUE
--------- --------
<S> <C> <C>
Due in one year or less..................................... $ 1,092 $ 1,104
Due after one year through five years....................... 23,497 25,071
Due after five years through ten years...................... 127,467 133,828
Due after ten years......................................... 172,526 176,671
Mortgage backed securities.................................. 152,796 150,217
Redeemable preferred stocks................................. 35,522 35,025
-------- --------
Total............................................. $512,900 $521,916
======== ========
</TABLE>
The amortized cost of high yield bonds included in debt securities
available-for-sale was $14.8 million with a market value of $15.0 million, which
represented 1.5% of invested assets.
There were no individual investments at December 31, 1996, other than U.S.
government securities, which exceeded 10% of the Company's stockholders' equity.
F-12
<PAGE> 107
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values (in thousands) of the Company's financial
instruments are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
---------- ----------
<S> <C> <C>
Debt securities............................................. $ 521,916 $ 521,916
Equity securities........................................... 34,520 34,520
Mortgage loans on real estate............................... 53,736 58,786
Investment real estate...................................... 453 2,400
Policy loans................................................ 399,608 399,608
Cash and short-term investments............................. 22,888 22,888
---------- ----------
Total cash and investments........................ $1,033,121 $1,040,118
---------- ----------
Notes payable to banks...................................... $ 85,459 $ 85,459
========== ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
---------- ----------
<S> <C> <C>
Debt securities............................................. $ 515,429 $ 515,429
Equity securities........................................... 34,735 34,735
Mortgage loans on real estate............................... 29,506 35,570
Investment real estate...................................... 375 2,400
Policy loans................................................ 376,672 376,672
Cash and short-term investments............................. 43,568 43,567
---------- ----------
Total cash and investments........................ $1,000,285 $1,008,373
---------- ----------
Notes payable to banks...................................... $ 94,994 $ 94,994
========== ==========
</TABLE>
These fair values were determined as follows:
Debt securities
The fair value and carrying value of debt securities were estimated based
on bid prices published in financial newspapers or bid quotations received from
securities dealers.
Equity securities
The fair value and carrying value of equity securities, other than private
placements, were based on bid prices published in financial newspapers. For
private placements, cost has been determined to approximate fair value.
Mortgage loans on real estate
For residential mortgage loans, fair value was estimated using quoted
market prices for securities backed by similar loans. The fair value of
commercial loans was estimated by discounting expected future cash flows using
current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. The outstanding principal
balance of adjustable-rate mortgage loans is assumed to approximate their fair
values.
Investment in real estate
The fair value of real estate was calculated using estimated market values.
F-13
<PAGE> 108
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Policy loans
The fair value of policy loans approximates the book value, as interest
rates charged for a majority of the policy loans are updated to current market
rates on an annual basis.
Cash and short-term investments
The carrying amount approximates fair value because of the short maturity
of these instruments.
Notes payable to banks
The carrying amount estimates fair value because the interest rates charged
approximate current market rates.
(5) NOTES PAYABLE TO BANKS
At December 31, 1996, all of the notes payable to banks were short-term,
unsecured, and related to advances under $120.0 million lines of credit ($54.5
million available to be drawn at December 31, 1996) bearing interest at rates
ranging from 6.09% to 7.75%. The arrangements under the terms of the lines of
credit are reviewed annually for renewal. Debt of $20.0 million matures in 1997
and relates to the acquisition of $20.0 million of GNMA's, which were financed
at an interest rate of 6.10% and which provides a positive interest spread
between the rate earned on the GNMA's and the respective borrowing rate.
Interest expense for the years ended December 31, 1996, 1995 and 1994
totaled $6.1 million, $5.6 million and $4.0 million, respectively, of which $3.7
million, $3.3 million and $2.0 million, respectively, were included in other
operating expenses and $2.4 million, $2.2 million and $2.0 million,
respectively, related to the purchase of the GNMA's discussed above which
reduced net investment income.
(6) REINSURANCE
In the normal course of business, the Company seeks to limit its exposure
to loss on any single insured and to recover a portion of benefits paid by
ceding insurance to other insurance companies or reinsurers under excess
coverage and co-insurance contracts. The maximum risk generally retained on
AHL's ordinary life insurance on any one insured is $100,000 for policies issued
prior to July 1, 1994 and $200,000 on policies issued subsequent to July 1,
1994. The amount retained on group and credit life insurance is generally
$50,000. Generally, income from reinsurance arrangements is recognized in a
manner similar to the income recognition on the underlying policy contracts.
A contingent liability exists for that portion of the policies reinsured in
the event that the reinsuring companies are unable to pay their share of any
resulting claims as reinsurance contracts do not relieve the Company from its
obligations to its policyholders. The Company evaluates the financial condition
of its reinsurers and monitors concentrations of credit risk arising from
similar geographic regions, activities, or economic characteristics of the
reinsurers to minimize its exposure to significant losses from reinsurer
insolvencies.
The amount of insurance premiums assumed and ceded under reinsurance
agreements for the year ended December 31, 1996 was $5.8 million and $111.7
million, respectively. For the year ended December 31, 1995 the amount assumed
and ceded was $12.6 million and $97.8 million, respectively. The amounts of
recoveries for benefits paid under reinsurance agreements for the years ended
December 31, 1996 and 1995 were $104.0 million and $96.7 million, respectively.
(7) STOCK COMPENSATION PLANS
At December 31, 1996, the Company had six stock-based compensation plans,
which are described below. The Company applies Accounting Principles Board
Opinion No. 25 "Accounting for Stock issued to
F-14
<PAGE> 109
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employees" and related interpretations in accounting for its plans. Accordingly,
no compensation cost has been recognized for its fixed option plans. The
compensation that has been charged against income for the long-term incentive
plan stock, employee stock purchase and agents stock purchase plans (in
thousands) was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Long-term incentive plan stock.............................. $487 $379 $308
Employee stock purchase plan................................ 70 66 64
Agents stock investment plan................................ 13 9 10
</TABLE>
Compensation cost determined pursuant to Financial Accounting Standard No.
123 "Accounting for Stock-Based Compensation" would not have had a material
effect on the Company's net earnings and earnings per share for 1996 and 1995.
(A) FIXED STOCK OPTION PLANS
The Company has three fixed stock option plans primarily for its employees.
Under the 1980 Stock Option Plan, the Company may grant options to its employees
for up to 300,000 shares of common stock. Under the 1988 Stock Option Plan, the
Company may grant options to its employees for up to 266,666 shares of common
stock. Under the 1996 Stock Option Plan, the Company may grant options to its
employees for up to 350,000 shares of common stock. Under all plans, the
exercise price of each option equals the market price of the Company's stock on
the date of grant. The Company had a 1982 Stock Option Plan which expired in
1992 but options which were granted under that plan prior to its expiration
continue in effect. Under the 1980 and 1996 Plans, the option's maximum term is
ten years. Under the 1988 Plan, the option's maximum term is six years. Under
the 1980 Plan, options are granted in the first part of the year and vest in
increments of 33% per year beginning one year from date of grant and continuing
for two more years. Under the 1988 Plan, options are granted during the year and
vest in increments of 20% per year over a five year period beginning no less
than six months after the grant.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1995, respectively: dividend yield of
3.1% and 3.6%; expected volatility of 20% for both years for the 1980 Plan
options. No options were granted under the 1982 or 1988 plans during the period.
F-15
<PAGE> 110
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the status of the Company's fixed stock option plans as of
December 31, 1996 and 1995, and changes during the years ended on those dates is
presented below:
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
FIXED STOCK OPTION PLANS SHARES PRICE SHARES PRICE
- ------------------------ ------- -------- ------- --------
<S> <C> <C> <C> <C>
1980 PLAN:
Outstanding at beginning of year................ 77,111 $19.21 44,391 $19.98
Granted......................................... 23,300 22.63 41,984 18.50
Exercised....................................... -- -- -- --
Forfeited....................................... -- -- (9,264) 19.66
------- ------ ------- ------
Outstanding at end of year...................... 100,411 20.00 77,111 19.21
------- ------ ------- ------
Options exercisable at year-end ................ 43,639 19.71 17,944 20.43
------- ------ ------- ------
Weighted-average fair value of options granted
during the year.............................. $ 6.51 -- $ 4.79 --
------- ------ ------- ------
1988 PLAN:
Outstanding at beginning of year................ 167,500 18.71 202,500 18.72
Granted......................................... -- -- -- --
Exercised....................................... -- -- -- --
Forfeited....................................... -- -- (35,000) 18.79
------- ------ ------- ------
Outstanding at end of year...................... 167,500 18.71 167,500 18.71
------- ------ ------- ------
Options exercisable at year-end ................ 94,000 19.22 60,500 19.51
------- ------ ------- ------
1982 PLAN:
Outstanding at beginning of year................ 27,336 11.13 44,670 11.13
Granted......................................... -- -- -- --
Exercised....................................... (27,336) 11.13 (17,334) 11.13
Forfeited....................................... -- -- -- --
------- ------ ------- ------
Outstanding at end of year...................... -- -- 27,336 11.13
------- ------ ------- ------
Options exercisable at year-end ................ -- -- 16,000 11.13
------- ------ ------- ------
ALL PLANS:
Outstanding at beginning of year................ 271,947 18.09 291,561 17.75
Granted......................................... 23,300 22.63 41,984 18.50
Exercised....................................... (27,336) 11.13 (17,334) 11.13
Forfeited....................................... -- -- (44,264) 18.97
------- ------ ------- ------
Outstanding at end of year...................... 267,911 19.19 271,947 18.09
------- ------ ------- ------
Options exercisable at year-end ................ 137,639 19.38 94,444 18.26
------- ------ ------- ------
Weighted-average fair value of options granted
during the year.............................. $ 6.51 -- $ 4.79 --
======= ====== ======= ======
</TABLE>
F-16
<PAGE> 111
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------------- --------------------------
NUMBER WEIGHTED-AVG WEIGHTED-AVG NUMBER WEIGHTED-AVG
EXERCISE OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
PRICES AT 12-31-96 CONTRACTUAL LIFE PRICE AT 12-31-96 PRICE
-------- ----------- ---------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
1980 PLAN
$18.50 39,729 8.1 years $18.50 13,230 $18.50
18.75 20,876 7.1 18.75 13,903 18.75
21.50 16,506 6.1 21.50 16,506 21.50
22.63 23,300 9.1 22.63 -- 22.63
----------- ------ ------ ------
100,411 $20.00 43,639 $19.71
----------- ------ ------ ------
1988 PLAN
17.50 100,000 2.9 years 17.50 40,000 17.50
20.50 67,500 1.7 20.50 54,000 20.50
----------- ------ ------ ------
167,500 $18.71 94,000 $19.22
=========== ====== ====== ======
</TABLE>
(B) LONG-TERM INCENTIVE PLAN
Under the Company's Long-Term Incentive Plan, the restricted stock feature
provides for the grant of common stock to a participating employee. The number
of shares of restricted stock available to be issued in the name of each
participating employee is determined at the beginning of each fiscal year, and
is based on the prior year's operating results. Such shares are held by the
Company in the name of the participating employee, who has the right to vote and
to receive dividends paid on all such shares.
During the years ended December 31, 1996, 1995 and 1994, the Company
granted 10,970, 19,985 and 12,651 shares of restricted stock, respectively.
Under the Company's Long-Term Incentive Plan, the performance units feature
provides for the grant to a participating employee of shares of common stock
based on targeted award levels established for each participating employee at
the beginning of each fiscal year in accordance with a formula relating to
individual levels of performance.
During the years ended December 31, 1996 and 1995, the Company granted
4,214 and 5,383 shares of common stock related to the performance units feature.
No shares were granted in 1994.
(C) EMPLOYEE STOCK PURCHASE PLAN
The Company maintains a stock purchase plan under which its employees and
directors and those of its subsidiaries can purchase shares of its common stock
in the open market through an unaffiliated plan administrator. Pursuant to the
plan, 328,534 shares had been purchased as of December 31, 1996. During the
years ended December 31, 1996 and 1995, 29,331 shares and 29,512 shares,
respectively, were purchased pursuant to the plan. This plan provides for
monthly payroll and directors' fees purchases up to $1,500, with the employer
making a monthly percentage contribution for the account of each participant,
based upon their purchases, as follows: (a) 25% of amounts from $5 through $25,
(b) 20% of amounts in excess of $25 through $50, and (c) 15% of amounts in
excess of $50 through $1,500.
(D) AGENTS STOCK INVESTMENT PLAN
The Company maintains a stock purchase plan under which its agents can
purchase shares of its common stock in the open market through an unaffiliated
plan administrator. Pursuant to the plan, 33,558 shares had been purchased as of
December 31, 1996. During the years ended December 31, 1996 and 1995, 12,952
shares and 10,448 shares, respectively, were purchased pursuant to the plan. The
plan provides for monthly
F-17
<PAGE> 112
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
deductions from commissions payable by participating subsidiaries of the Company
to their participating agents with a minimum monthly deduction of $500 and
maximum of $2,000. The participating subsidiary contributes, at the time of each
purchase, an amount equal to five percent (5%) of its agent's deduction for
purchases from commissions payable.
(8) PROFIT SHARING PLAN
The Company has a trusteed profit sharing plan for the exclusive benefit of
eligible employees. The Company's annual contribution to the plan is equal to
the lesser of 10% of consolidated earnings as defined or 10% of qualifying
compensation paid to participants. The annual contributions amounted to $1.2
million in 1996 and 1995, and $1.1 million in 1994. The total return to
participants in 1996 was 7.74%. The average annual return to participants for
the last ten years was 8.55%.
(9) POLICY AND CONTRACT CLAIMS
Activity in the liability for policy and contract claims (in thousands) at
December 31, 1996, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year................... $ 50,375 $ 53,309 $ 56,415
Less reinsurance recoverables................ 3,592 3,142 2,096
-------- -------- --------
Net balance at beginning of year............... 46,783 50,167 54,319
-------- -------- --------
Incurred related to:
Current year................................. 144,248 126,874 118,065
Prior years.................................. (953) (383) (1,130)
-------- -------- --------
Total incurred....................... 143,295 126,491 116,935
-------- -------- --------
Paid related to:
Current year................................. 128,137 114,149 101,868
Prior years.................................. 16,166 15,726 19,219
-------- -------- --------
Total paid........................... 144,303 129,875 121,087
-------- -------- --------
Net balance at end of year..................... 45,775 46,783 50,167
Plus reinsurance recoverables................ 5,486 3,592 3,142
-------- -------- --------
Balance at end of year......................... $ 51,261 $ 50,375 $ 53,309
-------- -------- --------
</TABLE>
(10) INDUSTRY SEGMENT INFORMATION
Insurance revenues, total income, and pre-tax operating earnings,
reconciled to net earnings, for the three years ended December 31, 1996 for each
industry segment, Ordinary, Group and Credit, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
*Insurance revenues:
Ordinary..................................... $137,421 $123,718 $113,993
Group........................................ 35,480 39,925 43,222
Credit....................................... 85,618 83,608 73,374
-------- -------- --------
Total insurance revenues............. $258,519 $247,251 $230,589
-------- -------- --------
</TABLE>
F-18
<PAGE> 113
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
*Total income:
Ordinary..................................... $204,749 $185,277 $171,471
Group........................................ 40,801 45,281 48,879
Credit....................................... 89,983 87,619 77,221
Other non-segmented income less
eliminations.............................. 21 (325) (276)
Realized investment gains (losses)........... 420 6,003 2,011
-------- -------- --------
Total income......................... $335,974 $323,855 $299,306
-------- -------- --------
Operating earnings:
*Ordinary -- Total income.................... $204,749 $185,277 $171,471
Less deductions:
Benefits and claims....................... 110,959 103,184 95,637
Taxes, commissions and general expenses... 33,092 29,414 29,027
Amortization of deferred acquisition
costs................................... 25,628 23,744 20,758
-------- -------- --------
Pre-tax operating earnings................ 35,070 28,935 26,049
-------- -------- --------
*Group -- Total income....................... 40,801 45,281 48,879
Less deductions:
Benefits and claims..................... 24,013 25,595 29,094
Taxes, commissions and general
expenses............................. 12,275 12,216 12,462
-------- -------- --------
Pre-tax operating earnings.............. 4,513 7,470 7,323
-------- -------- --------
*Credit -- Total income...................... 89,983 87,619 77,221
Less deductions:
Benefits and claims..................... 13,901 19,802 21,415
Taxes, commissions and general
expenses............................. 72,332 65,078 54,052
-------- -------- --------
Pre-tax operating earnings................ 3,750 2,739 1,754
-------- -------- --------
Other -- Total income..................... 441 5,677 1,735
Less: Total expenses...................... 3,915 3,384 2,198
-------- -------- --------
Total other.......................... (3,474) 2,293 (463)
-------- -------- --------
Earnings before income taxes.............. 39,859 41,437 34,663
Income taxes................................. 12,827 13,362 11,022
-------- -------- --------
Net earnings.............................. $ 27,032 $ 28,075 $ 23,641
======== ======== ========
</TABLE>
- ---------------
* Total income, insurance revenues and operating profits are net of reinsurance.
Total income includes net investment income which is allocated to the
industry segments based on required liabilities for future policy benefits and
policyholders' account balances.
A majority of the Company's assets consists of investments and cash which
are not identified with a specific operation. Accordingly, it is not possible to
separate assets, capital expenditures, and depreciation by industry segment.
(11) STOCKHOLDERS' EQUITY AND NET EARNINGS
The payment of dividends to AHLIC by AHL is subject to the regulation of
the State of Florida Department of Insurance. A dividend may be made without
prior Florida Insurance Commissioner's approval if the dividend is equal to or
less than the greater of: (a) 10% of AHL's surplus as to policyholders derived
from realized net operating profits on its business and net realized capital
gains; or (b) AHL's entire net operating profits and realized net capital gains
derived during the immediately preceding calendar year, if
F-19
<PAGE> 114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AHL will have surplus as to policyholders equal to or exceeding 115% of the
minimum required statutory surplus as to policyholders after the dividend is
paid. As a result of such restrictions, the maximum dividend which could be paid
to AHLIC by its insurance subsidiaries during 1997 without prior approval is
$24.8 million.
AHLIC's insurance subsidiaries had statutory net operating earnings of
$20.6 million, $19.0 million and $13.5 million and statutory net earnings of
$22.1 million, $33.9 million and $14.1 million for the years ended December 31,
1996, 1995 and 1994, respectively. Statutory stockholders' equity of such
subsidiaries was $145.0 million at December 31, 1996 and $134.5 million at
December 31, 1995. At December 31, 1996, pursuant to the insurance laws of the
State of Florida, the minimum capital and surplus required to be maintained by
AHL was approximately $45.6 million.
(12) NEW PRONOUNCEMENTS BY THE FINANCIAL ACCOUNTING STANDARDS BOARD
No pronouncements which have been issued by the Financial Accounting
Standards Board have or will have a significant impact on the consolidated
financial statements of the Company.
(13) CONTINGENT LIABILITIES
The Company's insurance subsidiaries, like other insurance companies, are
currently defendants in lawsuits that involve claims for punitive, exemplary or
other extracontractual damages, which are for amounts substantially in excess of
the actual damages sought. Management considers such litigation regrettably to
be of the type to which insurance companies are usually and customarily
subjected in the ordinary course of business, and to date the settlements of
such claims of this nature have not been material to the financial position of
the Company. In the opinion of management, based on the currently ascertained
facts of the pending litigation, which the Company intends to vigorously defend,
the ultimate resolution of such litigation should not be material to the
financial position of the Company.
(14) ACQUISITION
On March 3, 1997, AHL acquired all the outstanding common stock of Columbia
Universal Corporation (Columbia Universal) whose primary operating subsidiary is
Columbia Universal Life Insurance Company for $44.0 million in cash. Columbia
Universal Life Insurance Company is a life insurance company which sells
annuity, supplemental health and individual life insurance products. The
acquisition will be accounted for using the purchase method. At December 31,
1996 Columbia Universal had consolidated assets of $368.5 million and for the
year ended December 31, 1996 premiums and premium equivalents of $36.4 million.
On a pro forma basis at December 31, 1996, including the acquisition of
Columbia Universal, total assets for the Company would have been $1.7 billion
and life insurance volume in force would have been $22.1 billion.
F-20
<PAGE> 115
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
------------ ------------
(AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Income:
Insurance revenues........................................ $ 65,048 $ 61,187
Net investment income..................................... 25,223 19,070
Realized investment gains, net............................ 103 105
---------- ----------
Total income...................................... 90,374 80,362
---------- ----------
Benefits, claims and expenses:
Benefits and claims....................................... 41,618 35,929
Underwriting, acquisition and insurance expenses:
Taxes, commissions and general expenses................ 28,687 27,175
Amortization of deferred acquisition costs............. 6,937 6,403
Other operating expenses.................................. 1,582 954
---------- ----------
Total benefits, claims and expenses............... 78,824 70,461
---------- ----------
Earnings before income taxes...................... 11,550 9,901
Income taxes................................................ 3,805 3,172
---------- ----------
Net earnings...................................... $ 7,745 $ 6,729
========== ==========
Net earnings per share of common stock...................... $ .56 $ .49
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE> 116
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
-----------------------
1997 1996
---------- ----------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE AND PER
SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Investments:
Debt securities, available-for-sale, at fair value (cost
of $812,706 in 1997 and $514,327 in 1996).............. $ 803,415 $ 520,856
Equity securities, available-for-sale, at fair value (cost
of $22,072 in 1997 and $24,141 in 1996)................ 36,202 35,875
Mortgage loans on real estate............................. 60,663 34,440
Investment real estate, at cost........................... 461 386
Policy loans.............................................. 423,078 374,302
Short-term investments.................................... 1,908 9,143
---------- ----------
Total investments................................. 1,325,727 975,002
---------- ----------
Cash...................................................... 17,916 21,328
Agents' balances and prepaid commissions.................. 34,361 38,944
Premiums receivable....................................... 41,320 43,043
Accrued investment income................................. 35,080 29,928
Deferred acquisition costs................................ 210,871 164,977
Property and equipment, at cost, less accumulated
depreciation........................................... 29,724 28,152
Reinsurance receivables................................... 11,445 10,203
Other assets.............................................. 31,646 17,500
---------- ----------
Total assets...................................... $1,738,090 $1,329,077
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities:
Future policy benefits.................................... $ 266,040 $ 197,654
Policyholders' account balances........................... 950,120 648,187
Unearned premiums......................................... 51,673 53,545
Policy and contract claims................................ 53,855 47,789
---------- ----------
Total policy liabilities.......................... 1,321,688 947,175
Notes payable to banks.................................... 116,019 95,974
Deferred income taxes..................................... 33,729 28,384
Other liabilities......................................... 40,928 40,663
---------- ----------
Total liabilities................................. 1,512,364 1,112,196
---------- ----------
Stockholders' equity:
Common stock of $1 par value. Authorized 35,000,000 shares
in 1997 and 20,000,000 in 1996; issued 13,990,371 in
1997 and 13,961,107 in 1996............................ 13,990 13,961
Additional paid-in capital................................ 43,228 42,632
Retained earnings......................................... 168,582 152,698
Net unrealized investment gains (losses).................. 3,717 10,308
---------- ----------
229,517 219,599
Less cost of 173,128 in 1997 and 126,670 in 1996 common
shares in treasury..................................... 3,791 2,718
---------- ----------
Total stockholders' equity........................ 225,726 216,881
---------- ----------
Total liabilities and shareholders' equity........ $1,738,090 $1,329,077
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE> 117
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
----------- -----------
(AMOUNTS IN THOUSANDS,
EXCEPT SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
Common stock:
Balance at beginning of period............................ $ 13,967 $ 13,933
Other shares issued....................................... 23 28
-------- --------
Balance at end of period.................................. 13,990 13,961
-------- --------
Additional paid-in capital:
Balance at beginning of period............................ 42,644 42,215
Excess over par value on shares issued.................... 584 317
Net change on exercise of stock options................... -- 100
-------- --------
Balance at end of period.................................. 43,228 42,632
-------- --------
Retained earnings:
Balance at beginning of period............................ 163,460 148,454
Add net earnings.......................................... 7,745 6,729
-------- --------
171,205 155,183
Deduct cash dividends declared on common stock -- $.19 per
share in 1997 and $.18 per share in 1996............... (2,623) (2,485)
-------- --------
Balance at end of period.................................. 168,582 152,698
-------- --------
Net unrealized investment gains (losses):
Balance at beginning of period............................ 12,158 16,772
Change during the period.................................. (8,441) (6,464)
-------- --------
Balance at end of period.................................. 3,717 10,308
-------- --------
Treasury stock:
Balance at beginning of period............................ 3,287 2,045
Add treasury shares purchased (19,400 shares in 1997 and
29,393 shares in 1996)................................. 504 673
-------- --------
Balance at end of period.................................. 3,791 2,718
-------- --------
Total stockholders' equity........................ $225,726 $216,881
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE> 118
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
--------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net earnings.............................................. $ 7,745 $ 6,729
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Change in agents' balances and prepaid commissions..... 1,369 133
Change in premiums receivable.......................... (331) (1,226)
Change in accrued investment income.................... (4,918) (5,654)
Change in reinsurance receivables...................... 1,733 (972)
Amortization of deferred acquisition costs............. 6,937 6,403
Acquisition costs deferred............................. (10,269) (8,196)
Change in future policy benefits....................... (1,685) (7,434)
Change in policyholders' account balances.............. 21,075 12,517
Change in unearned premiums............................ (921) 228
Change in policy and contract claims................... 1,232 (2,586)
Change in income taxes................................. 4,414 2,882
Provision for depreciation and amortization............ 710 791
Change in unearned investment income................... (90) (129)
Other, net............................................. (2,112) 757
-------- --------
Net cash provided by operating activities.............. 24,889 4,243
-------- --------
Investing activities:
Sales of debt securities.................................. 25,180 1,232
Maturities of debt securities............................. 10,975 6,980
Sales (purchases) of short-term investments, net.......... 1,545 13,742
Sales of equity securities................................ 1,533 68
Maturities of mortgage loans on real estate............... 1,005 1,251
Policy loans paid......................................... 2,408 9,540
Acquisition, net of cash acquired......................... (45,266) --
Purchases of debt securities.............................. (33,144) (28,810)
Purchases of equity securities............................ -- (1,411)
Origination of mortgage loans on real estate.............. (5,595) (6,185)
Policy loans made......................................... (7,544) (7,169)
Purchases and additions of property and equipment and
investment real estate................................. (777) (715)
Other, net................................................ (36) 9,618
-------- --------
Net cash used by investing activities..................... (49,716) (1,859)
-------- --------
Financing activities:
Change in notes payable to banks, net..................... 23,590 980
Dividends to stockholders................................. (2,623) (2,486)
Other, net................................................ 104 (232)
-------- --------
Net cash provided (used) by financing activities.......... 21,071 (1,738)
-------- --------
Increase (decrease) in cash................................. (3,756) 646
Cash, beginning of period................................... 21,672 20,682
-------- --------
Cash, end of period......................................... $ 17,916 $ 21,328
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE> 119
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
(1) The accompanying consolidated financial statements, which are
unaudited, in the opinion of management, include all adjustments necessary to
present fairly the consolidated results of operations and financial position of
the Company for the periods indicated. However, certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. It is suggested
that these consolidated financial statements be read in conjunction with the
consolidated financial statements, schedules and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1996.
(2) The financial statements of the Company's life insurance operations,
primarily the operations of American Heritage Life Insurance Company (AHL) and
Columbia Universal Life Insurance Company (Columbia Universal), have been
included in the consolidated financial statements on the basis of generally
accepted accounting principles.
(3) On March 3, 1997, the Company closed on the acquisition of Columbia
Universal Corporation and its principal subsidiary, Columbia Universal, for
$44.0 million in cash. Columbia Universal markets individual life, annuity and
supplemental health products to selected markets. Amounts for Columbia Universal
are reflected in the Company's March 31, 1997 financial statements.
(4) Earnings per share of common stock were based on the weighted average
number of shares outstanding during each period, excluding treasury shares.
Options outstanding to purchase common stock had no significant dilutive effect
on earnings per share.
(5) Current accrued income taxes were included in other liabilities in the
amount of $2,360,000 at March 31, 1997 and $100,000 at March 31, 1996, in the
accompanying consolidated balance sheets.
(6) The Company's insurance subsidiaries, like other insurance companies,
are currently defendants in lawsuits that involve claims for punitive, exemplary
or other extracontractual damages, which are for amounts substantially in excess
of the actual damages sought. Management considers such litigation regrettably
to be of the type to which insurance companies are usually and customarily
subjected to in the ordinary course of business and to date the settlements of
such claims of this nature have not been material to the financial position of
the Company. In the opinion of management, based on the currently ascertained
facts of the pending litigation, which the Company intends to vigorously defend,
the ultimate resolution of such litigation should not be material to the
financial position of the Company.
F-25
<PAGE> 120
SCHEDULE I
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AMOUNT AT
WHICH SHOWN
FAIR IN THE
TYPE OF INVESTMENT COST VALUE BALANCE SHEET
------------------ -------- -------- -------------
<S> <C> <C> <C>
Debt securities available-for sale:
Bonds:
United States Government and government agencies and
authorities.......................................... $170,135 $168,234 $ 168,234
States, municipalities and political subdivisions...... 345 365 365
Public utilities....................................... 51,328 51,454 51,454
Convertibles and bonds with warrants attached.......... 1,295 1,472 1,472
All other corporate.................................... 254,275 265,366 265,366
Redeemable preferred stock................................ 35,522 35,025 35,025
-------- -------- ----------
Total debt securities............................. 512,900 521,916 521,916
-------- -------- ----------
Equity securities available-for-sale:
Common stocks:
Public utilities....................................... 490 989 989
Banks, trust and insurance companies................... 1,429 4,693 4,693
Industrial, miscellaneous and all other................ 19,546 28,838 28,838
-------- -------- ----------
Total equity securities........................... 21,465 $ 34,520 34,520
-------- ======== ----------
Mortgage loans on real estate............................... 53,736 53,736
Real estate................................................. 453 453
Policy loans................................................ 399,608 399,608
Short-term investments...................................... 1,216 1,216
-------- ----------
Total investments................................. $989,378 $1,011,449
======== ==========
</TABLE>
See Footnote 1(c) to the Consolidated Financial Statements on page F-8
which sets forth the accounting policies related to investments.
S-1
<PAGE> 121
SCHEDULE II
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
The following condensed balance sheets of American Heritage Life Investment
Corporation ("Registrant") as of December 31, 1996 and 1995 and its condensed
statements of earnings and cash flows for the years ended December 31, 1996,
1995 and 1994 should be read in conjunction with the notes to consolidated
financial statements included elsewhere in this report. Since the Registrant's
condensed statements of changes in stockholders' equity for the years ended
December 31, 1996, 1995 and 1994 are identical to the consolidated statements of
changes in stockholders' equity included elsewhere in this report, such
statements are not repeated in this schedule.
In the years 1996 and 1994, no dividend was paid to the Registrant by AHL.
On December 27, 1995, a dividend of $13,245,264 related to American Heritage
Life Insurance Company's (AHL's) earnings in 1994, was paid from AHL to the
Registrant.
S-2
<PAGE> 122
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash........................................................ $ 13,551 $ 46,174
Certificate of deposit...................................... 100,000 100,000
Investment in life insurance subsidiaries, at equity........ 274,516,430 249,370,749
Investment in non-life insurance subsidiaries, at equity.... 4,484,531 4,454,226
Accounts receivable......................................... 5,122,599 11,449,111
Intercompany accounts....................................... 1,752,116 756,600
Other assets................................................ 11,901,626 9,485,563
------------ ------------
$297,890,853 $275,662,423
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable to banks.................................... $ 65,459,000 $ 54,994,000
Other liabilities......................................... 3,488,935 1,339,193
------------ ------------
Total liabilities................................. 68,947,935 56,333,193
------------ ------------
Stockholders' equity:
Common stock of $1.00 par value. Authorized 20,000,000
shares in 1996 and 1995; issued 13,967,253 in 1996 and
13,933,206 in 1995..................................... 13,967,253 13,933,206
Preferred stock:
Convertible of $10.00 par value. Authorized 500,000
shares; none issued.................................. 0 0
Non-convertible of $10.00 par value. Authorized 500,000
shares; none issued.................................. 0 0
Additional paid-in capital................................ 42,644,212 42,214,787
Retained earnings......................................... 163,460,222 148,454,353
Unrealized investment gains (losses)...................... 12,157,809 16,772,078
------------ ------------
232,229,496 221,374,424
Less cost of 153,728 in 1996 and 97,277 in 1995 common
shares in treasury..................................... 3,286,578 2,045,194
------------ ------------
Total stockholders' equity........................ 228,942,918 219,329,230
------------ ------------
$297,890,853 $275,662,423
============ ============
</TABLE>
S-3
<PAGE> 123
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Investment income................................. $ 363,993 $ 62,678 $ 14,120
Other income...................................... 304,200 304,200 307,111
----------- ----------- -----------
Total income.............................. 668,193 366,878 321,231
Operating expenses.................................. 4,225,930 3,719,580 2,429,137
----------- ----------- -----------
Loss before income tax benefits........... (3,557,737) (3,352,702) (2,107,906)
Income tax benefits................................. (1,260,200) (1,203,700) (780,500)
----------- ----------- -----------
Loss before equity in earnings (loss) of
subsidiaries............................ (2,297,537) (2,149,002) (1,327,406)
Equity in net earnings of life insurance
subsidiaries...................................... 29,669,949 30,565,760 25,320,502
Equity in net losses of non-life insurance
subsidiaries...................................... (340,806) (341,372) (352,194)
----------- ----------- -----------
Net earnings.............................. $27,031,606 $28,075,386 $23,640,902
=========== =========== ===========
</TABLE>
S-4
<PAGE> 124
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(REGISTRANT)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net earnings................................... $ 27,031,606 $ 28,075,386 $ 23,640,902
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Change in accounts receivable............... 6,326,512 (10,988,112) (138,117)
Change in other assets...................... (2,416,063) 1,247,340 (1,270,691)
Change in other liabilities................. 2,149,742 (915,652) 1,082,606
Equity in net earnings of life insurance
subsidiaries.............................. (29,669,949) (30,565,760) (25,320,502)
Equity in net loss of non-life insurance
subsidiaries.............................. 340,806 341,372 352,194
------------ ------------ ------------
Net cash provided (used) from operating
activities........................... 3,762,654 (12,805,426) (1,653,608)
------------ ------------ ------------
Financing activities:
Dividends from subsidiaries.................... 0 13,245,264 0
Capital contribution to subsidiaries........... (99,000) (120,000) (240,000)
Increase (decrease) in notes payable to
banks....................................... 10,465,000 10,794,000 11,720,000
Change in intercompany accounts................ (995,516) (969,631) (170,635)
Dividends to stockholders...................... (12,387,849) (9,389,613) (10,061,465)
Purchase of treasury stock..................... (1,241,384) (1,118,462) (2,229)
Excess over par value on shares issued......... 317,029 402,718 405,830
Other, net..................................... 146,443 (26,896) 3,321
------------ ------------ ------------
Net cash provided (used) by financing
activities........................... (3,795,277) 12,817,380 1,654,822
------------ ------------ ------------
Increase (decrease) in cash............ (32,623) 11,954 1,214
Cash at beginning of year........................ 46,174 34,220 33,006
------------ ------------ ------------
Cash at end of year.............................. $ 13,551 $ 46,174 $ 34,200
============ ============ ============
</TABLE>
S-5
<PAGE> 125
SCHEDULE III
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
DEFERRED FUTURE POLICYHOLDERS' POLICY AND NET
ACQUISITION POLICY ACCOUNT UNEARNED CONTRACT INSURANCE INVESTMENT
INDUSTRY SEGMENT COSTS BENEFITS BALANCES PREMIUMS CLAIMS REVENUES(C) INCOME(A)
- ---------------------- ------------ ----------- -------------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER
31, 1996
Ordinary............ $173,698,681 261,223,527 924,690,539 5,689,412 12,774,597 137,421,080 67,327,761
Group............... 0 6,501,968 4,354,512 0 29,229,231 35,479,632 5,320,531
Credit.............. 0 0 0 46,904,097 11,819,172 85,618,365 4,365,225
Other............... 0 0 0 0 0 0 21,459
------------ ----------- ----------- ------------ ---------- ----------- ------------
$173,698,681 267,725,495 929,045,051 52,593,509 53,823,000 258,519,077 77,034,976
============ =========== =========== ============ ========== =========== ============
YEAR ENDED DECEMBER
31, 1995
Ordinary............ $158,250,346 195,859,984 629,589,633 3,360,538 9,537,431 123,718,289 61,559,101
Group............... 0 9,227,751 6,080,433 0 31,380,088 39,924,809 5,356,427
Credit.............. 0 0 0 49,956,614 9,457,926 83,608,031 4,011,351
Other............... 0 0 0 0 0 0 (325,514)
------------ ----------- ----------- ------------ ---------- ----------- ------------
$158,250,346 205,087,735 635,670,066 53,317,152 50,375,445 247,251,129 70,601,365
============ =========== =========== ============ ========== =========== ============
YEAR ENDED DECEMBER
31, 1994
Ordinary............ $162,867,773 183,043,220 570,024,695 1,677,180 8,198,767 113,993,333 57,477,827
Group............... 0 9,468,534 6,511,065 0 36,376,975 43,221,583 5,657,542
Credit.............. 0 0 0 49,927,086 8,733,157 73,373,760 3,846,885
Other............... 0 0 0 0 0 0 (275,761)
------------ ----------- ----------- ------------ ---------- ----------- ------------
$162,867,773 192,511,754 576,535,760 51,604,266 53,308,899 230,588,676 66,706,493
============ =========== =========== ============ ========== =========== ============
<CAPTION>
AMORTIZATION TAXES,
BENEFITS OF DEFERRED COMMISSIONS
AND ACQUISITION AND GENERAL
INDUSTRY SEGMENT CLAIMS COSTS EXPENSES(B)
- ---------------------- ----------- ------------ ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER
31, 1996
Ordinary............ 110,958,680 25,628,001 33,092,274
Group............... 24,013,352 0 12,275,230
Credit.............. 13,901,069 0 72,331,652
Other............... 14,183 0 (285,708)
----------- ---------- -----------
148,887,284 25,628,001 117,413,448
=========== ========== ===========
YEAR ENDED DECEMBER
31, 1995
Ordinary............ 103,183,528 23,744,359 29,414,331
Group............... 25,595,022 0 12,216,464
Credit.............. 19,801,846 0 65,077,894
Other............... 0 0 (309,722)
----------- ---------- -----------
148,580,296 23,744,359 106,398,967
=========== ========== ===========
YEAR ENDED DECEMBER
31, 1994
Ordinary............ 95,637,818 20,757,868 29,026.850
Group............... 29,093,520 0 12,462,165
Credit.............. 21,414,613 0 54,052,460
Other............... 0 0 (215,082)
----------- ---------- -----------
146,145,951 20,757,868 95,326,393
=========== ========== ===========
</TABLE>
- ---------------
(a) Allocated to the industry segment based on required liabilities for future
policy benefits.
(b) Allocated on functional cost basis unless specifically identifiable with
industry segment.
(c) Includes only cost of insurance, expense and surrender charges for
interest-sensitive products. Insurance revenues do not include group and
credit premium equivalents and cash deposits from interest-sensitive
products.
S-6
<PAGE> 126
SCHEDULE IV
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
REINSURANCE
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CEDED TO ASSUMED PERCENTAGE
GROSS OTHER FROM OTHER NET OF AMOUNT
YEAR ENDED DECEMBER 31, 1996 AMOUNT COMPANIES COMPANIES AMOUNTS ASSUMED TO NET
- ---------------------------- ----------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Life insurance volume in force... $16,798,842 $5,031,374 $5,310,210 $17,077,678 31.1%
=========== ========== ========== =========== ====
Insurance revenues(a):
Ordinary....................... $ 142,397 $ 6,963 $ 1,987 $ 137,421 1.4%
Group.......................... 38,294 6,583 3,769 35,480 10.6%
Credit......................... 183,787 98,169 0 85,618 --%
----------- ---------- ---------- ----------- ----
Total.................. $ 364,478 $ 111,715 $ 5,756 $ 258,519 2.2%
=========== ========== ========== =========== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
- ----------------------------
<S> <C> <C> <C> <C> <C>
Life insurance volume in force... $15,016,456 $3,836,741 $3,367,550 $14,547,265 23.1%
=========== ========== ========== =========== ====
Insurance revenues(a):
Ordinary....................... $ 119,182 $ 5,756 $ 10,292 $ 123,718 8.3%
Group.......................... 44,602 6,989 2,312 39,925 5.8%
Credit......................... 168,677 85,081 12 83,608 .1%
----------- ---------- ---------- ----------- ----
Total.................. $ 332,461 $ 97,826 $ 12,616 $ 247,251 5.1%
=========== ========== ========== =========== ====
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
- ----------------------------
<S> <C> <C> <C> <C> <C>
Life insurance volume in force... $13,818,345 $3,284,122 $2,977,321 $13,531,544 22.2%
=========== ========== ========== =========== ====
Insurance revenues(a):
Ordinary....................... $ 120,009 $ 6,016 $ 0 $ 113,993 --%
Group.......................... 51,534 8,502 190 43,222 .4%
Credit......................... 129,880 59,475 2,969 73,374 4.0%
----------- ---------- ---------- ----------- ----
Total.................. $ 301,423 $ 73,993 $ 3,159 $ 230,589 1.4%
=========== ========== ========== =========== ====
</TABLE>
- ---------------
(a) Includes both life and accident and health premiums and commission and
expense allowances on reinsurance ceded.
S-7
<PAGE> 127
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AHLIC, AHL FINANCING OR THE
UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AHLIC OR AHL FINANCING SINCE THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 5
Incorporation of Certain Documents by
Reference........................... 5
Prospectus Summary.................... 7
Risk Factors.......................... 20
The Trust............................. 26
Price Range of Common Stock and
Dividends........................... 27
Use of Proceeds....................... 27
Capitalization........................ 28
Accounting Treatment.................. 28
Selected Consolidated Financial
Information......................... 29
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 37
Management............................ 50
Description of the FELINE PRIDES...... 53
Description of the Purchase
Contracts........................... 55
Description of the Common Stock....... 62
Certain Provisions of the Purchase
Contract Agreement and the Pledge
Agreement........................... 63
Description of the Trust Preferred
Securities.......................... 65
Description of the Guarantee.......... 75
Description of the Junior Subordinated
Debentures.......................... 77
Effect of Obligations Under the Junior
Subordinated Debentures and the
Guarantee........................... 84
Certain Federal Income Tax
Consequences........................ 85
ERISA Considerations.................. 89
Underwriting.......................... 91
Legal Matters......................... 92
Experts............................... 93
Index to Consolidated Financial
Statements and Financial Statement
Schedules........................... F-1
</TABLE>
======================================================
======================================================
1,500,000 FELINE PRIDES(SM)
AHL LOGO
AMERICAN HERITAGE
LIFE INVESTMENT
CORPORATION
AHL FINANCING
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
THE ROBINSON-HUMPHREY
COMPANY, INC.
, 1997
(SM) Service Mark of Merrill Lynch & Co. Inc.
======================================================
<PAGE> 128
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 52,300
NASD Filing Fee............................................. 17,800
NYSE Listing Fee............................................ 24,800
Printing and Engraving...................................... 100,000
Rating Agency Fee........................................... 32,000
Accounting Fees............................................. 55,000
Legal Fees.................................................. 155,000
Blue Sky Fees............................................... 10,000
Fees of Trustees, Purchase Contract Agent and Collateral
Agent..................................................... 23,000
Miscellaneous............................................... 30,100
-----------
Total............................................. $ 500,000
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (1) of Section 607.0850 of the Florida Business Corporation Act
(the "FBCA") empowers a corporation to indemnify any person who was or is a
party to any proceeding (other than an action by or in the right of the
corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against liability incurred in connection with such proceeding
(including any appeal thereof) if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Subsection (2) of Section 607.0850 of the FBCA empowers a corporation to
indemnify any person who was or is a party to any proceeding by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth in the preceding paragraph,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expenses of litigating the proceeding
including appeals, provided that the person acted under the standards set forth
in the preceding paragraph. However, no indemnification may be made for any
claim, issue or matter as to which such person is adjudged to be liable unless,
and only to the extent that, the court in which such proceeding was brought, or
any other court of competent jurisdiction, determines upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses that the court deems proper.
Section 607.0850(3) of the FBCA provides that to the extent a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in the defense of any proceeding referred to in subsections (1) and
(2) of Section 607.0850 or in the defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses actually and reasonably incurred
by him or her in connection therewith.
Subsection (4) provides that any indemnification under subsections (1) and
(2) of Section 607.0850, unless determined by a court, shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances
II-1
<PAGE> 129
because he or she has met the applicable standard of conduct set forth in
subsections (1) and (2) of Section 607.0850. Such determination shall be made:
(a) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) if such a quorum is not obtainable, or, even if obtainable, by a
majority vote of a committee duly designated by the board of directors (in
which directors who are parties may participate) consisting solely of two
or more directors not at the time parties to the proceeding;
(c) by independent legal counsel:
(1) selected by the board of directors as prescribed in paragraph
(a) or a committee selected as prescribed in paragraph (b); or
(2) if no quorum of directors can be obtained under paragraph (a),
and no committee can be designated under paragraph (b), by a majority
vote of the full board of directors (in which directors who are parties
may participate); or
(d) by the shareholders by a majority vote of a quorum of shareholders
who were not parties to such proceedings or if no quorum is obtainable, by
a majority vote of shareholders who were not parties to such proceeding.
Expenses incurred by a director or officer in defending a civil or criminal
proceeding may be paid by the corporation in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it is ultimately determined that such director
or officer is not entitled to indemnification under Section 607.0850.
Section 607.0850(7) of the FBCA states that indemnification and advancement
of expenses are not exclusive and empowers the corporation to make any other
further indemnification or advancement of expenses of it directors, officers,
employees or agents under any bylaw, agreement vote of shareholders or
disinterested directors or otherwise, for actions in an official capacity and in
other capacities while holding an office. However, a corporation cannot
indemnify or advance expenses if a judgment or other final adjudication
establishes that the actions of the director, officer, employee or agent (a)
violated criminal law, unless the director, officer, employee or agent had
reasonable cause to believe his or her conduct was lawful or had no reasonable
cause to believe his or her conduct was unlawful, (b) derived an improper
personal benefit from such transaction, (c) was or is a director in a
circumstance where the liability under Section 607.0834 of the FBCA (relating to
unlawful distributions) applies, or (d) engages in willful misconduct or
conscious disregard for the best interests of the corporation in a proceeding by
or in right of the corporation to procure a judgment in its favor or in a
proceeding by or in right of a shareholder.
Section 607.0850(9) of the FBCA permits any director, officer, employee or
agent who is or was a party to a proceeding to apply for indemnification or
advancement of expenses to any court of competent jurisdiction. Section
607.0850(12) of the FBCA permits a corporation to purchase and maintain
insurance for a director, officer, employee or agent against any liability
incurred in his or her official capacity or arising out of his or her status as
such regardless of the corporation's power to indemnify him or her against such
liability under this section.
The Company's Articles of Incorporation (the "Articles") provide that the
Company will indemnify the officers and directors of the Company against
expenses actually and necessarily incurred by such person in connection with the
defense of any action, suit or proceeding in which such person is made a party
by reason of being or having been an officer or director of the Company. The
Articles provide, however, that such indemnification provision does not apply in
relation to matters as to which such person shall be adjudged liable for
negligence or misconduct in the performance of duty. The Company's Articles also
provide that the Company may reimburse any officer or director for the
reasonable costs of settlement of any such action, suit, or proceeding if a
majority of a committee composed of the directors of the Company not involved in
the matter or controversy finds that it was in the interest of the Company that
such settlement be made and that such officer or director was not guilty of
negligence or misconduct.
The Company's Bylaws provide specific provisions for indemnification of the
Company's officers and directors and provide further that, in addition to such
indemnification, the Company shall be obligated to
II-2
<PAGE> 130
indemnify the officers and directors of the Company to the fullest extent as is
provided and allowed pursuant to the law of the State of Florida as it shall be
enacted at the time such indemnification is to be made.
The Company maintains directors' and officers' liability insurance which
covers certain liabilities arising from the performance of their
responsibilities as directors and officers.
The Declaration of Trust provides that no Institutional Trustee or any of
its Affiliates, Delaware Trustee or any of its Affiliates, or officer, director,
shareholder, member, partner, employee, representative or agent of the
Institutional Trustee or the Delaware Trustee (each a "Fiduciary Indemnified
Person"), and no Regular Trustee, Affiliate of any Regular Trustee, Affiliate of
any Regular Trustee, or any officer, director, shareholder, member, partner,
employee, representative or agent of any Regular Trustee, or any employee or
agent of the Trust or its Affiliates (each a "Company Indemnified Person") shall
be liable, responsible or accountable in damages or otherwise to such Trust or
any officer, director, shareholder, partner, member, representative, employee or
agent of the Trust or its Affiliates for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Fiduciary Indemnified
Person or Company Indemnified Person in good faith on behalf of such Trust and
in a manner such Fiduciary Indemnified Person or Company Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Fiduciary Indemnified Person or Company Indemnified Person by such Declaration
or by law, except that a Fiduciary Indemnified Person or Company Indemnified
Person shall be liable for any such loss, damage or claim incurred by reason of
such Fiduciary Indemnified Person's or Company Indemnified Person's gross
negligence (or, in the case of a Fiduciary Indemnified Person, negligence) or
willful misconduct with respect to such acts or omissions.
The Declaration of Trust also provides that to the full extent permitted by
law, the Company shall indemnify any Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil criminal, administrative or
investigative (other than an action by or in the right of the Trust), by reason
of the fact that he is or was a Company Indemnified Person, against expenses
(including attorneys fees), judgments, fines and any amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The Declaration of Trust also provides that to the full
extent permitted by law, the Company shall indemnify any Company Indemnified
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the Trust
to procure a judgment in its favor by reason of the fact that he is or was a
Company Indemnified Person against expenses (including attorneys fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust and except
that no such indemnification shall be made in respect of any claim issue or
matters to which such Company Indemnified Person shall have been adjudged to be
liable to the Trust unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonable entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper. The Declaration of Trust further provides that expenses
(including attorneys fees) incurred by a Company Indemnified Person in defending
a civil, criminal, administrative or investigative action, suit or proceeding
referred to in the immediately preceding two sentences shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such Company Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company as authorized in the Declaration. The
directors and officers of the Company and the Regular Trustees are covered by
insurance policies indemnifying them against certain liabilities, including
certain liabilities arising under the Securities Act of 1933, which might be
incurred by them in such capacities and against which they cannot be indemnified
by the Company or the Trust.
II-3
<PAGE> 131
ITEM 16. EXHIBITS
Exhibits identified in parentheses below are on file with the SEC and are
incorporated by reference to such previous filings.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S> <C>
1 -- Form of Underwriting Agreement with respect to the AHLIC
Income PRIDES.
3(a) -- Amended and Restated Articles of Incorporation of American
Heritage Life Investment Corporation dated April 25, 1996.
Incorporated by reference to Exhibit 3(a) of the Form 8-K,
dated May 8, 1996. (File No. 1-7255).
3(b) -- By-Laws of American Heritage Life Investment Corporation as
amended and restated, dated February 6, 1996. Incorporated
by reference to Exhibit 3 of the Form 8-K, dated February
15, 1996 (File No. 1-7255).
4(a) -- Common Stock Certificate of American Heritage Life
Investment Corporation. Incorporated by reference to Exhibit
4 of the Form 10-K filed by the Registrant for the period
ended December 31, 1994 (File No. 1-7255).
4(b) -- Form of Indenture between the Company and The First National
Bank of Chicago, as Trustee.
4(c) -- Form of Preferred Security.
4(d) -- Form of Junior Subordinated Debenture.
4(e) -- Form of Guarantee Agreement with respect to Trust Preferred
Securities.
4(f) -- Form of Purchase Contract Agreement, between the Company and
The First National Bank of Chicago, as Purchase Contract
Agent (including as Exhibit A the form of Income PRIDES and
as Exhibit B the form of Growth PRIDES).
4(g) -- Form of Pledge Agreement, among the Company, The Chase
Manhattan Bank, as Collateral Agent and The First National
Bank of Chicago, as Purchase Contract Agent.
4(h) -- Certificate of Trust of AHL Financing.
4(i) -- Declaration of Trust of AHL Financing.
4(j) -- Form of Supplemental Indenture to Indenture to be used in
connection with issuance of Junior Subordinated Debentures
related to Income PRIDES.
4(k) -- Form of Amended and Restated Declaration of Trust of AHL
Financing.
5(a) -- Opinion of W. Michael Heekin, Senior Vice President and
Corporate Secretary for the Company regarding the validity
of certain of the Securities.
5(b) -- Opinion of W. Michael Heekin, Senior Vice President and
Corporate Secretary for the Company regarding the validity
of certain of the Securities.
8 -- Tax Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
12 -- Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Fixed Charges and Preferred Stock Dividends.
23(a) -- Consent of KPMG Peat Marwick LLP
23(b) -- Consent of Coopers & Lybrand L.L.P.
23(c) -- Consent of W. Michael Heekin, Senior Vice President and
Corporate Secretary for the Company (included in Exhibits
5(a) and 5(b)).
25(a) -- Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Trustee under the Indenture.
25(b) -- Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of the First National Bank of Chicago, as
Trustee of the Trust Preferred Securities Guarantee of the
Company for the benefit of the holders of Trust Preferred
Securities of AHL Financing.
25(c) -- Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of the First National Bank of Chicago, as
Trustee under the Declaration of Trust of AHL Financing.
</TABLE>
- ---------------
References are to the Company (File No. 1-7255) for documents incorporated by
reference.
II-4
<PAGE> 132
ITEM 17. UNDERTAKINGS
The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required in Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions described under Item 15 above, or
otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such Liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer or
controlling person of the Registrants in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrants will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of, 1933, the Trust
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and that it has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto to duly authorized, in the City of Jacksonville and State of Florida
on June 3, 1997.
AHL FINANCING
By: /s/ T. O'NEAL DOUGLAS
------------------------------------
T. O'Neal Douglas
Trustee
By: /s/ C. RICHARD MOREHEAD
------------------------------------
C. Richard Morehead
Trustee
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Jacksonville, State of Florida, on June 3, 1997.
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By: /s/ T. O'NEAL DOUGLAS
------------------------------------
T. O'Neal Douglas
Chairman of the Board and
Chief Executive Officer
II-6
<PAGE> 134
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities with American Heritage Life Investment Corporation and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ T. O'NEAL DOUGLAS Chairman of the Board, Chief June 3, 1997
- ----------------------------------------------------- Executive Officer and Director
T. O'Neal Douglas (Principal Executive Officer)
/s/ C. RICHARD MOREHEAD Executive Vice President, June 3, 1997
- ----------------------------------------------------- Treasurer and Chief Financial
C. Richard Morehead Officer (Principal Financial
Officer and Principal
Accounting Officer
* Director June 3, 1997
- -----------------------------------------------------
Edward L. Baker
* Director June 3, 1997
- -----------------------------------------------------
A. Dano Davis
* Director June 3, 1997
- -----------------------------------------------------
Robert H. Davis
* Director June 3, 1997
- -----------------------------------------------------
H. Corbin Day
* Director June 3, 1997
- -----------------------------------------------------
Radford D. Lovett
/s/ CHRIS A. VERLANDER President, Chief Operating June 3, 1997
- ----------------------------------------------------- Officer and Director
Chris A. Verlander
* Director June 3, 1997
- -----------------------------------------------------
W. Ashley Verlander
</TABLE>
*By: /s/ W. MICHAEL HEEKIN
-------------------------------
(Attorney-in-Fact)
II-7
<PAGE> 135
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<C> <C> <S> <C>
1 -- Form of Underwriting Agreement with respect to the AHLIC
Income PRIDES.**
3(a) -- Amended and Restated Articles of Incorporation of American
Heritage Life Investment Corporation dated April 25, 1996.
Incorporated by reference to Exhibit 3(a) of the Form 8-K,
dated May 8, 1996. (File No. 1-7255).
3(b) -- By-Laws of American Heritage Life Investment Corporation as
amended and restated, dated February 6, 1996. Incorporated
by reference to Exhibit 3 of the Form 8-K, dated February
15, 1996 (File No. 1-7255).
4(a) -- Common Stock Certificate of American Heritage Life
Investment Corporation. Incorporated by reference to Exhibit
4 of the Form 10-K filed by the Registrant for the period
ended December 31, 1994 (File No. 1-7255).
4(b) -- Form of Indenture between the Company and The First National
Bank of Chicago, as Trustee.**
4(c) -- Form of Preferred Security.**
4(d) -- Form of Junior Subordinated Debenture.**
4(e) -- Form of Guarantee Agreement with respect to Trust Preferred
Securities.**
4(f) -- Form of Purchase Contract Agreement, between the Company and
The First National Bank of Chicago, as Purchase Contract
Agent (including as Exhibit A the form of Income PRIDES and
as Exhibit B the form of Growth PRIDES).**
4(g) -- Form of Pledge Agreement, among the Company, The Chase
Manhattan Bank, as Collateral Agent and The First National
Bank of Chicago, as Purchase Contract Agent.**
4(h) -- Certificate of Trust of AHL Financing.*
4(i) -- Declaration of Trust of AHL Financing.*
4(j) -- Form of Supplemental Indenture to Indenture to be used in
connection with issuance of Junior Subordinated Debentures
related to Income PRIDES.**
4(k) -- Form of Amended and Restated Declaration of Trust of AHL
Financing.**
5(a) -- Opinion of W. Michael Heekin, Senior Vice President and
Corporate Secretary for the Company regarding the validity
of certain of the Securities.**
5(b) -- Opinion of W. Michael Heekin, Senior Vice President and
Corporate Secretary for the Company regarding the validity
of certain of the Securities.**
8 -- Tax Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.**
12 -- Computation of Ratio of Earnings to Fixed Charges and Ratio
of Earnings to Fixed Charges and Preferred Stock
Dividends.**
23(a) -- Consent of KPMG Peat Marwick LLP**
23(b) -- Consent of Coopers & Lybrand L.L.P.**
</TABLE>
II-8
<PAGE> 136
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<C> <C> <S> <C>
23(c) -- Consent of W. Michael Heekin, Senior Vice President and
Corporate Secretary for the Company (included in Exhibits
5(a) and 5(b)).
25(a) -- Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago as
Trustee under the Indenture.**
25(b) -- Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago as
Trustee of the Trust Preferred Securities Guarantee of the
Company for the benefit of the holders of Trust Preferred
Securities of AHL Financing.**
25(c) -- Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago as
Trustee under the Declaration of Trust of AHL Financing.**
</TABLE>
- ---------------
* Indicates document previously filed.
** Indicates document filed herewith.
References are to the Company (File No. 1-7255) for documents incorporated
by reference.
II-9
<PAGE> 1
EXHIBIT 1
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(A FLORIDA CORPORATION)
AHL FINANCING
(A DELAWARE BUSINESS TRUST)
1,500,000 FELINE PRIDES
FORM OF
UNDERWRITING AGREEMENT
DATED: , 1997
---------------
<PAGE> 2
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(A FLORIDA CORPORATION)
AHL FINANCING
(A DELAWARE BUSINESS TRUST)
1,500,000 FELINE PRIDES
(STATED AMOUNT OF $50 PER FELINE PRIDES)
EACH CONSISTING OF
A PURCHASE CONTRACT OF AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION REQUIRING THE PURCHASE ON __________, 2000
(OR EARLIER) OF CERTAIN SHARES OF COMMON STOCK OF
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AND
A % TRUST ORIGINATED PREFERRED SECURITY
____ OF AHL FINANCING
UNDERWRITING AGREEMENT
, 1997
-----------
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
[as Representatives of the several Underwriters]
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281-1209
- -----------------------
"FELINE PRIDES," "Income PRIDES," "Trust Originated Preferred
Securities" and "TOPrS" are service marks of Merrill Lynch & Co. Inc.
<PAGE> 3
Ladies and Gentlemen:
American Heritage Life Investment Corporation, a Florida corporation
(the "Company"), and AHL Financing, a Delaware statutory business trust (the
"Trust" and, together with the Company, the "Offerors"), confirm their
agreement with the several underwriters named in Schedule A hereto
(collectively, the "Underwriters", which term shall also include any
underwriter substituted as hereinafter provided in Section 10 hereof), for whom
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Goldman, Sachs & Co., Oppenheimer & Co., Inc. and The
Robinson-Humphrey Company, Inc., as representatives (in such capacity,
collectively, the "Representatives"), with respect to the sale to the
Underwriters of 1,500,000 FELINE PRIDES(SM), each of which will initially
consist of a unit (referred to as Income PRIDES(SM)) with a Stated Amount of
$50 comprised of (a) a stock purchase contract (the "Purchase Contract") under
which (i) the holder will purchase from the Company on __________, 2000, a
number of shares of common stock, par value $1.00 per share, of the Company
(the "Common Stock") equal to the Settlement Rate or Cash Settlement Rate as
set forth in the Purchase Contract Agreement (defined below) and (ii) the
Company will pay to the holder contract adjustment payments, and (b) beneficial
ownership of a ____% Trust Originated Preferred Security(SM) (the "Preferred
Security") of the Trust, having a liquidation amount of $50 (the "Initial
Securities"). The Company and the Trust also propose to grant to the
Underwriters an option to purchase up to 225,000 additional Income PRIDES (the
"Option Securities" and together with the Initial Securities, the "Securities")
as described in Section 2(b) hereof. In accordance with the terms of the
Purchase Contract Agreement, dated as of ____________, 1997, between the
Company and The First National Bank of Chicago, as Purchase Contract Agent (the
"Purchase Contract Agent"), the Preferred Securities constituting a part of the
Securities will be pledged by the Purchase Contract Agent, on behalf of the
holders of the Securities, to The Chase Manhattan Bank, as Collateral Agent,
pursuant to the Pledge Agreement, dated as of ____________, 1997 (the "Pledge
Agreement"), among the Company, the Purchase Contract Agent and the Collateral
Agent, to secure the holders' obligation to purchase Common Stock under the
Purchase Contracts. The rights and obligations of a holder of Securities in
respect of Preferred Securities, subject to the pledge thereof, and Purchase
Contracts will be evidenced by Security Certificates (the "Security
Certificates") to be issued pursuant to the Purchase Contract Agreement.
<PAGE> 4
The Preferred Securities will be guaranteed by the Company with
respect to distributions and payments upon liquidation, redemption and
otherwise (the "Preferred Securities Guarantee") pursuant to the Preferred
Securities Guarantee Agreement, dated as of _______, 1997 (the "Preferred
Securities Guarantee Agreement"), executed and delivered by the Company and The
First National Bank of Chicago, as trustee (the "Guarantee Trustee"), for the
benefit for the holders from time to time of the Preferred Securities, and
certain back-up undertakings of the Company. The entire proceeds from the sale
of the Preferred Securities will be combined with the entire net proceeds from
the sale by the Trust to the Company of its common securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities") guaranteed by the Company with respect to distributions and
payments upon liquidation and redemption (the "Common Securities Guarantee"
and, together with the Preferred Securities Guarantee, the "Guarantees")
pursuant to the Common Securities Guarantee Agreement, dated as of ________,
1997 (the "Common Securities Guarantee Agreement" and, together with the
Preferred Securities Guarantee Agreement, the "Guarantee Agreements"), executed
and delivered by the Company for the benefit of the holders from time to time
of the Common Securities, and certain backup undertakings of the Company, and
will be used by the Trust to purchase the __% Junior Subordinated Debentures
due _____________, 2002 (the "Junior Subordinated Debentures") of the Company.
The Preferred Securities and the Common Securities will be issued pursuant to
the amended and restated declaration of trust of the Trust, dated as of
_______, 1997 (the "Declara- tion"), among the Company, as Sponsor, T. O'Neal
Douglas and C. Richard Morehead (the "Regular Trustees"), The First National
Bank of Chicago, as institutional trustee (the "Institutional Trustee") and
First Chicago Delaware Inc. (the "Delaware Trustee" and, together with the
Institutional Trustee and the Regular Trustees, the "Trustees"), and the
holders from time to time of undivided beneficial interests in the assets of
the Trust. The Junior Subordinated Debentures will be issued pursuant to the
Subordinated Debt Securities Indenture, dated as of _________, 1997 (the "Base
Indenture"), between the Company and The First National Bank of Chicago, as
Trustee (the "Debt Trustee"), as supplemented by the First Supplemental
Indenture, dated ___________, 1997 (the Base Indenture, as supplemented and
amended, being referred to as the "Indenture"). Capitalized terms used herein
without definition shall be used as defined in the Prospectus.
Prior to the purchase and public offering of the Securities by the
several Underwriters, the Offerors and the
2
<PAGE> 5
[Representatives], acting on behalf of the several Underwriters, shall enter
into an agreement substantially in the form of Exhibit A hereto (the "Pricing
Agreement"). The Pricing Agreement may take the form of an exchange of any
standard form of written communication between the Offerors and the
[Representatives] and shall specify such applicable information as is indicated
in Exhibit A hereto. The offering of the Securities will be governed by this
Agreement, as supplemented by the Pricing Agreement. From and after the date
of the execution and delivery of the Pricing Agreement, this Agreement shall be
deemed to incorporate the Pricing Agreement.
The Company and the Trust have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-24153) and pre-effective amendment[s] no. 1 [and no. 2] thereto covering
the registration of securities of the Company and the Trust, including the
Securities and the Purchase Contracts and Preferred Securities included in and
shares of Common Stock underlying, the Securities, under the Securities Act of
1933, as amended (the "1933 Act"), including the related preliminary prospectus
or prospectuses, and the offering thereof from time to time in accordance with
the rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") and the Company has filed such post-effective amendments thereto
as may be required prior to the execution of the Pricing Agreement. Such
registration statement, as so amended, has been declared effective by the
Commission. Such registration statement, as so amended, including the exhibits
and schedules thereto, if any, and the information, if any, deemed to be a part
thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "Rule 430A
Information") or Rule 434(d) of the 1933 Act Regulations (the "Rule 434
Information"), is referred to herein as the "Registration Statement"; and the
final prospectus relating to the offering of the Securities, in the form first
furnished to the Underwriters by the Company for use in connection with the
offering of the Securities, are collectively referred to herein as the
"Prospectus"; provided, however, that all references to the "Registration
Statement" and the "Prospectus" shall be deemed to include all documents
incorporated therein by reference pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act"), prior to the execution of the applicable
Pricing Agreement; provided, further, that if the Offerors file a registration
statement with the Commission pursuant to Section 462(b) of the 1933 Act
Regulations (the "Rule 462(b) Registration Statement"), then after such filing,
all references to "Registration Statement" shall be deemed to include the Rule
462(b) Registration Statement; and
3
<PAGE> 6
provided, further, that if the Offerors elect to rely upon Rule 434 of the 1933
Act Regulations, then all references to "Prospectus" shall be deemed to include
the final or preliminary prospectus and the applicable term sheet or
abbreviated term sheet (the "Term Sheet"), as the case may be, in the form
first furnished to the Underwriters by the Company in reliance upon Rule 434 of
the 1933 Act Regulations, and all references in this Underwriting Agreement to
the date of the Prospectus shall mean the date of the Term Sheet. A
"preliminary prospectus" shall be deemed to refer to any prospectus used before
the registration statement became effective and any prospectus that omitted, as
applicable, the Rule 430A Information, the Rule 434 Information or other
information to be included upon pricing in a form of prospectus filed with the
Commission pursuant to Rule 424(b) of the 1933 Act Regulations, that was used
after such effectiveness and prior to the execution and delivery of the
applicable Pricing Agreement. For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus, the Prospectus or
any Term Sheet or any amendment or supplement to any of the foregoing shall be
deemed to include the electronically transmitted copy thereof filed with the
Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval
system ("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the 1934 Act which is incorporated by reference in the
Registration Statement, such preliminary prospectus or the Prospectus, as the
case may be.
The Offerors understand that the Underwriters propose to make a public
offering of the Securities as soon as the [Representatives] deem advisable
after the Pricing Agreement has been executed and delivered and the
Declaration, the Indenture and the Preferred Securities Guarantee Agreement
have been qualified under the Trust Indenture Act of 1939, as amended (the
"1939 Act").
4
<PAGE> 7
SECTION 1. Representations and Warranties.
(a) The Offerors represent and warrant to each Underwriter as of the
date hereof and as of the date of the Pricing Agreement (such later date being
hereinafter referred to as the "Representation Date") that:
(i) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been initiated or, to the knowledge of the Offerors, threatened by the
Commission.
(ii) The Company and the Trust meet, and at the respective
times of the commencement and consummation of the offering of the Securities
will meet, the requirements for the use of Form S-3 under the 1933 Act. Each
of the Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act. At the respective times the Registration
Statement, any Rule 462(b) Registration Statement and any post-effective
amendments thereto (including the filing of the Company's most recent Annual
Report on Form 10-K with the Commission) became effective and at each
Representation Date, the Registration Statement, any Rule 462 Registration
Statement and any amendments or supplements thereto complied and will comply in
all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and the 1939 Act and the rules and regulations of the Commission
under the 1939 Act (the "1939 Act Regulations") and did not and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading. At the date of the Prospectus and at the Closing Time (as defined
herein), the Prospectus and any amendments and supplements thereto did not and
will not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If the
Offerors elect to rely upon Rule 434 of the 1933 Act Regulations, the Offerors
will comply with the requirements of Rule 434. Notwithstanding the foregoing,
the representations and warranties in this subsection shall not apply to (A)
statements in or omissions from the Registration Statement or the Prospectus
made in reliance upon and in conformity with information furnished to the
Offerors in writing by any Underwriter through Merrill Lynch expressly for use
in the Registration Statement or the Prospectus or (B) the part of the
Registration Statement which shall constitute the Statement of Eligibility
(Form T-1) under the 1939 Act.
5
<PAGE> 8
Each preliminary prospectus and prospectus filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied as so filed
in all material respects with the 1933 Act Regulations and, if applicable, each
preliminary prospectus and the Prospectus delivered to the Underwriters for use
in connection with the offering of the Securities will, at the time of such
delivery, be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(iii) The documents incorporated or deemed to be incorporated
by reference in the Registration Statement or the Prospectus, at the time they
were or hereafter are filed or last amended, as the case may be, with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act, and the rules and regulations of Commission
thereunder (the "1934 Act Regulations"), and at the time of filing or as of the
time of any subsequent amendment, did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were or are made, not misleading; and any additional documents
deemed to be incorporated by reference in the Registration Statement or the
Prospectus will, if and when such documents are filed with the Commission, or
when amended, as appropriate, comply in all material respects to the
requirements of the 1934 Act and the 1934 Act Regulations and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Offerors by an Underwriter through
Merrill Lynch expressly for use in the Registration Statement or the
Prospectus.
(iv) The accountants who certified the financial statements
and supporting schedules included or incorporated by reference in the
Registration Statement and the Prospectus are independent public accountants as
required by the 1933 Act and the 1933 Act Regulations.
(v) The financial statements of the Company included or
incorporated by reference in the Registration Statement and the Prospectus,
together with the related schedules and notes, present fairly the financial
position of the Company and its
6
<PAGE> 9
consolidated subsidiaries as at the dates indicated and the results of their
operations for the periods specified. Such financial statements have been
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved. The supporting
schedules, if any, included or incorporated by reference in the Registration
Statement and the Prospectus present fairly in accordance with GAAP the
information required to be stated therein. The ratio of earnings to fixed
charges included in the Prospectus has been calculated in compliance with Item
503(d) of Regulation S-K of the Commission. The selected financial information
and the summary financial data included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with
that of the audited financial statements included in the Registration Statement
and the Prospectus. The pro forma financial statements and the related notes
thereto included in the Registration Statement and the Prospectus present
fairly the information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(vi) The statutory financial statements of each of the
Company's insurance subsidiaries, from which certain ratios and other
statistical data contained in the Registration Statement have been derived,
have for each relevant period been prepared in accordance with accounting
practices prescribed or permitted by the National Association of Insurance
Commissioners, and with respect to each insurance subsidiary, the appropriate
Insurance Department of the state of domicile of such insurance subsidiary, and
such accounting practices have been applied on a consistent basis throughout
the periods involved.
(vii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as otherwise
stated therein, (A) there has been no material adverse change and no
development which could reasonably be expected to result in a material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries, considered
as one enterprise whether or not arising in the ordinary course of business (a
"Material Adverse Effect"), (B) there have been no transactions entered into by
the Company or any of its subsidiaries, other than those arising in the
7
<PAGE> 10
ordinary course of business, which are material with respect to the Company and
its subsidiaries, considered as one enterprise, (C) except for regular
dividends on the Common Stock in amounts per share that are consistent with
past practice or the applicable charter document or supplement thereto,
respectively, there has been no dividend or distribution of any kind declared,
paid or made by the Company on any class of its capital stock.
(viii) The Company has been incorporated, is validly existing
as a corporation and its status is active under the laws of the State of
Florida, with corporate power and authority to own, lease and operate its
properties and to conduct its business as presently conducted and as described
in the Prospectus and to enter into and perform its obligations under, or as
contemplated under, this Agreement, the Pricing Agreement, the Purchase
Contract Agreement, the Pledge Agreement and the Guarantee Agreements. The
Company is qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify or be in good standing would
not have a Material Adverse Effect.
(ix) Other than the Trust, each subsidiary of the Company
has been incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the corporate
power and authority to own, lease and operate its properties and to conduct its
business as presently conducted and as described in the Prospectus, and is
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except
where the failure to so qualify or be in good standing would not have a
Material Adverse Effect. Except as otherwise stated in the Registration
Statement and the Prospectus, all of the issued and outstanding shares of
capital stock of each subsidiary of the Company have been authorized and
validly issued, are fully paid and non-assessable and all such shares are owned
by the Company, directly or through its subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or equity. None
of the outstanding shares of capital stock of the subsidiaries was issued in
violation of preemptive or other similar rights arising by operation of law,
under the charter or by-laws of any subsidiary or under any agreement to which
the Company or any subsidiary is a party, or otherwise.
8
<PAGE> 11
(x) The authorized, issued and outstanding capital stock of
the Company is as set forth in the Prospectus; since the date indicated in the
Prospectus there has been no change in the consolidated capitalization of the
Company and its subsidiaries (other than changes in outstanding Common Stock
resulting from employee benefit plan or dividend reinvestment and stock
purchase plan transactions); and all of the issued and outstanding capital
stock of the Company has been authorized and validly issued, is fully paid and
non-assessable and conforms to the descriptions thereof contained in the
Prospectus.
(xi) The Trust has been created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act (the
"Delaware Act") with the power and authority to own property and to conduct its
business as described in the Registration Statement and Prospectus and to enter
into and perform its obligations under this Agreement, the Pricing Agreement,
the Preferred Securities, the Common Securities and the Declaration; the Trust
is qualified to transact business as a foreign company and is in good standing
in each jurisdiction in which such qualification is necessary, except where the
failure to so qualify or be in good standing would not have a Material Adverse
Effect on the Trust; the Trust is not a party to or otherwise bound by any
agreement other than those described in the Prospectus; the Trust is and will,
under current law, be classified for United States federal income tax purposes
as a grantor trust and not as an association taxable as a corporation.
(xii) The Purchase Contract Agreement has been authorized by
the Company and, at the Closing Time, when validly executed and delivered by
the Company and assuming due authorization, execution and delivery of the
Purchase Contract Agreement by the Purchase Contract Agent, will constitute a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity) (the "Bankruptcy Exceptions"), and will conform
in all material respects to the description thereof contained in the
Prospectus.
(xiii) The Pledge Agreement has been authorized by the
Company and, at the Closing Time, when validly executed and delivered by the
Company and assuming due authorization,
9
<PAGE> 12
execution and delivery of the Pledge Agreement by the Collateral Agent and the
Purchase Contract Agent, will constitute a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms
except to the extent that enforcement thereof may be limited by the Bankruptcy
Exceptions, and will conform in all material respects to the description
thereof contained in the Prospectus.
(xiv) The Common Securities have been authorized by the
Declaration and, when issued and delivered by the Trust to the Company against
payment therefor as described in the Registration Statement and Prospectus,
will be validly issued and will represent undivided beneficial interests in the
assets of the Trust and will conform in all material respects to the
description thereof contained in the Prospectus; the issuance of the Common
Securities is not subject to preemptive or other similar rights; and at the
Closing Time all of the issued and outstanding Common Securities of the Trust
will be directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equitable right.
(xv) The Declaration has been authorized by the Company and,
at the Closing Time, will have been executed and delivered by the Company and
the Trustees, and assuming due authorization, execution and delivery of the
Declaration by the Institutional Trustee and the Delaware Trustee, the
Declaration will, at the Closing Time, be a legal, valid and binding obligation
of the Company and the Regular Trustees, enforceable against the Company and
the Regular Trustees in accordance with its terms, except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions, and will
conform in all material respects to the description thereof contained in the
Prospectus.
(xvi) Each of the Guarantee Agreements has been authorized by
the Company and, when validly executed and delivered by the Company, and, in
the case of the Preferred Securities Guarantee Agreement, assuming due
authorization, execution and delivery of the Preferred Securities Guarantee by
the Guarantee Trustee, will constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms
except to the extent that enforcement thereof may be limited by the Bankruptcy
Exceptions, and each of the Guarantees and the Guarantee Agreements will
conform in all material respects to the description thereof contained in the
Prospectus.
10
<PAGE> 13
(xvii) The Securities have been authorized for issuance and
sale to the Underwriters and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully paid and
non-assessable and will conform in all material respects to the description
thereof contained in the Prospectus; the issuance of the Securities is not
subject to preemptive or other similar rights.
(xviii) The shares of Common Stock to be issued and sold by
the Company pursuant to the Purchase Contract Agreement (the "Shares"), when
issued and delivered in accordance with the provisions of the Purchase Contract
Agreement and the Pledge Agreement, will be authorized, validly issued and
fully paid and non-assessable and will conform in all material respects to the
description thereof contained in the Prospectus; and the issuance of such
Shares will not be subject to preemptive or other similar rights.
(xix) The Indenture has been authorized and qualified under
the 1939 Act and, at the Closing Time, will have been executed and delivered
and will constitute a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms except to the
extent that enforcement thereof may be limited by the Bankruptcy Exceptions;
the Indenture will conform in all material respects to the description thereof
contained in the Prospectus.
(xx) The Junior Subordinated Debentures have been
authorized by the Company and, at the Closing Time, will have been executed by
the Company and, when authenticated in the manner provided for in the Indenture
and delivered against payment therefor as described in the Prospectus, will
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions, and will be in
the form contemplated by, and entitled to the benefits of, the Indenture and
will conform in all material respects to the description thereof contained in
the Prospectus.
(xxi) Each of the Regular Trustees of the Trust is an
employee of the Company and has been authorized by the Company to execute and
deliver the Declaration.
(xxii) Neither the Company nor any of its subsidiaries is in
violation of its articles of incorporation or by-laws or in default in the
performance or observance of any material
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obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, note, lease, loan or credit agreement or any other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which any of them may be bound, or to which any of the property or
assets of the Company or any of its subsidiaries is subject, or in violation of
any applicable law, rule or regulation or any judgment, order or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets, which violation or default would, singly or in
the aggregate, have a Material Adverse Effect.
(xxiii) The Trust is not in violation of the Declaration or
its certificate of trust filed with the State of Delaware on March 20, 1997
(the "Certificate of Trust"); none of the entry into the Purchase Contracts
underlying the Securities by the Company, the offer of the Securities as
contemplated herein and in the Prospectus, the issue of the Shares and the sale
of the Shares by the Company pursuant to the Purchase Contracts; the execution,
delivery and performance of this Agreement, the Pricing Agreement, the Purchase
Contracts, the Purchase Contract Agreement, the Pledge Agreement, the
Declaration, the Preferred Securities, the Common Securities, the Indenture,
the Junior Subordinated Debentures, the Guarantee Agreements and the
Guarantees, and the consummation of the transactions contemplated herein and
therein and compliance by the Offerors with its obligations hereunder and
thereunder, did or will result in a breach of any of the terms or provisions
of, or constitute a default under or require the consent of any party under the
Certificate of Trust of the Trust or the Articles of Incorporation or by-laws
of the Company and its subsidiaries, any contract, indenture, mortgage, note,
lease, agreement or other instrument to which either the Trust, the Company or
any of its subsidiaries is a party or by which any of them may be bound, any
applicable law, rule or regulation or any judgment, order or decree of any
government, governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Trust, the Company or any of its subsidiaries or any of
their respective property or assets, or did or will result in the creation or
imposition of any lien on the properties or assets of the Trust, the Company or
any of its subsidiaries.
(xxiv) No labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is
imminent.
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<PAGE> 15
(xxv) There is no action, suit, proceeding, inquiry or
investigation before or by any court or governmental agency or body, domestic
or foreign (including, without limitation, any proceeding to revoke or deny
renewal of any Insurance Licenses (as defined below)), now pending or to the
knowledge of the Company threatened against or affecting the Trust, the Company
or any of its subsidiaries which is required to be disclosed in the
Registration Statement and the Prospectus (other than as stated therein), or
which might reasonably be expected to result in a Material Adverse Effect, or
which might be reasonably expected to materially and adversely affect the
assets, properties or operations thereof or the consummation of this Agreement,
the Pricing Agreement, the Purchase Contracts, the Purchase Contract Agreement,
the Pledge Agreement, the Guarantee Agreements, the Indenture or the
transactions contemplated herein or therein. The aggregate of all pending
legal or governmental proceedings to which the Trust, the Company or any
subsidiary thereof is a party or of which any of their respective properties or
operations is the subject which are not described in the Registration Statement
and the Prospectus, including ordinary routine litigation incidental to the
business, could not reasonably be expected to result in a Material Adverse
Effect.
(xxvi) The Company and its subsidiaries have good and
marketable title to all material real and personal property owned by them, in
each case free and clear of all liens, encumbrances and defects except such as
are described in the Registration Statement or the Prospectus or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries; and any material real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries; the Company and its
subsidiaries possess all licenses, franchises, permits, certificates,
authorizations, approvals, consents and orders of all governmental authorities
or agencies (including, without limitation, insurance licenses from the
insurance departments of the various states where the subsidiaries write
insurance business (the "Insurance Licenses")) which are necessary for the
ownership or lease of the material properties owned or leased by each of them
and for the operation of the business now operated by each of them with such
exceptions which, singly or in the aggregate, are not material and do not
materially interfere with the conduct of the business of the
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<PAGE> 16
Company and its subsidiaries, considered as one enterprise; the Company, on
behalf of its subsidiaries, has made all required filings under applicable
insurance holding company statutes (except for failures to file that,
individually or in the aggregate, would not have a Material Adverse Effect),
including without limitation, all insurance holding company system registration
statements required to be filed, in all jurisdictions in which such
registrations are required; the insurance subsidiaries of the Company have
fulfilled and performed all material obligations necessary to maintain their
respective Insurance Licenses, and no event or events have occurred which may
result in the impairment, modification, termination or revocation of such
Insurance Licenses; all such licenses, franchises, permits, certificates,
orders, authorizations, approvals and consents are in full force and effect and
contain no unduly burdensome provisions that would interfere with the conduct
of the business of the Company and its subsidiaries, considered as one
enterprise and, except as otherwise set forth in the Registration Statement or
the Prospectus, there are no legal or governmental proceedings pending or
threatened that would result in a material modification, suspension or
revocation thereof.
(xxvii) No authorization, approval, consent, order,
registration or qualification of or with any court or governmental authority or
agency (including, without limitation, any insurance regulatory agency or body)
is required for the entry into the Purchase Contracts underlying the
Securities, in connection with the issuance and sale of the Common Securities,
the offering of the Securities and the issuance and sale of the Shares by the
Company pursuant to such Purchase Contracts, except such as have been obtained
and made under the federal securities laws or state insurance laws and such as
may be required under state or foreign securities or Blue Sky laws.
(xxviii) This Agreement and the Pricing Agreement have been
authorized, executed and delivered by each of the Offerors.
(xxix) The Company has complied with, and is and will be in
compliance with, the provisions of that certain Florida act relating to
disclosure of doing business in Cuba, codified as Section 517.075 of the
Florida statutes, and the rules and regulations thereunder (collectively, the
"Cuba Act") or is exempt therefrom.
(xxx) None of the Trust or the Company or any of its
subsidiaries is an "investment company" or under the "control" of
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<PAGE> 17
an "investment company" as such terms are defined under the Investment Company
Act of 1940, as amended (the "1940 Act").
(xxxi) The Company and the Subsidiaries have each filed all
federal, state and foreign income tax returns which have been required to be
filed and have paid all taxes indicated by said returns and all assessments
received by any of them to the extent that such taxes have become due and are
not being contested in good faith.
(xxxii) None of the Company, its subsidiaries or any of their
respective directors, officers or controlling persons, has taken, directly or
indirectly, any action resulting in a violation of Regulation M under the 1934
Act, or designed to cause or result in, or that has constituted or that
reasonably might be expected to constitute, the stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Securities or the Common Stock.
(xxxiii) No "forward looking statement" (as defined in Rule
175 under the 1933 Act) contained in the Registration Statement, any
preliminary prospectus or the Prospectus was made or reaffirmed without a
reasonable basis or was disclosed other than in good faith.
(b) Any certificate signed by any officer of the Company or a
Trustee of the Trust and delivered to the [Representatives] or to counsel for
the Underwriters shall be deemed a representation and warranty by the Company
or the Trust, as the case may be, to each Underwriter as to the matters covered
thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the
Offerors agree to sell to each Underwriter, and each Underwriter severally and
not jointly, agrees to purchase from the Offerors, at the price per security
set forth in the Pricing Agreement, the number of Initial Securities set forth
in Schedule A hereto opposite the name of such Underwriter, plus any additional
number of Initial Securities which such Underwriter may become obligated to
purchase pursuant to the provisions of Section 10 hereof.
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<PAGE> 18
(1) If the Offerors have elected not to rely upon Rule 430A
of the 1933 Act Regulations, the initial public offering price per Security and
the purchase price per Security to be paid by the several Underwriters for the
Securities have each been determined and set forth in the Pricing Agreement,
dated the date hereof, and any necessary amendments to the Registration
Statement and the Prospectus will be filed before the Registration Statement
becomes effective.
(2) If the Offerors have elected to rely upon Rule 430A of
the 1933 Act Regulations, the purchase price per Security to be paid by the
several Underwriters shall be an amount equal to the initial public offering
price per Security, less an amount per Security to be determined by agreement
between the Underwriters and the Offerors. The initial public offering price
per Security shall be a fixed price to be determined by agreement between the
Underwriters and the Offerors. The initial public offering price and the
purchase price, when so determined, shall be set forth in the Pricing
Agreement. In the event that such prices have not been agreed upon and the
Pricing Agreement has not been executed and delivered by all parties thereto by
the close of business on the fourth business day following the date of this
Agreement, this Agreement shall terminate forthwith, without liability of any
party to any other party, unless otherwise agreed to by the Offerors and the
Underwriters.
(b) In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Offerors hereby grant to the Underwriters, severally and not
jointly, the right to purchase at their election up to 225,000 Option
Securities at the price per share set forth in the Pricing Agreement. The
option hereby granted will expire automatically at the close of business on the
30th calendar day after (i) the later of the date the Registration Statement
and any Rule 462(b) Registration Statement becomes effective, if the Offerors
have elected not to rely upon Rule 430A under the 1933 Act Regulations, or (ii)
the Representation Date, if the Offerors have elected to rely upon Rule 430A
under the 1933 Act Regulations, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Initial Securities upon
notice by the Underwriters to the Offerors setting forth the aggregate number
of additional Optional Securities to be purchased and the time and date of
delivery for the related Option Securities. Any such time and date of delivery
(a "Date of Delivery") shall be determined by the Underwriters but shall not be
later than seven
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<PAGE> 19
full business days after the exercise of such option, nor in any event before
the Closing Time, unless otherwise agreed upon by the Underwriters and the
Offerors. If the option is exercised as to all or any portion of the Option
Securities, each of the Underwriters, acting severally and not jointly, will
purchase from the Company the same percentage of the total number of Option
Securities as such Underwriter is purchasing of the Initial Securities as set
forth in Schedule A hereto (subject in each case to such adjustments as the
[Representatives] in their discretion shall make to eliminate any fractional
Option Securities).
(c) The Preferred Securities underlying the Securities will be
pledged with the Collateral Agent to secure the holders' obligations to
purchase Common Stock under the Purchase Contracts. Such pledge shall be
effected by the transfer to the Collateral Agent of the Preferred Securities to
be pledged at the Closing Time and appropriate Date of Delivery, if any, in
accordance with the Pledge Agreement.
(d) Delivery of certificates for the Initial Securities and the
Option Securities (if the option provided for in Section 2(b) hereof shall have
been exercised on or before the first business day prior to the Closing Time)
shall be made at the offices of the Underwriters in New York, against the
delivery to the Collateral Agent of the Preferred Securities relating to such
Securities by such Underwriters or on their behalf, and payment of the purchase
price for such Securities shall be made at the offices of Skadden, Arps, Slate,
Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022 or at such other
place as shall be agreed upon by the Underwriters and the Offerors, at 9:00
a.m. (New York time) on the third business day after the date the Registration
Statement becomes effective (or, if the Offerors have elected to rely upon Rule
430A, the third full business day after execution of the Pricing Agreement (or,
if pricing of the Securities occurs after 4:30 p.m., Eastern time, on the
fourth full business day thereafter)), or such other time not later than ten
business days after such date as shall be agreed upon by the Underwriters and
the Offerors (such time and date of payment and delivery being referred to
herein as the "Closing Time"). Payment for the Securities purchased by the
Underwriters shall be made by wire transfer of immediately available funds,
payable to the Company, against delivery to the respective accounts of the
Underwriters of the Securities to be purchased by it. Delivery of, and payment
for, the Securities shall be made through the facilities of the Depository
Trust Company. In addition, if the
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<PAGE> 20
Underwriters purchase any or all of the Option Securities, payment of the
purchase price and delivery of certificates for such Option Securities shall be
made at the offices of Skadden, Arps, Slate, Meagher & Flom LLP set forth
above, or at such other place as shall be agreed upon by the Underwriters and
the Offerors, on each Date of Delivery as specified in the relevant notice from
the Underwriters to the Offerors.
Certificates for the Initial Securities and the Option
Securities, if any, shall be in such denominations and registered in such names
as the Underwriters may request in writing at least two full business days
before the Closing Time or any Date of Delivery, as the case may be. Merrill
Lynch, individually and not as representative of the Underwriters, may (but not
shall be obligated to) make payment of the purchase price for the Securities,
if any, to be purchased by any Underwriter whose funds have not been received
by the Closing Time, or the Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder. The
certificates for the Initial Securities and the Option Securities, if any, will
be made available for examination by the Underwriters no later than 10:00 a.m.
(New York City time) on the last business day prior to the Closing Time or the
Date of Delivery, as the case may be.
(e) If settlement for the Option Securities occurs after the
Closing Time, the Offerors will deliver to the Underwriters on the relevant
Date of Delivery, and the obligations of the Underwriters to purchase the
Option Securities shall be conditioned upon the receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered at the Closing Time pursuant to Section
5[(k)] hereof.
SECTION 3. Covenants of the Offerors. The Offerors agree with each
Underwriter as follows:
(a) Promptly following the execution of this Agreement, the Offerors
will cause the Prospectus to be filed with the Commission pursuant to Rule 424
of the 1933 Act Regulations and the Offerors will promptly advise the
Underwriters when such filing has been made. Prior to the filing, the Offerors
will cooperate with the Underwriters in the preparation of such Prospectus to
assure that the Underwriters have no reasonable objection to the form or
content thereof when filed or mailed.
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<PAGE> 21
(b) The Offerors will comply with the requirements of Rule 430A of
the 1933 Act Regulations and/or Rule 434 of the 1933 Act Regulations if and as
applicable, and will notify the Underwriters immediately, and confirm the
notice in writing, (i) of the effectiveness of any post-effective amendment to
the Registration Statement or the filing of any supplement or amendment to the
Prospectus, (ii) the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for additional information,
(iv) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose and (v) of the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or the exemption from qualification of the Securities or the
Shares under state securities or Blue Sky laws or the initiation or threatening
of any proceeding for such purpose. The Offerors will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(c) The Offerors will give the Underwriters notice of its intention
to file or prepare any amendment to the Registration Statement (including any
post-effective amendment and any filing under Rule 462(b) of the 1933 Act
Regulations), any Term Sheet or any amendment, supplement or revision to either
the prospectus included in the Registration Statement at the time it became
effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act
or otherwise; will furnish the Underwriters with copies of any such Rule 462(b)
Registration Statement, Term Sheet, amendment, supplement or revision a
reasonable amount of time prior to such proposed filing or use, as the case may
be; and will not file any such Rule 462(b) Registration Statement, Term Sheet,
amendment, supplement or revision to which the Underwriters or counsel for the
Underwriters shall object.
(d) The Company will deliver to Merrill Lynch and counsel for the
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to Merrill Lynch,
without charge, a conformed copy of the Registration Statement as originally
filed and of each amendment thereto (without exhibits) for each of the
Underwriters. If
19
<PAGE> 22
applicable, the copies of the Registration Statement and each amendment thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(e) The Company has delivered to each Underwriter, without charge, as
many copies of each preliminary prospectus as such Underwriter reasonably
requested, and the Company hereby consents to the use of such copies for
purposes permitted by the 1933 Act. The Company will furnish to each
Underwriter, without charge, during the period when the Prospectus is required
to be delivered under the 1933 Act or the 1934 Act, such number of copies of
the Prospectus (as amended or supplemented) as such Underwriter may reasonably
request. If applicable, the Prospectus and any amendments or supplements
thereto furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR, except
to the extent permitted by Regulation S-T.
(f) The Offerors will comply with the 1933 Act and the 1933 Act
Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Registration Statement and the Prospectus. If at any time
when the Prospectus is required by the 1933 Act or the 1934 Act to be delivered
in connection with sales of the Securities, any event shall occur or condition
shall exist as a result of which it is necessary, in the opinion of counsel for
the Underwriters or for the Offerors, to amend the Registration Statement in
order that the Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or to amend or
supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement the Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Offerors will promptly prepare and file with the Commission, subject to Section
3(c), such amendment or supplement as may be necessary to correct such
statement or omission or to make the Registration Statement or the Prospectus
comply with such requirements, and the Offerors will furnish to the
Underwriters,
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<PAGE> 23
without charge, such number of copies of such amendment or supplement as the
Underwriters may reasonably request.
(g) The Offerors will use their best efforts, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions (domestic or
foreign) as Merrill Lynch may designate; provided, however, that the Company
shall not be obligated to qualify as a foreign corporation in any jurisdiction
in which it is not so qualified or subject itself to taxation in respect of
doing business in any jurisdiction in which it is not otherwise so subject. In
each jurisdiction in which the Securities have been so qualified, the Offerors
will file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for so long as may be
required in connection with distribution of the Securities and the Shares.
(h) The Company will make generally available to its securityholders
as soon as practicable, but not later than 45 days (or 90 days, in the case of
a period that is also the Company's fiscal year) after the close of the period
covered thereby, an earnings statement of the Company and its subsidiaries (in
form complying with the provisions of Rule 158 of the 1933 Act Regulations)
covering a twelve-month period beginning not later than the first day of the
Company's fiscal quarter next following the "effective date" (as defined in
said Rule 158) of the Registration Statement.
(i) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Prospectus under "Use of
Proceeds".
(j) If, at the time that the Registration Statement became (or in the
case of a post-effective amendment becomes) effective, any information shall
have been omitted therefrom in reliance upon Rule 430A or Rule 434 of the 1933
Act Regulations, then immediately following the execution of the Pricing
Agreement, the Offerors will prepare, and file or transmit for filing with the
Commission in accordance with such Rule 430A or Rule 434 and Rule 424(b) of the
1933 Act Regulations, copies of an amended Prospectus, or Term Sheet, or, if
required by such Rule 430A, a post-effective amendment to the Registration
Statement (including an amended Prospectus), containing all information so
omitted.
(k) If the Offerors elect to rely upon Rule 462(b), the Offerors
shall file a Rule 462(b) Registration Statement with the
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<PAGE> 24
Commission in compliance with Rule 462(b) and pay the applicable fees in
accordance with Rule 111 of the 1933 Act Regulations by the earlier of (i)
10:00 p.m. Eastern time on the date of the Pricing Agreement and (ii) the time
confirmations are sent or given, as specified by Rule 462(b)(2).
(l) The Offerors, during the period when the Prospectus is required
to be delivered under the 1933 Act, will file all documents required to be
filed with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act
within the time periods required by the 1934 Act and the 1934 Act Regulations.
(m) The Offerors will use their best efforts to effect the listing of
the Income PRIDES and the Shares on the New York Stock Exchange and to cause
the Securities to be registered under the 1934 Act.
(n) During a period of 180 days from the date of the Pricing
Agreement, neither the Trust nor the Company will, without the prior written
consent of Merrill Lynch, directly or indirectly, sell, offer to sell, grant
any option for the sale of, or otherwise dispose of, or enter into any
agreement to sell, any Securities, Purchase Contracts, Preferred Securities or
Common Stock or any security convertible into or exchangeable or exercisable
for Securities, Purchase Contracts, Preferred Securities, Common Stock or the
Junior Subordinated Debentures, or any equity securities substantially similar
to the Securities, Preferred Securities, Purchase Contracts or Common Stock or
any debt securities substantially similar to the Junior Subordinated
Debentures; provided, however, that such restriction shall not affect the
ability of the Offerors to take any such action (i) in connection with any
employee benefit, dividend reinvestment or stock purchase plan of the Company
or its subsidiaries or (ii) in connection with the offering of the Securities,
including the Preferred Securities, and the Junior Subordinated Debentures
issued pursuant to this Agreement.
(o) The Company, during a period of three years from the Closing
Time, will make generally available to the Underwriters copies of all reports
and other communications (financial or other) mailed to stockholders, and
deliver to the Underwriters promptly after they are available, copies of any
reports and financial statements furnished to or filed with the Commission or
any national securities exchange on which any class of securities of the
Company is listed; and shall furnish such additional information concerning the
business and financial condition of the Company as the Underwriters may from
time to time reasonably
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<PAGE> 25
request (such financial statements to be on a consolidated basis to the extent
the accounts of the Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission).
(p) The Company will reserve and keep available at all times, free
of preemptive or other similar rights and liens and adverse claims, sufficient
shares of Common Stock to satisfy any obligations to issue Shares upon
settlement of the Purchase Contracts and shall take all actions necessary to
keep effective the Registration Statement with respect to the Shares.
(q) None of the Company, its subsidiaries or any of their
respective directors, officers or controlling persons, will take, directly or
indirectly, any action resulting in a violation of Regulation M under the 1934
Act, or designed to cause or result in, or that reasonably might be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities or the Common
Stock.
SECTION 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement, the
Pricing Agreement, the Purchase Contracts, the Purchase Contract Agreement and
the Pledge Agreement, including, without limitation, expenses related to the
following, if incurred: (i) the preparation, delivery, printing and filing of
the Registration Statement and Prospectus as originally filed (including
financial statements and exhibits) and of each amendment thereto; (ii) the
printing and delivery to the Underwriters of this Agreement, the Pricing
Agreement, any Agreement among Underwriters and such other documents as may be
required in connection with the offering, purchase, sale and delivery of the
Securities; (iii) the preparation, issuance and delivery of the certificates
for the Securities and the Shares; (iv) the fees and disbursements of the
Company's counsel, accountants and other advisors or agents (including the
transfer agents and registrars), as well as fees and disbursements of the
Trustees, the Purchase Contract Agent, the Collateral Agent and any Depositary,
and their respective counsel (except as provided for in the Prospectus); (v)
the qualification of the Securities and the Shares under securities laws in
accordance with the provisions of Section 3(g), including filing fees and the
fees and disbursements of counsel for the Underwriters in connection therewith
and in connection with the preparation of the Blue Sky Survey and any Legal
Investment Survey; (vi) the printing and delivery to the Underwriters of copies
of the Registration
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Statement as originally filed and of each amendment thereto, of each
preliminary prospectus, any Term Sheet and of the Prospectus and any amendments
or supplements thereto; (vii) the printing and delivery to the Underwriters of
copies of the Blue Sky Survey and any Legal Investment Survey; (viii) any fees
payable in connection with the rating of the Securities by nationally
recognized statistical rating organizations; (ix) the filing fees incident to,
and the fees and disbursements of counsel to the Underwriters in connection
with, the review, if any, by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Securities; (x) any fees
payable to the Commission; and (xi) the fees and expenses incurred in
connection with the listing of the Income PRIDES and the Shares on the New York
Stock Exchange.
If this Agreement is terminated by the [Representatives] in
accordance with the provisions of Section 5 or Section 9(a)(i) hereof, the
Company shall reimburse the Underwriters for all of their out-of-pocket
expenses, including the reasonable fees and disbursements of Skadden, Arps,
Slate, Meagher & Flom LLP, counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations
of the Underwriters to purchase and pay for the Securities pursuant to this
Agreement are subject to the accuracy of the representations and warranties of
the Offerors herein contained or in certificates of any officer of the Company
or any subsidiary or the trustees of the Trust delivered pursuant to the
provisions hereof, to the performance by the Offerors of their obligations
hereunder, and to the following further conditions:
(a) The Registration Statement, including any Rule 462(b)
Registration Statement, shall have become effective under the 1933 Act not
later than 5:30 p.m., New York City time, on the date hereof, and on the date
hereof and at the Closing Time and any Date of Delivery, no stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the Commission for
additional information shall have been complied with to the satisfaction of
counsel to the Underwriters. A prospectus containing information relating to
the description of the Securities, the specific method of distribution and
similar matters shall have been filed with the Commission in accordance with
Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any
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required post-effective amendment providing such information shall have been
filed and declared effective in accordance with the requirements of Rule 430A),
or, if the Company has elected to rely upon Rule 434 of the 1933 Act
Regulations, a Term Sheet including the Rule 434 Information shall have been
filed with the Commission in accordance with Rule 424(b)(7).
(b) At the Closing Time the Underwriters shall have received:
(1) The favorable opinion, dated as of the Closing Time, of
W. Michael Heekin, Esq., Senior Vice President, Corporate Secretary and General
Counsel of the Company, in form and substance reasonably satisfactory to
counsel for the Underwriters, to the effect that:
(i) The Company has been incorporated, is
validly existing as a corporation and its status is active under
the laws of the State of Florida.
(ii) The Company has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus.
(iii) The Company is qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required.
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus (except
for subsequent issuances, if any, pursuant to employee benefit plan or
dividend reinvestment and stock purchase plan transactions), and the
shares of issued and outstanding capital stock of the Company have
been authorized and validly issued and are fully paid and
non-assessable.
(v) Except for the Trust, each subsidiary of
the Company has been incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own, lease and
operate its properties and to conduct its business as presently
conducted and as described in the Prospectus, and is qualified as a
foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or
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<PAGE> 28
the conduct of business, except where the failure to so qualify or be
in good standing would not have a Material Adverse Effect; all of the
issued and outstanding capital stock of each such subsidiary of the
Company has been authorized and validly issued, is fully paid and
non-assessable and all such shares are owned by the Company, directly
or through its subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
(vi) The Trust is not required to be qualified
and in good standing as a foreign company in Florida, except to the
extent that the failure to so qualify or be in good standing would not
have a Material Adverse Effect on the Trust; and the Trust is not a
party to or otherwise bound by any agreement other than those
described in the Prospectus.
(vii) The Declaration has been authorized,
executed and delivered by the Company and the Trustees and is a legal,
valid and binding obligation of the Company, enforceable against the
Company and each of the Regular Trustees in accordance with its terms,
except as enforcement thereof may be limited by the Bankruptcy
Exceptions; and the Declaration has been duly qualified under the 1939
Act.
(viii) All legally required proceedings in
connection with the authorization, issuance and validity of the
Securities and the sale of the Securities in accordance with this
Agreement (other than the filing of post-issuance reports, the
non-filing of which would not render the Securities invalid) have been
taken and all legally required orders, consents or other
authorizations or approvals of any other public boards or bodies
(including, without limitation, any insurance regulatory agency or
body) in connection with the authorization, issuance and validity of
the Securities and the sale of the Securities in accordance with this
Agreement (other than in connection with or in compliance with the
provisions of the securities or Blue Sky laws of any jurisdictions, as
to which no opinion need be expressed) have been obtained and are in
full force and effect.
(ix) The Registration Statement is effective
under the 1933 Act and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has
been issued under the 1933 Act,
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<PAGE> 29
and no proceedings therefor have been initiated or threatened by the
Commission.
(x) The Registration Statement as of its
effective date and the Prospectus and each amendment or supplement
thereto as of its issue date (in each case, other than the financial
statements and the notes thereto, the financial schedules, and any
other financial data included or incorporated by reference therein, as
to which such counsel need express no belief), complied as to form in
all material respects with the requirements of the 1933 Act and the
1933 Act Regulations; and the Declaration, the Indenture, the
Preferred Securities Guarantee Agreement and the Statements of
Eligibility on Forms T-1 with respect to each of the Institutional
Trustee, the Debt Trustee, and the Guarantee Trustee filed with the
Commission as part of the Registration Statement complied as to form
in all respects with the requirements of the 1939 Act and the 1939 Act
Regulations.
(xi) Each of the documents incorporated by
reference in the Registration Statement or the Prospectus at the time
they were filed or last amended (other than the financial statements
and the notes thereto, the financial schedules, and any other
financial data included or incorporated by reference therein, as to
which such counsel need express no belief), complied as to form in all
material respects with the requirements of the 1934 Act and the 1934
Act Regulations, as applicable; and such counsel has no reason to
believe that any of such documents, when such documents became
effective or were so filed, as the case may be, contained, in the case
of a registration statement which became effective under the 1933 Act,
an untrue statement of a material fact, or omitted to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and, in the case of other documents which were
filed under the 1934 Act with the Commission, an untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements therein not misleading.
(xii) The Company and the Trust meet the
registrant requirements for use of Form S-3 under the 1933 Act
Regulations.
(xiii) The Securities have been authorized for
issuance and sale to the Underwriters pursuant to this
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<PAGE> 30
Agreement and, when issued and delivered by the Company pursuant to
this Agreement against payment of the consideration set forth in the
Pricing Agreement, will be validly issued and fully paid and
non-assessable; the Common Stock and the Securities are each
registered under the 1934 Act, and the Income PRIDES issuable at the
Closing Time and the Shares issuable by the Company pursuant to the
Purchase Contracts have been authorized for listing on the New York
Stock Exchange, upon official notice of issuance.
(xiv) The Shares subject to the Purchase
Contract Agreement have been validly authorized and reserved for
issuance and, when issued and delivered by the Company in accordance
with the provisions of the Purchase Contract Agreement, the Purchase
Contracts and the Pledge Agreement, will be fully paid and non-
assessable; the issuance of such Shares will not be subject to
preemptive or other similar rights arising by law or, to the best of
such counsel's knowledge, otherwise.
(xv) The issuance of the Securities is not
subject to preemptive or other similar rights arising by law or, to
the best of such counsel's knowledge, otherwise.
(xvi) All of the issued and outstanding Common
Securities of the Trust are directly owned by the Company free and
clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equitable right.
(xvii) This Agreement and the Pricing Agreement
have been duly authorized, executed and delivered by each of the
Company and the Trust.
(xviii) The Purchase Contract Agreement has been
duly authorized by the Company and, assuming due authorization,
execution and delivery of the Purchase Contract Agreement by the
Purchase Contract Agent, constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions.
(xix) The Pledge Agreement has been duly
authorized by the Company and, assuming due authorization, execution
and delivery of the Pledge Agreement by the Collateral Agent and the
Purchase Contract Agent, constitutes a legal, valid and binding
obligation of the
28
<PAGE> 31
Company, enforceable against the Company in accordance with its terms
except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions.
(xx) Each of the Guarantee Agreements has been
duly authorized, executed and delivered by the Company; the Preferred
Securities Guarantee Agreement, assuming it is duly authorized,
executed, and delivered by the Guarantee Trustee, constitutes a legal,
valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by Bankruptcy Exceptions; and the
Preferred Securities Guarantee Agreement and the Declaration have been
duly qualified under the 1939 Act.
(xxi) The Indenture has been executed and
delivered by the Company and, assuming authorization, execution, and
delivery thereof by the Debt Trustee, is a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions; and the Indenture
has been duly qualified under the 1939 Act.
(xxii) The Junior Subordinated Debentures are in
the form contemplated by the Indenture, have been duly authorized,
executed and delivered by the Company and, when authenticated by the
Debt Trustee in the manner provided for in the Indenture and delivered
against payment therefor by the Trust, will constitute legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except to the extent that
enforcement thereof may be limited by the Bankruptcy Exceptions.
(xxiii) The entry into the Purchase Contracts
underlying the Securities; the issuance and sale of the Securities by
the Offerors; the issuance and sale of the Shares by the Company
pursuant to the Purchase Contracts; the execution, delivery and
performance by the Company of this Agreement, the Pricing Agreement,
the Purchase Contracts, the Purchase Contract Agreement, the Pledge
Agreement, the Declaration, the Securities, the Common Securities, the
Indenture, the Junior Subordinated Debentures, the Guarantee
Agreements and the Guarantees; the consummation of the transactions
contemplated herein and therein; and the compliance by each of the
Offerors with
29
<PAGE> 32
their respective obligations hereunder and thereunder do not and will
not conflict with, result in a breach of, or constitute a default
under or require the consent of any party under the Certificate of
Trust of the Trust or the Articles of Incorporation or by-laws of the
Company or any of its subsidiaries, or any contract, indenture,
mortgage, agreement, note,
lease or other instrument to which the Trust, the Company or any of its
subsidiaries is a party or by which any of them may be bound, or any applicable
law, rule or regulation, or any judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over the Trust, the Company or any of its subsidiaries or any of their
respective properties or assets or did or will result in the creation or
imposition of any lien on the properties or assets of the Trust, the Company or
any of its subsidiaries.
(xxiv) All conditions precedent provided for in
the Purchase Contract Agreement relating to the authentication and
delivery of the Security Certificates have been complied with and the
Company is duly entitled to the authentication and delivery of the
Security Certificates in accordance with the terms of the Purchase
Contract Agreement; the Security Certificates are in a form
contemplated by the Purchase Contract Agreement and comply with all
applicable statutory requirements and with the requirements of the New
York Stock Exchange.
(xxv) To the best of such counsel's knowledge,
there are no actions, suits or proceedings before or by any court or
governmental agency or body, domestic or foreign, (including, without
limitation, any insurance regulatory agency or body) pending or
threatened which are required to be disclosed in the Registration
Statement or the Prospectus, other than those disclosed therein, and
all pending legal or governmental proceedings to which the Company or
any of its subsidiaries is a party or to which any of their property
is subject which are not described in the Registration Statement and
the Prospectus, including ordinary routine litigation incidental to
the business, are, considered in the aggregate, not material.
(xxvi) The information in the Prospectus under
the captions "Prospectus Summary- The Company," "The Trust," "Use of
Proceeds", "Capitalization," "Description of the
30
<PAGE> 33
FELINE PRIDES," "Description of the Purchase Contracts," "Certain
Provisions of the Purchase Contract Agreement and the Pledge
Agreement," "Description of the Trust Preferred Securities,"
"Description of the Guarantee," "Description of the Junior
Subordinated Debentures," "Description of the Common Stock," and
"ERISA Considerations" to the extent that they involve matters of law,
summaries of legal matters, documents or proceedings, or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects.
(xxvii) To the best of such counsel's knowledge
and information, there are no contracts, indentures, mortgages,
agreements, notes, leases or other instruments required to be
described or referred to or incorporated by reference in the
Registration Statement or to be filed as exhibits thereto other than
those described or referred to or incorporated by reference therein or
filed as exhibits thereto; the descriptions thereof or references
thereto are true and correct, and no default exists in the due
performance or observance of any material obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
agreement, note, lease or other instrument so described, referred to,
filed or incorporated by reference.
(xxviii) No authorization, approval, consent,
order, registration or qualification of or with any court or federal
or state governmental authority or agency (including, without
limitation, any insurance regulatory agency or body) is required for
the issuance and sale of the Securities by the Offerors to the
Underwriters or the performance by the Trust and the Company of their
respective obligations in this Agreement, the Pricing Agreement, the
Purchase Contract Agreement, the Pledge Agreement, the Indenture, the
Junior Subordinated Debentures, the Preferred Securities Guarantee
Agreement, the Preferred Securities Guarantee, the Declaration and the
Securities except such as has been obtained and made under the federal
securities laws or such as may be required under state or foreign
securities or Blue Sky laws.
(xxix) The Company, on behalf of its subsidiaries,
has made all required filings under applicable insurance holding
company statutes, including without limitation insurance holding
company system registration statements, in each jurisdiction where
such filings are required to conduct
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<PAGE> 34
its business as described in the Prospectus, except where the failure
to make such filings would not, individually or in the aggregate, have
a Material Adverse Effect.
(xxx) Each Subsidiary that is required to be
organized and licensed as an insurance company in its jurisdiction of
incorporaton is so organized and licensed and each such Subsidiary is
authorized or qualified as an insurer in each other jurisdiction where
it is required to be so authorized or qualified to conduct its busines
as described in the Prospectus, except where the failure to be so
authorized or qualifed in such jurisdiction would not, singly or in
the aggregate, have a Material Adverse Effect; the Company and its
subsidiaries possess all licenses, franchises, permits, certificates,
authorizations, approvals, consents and orders of all governmental
authorities or agencies (including, without limitation, the Insurance
Licenses) necessary for the ownership or lease of the material
properties owned or leased by each of them and for the operation of
the business carried on by each of them as described in the
Registration Statement and the Prospectus with such exceptions as are
not material and do not materially interfere with the conduct of the
business of the Company and its subsidiaries, considered as one
enterprise; all such licenses, franchises, permits, certificates,
authorizations, approvals, consents and orders are in full force and
effect and contain no unduly burdensome provisions that would
interfere with the conduct of the business of the Company and its
subsidiaries, considered as one enterprise and, except as otherwise
set forth in the Registration Statement or the Prospectus, there are
no legal or governmental proceedings pending or threatened that would
result in a material modification, suspension or revocation thereof.
(xxxi) None of the Trust or the Company or any of
its subsidiaries is an "investment company" or under the "control" of
an "investment company" as such terms are defined in the 1940 Act.
Moreover, such counsel shall confirm that nothing has come to such
counsel's attention that would lead such counsel to believe that the
Registration Statement, including any information provided pursuant to
Rule 430A or Rule 434 (except for financial statements and the notes
thereto, the financial schedules and any other financial data included
or incorporated by reference therein, as to which counsel need
32
<PAGE> 35
express no opinion), at the time it became effective or at the
Representation Date, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (except for financial statements and the notes thereto, the
financial schedules, and any other financial data included or
incorporated by reference therein, as to which counsel need express no
opinion), at the Representation Date (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by
the Company for use in connection with the offering of the Securities
which differs from the Prospectus on file at the Commission at the
time the Registration Statement became effective, in which case at the
time it is first provided to the Underwriters for such use) or at the
Closing Time, included (or includes) an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In giving such opinion, such counsel may rely, as to matters
of New York law, upon the opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
special counsel to the Offerors, and as to matters of Delaware law, upon the
opinion of ________________, special Delaware counsel to the Offerors, in which
case the opinion shall state that such counsel believes that you and such
counsel are entitled to so rely.
(2) The favorable opinion, dated as of the Closing Time, of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel to the Offerors, in
form and substance satisfactory to counsel for the Underwriters and subject to
the qualifications and assumptions stated therein, to the effect that:
(i) The Registration Statement, including any
Rule 462(b) Registration Statement, is effective under the 1933 Act;
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b);
and no stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act or proceedings therefor
initiated, to the best of such counsel's knowledge, or threatened by
the Commission.
(ii) The Registration Statement, including any
Rule 462(b) Registration Statement and the Prospectus, and
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<PAGE> 36
each amendment or supplement thereto (other than the financial
statements and the notes thereto, the financial schedules and any
other financial data included or incorporated by reference therein, or
the exhibits to the Registration Statement, including any Form T-1, as
to which no opinion need be rendered), as of their respective
effective or issue dates, or when amended, as appropriate, complied as
to form in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations.
(iii) The statements in the Prospectus under the
captions "The Trust," "Description of the FELINE PRIDES," "Description
of the Purchase Contracts," "Certain Provisions of the Purchase
Contract Agreement and the Pledge Agreement," "Description of the
Trust Preferred Securities," "Description of the Guarantee,"
"Description of the Junior Subordinated Debentures," "Effect of
Obligations Under the Junior Subordinated Debentures and the
Guarantee," "Description of the Common Stock," and "ERISA
Considerations" to the extent that they involve matters of law,
summaries of legal matters, documents or proceedings, or legal
conclusions, has been reviewed by such counsel and is correct in all
material respects.
(iv) The Purchase Contract Agreement, the
Purchase Contracts underlying the Securities being delivered at
the Closing Time and at any Date of Delivery, and the Pledge
Agreement have been duly authorized, executed and delivered by the
Company and each is a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms,
except as may be limited by the Bankruptcy Exceptions; provided,
however, that based on a review of applicable case law, upon the
occurrence of a Termination Event, Section 365(e)(2) of the Bankruptcy
Code (11 U.S.C. Section Section 101-1330, as amended) should not
substantively limit the provisions of Sections 3.15 and 5.8 of the
Purchase Contract Agreement and Section 4.3 of the Pledge Agreement
that require termination of the Purchase Contracts and release of the
Collateral Agent's security interest in the Preferred Securities or
the Treasury Securities; provided, however, that procedural
restrictions respecting relief from the automatic stay under Section
362 of the Code may affect the timing of the exercise of such rights
and remedies.
(v) When the Securities are issued in
accordance with the terms of the Purchase Contract Agreement
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<PAGE> 37
and delivered against payment therefor, the Securities will entitle
the holders thereof to the rights specified in the Purchase Contract
Agreement.
(vi) For purposes of the opinions expressed
therein, such counsel has assumed that (1) the Pledge Agreement has
been authorized, executed and delivered by the Purchase Contract Agent
on behalf of each of the holders of the Securities from time to time,
(2) the Purchase Contract Agent is incorporated and validly existing
under the laws of the state of its incorporation, (3) the Purchase
Contract Agent and each of the holders of the Securities has full
power, authority and legal right (including, without limitation, any
legal right dependent upon there being no necessary governmental
approvals or filings and no conflict with laws, governing documents or
contracts) to make and perform its obligations under the Pledge
Agreement, (4) the Pledge Agreement is the legal, valid, binding and
enforceable obligation of the Purchase Contract Agent on behalf of
each of the holders of the Securities from time to time, and (5) the
Purchase Contract Agent and each holder of Securities has sufficient
rights in the Preferred Securities or the Treasury Securities, as the
case may be, for the security interest of the Collateral Agent for the
benefit of the Company to attach.
For purposes of such counsel's opinion: (i) "UCC" means the
Uniform Commercial Code as in effect on the date thereof in the State
of New York; (ii) "Federal Book-Entry Regulations" means the United
States Department of Treasury regulations governing the transfer and
pledge of marketable Treasury Securities maintained in the form of
entries in the records of the Federal Reserve Banks and set forth in
61 Fed. Reg. 43,626 (1996) (to be codified at 31 C.F.R. Part 357),
including the 1994 Official Text of the Uniform Com- mercial Code,
Revised Article 8, Investment Securities (with Conforming and
Miscellaneous Amendments to Articles 1, 3, 4, 5, 9 and 10) adopted by
the American Law Institute and National Conference of Commissioners On
Uniform State Laws and approved by the American Bar Association on
February 14, 1995, which is incorporated by reference pursuant to 61
Fed. Reg. 43,626 (1996) (to be codified at 31 C.F.R. Section 357.2;
(iii) "Securities Intermediary" means The Chase Manhattan Bank acting
solely in its capacity as a "securities intermediary" as defined in
the Federal Book-Entry Regulations; (iv) "Security Entitlements"
means "security entitlements" as defined in the Federal Book-Entry
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<PAGE> 38
Regulations; and (v) "Collateral Account" means account number
_________ maintained by the Securities Intermediary in the name "The
First National Bank of Chicago as Purchase Contract Agent on behalf of
the holders of certain securities of AHL Financing, Collateral Account,
subject to the security interest of The Chase Manhattan Bank as
Collateral Agent for the benefit of American Heritage Life Investment
Corporation as pledgee" pursuant to the Pledge Agreement, dated as of
________, 1997, among the Securities Intermediary, the Purchase
Contract Agent and the Company (the "Pledge Agreement") and (vi) "
Financial Intermediary" means The Chase Manhattan Bank acting solely
in its capacity as a "financial intermediary" as defined in Section
8-313(4) of the UCC.
(A) The "transfer" of the Preferred Securities together
with the Pledge Agreement will be effective to create in favor of the
Collateral Agent for the benefit of the Company a valid and perfected
security interest in the Preferred Securities to secure the
obligations of the holders under the Purchase Contracts. Transfer of
the Preferred Securities will occur upon the latest of (a) the
delivery of the Preferred Securities to the Financial Intermediary
indorsed to the Financial Intermediary or in blank, (b) the sending of
a confirmation by the Financial Intermediary of the purchase by the
Collateral Agent for the benefit of the Company of such Preferred
Securities and (c) the identification by book-entry of the Preferred
Securities to the Collateral Account.
(B) Such counsel notes that although the Federal
Book-Entry Regulations contain express provisions identifying the law
governing perfection and priority of security interests in security
entitlements, they do not contain express provisions identifying the
law governing validity and attachment of such security interests.
Such counsel further notes that the parties have chosen the laws of
the State of New York to govern the Pledge Agreement and that the UCC
does not contain any provisions with respect to the creation of a
secu- rity interest in collateral constituting a "security
entitlement." The UCC, however, does contain provisions for creation
of a security interest in collateral constituting either a "general
intangible" or a "security" (each as defined in the UCC). If and to
the extent (i) the Federal Book-entry Regulations do not preempt the
choice of New York law with respect to the validity and attachment of
the security interest in the Treasury Security Entitlements
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<PAGE> 39
(as defined herein), (ii) under New York law a security interest in a
"security entitlement" with respect to a book-entry security issued by
the U.S. Treasury would be created in the same manner as a security
interest in a "general intangible" (as defined in the UCC), such
counsel is of the opinion that the provisions of the Pledge Agreement
are effective to create a valid security interest in favor of the
Company, to secure the obligations of the holders of the Growth PRIDES
under the Purchase Contracts comprising a part of such Growth PRIDES,
in each such holder's rights in all "security entitlements" with
respect to book-entry securities issued by the United States Treasury
and credited to the Collateral Account (such security entitlements,
the "Treasury Security Entitlements"). Alternatively, if and to the
extent (i) the Federal Book-Entry Regulations do not preempt the
choice of New York law with respect to the validity and attachment of
the security interest in the Treasury Security Entitlements, and (ii)
under New York law a security interest in a "security entitlement"
with respect to a book-entry security issued by the U.S. Treasury
would be created in the same manner as a security interest in a
"security" (as defined in the UCC), such counsel is of the opinion
that the provisions of the Pledge Agreement together with the
"transfer" (within the meaning of Section 8-313 of the UCC) of the
Treasury Security Entitlements to the Collateral Agent will be
effective to create a valid security interest in favor of the
Collateral Agent for the benefit of the Company, to secure the
obligations of the holders of the Growth PRIDES under the Purchase
Contracts, in such holders' rights in all Treasury Security
Entitlements. Assuming that the Securities Intermediary satisfies the
requirements of Section 8-313(d)(iii) of the UCC (as to which such
counsel expresses no opinion), "transfer" of the Treasury Securities
Entitlements will occur upon the later to occur of (1) the sending of
a confirmation by the Securities Intermediary to the Collateral Agent
for the benefit of the Company of the purchase by the Collateral Agent
of the Treasury Securities Entitlements and (2) the identification by
book-entry by the Securities Intermediary of the Treasury Securities
Entitlements as belonging to the Collateral Agent for the benefit of
the Company.
(C) Upon the execution and delivery of the Pledge
Agreement and the establishment of the Collateral Account in
accordance with the terms of the Pledge Agreement, the security
interest of the Company in the Treasury Securities
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Entitlements will be perfected under the Federal Book-Entry
Regulations.
(vii) Assuming due authorization, execution and
delivery thereof by the Guarantee Trustee, the Preferred Securities
Guarantee Agreement is a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions.
(viii) Assuming due authorization, execution, and
delivery thereof by the Debt Trustee, the Indenture is a legal, valid
and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except to the extent that enforcement
thereof may be limited by the Bankruptcy Exceptions; and the
Indenture, Declaration and Preferred Securities Agreement have been
duly qualified under the 1939 Act.
(ix) The Securities, the Shares, the Common
Securities, the Junior Subordinated Debentures, each of the
Guarantees, the Declaration and each of the Guarantee Agreements
conform in all material respects to the description thereof contained
in the Prospectus.
(x) No authorization, approval, consent,
order, registration or qualification of or with any court or federal
or New York or Florida state governmental authority or agency
(including, without limitation, any insurance regulator) is required
for the entry into the Purchase Contracts underlying the Securities,
the issuance and sale of the Securities by the Offerors to the
Underwriters, or the issuance and sale of the Shares by the Company
pursuant to such Purchase Contracts, or the performance by the Company
and the Trust of their respective obligations under this Agreement,
the Pricing Agreement, the Purchase Contracts, the Purchase Contract
Agreement, the Pledge Agreement, the Indenture, the Junior
Subordinated Debentures, the Preferred Securities Guarantee Agreement,
the Preferred Securities Guarantee, the Declaration and the
Securities, except such as has been obtained and made under the
federal securities laws or such as may be required under state or
foreign securities or Blue Sky laws.
38
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(xi) The issuance and sale of the Securities do
not contravene the Commodity Exchange Act or the regulations of the
Commodity Futures Trading Commission.
Moreover, such counsel shall confirm that nothing has come to such
counsel's attention that would lead such counsel to believe that the
Registration Statement, including any information provided pursuant to
Rule 430A or Rule 434 (except for financial statements and the notes
thereto, the financial schedules, and any other financial data
included or incorporated by reference therein, as to which counsel
need express no opinion), at the time it became effective or at the
Representation Date, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (except for financial statements and the notes thereto, the
financial schedules, and any other financial data included or
incorporated by reference therein, as to which counsel need express no
opinion), at the Representation Date (unless the term "Prospectus"
refers to a prospectus which has been provided to the Underwriters by
the Company for use in connection with the offering of the Securities
which differs from the Prospectus on file at the Commission at the
time the Registration Statement became effective, in which case at the
time it is first provided to the Underwriters for such use) or at the
Closing Time, included (or includes) an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(3) The favorable opinion, dated as of the Closing Time, of
____________________________________, special Delaware counsel to the Offerors,
in form and substance satisfactory to counsel for the Underwriters, to the
effect that:
(i) The Trust has been created and is validly
existing in good standing as a business trust under the Delaware Act,
and has the business trust power and authority to conduct its business
as described in the Registration Statement and the Prospectus.
(ii) The Declaration constitutes a legal, valid
and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except
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that to the extent enforceability thereof may be limited by the
Bankruptcy Exceptions.
(iii) Under the Delaware Act and the
Declaration, the Trust has the power and authority to (i) execute and
deliver, and to perform its obligations under, this Agreement and the
Pricing Agreement and (ii) issue, and perform its obligations under,
the Trust Securities.
(iv) The execution and delivery by the Trust of
this Agreement and the Pricing Agreement, and the performance by the
Trust of its obligations hereunder and under the Pricing Agreement,
have been authorized by all necessary action on the part of the Trust.
(v) The Preferred Securities have been
authorized by the Declaration and, when executed by the trust and the
Institutional Trustee in accordance with the Declaration and delivered
against payment therefor in accordance with the terms of this
Agreement, will be validly issued and, subject to qualifications
hereinafter expressed in subparagraph (vi), fully paid and
nonassessable undivided beneficial interests in the assets of the
Trust; the holders of the Preferred Securities, as beneficial owners
of the Trust, will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware;
said counsel may note that the holders of the Preferred Securities may
be obligated to make payments as set forth in the Declaration.
(vi) The Common Securities have been authorized
by the Declaration and, when issued, executed and authenticated in
accordance with the terms of the Declaration, and delivered and paid
for as set forth in the Registration Statement, will be validly
issued, undivided beneficial interests in the assets of the Trust.
(vii) Under the Delaware Act and the
Declaration, the issuance of the Trust Securities is not subject to
preemptive or other similar rights.
(viii) None of the execution and delivery by the
Trust of, or the performance by the Trust of its obligations under,
this Agreement, the issuance and sale of the Preferred Securities by
the Trust in accordance with the terms of this Agreement and the
Pricing Agreement, or the
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<PAGE> 43
consummation of the other transactions contemplated thereby, will
contravene any provisions of applicable Delaware law or administrative
regulations or the Certificate of Trust or the Declaration.
(ix) This Agreement and the Pricing Agreement
have been authorized, executed and delivered by the Trust.
(x) No authorization, approval, consent,
order, registration or qualification of or with any Delaware state
governmental authority or agency is required for the entry into the
Purchase Contracts underlying the Securities, the issuance and sale of
the Securities by the Offerors to the Underwriters, or the issuance
and sale of the Shares by the Company pursuant to such Purchase Contracts, or
the performance by the Company and the Trust of their respective obligations
under this Agreement, the Pricing Agreement, the Purchase Contracts, the
Purchase Contract Agreement, the Pledge Agreement, the Indenture, the Junior
Subordinated Debentures, the Preferred Securities Guarantee Agreement, the
Preferred Securities Guarantee, the Declaration and the Securities, except
such as has been obtained and made under the federal securities laws or such as
may be required under state or foreign securities or Blue Sky laws.
(4) The favorable opinion, dated as of the Closing Time, of
Pepper, Hamilton & Scheetz LLP, counsel to First Chicago Delaware Inc., as
Delaware Trustee, and to The First National Bank of Chicago, as Institutional
Trustee under the Declaration, and Guarantee Trustee under the Preferred
Securities Guarantee Agreement, in form and substance satisfactory to counsel
for the Underwriters, to the effect that:
(i) First Chicago Delaware Inc. is a Delaware
corporation with corporate powers, duly organized, validly existing
and in good standing under the laws of the State of Delaware with all
necessary power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of the Declaration and the
Preferred Securities Guarantee Agreement.
(ii) The execution, delivery and performance by
the Institutional Trustee of the Declaration and the execution,
delivery and performance by the Guarantee Trustee of the Preferred
Securities Guarantee Agreement have been duly authorized by all
necessary corporation action on the part of the Institutional Trustee
and the Guarantee Trustee,
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<PAGE> 44
respectively. The Declaration and the Preferred Securities Guarantee
Agreement have been duly executed and delivered by the Institutional
Trustee and the Guarantee Trustee, respectively, and constitute the
legal, valid and binding obligations of the Institutional Trustee and
the Guarantee Trustee, respectively, enforceable against the
Institutional Trustee and the Guarantee Trustee, respectively, in
accordance with their terms, except to the extent enforcement thereof
may be limited by the Bankruptcy Exceptions.
(iii) The execution, delivery and performance of
the Declaration and the Preferred Securities Guarantee Agreement by
the Institutional Trustee and the Guarantee Trustee, respectively, do
not conflict with or constitute a breach of the Articles of
Organization or Bylaws of the Institutional Trustee and the Guarantee
Trustee, respectively.
(iv) No consent, approval or authorization of,
or registration with or notice to, any Delaware or federal banking
authority is required for the execution, delivery or performance by
the Institutional Trustee and the Guarantee Trustee of the Declaration
and the Preferred Securities Guarantee Agreement.
(5) The favorable opinion, dated as of the Closing Time, of
The Law Department of The First National Bank of Chicago, as Purchase Contract
Agent, in form and substance satisfactory to counsel for the Underwriters, to
the effect that:
(i) The First National Bank of Chicago is duly
incorporated and is validly existing as a banking corporation with
trust powers under the laws of the United States with all necessary
power and authority to execute, deliver and perform its obligations
under the Purchase Contract Agreement and the Pledge Agreement.
(ii) The execution, delivery and performance by
the Purchase Contract Agent of the Purchase Contract Agreement and the
Pledge Agreement, and the authentication and delivery of the
Securities have been duly authorized by all necessary corporate action
on the part of the Purchase Contract Agent. The Purchase Contract
Agreement and the Pledge Agreement have been duly executed and
delivered by the Purchase Contract Agent,and constitute the legal,
valid and binding obligations of the Purchase Contract Agent,
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<PAGE> 45
enforceable against the Purchase Contract Agent in accordance with its
terms, except to the extent that enforcement thereof may be limited by
the Bankruptcy Exceptions.
(iii) the execution, delivery and performance of the
Purchase Contract Agreement and the Pledge Agreement by the Purchase
Contract Agent does not conflict with or constitute a breach of the
charter or by- laws of the Purchase Contract Agent.
(iv) No consent, approval or authorization of, or
registration with or notice to, any Illinois or federal governmental
authority or agency is required for the execution, delivery or
performance by the Purchase Contract Agent of the Purchase Contract
Agreement and the Pledge Agreement.
(6) The opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.,
special tax counsel to the Offerors, generally to the effect that based upon
current law and the assumptions stated or referred to therein, under current
U.S. federal income tax law: (i) the Trust will be classified as a grantor
trust and not as an association taxable as a corporation; (ii) the Junior
Subordinated Debentures will be classified as indebtedness of the Company, and
(iii) the discussion set forth in the Prospectus under the headings "Risk
Factors - Proposed Tax Legislation" and "Certain Federal Income Tax
Consequences" is a fair and accurate summary of the matters addressed therein.
The opinion expressed pursuant to clause (iii) may be conditioned on, among
other things, the initial and continuing accuracy of the facts, financial and
other information, covenants and representations set forth in certificates of
officers of the Company and the Trust and other documents deemed necessary for
such opinion.
(7) The favorable opinion, dated as of then Closing Time, of
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters, in form
and substance satisfactory to the Underwriters, with respect to the
incorporation and legal existence of the Company, the issuance and sale of the
Securities, the Purchase Contract Agreement, the Pledge Agreement, the
Indenture, the Preferred Securities Guarantee Agreement, this Agreement, the
Pricing Agreement, the Registration Statement, the Prospectus and other related
matters as the [Representatives] may reasonably require, and the Company shall
have furnished to such counsel such documents as they request for the purpose
of enabling them to pass upon such
43
<PAGE> 46
matters. In giving its opinion, Skadden, Arps, Slate, Meagher & Flom LLP may
rely as to certain matters of Florida law upon the opinions of W. Michael
Heekin, Esq. and LeBoeuf, Lamb, Greene & MacRae, L.L.P., special counsel for
the Offerors, which shall be delivered in accordance with Section 5(b)(1) and
5(b)(3) hereof.
(8) The favorable opinions, dated as of the Closing Time, of
(i) LeBoeuf, Lamb, Greene & MacRae, L.L.P., special Connecticut and
Pennsylvania counsel for the Company, and (ii) Dickinson, Wright, Moon, Van
Dusen & Freeman, special Michigan counsel for the Company, in form and
substance satisfactory to the Underwriters, with respect to the applicability
of the "bucket shop" laws of such states.
(c) Between the date of this Agreement and prior to the Closing Time,
no material adverse change shall have occurred in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Trust or the Company and its subsidiaries, considered as one enterprise,
whether or not in the ordinary course of business.
(d) At the Closing Time, the [Representatives] shall have received a
certificate of the President or a Vice- President of the Company and of the
Chief Financial Officer or Chief Accounting Officer of the Company and a
certificate of a Regular Trustee of the Trust, and dated as of the Closing
Time, to the effect that (i) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Trust or the Company and its subsidiaries considered
as one enterprise, whether or not in the ordinary course of business, (ii) the
representations and warranties in Section 1 hereof are true and correct as
though expressly made at and as of the Closing Time, (iii) the Company and the
Trust have complied with all agreements and satisfied all condi- tions on their
part to be performed or satisfied at or prior to the Closing Time, and (iv) no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been initiated or threatened by
the Commission.
(e) At the time of the execution of this Agreement, the
[Representatives] shall have received from KPMG Peat Marwick LLP a letter dated
such date in form and substance satisfactory to the [Representatives], to the
effect set forth below and as to such other matters as the [Representatives]
may reasonably request, that:
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<PAGE> 47
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the meaning of
the 1933 Act and the 1933 Act Regulations;
(ii) In their opinion, the consolidated financial
statements and any financial statement schedules audited by them and
included or incorporated by reference in the Registration Statement
and the Prospectus as amended or supplemented comply as to form in all
material respects with the applicable accounting requirements of the
1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934
Act Regulations;
[(iii) On the basis of limited procedures, not constituting an
audit in accordance with generally accepted auditing standards,
including a review in accordance with standards established by the
American Institute of Certified Public Accountants of the unaudited
condensed consolidated financial statements included in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Registration Statement and the Prospectus as amended or supplemented
for the periods specified in such letter, a reading of the latest
available unaudited interim consolidated financial statements of the
Company and its subsidiaries, a reading of the minutes of the Company
and its subsidiaries since the audited consolidated financial
statements set forth in the Company's Annual Report on Form 10-K for
the most recent year, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters, a
review of interim financial information in accordance with standards
established by the American Institute of Certified Public Accountants
in Statement on Auditing Standards No. 71, Interim Financial
Information ("SAS 71") and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) the unaudited condensed consolidated
financial statements set forth in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the
Registration Statement and the Prospectus as amended or
supplemented do not comply as to form in all material respects
with the applicable accounting requirements of the 1934 Act
and the 1934 Act Regulations as they apply to Form 10-Q or any
material modifications should be made for them to be in
conformity with generally accepted accounting
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<PAGE> 48
principles applied on a basis substantially consistent with
that of the audited consolidated financial statements set
forth in the Company's Annual Report on Form 10-K for the most
recent year ended incorporated by reference in the
Registration Statement and the Prospectus as amended or
supplemented;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus as amended or
supplemented do not agree with the corresponding items in the
unaudited consolidated financial statements from which such
data and items were derived;
(C) any unaudited pro forma consolidated condensed
financial statements or any unaudited pro forma consolidating
financial statements included or incorporated by reference in
the Prospectus as amended or supplemented do not comply as to
form in all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act Regulations and
the 1934 Act and the 1934 Act Regulations or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(D) as of a specified date not more than five
days prior to the date of delivery of such letter, there has
been any decrease or increase in the common stock (except for
any increases in connection with any employee benefit,
dividend reinvestment or stock purchase plan of the Company)
or any increase or decrease in long-term debt including
capital lease obligations and current maturities or any
increase in short-term debt, or any decrease in consolidated
common shareholders' equity of the Company and its
consolidated subsidiaries (other than periodic dividends
declared to shareholders), in each case as compared with the
corresponding amounts shown in the latest consolidated
statement of financial position of the Company and its
subsidiaries incorporated by reference in the Registration
Statement and the Prospectus as amended or supplemented,
except in each case for increases or decreases which the
Prospectus as amended or supplemented, including financial
information incorporated by reference, discloses have
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<PAGE> 49
occurred or may occur or which are described in such letter;
and
(E) for the period from the date of the latest
consolidated financial statements included or incorporated by
reference in the Prospectus as amended or supplemented to the
end of the latest period for which unaudited condensed
consolidated financial statements or financial information are
available there were any decreases in consolidated operating
revenues, operating income, net income or earnings available
for Common Stock of the Company and its consolidated
subsidiaries, or any increases in any items specified by the
[Representatives], in each case as compared with the
corresponding period in the preceding year and with any other
period of corresponding length specified by the
[Representatives], except in each case for increases or
decreases which the Prospectus as amended or supplemented,
including financial information incorporated by reference,
discloses have occurred or may occur or which are described in
such letter; and
(F) the unaudited condensed consolidated
financial statements referred to in Clause (E) are not stated
on a basis substantially consistent with the audited
consolidated financial statements incorporated by reference in
the Registration Statement and the Prospectus as amended or
supplemented.]
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years included
in the Prospectus as amended or supplemented and included or
incorporated by reference in the Company's Annual Report on Form 10-K
for the most recent fiscal year agrees with the corresponding amounts
(after restatement where applicable) in the audited consolidated
financial statements for such five fiscal years which were included or
incorporated by reference in the Company's Annual Reports on Form 10-K
for such fiscal years;
(v) based upon the procedures set forth in clause (iii)
above and a reading of the Selected Consolidated Financial
Information included in the Registration Statement, nothing came to
their attention that caused them to believe that the Selected
Consolidated Financial Information included in the Registration
Statement does not
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<PAGE> 50
comply as to form in all material respects with the disclosure
requirements of Item 301 of Regulation S-K of the 1933 Act, that the
amounts included in the Selected Consolidated Financial Information
are not in agreement with the corresponding amounts in the audited
consolidated financial statements for the respective periods or that
the financial statements not included in the Registration Statement
from which certain of such data were derived are not in conformity
with generally accepted accounting principles;
(vi) they have compared the information in the
Registration Statement under selected captions with the disclosure
requirements of Regulation S-K of the 1933 Act and on the basis of
limited procedures specified herein, nothing came to their attention
that caused them to believe that this information does not comply as
to form in all material respects with the disclosure requirements of
Items 302, 402 and 503(d), respectively, of Regulation S-K;
(vii) based upon the procedures set forth in clause (ii)
above, a reading of the unaudited financial statements of the Company
of the most recent period that have not been included in the
Registration Statement and a review of such financial statements in
accordance with SAS 71, nothing came to their attention that caused
them to believe that the unaudited amounts for the most recent period
do not agree with the amounts set forth in the unaudited consolidated
financial statements for those periods or that such unaudited amounts
were not determined on a basis substantially consistent with that of
the corresponding amounts in the audited consolidated financial
statements;
(viii) they are unable to and do not express any opinion on
the Pro Forma Statement included in the Registration Statement or on
the pro forma adjustments applied to the historical amounts included
in the Pro Forma Statement; however, for purposes of this letter they
have:
(A) read the Pro Forma Statement;
(B) performed a review in accordance with SAS 71
of the financial statements to which the pro forma adjustments
were applied;
(C) made inquiries of certain officials of the
Company who have responsibility for financial and
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<PAGE> 51
accounting matters about the basis for their determination of
the pro forma adjustments and whether the Pro Forma Statement
complies as to form in all material respects with the
applicable accounting requirements of Rule 11-02 of Regulation
S-X; and
(D) proved the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in the Pro Forma Statement; and
on the basis of such procedures and such other inquiries and procedures as
specified herein, nothing came to their attention that caused them to believe
that the Pro Forma Statement included in the Registration Statement does not
comply as to form in all material respects with the applicable requirements of
Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
(viii) In addition to the limited procedures, reading of
minutes, inquiries and other procedures referred to in clause (iii)
and (iv) above, they have carried out certain other specified
procedures, not constituting an audit in accordance with generally
accepted auditing standards, with respect to certain amounts,
percentages and financial information which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus as amended or supplemented and the
Registration Statement, in the Company's Annual Report on Form 10-K
for the latest year ended and in the Company's Quarterly Reports on
Form 10-Q since the latest Annual Report on Form 10-K and which are
specified by the [Representatives], and have compared certain of such
amounts, percentages and financial information with the accounting
records of the Company and its subsidiaries and have found them to be
in agreement; and
(ix) If applicable and agreed to by the parties, they have
made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the selected financial
data, pro forma financial information, prospective financial
statements, consolidating financial statements and/or condensed
financial statements derived from audited financial statements of the
Company for the periods specified in such letter, as indicated in
their reports thereon, copies of which have been furnished to the
[Representatives].
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<PAGE> 52
(f) At the Closing Time, the [Representatives] shall have received
from KPMG Peat Marwick LLP a letter, dated as of the Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (e) of this Section, except that the specified date referred to
shall be a date not more than five days prior to the Closing Time.
(g) At the Closing Time, and at each Date of Delivery, if any,
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated and related
proceedings, or in order to evidence the accuracy of any of the representations
or warranties, or the fulfillment of any of the conditions herein contained;
and all proceedings taken by the Offerors in connection with the issuance and
sale of the Securities as herein contemplated shall be satisfactory in form and
substance to the Underwriters and counsel for the Underwriters.
(h) At the Closing Time, (i) the Securities shall be rated [in one of
the four highest rating categories for preferred stock ("Investment Grade")] by
any nationally recognized statistical rating agency, and the Offerors shall
have delivered to the [Representatives] a letter, dated the Closing Time, from
such nationally recognized statistical rating agency, or other evidence
satisfactory to the [Representatives], confirming that the Securities have
Investment Grade ratings; (ii) there shall not have occurred any decrease in
the ratings of the Securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the 1933 Act
Regulations), (iii) no downgrading shall have occurred in the Company's "AA"
claims-paying ability rating assigned by Standard and Poor's Corporation
("S&P") or the "A (Excellent)" financial strength rating assigned by A.M. Best
Company, Inc. ("Best"), and (iv) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of the Securities or the Company's financial strength
or claims paying ability.
(i) At the Closing Time, the Income PRIDES and the Shares shall have
been approved for listing on the New York Stock Exchange upon notice of
issuance.
(j) The NASD shall not have raised any objection with respect to the
fairness and reasonableness of the underwriting terms and arrangements.
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(k) In the event that the Underwriters exercise their option
provided in Section 2(b) hereof to purchase all or any portion of the Option
Securities, the representations and warranties of the Offerors contained herein
and the statements in any certificates furnished by the Offerors hereunder
shall be true and correct as of, and as if made on, each Date of Delivery, and
at the relevant Date of Delivery, the Underwriters shall have received:
(1) A certificate, dated such Date of Delivery, of the
President or a Vice-President of the Company and the Chief Financial
Officer or Chief Accounting Officer of the Company and a certificate
of a Regular Trustee of the Trust confirming that the certificate
delivered at the Closing Time pursuant to Section 5(d) hereof is true
and correct as of, and as if made on, such Date of Delivery.
(2) The favorable opinion of W. Michael Heekin, Esq., Senior
Vice President, Corporate Secretary and General Counsel for the
Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required by
Section 5(b)(1) hereof.
(3) The favorable opinion of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., special counsel and special tax counsel for the Offerors, in
form and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities and otherwise
to the same effect as the opinion required by Sections [5(b)(2) and
5(b)(6)] hereof.
(4) The favorable opinion of ____________________, special
Delaware counsel for the Offerors, in form and substance satisfactory
to counsel for the Underwriters, dated such Date of Delivery, relating
to the Option Securities and otherwise to the same effect as the
opinion required by Section 5(b)(3) hereof.
(5) The favorable opinion of ______________________, counsel
to First Chicago Delaware Inc., in form and substance satisfactory to
counsel for the Underwriters, dated such Date of Delivery, relating to
the Option Securities and otherwise to the same effect as the opinion
required by Section 5(b)(4) hereof.
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<PAGE> 54
[(6) The favorable opinion of ______________________, counsel
to The First National Bank of Chicago, as Purchase Contract Agent, in
form and substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities and otherwise
to the same effect as the opinion required by Section 5(b)(5) hereof.]
(7) The favorable opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities and otherwise to the same effect as
the opinion required by Section 5(b)(7) hereof.
(8) A letter from KPMG Peat Marwick LLP in form and substance
satisfactory to the Underwriters and dated such Date of Delivery,
substantially the same in form and substance as the letter furnished
to the Underwriters pursuant to Section 5(e) hereof, except that the
"specified date" in the letter furnished pursuant to this Section
shall be a date not more than five days prior to such Date of
Delivery.
If any condition specified in this Section 5 shall not have been
fulfilled when and as required to be fulfilled, this Agreement, or, in the case
of any condition to the purchase of Option Securities on a Date of Delivery
which is after the Closing Time, the obligations of the several Underwriters to
purchase the relevant Option Securities may be terminated by the Underwriters
by notice to the Company at any time at or prior to the Closing Time, or such
Date of Delivery, as the case may be, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6, 7 and 8 shall survive any such termination and
remain in full force and effect.
SECTION 6. Indemnification.
(a) The Offerors agree to jointly and severally indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information
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<PAGE> 55
and the Rule 434 Information deemed to be part thereof, if applicable,
or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(ii) against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue
statement or omission, provided, that (subject to Section 6(d) below)
any such settlement is effected with the written consent of the
Offerors; and
(iii) against any and all expense
whatsoever, as incurred (including the fees and disbursements of
counsel chosen by Merrill Lynch), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that the foregoing indemnity agreement shall not apply to
any loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Offerors by any Underwriter through Merrill Lynch expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information deemed to be a part thereof, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto).
(b) Insofar as this indemnity agreement may permit indemnification
for liabilities under the 1933 Act of any person
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<PAGE> 56
who is a partner of an Underwriter or who controls an underwriter within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and who, at
the date of this Agreement, is a director or officer of the Company or controls
the Company within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, such indemnity agreement is subject to the undertaking of the
Company in the Registration Statement under Item 15 thereof.
(c) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, the Trust and each of its Trustees who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information deemed to be a part thereof, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Offerors by such Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(d) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. In the case
of parties indemnified pursuant to Section 6(a) above, counsel to the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 6(b) above, counsel to the indemnified
parties shall be selected by the Offerors. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than
54
<PAGE> 57
one counsel (in addition to any local counsel) separate from their own counsel
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. No indemnifying party shall, without the
prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 6 or Section 7 hereof (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
(e) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 6(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement
at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Offerors on the one hand, and the Underwriters, on the other hand, from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Offerors on the one hand,
and the
55
<PAGE> 58
Underwriters, on the other hand, in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as
well as any other relevant equitable considerations.
The relative benefits received by Offerors on the one hand, and the
Underwriters, on the other hand, in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of such
Securities (before deducting expenses) received by the Offerors and the total
underwriting discount received by the Underwriters, in each case as set forth
on the cover of the Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet bear to the aggregate initial public offering price
of such Securities as set forth on such cover.
The relative fault of the Offerors, on the one hand, and the
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Offerors or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Offerors and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
56
<PAGE> 59
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company and each Trustee
of the Trust who signed the Registration Statement, and each person, if any,
who controls the Company and the Trust within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as the Offerors. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the number
or aggregate principal amount, as the case may be, of Initial Securities set
forth opposite their respective names in Schedule A to this Agreement, and not
joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement and the Pricing Agreement, or contained in certificates of officers
of the Company or trustees of the Trust submitted pursuant hereto, shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Underwriter or controlling person, or by or on behalf of
the Company, and shall survive delivery of and payment for the Securities to
the Underwriters.
SECTION 9. Termination of Agreement.
(a) The [Representatives] may terminate this Agreement, by notice to
the Company at any time at or prior to the Closing Time, if (i) there has been,
since the date of this Agreement or since the respective dates as of which
information is given in the Prospectus, any material adverse change or any
development which could reasonably be expected to result in a prospective
material adverse change, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business, or
(ii) there has occurred any material adverse change in the financial markets in
57
<PAGE> 60
the United States or any outbreak of hostilities or escalation of hostilities
or other calamity or crisis, or any change or development involving a
prospective change in national or international political, financial or
economic conditions the effect of which is such as to make it, in the judgment
of the [Representatives], impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in the Common
Stock or any other security of the Company has been suspended or limited by the
Commission, NASD or the New York Stock Exchange, or if trading generally on
either the American Stock Exchange, the New York Stock Exchange or in the
over-the-counter market has been suspended or limited, or minimum or maximum
prices for trading have been fixed, or maximum ranges for prices for securities
have been required, by either of said exchanges or by such system or by order
of the Commission, NASD or any other governmental authority, or (iv) if a
banking moratorium has been declared by either Federal, New York or Florida
authorities.
(b) If this Agreement and the Pricing Agreement are terminated
pursuant to this Section 9, such termination shall be without liability of any
party to any other party except as provided in Section 4, and provided,
further, that Sections 1, 6, 7 and 8 shall survive such termination and remain
in full force and effect.
SECTION 10. Default by One or More of the Underwriters. If one or
more of the Underwriters shall fail at the Closing Time or a Date of Delivery,
as the case may be, to purchase the Securities which it or they are obligated
to purchase under this Agreement and the Pricing Agreement (the "Defaulted
Securities"), Merrill Lynch shall have the right, within 24 hours thereafter,
to make arrangements for one or more of the non-defaulting Underwriters, or any
other underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, Merrill Lynch shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number or aggregate principal amount, as the case
may be, of Defaulted Securities does not exceed 10% of the total number or
aggregate principal amount, as the case may be, of Securities, the
non-defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of all
non-defaulting Underwriters, or
58
<PAGE> 61
(b) if the number or aggregate principal amount, as the case
may be, of Defaulted Securities exceeds 10% of the total number or aggregate
principal amount, as the case may be, of the Securities to be purchased on such
date, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the
obligation of the Underwriters to purchase and the Company to sell the relevant
Option Securities, as the case may be, either Merrill Lynch or the Company
shall have the right to postpone the Closing Time or the relevant Date of
Delivery, as the case may be,for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or the Prospectus or
in any other documents or arrangements. As used herein, the term "Underwriter"
includes any person substituted for an Underwriter under this Section 10.
SECTION 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the [Representatives] c/o Merrill Lynch at
Merrill Lynch World Headquarters, World Financial Center, North Tower, New
York, New York 10281, Attention of Tony Ursano, Director, with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP, Attention of Robert G. Wray, Esq.;
notices to the Company shall be directed to it at American Heritage Life
Investment Corporation, 1776 American Heritage Life Drive, Jacksonville,
Florida 32224, Attention of C. Richard Morehead, Executive Vice President,
Treasurer and Chief Financial Officer.
SECTION 12. Parties. This Agreement and the Pricing Agreement shall
each inure to the benefit of and be binding upon the Offerors and the
Underwriters and their respective successors. Nothing expressed or mentioned
in this Agreement or the Pricing Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriters and the
Offerors and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and
legal representatives, any legal or
59
<PAGE> 62
equitable right, remedy or claim under or in respect of this Agreement or the
Pricing Agreement or any provision herein or therein contained. This Agreement
and the Pricing Agreement and all conditions and provisions hereof and thereof
are intended to be for the sole and exclusive benefit of the parties hereto and
thereto and their respective successors and legal representatives, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or corporation.
No purchaser of Securities from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE PRICING
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME UNLESS
OTHERWISE INDICATED.
SECTION 14. Effect of Headings. The Article and Section headings
herein are for convenience only and shall not affect the construction hereof.
60
<PAGE> 63
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, shall become a binding
agreement among the Company, the Trust and the several Underwriters in
accordance with its terms.
Very truly yours,
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
By:
--------------------------
Name:
Title:
AHL FINANCING
By:
--------------------------
Name: T. O'Neal Douglas
Title: Regular Trustee
By:
--------------------------
Name: C. Richard Morehead
Title: Regular Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
THE ROBINSON-HUMPHREY COMPANY, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-------------------------------------------------
Authorized Signatory: Tony Ursano
Director
Investment Banking Group
[For themselvles and as the Representatives of the
61
<PAGE> 64
several underwriters named in Schedule A hereto.]
62
<PAGE> 65
SCHEDULE A
<TABLE>
<CAPTION>
Name of Underwriter Number of Shares
------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . . . . . . . . . . . . . . . . . .
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . . .
Oppenheimer & Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . .
The Robinson-Humphrey Company, Inc. . . . . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000
=========
</TABLE>
<PAGE> 66
EXHIBIT A
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(A FLORIDA CORPORATION)
AHL FINANCING
(A DELAWARE BUSINESS TRUST)
1,500,000 FELINE PRIDES
(STATED AMOUNT OF $50 PER SECURITY)
EACH CONSISTING OF
A PURCHASE CONTRACT OF AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION REQUIRING THE PURCHASE ON __________, 2000
(OR EARLIER) OF CERTAIN SHARES OF COMMON STOCK OF
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AND
A ___% TRUST ORIGINATED PREFERRED SECURITY
OF AHL FINANCING
PRICING AGREEMENT
, 1997
------------
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, as representatives of the
several Underwriters named in the within-
mentioned Underwriting Agreement
Merrill Lynch World Headquarters
World Financial Center
North Tower
New York, New York 10281
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated
_____________, 1997 (the "Underwriting Agreement"), relating to the purchase by
[the several Underwriters named in Schedule A thereto for whom Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co.,
Oppenheimer &
- --------------------
"FELINE PRIDES" is a service mark of Merrill Lynch & Co. Inc.
1
<PAGE> 67
Co., Inc. and The Robinson-Humphrey Company, Inc. are acting as representatives
(the "Representatives"),] of the above FELINE PRIDES (the "Securities") of
American Heritage Life Investment Corporation, (the "Company"), and AHL
Financing (the "Trust").
Pursuant to Section 2 of the Underwriting Agreement, the
Company and the Trust agree with each Underwriter as follows:
1. The initial public offering price per security for the
Securities, determined as provided in said Section 2, shall be $50.00.
2. The purchase price per security for the Securities to be
paid by the several Underwriters shall be $48.50, being an amount
equal to the initial public offering price set forth above less $1.50
per security.
2
<PAGE> 68
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company and the Trust in accordance
with its terms.
Very truly yours,
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By:
-------------------------------------
Name:
Title:
AHL FINANCING
By:
-------------------------------------
Name: T. O'Neal Douglas
Title: Regular Trustee
By:
-------------------------------------
Name: C. Richard Morehead
Title: Regular Trustee
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
OPPENHEIMER & CO., INC.
THE ROBINSON-HUMPHREY
COMPANY, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-----------------------
Authorized Signatory:
[For themselves and as the Representatives of the
3
<PAGE> 69
several Underwriters named in the Purchase Agreement.]
4
<PAGE> 1
Exhibit 4(b)
- --------------------------------------------------------------------------------
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION,
AS ISSUER
TO
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
- --------------------------------------------------------------------------------
Indenture
SUBORDINATED DEBT SECURITIES
DATED AS OF ________, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
RECONCILIATION AND TIE BETWEEN TRUST
INDENTURE ACT OF 1939, AS AMENDED
AND INDENTURE, DATED AS OF , 1997
-------
<TABLE>
<CAPTION>
TRUST INDENTURE INDENTURE SECTION
ACT SECTION
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608, 610
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701, 702(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702(c)
Section 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(a), 703(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703(b)
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601(a)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601(b)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601(c)
(d)(l) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601(a), 601(c)
(d)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601(c)
(d)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502, 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1009
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
- -----------------------
</TABLE>
NOTE: THIS RECONCILIATION AND TIE SHALL NOT, FOR ANY PURPOSE, BE DEEMED TO BE A
PART OF THIS INDENTURE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bankruptcy Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Security holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Original Issue Discount Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Registered Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Security Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Significant Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 114. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 2
SECURITY FORMS
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 204. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 205. Securities in Global Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 206. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 207. Form of Legend for the Securities in Global Form . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 3.
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 305. Registration, Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 4.
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5.
REMEDIES
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . . . . . . 24
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SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . . . . . 25
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 505. Trustee May Enforce Claims
Without Possession of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. . . . . . . . . . . . . . 27
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6.
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . 33
SECTION 613. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 7.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . . . . . . . . . . . . . . 34
SECTION 702. Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 8.
CONSOLIDATION, MERGER, LEASE, SALE OR TRANSFER
SECTION 801. When Company May Merge, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 802. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 803. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9.
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 902. Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 10.
COVENANTS
SECTION 1001. Payments of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 1003. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 1004. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 1005. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 1006. Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 1007. Commission Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 1008. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 1009. Money for Securities Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 1010. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 1011. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 11.
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 1104. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 12.
SINKING FUNDS
SECTION 1201. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 13.
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Applicability of Article; Company's Option to
Effect Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 1302. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 1303. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 1304. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 1305. Deposited Money and Government Obligations
To Be Held In Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 14.
SUBORDINATION
SECTION 1401. Agreement of Security Holders that Securities
Subordinated to Extent Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
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SECTION 1402. Company not to Make Payments with Respect
to Securities in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 1403. Securities Subordinated to Prior Payment of all Senior
Indebtedness on Dissolution, Liquidation or Reorganization
of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 1404. Security Holders to be Subrogated to Right of Holders
of Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 1405. Obligation of the Company Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 1406. Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 1407. Application by Trustee of Monies Deposited With It . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 1408. Subordination Rights not Impaired by Acts or Omissions of
Company or Holders of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 1409. Security Holders Authorize Trustee to Effectuate
Subordination of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 1410. Right of Trustee to Hold Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 1411. Article Fourteen Not to Prevent Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 15.
MISCELLANEOUS
SECTION 1501. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Indenture, dated as of _______, 1997, between AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION, a corporation duly organized and existing under the
laws of the State of Florida (herein called the "Company "), having its
principal office at 1776 American Heritage Life Drive, Jacksonville, Florida,
32224 and THE FIRST NATIONAL BANK OF CHICAGO, a national banking association,
as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture
provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for
the equal and proportionate benefit of all Holders of the Securities or of
series thereof, as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(4) the word "Including" (and with the correlative meaning
"Include") means including, without limiting the generality of, any description
preceding such term; and
(5) the words "Herein," "Hereof" and "Hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in that
Article.
"Act," when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
act on behalf of the Trustee to authenticate Securities.
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"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company;
provided, however, that when the context refers to actions or resolutions of
the Board of Directors, then the term "Board of Directors" shall also mean any
duly authorized committee of the Board of Directors of the Company or Officer
authorized to act with respect to any particular matter to exercise the power
of the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day," when used with respect to any Place of Payment, means
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in that Place of Payment are authorized or obligated
by law or regulation to close.
"Capitalized Lease Obligation" means an obligation under a lease that
is required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligation shall
be the capitalized amount of such obligations determined ln accordance with
such principles.
"Capital Stock" of any Person shall mean any and all shares,
interests, participations or other equivalents of or interests in (however
designated) equity of such Person, including any preferred stock, but excluding
any debt securities convertible into such equity.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Depositary" has the meaning specified in Section 304.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Controller, an Assistant Controller, its Secretary or an Assistant Secretary,
and delivered to the Trustee.
"Corporate Trust Office" means the office of the Trustee in Chicago,
Illinois at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is located at One
First National Plaza, Mail Suite 0126, Chicago, Illinois 60670-0126.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Dollars" and "$" means lawful money of the United States of America.
"Event of Default" has the meaning specified in Section 501.
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"Exchange Act" means the Securities and Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated
thereunder.
"GAAP" means such accounting principles that are generally accepted in
the United States of America as of the date of any computation required
hereunder.
"Holder" or "Security holder" means a Person in whose name a Security
if registered in the Security Register.
"Indebtedness" of any Person means, without duplication, (i) the
principal of and premium (if any) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by notes, debentures,
bonds or other similar instruments for the payment of which such Person is
responsible or liable; (ii) all Capitalized Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations and all obligations under
any title retention agreement (but excluding trade accounts payable arising in
the ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (i) through
(iii) above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the extent
drawn upon, such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement following
payment on the letter of credit); (v) all obligations of the type referred to
in clauses (i) through (iv) of other Persons and all dividends of other Persons
for the payment of which, in either case, such Person is responsible or liable
as obligor, guarantor or otherwise; and (vi) all obligations of the type
referred to in clauses (i) through (v) of other Persons secured by any Lien on
any property or asset of such Person (whether or not such obligation is assumed
by such Person), the amount of such obligation being deemed to be the lesser of
the value of such property or assets or the amount of the obligation so
secured.
"Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
and shall include the terms of particular series of Securities established as
contemplated by Section 301.
"Interest," when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date," when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, capitalized lease or other title retention
agreement).
"Maturity," when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Officer" means the Chairman of the Board, the Vice Chairman of the
Board, the President, the Executive Vice President, any Vice President, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any
Assistant Secretary of the Company.
"Officer's Certificate" means a certificate signed by an Officer and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be an
employee of or counsel for the Company, and who shall be reasonably acceptable
to the Trustee.
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"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding," when used with respect to Securities or Securities of
any series, means, as of the date of determination, all such Securities
theretofore authenticated and delivered under this Indenture, except: (i)
Securities theretofore cancelled by the Trustee or delivered to the Trustee for
cancellation; (ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set aside
and segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satisfactory to the Trustee
has been made; (iii) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser in
whose hands such Securities are valid obligations of the Company; and (iv)
Securities which have been defeased pursuant to Section 1302; provided,
however, that in determining whether the Holders of the requisite principal
amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, (a) the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be that portion of the principal amount
thereof that could be declared to be due and payable upon the occurrence of an
Event of Default and the continuation thereof pursuant to the terms of such
Original Issue Discount Security as of the date of such determination and (b)
Securities owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Securities which the Trustee knows
to be so owned shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect
to such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. The Company may act as Paying Agent with respect to any Securities
issued hereunder.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Place of Payment," when used with respect to the Securities of any
series, means the place or places where the principal of (and premium, if any)
and interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Redemption Date," when used with respect to any Security of any
series to be redeemed, means the date fixed for such redemption by or pursuant
to this Indenture.
"Redemption Price," when used with respect to any Security of any
series to be redeemed, means the price at which it is to be redeemed pursuant
to this Indenture.
"Registered Security" means any Security issued hereunder and
registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer," when used with respect to the Trustee, means
any officer of the Trustee in its Corporate Trust Office and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
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"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on the following, whether outstanding on the date of execution of this
Indenture or thereafter incurred or created: (i) indebtedness of the Company
for money borrowed by the Company (including purchase money obligations with an
original maturity in excess of one year) or evidenced by debentures (other than
the Securities), notes, bankers' acceptances or other corporate debt securities
or similar instruments issued by the Company; (ii) obligations with respect to
letters of credit; (iii) indebtedness of the Company constituting a guarantee
of indebtedness of others of the type referred to in the preceding clauses (i)
and (ii); or (iv) renewals, extensions or refundings of any of the indebtedness
referred to in the preceding clauses (i), (ii) and (iii) unless, in the case of
any particular indebtedness, renewal, extension or refunding, under the express
provisions of the instrument creating or evidencing the same, or pursuant to
which the same is outstanding, such indebtedness or such renewal, extension or
refunding thereof is not superior in right of payment to the Securities.
"Significant Subsidiary" means a Subsidiary or Subsidiaries of the
Company possessing assets (including the assets of its own Subsidiaries but
without regard to the Company or any other Subsidiary) having a book value, in
the aggregate, equal to not less than 10% of the book value of the aggregate
assets of the Company and its Subsidiaries calculated on a consolidated basis.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity," when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one
or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled. Unless
otherwise expressly provided, all references herein to a "Subsidiary" shall
mean a Subsidiary of the Company.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended, as in force at the date as of which this Indenture was executed;
provided, however, that in the event that such Act is amended after such date,
"Trust Indenture Act" means the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder,
and if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more permanent
global Securities, the Person designated as U.S. Depositary by the Company
pursuant to Section 301, which must be a clearing agency registered under the
Exchange Act until a successor U.S. Depositary shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "U.S.
Depositary" shall mean or include each Person who is then a U.S. Depositary
hereunder, and if at any time there is more than one such Person, "U.S.
Depositary" shall mean the U.S. Depositary with respect to the Securities of
that series.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
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supervised by and acting as an agency or instrumentality of the United States
of America the timely payment of which is unconditionally guaranteed by the
full faith and credit of the United States of America which, in either case,
are not callable or redeemable at the option of the issuer thereof or otherwise
subject to prepayment, and shall also include a depository receipt issued by a
New York Clearing House bank or trust company as custodian with respect to any
such U.S. Government Obligation or a specific payment or interest on or
principal of any such U.S. Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt or from any amount
held by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt.
"Vice President," when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, other than an action
permitted by Sections 205 and 704 hereof, the Company shall furnish to the
Trustee an Officer's Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein relating
thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Officer may be based, insofar as it
relates to legal matters, upon a certificate or opinion of, or representations
by, counsel, unless such Officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
the matters upon which his certificate or opinion is based are erroneous. Any
such certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
Officer or Officers of the Company stating that the information with respect to
such factual matters is in the possession of the Company, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "ACT" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Registered Securities shall be proved by the
Security Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such action is made
upon such Security.
(e) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other Act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other Act may be given before or after such record date, but only the
Holders of record at the close of business on such record date shall be deemed
to be Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or
other Act, and for that purpose the Outstanding Securities shall be computed as
of such record date; provided that no such authorization, agreement or consent
by the Holders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than
six months after the record date.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with the Trustee and received by the Trustee at its Corporate
Trust Office, Attention: Corporate Trust Administration, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to the Company
addressed
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to it at the address of its principal office specified in the first paragraph of
this Indenture, attention: Secretary, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture or any Security provides for notice to Holders of
any event, such notice shall be deemed sufficiently given (unless otherwise
herein or in such Security expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date,
and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders or the validity of the proceedings to which such notice relates.
Where this Indenture or any Security provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Any request, demand, authorization, direction, notice, consent or
waiver required or permitted under this Indenture shall be in the English
language, except that any published notice may be in an official language of the
country of publication.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with another
provision hereof which is required to be included in this Indenture by any of
the provisions of the Trust Indenture Act, such required provision shall
control. If any provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or shall be
excluded, as the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
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SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed in
accordance with the laws (other than the choice of law provisions) of the State
of New York.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of interest or principal (and premium, if any) need not be
made at such Place of Payment on such date, but may be made on the next
succeeding Business Day or on such other day as may be set out in the Officer's
Certificate pursuant to Section 301 at such Place of Payment with the same force
and effect as if made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity, provided that no interest shall accrue for the period from and
after such Interest Payment Date, Redemption Date or Stated Maturity, as the
case may be.
SECTION 114. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Security holder, by accepting
a Security, waives and releases all such liability. Such waivers and releases
are part of the consideration for the issuance of the Securities.
ARTICLE 2
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
ln each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Officers executing such Securities, as evidenced by their execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 for the authentication and delivery of such
Securities.
The Trustee's certificates of authentication shall be in substantially
the form set forth in this Article.
The definitive Securities shall be photocopied, printed, lithographed
or engraved on steel engraved borders or may be produced in any other manner,
all as determined by the Officers executing such Securities, as evidenced by
their execution of such Securities.
SECTION 202. FORM OF FACE OF SECURITY.
(If the Security is an Original Issue Discount Security, insert --FOR
PURPOSES OF SECTION 1272 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
"CODE"), THE AMOUNT OF ORIGINAL ISSUE DISCOUNT (AS DEFINED IN SECTION 1273(a)
(1) OF THE CODE AND TREASURY REGULATION SECTION 1.1273-l(a) WITH RESPECT TO
THIS SECURITY IS ________, THE ISSUE PRICE (AS DEFINED IN TREASURY REGULATION
SECTION 1.1273-2) OF THIS SECURITY IS __________,THE ISSUE DATE (AS DEFINED IN
SECTION 1275(a)(2) OF THE CODE AND TREASURY REGULATION SECTION 1.1273-2) OF THIS
SECURITY IS __________ AND THE YIELD TO MATURITY OF THIS SECURITY IS _________).
9
<PAGE> 17
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
........................
No. ________ ($)________
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION, a corporation duly
organized and existing under the laws of Florida (herein called the "Company,"
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _______________, or
registered assigns, the principal sum of $____________ on ____________. (If the
Security is to bear interest prior to Maturity, insert --, and to pay interest
thereon from _______________ or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, (semi-annually) (quarterly)
(monthly) on _______________ and in each year, commencing
______________________, at the rate of _____% per annum, until the principal
hereof is paid or made available for payment (If applicable insert--, and (to
the extent that the payment of such interest shall be legally enforceable) at
the rate of _____% per annum on any overdue principal and premium and on any
overdue installment of interest). The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be the _______________ of
_______________ (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest to
be fixed by the Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities of this series
may be listed, and upon such notice as may be required by such exchange, all as
more fully provided in said Indenture.)
(If the Security is not to bear interest prior to Maturity, insert--The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal of this Security shall bear
interest at the rate of _____% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
default in payment to the date payment of such principal has been made or duly
provided for. Interest on any overdue principal shall be payable on demand. Any
such interest on any overdue principal that is not so paid on demand shall bear
interest at the rate of _____% per annum (to the extent that the payment of such
interest shall be legally enforceable), which shall accrue from the date of such
demand for payment to the date payment of such interest has been made or duly
provided for, and such interest shall also be payable on demand.)
Payment of the principal of (and premium, if any) and (if applicable,
insert--any such) interest on this Security will be made at the office or agency
of the Company maintained for that purpose in ________________, in Dollars (if
applicable, insert--; provided, however, that at the option of the Company
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register).
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
10
<PAGE> 18
By:
----------------------------------
Attest:
- -------------------------------
(SEAL)
SECTION 203. FORM OF REVERSE OF SECURITY.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of April 1, 1997 (herein called the
"Indenture"), between the Company and as Trustee (herein called the "Trustee,"
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof
(limited in aggregate principal amount to $ ________).
(If applicable, insert--The Securities of this series are subject to redemption
upon not less than 30 nor more than 45 days' notice by first class mail, (if
applicable, insert--(1) on _______________ in any year commencing with the year
____________ and ending with the year _______________ through operation of the
sinking fund for this series at a Redemption Price equal to 100% of the
principal amount, and (2)) at any time (on or after _______________, ), as a
whole or in part, at the election of the Company, at the following Redemption
Prices (expressed as percentages of the principal amount):
If redeemed (on or before ______________________, _______%, and if
redeemed) during the 12-month period beginning ______________ of the years
indicated,
Year Redemption Price Year Redemption Price
and thereafter at a Redemption Price equal to _______ of the principal amount,
together in the case of any such redemption (if applicable, insert -- (whether
through operation of the sinking fund or otherwise)) with accrued and unpaid
interest to the Redemption Date, but interest installments whose Stated Maturity
is on or prior to such Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, of record at the close of
business on the relevant Record Dates referred to on the face hereof, all as
provided in the Indenture.)
(If applicable, insert -- The Securities of this series are subject to
redemption upon not less than 30 nor more than 45 days' notice by first class
mail, (1) on _______________ in any year commencing with the year ____________
and ending with the year _______________ through operation of the sinking fund
for this series at the Redemption Prices for redemption through operation of the
sinking fund (expressed as percentages of the principal amount) set forth in the
table below, and (2) at any time (on or after ____________), as a whole or in
part, at the election of the Company, at the Redemption Prices for redemption
otherwise than through operation of the sinking fund (expressed as percentages
of the principal amount) set forth in the table below:
If redeemed during a 12-month period beginning _____________________
of the years indicated,
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<PAGE> 19
Redemption Price for Redemption Price for
Redemption Through Redemption Otherwise
Operation of the Than Through Operation
Year Sinking Fund of the Sinking Fund
and thereafter at a Redemption Price equal to ____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued and unpaid interest to the Redemption
Date, but interest installments whose Stated Maturity is on or prior to such
Redemption Date will be payable to the Holders of such Securities, or one or
more Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.)
(Notwithstanding the foregoing, the Company may not, prior to
__________ redeem any Securities of this series as contemplated by (clause (2)
of) the preceding paragraph as a part of, or in anticipation of, any refunding
operation by the application, directly or indirectly, of moneys borrowed having
an interest cost to the Company (calculated in accordance with generally
accepted financial practice) of less than ____% per annum.)
(The sinking fund for this series provides for the redemption on
____________ in each year beginning with the year _____ and ending with the year
_____ of (not less than) $______ (("mandatory sinking fund") and not more than
$________ aggregate principal amount of Securities of this series.) (Securities
of this series acquired or redeemed by the Company otherwise than through
(mandatory) sinking fund payments may be credited against subsequent (mandatory)
sinking fund payments otherwise required to be made--in the (inverse) order in
which they become due.)
(In the event of redemption of this Security in part only a new
Security or Securities of this series for the unredeemed portion hereof will be
issued ln the name of the Holder hereof upon the cancellation hereof.)
(If the Security is not an Original Issue Discount Security, insert --
If any Event of Default with respect to Securities of this series shall occur
and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.) (If the Security is an Original Issue Discount Security, insert --
If an Event of Default with respect to Securities of this series shall occur and
be continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal -- insert formula for determining the
amount.) Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal and overdue interest (in each case
to the extent that the payment of such interest shall be legally enforceable),
all of the Company's obligations in respect of the payment of the principal of
and interest, if any, on the Securities of this series shall terminate.
This Security is a general unsecured obligation of the Company and will
be subordinate in right of payment to all existing and future Senior
Indebtedness of the Company.
This Security is subject to Defeasance as described in the Indenture.
The Indenture may be modified by the Company and the Trustee without
consent of any Holder with respect to certain matters as described in the
Indenture. In addition, the Indenture permits, with certain exceptions as
therein provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Securities of
each series to be affected under the Indenture at any time by the Company and
the Trustee with the consent of the Holders of a majority in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of a majority in
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall bind such
12
<PAGE> 20
Holder and all future Holders of this Security and of any Security issued upon
the registration of transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of (and premium, if any) and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of (and
premium, if any) and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series, of authorized denominations and for the same Stated Maturity and
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of ($1,000) and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate principal
amount of Securities of this se les of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture imposes certain limitations on the ability of the Company
to, among other things, merge or consolidate with any other Person or sell,
assign, transfer or lease all or substantially all of its properties or assets
(If other covenants are applicable pursuant to the provisions of Section 301,
insert here). All such covenants and limitations are subject to a number of
important qualifications and exceptions. The Company must report periodically to
the Trustee on compliance with the covenants in the Indenture.
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under this
Security or the Indenture or for any claim based on, in respect of or by reason
of, such obligations or their creation. Each Holder, by accepting a Security,
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of this Security.
(If applicable, insert -- Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures ("CUSIP"), the
Company has caused CUSIP numbers to be printed on the Securities of this series
as a convenience to the Holders of the Securities of this series. No
representation is made as to the correctness or accuracy of such numbers as
printed on the Securities of this series and reliance may be placed only on the
other identification numbers printed hereon.)
All capitalized terms used in this Security without definition which
are defined in the Indenture shall have the meanings assigned to them in the
Indenture.
13
<PAGE> 21
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________ Your Signature:_____________________________________________
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guaranty:_________________________________________________
(Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Transfer Agent, which requirements will
include membership or participation in STAMP or
such other "signature guarantee program" as may be
determined by the Transfer Agent in addition to,
or in substitution for, STAMP all in accordance
with the Exchange Act.)
Social Security Number or Taxpayer Identification Number:_______________________
SECTION 204. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
Dated:____________________
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
The First National Bank of Chicago
as Trustee
By:
-------------------------------------
Authorized Signatory
SECTION 205. SECURITIES IN GLOBAL FORM.
If Securities of a series are issuable in global form, as contemplated
by Section 301, then, notwithstanding the provisions of Section 302, any such
Security shall represent such of the Outstanding Securities of such series as
shall be specified therein and may provide that it shall represent the aggregate
amount of Outstanding Securities from
14
<PAGE> 22
time to time endorsed thereon and that the aggregate amount of Outstanding
Securities represented thereby may from time to time be reduced to reflect
exchanges. Any endorsement of a Security in qlobal form to reflect the amount,
or any increase or decrease in the amount, of Outstanding Securities represented
thereby shall be made in such manner and upon instructions given by such Person
or Persons as shall be specified therein or in the Company Order to be delivered
to the Trustee pursuant to Section 303 or Section 304. Subject to the provisions
of Section 303 and, if applicable, Section 304, the Trustee shall deliver and
redeliver any Security in permanent global form in the manner and upon
instructions given by the Person or Persons specified therein or in the
applicable Company Order. If a Company Order pursuant to Section 303 or 304 has
been, or simultaneously is, delivered, any instructions by the Company with
respect to endorsement or delivery or redelivery of a Security in global form
shall be in writing but need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel.
The provisions of Section 309 shall apply to any Security represented
by a Security in global form if such Security was never issued and sold by the
Company and the Company delivers to the Trustee the Security in global form
together with written instructions (which need not comply with Section 102 and
need not be accompanied by an Opinion of Counsel) with regard to the reduction
in the principal amount of Securities represented thereby.
Notwithstanding the provisions of Sections 201 and 307, unless
otherwise specified as contemplated by Section 301, payment of principal of,
premium, if any, and interest on any Security in permanent global form shall be
made to the Person or Persons specified therein.
Notwithstanding the provisions of Section 308 and except as provided in
the preceding paragraph, the Company, the Trustee and any agent of the Company
and the Trustee shall treat a Person as the Holder of such principal amount of
Outstanding Securities represented by a permanent global Security as shall be
specified in a written statement of the Holder of such permanent global
Security.
SECTION 206. CUSIP NUMBER.
The Company in issuing Securities of any series may use a "CUSIP"
number, and, if so, the Trustee may use the CUSIP number in notices of
redemption or exchange as a convenience to Holders of such series; provided,
that any such notice may state that no representation is made as to the
correctness or accuracy of the CUSIP number printed on the notice or on the
Securities of such series, and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Trustee of any change in the CUSIP number of any series of
Securities.
SECTION 207. FORM OF LEGEND FOR THE SECURITIES IN GLOBAL FORM.
Any Security in global form authenticated and delivered hereunder shall
bear a legend in substantially the following form:
"This Security is in global form within the meaning of the Indenture
hereinafter referred to and is registered in the name of a Common Depositary or
a U.S. Depositary. Unless and until it is exchanged in whole or in part for
Securities in certificated form, this Security may not be transferred except as
a whole by the Common Depositary or a U.S. Depositary or by a nominee of the
Common Depositary or a nominee of the U.S. Depositary as the case may be."
ARTICLE 3.
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
15
<PAGE> 23
The Securities may be issued from time to time in one or more series.
There shall be established in or pursuant to a Board Resolution, and set forth
in an Officer's Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series:
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from all other Securities);
(2) any limit upon the aggregate principal amount of the Securities of
the series which may be authenticated and delivered under this Indenture (except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities of the series pursuant to
Sections 304, 305, 306, 906 or 1107);
(3) whether any Securities of the series are to be issuable in
permanent global form with or without coupons and, if so, (i) whether beneficial
owners of interests in any such permanent global security may exchange such
interests for Securities of such series and of like tenor of any authorized form
and denomination and the circumstances under which any such exchanges may occur,
if other than in the manner provided in Section 305, and (ii) the name of the
Common Depositary (as defined in Section 304) or the U.S. Depositary, as the
case may be, with respect to any global security;
(4) the date or dates on which the principal of the Securities of the
series is payable;
(5) the rate or rates at which the Securities of the series shall bear
interest, if any, the date or dates from which such interest shall accrue, the
Interest Payment Dates on which such interest shall be payable and the Regular
Record Date for the interest payable on any Interest Payment Date and, if
applicable to such series of Securities, the basis points and United States
Treasury rate(s) and any other rates to be used in calculating the reset rate;
(6) the place or places where the principal of (and premium, if
any) and interest on Securities of the series shall be payable;
(7) the right of the Company, if any, to defer any payment of
principal of or interest on the Securities of the series, and the maximum length
of any such deferral period;
(8) the period or periods within which, the price or prices at which
and the terms and conditions upon which Securities of the series may be
redeemed, in whole or in part, at the option of the Company, pursuant to any
sinking fund or otherwise;
(9) the obligation, if any, of the Company to redeem or purchase
Securities of the series pursuant to any sinking fund or analogous provisions 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 Securities of
the series shall be redeemed or purchased, in whole or in part, pursuant to such
obligation, and, where applicable, the obligation of the Company to select the
Securities to be redeemed;
(10) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which Securities of the series shall be
issuable;
(11) if other than the principal amount thereof, the portion of the
principal amount of Securities of the series which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section 502;
(12) additional Events of Default with respect to Securities of the
series, if any, other than those set forth herein;
(13) if either or both of Section 1302 and Section 1303 shall be
inapplicable to the Securities of the series (provided that if no such
inapplicability shall be specified, then both Section 1302 and Section 1303
shall be applicable to the Securities of the series);
16
<PAGE> 24
(14) if other than U.S. dollars, the currency or currencies or units
based on or related to currencies in which the Securities of such series shall
be denominated and in which payments or principal of, and any premium and
interest on, such Securities shall or may by payable;
(15) additional covenants with respect to Securities of the series, if
any, other than those set forth herein;
(16) if other than the Trustee, the identity of the Registrar and any
Paying Agent; and
(17) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to such Board Resolution and set forth in such Officer's Certificate or in any
such Indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officer's
Certificate setting forth, or providing the manner for determining, the terms of
the Securities of such series.
SECTION 302. DENOMINATIONS.
The Securities of each series shall be issuable in registered form
without coupons in such denominations as shall be specified as contemplated by
Section 301. In the absence of any such provisions with respect to the
Securities of any series, the Securities of such series shall be issuable in
denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile. The seal of the Company
may be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Securities. Typographical and other
minor errors or defects in any such reproduction of the seal or any such
signature shall not affect the validity or enforceability of any security that
has been duly authenticated and delivered by the Trustee.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and make such Securities available for
delivery. If the form or terms of the Securities of the series have been
established in or pursuant to one or more Board Resolutions as permitted by
Sections 201 and 301, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Sections 315(a)
through (d) of the Trust Indenture Act) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 201, that such form has been
established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such terms have
been established in conformity wit the provisions of this Indenture;
17
<PAGE> 25
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute valid and legally binding
obligations of the Company, enforceable in accordance With their terms, except
to the extent enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law); and
(d) that no consent, approval, authorization, order, registration or
qualification of or with any court or any governmental agency or body having
jurisdiction over the Company is required for the execution and delivery of such
Securities by the Company, except such as have been obtained (except that no
opinion need be expressed as to state securities or Blue Sky laws).
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee, or in the written opinion of
counsel to the Trustee (which counsel may be an employee of the Trustee) such
authentication may not lawfully be made or would involve the Trustee in personal
liability.
Notwithstanding the provisions of Section 301 and of the immediately
preceding paragraph, if all Securities of a series are not to be originally
issued at one time, it shall not be necessary to deliver the Officer's
Certificate otherwise required pursuant to Section 301 or the Company Order and
Opinion of Counsel otherwise required pursuant to the immediately preceding
paragraph at or prior to the time of authentication of each security of such
series if such documents are delivered at or prior to the authentication upon
original issuance of the first security of such series to be issued.
If the Company shall establish pursuant to Section 301 that the
Securities of a series are to be issued in the form of one or more global
Securities, then the Company shall execute and the Trustee shall, in accordance
with this Section and the Company Order with respect to the authentication and
delivery of such series, authenticate and deliver one or more global Securities
that (i) shall be in an aggregate amount equal to the aggregate principal amount
specified in such Company Order, (ii) shall be registered in the name of the
Common Depositary or U.S. Depositary, as the case may be, therefor or its
nominee, and (iii) shall be made available for delivery by the Trustee to such
depositary or pursuant to such depositary's instruction.
Each depositary designated pursuant to Section 301 must, at the time of
its designation and at all times while it serves as depositary, be a clearing
agency registered under the Exchange Act and any other applicable statute or
regulation.
Unless otherwise provided for in the form of security, each security
shall be dated the date of its authentication.
No security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
security shall be conclusive evidence, and the only evidence, that such security
has been duly authenticated and delivered hereunder and is entitled to the
benefits of this Indenture.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
make available for delivery, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
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In the case of Securities of any series, such temporary Securities may
be in global form, representing all or a portion of the Outstanding Securities
of such series.
Except in the case of temporary Securities in global form (which shall
be exchanged in accordance with the provisions of Section 305), if temporary
Securities of any series are issued, the Company will cause definitive
Securities of that series to be prepared without unreasonable delay. After the
preparation of definitive Securities of such series, the temporary Securities of
such series shall be exchangeable for definitive Securities of such series upon
surrender of the temporary Securities of such series at the office or agency of
the Company in a Place of Payment for that series, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Securities of any
series, the Company shall execute and the Trustee shall authenticate and make
available for delivery in exchange therefor a like principal amount of
definitive Securities of the same series of authorized denominations and of like
tenor. Until so exchanged, the temporary Securities of any series shall in all
respects be entitled to the same benefits under this Indenture as definitive
Securities of such series.
If temporary Securities of any series are issued in global form, any
such temporary global Security shall, unless otherwise provided therein, be
delivered to the office of a depositary or common depositary (the "COMMON
DEPOSITARY") for credit to the respective accounts of the beneficial owners of
such Securities (or to such other accounts as they may direct).
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of registration of transfers of Securities. The
Trustee is hereby appointed "Security Register" for the purpose of registering
Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any security of any
series at the office or agency of the Company in Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and make
available for delivery, in the name of the designated transferee or transferees,
one or more new Securities of the same series, of any authorized denominations
and of a like aggregate principal amount and Stated Maturity.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
a like aggregate principal amount and Stated Maturity, upon surrender of the
Securities to be exchanged at such office or agency. Whenever any Securities are
so surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and make available for delivery, the Securities which the Holder
making the exchange is entitled to receive.
Notwithstanding the foregoing, except as otherwise specified as
contemplated by Section 301, any permanent global security shall be exchangeable
only as provided in this paragraph. If the beneficial owners of interests in a
permanent global security are entitled to exchange such interests for Securities
of such series and of like tenor and principal amount of another authorized form
and denomination, as specified and as subject to the conditions contemplated by
Section 301, then without unnecessary delay but in any event not later than the
earliest date on which such interests may be so exchanged, the Company shall
deliver to the Trustee definitive Securities of that series in aggregate
principal amount equal to the principal amount of such permanent global
security, executed by the Company. On or after the earliest date on which such
interests may be so exchanged, such permanent global Securities shall be
surrendered from time to time by the Common Depositary or the U.S. Depositary,
as the case may be, and in accordance with instructions given to the Trustee and
the Common Depositary or the U.S. Depositary, as the case may be (which
instructions shall be in writing but need not comply with Section 102 or be
accompanied by an Opinion of Counsel), as shall be specified in the Company
Order with respect thereto to the Trustee, as the Company's agent for such
purpose, to be exchanged, in whole or in part, for definitive Securities of the
same series without charge. The Trustee shall authenticate and make available
for delivery, in exchange for each portion of such surrendered permanent global
security, a like aggregate principal amount of definitive Securities of the same
series of authorized denominations and of like tenor as the portion of such
permanent global security to be exchanged which
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shall be in the form of the Securities of such series; provided, however, that
no such exchanges may occur during a period beginning at the opening of business
15 days before the day of the mailing of a notice of redemption of Securities of
that series selected for redemption under Section 1103 and ending at the close
of business on the day of such mailing. Promptly following any such exchange in
part, such permanent global Security shall be returned by the Trustee to the
Common Depositary or the U.S. Depositary, as the case may be, or such other
Common Depositary or U.S. Depositary referred to above in accordance with the
written instructions of the Company referred to above. If a Security in the form
specified for such series is issued in exchange for any portion of a permanent
global Security after the close of business at the office or agency where such
exchange occurs on (i) any Regular Record Date and before the opening of
business at such office or agency on the relevant Interest Payment Date, or (ii)
any Special Record Date and before the opening of business at such office or
agency on the related proposed date for payment of interest or Defaulted
Interest, as the case may be, such interest or Defaulted Interest will not be
payable on such Interest Payment Date or proposed date for payment, as the case
may be, in respect of such security in the form specified for such series, but
will be payable on such Interest Payment Date or proposed date for payment, as
the case may be, only to the Person to whom interest in respect of such portion
of such permanent global Security is payable in accordance with the provisions
of this Indenture.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligation, of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
Unless otherwise provided in the Securities to be transferred or
exchanged, no service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange Securities of any series during a period beginning at the opening
of business 15 days before the day of the mailing of a notice of redemption of
Securities of that series selected for redemption under Section 1103 and ending
at the close of business on the day of such mailing, or (ii) to register the
transfer of or exchange any security so selected for redemption in whole or in
part, except the unredeemed portion of any security being redeemed in part.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such Security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
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Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name that Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Securities of such series (or their respective
Predecessor Securities) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each Security of such series
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the be
fit of the Persons entitled to such Defaulted Interest as in this Section 307
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than 10 days
after the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such Special Record Date and, in
the name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder of Securities of such series
at his address as it appears in the security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the Persons in whose names the
Securities of such series (or their respective Predecessor Securities) are
registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange, if, after notice given
by the Company to the Trustee of the proposed payment pursuant to this Section
307, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of (and premium, if
any) and (subject to Section 307) interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
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None of the Company, the Trustee or any agent of the Company or the
Trustee shall have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interest of a
Security in global form, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest. Notwithstanding the
foregoing, with respect to any Security in global form, nothing herein shall
prevent the Company or the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by any Common Depositary (or its nominee), as a Holder, with respect
to such Security in global form or impair, as between such Common Depositary and
owners of beneficial interests in such Security in global form, the operation of
customary practices governing the exercise of the right of such Common
Depositary (or its nominee) as holder of such Security in global form.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in exchange for any
Securities cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Securities shall be held by the Trustee and may
be destroyed (and, if so destroyed, certification of their destruction shall be
delivered to the Company, unless, by a Company Order, the Company shall direct
that cancelled Securities be returned to it).
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
ARTICLE 4.
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Securities herein
expressly provided for or in the form of security for such series), when the
Trustee, upon Company Request and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 306 and (ii) Securities for
whose payment money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company or discharged
from such trust, as provided in Section 1009) have been delivered to the Trustee
for cancellation; or
(B) all such Securities not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company,
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and the Company, in the case of (i), (ii) or (iii) above, has deposited with the
Trustee as trust funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore delivered
to the Trustee for cancellation, for principal (and premium, if any) and
interest to the date of such deposit (in the case of Securities which have
become due and payable) or the Stated Maturity or Redemption Date, as the case
may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel, each stating that all conditions precedent provided
for herein relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Company to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1009 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1009, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with or
received by the Trustee.
ARTICLE 5.
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"EVENT OF DEFAULT," wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or to be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):
(1) the Company defaults in the payment of interest on any Security of
that series when such interest becomes due and payable and the default continues
for a period of 30 days; provided, however, that if the Company is permitted by
the terms of the Securities of the applicable series to defer the payment in
question, the date on which such payment is due and payable shall be the date on
which the Company is required to make payment following such deferral, if such
deferral has been elected pursuant to the terms of the Securities; or
(2) the Company defaults in the payment of the principal of (or
premium, if any, on) any Security of that series when the same becomes due and
payable at Maturity, upon redemption (including redemptions under Article 11),
or otherwise; provided, however, that if the Company is permitted by the terms
of the Securities of the applicable series to defer the payment in question, the
date on which such payment is due and payable shall be the date on which the
Company is required to make payment following such deferral, if such deferral
has been elected pursuant to the terms of the Securities; or
(3) the Company fails to observe or perform any of its other covenants,
warranties or agreements in the Securities of that series or this Indenture
(other than a covenant, agreement or warranty a default in whose performance or
whose breach is elsewhere in this Section specifically dealt with or which has
expressly been included int his Indenture solely for the benefit of series of
Securities other than that series), and the failure to observe or perform
continues for the period and after the notice specified in the last paragraph of
this Section; or
(4) any Event of Default under any series of Securities issued pursuant
to this Indenture or any event of default, as defined in any other Indenture,
mortgage, indenture, or instrument under which there may be issued, or
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by which there may be secured or evidenced, any Indebtedness of the Company or a
Subsidiary (whether such Indebtedness now exists or shall hereafter be created
or incurred) shall occur and shall consist of default in the payment of such
Indebtedness at the maturity thereof (after giving effect to any applicable
grace period) or shall result in Indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable,
and such default in payment is not cured or such acceleration shall not be
rescinded or annulled within 10 days after written notice to the Company from
the Trustee or to the Company and to the Trustee from the Holders of at least
10% in aggregate principal amount of the Securities of that series at the time
outstanding; provided that it shall not be an Event of Default if the principal
amount of Indebtedness (other than Indebtedness represented by Securities issued
pursuant to this Indenture) which is not paid at maturity or the maturity of
which is accelerated is less than the amount equal to 1% of the Company's
consolidated total assets (determined as of its most recent fiscal year-end)
provided further that if, prior to a declaration of acceleration of the maturity
of the Securities of that series or the entry of judgment in favor of the
Trustee in a suit pursuant to Section 503, such default shall be remedied or
cured by the Company or waived by the holders of such Indebtedness, then the
Event of Default hereunder by reason thereof shall be deemed likewise to have
been thereupon remedied, cured or waived without further action upon the part of
either the Trustee or any of the Holders of the Securities of that series, and
provided further, that, subject to Sections 601 and 602, the Trustee shall not
be charged with knowledge of any such default unless written notice of such
default shall have been given to the Trustee by the Company, by a holder or an
agent of a holder of any such Indebtedness, by the trustee then acting under any
indenture or other instrument under which such default shall have occurred, or
by the Holders of at least five percent in aggregate principal amount of the
Securities of that series at the time outstanding; or
(5) the Company pursuant to or within the meaning of any Bankruptcy Law
(A) commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or order for
relief against it in an involuntary case or proceeding under any Bankruptcy Law,
(C) consents to or acquiesces in the institution of bankruptcy or insolvency
proceedings against it, (D) applies for, consents to or acquiesces in the
appointment of or taking possession by a Custodian of the Company or for any
material part of its property, (E) makes a general assignment for the benefit of
its creditors or (F) takes any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing; or
(6) (i) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company in an involuntary case or proceeding
under any Bankruptcy Law which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in respect of the
Company, (B) appoint a Custodian of the Company or for any material part of its
property, or (C) order the winding-up or liquidation of its affairs, and such
judgment, decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (ii) any bankruptcy or insolvency petition or application
is filed, or any bankruptcy or insolvency proceeding is commenced against the
Company and such petition, application or proceeding is not dismissed within 60
days; or (iii) a warrant of attachment is issued against any material portion of
the property of the Company which is not released within 60 days of service; or
(7) any other Event of Default provided with respect to Securities of
that series.
A Default under clause (3) above is not an Event of Default until the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Outstanding Securities of that series notify the Company of the Default and the
Company does not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default." When a Default under clause (3) above is
cured within such 60-day period, it ceases.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default with respect to Securities of any series (other
than an Event of Default specified in clause (5) or (6) of Section 501) occurs
and is continuing, the Trustee by notice in writing to the Company, or the
Holders of at least 25% in aggregate principal amount of the Outstanding
Securities of that series by notice in writing to the Company and the Trustee,
may declare the unpaid principal of and accrued interest to the date of
acceleration (or, if the Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) on all the Outstanding Securities of that series to be due
and payable
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immediately and, upon any such declaration, the Outstanding Securities of that
series (or specified principal amount) shall become and be immediately due and
payable.
If an Event of Default specified in clause (5) or (6) of Section 501
occurs, all unpaid principal of and accrued interest on the Outstanding
Securities of that series (or specified principal amount) shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder of any Security of that series.
Upon payment of all such principal and interest, all of the Company's
obligations under the Securities of that series and (upon payment of the
Securities of all series) this Indenture shall terminate, except obligations
under Section 607.
The Holders of a majority in principal amount of the Outstanding
Securities of that series by notice to the Trustee may rescind an acceleration
and its consequences if (i) all existing Events of Default, other than the
nonpayment of the principal and interest of the Securities of that series that
has become due solely by such declaration of acceleration, have been cured or
waived, (ii) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal that has become due
otherwise than by such declaration of acceleration have been paid, (iii) the
rescission would not conflict with any judgment or decree of a court of
competent jurisdiction and (iv) all payments due to the Trustee and any
predecessor Trustee under Section 607 have been made.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
The Company covenants that if:
(1) default is made in the payment of any interest on any Security of
any series when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or premium, if
any, on) any Security of any series at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal (and premium, if any) and interest and, to the extent
that payment of such interest shall be legally enforceable, interest on any
overdue principal (and premium, if any) and on any overdue interest, at the rate
or rates prescribed therefor in such Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the reasonable costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to secure any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
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otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Securities and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceedings, and
(ii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS
WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article in respect
of the Securities of any series shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal (or premium, if any) or interest, upon
presentation of the Securities in respect of which moneys have been collected
and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section 607
applicable to such series;
Second: To the payment of the amounts then due and unpaid for principal
of (and premium, if any) and interest on the Securities of such series in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Securities of such series for principal (and premium, if
any) and interest, respectively; and
Third: To the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 506. At least fifteen (15) days before such
record date, the Trustee shall mail to each Holder and the Company a notice that
states the record date, the payment date and the amount to be paid.
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SECTION 507. LIMITATION ON SUITS.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default with respect to the Securities of that series;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of that series;
it being understood and intended that no one or more of Holders of Securities of
any series shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or prejudice the
rights of any other of such Holders, or to obtain or to seek to obtain priority
or preference over any other of such Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all Holders of Securities of the affected series.
SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 307) interest on such Security on the Stated Maturity or Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding has been instituted.
SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or ln equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
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SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that:
(1) such direction shall not be in conflict with any rule of law or
with this Indenture;
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction; and
(3) subject to Section 601, the Trustee need not take any action which
might involve the Trustee in personal liability or be unduly prejudicial to the
Holders not joining therein.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may by written notice to the Trustee on
behalf of the Holders of all the Securities of such series waive any Default or
Event of Default with respect to such series and its consequences, except a
Default or Event of Default
(1) in respect of the payment of the principal of (or premium, if any)
or interest on any Security of such series, or
(2) in respect of a covenant or other provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such Default or Event of Default shall cease to
exist and shall be deemed to have been cured, for every purpose of this
Indenture and the Securities of such series; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities of any series, or to any suit instituted by
any Holder for the enforcement of the payment of the principal of (or premium,
if any) or interest on any Security on or after the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption, on or
after the Redemption Date).
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ARTICLE 6.
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE.
(a) Except during the continuance of an Event of Default, the Trustee's
duties and responsibilities under this Indenture shall be governed by Section
315(a) of the Trust Indenture Act.
(b) In case an Event of Default has occurred and is continuing, and is
known to the Trustee, the Trustee shall exercise the rights and powers vested in
it by this Indenture, and shall use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(c) None of the provisions of Section 315(d) of the Trust Indenture
Act shall be excluded from this Indenture.
SECTION 602. NOTICE OF DEFAULTS.
Within 30 days after the occurrence of any Default or Event of Default
with respect to the Securities of any series, the Trustee shall give to all
Holders of Securities of such series, as their names and addresses appear in the
Security Register, notice of such Default or Event of Default known to the
Trustee, unless such Default or Event of Default shall have been cured or
waived; provided, however, that, except in the case of a Default or Event of
Default in the payment of the principal of (or premium, if any) or interest on
any Security of such series or in the payment of any sinking fund installment
with respect to Securities of such series, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or directors or Responsible Officers of the Trustee in good faith
determine that the withholding of such notice is in the interest of the Holders
of Securities of such series.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee security or indemnity to its reasonable satisfaction
against the costs, expenses and liabilities which might be incurred by it in
compliance with such request or direction;
(f) prior to the occurrence of an Event of Default with respect to the
Securities of any series and after the curing or waiving of all such Events of
Default which may have occurred, the Trustee shall not be bound to make any
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investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, approval or other paper or document, or the books and records of the
Company, unless requested in writing to do so by the Holders of a majority in
principal amount of the Outstanding Securities of any series; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is not, in the opinion of the Trustee, reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such costs, expenses or
liabilities as a condition to so proceeding; the reasonable expense of every
such investigation shall be paid by the Company or, if paid by the Trustee,
shall be repaid by the Company upon demand;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder; and
(h) the Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and the Trustee or any Authenticating Agent assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. Neither the Trustee nor any
Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder (including amounts held by
the Trustee as Paying Agent) need to be segregated from other funds except to
the extent required by law. The Trustee shall be under no liability for interest
on any money received by it hereunder except as otherwise agreed upon in writing
with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability, damage, claim or expense, including taxes (other than taxes
based upon or determined or measured by the income of the Trustee),
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incurred without gross negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(5) or Section 501(6), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.
The provisions of this Section 607 shall survive this Indenture.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
The Trustee shall be disqualified only where such disqualification is
required by Section 310(b) of the Trust Indenture Act. Nothing shall prevent the
Trustee from filing with the Commission the application referred to in the
second to last paragraph of Section 310(b) of the Trust Indenture Act.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be eligible
to act as Trustee under Section 310(a)(1) of the Trust Indenture Act having a
combined capital and surplus of at least $50,000,000 subject to supervision or
examination by federal or State authority. If such corporation publishes reports
of condition at least annually, pursuant to law or to the requirements of said
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. Neither the Company nor any Person directly or indirectly
controlling, controlled by, or under common control with the Company may serve
as Trustee. If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
(b) The Trustee may resign at any time with respect to the Securities
of one or more series by giving written notice thereof to the Company. If the
instrument of acceptance by a successor Trustee required by Section 611 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority in principal amount
of the Outstanding Securities of such series, delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310(b) of the
Trust Indenture Act after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six months; or
(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request here for by the Company or by any
such Holder of a Security who has been a bona fide Holder of a Security for at
least six months; or
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(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation;
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 315(e) of the
Trust Indenture Act, any Holder who has been a bona fide Holder of a security
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series) and shall comply with the
applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment in accordance with the applicable requirements of Section
611, become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company with
respect to such Securities. If no successor Trustee with respect to the
Securities of any series shall have been so appointed by the Company or the
Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.
(f) The Company shall give notice of each resignation and each removal
of the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its Corporate
Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary
or desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental Indenture shall constitute such Trustees
co-trustees of the same trust and that each such Trustee shall
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be trustee of a trust or trusts hereunder separate and apart from any trust or
trusts hereunder administered by any other such Trustee; and upon the execution
and delivery of such supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided therein and each
such successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request of the Company or
any successor Trustee, such retiring Trustee shall duly assign, transfer and
deliver to such successor Trustee all property and money held by such retiring
Trustee hereunder with respect to the Securities of that or those series to
which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts referred
to in paragraph (a) or (b) of this Section, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be qualified and eligible
under the Trust Indenture Act.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO
BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship listed in Section 311(b) of the Trust
Indenture Act. A Trustee who has resigned or been removed shall be subject to
Section 311(a) of the Trust Indenture Act to the extent indicated therein.
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
At any time when any of the Securities remain Outstanding the Trustee
may appoint an Authenticating Agent or Agents with respect to one or more series
of Securities which shall be authorized to act on behalf of, and subject to the
direction of, the Trustee to authenticate Securities of such series issued upon
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 306, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating
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Agent shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of
Securities of the series with respect to which such Authenticating Agent will
serve, as their names and addresses appear in the security Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternate
certificate of authentication in the following form:
Form of Authenticating Agent's
Certificate of Authentication
Dated:
--------------------------
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
The First National Bank of Chicago
As Trustee
By:
-------------------------------------
As Authenticating Agent
By:
-------------------------------------
Authorized Signatory
ARTICLE 7.
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF
HOLDERS.
The Company will furnish or cause to be furnished to the Trustee:
(a) semi-annually, not later than January 1 and July 1 in each year, a
list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders as of the preceding December 15 or June 15, as the case
may be; and
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(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished;
provided, however, that so long as the Trustee is the Security Registrar, no
such list shall be required to be furnished.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as "applicants") apply
in writing to the Trustee, and furnish to the Trustee reasonable proof that each
such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their rights
under this Indenture or under the Securities and is accompanied by a copy of the
form of proxy or other communication which such applicants propose to transmit
then the Trustee shall, within five Business Days after the receipt of such
application, at its election, either
(i) afford such applicants access to the information
preserved at the time by the Trustee in accordance with Section 702(a); or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved at the
time by the Trustee in accordance with Section 702(a), and as to the approximate
cost of mailing to such Holders the form of proxy or other communication, if
any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder whose name and address appears in the information preserved
at the time by the Trustee in accordance with Section 702(a) a copy of the form
of proxy or other communication which is specified in such request, with
reasonable promptness after a tender to the Trustee of the material to be mailed
and of payment, or provision for the payment, of the reasonable expenses of
mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interest of the Holders
or would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter an
order refusing to sustain any of such objections or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with Section 702(b), regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under Section 702(b).
SECTION 703. REPORTS BY TRUSTEE.
(a) Within 60 days after May 15 of each year commencing with the year
1998, the Trustee shall transmit by mail to all Holders of Securities as
provided in Section 313(c) of the Trust Indenture Act, a brief report dated as
of May 15, if required by and in compliance with Section 313(a) of the Trust
Indenture Act.
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(b) A copy of each such report shall, at the time of such transmission
to Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall:
(1) file with the Trustee, within 30 days after the Company is required
to file the same with the Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the Commission may from time to time by rules and regulations
prescribe) which the Company may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company
is not required to file information, documents or reports pursuant to either of
said Sections, then it shall file with the Trustee and the Commission, in
accordance with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information, documents and
reports which may be required pursuant to Section 13 of the Exchange Act in
respect of a security listed and registered on a national securities exchange as
may be prescribed from time to time in such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with rules
and regulations prescribed from time to time by the Commission, such additional
information, documents and reports with respect to compliance by the Company
with the conditions and covenants of this Indenture as may be required from time
to time by such rules and regulations;
(3) transmit by mail to all Holders, as their names and addresses
appear in the Security Register, (a) concurrently with furnishing the same to
its shareholders, the Company's annual report to shareholders, containing
certified financial statements, and any other financial reports which the
Company generally furnishes to its shareholders, and (b) within 30 days after
the filing thereof with the Trustee, such summaries of any other information,
documents and reports required to be filed by the Company pursuant to paragraphs
(1) and (2) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission; and
(4) furnish to the Trustee, on or before May 1 of each year, a brief
certificate from the principal executive officer, principal financial officer or
principal accounting officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this Indenture. For purposes
of this paragraph, such compliance shall be determined without regard to any
period of grace or requirement of notice provided under this Indenture. Such
certificate need not comply with Section 102.
ARTICLE 8.
CONSOLIDATION, MERGER, LEASE, SALE OR TRANSFER
SECTION 801. WHEN COMPANY MAY MERGE, ETC.
The Company shall not consolidate with, or merge with or into any other
corporation (whether or not the Company shall be the surviving corporation), or
sell, assign, transfer or lease all or substantially all of its properties and
assets as an entirety or substantially as an entirety to any Person or group of
affiliated Persons, in one transaction or a series of related transactions,
unless:
(1) either the Company shall be the continuing Person or the Person (if
other than the Company) formed by such consolidation or with which or into which
the Company is merged or the Person (or group of affiliated Persons) to which
all or substantially all the properties and assets of the Company as an entirety
or substantially as an entirety are sold, assigned, transferred or leased shall
be a corporation (or constitute corporations) organized and existing under the
laws of the United States of America or any State thereof or the District of
Columbia and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Securities and this Indenture; and
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(2) immediately before and after giving effect to such transaction or
series of related transactions, no Event of Default, and no Default, shall have
occurred and be continuing.
SECTION 802. OPINION OF COUNSEL.
The Company shall deliver to the Trustee prior to the proposed
transaction(s) covered by Section 801 an Officer's Certificate and an Opinion of
Counsel stating that the transaction(s) and such supplemental indenture comply
with this Indenture and that all conditions precedent to the consummation of the
transaction(s) under this Indenture have been met.
SECTION 803. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation by the Company with or merger by the Company
into an other corporation or any lease, sale, assignment, or transfer of all or
substantially all of the property and assets of the Company in accordance with
Section 801, the successor corporation formed by such consolidation or into
which the Company is merged or the successor corporation or affiliated group of
corporations to which such lease, sale, assignment, or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
corporation or corporations had been named as the Company herein, and
thereafter, except in the case of a lease, the predecessor corporation or
corporations shall be relieved of all obligations and covenants under this
Indenture and the Securities and in the event of such conveyance or transfer,
except in the case of a lease, any such predecessor corporation may be dissolved
and liquidated.
ARTICLE 9.
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without notice to or the consent of any Holders, the Company, when authorized by
a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company herein
and in the Securities; or
(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be for
the benefit of less than all series of Securities, stating that such covenants
are expressly being included solely for the benefit of series) or to surrender
any right or power herein conferred upon the Company; or
(3) to add any additional Events of Default with respect to all or any
series of Securities; or
(4) to add or change any of the provisions of this Indenture to such
extent as shall be necessary to permit or facilitate the issuance of Securities
in bearer form, registrable or not registrable as to principal, and with or
without interest coupons; or
(5) to change or eliminate any of the provisions of this Indenture,
provided that any such change or elimination shall become effective only when
there is no Security Outstanding of any series created prior to the execution of
such supplemental Indenture which is entitled to the benefit of such provision;
or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or
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(8) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee with respect to the Securities of one or more series and
to add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements of Section
611(b); or
(9) to cure any ambiguity, defect or inconsistency or to correct or
supplement any provision herein which may be inconsistent with any other
provision herein; or
(10) to make any change that does not materially adversely affect the
interests of the Holders of Securities of any series.
Upon request of the Company, accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon receipt
by the Trustee of the documents described in (and subject to the last sentence
of) Section 903, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the written consent of the Holders of a majority in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
shall, subject to Section 903, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities of such series
under this Indenture; provided, however, that no such supplemental indenture
shall, without the consent of the Holder of each Outstanding security affected
thereby,
(1) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof or extend the time for payment thereof, or reduce the amount
of the principal of an Original Issue Discount security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant to
Section 502, or change any Place of Payment where, or the coin or currency in
which, any security or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date);
(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any such
supplemental indenture, or the consent of whose Holders is required for any
waiver of compliance with certain provisions of this Indenture or Defaults or
Events of Default hereunder and their consequences provided for in this
Indenture; or
(3) change the redemption provisions (including Article Eleven) hereof
in a manner adverse to such Holder; or
(4) modify any of the provisions of this Section or Section 513, except
to increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the Holder of
each Outstanding Security affected thereby; provided, however, that this clause
shall not be deemed to require the consent of any Holder with respect to changes
in the references to "the Trustee" and concomitant changes in this Section, or
the deletion of this proviso, in accordance with the requirements of Sections
611(b) and 901(8).
A supplemental indenture which changes or eliminates any covenant or
other provisions of this Indenture which as expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
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SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
The Trustee shall sign any supplemental indenture authorized pursuant
to this Article, subject to the last sentence of this Section 903. In executing,
or accepting the additional trusts created by, any supplemental indenture
permitted by this Article or the modifications thereby of the trusts created by
this Indenture, the Trustee shall be entitled to receive, and (subject to
Section 601) shall be fully protected in relying upon, an Officer's Certificate
and an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
Indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, ln the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticate and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE 10.
COVENANTS
SECTION 1001. PAYMENTS OF SECURITIES.
With respect to each series of Securities, the Company will duly and
punctually pay the principal of (and premium, if any) and interest on such
Securities in accordance with their terms and this Indenture, and will duly
comply with all the other terms, agreements and conditions contained in, or made
in the Indenture for the benefit of, the Securities of such series.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain an office or agency in each Place of Payment
where Securities may be surrendered for registration of transfer or exchange or
for presentation for payment,where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company will
give prompt written notice to the Trustee of the location, and any change in
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee as set forth in Section 105
hereof.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
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Unless otherwise set forth in, or pursuant to, a Board Resolution or
indenture supplemental hereto with respect to a series of Securities, the
Company hereby initially designates the office of The First National Bank of
Chicago, Corporate Trust Administration located in One First National Plaza,
Mail Suite 0126, Chicago, Illinois 60670-0126 as such office of the Company.
SECTION 1003. CORPORATE EXISTENCE.
Subject to Article 8 hereof, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and that of each of its Subsidiaries and the rights (charter and
statutory) of the Company and its Subsidiaries; provided, however, that (a) the
Company shall not be required to preserve any such right, license or franchise
or the corporate existence of any of its Subsidiaries if the Board of Directors,
or the board of directors of the Subsidiary concerned, as the case may be, shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company or any of its Subsidiaries and that the loss thereof
is not materially disadvantageous to the Holders, and (b) nothing herein
contained shall prevent any Subsidiary of the Company from liquidating or
dissolving, or merging into, or consolidating with the Company (provided that
the Company shall be the continuing or surviving corporation) or with any one or
more Subsidiaries if the Board of Directors or the board of directors of the
Subsidiary concerned, as the case may be, shall so determine.
SECTION 1004. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge, or cause to be paid or discharged,
before the same shall become delinquent, (1) all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a material lien upon the property of the Company or any Subsidiary;
provided, however, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which adequate provision has been made.
SECTION 1005. MAINTENANCE OF PROPERTIES.
The Company will cause all material properties used or useful in the
conduct of its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order (normal wear
and tear excepted) and supplied with all necessary equipment and will cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary,
so that the business carried on in connection therewith may be properly
conducted at all times; provided, however, that nothing in this Section shall
prevent the Company from discontinuing the operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors or of the board of
directors of the Subsidiary concerned, as the case may be, desirable in the
conduct of the business of the Company or any Subsidiary of the Company and not
materially disadvantageous to the Holders.
SECTION 1006. COMPLIANCE CERTIFICATES.
(a) The Company shall deliver to the Trustee within 90 days after the
end of each fiscal year of the Company (which fiscal year currently ends on
December 31), an Officer's Certificate stating whether or not the signer knows
of any Default or Event of Default by the Company that occurred prior to the end
of the fiscal year and is then continuing. If the signer does know of such a
Default or Event of Default, the certificate shall describe each such Default or
Event of Default and its status and the specific section or sections of this
Indenture in connection with which such Default or Event of Default has
occurred. The Company shall also promptly notify the Trustee in writing should
the Company's fiscal year be changed so that the end thereof is on any date
other than the date on which the Company's fiscal year currently ends. The
certificate need not comply with Section 102 hereof.
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(b) The Company shall deliver to the Trustee, within 10 days after the
occurrence thereof, notice of any acceleration which with the giving of notice
and the lapse of time would be an Event of Default within the meaning of Section
501(4) hereof.
(c) The Company shall deliver to the Trustee forthwith upon becoming
aware of a Default or Event of Default (but in no event later than 10 days after
the occurrence of each Default or Event of Default that is continuing), an
Officer's Certificate setting forth the details of such Default or Event of
Default and the action that the Company proposes to take with respect thereto
and the specific section or sections of this Indenture in connection with which
such Default or Event of Default has occurred.
SECTION 1007. COMMISSION REPORTS.
(a) The Company shall file with the Trustee, within 30 days after it
files them with the Commission, copies of the quarterly and annual reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the Commission may by rules and regulations prescribe)
which the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act. If the Company is not subject to the requirement
of such Section 13 or 15(d) of the Exchange Act, the Company shall file with the
Trustee, within 30 days after it would have been required to file such
information with the Commission, financial statements, including any notes
thereto and, with respect to annual reports, an auditors' report by an
accounting firm of established national reputation and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations," both
comparable to that which the Company would have been required to include in such
annual reports, information, documents or other reports if the Company had been
subject to the requirements of such Sections 13 or 15(d) of the Exchange Act.
The Company also shall comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
(b) So long as the Securities remain outstanding, the Company shall
cause its annual report to shareholders and any other financial reports
furnished by it to shareholders generally, to be mailed to the Holders at their
addresses appearing in the register of Securities maintained by the Security
Registrar in each case at the time of such mailing or furnishing to
shareholders. If the Company is not required to furnish annual or quarterly
reports to its shareholders pursuant to the Exchange Act, the Company shall
cause its financial statements, including any notes thereto and, with respect to
annual reports, an auditors' report by an accounting firm of established
national reputation and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations," to be so filed with the Trustee and mailed
to the Holders within 90 days after the end of each of the Company's fiscal
years and within 45 days after the end of each of the first three quarters of
each fiscal year.
(c) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Company may
be required to deliver to the Holders under this Section 1007.
SECTION 1008. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim, and will actively resist any and all efforts to be compelled to take the
benefit or advantage of, any stay or extension law or any usury law or other
law, which would prohibit or forgive the Company from paying all or any portion
of the principal of and/or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 1009. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of (and premium, if any) or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
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Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of (and
premium, if any) or interest on any Securities of that series, deposit with a
Paying Agent a sum sufficient to pay the principal (and premium, if any) or
interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium or interest, and (unless such Paying
Agent is the Trustee) the Company will promptly notify the Trustee of its action
or failure to so act.
The Company will cause each Paying Agent for any series of Securities
(other than the Trustee) to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of the principal of (and
premium, if any) or interest on Securities of that series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(ii) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any payment
of principal (and premium, if any) or interest on the Securities of that series;
and
(iii) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any security of any series and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee of such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in New York, New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1010. LIMITATION ON LIENS.
Neither the Company will, nor will it permit any Significant Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the property of the
Company or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or thereafter can
be paid without penalty or are being contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted principles of accounting shall have been set aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books.
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(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Company or its Subsidiaries.
(v) Liens on the capital stock, partnership interest, or other
evidence of ownership of any Subsidiary or such Subsidiary's assets that secure
financings for such Subsidiary.
(vi) Purchase money liens upon or in property now owned or hereafter
acquired in the ordinary course of business (consistent with the Company's
business practices) to secure (A) the purchase price of such property or (B)
Indebtedness incurred solely for the purpose of financing the acquisition,
construction, or improvement of any such property to be subject to such liens,
or Liens existing on any such property at the time of acquisition, or
extensions, renewals, or replacements of any of the foregoing for the same or a
lesser amount; provided that no such lien shall extend to or cover any property
other than the property being acquired, constructed, or improved and
replacements, modifications, and proceeds of such property, and no such
extension, renewal, or replacement shall extend to or cover any property not
theretofore subject to the Lien being extended, renewed, or replaced.
(vii) Liens existing on the date Securities are first issued
hereunder.
(viii) Liens for no more than 90 days arising from a transaction
involving accounts receivable or third-party reimbursements of the Company
(including the sale of such accounts receivable or third-party reimbursements),
where such accounts receivable or third-party reimbursements arose in the
ordinary course of the Company's business.
SECTION 1011. WAIVER OF CERTAIN COVENANTS.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 1010 or 1011 hereof, if before or
after the time for such compliance the Holders of not less than a majority in
principal amount of the Securities at the time Outstanding of each series which
is affected thereby, shall, by consent in writing of such Holders, either waive
such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or conditions except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect.
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ARTICLE 11.
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for Securities of any series)
in accordance with this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of less than all the Securities of any series, the Company shall, at least 45
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date and of the principal amount of Securities of such series to be redeemed. In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officer's Certificate evidencing compliance with such restriction.
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed, the
particular Securities to be redeemed shall be selected not more than 90 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, substantially pro rata, by lot
or by any other method as the Trustee considers fair and appropriate and that
complies with the requirements of the principal national securities exchange, if
any, on which such Securities are listed, and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of that series or any integral multiple thereof) of
the principal amount of Securities of such series of a denomination larger than
the minimum authorized denomination for Securities of that series; provided that
in case the Securities of such series have different terms and maturities, the
Securities to be redeemed shall be selected by the Company and the Company shall
give notice thereof to the Trustee.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of the Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in part,
to the portion of the principal amount of such Securities which has been or is
to be redeemed.
SECTION 1104. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 45 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at this address appearing in
the security Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities of any series are
to be redeemed, the identification (and, in the case of partial redemption, the
principal amounts) of the particular Securities to be redeemed;
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(4) that on the Redemption Date the Redemption Price will be come due
and payable upon each such security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date;
(5) the place or places where such Securities are to be surrendered for
payment of the Redemption Price;
(6) that the redemption is for a sinking fund, if such is the case;
(7) the CUSIP number, if any, of the Securities to be redeemed; and
(8) unless otherwise provided as to a particular series of Securities,
if at the time of publication or mailing of any notice of redemption the Company
shall not have deposited with the Trustee or Paying Agent and/or irrevocably
directed the Trustee or Paying Agent to apply, from money held by it available
to be used for the redemption of Securities, an amount in cash sufficient to
redeem all of the Securities called for redemption, including accrued interest
to the Redemption Date, such notice shall state that it is subject to the
receipt of the redemption moneys by the Trustee or Paying Agent before the
Redemption Date (unless such redemption is mandatory) and such notice shall be
of no effect unless such moneys are so received before such date.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1009) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date.
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such security for redemption in accordance with said notice, such security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such at the close of business on the relevant Regular or Special Record Dates
according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, lf any) shall,
until paid, bear interest from the Redemption Date at the rate prescribed
thereof or in the security.
SECTION 1107. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at an office or agency of the Company at a Place of Payment therefor (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing), and
the Company shall execute, and the Trustee shall authenticate and deliver to the
Holder of such security without service charge, a new Security or Securities of
the same series and Stated Maturity, of any authorized denomination as requested
by such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the security so surrendered.
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ARTICLE 12.
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of a series, except as otherwise specified as
contemplated by Section 301 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series is herein referred to as a "Mandatory Sinking
Fund Payment," and any payment in excess of such minimum amount provided for by
the terms of Securities of any series is herein referred to as an "Optional
Sinking Fund Payment." If provided for by the terms of Securities of any series,
the cash amount of any sinking fund payment may be subject to redemption as
provided in Section 1202. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series.
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (1) may deliver Securities of a series (other than any
Securities previously called for redemption) and (2) may apply as a credit
Securities of a series which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to the Securities of such series required to be made
pursuant to the terms of such Securities as provided for by the terms of such
series; provided that such Securities have not been previously so credited. Such
Securities shall be received and credited for such purpose by the Trustee at the
Redemption Price specified in such Securities for redemption through operation
of the sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 45 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officer's
Certificate specifying the amount of the next ensuing sinking fund payment for
that series pursuant to the terms of that series, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion thereof, if any,
which is to be satisfied by delivering and crediting Securities of that series
pursuant to Section 1202 and will also deliver to the Trustee any Securities to
be so delivered. Not less than 30 days before each such sinking fund payment
date the Trustee shall select the Securities to be redeemed upon such sinking
fund payment date in the manner specified in Section 1103 and cause notice of
the redemption thereof to be given in the name of and at the expense of the
Company in the manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon the terms and in the
manner stated in Sections 1106 and 1107.
ARTICLE 13.
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. APPLICABILITY OF ARTICLE; COMPANY'S OPTION TO
EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
Unless pursuant to Section 301 provision is made for the
inapplicability of either or both of (a) Defeasance of the Securities of a
series under Section 1302 or (b) Covenant Defeasance of the Securities of a
series under Section 1303, then the provisions of such Section or Sections, as
the case may be, together with the other provisions of this Article, shall be
applicable to the Securities of such series, and the Company may at its option
by Board Resolution, at any time, with respect to the Securities of such series,
elect to have either Section 1302 (unless inapplicable) or Section 1303 (unless
inapplicable) be applied to the Outstanding Securities of such series upon
compliance with the applicable conditions set forth below in this Article.
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SECTION 1302. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of the option provided in Section 1301 to
defease the Outstanding Securities of a particular series, the Company shall be
discharged from its obligations with respect to the Outstanding Securities of
such series on the date the applicable conditions set forth in Section 1304 are
satisfied (hereinafter, "Defeasance"). Defeasance shall mean that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Outstanding Securities of such series and to have satisfied all its other
obligations under such Securities and this Indenture insofar as such Securities
are concerned (and the Trustee, at the expense of the Company, shall execute
proper instruments acknowledging the same); provided, however, that the
following rights, obligations, powers, trusts, duties and immunities shall
survive until otherwise terminated or discharged hereunder: (A) the rights of
Holders of Outstanding Securities of such series to receive, solely from the
trust fund provided for in Section 1304, payments in respect of the principal of
(and premium, if any) and interest on such Securities when such payments are
due, (B) the Company's obligations with respect to such Securities under
Sections 304, 305, 306, 1002 and 1009, (C) the rights, powers, trusts, duties
and immunities of the Trustee hereunder and (D) this Article. Subject to
compliance with this Article, the Company may exercise its option with respect
to Defeasance under this Section 1302 notwithstanding the prior exercise of its
option with respect to Covenant Defeasance under Section 1303 in regard to the
Securities of such series.
SECTION 1303. COVENANT DEFEASANCE.
Upon the Company's exercise of the option provided in Section 1301 to
obtain a Covenant Defeasance with respect to the Outstanding Securities of a
particular series, the Company shall be released from its obligations under this
Indenture (except its obligations under Sections 304, 305, 306, 506, 509, 610,
1001, 1002, 1006, 1008 and 1009) with respect to the Outstanding Securities of
such series on and after the date the applicable conditions set forth in Section
1304 are satisfied (hereinafter, "Covenant Defeasance"). Covenant Defeasance
shall mean that, with respect to the Outstanding Securities of such series, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in this Indenture (except its
obligations under Sections 304, 305, 306, 506, 509, 610, 1001, 1002, 1006, 1008
and 1009), whether directly or indirectly by reason of any reference elsewhere
herein or by reason of any reference to any other provision herein or in any
other document, and such omission to comply shall not constitute an Event of
Default under Section 501(4) with respect to Outstanding Securities of such
series, and the remainder of this Indenture and of the Securities of such series
shall be unaffected thereby.
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to Defeasance under Section 1302
and Covenant Defeasance under Section 1303 with respect to the Outstanding
Securities of a particular series:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 609 who shall agree to comply with the provisions of this Article
applicable to it), under the terms of an irrevocable trust agreement in form and
substance reasonably satisfactory to such Trustee, as trust funds in trust for
the purpose of making the following payments, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of such Securities, (A)
Dollars in an amount, or (B) U.S. Government Obligations which through the
scheduled payment of principal and interest in respect thereof in accordance
with their terms will provide, not later than the due date of any payment, money
in an amount, or (C) a combination thereof, in each case sufficient, after
payment of all federal, state and local taxes or other charges or assessments in
respect thereof payable by the Trustee, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge, and which
shall be applied by the Trustee (or other qualifying trustee) to pay and
discharge, (i) the principal of (and premium, if any, on) and each installment
of principal of (and premium, if any) and interest on the Outstanding Securities
of such series on the Stated Maturity of such principal or installment of
principal or interest and (ii) any mandatory sinking fund payments or analogous
payments applicable to the Outstanding Securities of such series on the day on
which such payments are due and payable in accordance with the terms of this
Indenture and of such Securities.
(2) No Default or Event of Default with respect to the Securities of
such series shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit, and no Default or Event of Default
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under clause (5) or (6) of Section 501 hereof shall occur and be continuing, at
any time during the period ending on the 31st day after the date of such deposit
(it being understood that this condition shall not be deemed satisfied until the
expiration of such period).
(3) Such deposit, Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company is a party or by which it is bound.
(4) Such Defeasance or Covenant Defeasance shall not cause any
Securities of such series then listed on any national securities exchange
registered under the Exchange Act to be delisted.
(5) In the case of an election with respect to Section 1302, the
Company shall have delivered to the Trustee either (A) a ruling directed to the
Trustee received from the Internal Revenue Service to the effect that the
Holders of the Outstanding Securities of such series will not recognize income,
gain or loss for federal income tax purposes as a result of such Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Defeasance had not
occurred or (B) an Opinion of Counsel, based on such ruling or on a change in
the applicable federal income tax law since the date of this Indenture, in
either case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the Outstanding Securities of such series will not
recognize income, gain or loss for federal income tax purposes as a result of
such Defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
Defeasance had not occurred.
(6) In the case of an election with respect to Section 1303, the
Company shall have delivered to the Trustee an Opinion of Counsel or a ruling
directed to the Trustee received from the Internal Revenue Service to the effect
that the Holders of the Outstanding Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred.
(7) Such Defeasance or Covenant Defeasance shall be effected in
compliance with any additional terms, conditions or limitations which may be
imposed on the Company in connection therewith pursuant to Section 301.
(8) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Defeasance under Section 1302 or
the Covenant Defeasance under Section 1303 (as the case may be) have been
complied with.
SECTION 1305. DEPOSITED MONEY AND GOVERNMENT OBLIGATIONS
TO BE HELD IN TRUST.
Subject to the provisions of the last paragraph of Section 1009, all
money and Government Obligations (including the proceeds thereof) deposited with
the Trustee (or other qualifying trustee--collectively for purposes of this
Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Outstanding Securities of a particular series shall be held in trust and applied
by the Trustee, in accordance with the provisions of such Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Holders of such Securities of all sums due and to become due
thereon in respect of principal (and premium, if any) and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the Government Obligations deposited
pursuant to Section 1304 or the principal and interest received in respect
thereof, other than any such tax, fee or other charge which by law is for the
account of the Holders of the Outstanding Securities of such series.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver to pay to the Company from time to time upon Company Request any
money or Government Obligations held by it as provided ln Section 1304 which, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written
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certification thereof delivered to the Trustee, are in excess of the amount
thereof which would then be required to be deposited for the purpose for which
such money or Government Obligations were deposited.
ARTICLE 14.
SUBORDINATION
SECTION 1401. AGREEMENT OF SECURITY HOLDERS THAT SECURITIES
SUBORDINATED TO EXTENT PROVIDED.
The Company, for itself, its successors and assigns, covenants and
agrees and each Holder of the Securities by his acceptance thereof likewise
covenants and agrees that the payment of the principal of, premium, if any, and
interest on each and all of the Securities is hereby expressly subordinated, to
the extent and in the manner hereinafter set forth, to the prior payment in full
of all Senior Indebtedness. The provisions of this Article shall constitute a
continuing offer to all persons who, in reliance upon such provisions, become
holders of, or continue to hold, Senior Indebtedness, and such provisions are
made for the benefit of the holders of Senior Indebtedness, and such holders are
hereby made obligees hereunder the same as if their names were written herein as
such, and they and/or each of them may proceed to enforce such provisions.
SECTION 1402. COMPANY NOT TO MAKE PAYMENTS WITH RESPECT
TO SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) Upon the maturity of any Senior Indebtedness by lapse of time,
acceleration or otherwise, all principal thereof and premium, if any, and
interest thereon shall first be paid in full, or such payment duly provided for
in cash or in a manner satisfactory to the holder or holders of such Senior
Indebtedness, before any payment is made on account of the principal of or
premium, if any, or interest on the Securities or to acquire any of the
Securities or on account of any sinking fund (except sinking fund payments made
in Securities acquired by the Company before the maturity of such Senior
Indebtedness).
(b) Upon the happening of (i) an event of default with respect to any
Senior Indebtedness, as such event of default is defined therein or in the
instrument under which it is outstanding, permitting the holders to accelerate
the maturity thereof, or (ii) an event which, with the giving of notice, or
lapse of time, or both, would constitute such an event of default, then, unless
and until such event shall have been cured or waived or shall have ceased to
exist, no payment shall be made by the Company with respect to the principal of
or premium, if any, or interest on the Securities or to acquire any of the
Securities or on account of any sinking fund for the Securities (except sinking
fund payments made in Securities acquired by the Company before such default and
notice thereof).
(c) In the event that notwithstanding the provisions of this Section
1402 the Company shall make any payment to the Trustee on account of the
principal of or premium, if any, or interest on the Securities, or on account of
any sinking fund, or the Holders of the Securities shall receive any such
payment, after the happening of a default in payment of the principal of or
premium, if any, or interest on Senior Indebtedness, then, unless and until such
default or event of default shall have been cured or waived or shall have ceased
to exist, such payment (subject to the provisions of Section 1406) shall be held
by the Trustee or the Holders of the Securities, as the case may be, in trust
for the benefit of, and shall be paid forthwith over and delivered to, the
holders of Senior Indebtedness (pro rata as to each of such holders on the basis
of the respective amounts of Senior Indebtedness held by them) or their
representative or the trustee under the Indenture or other agreement (if any)
pursuant to which any instruments evidencing any Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with the terms of such Senior
Indebtedness, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness. The Company shall give prompt written
notice to the Trustee of any default under any Senior Indebtedness or under any
agreement pursuant to which Senior Indebtedness may have been issued.
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SECTION 1403. SECURITIES SUBORDINATED TO PRIOR PAYMENT OF ALL
SENIOR INDEBTEDNESS ON DISSOLUTION, LIQUIDATION
OR REORGANIZATION OF COMPANY.
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):
(a) the holders of all Senior Indebtedness shall first be entitled to
receive payment in full of the principal thereof, premium, if any, and interest
due thereon before the Holders of the Securities are entitled to receive any
payment on account of the principal of, premium, if any, or interest on the
Securities;
(b) any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the
Securities or the Trustees would be entitled except for the provisions of this
Article Fourteen, shall be paid by the liquidating trustee or agent or other
person making such payment or distribution, whether a trustee in bankruptcy, a
receiver or liquidating trustee or other trustee or agent, directly to the
holders of Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, to the extent
necessary to make payment in full of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution or provision
therefor to the holders of such Senior Indebtedness;
(c) in the event that notwithstanding the foregoing provisions of this
Section 1403, any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, shall be received by the
Trustee or the Holders of the Securities on account of principal, premium, if
any, or interest on the Securities before all Senior Indebtedness is paid in
full, or effective provision made for its payment, such payment or distribution
(subject to the provisions of Section 1406 and 1407) shall be received and held
in trust for and shall be paid over to the holders of the Senior Indebtedness
remaining unpaid or unprovided for or their representative or representatives,
or to the trustee or trustees under any indenture under which any instruments
evidencing any of such Senior Indebtedness may have been issued, for application
to the payment of such Senior Indebtedness until all such Senior Indebtedness
shall have been paid in full, after giving effect to any concurrent payment or
distribution or provision the effect to the holders of such Senior Indebtedness.
SECTION 1404. SECURITY HOLDERS TO BE SUBROGATED TO RIGHT OF HOLDERS
OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness, the Holders
of the Securities shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of the Company
applicable to the Senior Indebtedness until all amounts owing on the Securities
shall be paid in full, and for the purpose of such subrogation no payments or
distributions to the holders of the Senior Indebtedness by or on behalf of the
Company or by or on behalf of the Holders of the Securities by virtue of this
Article which otherwise would have been made to the Holders of the Securities
shall, as between the Company and the Holders of the Securities, be deemed to be
payment by the Company to or on account of the Senior Indebtedness, it being
understood that the provisions of this Article Fourteen are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.
SECTION 1405. OBLIGATION OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article Fourteen or elsewhere in this
Indenture or in the Securities is intended to or shall impair as between the
Company and the Holders of the Securities, the obligation of the Company, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders of the Securities and
creditors of the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
security from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Fourteen of the holders of Senior Indebtedness in respect of cash, property, or
securities of the Company received upon the exercise of any such remedy. Upon
any distribution of assets of the Company referred
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to in this Article Fourteen, the Trustee, subject to the provisions of Section
601, and the Holders of the Securities shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, or a
certificate of the liquidating trustee or agent or other person making any
distribution to the Trustee or to the Holders of the Securities, for the purpose
of ascertaining the persons entitled to participate in such distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article Fourteen.
SECTION 1406. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED
IN ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of monies
to or by the Trustee, unless and until a Responsible Officer of the Trustee
shall have received written notice thereof from the Company or from one or more
holders of Senior Indebtedness or from any trustee therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 601, shall be entitled to assume conclusively that no such facts exist.
SECTION 1407. APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Anything in this Indenture to the contrary notwithstanding, any deposit
of monies by the Company with the Trustee or any Paying Agent (whether or not in
trust) for the payment of the principal of or premium, if any, or interest on
any Securities shall be subject to the provisions of Sections 1401, 1402, 1403
and 1404 except that, if prior to the date on which by the terms of this
Indenture any such monies may become payable for any purpose (including, without
limitation, the payment of either the principal of or the interest or premium,
if any, on any Security) a Responsible Officer of the Trustee shall not have
received with respect to such monies the notice provided for in Section 1406,
then, anything herein contained to the contrary notwithstanding, the Trustee
shall have full power and authority to receive such monies and to apply the same
to the purpose for which they were received, and shall not be affected by any
notice to the contrary which may be received by it on or after such date.
SECTION 1408. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS
OF COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof which any such holder may have or
be otherwise charged with.
SECTION 1409. SECURITY HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF SECURITIES.
Each Holder of the Securities by his acceptance thereof authorizes and
expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article Fourteen and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or otherwise)
tending towards liquidation of the business and assets of the Company, the
immediate filing of a claim for the unpaid balance of its or his Securities in
the form required in said proceedings and cause said claim to be approved. If
the Trustee does not file a proper claim or proof of debt in the form required
in such proceeding prior to 30 days before the expiration of the time to file
such claim or claims, then the holder or holders of Senior Indebtedness are
hereby authorized to and have the right to file an appropriate claim for and on
behalf of the holders of said Securities.
51
<PAGE> 59
SECTION 1410. RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
The Trustee shall be entitled to all of the rights set forth in this
Article Fourteen in respect of any Senior Indebtedness at any time held by it to
the same extent as any other holder of Senior Indebtedness, and nothing in
Section 613 or elsewhere in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
SECTION 1411. ARTICLE FOURTEEN NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal, interest or
sinking fund by reason of any provision in this Article Fourteen shall not be
construed as preventing the occurrence of an Event of Default under Section 501.
ARTICLE 15.
MISCELLANEOUS
SECTION 1501. MISCELLANEOUS.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
By /s/
-------------------------
Name:
Title:
Attest:
/s/
----------------------------
Name:
Title:
(Signatures continued on following page)
52
<PAGE> 60
The First National Bank of Chicago, as Trustee
By /s/
---------------------------------------------
Name:
Title:
Attest:
/s/
- ---------------------------
Name:
Title:
53
<PAGE> 1
EXHIBIT 4(c)
FORM OF
PREFERRED SECURITY CERTIFICATE
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE
INSERT - this Preferred Security is a Global Certificate within the
meaning of the Declaration hereinafter referred to and is registered in the
name of The Depository Trust Company (the "Depositary") or a nominee of the
Depositary. This Preferred Security is exchangeable for Preferred Securities
registered in the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Declaration of this
Preferred Security as a whole by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary) may be registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the Trust or its agent for registration of transfer, exchange or
payment, and any Preferred Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.]
Certificate Number Number of Preferred Securities
CUSIP NO.
------- -----------
Certificate Evidencing Preferred Securities
of
AHL FINANCING
___% Trust Originated Preferred SecuritiesSM ("FELINE PRIDES"SM)
(liquidation amount $50 per Preferred Security)
AHL FINANCING, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co.
(the "Holder") is the registered owner of preferred securities of the Trust
representing undivided beneficial interests in the assets of the trust
designated the ___% Trust Originated Preferred SecuritiesSM (liquidation amount
$50 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of ________, 1997, as the same may be
<PAGE> 2
amended from time to time (the "Declaration"), including the designation of the
terms of the Preferred Securities as set forth in Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The Holder is entitled to the benefits of the Preferred
Securities Guarantee to the extent provided therein. The Sponsor will provide a
copy of the Declaration, the Preferred Securities Guarantee and the Indenture
to the Holder without charge upon written request to the Trust at its principal
place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United Stated
federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate
this day of _____, 1997.
AHL FINANCING
By:
--------------------------------
Name:
Title: Regular Trustee
2
<PAGE> 3
(REVERSE OF SECURITY)
Distributions payable on each Preferred Security will be
fixed at a rate per annum of ____% (the "Coupon Rate") of the stated
liquidation amount of $50 per Preferred Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Paying Agent has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year consisting of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be commuted on the basis of the actual number of days
elapsed per 30-day month.
Except as otherwise described below, Distributions on the
Preferred Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year, commencing on September 30, 1997, to
holders of record, if in book-entry only form, one day prior to such payment
dates, which payment dates shall correspond to the interest payment dates on
the Debentures. In the event that the Preferred Securities are not in
book-entry form, the Regular Trustees will have the right to select relevant
record dates, which will be more than one Business Day but less than 60
Business Days prior to the relevant payment dates. The Debenture Issuer has
the right under the Indenture to defer payments of interest by extending the
interest payment period from time to time on the Debentures for a period not
exceeding beyond the date of maturity of the Debentures (each an "Extension
Period") and, as a consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
Coupon Rate compounded quarterly during any such Extension Period. Payments of
accrued Distributions will be payable to Holders as they appear on the books
and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period; provided that such Extension Period together with all such previous and
further extensions thereof may not extend beyond the maturity date of the
Debentures.
The Preferred Securities shall be repayable as provided in
the Declaration.
3
<PAGE> 4
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the
Trust to repay $____________ stated liquidation amount of the within Preferred
Security, pursuant to its terms, on the "Purchase Contract Settlement Date" or
on any Business Day within a period of ninety days thereafter after receipt of
the within Preferred Security as specified below, together with distributions
thereon accrued to the date or repayment, to the undersigned at:
(Please print or type Name and Address of the Undersigned)
and to issue to the undersigned, pursuant to the terms of the Declaration, a
new Preferred Security or Preferred Securities representing the remaining
stated liquidation amount of this Preferred Security.
For this Option to Elect Repayment to be effective, this Preferred Security
with the Option to Elect Repayment duly completed must be received by the Trust
at the Corporate Trust Office of the Institutional Trustee at The First
National Bank of Chicago, One First National Plaza, Suite 0126, Chicago,
Illinois 60670, Attention: Corporate Trust Administrator.
Dated: Signature:
------------------ ----------------------------
Note: The signature to this Option to Elect Repayment must correspond with
the name as written upon the face of the within Preferred Security in
every particular without alternation or enlargement or any change
whatsoever.
4
<PAGE> 5
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
--------------------------------------------------
- ---------------------------------------------------------------------------
agent to transfer this Preferred
- ------------------------------------------
Security Certificate on the books of the Trust. The agent must substitute
another to act for him or her.
Date: Signature:
------------------------ --------------------------
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
5
<PAGE> 1
EXHIBIT 4 (d)
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - This Debenture is a
Global Debenture within the meaning of the Indenture hereinafter referred to and
is registered in the name of a Depositary or a nominee of a Depositary. This
Debenture is exchangeable for Debentures registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.
Unless this Debenture is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Debenture
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede &
Co., has an interest herein.]
No.____________________________
$______________________________
CUSIP No.______________________
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
_____% JUNIOR SUBORDINATED DEBENTURE
DUE______
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION, a Florida corporation
(the "Company", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to, or registered assigns, the principal sum of ___________________ Dollars
($______ ) on _____________, 2002, and to pay interest on said principal sum
from ______ , 1997, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, quarterly (subject to deferral as set forth herein) in arrears on
March 31, June 30, September 30 and December 31 of each year commencing
September 30, 1997, at the rate of ___% per annum until the principal hereof
shall have become due and payable, and on any overdue principal and premium, if
any, and (without duplication and to the extent that payment of such interest
is enforceable under applicable law) on any overdue installment of interest at
the same rate per annum compounded quarterly. The amount of interest payable on
any Interest Payment Date shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. In the event that any date on which
interest is payable on this Debenture is not a Business Day, then payment of
<PAGE> 2
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Debenture (or one or more Predecessor Securities, as defined
in said Indenture) is registered at the close of business on the regular record
date for such interest installment which shall be the close of business on the
business day next preceding such Interest Payment Date. [IF PURSUANT TO THE
PROVISIONS OF THE INDENTURE THE DEBENTURES ARE NO LONGER REPRESENTED BY A GLOBAL
Debenture -- which shall be the close of business on the ___________ business
day next preceding such Interest Payment Date.] Any such interest installment
not punctually paid or duly provided for shall forthwith cease to be payable to
the registered Holders on such regular record date and may be paid to the Person
in whose name this Debenture (or one or more Predecessor Securities) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered Holders of this series of Debentures not less than 10
days prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Debentures may be listed, and upon such notice as may be required
by such exchange all as more fully provided in the Indenture. The principal of
(and premium, if any) and the interest on this Debenture shall be payable at the
office or agency of the Trustee maintained for that purpose in any coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
registered Holder at such address as shall appear in the Security Register.
Notwithstanding the foregoing, so long as the Holder of this Debenture is the
Institutional Trustee or the Collateral Agent, the payment of the principal of
(and premium, if any) and interest on this Debenture will be made at such place
and to such account as may be designated in writing by the Institutional Trustee
or the Collateral Agent.
The indebtedness evidenced by this Debenture is, to the extent provided in the
Indenture, subordinate and junior in right of payment to the prior payment in
full of all Senior Indebtedness and pari passu in right of payment with the
Company's other junior subordinated debentures, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Debenture by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each Holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
2
<PAGE> 3
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated__________________________________
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By:
-------------------------------
Name:
Title:
Attest:
By:
-----------------------------------
Name:
Title:
3
<PAGE> 4
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in the
within-mentioned Indenture.
Dated______________________________________
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By________________________________________
Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Securities of the
Company (herein sometimes referred to as the "Securities"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of _____, 1997 (the "Base Indenture"), duly executed
and delivered between the Company and The First National Bank of Chicago, as
Trustee (the "Trustee") (as supplemented by a First Supplemental Indenture,
dated _______, 1997, (the Base Indenture as so supplemented, the "Indenture"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders of the
Securities. By the terms of the Indenture, the Securities are issuable in series
that may vary as to amount, date of maturity, rate of interest and in other
respects as provided in the Indenture. This series of Securities is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
The Debentures are not entitled to the benefit of any sinking fund.
The Holder of this Debenture, including the Institutional Trustee and the
Collateral Agent, shall have the right to require the Company to repurchase this
Debenture on the Purchase Contract Settlement Date and for a period of ninety
days thereafter (the "Put Option"), either in whole or in part, at an amount per
Debenture equal to $50, plus accumulated and unpaid distributions, if any (the
"Debenture Repurchase Price"). On the Purchase Contract Settlement Date, each
Holder of Debentures that has not settled its Purchase Contract with cash will
be deemed to have requested the Trust to put the aggregate principal amount of
its Debentures to the Company for
4
<PAGE> 5
an amount equal to the Debenture Repayment Price. Upon such repurchase by the
Company, the Trust shall use simultaneously the proceeds from such repurchase to
redeem the Preferred Securities of such Holder having an aggregate Stated Amount
equal to the aggregate principal amount of the Debentures so repurchased and
shall be applied to satisfy in full such Holder's obligation to purchase Common
Securities under the Purchase Contract and any accumulated and unpaid
distributions with respect to the Debentures so repurchased shall be paid to the
Holder thereof in cash. Each Holder of Debentures that has settled its Purchase
Contract with cash shall have the right to request the Company to repurchase the
Debentures on the Purchase Contract Settlement Date and at any time during a
period of ninety days thereafter for an amount equal to the Debenture Repayment
Price. Upon such repurchase by the Company the Trust shall use simultaneously
the proceeds from such repurchase to redeem in cash the Preferred Securities of
such Holder having an aggregate Stated Amount equal to the aggregate principal
amount of the Debentures so repurchased and shall pay in cash any accumulated
and unpaid distributions to the Holder thereof. In order for the Debentures to
be repurchased on the Purchase Contract Settlement Date or for a period of
ninety days thereafter, the Company must receive at the Corporate Trust Office
in the City of Chicago, Illinois the Debentures to be repurchased with the form
entitled "Option to Elect Repayment" on the reverse of or otherwise accompanying
such Debentures duly completed. All questions as to the validity, eligibility
(including time of receipt) and acceptance of the Debentures for repurchase
shall be determined by the Company, whose determination shall be final and
binding. Notwithstanding the foregoing, so long as the Holder is the
Institutional Trustee or the Collateral Agent this Debenture may be received at
the Corporate Trust Office at any time prior to 11:00 a.m., New York City time,
on the Purchase Contract Settlement Date in the form and manner as may be
designated by the Institutional Trustee or the Collateral Agent and acceptable
to the Trustee. So long as the Holder of any Debentures presented for repayment
is the Institutional Trustee or the Collateral Agent, the payment of the
Debentures Repayment Price in respect of such Debentures shall be made, either
through the Trustee or the Company acting as Paying Agent, no later than 12:00
noon, New York City time, on the Purchase Contract Settlement Date or on any
Business Day during the ninety days immediately thereafter.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
however, that no such supplemental indenture shall (i) reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, without the
consent of the Holder of each Debenture so affected, or (ii) reduce the
aforesaid percentage
5
<PAGE> 6
of Debentures, the Holders of which are required to consent to any such
supplemental indenture, without the consent of the Holders of each Debenture
then outstanding and affected thereby. The Indenture also contains provisions
permitting the Holders of a majority in aggregate principal amount of the
Securities of any series at the time outstanding affected thereby, on behalf of
all of the Holders of the Debentures of such series, to waive Default or Event
of Default with respect to such series, and its consequences, except a Default
or Event of Default in the payment of the principal of or premium, if any, or
interest on any of the Securities of such series. Any such consent or waiver by
the registered Holder of this Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Debenture and of any Debenture issued in exchange he
for or in place hereof (whether by registration of transfer or otherwise),
irrespective of whether or not any notation of such consent or waiver is made
upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Debenture at the time and place and at the rate and in the
money herein prescribed.
So long as the Company is not in default in the payment of interest on the
Debenture, the Company shall have the right at any time during the term of the
Debentures from time to time to extend the interest payment period of such
Debentures for a period not extending, in the aggregate, beyond the maturity
date of the Debentures (an "Extended Interest Payment Period"). At the end of an
Extended Interest Payment Period, the Company shall pay all interest then
accrued and unpaid (together with the interest thereon at the rate specified for
the Debentures to the extent that payment of such interest is enforceable under
applicable law). In the event that the Company exercises this right, then (a)
the Company shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of its Common Stock in connection with the satisfaction by the Company
of its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of the Company's Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged)
or make any guarantee payments with respect to the foregoing), (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Company that rank pari passu with or junior to such Debentures and (c) the
Company shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Preferred Securities Guarantee). Prior to the
termination of any such Extended Interest Payment Period, the Company may
further extend the interest payment period; provided, that such Extended
Interest Payment Period, together with all such previous and further extensions
thereof, may not extend beyond the maturity date of the
6
<PAGE> 7
Debenture. At the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid interest and any additional amount
then due, the Company may commence a new Extended Interest Payment Period,
subject to the above requirements.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered Holder hereof on the
Security Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee in the City of
Chicago and State of Illinois accompanied by a written instrument or instruments
of transfer in form satisfactory to the Company or the Trustee duly executed by
the registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debenture,
the Company, the Trustee, any paying agent and the Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Debenture shall be overdue and notwithstanding any notice of ownership
or writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Security Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, shareholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Indenture imposes certain limitations on the ability of the Company to,
among other things, merge or consolidate with any other Person or sell, assign,
transfer or lease all or substantially all of its properties or assets. All such
covenants and limitations are subject to a number of important qualifications
and exceptions. The Company must report periodically to the Trustee on
compliance with the covenants in the Indenture.
The Debentures of this series are issuable only in registered form without
coupons in denominations of $50 and any integral multiple thereof. This Global
Debenture is exchangeable for Debentures in definitive form only under certain
limited circumstances set forth in the Indenture. Debentures of this series so
issued are issuable only in registered form without coupons in denominations of
$50 and any integral multiple thereof. As provided in the Indenture and
7
<PAGE> 8
subject to certain limitations therein set forth, Debentures of this series so
issued are exchangeable for a like aggregate principal amount of Debentures of
this series of a different authorized denomination, as requested by the Holder
surrendering the same.
All terms used in this Debenture that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
8
<PAGE> 9
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Your Signature:
-------------------- -----------------------
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guaranty:
---------------------------------------------
(Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Transfer Agent, which requirements will
include membership or participation in STAMP
or such other "signature guarantee program" as
may be determined by the Transfer Agent in addition
to, or in substitution for, STAMP, all in
accordance with the Exchange Act.)
Social Security Number or Taxpayer Identification
Number:
-----------------------------------------------
9
<PAGE> 1
EXHIBIT 4(e)
===========================================
FORM OF
PREFERRED SECURITIES GUARANTEE AGREEMENT
AHL FINANCING
Dated as of _________, 1997
===========================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
<S> <C> <C>
SECTION 1.1 Definitions and Interpretation...........................1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act: Application.........................5
SECTION 2.2 List of Holders of Securities............................5
SECTION 2.3 Reports by the Preferred Guarantee Trustee...............5
SECTION 2.4 Periodic Reports to Preferred Guarantee
Trustee.........................................6
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.......................................6
SECTION 2.6 Events of Default; Waiver................................6
SECTION 2.7 Event of Default; Notice.................................6
SECTION 2.8 Conflicting Interests....................................7
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred
Guarantee Trustee...............................7
SECTION 3.2 Certain Rights of Preferred Guarantee
Trustee.........................................9
SECTION 3.3. Not Responsible for Recitals or
Issuance of Guarantee..........................11
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility................11
SECTION 4.2. Appointment, Removal and Resignation of
Preferred Guarantee Trustees...................12
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee...............................................13
SECTION 5.2 Waiver of Notice and Demand.............................13
SECTION 5.3 Obligations Not Affected................................13
SECTION 5.4 Rights of Holders.......................................14
SECTION 5.5 Guarantee of Payment....................................15
SECTION 5.6 Subrogation.............................................15
SECTION 5.7 Independent Obligations.................................15
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions..............................15
SECTION 6.2 Ranking.................................................16
</TABLE>
i
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ARTICLE VII
TERMINATION
<TABLE>
<S> <C> <C>
SECTION 7.1 Termination.............................................16
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.............................................17
SECTION 8.2 Indemnification.........................................17
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns..................................18
SECTION 9.2 Amendments..............................................18
SECTION 9.3 Notices.................................................18
SECTION 9.4 Benefit.................................................20
SECTION 9.5 Governing Law...........................................20
</TABLE>
ii
<PAGE> 4
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated
as of June ___, 1997, is executed and delivered by American Heritage Life
Investment Corporation, a Florida corporation (the "Guarantor"), and The First
National Bank of Chicago, as trustee (the "Preferred Guarantee Trustee"), for
the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of AHL Financing, a Delaware statutory
business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of June __, 1997, among the trustees of the Issuer
named therein, the Guarantor, as sponsor, and the holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof ____________ preferred securities, liquidation amount
$50 per preferred security, having an aggregate liquidation amount of
$_____________ designated the ______% Trust Originated Preferred Securities (the
"Preferred Securities");
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein;
and
WHEREAS, the Guarantor is also executing and delivering a guarantee
agreement (the "Common Securities Guarantee") in substantially identical terms
to this Preferred Securities Guarantee for the benefit of the holders of the
Common Securities (as defined herein), except that if an Event of Default (as
defined in the Indenture), has occurred and is continuing, the rights of holders
of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated to the rights of Holders of Preferred
Securities to receive Guarantee Payments under this Preferred Securities
Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1 Definitions and Interpretation
<PAGE> 5
In this Preferred Securities Guarantee, unless the context otherwise
requires:
(a) capitalized terms used in this Preferred Securities Guarantee
but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Preferred Securities
Guarantee has the same meaning throughout;
(c) all reference to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred
Securities Guarantee as modified, supplemented or amended from
time to time;
(d) all references in this Preferred Securities Guarantee to
Articles and Sections are to Articles and Sections of
this Preferred Securities Guarantee, unless otherwise
specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Securities Guarantee, unless
otherwise defined in this Preferred Securities Guarantee or
unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Business Day" means any day other than a day on which banking
institutions in the City of New York, New York are authorized or required by any
applicable law to close.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at The First National Bank of
Chicago, One First National Plaza, Suite 0126, Chicago, IL 60670-0126,
Attention: Corporate Trust Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
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<PAGE> 6
"Debentures" means the series of junior subordinated debt securities of
the Guarantor or designated the _____% Junior Subordinated Debentures due 2002
held by the Institutional Trustee (as defined in the Declaration) of the Issuer.
"Direction" by a person means a written direction signed: (a) if the
Person is a natural person, by that Person; or (b) in any other case in the name
of such Person by one or more Authorized Officers of that Person.
"Event of Default" means a default by the Guarantor on any of its
payments or other obligations under this Preferred Securities Guarantee.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Issuer: (i) any accrued and unpaid Distributions (as defined
in the Declaration) that are required to be paid on such Preferred Securities to
the extent the Issuer shall have funds available therefor, (ii) the repayment
price, including all accrued and unpaid distributions to the date of repayment
(the "Repayment Price") to the extent the Issuer has funds available therefor,
with respect to any Preferred Securities presented for repayment by the Holders,
and (iii) upon a voluntary or involuntary dissolution, winding-up or termination
of the Issuer (other than in connection with the distribution of Debentures to
the Holders in exchange for Preferred Securities as provided in the
Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer shall have funds available therefor, and (b)
the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution"). If an event of default under the Indenture has occurred and is
continuing, the rights of holders of the Common Securities to receive payments
under the Common Securities Guarantee Agreement are subordinated to the rights
of Holders of Preferred Securities to receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and records
of the Issuer of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any
Affiliate of the Preferred Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of June ___, 1997, among the
Guarantor (the "Debenture Issuer" ) and The First
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<PAGE> 7
National Bank of Chicago, as trustee, and any indenture supplemental thereto
pursuant to which certain subordinated debt securities of the Debenture Issuer
are to be issued to the Institutional Trustee of the Issuer.
"Majority in liquidation amount of the Securities" means, except as
provided by the Trust Indenture Act, a vote by Holder(s) of Preferred
Securities, voting separately as a class, of more than 50% of the liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all Preferred Securities.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall include:
(a) a statement that the officer signing the Officer's
Certificate has read the covenant or condition and the definition
relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by the officer in rendering
the Officer's Certificate;
(c) a statement that such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means The First National Bank of Chicago,
until a Successor Preferred Guarantee Trustee has been appointed and has
accepted such appointment pursuant to the terms of this Preferred Securities
Guarantee and thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust office of the Preferred
Guarantee Trustee, including any vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust
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Office of the Preferred Guarantee Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act: Application
(a) This Preferred Securities Guarantee is subject to the provisions
of the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and
(b) if and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.2 List of Holders of Securities
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably require, of
the names and addresses of the Holders of the Preferred Securities ("List of
Holders") as of such date, (i) within 1 Business Day after January 1 and July 1
of each year, and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Preferred Guarantee Trustee
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Preferred Guarantee Trustee by the Guarantor. The
Preferred Guarantee Trustee may destroy any List of Holders previously given to
it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Section 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
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SECTION 2.3 Reports by the Preferred Guarantee Trustee
Within 60 days after May 15 of each year, the Preferred Guarantee
Trustee shall provide to the Holders of the Preferred Securities such reports as
are required by Section 313 of the Trust Indenture Act, if any, in the form and
in the manner provided by Section 313 of the Trust Indenture Act. The Preferred
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred Guarantee Trustee
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information as required by Section 314 (if any) and the
compliance certificate required by Section 314 of the Trust Indenture Act in the
form, in the manner and at the times required by Section 314 of the Trust
Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officer's Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.7 Event of Default; Notice
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Preferred Securities, notices of all Events of
Default actually known to a Responsible Officer of the Preferred Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, that, the Preferred Guarantee Trustee shall be protected in
withholding such notice if and so long as a Responsible Officer of the Preferred
Guarantee Trustee in good faith determines that
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the withholding of such notice is in the interests of the Holders of the
Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee Trustee shall
have received written notice, or of which a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of the Declaration shall have
obtained actual knowledge.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Preferred Guarantee Trustee
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred Securities,
and the Preferred Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder of Preferred Securities exercising his
or her rights pursuant to Section 5.4(b) or to a Successor Preferred Guarantee
Trustee on acceptance by such Successor Preferred Guarantee Trustee of its
appointment to act as Successor Preferred Guarantee Trustee. The right, title
and interest of the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Preferred Securities Guarantee, and no implied covenants shall be
read into this Preferred Securities Guarantee against the Preferred Guarantee
7
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Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.6) and is actually known to a Responsible Officer
of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Preferred Securities
Guarantee, and use the same degree of care and skill in its exercise thereof, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any event of Default
and after the curing or waiving of such Events of Default that may
have occurred:
(A) the duties and obligations of the
Preferred Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the Preferred
Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee; and
(B) In the absence of bad faith on the part
of the Preferred Guarantee Trustee, the Preferred Guarantee Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates
or opinions furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferred Securities Guarantee;
but in the case of any such certificates or opinions that by any
provision hereof are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be proved
that the Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders of not
less than a Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any proceeding
for any remedy available to the
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Preferred Guarantee Trustee, or exercising any trust or power conferred
upon the Preferred Guarantee Trustee under this Preferred Securities
Guarantee; and
(iv) no provision of this Preferred Securities
Guarantee shall require the Preferred Guarantee Trustee to expend or
risk its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this
Preferred Securities Guarantee or indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively
rely, and shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated
by this Preferred Securities Guarantee shall be sufficiently evidenced
by a Direction or an Officer's Certificate.
(iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the Preferred Guarantee
Trustee (unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and conclusively rely
upon an Officer's Certificate which, upon receipt of such request,
shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty
to see to any recording, filing or registration of any instrument (or
any rerecording, refiling or reregistration thereof).
(v) The Preferred Guarantee Trustee may consult with
competent legal counsel, and the written advice or opinion of such
counsel with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and
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in accordance with such advice or opinion. Such counsel may be counsel
to the Guarantor or any of its Affiliates and may include any of its
employees. The Preferred Guarantee Trustee shall have the right at any
time to seek instructions concerning the administration of this
Preferred Securities Guarantee from any court of competent
jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by
this Preferred Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Preferred
Guarantee Trustee such Security and indemnity, reasonably satisfactory
to the Preferred Guarantee Trustee, against the costs, expenses
(including attorneys' fees and expenses and the expenses of the
Preferred Guarantee Trustees, agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided that, nothing
contained in this Section 3.2 (a) (vi) shall be taken to relieve the
Preferred Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee.
(vii) The Preferred Guarantee Trustee shall not be bound
to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document, but the
Preferred Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of
the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys,
and the Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee
Trustee or its agents hereunder shall bind the Holders of the
Preferred Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective to
perform any such action. No third party shall be required to inquire
as to the authority of the Preferred Guarantee Trustee to so act or as
to its compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of which shall be conclusively
evidenced by the Preferred Guarantee Trustee's or its agent's taking
such action.
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(x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the Holders of a Majority in
liquidation amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(b) No provision of this Preferred Securities Guarantee shall be
deemed to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Preferred Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Guarantee
The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Preferred Guarantee Trustee does not assume
any responsibility for their correctness. The Preferred Guarantee Trustee makes
no representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1. Preferred Guarantee Trustee; Eligibility
(a) There shall at all times be a Preferred Guarantee Trustee
which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to act as
an institutional trustee under the Trust Indenture Act, authorized
under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
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publishes reports of condition at least annually, pursuant to law or to
the requirements of the supervising or examining authority referred to
above, then, for the purposes of this Section 4.1 (a)(ii), the combined
capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease
to be eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.2. Appointment, Removal and Resignation of Preferred Guarantee
Trustees
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee
may be appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall
hold office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Guarantee Trustee and delivered
to the Guarantor, which resignation shall not take effect until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
by instrument in writing executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2 within 60
days after delivery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
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(e) No Preferred Guarantee Trustee shall be liable for the acts
or omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or
removal or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee all
amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Repayment Price, Liquidation Distribution
or any other sums payable under the terms of the Preferred Securities or the
extension of time for the
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performance of any other obligation under, arising out of, or in connection
with, the Preferred Securities (other than an extension of time for payment of
Distributions, Repayment Price, Liquidation Distribution or other sum payable
that results from the extension of any interest payment period on the Debentures
or any extension of the maturity date of the Debentures permitted by the
Indenture);
(c) any failure, omission delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the
Preferred Securities have the right to direct the time, method and place of
conducting of any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails to enforce this
Preferred Securities Guarantee, any Holder of Preferred Securities may institute
a legal proceeding directly against the Guarantor to enforce its rights under
this Preferred Securities Guarantee, without first instituting a legal
proceeding against the Issuer, the Preferred Guarantee Trustee or any other
Person. Notwithstanding the foregoing, if the Guarantor has failed to make
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a Guarantee Payment, a holder of Preferred Securities may directly institute a
proceeding against the Guarantor for enforcement of the Preferred Security
Guarantee for such payment. The Guarantor waives any right or remedy to require
that any action on this Preferred Securities Guarantee be brought first against
the Issuer or any other person or entity before proceeding directly against the
Guarantor.
SECTION 5.5 Guarantee of Payment
This Preferred Securities Guarantee creates a guarantee of payment and
not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all rights, if any, of the
Holders of Preferred Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Preferred Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any right
that it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Preferred
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Preferred Securities Guarantee. If any amount shall be
paid to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such amount
to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Preferred Securities remain outstanding, if there shall
have occurred an Event of Default or an event of default under the Declaration,
then (a) the Guarantor shall not declare or pay any dividend on, make any
distributions with respect
15
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to, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock (other than (i) purchases or acquisition of shares of
its common stock in connection with the satisfaction by the Guarantor of its
obligations under any employee benefit plans or the satisfaction by the
Guarantor of its obligations pursuant to any contract or security outstanding on
the date of such event requiring the Guarantor to purchase shares of its common
stock, (ii) as a result of a reclassification of its capital stock or the
exchange or conversion of one class or series of its capital stock for another
class or series of its capital stock or, (iii) the purchase of fractional
interests in shares of its capital stock pursuant to the conversion or exchange
provisions of such capital stock or security being converted or exchanged) or
make any guarantee payment with respect thereto, (b) the Guarantor shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by the Guarantor which rank pari
passu with or junior to the Debentures or any other junior subordinated
debentures issued by the Guarantor and the Guarantor shall not make any
guarantee payments with respect to the foregoing (other than the Guaranty
Payments).
SECTION 6.2 Ranking
This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor except those liabilities of
the Guarantor made pari passu or subordinate by their terms, (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
the Guarantor and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Preferred Securities Guarantee shall terminate upon (i) full
payment of the Repayment Price of all Preferred Securities, (ii) upon the
distribution of the Debentures to the Holders of all of the Preferred Securities
or (iii) upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. Notwithstanding the foregoing, this
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
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ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Preferred
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Preferred Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.2 Indemnification
(a) To the fullest extent permitted by applicable law, the Guarantor
shall indemnify and hold harmless each Indemnified Person from and against any
loss, damage or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in good faith in
accordance with this Guarantee Agreement and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Guarantee Agreement, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of negligence or willful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, reasonable
expenses (including legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Guarantor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Guarantor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it
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shall be determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 8.2(a).
(c) The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of the Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of all the outstanding Preferred Securities. The provisions of
Section 12.2 of the Declaration with respect to meetings of Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other address as
the Preferred Guarantee Trustee may give notice of to the Holders of the
Preferred Securities):
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attn: Corporate Trust Administration
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(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders of the Preferred Securities):
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Attention: General Counsel
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
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SECTION 9.4 Benefit
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS 0F THE STATE OF NEW YORK.
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
By:
-----------------------------------------
Name
Title
THE FIRST NATIONAL BANK OF CHICAGO
By:
-----------------------------------------
Name
Title
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EXHIBIT 4(f)
================================================
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS PURCHASE CONTRACT AGENT
---------------------
FORM OF PURCHASE CONTRACT AGREEMENT
---------------------
DATED AS OF _________ __, 1997
================================================
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TABLE OF CONTENTS
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
Definitions and Other Provisions
of General Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.3. Form of Documents Delivered to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.4. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 1.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 1.6. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.7. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 1.8. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 1.9. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 1.10. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 1.14. Inspection of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II
Certificate Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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Section 2.1. Forms of Certificates Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.2. Form of Agent's Certificate of Authentication. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE III
The Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.1. Title and Terms; Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.2. Rights and Obligations Evidenced by the Certificates . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.3. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.4. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.5. Registration; Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.6. Book-Entry Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.7. Notices to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.8. Appointment of Successor Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.9. Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.10. Mutilated, Destroyed, Lost and Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.11. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.12. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.13. Substitution of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.14. Reestablishment of Income PRIDES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.15. Transfer of Collateral upon Occurrence of Termination Event . . . . . . . . . . . . . . . . . . . . 35
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Section 3.16. No Consent to Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IV
The Preferred Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.1. Payment of Distribution; Rights to Distributions Preserved . . . . . . . . . . . . . . . . . . . . . 36
Section 4.2. Notice and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.3. Tax Event; Investment Company Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE V
The Purchase Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.1. Purchase of Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 5.2. Contract Adjustment Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 5.3. Deferral of Payment Dates For Contract Adjustment Payments . . . . . . . . . . . . . . . . . . . . . 42
Section 5.4. Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 5.5. Issuance of Shares of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.6. Adjustment of Settlement Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 5.7. Notice of Adjustments and Certain Other Events . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.8. Termination Event; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.9. Early Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 5.10. No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 5.11. Charges and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VI
Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
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Section 6.1. Unconditional Right of Holders to Receive Contract Adjustment Payments and to Purchase Common
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 6.2. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.3. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.4. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.5. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 6.6. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE VII
The Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.1. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 7.2. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 7.3. Certain Rights of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 7.4. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.5. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.6. Money Held in Custody . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.7. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.8. Corporate Agent Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.9. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 7.10. Acceptance of Appointment by
Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 7.11. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . 69
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Section 7.12. Preservation of Information; Communications to Holders . . . . . . . . . . . . . . . . . . . . . . . 70
Section 7.13. No Obligations of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 7.14. Tax Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE VIII
Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.1. Supplemental Agreements Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.2. Supplemental Agreements with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.3. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 8.4. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 8.5. Reference to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE IX
Consolidation, Merger, Sale or Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey Property Except Under Certain Conditions . . . . 75
Section 9.2. Rights and Duties of Successor Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 9.3. Opinion of Counsel to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X
Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.1. Performance Under Purchase Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.3. Company to Reserve Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.4. Covenants as to Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 10.5. Statements of Officers of the Company as to Default . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
<TABLE>
<S> <C>
EXHIBIT A Form of Income PRIDES Certificate
EXHIBIT B Form of Growth PRIDES Certificate
EXHIBIT C Instruction to Collateral Agent
EXHIBIT D Instruction to Purchase Contract Agent
</TABLE>
vi
<PAGE> 8
PURCHASE CONTRACT AGREEMENT, dated as of _________ __, 1997, between
American Heritage Life Investment Corporation, a Florida corporation (the
"Company"), and The First National Bank of Chicago, a national banking
association, acting as purchase contract agent for the Holders of Securities
from time to time (the "Agent").
RECITALS
The Company has duly authorized the execution and delivery of this
Agreement and the Certificates evidencing the Securities.
All things necessary to make the Purchase Contracts, when the
Certificates are executed by the Company and authenticated, executed on behalf
of the Holders and delivered by the Agent, as provided in this Agreement, the
valid obligations of the Company, and to constitute these presents a valid
agreement of the Company, in accordance with its terms, have been done.
WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed as follows:
ARTICLE I
Definitions and Other Provisions
of General Applications
Section 1.1. Definitions.
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
<PAGE> 9
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States;
(c) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision;
(d) the following terms have the meanings given to them in the
Declaration: (i) Indenture, (ii) Investment Company Event; (iii) Liquidation
Distribution; and (iv) Tax Event; and
(e) the following terms have the meanings given to them in this
Section 1.1(e).
"Act" when used with respect to any Holder, has the meaning specified
in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" with respect to any specified Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agent" means the Person named as the "Agent" in the first paragraph
of this instrument until a successor Agent shall have become such pursuant to
the applicable provisions of this Agreement, and thereafter "Agent" shall mean
such Person.
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Applicable Market Value" has the meaning specified in Section 5.1.
2
<PAGE> 10
"Bankruptcy Code" means title 11 of the United States Code, or any
other law of the United States that from time to time provides a uniform system
of bankruptcy laws.
"Beneficial Owner" means, with respect to a Book-Entry Interest, a
Person, who is the beneficial owner of such Book-Entry Interest, as reflected
on the books of the Clearing Agency, or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Board of Directors" means the board of directors of the Company or a
duly authorized committee of that board.
"Board Resolution" means one or more resolutions of the Board of
Directors, a copy of which has been certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such certification and
delivered to the Agent.
"Book-Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 3.6.
"Business Day" means any day which is not a Saturday or Sunday or a
day on which banking institutions in New York City (in the State of New York)
are permitted or required by any applicable law to close.
"Cash Settlement" has the meaning set forth in Section 5.4(a)(i).
"Cash Settlement Rate" has the meaning specified in Section 5.1.
"Certificate" means an Income PRIDES Certificate or a Growth PRIDES
Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as a
depositary for the Securities and in whose name or in the name of a nominee
3
<PAGE> 11
of that organization, shall be registered a Global Certificate and which shall
undertake to effect book entry transfers and pledges of the Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Price" has the meaning specified in Section 3.13.
"Collateral" has the meaning specified in Section 2.1 of the Pledge
Agreement.
"Collateral Agent" means The Chase Manhattan Bank, as Collateral Agent
under the Pledge Agreement until a successor Collateral Agent shall have become
such pursuant to the applicable provisions of the Pledge Agreement, and
thereafter "Collateral Agent" shall mean the Person who is then the Collateral
Agent thereunder.
"Collateral Substitution" has the meaning specified in Section 3.13.
"Common Stock" means the Common Stock, par value $1.00 per share, of
the Company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor shall have become such pursuant
to the applicable provision of this Agreement, and thereafter "Company" shall
mean such successor.
"Contract Adjustment Payments" means the fee payable by the Company in
respect of each Purchase Contract, equal to __% per annum of the Stated Amount,
computed on the basis of a 360 day year of twelve 30 day months, plus any
Deferred Contract Adjustment Payments accrued pursuant to Section 5.2.
"Corporate Trust Office" means the principal corporate trust office of
the Agent at which, at any particular time, its corporate trust business shall
be administered, which office at the date hereof is located at One First
National Plaza, Suite 0126, Chicago,
4
<PAGE> 12
Illinois 60670-0126, Attention: Corporate Trust Services Division, except that
for purposes of Section 10.2, such term shall mean the office or agency of the
Agent in the Borough of Manhattan, the City of New York, which office at the
date hereof is located at 14 Wall Street, Eighth Floor, New York, New York
10005.
"Current Market Price" has the meaning specified in Section 5.6(a)(8).
"Declaration" means the Amended and Restated Declaration of Trust of
AHL Financing, dated _______ __, 1997, among the Company, as the sponsor, the
trustees named therein and the holders from time to time of individual
beneficial interests in the assets of the Trust.
"Deferred Contract Adjustment Payments" has the meaning specified in
Section 5.3.
"Depositary" means, initially, DTC until another Clearing Agency
becomes its successor.
"DTC" means the Depository Trust Company, the initial Clearing Agency.
"Early Settlement" has the meaning specified in Section 5.9(a).
"Early Settlement Amount" has the meaning specified in Section 5.9(a).
"Early Settlement Date" has the meaning specified in Section 5.9(a).
"Early Settlement Rate" has the meaning specified in Section 5.9(b).
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time, and the
rules and regulations promulgated thereunder.
"Expiration Date" has the meaning specified in Section 1.4.
5
<PAGE> 13
"Expiration Time" has the meaning specified in Section 5.6(a)(6).
"Global Certificate" means a Certificate that evidences all or part of
the Securities and is registered in the name of a Depositary or a nominee
thereof.
"Global Preferred Security Certificate" means a certificate evidencing
the rights and obligations of a holder in respect of the number of Preferred
Securities specified on such certificate and which is registered in the name of
a Clearing Agency or a nominee thereof.
"Growth PRIDES" means, following the substitution of one or more
Treasury Securities for Preferred Securities as collateral to secure a holder's
obligations under a Purchase Contract, the collective rights and obligations of
a holder of a Growth PRIDES Certificate in respect of such Treasury Securities,
subject to the Pledge thereof, and the related Purchase Contract.
"Growth PRIDES Certificate" means a certificate evidencing the rights
and obligations of a Holder in respect of the number of Growth PRIDES specified
on such certificate.
"Growth PRIDES Register" and "Growth PRIDES Registrar" have the
respective meanings specified in Section 3.5.
"Holder," when used with respect to a Security, means a Person in
whose name the Security evidenced by an Income PRIDES Certificate and/or a
Growth PRIDES Certificate is registered in the related Income PRIDES Register
and/or the Growth PRIDES Register, as the case may be.
"Income PRIDES" means the collective rights and obligations of a
Holder of an Income PRIDES Certificate in respect of a Preferred Security,
subject to the Pledge thereof, and a related Purchase Contract.
"Income PRIDES Certificate" means a certificate evidencing the rights
and obligations of a Holder in respect of the number of Income PRIDES specified
on such certificate.
6
<PAGE> 14
"Income PRIDES Register" and "Income PRIDES Registrar" have the
respective meanings specified in Section 3.5.
"Indenture" has the meaning set forth in Section 1.1 of the
Declaration.
"Indenture Trustee" means The First National Bank of Chicago, a
national banking association, as trustee under the Indenture, or any successor
thereto.
"Institutional Trustee" means The First National Bank of Chicago, as
institutional trustee under the Declaration, or any successor thereto that is a
financial institution unaffiliated with the Company.
"Investment Company Event" has the meaning set forth in Annex I of the
Declaration.
"Issuer Order" or "Issuer Request" means a written order or request
signed in the name of the Company by its Chairman of the Board, any Vice
Chairman, its President or a Vice President and by its Treasurer, an Assistant
Treasurer, its Secretary or an Assistant Secretary, and delivered to the Agent.
"Junior Subordinated Debentures" means the series of junior
subordinated debentures of the Company designated the __% Junior Subordinated
Debentures due _________ __, 2002, to be issued under the Indenture as of the
date hereof.
"Liquidation Distribution" has the meaning set forth in Annex I of the
Declaration.
"NYSE" has the meaning specified in Section 5.1.
"Officer Certificate" means a certificate signed by the Chairman of
the Board, any Vice Chairman of the Board, the President, any Vice President,
the Treasurer or the Secretary of the Company and delivered to the Agent.
"Opinion of Counsel" means an opinion in writing signed by legal
counsel, who may be an employee of or counsel to the Company and who shall be
reasonably acceptable to the Agent.
7
<PAGE> 15
"Outstanding Securities," with respect to any Income PRIDES and/or
Growth PRIDES, means, as of the date of determination, all Income PRIDES and/or
Growth PRIDES evidenced by Certificates theretofore authenticated, executed and
delivered under this Agreement, except:
(i) If a Termination Event has occurred, (A) Growth PRIDES
and (B) Income PRIDES for which the Stated Amount of the underlying
Preferred Security or a Liquidation Distribution in respect of such
Preferred Security has been theretofore deposited with the Agent in
trust for the Holders of such Income PRIDES;
(ii) Income PRIDES and Growth PRIDES evidenced by
Certificates theretofore cancelled by the Agent or delivered to the
Agent for cancellation or deemed cancelled pursuant to the provisions
of this Agreement; and
(iii) Income PRIDES and Growth PRIDES evidenced by
Certificates in exchange for or in lieu of which other Certificates
have been authenticated, executed on behalf of the Holder and
delivered pursuant to this Agreement, other than any such Certificate
in respect of which there shall have been presented to the Agent proof
satisfactory to it that such Certificate is held by a bona fide
purchaser in whose hands the Income PRIDES or Growth PRIDES evidenced
by such Certificate are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
number of the Income PRIDES or Growth PRIDES have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Income PRIDES or
Growth PRIDES owned by the Company or any Affiliate of the Company shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Agent shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Income PRIDES or
Growth PRIDES which a Responsible Officer of the Agent knows to be so owned
shall be so disregarded. Income PRIDES or Growth PRIDES so owned which have
been pledged in good faith may be regarded as Outstanding Securities if the
pledgee establishes to the satisfaction of the
8
<PAGE> 16
Agent the pledgee's right so to act with respect to such Income PRIDES or
Growth PRIDES and that the pledgee is not the Company or any Affiliate of the
Company.
"Payment Date" means each March 31, June 30, September 30, and
December 31, commencing September 30, 1997.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Permitted Investments" has the meaning set forth in Section 1 of the
Pledge Agreement.
"Pledge" means the pledge under the Pledge Agreement of the Preferred
Securities or the Treasury Securities, in each case constituting a part of the
Securities.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
hereof, by and among the Company, the Collateral Agent and the Agent, on its
own behalf and as attorney-in-fact for the Holders from time to time of the
Securities.
"Predecessor Certificate" means a Predecessor Income PRIDES
Certificate or a Predecessor Growth PRIDES Certificate.
"Predecessor Growth PRIDES Certificate" of any particular Growth
PRIDES Certificate means every previous Growth PRIDES Certificate evidencing
all or a portion of the rights and obligations of the Company and the Holder
under the Growth PRIDES evidenced thereby; and, for the purposes of this
definition, any Growth PRIDES Certificate authenticated and delivered under
Section 3.10 in exchange for or in lieu of a mutilated, destroyed, lost or
stolen Growth PRIDES Certificate shall be deemed to evidence the same rights
and obligations of the Company and the Holder as the mutilated, destroyed, lost
or stolen Growth PRIDES Certificate.
"Predecessor Income PRIDES Certificate" of any particular Income
PRIDES Certificate means every previous Income PRIDES Certificate evidencing
all or a portion of
9
<PAGE> 17
the rights and obligations of the Company and the Holder under the Income
PRIDES evidenced thereby; and, for the purposes of this definition, any Income
PRIDES Certificate authenticated and delivered under Section 3.10 in exchange
for or in lieu of a mutilated, destroyed, lost or stolen Income PRIDES
Certificate shall be deemed to evidence the same rights and obligations of the
Company and the Holder as the mutilated, destroyed, lost or stolen Income
PRIDES Certificate.
"Preferred Securities" means the __% Trust Originated Preferred
Securities of the Trust, each having a liquidation amount of $50, representing
preferred undivided beneficial interests in the assets of the Trust.
"Proceeds" has the meaning set forth in Section 1 of the Pledge
Agreement.
"Purchase Contract," when used with respect to any Security, means the
contract obligating the Company to (i) sell and the Holder of such Security to
purchase Common Stock and (ii) pay the Holder Contract Adjustment Payments, on
the terms and subject to the conditions set forth in Article Five hereof.
"Purchase Contract Settlement Date" means __________ __, 2000.
"Purchase Contract Settlement Fund" has the meaning specified in
Section 5.5.
"Purchase Price" has the meaning specified in Section 5.1.
"Purchased Shares" has the meaning specified in Section 5.6(a)(6).
"Record Date" for the distribution and Contract Adjustment Payments
payable on any Payment Date means, as to any Global Certificate, the Business
Day next preceding such Payment Date, and as to any other Certificate, the 15th
day of the month preceding such Payment Date.
"Register" means the Income PRIDES Register and the Growth PRIDES
Register.
10
<PAGE> 18
"Registrar" means the Income PRIDES Registrar and the Growth PRIDES
Registrar.
"Reorganization Event" has the meaning specified in Section 5.6(b).
"Repayment Price" means, with respect to a Preferred Security, the
Stated Amount plus any accrued and unpaid distributions thereon to the date of
repayment (subject to the rights of holders of record on the relevant record
date to receive distributions due on a Payment Date).
"Responsible Officer," when used with respect to the Agent, means any
officer of the Agent assigned by the Agent to administer its corporate trust
matters.
"Security" means an Income PRIDES or a Growth PRIDES.
"Settlement Rate" has the meaning specified in Section 5.1.
"Stated Amount" means $50.
"Tax Event" has the meaning set forth in Annex I of the Declaration.
"Termination Date" means the date, if any, on which a Termination
Event occurs.
"Termination Event" means the occurrence of any of the following
events: (i) at any time on or prior to the Purchase Contract Settlement Date, a
judgment, decree or court order shall have been entered granting relief under
the Bankruptcy Code, adjudicating the Company to be insolvent, or approving as
properly filed a petition seeking reorganization or liquidation of the Company
or any other similar applicable Federal or State law, and, unless such
judgment, decree or order shall have been entered within 60 days prior to the
Purchase Contract Settlement Date, such decree or order shall have continued
undischarged and unstayed for a period of 60 days; or (ii) a judgment, decree
or court order for the appointment of a receiver or liquidator or trustee or
assignee in bankruptcy or insolvency of the Company or of its property, or for
the winding up or liquidation of its affairs, shall have been entered, and,
unless such
11
<PAGE> 19
judgment, decree or order shall have been entered within 60 days prior to the
Purchase Contract Settlement Date, such judgment, decree or order shall have
continued undischarged and unstayed for a period of 60 days, or (iii) at any
time on or prior to the Purchase Contract Settlement Date the Company shall
file a petition for relief under the Bankruptcy Code, or shall consent to the
filing of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization or liquidation under the Bankruptcy
Code or any other similar applicable Federal or State law, or shall consent to
the filing of any such petition, or shall consent to the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it
or of its property, or shall make an assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts generally as they
become due.
"Threshold Appreciation Price" has the meaning specified in Section
5.1.
"TIA" means the Trust Indenture Act of 1939, as amended, or any
successor statute.
"Trading Day" has the meaning specified in Section 5.1.
"Treasury Security" means a zero-coupon U.S. Treasury Security due
_______ __, 2000 (Cusip Number _______) which is the principal strip of the __%
U.S. Treasury Security which matures on _________ __, 2000.
"Trust" means AHL Financing, a statutory business trust formed under
the laws of the State of Delaware.
"Underwriting Agreement" means the Underwriting Agreement dated
_______ __, 1997 between the Company and the Trust, on the one hand, and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman Sachs & Co.,
Oppenheimer & Co., Inc. and The Robertson-Humphrey Company, as representatives
of the several Underwriters named therein, on the other hand.
"Vice President" means any vice president, whether or not designated
by a number or a word or words added before or after the title "vice
president."
12
<PAGE> 20
Section 1.2. Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Agreement, upon any
application or request by the Company to the Agent to take any action under any
provision of this Agreement, the Company shall furnish to the Agent an Officer
Certificate stating that all conditions precedent, if any, provided for in this
Agreement relating to the proposed action have been complied with and an
Opinion of Counsel stating that, in the opinion of such counsel, all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Agreement relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.3. Form of Documents Delivered to Agent.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified
13
<PAGE> 21
Person, it is not necessary that all such matters be certified by, or covered
by the opinion of, only one such Person, or that they be so certified or
covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement, they may, but need not, be consolidated and
form one instrument.
Section 1.4. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Agent and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
14
<PAGE> 22
Holders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for
any purpose of this Agreement and (subject to Section 7.1) conclusive in favor
of the Agent and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Agent deems
sufficient.
(c) The ownership of Securities shall be proved by the Income
PRIDES Register or the Growth PRIDES Register, as the case may be.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Certificate shall bind every
future Holder of the same Certificate and the Holder of every Certificate
issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof in respect of anything done, omitted or suffered to be done by the
Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Certificate.
(e) The Company may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Agreement to be given, made or taken
by Holders of Securities. If any record date is set pursuant to this
paragraph, the Holders of Outstanding Securities on such record date, and no
other Holders, shall be entitled to take the relevant action, whether or not
such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite number of Outstanding Securities on
such record date. Nothing in this paragraph shall be construed to prevent the
Company from setting a new record date for any action for which a record date
has previously been set pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall be construed
to render ineffective any action taken by Holders of the requisite number of
15
<PAGE> 23
Outstanding Securities on the date such action is taken. Promptly after any
record date is set pursuant to this paragraph, the Company, at its own expense,
shall cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Agent in writing and to each
Holder of Securities in the manner set forth in Section 1.6.
With respect to any record date set pursuant to this Section, the
Company may designate any date as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day; provided that no
such change shall be effective unless notice of the proposed new Expiration
Date is given to the Agent in writing, and to each Holder of Securities in the
manner set forth in Section 1.6, on or prior to the existing Expiration Date.
If an Expiration Date is not designated with respect to any record date set
pursuant to this Section, the Company shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Section 1.5. Notices.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Agreement to
be made upon, given or furnished to, or filed with,
(1) the Agent by any Holder or by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing
and personally delivered or mailed, first-class postage prepaid, to
the Agent at One First National Plaza, Suite 0126, Chicago, Illinois
60670-0126, Attention: Corporate Trust Services Division, or at any
other address previously furnished in writing by the Agent to the
Holders and the Company, or
(2) the Company by the Agent or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if
16
<PAGE> 24
made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid, to the Company at 1776 American
Heritage Life Drive, Jacksonville, FL 32224, Attention: Corporate
Secretary, or at any other address previously furnished in writing to
the Agent by the Company.
(3) the Collateral Agent by the Agent, the Company or any
Holder shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if made, given, furnished or
filed in writing and personally delivered or mailed, first-class
postage prepaid, addressed to the Collateral Agent at The Chase
Manhattan Bank, 450 W. 33rd Street, 15th Floor, New York, New York
10001, Attention: Corporate Trust Trustee Administration, or at any
other address previously furnished in writing by the Collateral Agent
to the Agent, the Company and the Holders; or
(4) the Institutional Trustee by the Company shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if made, given, furnished or filed in writing and
personally delivered or mailed, first-class postage prepaid, addressed
to the Institutional Trustee at One First National Plaza, Suite 0126,
Chicago, IL 60670-0126, Attention: Corporate Trust Services Division,
or at any other address previously furnished in writing by the
Institutional Trustee to the Company; or
(5) the Indenture Trustee by the Company shall be sufficient
for every purpose hereunder (unless otherwise herein expressly
provided) if made, given, furnished or filed in writing and personally
delivered or mailed, first-class postage prepaid, addressed to the
Indenture Trustee at One First National Plaza, Suite 0126, Chicago, IL
60670-0126, Attention: Corporate Trust Services Division, or at any
other address previously furnished in writing by the Indenture Trustee
to the Company.
Section 1.6. Notice to Holders; Waiver.
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Where this Agreement provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at its address as it appears in the applicable Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Holders is given by
mail, neither the failure to mail such notice, nor any defect in any notice so
mailed to any particular Holder shall affect the sufficiency of such notice
with respect to other Holders. Where this Agreement provides for notice in any
manner, such notice may be waived in writing by the Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Agent, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Agent
shall constitute a sufficient notification for every purpose hereunder.
Section 1.7. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
Section 1.8. Successors and Assigns.
All covenants and agreements in this Agreement by the Company shall
bind its successors and assigns, whether so expressed or not.
Section 1.9. Separability Clause.
In case any provision in this Agreement or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.
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Section 1.10. Benefits of Agreement.
Nothing in this Agreement or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder and the Holders, any benefits or any legal or equitable right, remedy
or claim under this Agreement. The Holders from time to time shall be
beneficiaries of this Agreement and shall be bound by all of the terms and
conditions hereof and of the Securities evidenced by their Certificates by
their acceptance of delivery of such Certificates.
Section 1.11. Governing Law.
This Agreement and the Securities shall be governed by and construed
in accordance with the laws of the State of New York.
Section 1.12. Legal Holidays.
In any case where any Payment Date shall not be a Business Day, then
(notwithstanding any other provision of this Agreement or the Income PRIDES
Certificates or the Growth PRIDES Certificates) payment of the Contract
Adjustment Payments shall not be made on such date, but such payments shall be
made on the next succeeding Business Day with the same force and effect as if
made on such Payment Date, provided that no interest shall accrue or be payable
by the Company or any Holder for the period from and after any such Payment
Date, except that, if such next succeeding Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day with the same force and effect as if made on such
Payment Date.
In any case where any Purchase Contract Settlement Date shall not be a
Business Day, then (notwithstanding any other provision of this Agreement, the
Income PRIDES Certificates or the Growth PRIDES Certificates), the Purchase
Contracts shall not be performed on such date, but the Purchase Contracts shall
be performed on the next preceding Business Day with the same force and effect
as if performed on such Purchase Contract Settlement Date.
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Section 1.13. Counterparts.
This Agreement may be executed in any number of counterparts by the
parties hereto on separate counterparts, each of which, when so executed and
delivered, shall be deemed an original, but all such counterparts shall
together constitute one and the same instrument.
Section 1.14. Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable times
during normal business hours at the Corporate Trust Office for inspection by
any Holder.
ARTICLE II
Certificate Forms
Section 2.1. Forms of Certificates Generally.
The Income PRIDES Certificates (including the form of Purchase
Contracts forming part of the Income PRIDES evidenced thereby) shall be in
substantially the form set forth in Exhibit A hereto, with such letters,
numbers or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as may be required by
the rules of any securities exchange on which the Income PRIDES are listed or
any depositary therefor, or as may, consistently herewith, be determined by the
officers of the Company executing such Income PRIDES Certificates, as evidenced
by their execution of the Income PRIDES Certificates.
The definitive Income PRIDES Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers of the Company executing the
Income PRIDES evidenced by such Income PRIDES Certificates, consistent with the
provisions of this Agreement, as evidenced by their execution thereof.
The Growth PRIDES Certificates (including the form of Purchase
Contracts forming part of the Growth PRIDES evidenced thereby) shall be in
substantially the form set
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forth in Exhibit B hereto, with such letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as may be required by the rules of any
securities exchange on which the Growth PRIDES may be listed or any depositary
therefor, or as may, consistently herewith, be determined by the officers of
the Company executing such Growth PRIDES Certificates, as evidenced by their
execution of the Growth PRIDES Certificates.
The definitive Growth PRIDES Certificates shall be printed,
lithographed or engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers of the Company executing the
Growth PRIDES evidenced by such Growth PRIDES Certificates, consistent with the
provisions of this Agreement, as evidenced by their execution thereof.
Every Global Certificate authenticated, executed on behalf of the
Holders and delivered hereunder shall bear a legend in substantially the
following form:
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED
IN THE NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS
CERTIFICATE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE
REGISTERED, AND NO TRANSFER OF THIS CERTIFICATE IN WHOLE OR IN PART
MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH CLEARING
AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.
Section 2.2. Form of Agent's Certificate of Authentication.
The form of the Agent's certificate of authentication of the Income
PRIDES shall be in substantially the form set forth on the form of the Income
PRIDES Certificates.
The form of the Agent's certificate of authentication of the Growth
PRIDES shall be in substantially the form set forth on the form of the Growth
PRIDES Certificates.
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ARTICLE III
The Securities
Section 3.1. Title and Terms; Denominations.
The aggregate number of Income PRIDES evidenced by Certificates
authenticated, executed on behalf of the Holders and delivered hereunder is
limited to 1,725,000 except for Certificates authenticated, executed and
delivered upon registration of transfer of, in exchange for, or in lieu of,
other Certificates pursuant to Section 3.4, 3.5, 3.10, 3.13, 3.14, 5.9 or 8.5.
The Certificates shall be issuable only in registered form and only in
denominations of a single Income PRIDES or Growth PRIDES and any integral
multiple thereof.
Section 3.2. Rights and Obligations Evidenced by the Certificates.
Each Income PRIDES Certificate shall evidence the number of Income
PRIDES specified therein, with each such Income PRIDES representing the
ownership by the Holder thereof of a beneficial interest in Preferred Security
with a principal amount equal to the Stated Amount, subject to the Pledge of
such Preferred Security by such Holder pursuant to the Pledge Agreement, and
the rights and obligations of the Holder thereof and the Company under one
Purchase Contract. The Agent as attorney-in-fact for, and on behalf of, each
Holder of Income PRIDES shall pledge, pursuant to the Pledge Agreement, the
Preferred Security forming a part of such Holder's Income PRIDES, to the
Collateral Agent and grant to the Collateral Agent a security interest in the
right, title, and interest of such Holder in such Preferred Security, for the
benefit of the Company, to secure the obligation of the Holder under the
Purchase Contracts to purchase the Common Stock of the Company. Prior to the
purchase of shares of Common Stock under the Purchase Contracts, such Purchase
Contracts shall not entitle the Holders of Income PRIDES Certificates to any of
the rights of a holder of shares of Common Stock, including, without
limitation, the right to vote or receive any dividends or other payments or to
consent or to receive notice as
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stockholders in respect of the meetings of stockholders or for the election of
directors of the Company or for any other matter, or any other rights
whatsoever as stockholders of the Company.
Each Growth PRIDES Certificate shall evidence the number of Growth
PRIDES specified therein, with each such Growth PRIDES representing the
ownership by the Holder thereof of a beneficial interest in Treasury Security
with a principal amount equal to the aggregate Stated Amount of the Preferred
Securities for which such Treasury Security is being substituted, subject to
the Pledge of such Treasury Security by such Holder pursuant to the Pledge
Agreement, and the rights and obligations of the Holder thereof and the Company
under one Purchase Contract. Prior to the purchase, if any, of shares of Common
Stock under the Purchase Contracts, such Growth PRIDES Certificates shall not
entitle the Holders of Growth PRIDES Certificates to any of the rights of a
holder of shares of Common Stock, including, without limitation, the right to
vote or receive any dividends or other payments or to consent or to receive
notice as stockholders in respect of the meetings of stockholders or for the
election of directors of the Company or for any other matter, or any other
rights whatsoever as stockholders of the Company.
Section 3.3. Execution, Authentication, Delivery and Dating.
Subject to the provisions of Sections 3.13 and 3.14 hereof, upon the
execution and delivery of this Agreement, and at any time and from time to time
thereafter, the Company may deliver Certificates executed by the Company to the
Agent for authentication, execution on behalf of the Holders and delivery,
together with its Issuer Order for authentication of such Certificates, and the
Agent in accordance with such Issuer Order shall authenticate, execute on
behalf of the Holder and deliver such Certificates.
The Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its President or one of
its Vice Presidents, under its corporate seal reproduced thereon attested by
its Secretary or one of its Assistant
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Secretaries. The signature of any of these officers on the Certificates may be
manual or facsimile.
Certificates bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did
not hold such offices at the date of such Certificates.
No Purchase Contract evidenced by a Certificate shall be valid until
such Certificate has been executed on behalf of the Holder by the manual
signature of an authorized signatory of the Agent, as such Holder's
attorney-in-fact. Such signature by an authorized signatory of the Agent shall
be conclusive evidence that the Holder of such Certificate has entered into the
Purchase Contracts evidenced by such Certificate.
Each Certificate shall be dated the date of its authentication.
No Certificate shall be entitled to any benefit under this Agreement
or be valid or obligatory for any purpose unless there appears on such
Certificate a certificate of authentication substantially in the form provided
for herein executed by an authorized signatory of the Agent by manual
signature, and such certificate upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder.
Section 3.4. Temporary Certificates.
Pending the preparation of definitive Certificates, the Company shall
execute and deliver to the Agent, and the Agent shall authenticate, execute on
behalf of the Holders, and deliver, in lieu of such definitive Certificates,
temporary Certificates which are in substantially the form set forth in Exhibit
A or Exhibit B hereto, as the case may be, with such letters, numbers or other
marks of identification or designation and such legends or endorsements
printed, lithographed or engraved thereon as may be required by the rules of
any securities exchange on which the Income PRIDES or Growth PRIDES are listed,
or as may, consistently herewith, be determined
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by the officers of the Company executing such Certificates, as evidenced by
their execution of the Certificates.
If temporary Certificates are issued, the Company will cause
definitive Certificates to be prepared without unreasonable delay. After the
preparation of definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the temporary
Certificates at the Corporate Trust Office, at the expense of the Company and
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Certificates, the Company shall execute and deliver to the
Agent, and the Agent shall authenticate, execute on behalf of the Holder, and
deliver in exchange therefor, one or more definitive Certificates of like tenor
authorized denominations and evidencing a like number of Income PRIDES or
Growth PRIDES, as the case may be, as the temporary Certificate or Certificates
so surrendered. Until so exchanged, the temporary Certificates shall in all
respects evidence the same benefits and the same obligations with respect to
the Income PRIDES or Growth PRIDES, as the case may be, evidenced thereby as
definitive Certificates.
Section 3.5. Registration; Registration of Transfer and Exchange.
The Agent shall keep at the Corporate Trust Office a register (the
"Income PRIDES Register") in which, subject to such reasonable regulations as
it may prescribe, the Agent shall provide for the registration of Income PRIDES
Certificates and of transfers of Income PRIDES Certificates (the Agent, in such
capacity, the "Income PRIDES Registrar") and a Register (the "Growth PRIDES
Register") in which, subject to such reasonable regulations as it may
prescribe, the Agent shall provide for the registration of the Growth PRIDES
Certificates following Collateral Substitutions and transfers of Growth PRIDES
Certificates (the Agent, in such capacity, the "Growth PRIDES Registrar").
Upon surrender for registration of transfer of any Certificate at the
Corporate Trust Office, the Company shall execute and deliver to the Agent, and
the Agent shall authenticate, execute on behalf of the designated transferee or
transferees, and deliver, in the name of
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the designated transferee or transferees, one or more new Certificates of any
authorized denominations, like tenor, and evidencing a like number of Income
PRIDES or Growth PRIDES, as the case may be.
At the option of the Holder, Certificates may be exchanged for other
Certificates, of any authorized denominations and evidencing a like number of
Income PRIDES or Growth PRIDES, as the case may be, upon surrender of the
Certificates to be exchanged at the Corporate Trust Office. Whenever any
Certificates are so surrendered for exchange, the Company shall execute and
deliver to the Agent, and the Agent shall authenticate, execute on behalf of
the Holder, and deliver the Certificates which the Holder making the exchange
is entitled to receive.
All Certificates issued upon any registration of transfer or exchange
of a Certificate shall evidence the ownership of the same number of Income
PRIDES or Growth PRIDES, as the case may be, and be entitled to the same
benefits and subject to the same obligations, under this Agreement as the
Income PRIDES or Growth PRIDES, as the case may be, evidenced by the
Certificate surrendered upon such registration of transfer or exchange.
Every Certificate presented or surrendered for registration of
transfer or for exchange shall (if so required by the Agent) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Agent duly executed, by the Holder thereof or his attorney
duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of a Certificate, but the Company and the Agent may require payment
from the Holder of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer or
exchange of Certificates, other than any exchanges pursuant to Sections 3.6 and
8.5 not involving any transfer.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder and deliver any Certificate
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presented or surrendered for registration of transfer or for exchange on or
after the Purchase Contract Settlement Date or the Termination Date. In lieu of
delivery of a new Certificate, upon satisfaction of the applicable conditions
specified above in this Section and receipt of appropriate registration or
transfer instructions from such Holder, the Agent shall (i) if the Purchase
Contract Settlement Date has occurred, deliver the shares of Common Stock
issuable in respect of the Purchase Contracts forming a part of the Securities
evidenced by such Certificate, (ii) in the case of Income PRIDES, if a
Termination Event shall have occurred prior to the Purchase Contract Settlement
Date, transfer the aggregate Stated Amount of the Preferred Securities
evidenced thereby, or (iii) in the case of Growth PRIDES, if a Termination
Event shall have occurred prior to the Purchase Contract Settlement Date,
transfer the Treasury Securities evidenced thereby, in each case subject to the
applicable conditions and in accordance with the applicable provisions of
Article Five hereof.
Section 3.6. Book-Entry Interests.
The Certificates, on original issuance, will be issued in the form of
one or more, fully registered Global Certificates, to be delivered to the
Depositary by, or on behalf of, the Company. Such Global Certificate shall
initially be registered on the books and records of the Company in the name of
Cede & Co., the nominee of the Depositary, and no Beneficial Owner will receive
a definitive Certificate representing such Beneficial Owner's interest in such
Global Certificate, except as provided in Section 3.9. The Agent shall enter
into an agreement with the Depositary if so requested by the Company. Unless
and until definitive, fully registered Certificates have been issued to
Beneficial Owners pursuant to Section 3.9:
(a) the provisions of this Section 3.6 shall be in full
force and effect;
(b) the Company shall be entitled to deal with the
Clearing Agency for all purposes of this Agreement (including the payment of
Contract Adjustment Payments and receiving approvals, votes or consents
hereunder) as the Holder of the Securities and the sole holder of the
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Global Certificate(s) and shall have no obligation to the Beneficial Owners;
(c) to the extent that the provisions of this Section 3.6
conflict with any other provisions of this Agreement, the provisions of this
Section 3.6 shall control; and
(d) the rights of the Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Beneficial Owners and the
Clearing Agency and/or the Clearing Agency Participants. The Clearing Agency
will make book entry transfers among Clearing Agency Participants and receive
and transmit payments of Contract Adjustment Payments to such Clearing Agency
Participants.
Section 3.7. Notices to Holders.
Whenever a notice or other communication to the Holders is required to
be given under this Agreement, the Company or the Company's agent shall give
such notices and communications to the Holders and, with respect to any
Securities registered in the name of a Clearing Agency or the nominee of a
Clearing Agency, the Company or the Company's agent shall, except as set forth
herein, have no obligations to the Beneficial Owners.
Section 3.8. Appointment of Successor Clearing Agency.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Securities, the Company may, in its
sole discretion, appoint a successor Clearing Agency with respect to the
Securities.
Section 3.9. Definitive Certificates.
If (i) a Clearing Agency elects to discontinue its services as
securities depositary with respect to the Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 3.8, (ii) the Company elects to terminate the book-entry system through
the Clearing Agency with respect to the Securities, or (iii) there shall have
occurred and be continuing a default by the
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Company in respect of its obligations under one or more Purchase Contracts,
then upon surrender of the Global Certificates representing the Book-Entry
Interests with respect to the Securities by the Clearing Agency, accompanied by
registration instructions, the Company shall cause definitive Certificates to
be delivered to Beneficial Owners in accordance with the instructions of the
Clearing Agency. The Company shall not be liable for any delay in delivery of
such instructions and may conclusively rely on and shall be protected in
relying on, such instructions.
Section 3.10. Mutilated, Destroyed, Lost and Stolen Certificates.
If any mutilated Certificate is surrendered to the Agent, the Company
shall execute and deliver to the Agent, and the Agent shall authenticate,
execute on behalf of the Holder, and deliver in exchange therefor, a new
Certificate, evidencing the same number of Income PRIDES or Growth PRIDES, as
the case may be, and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Agent (i) evidence
to their satisfaction of the destruction, loss or theft of any Certificate, and
(ii) such security or indemnity as may be required by them to hold each of them
and any agent of any of them harmless, then, in the absence of notice to the
Company or the Agent that such Certificate has been acquired by a bona fide
purchaser, the Company shall execute and deliver to the Agent, and the Agent
shall authenticate, execute on behalf of the Holder, and deliver to the Holder,
in lieu of any such destroyed, lost or stolen Certificate, a new Certificate,
evidencing the same number of Income PRIDES or Growth PRIDES, as the case may
be, and bearing a number not contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be obligated to
execute and deliver to the Agent, and the Agent shall not be obligated to
authenticate, execute on behalf of the Holder, and deliver to the Holder, a
Certificate on or after the Purchase Contract Settlement Date or the
Termination Date. In lieu of delivery of a new Certificate, upon satisfaction
of the applicable conditions specified above in this Section and receipt of
appropriate registration or transfer instructions from
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such Holder, the Agent shall (i) if the Purchase Contract Settlement Date has
occurred, deliver the shares of Common Stock issuable in respect of the
Purchase Contracts forming a part of the Securities evidenced by such
Certificate, or (ii) if a Termination Event shall have occurred prior to the
Purchase Contract Settle- ment Date, transfer the Preferred Securities or the
Treasury Securities, as the case may be, evidenced thereby, in each case
subject to the applicable conditions and in accordance with the applicable
provisions of Article Five hereof.
Upon the issuance of any new Certificate under this Section, the
Company and the Agent may require the payment by the Holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Agent)
connected therewith.
Every new Certificate issued pursuant to this Section in lieu of any
destroyed, lost or stolen Certificate shall constitute an original additional
contractual obligation of the Company and of the Holder in respect of the
Security evidenced thereby, whether or not the destroyed, lost or stolen
Certificate (and the Securities evidenced thereby) shall be at any time
enforceable by anyone, and shall be entitled to all the benefits and be subject
to all the obligations of this Agreement equally and proportionately with any
and all other Certificates delivered hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.11. Persons Deemed Owners.
Prior to due presentment of a Certificate for registration of
transfer, the Company and the Agent, and any agent of the Company or the Agent,
may treat the Person in whose name such Certificate is registered as the owner
of the Income PRIDES or Growth PRIDES evidenced thereby, for the purpose of
receiving distributions on the Preferred Securities, receiving payments of
Contract Adjustment Payments, performance of the Purchase Contracts and for all
other purposes whatsoever, whether
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or not any distributions on the Preferred Securities or the Contract Adjustment
Payments payable in respect of the Purchase Contracts constituting a part of
the Income PRIDES or Growth PRIDES evidenced thereby shall be overdue and
notwithstanding any notice to the contrary, and neither the Company nor the
Agent, nor any agent of the Company or the Agent, shall be affected by notice
to the contrary.
Notwithstanding the foregoing, with respect to any Global Certificate,
nothing herein shall prevent the Company, the Agent or any agent of the Company
or the Agent, from giving effect to any written certification, proxy or other
authorization furnished by any Clearing Agency (or its nominee), as a Holder,
with respect to such Global Certificate or impair, as between such Clearing
Agency and owners of beneficial interests in such Global Certificate, the
operation of customary practices governing the exercise of rights of such
Clearing Agency (or its nominee) as Holder of such Global Certificate.
Section 3.12. Cancellation.
All Certificates surrendered for delivery of shares of Common Stock on
or after the Purchase Contract Settlement Date, upon the transfer of Preferred
Securities or Treasury Securities, as the case may be, after the occurrence of
a Termination Event or pursuant to an Early Settlement, or upon the
registration of a transfer or exchange of a Security, or a Collateral
Substitution or the re-establishment of an Income PRIDES shall, if surrendered
to any Person other than the Agent, be delivered to the Agent and, if not
already cancelled, shall be promptly cancelled by it. The Company may at any
time deliver to the Agent for cancellation any Certificates previously
authenticated, executed and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Certificates so delivered shall,
upon Issuer Order, be promptly cancelled by the Agent. No Certificates shall
be authenticated, executed on behalf of the Holder and delivered in lieu of or
in exchange for any Certificates cancelled as provided in this Section, except
as expressly permitted by this Agreement. All cancelled Certificates held by
the Agent shall be destroyed by the Agent unless otherwise directed by Issuer
Order.
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If the Company or any Affiliate of the Company shall acquire any
Certificate, such acquisition shall not operate as a cancellation of such
Certificate unless and until such Certificate is delivered to the Agent
cancelled or for cancellation.
Section 3.13. Substitution of Securities.
A Holder may separate Preferred Securities from the related Purchase
Contracts in respect of an Income PRIDES by substituting for such Preferred
Securities, Treasury Securities in an aggregate principal amount equal to the
aggregate Stated Amount of such Preferred Securities (a "Collateral
Substitution") at any time from and after the date of this Agreement and on or
prior to the second Business Day immediately preceding the Purchase Contract
Settlement Date by (a) depositing with the Collateral Agent Treasury Securities
having an aggregate principal amount equal to the aggregate Stated Amount of
the Preferred Securities comprising part of such Income PRIDES and (b)
transferring the related Income PRIDES to the Agent accompanied by a notice to
the Agent, substantially in the form of Exhibit D hereto, stating that the
Holder has transferred the relevant amount of Treasury Securities to the
Collateral Agent and requesting that the Agent instruct the Collateral Agent to
release the Preferred Securities underlying such Income PRIDES, whereupon the
Agent shall promptly give such instruction to the Collateral Agent,
substantially in the form of Exhibit C hereto. Upon receipt of the Treasury
Securities described in clause (a) above and the instruction described in
clause (b) above, in accordance with the terms of the Pledge Agreement, the
Collateral Agent will release to the Agent, on behalf of the Holder, Preferred
Securities having a corresponding aggregate Stated Amount from the Pledge, free
and clear of the Company's security interest therein, and upon receipt thereof
the Agent shall promptly:
(i) cancel the related Income PRIDES;
(ii) transfer the Preferred Securities to the Holder; and
(iii) authenticate, execute on behalf of such Holder and
deliver a Growth PRIDES Certificate executed by the Company in
accordance with Section
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3.3 evidencing the same number of Purchase Contracts as were evidenced
by the cancelled Income PRIDES Certificates.
Holders who elect to separate the Preferred Security from the related
Purchase Contract and to substitute Treasury Securities for such Preferred
Securities shall be responsible for any fees or expenses payable to the
Collateral Agent for its services as Collateral Agent in respect of the
substitution, and the Company shall not be responsible for any such fees or
expenses.
Holders may make Collateral Substitutions only in integral multiples
of 20 Income PRIDES.
In the event a Holder making a Collateral Substitution pursuant to
this Section 3.13 fails to effect a book- entry transfer of the Income PRIDES
or fails to deliver an Income PRIDES Certificate(s) to the Agent after
depositing Treasury Securities with the Collateral Agent, the Preferred
Security constituting a part of such Income PRIDES, and any distributions on
such Preferred Security, shall be held in the name of the Agent or its nominee
in trust for the benefit of such Holder, until such Income PRIDES is so
transferred or the Income PRIDES Certificate is so delivered, as the case may
be, or, with respect to an Income PRIDES Certificate, such Holder provides
satisfactory evidence that such Income PRIDES Certificate has been destroyed,
lost or stolen, together with any indemnity that may be required by the Agent
and the Company.
Except as described in this Section 3.13, for so long as the Purchase
Contract underlying an Income PRIDES remains in effect, such Income PRIDES
shall not be separable into its constituent parts, and the rights and
obligations of the Holder in respect of the Preferred Security and Purchase
Contract comprising such Income PRIDES may be acquired, and may be transferred
and exchanged, only as an Income PRIDES.
Section 3.14. Reestablishment of Income PRIDES.
A Holder of a Growth PRIDES may at any time on or prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date,
recreate Income PRIDES by (a) depositing with the Collateral Agent
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Preferred Securities having an aggregate Stated Amount equal to the aggregate
principal amount of the Treasury Securities comprising part of the Growth
PRIDES to the Collateral Agent and (b) transferring the related Growth PRIDES
to the Agent accompanied by a notice to the Agent, substantially in the form of
Exhibit D hereto, stating that the Holder has transferred the relevant amount
of Preferred Securities to the Collateral Agent and requesting that the Agent
instruct the Collateral Agent to release the Treasury Securities underlying
such Growth PRIDES, whereupon the Agent shall promptly give such instruction to
the Collateral Agent, substantially in the form of Exhibit C hereto. Upon
receipt of the Preferred Securities described in clause (a) above and the
instruction described in clause (b) above, in accordance with the terms of the
Pledge Agreement, the Collateral Agent will effect the release of the Treasury
Securities having a corresponding aggregate principal amount from the Pledge to
the Agent free and clear of the Company's security interest therein, and upon
receipt thereof the Agent shall promptly:
(i) cancel the related Growth PRIDES;
(ii) transfer the Treasury Securities to the Holder; and
(iii) authenticate, execute on behalf of such Holder and
deliver an Income PRIDES Certificate executed by the Company in
accordance with Section 3.3 evidencing the same number of Purchase
Contracts as were evidenced by the cancelled Growth PRIDES.
Holders of Growth PRIDES may reestablish Income PRIDES only in
integral multiples of 20 Income PRIDES for each Growth PRIDES.
Except as provided in this Section 3.14, for so long as the Purchase
Contract underlying a Growth PRIDES remains in effect, such Growth PRIDES shall
not be separable into its constituent parts and the rights and obligations of
the Holder of such Growth PRIDES in respect of the Treasury Security and
Purchase Contract comprising such Growth PRIDES may be acquired, and may be
transferred and exchanged only as a Growth PRIDES.
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Section 3.15. Transfer of Collateral upon Occurrence of Termination Event.
Upon the occurrence of a Termination Event and the transfer to the
Agent of the Preferred Securities or the Treasury Securities, as the case may
be, underlying the Income PRIDES and the Growth PRIDES, respectively, pursuant
to the terms of the Pledge Agreement, the Agent shall request transfer
instructions with respect to such Preferred Securities and/or Treasury
Securities, as the case may be, from each Holder by written request mailed to
such Holder at its address as it appears in the Income PRIDES Register or the
Growth PRIDES Register, as the case may be. Upon book- entry transfer of the
Income PRIDES or Growth PRIDES or delivery of an Income PRIDES Certificate or
Growth PRIDES Certificate to the Agent with such transfer instructions, the
Agent shall transfer the Preferred Securities or Treasury Securities underlying
such Income PRIDES or Growth PRIDES, as the case may be, to such Holder by
book-entry transfer, or other appropriate procedures, in accordance with such
instructions. In the event a Holder of Income PRIDES or Growth PRIDES fails to
effect such transfer or delivery, the Preferred Securities or Treasury
Securities underlying such Income PRIDES or Growth PRIDES, as the case may be,
and any distributions thereon, shall be held in the name of the Agent or its
nominee in trust for the benefit of such Holder, until such Income PRIDES or
Growth PRIDES are transferred or the Income PRIDES Certificate or Growth PRIDES
Certificate is surrendered or such Holder provides satisfactory evidence that
such Income PRIDES Certificate or Growth PRIDES Certificate has been destroyed,
lost or stolen, together with any indemnity that may be required by the Agent
and the Company.
Section 3.16. No Consent to Assumption.
Each Holder of a Security, by acceptance thereof, shall be deemed
expressly to have withheld any consent to the assumption under Section 365 of
the Bankruptcy Code or otherwise, of the Purchase Contract by the Company or
its trustee in the event that the Company becomes the debtor under the
Bankruptcy Code.
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ARTICLE IV
The Preferred Securities
Section 4.1. Payment of Distribution; Rights to Distributions Preserved.
A distribution on any Preferred Security which is paid on any Payment
Date shall, subject to receipt thereof by the Agent from the Collateral Agent
as provided by the terms of the Pledge Agreement, be paid to the Person in
whose name the Income PRIDES Certificate (or one or more Predecessor Income
PRIDES Certificates) of which such Preferred Security is a part is registered
at the close of business on the Record Date for such Payment Date.
Each Income PRIDES Certificate evidencing Preferred Securities
delivered under this Agreement upon registration of transfer of or in exchange
for or in lieu of any other Income PRIDES Certificate shall carry the rights to
distributions accrued and unpaid, and to accrue distributions, which were
carried by the Preferred Securities underlying such other Income PRIDES
Certificate.
In the case of any Income PRIDES with respect to which Cash Settlement
of the underlying Purchase Contract is effected on the Purchase Contract
Settlement Date, or with respect to which Early Settlement of the underlying
Purchase Contract is effected on an Early Settlement Date, or with respect to
which a Collateral Substitution is effected on a date, after any Record Date
and on or prior to the next succeeding Payment Date, distributions on the
Preferred Securities underlying such Income PRIDES otherwise payable on such
Payment Date shall be payable on such Payment Date notwithstanding such Cash
Settlement or Early Settlement or Collateral Substitution, and such
distributions shall, subject to receipt thereof by the Agent, be paid to the
Person in whose name the Income PRIDES Certificate (or one or more Predecessor
Income PRIDES Certificates) is registered at the close of business on the
Record Date. Except as otherwise expressly provided in the immediately
preceding sentence, in the case of any Income PRIDES with respect to which Cash
Settlement or Early Settlement of the underlying
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Purchase Contract is effected on a Purchase Contract Settlement Date or an
Early Settlement Date, as the case may be, or with respect to which a
Collateral Substitution has been effected, distributions on the related
Preferred Securities that would otherwise be payable after the Purchase
Contract Settlement Date or Early Settlement Date shall not be payable
hereunder to the Holder of such Income PRIDES; provided, however, that to the
extent that such Holder continues to hold the separated Preferred Securities
that formerly comprised a part of such Holder's Income PRIDES, such Holder
shall be entitled to receive the distributions on such separated Preferred
Securities.
Section 4.2. Notice and Voting.
Under the terms of the Pledge Agreement, the Agent will be entitled to
exercise the voting and any other consensual rights pertaining to the Preferred
Securities pledged with the Collateral Agent but only to the extent instructed
by the Holders as described below. Upon receipt of notice of any meeting at
which holders of Preferred Securities are entitled to vote or upon any
solicitation of consents, waivers or proxies of holders of Preferred
Securities, the Agent shall, as soon as practicable thereafter, mail to the
Holders a notice (a) containing such information as is contained in the notice
or solicitation, (b) stating that each Holder on the record date set by the
Agent therefor (which, to the extent possible, shall be the same date as the
record date for determining the holders of Preferred Securities entitled to
vote) shall be entitled to instruct the Agent as to the exercise of the voting
rights pertaining to the Preferred Securities underlying their Income PRIDES
and (c) stating the manner in which such instructions may be given. Upon the
written request of the Holders on such record date, the Agent shall endeavor
insofar as practicable to vote or cause to be voted, in accordance with the
instructions set forth in such requests, the maximum number of Preferred
Securities as to which any particular voting instructions are received. In the
absence of specific instructions from the Holder of an Income PRIDES, the Agent
shall abstain from voting the Preferred Security underlying such Income PRIDES.
The Company hereby agrees, if applicable, to solicit Holders to timely instruct
the Agent in order to enable the Agent to vote such Preferred Securities or to
cause such
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Preferred Securities to be voted, and the Trust shall covenant in the
Declaration to take all action which may be deemed necessary by the Agent in
order to enable the Agent to vote such Preferred Securities or to cause such
Preferred Securities to be voted.
Section 4.3. Tax Event; Investment Company Event.
Upon the occurrence of a Tax Event or an Investment Company Event or a
liquidation of the Trust, a principal amount of Junior Subordinated Debentures
constituting the assets of the Trust and underlying the Preferred Securities
equal to the aggregate Stated Amount of the Pledged Preferred Securities shall
be delivered to the Collateral Agent in exchange for the Pledged Preferred
Securities. Thereafter, the Junior Subordinated Debentures will be held by the
Collateral Agent in accordance with the terms of the Pledge Agreement to secure
the obligations of each Holder of an Income PRIDES to purchase the Common Stock
of the Company under the Purchase Contracts constituting a part of such Income
PRIDES. Following the occurrence of a Tax Event, an Investment Company Event or
a liquidation of the Trust, the Holders and the Collateral Agent shall have
such security interests, rights and obligations with respect to the Junior
Subordinated Debentures as the Holders and the Collateral Agent had in respect
of the Preferred Securities subject to the Pledge thereof as provided in
Articles II, III, IV, V and VI of the Pledge Agreement, and any reference
herein to the Preferred Securities shall be deemed to be a reference to the
Junior Subordinated Debentures. The Company may cause to be made in any Income
PRIDES Certificates thereafter to be issued such change in phraseology and form
(but not in substance) as may be appropriate to reflect the liquidation of the
Trust and the substitution of Junior Subordinated Debentures for Preferred
Securities as Collateral.
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ARTICLE V
The Purchase Contracts
Section 5.1. Purchase of Shares of Common Stock.
Each Purchase Contract shall obligate the Holder of the related
Security to purchase, and the Company to sell, on the Purchase Contract
Settlement Date at a price equal to the Stated Amount (the "Purchase Price"), a
number of new shares of Common Stock equal to the Settlement Rate or the Cash
Settlement Rate, as applicable, unless, on or prior to the Purchase Contract
Settlement Date, there shall have occurred a Termination Event with respect to
the Security of which such Purchase Contract is a part. The "Settlement Rate"
is equal to (a) if the Applicable Market Value (as defined below) is equal to
or greater than $____ (the "Threshold Appreciation Price"), ______ shares of
Common Stock per Purchase Contract, (b) if the Applicable Market Value is less
than the Threshold Appreciation Price, but is greater than $__, the number of
shares of Common Stock equal to the Stated Amount divided by the Applicable
Market Value and (c) if the Applicable Market Value is less than or equal to
$__, _____ shares of Common Stock per Purchase Contract, in each case subject
to adjustment as provided in Section 5.6 (and in each case rounded upward or
downward to the nearest 1/10,000th of a share). As provided in Section 5.10, no
fractional shares of Common Stock will be issued upon settlement of Purchase
Contracts.
Each Purchase Contract, which is settled either through Early
Settlement, Cash Settlement or through the application of Proceeds from the
related Treasury Securities, shall obligate the Holder of the related Security
to purchase, at the Purchase Price, and the Company to sell, a number of new
shares of Common Stock equal to the Cash Settlement Rate. The "Cash Settlement
Rate" is equal to (a) 1.00125 times the Early Settlement Rate in the case of
Early Settlement of a Purchase Contract and (b) 1.00125 times the Settlement
Rate in the case of (i) Cash Settlement of a Purchase Contract or (ii)
settlement of a Purchase Contract through the application of Proceeds from the
related Treasury Securities.
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The "Applicable Market Value" means the average of the Closing Prices
per share of Common Stock on each of the thirty consecutive Trading Days ending
on the second Trading Day immediately preceding the Purchase Contract
Settlement Date. The "Closing Price" of the Common Stock on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of the Common Stock on the New York
Stock Exchange (the "NYSE") on such date or, if the Common Stock is not listed
for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by The Nasdaq
Stock Market, or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of the Common Stock on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" means a day on which the Common Stock
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
Each Holder of an Income PRIDES or a Growth PRIDES, by its acceptance
thereof, irrevocably authorizes the Agent to enter into and perform the related
Purchase Contract on its behalf as its attorney-in-fact, agrees to be bound by
the terms and provisions thereof, covenants and agrees to perform its
obligations under such Purchase Contracts, and consents to the provisions
hereof, irrevocably authorizes the Agent as its attorney-in-fact to enter into
and perform the Pledge Agreement on its behalf as its attorney-in-fact, and
consents to and agrees to be bound by the Pledge of the Preferred Securities or
the Treasury Securities pursuant to the Pledge Agreement; provided that upon a
Termination Event, the rights of the Holder of such Security under the Purchase
Contract may be enforced without regard to any other rights or obligations.
Each Holder of an Income
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PRIDES or a Growth PRIDES, by its acceptance thereof, further covenants and
agrees, that, to the extent and in the manner provided in Section 5.4 and the
Pledge Agreement, but subject to the terms thereof, payments in respect of the
Stated Amount of the Preferred Securities or the Proceeds of the Treasury
Securities on the Purchase Contract Settlement Date shall be paid by the
Collateral Agent to the Company in satisfaction of such Holder's obligations
under such Purchase Contract and such Holder shall acquire no right, title or
interest in such payments.
Upon registration of transfer of a Certificate, the transferee shall
be bound (without the necessity of any other action on the part of such
transferee), under the terms of this Agreement, the Purchase Contracts
underlying such Certificate and the Pledge Agreement and the transferor shall
be released from the obligations under this Agreement, the Purchase Contracts
underlying the Certificates so transferred and the Pledge Agreement. The
Company covenants and agrees, and each Holder of a Certificate, by its
acceptance thereof, likewise covenants and agrees, to be bound by the
provisions of this paragraph.
Section 5.2. Contract Adjustment Payments.
Subject to Section 5.3, the Company shall pay, on each Payment Date,
the Contract Adjustment Payments payable in respect of each Purchase Contract
to the Person in whose name a Certificate (or one or more Predecessor
Certificates) is registered at the close of business on the Record Date next
preceding such Payment Date. The Contract Adjustment Payments will be payable
at the office of the Agent in The City of New York maintained for that purpose
or, at the option of the Company, by check mailed to the address of the Person
entitled thereto at such Person's address as it appears on the Income PRIDES
Register or Growth PRIDES Register.
Upon the occurrence of a Termination Event, Contract Adjustment
Payments shall cease to accrue in respect of any period from and after the date
of such Termination Event (unless the Company defaults in the payment of
accrued Contract Adjustment Payments). The Company's obligations to pay any
accrued Contract Adjustment Payments shall be deemed to be fulfilled if the
Company
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deposits with the Agent funds necessary to pay accrued Contract Adjustment
Payments, in trust with irrevocable instructions and authorization that such
funds shall be delivered to the Holders.
Each Certificate delivered under this Agreement upon registration of
transfer of or in exchange for or in lieu of (including as a result of a
Collateral Substitution or the re-establishment of an Income PRIDES) any other
Certificate shall carry the rights to Contract Adjustment Payments accrued and
unpaid, and to accrue Contract Adjustment Payments, which were carried by the
Purchase Contracts underlying such other Certificates.
In the case of any Security with respect to which Early Settlement of
the underlying Purchase Contract is effected on an Early Settlement Date, after
any Record Date and on or prior to the next succeeding Payment Date, Contract
Adjustment Payments otherwise payable on such Payment Date shall be payable on
such Payment Date notwithstanding such Early Settlement, and such Contract
Adjustment Payments shall be paid to the Person in whose name the Certificate
evidencing such Security (or one or more Predecessor Certificates) is
registered at the close of business on such Record Date. Except as otherwise
expressly provided in the immediately preceding sentence, in the case of any
Security with respect to which Early Settlement of the underlying Purchase
Contract is effected on an Early Settlement Date, Contract Adjustment Payments
that would otherwise be payable after the Early Settlement Date with respect to
such Purchase Contract shall not be payable.
The Company's obligations with respect to Contract Adjustment Payments
are subordinate and junior in right of payment to all liabilities of the
Company, other than by the Company in the Company's guarantee of its
subordinated debentures with which they rank pari passu.
Section 5.3. Deferral of Payment Dates For Contract Adjustment Payments.
The Company shall have the right, at any time prior to the Purchase
Contract Settlement Date, to defer the payment of any or all of the Contract
Adjustment Payments otherwise payable on any Payment Date, but only if the
Company shall give the Holders and the Agent written
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notice of its election to defer such payment (specifying the amount to be
deferred) at least ten Business Days prior to the earlier of (i) the next
succeeding Payment Date or (ii) the date the Company is required to give notice
of the Record Date or Payment Date with respect to payment of such Contract
Adjustment Payments to the New York Stock Exchange or other applicable
self-regulatory organization or to Holders of the Securities, but in any event
not less than two Business Days prior to such Record Date. Any Contract
Adjustment Payments so deferred shall bear additional Contract Adjustment
Payments thereon at the rate of __% per annum (computed on the basis of 360 day
year of twelve 30 day months), compounding on each succeeding Payment Date,
until paid in full (such deferred installments of Contract Adjustment Payments
together with the additional Contract Adjustment Payments accrued thereon,
being referred to herein as the "Deferred Contract Adjustment Payments").
Deferred Contract Adjustment Payments shall be due on the next succeeding
Payment Date except to the extent that payment is deferred pursuant to this
Section. No Contract Adjustment Payments may be deferred to a date that is
after the Purchase Contract Settlement Date or, with respect to any particular
Purchase Contract, Early Settlement thereof. If the Purchase Contracts are
terminated (upon the occurrence of a Termination Event, the Holder's right to
receive Contract Adjustment Payments and Deferred Contract Adjustment Payments
will terminate.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, each Holder will receive on the Purchase Contract Settlement
Date, in lieu of a cash payment, a number of shares of Common Stock (in
addition to a number of shares of Common Stock equal to the Settlement Rate)
equal to (x) the aggregate amount of Deferred Contract Adjustment Payments
payable to a Holder divided by (y) the Applicable Market Value.
No fractional shares of Common Stock will be issued by the Company
with respect to the payment of Deferred Contract Adjustment Payments on the
Purchase Contract Settlement Date. In lieu of fractional shares otherwise
issuable with respect to such payment of Deferred
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Contract Adjustment Payments, the Holder will be entitled to receive an amount
in cash as provided in Section 5.10.
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then, until the Deferred Contract Adjustment
Payments have been made, (a) the Company shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security outstanding on the date of such event requiring the Company to
purchase shares of Common Stock, (ii) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's
capital stock or (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged) or make any
guarantee payments with respect to the foregoing), (b) the Company shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank pari passu with such Contract Adjustment Payments and (c) the
Company shall not make any guarantee payments with respect to the foregoing.
Section 5.4. Payment of Purchase Price.
(a) Unless a Holder settles the underlying Purchase Contract either
through the early delivery of cash to the Purchase Contract Agent in the manner
described in Section 5.9 or otherwise, the Purchase Price for the shares of
Common Stock purchased pursuant to a Purchase Contract shall be paid by
application of payments received by the Company on the Purchase Contract
Settlement Date from the Collateral Agent pursuant to the Pledge Agreement,
payable at the office of the Collateral Agent in the City of New York
maintained for such purpose, as follows:
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(i) A Holder may effect a "Cash Settlement" of a Purchase
Contract by (A) providing the Agent with notice of its election to
effect a Cash Settlement on or prior to 5:00 p.m., New York City time,
on the second Business Day immediately preceding the Purchase Contract
Settlement Date (B) concurrently making a payment of the Purchase
Price to the Collateral Agent prior to 9:00 a.m., New York City time,
on the Business Day immediately preceding the Purchase Contract
Settlement Date in lawful money of the United States by certified or
cashiers' check or wire transfer in immediately available funds
payable to or upon the order of the Company. Upon receipt of notice
from a Holder electing a Cash Settlement, the Agent promptly shall
notify the Collateral Agent of such Holder's election. Any cash
received by the Collateral Agent will be invested promptly by the
Collateral Agent in Permitted Investments and paid to the Company on
the Purchase Contract Settlement Date in settlement of the Purchase
Contract in accordance with the terms of the Pledge Agreement. Any
funds received by the Collateral Agent in respect of the investment
earnings from the investment in such Permitted Investments, will be
distributed to the Agent when received for payment to the Holder.
(ii) A Holder of Income PRIDES who does not make an effective
Cash Settlement or an Early Settlement under Section 5.9 hereof shall
be deemed to have elected to pay for the shares of Common Stock to be
issued under the related Purchase Contract from the proceeds of the
related Preferred Securities underlying its Income PRIDES, which will
be applied automatically by the Collateral Agent to pay the Purchase
Price for the Purchase Contract to the Company on the Purchase
Contract Settlement Date as provided in subparagraph (a)(i); and
(iii) A Holder of Growth PRIDES shall pay for the shares of
Common Stock to be issued under the Purchase Contract from the
Proceeds of the related Pledged Treasury Securities held by the
Collateral Agent, which will be applied automatically by the
Collateral Agent to pay the Purchase Price for the Purchase Contract
to the Company on the Purchase Contract Settlement Date without
receiving any
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instruction from the Holder. Upon the maturity of the Pledged Treasury
Notes held by the Collateral Agent on the day immediately prior to the
Purchase Contract Settlement Date, the principal amount of the
Treasury Securities received by the Collateral Agent will be invested
promptly in overnight Permitted Investments. In the event the sum of
the proceeds from the related Pledged Treasury Securities and the
investment earnings earned from such investments is in excess of the
aggregate Purchase Price of the Purchase Contracts being settled
thereby, the Collateral Agent will distribute such excess to the Agent
for the benefit of the Holder of the related Growth PRIDES when
received.
Any distribution to Holders of excess funds and interest described in
subparagraph (i), (ii) or (iii) above, shall be payable at the office of the
Agent in The City of New York maintained for that purpose or, at the option of
the Holder, by check mailed to the address of the Person entitled thereto at
such address as it appears on the Register.
(b) The Company shall not be obligated to issue any
shares of Common Stock in respect of a Purchase Contract or deliver any
certificate therefor to the Holder unless it shall have received payment in
full of the Purchase Price for the shares of Common Stock to be purchased
thereunder in the manner herein set forth.
(c) Upon Cash Settlement of any Purchase Contract, (i)
the Collateral Agent will in accordance with the terms of the Pledge Agreement
cause the Pledged Preferred Securities underlying the relevant Security to be
released from the Pledge by the Collateral Agent free and clear of any security
interest of the Company and transferred to the Agent for delivery to the Holder
thereof or its designee as soon as practicable and (ii) subject to the receipt
thereof from the Collateral Agent, the Agent shall, by book-entry transfer, or
other appropriate procedures, in accordance with instructions provided by the
Holder thereof, transfer the Pledged Preferred Security or the Pledged Treasury
Securities (or, if no such instructions are given to the Agent by the Holder,
the Agent shall hold the Pledged Preferred Security or the Pledged Treasury
Securities, and any
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distributions thereon, in the name of the Agent or its nominee in trust for the
benefit of such Holder).
Section 5.5. Issuance of Shares of Common Stock.
Unless a Termination Event shall have occurred on or prior to the
Purchase Contract Settlement Date, on the Purchase Contract Settlement Date,
upon its receipt of payment in full of the Purchase Price for the shares of
Common Stock purchased by the Holders pursuant to the foregoing provisions of
this Article, and in payment of Deferred Contract Adjustment Payments, if any,
owed by the Company to the Holders and subject to Section 5.6(b), the Company
shall issue and deposit with the Agent, for the benefit of the Holders of the
Outstanding Securities, one or more certificates representing the new shares of
Common Stock registered in the name of the Agent (or its nominee) as custodian
for the Holders (such certificates for shares of Common Stock, together with
any dividends or distributions with respect thereto, being hereinafter referred
to as the "Purchase Contract Settlement Fund") to which the Holders are
entitled hereunder. Subject to the foregoing, upon surrender of a Certificate
to the Agent on or after the Purchase Contract Settlement Date, together with
settlement instructions thereon duly completed and executed, the Holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Common Stock which such Holder is
entitled to receive pursuant to the provisions of this Article Five (after
taking into account all Securities then held by such Holder) together with cash
in lieu of fractional shares as provided in Section 5.10 and any dividends or
distributions with respect to such shares constituting part of the Purchase
Contract Settlement Fund, but without any interest thereon, and the Certificate
so surrendered shall forthwith be cancelled. Such shares shall be registered in
the name of the Holder or the Holder's designee as specified in the settlement
instructions provided by the Holder to the Agent. If any shares of Common Stock
issued in respect of a Purchase Contract and in payment of any Deferred
Contract Adjustment Payments are to be registered to a Person other than the
Person in whose name the Certificate evidencing such Purchase Contract is
registered, no such registration shall be made unless the Person requesting
such registration has paid any transfer and other taxes
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required by reason of such registration in a name other than that of the
registered Holder of the Certificate evidencing such Purchase Contract or has
established to the satisfaction of the Company that such tax either has been
paid or is not payable.
Section 5.6. Adjustment of Settlement Rate.
(a) Adjustments for Dividends, Distributions, Stock Splits, Etc.
(1) In case the Company shall pay or make a dividend or other
distribution on any class of Common Stock of the Company in Common Stock, the
Settlement Rate in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be increased by dividing such Settlement
Rate by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of shares and
the total number of shares constituting such dividend or other distribution,
such increase to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purposes of
this paragraph (1), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu
of fractions of shares of Common Stock. The Company will not pay any dividend
or make any distribution on shares of Common Stock held in the treasury of the
Company.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock (not being available on an equivalent basis to
Holders of the Securities upon settlement of the Purchase Contracts underlying
such Securities) entitling them, for a period expiring within 45 days after the
record date for the determination of stockholders entitled to receive such
rights, options or warrants, to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Market Price per share of the
Common Stock on the date fixed for the determination of stockholders entitled
to receive such rights, options or warrants (other than
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pursuant to a dividend reinvestment plan), the Settlement Rate in effect at the
opening of business on the day following the date fixed for such determination
shall be increased by dividing such Settlement Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or purchase would
purchase at such Current Market Price and the denominator shall be the number
of shares of Common Stock outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock so
offered for subscription or purchase, such increase to become effective
immediately after the opening of business on the day following the date fixed
for such determination. For the purposes of this paragraph (2), the number of
shares of Common Stock at any time outstanding shall not include shares held in
the trea- sury of the Company but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock. The
Company shall not issue any such rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided or
split into a greater number of shares of Common Stock, the Settlement Rate in
effect at the opening of business on the day following the day upon which such
subdivision or split becomes effective shall be proportionately increased, and,
conversely, in case outstanding shares of Common Stock shall each be combined
into a smaller number of shares of Common Stock, the Settlement Rate in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately reduced, such increase
or reduction, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision,
split or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any rights or warrants referred to in
paragraph (2) of this Section, any dividend or
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distribution paid exclusively in cash and any dividend or distribution referred
to in paragraph (1) of this Section), the Settlement Rate shall be adjusted so
that the same shall equal the rate determined by dividing the Settlement Rate
in effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Current Market Price per share of
the Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution filed with the Agent)
of the portion of the assets or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall all be such
Current Market Price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
distribution. In any case in which this paragraph (4) is applicable, paragraph
(2) of this Section shall not be applicable.
(5) In case the Company shall, (I) by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed in a Reorganization Event to which Section 5.6(b) applies or as
part of a distribution referred to in paragraph (4) of this Section) in an
aggregate amount that, combined together with (II) the aggregate amount of any
other distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to this paragraph (5) or paragraph (6)
of this Section has been made and (III) the aggregate of any cash plus the fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) of consideration
payable in respect of any tender or exchange offer by the Company or any of its
subsidiaries for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of the distribution described in clause
(I) above and in respect of which no adjustment pursuant to this paragraph (5)
or paragraph (6) of this Section has been made, exceeds 15% of the product of
the Current Market Price per share of the Common Stock on the date for the
determination of
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holders of shares of Common Stock entitled to receive such distribution times
the number of shares of Common Stock outstanding on such date, then, and in
each such case, immediately after the close of business on such date for
determination, the Settlement Rate shall be increased so that the same shall
equal the rate determined by dividing the Settlement Rate in effect immediately
prior to the close of business on the date fixed for determination of the
stockholders entitled to receive such distribution by a fraction (i) the
numerator of which shall be equal to the Current Market Price per share of the
Common Stock on the date fixed for such determination less an amount equal to
the quotient of (x) the combined amount distributed or payable in the
transactions described in clauses (I), (II) and (III) above and (y) the number
of shares of Common Stock outstanding on such date for determination and (ii)
the denominator of which shall be equal to the Current Market Price per share
of the Common Stock on such date for determination.
(6) In case (I) a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Common Stock shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to stockholders (based on the acceptance (up
to any maximum specified in the terms of the tender or exchange offer) of
Purchased Shares) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) that combined together with (II) the
aggregate of the cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of such tender or exchange offer, of
consideration payable in respect of any other tender or exchange offer, by the
Company or any subsidiary of the Company for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such tender or
exchange offer and in respect of which no adjustment pursuant to paragraph (5)
of this Section or this paragraph (6) has been made and (III) the aggregate
amount of any distributions to all holders of the Company's Common Stock made
exclusively in cash within the 12 months preceding the expiration of such
tender or exchange offer and in respect of which no adjustment
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pursuant to paragraph (5) of this Section or this paragraph (6) has been made,
exceeds 15% of the product of the Current Market Price per share of the Common
Stock as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender or exchange offer (as it may be amended) times the
number of shares of Common Stock outstanding (including any tendered shares) on
the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Settlement Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Settlement Rate immediately prior to the close of
business on the date of the Expiration Time by a fraction (i) the numerator of
which shall be equal to (A) the product of (I) the Current Market Price per
share of the Common Stock on the date of the Expiration Time and (II) the
number of shares of Common Stock outstanding (including any tendered shares) on
the Expiration Time less (B) the amount of cash plus the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the transactions described in clauses (I), (II) and (III)
above (assuming in the case of clause (I) the acceptance, up to any maximum
specified in the terms of the tender or exchange offer, of Purchased Shares),
and (ii) the denominator of which shall be equal to the product of (A) the
Current Market Price per share of the Common Stock as of the Expiration Time
and (B) the number of shares of Common Stock outstanding (including any
tendered shares) as of the Expiration Time less the number of all shares
validly tendered and not withdrawn as of the Expiration Time (the shares deemed
so accepted, up to any such maximum, being referred to as the "Purchased
Shares").
(7) The reclassification of Common Stock into securities including
securities other than Common Stock (other than any reclassification upon a
Reorganization Event to which Section 5.6(b) applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and the "date fixed for such determination"
within the meaning of paragraph (4) of this Section), and (b) a subdivision,
split or combination, as the case may be, of
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the number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall
be deemed to be "the day upon which such subdivision or split becomes
effective" or "the day upon which such combination becomes effective", as the
case may be, and "the day upon which such subdivision, split or combination
becomes effective" within the meaning of paragraph (3) of this Section).
(8) The "Current Market Price" per share of Common Stock on any day
means the average of the daily Closing Prices for the 5 consecutive Trading
Days selected by the Company commencing not more than 30 Trading Days before,
and ending not later than, the earlier of the day in question and the day
before the "ex date" with respect to the issuance or distribution requiring
such computation. For purposes of this paragraph, the term "ex date", when
used with respect to any issuance or distribution, shall mean the first date on
which the Common Stock trades regular way on such exchange or in such market
without the right to receive such issuance or distribution.
(9) All adjustments to the Settlement Rate shall be calculated to the
nearest 1/10,000th of a share of Common Stock (or if there is not a nearest
1/10,000th of a share to the next lower 1/10,000th of a share). No adjustment
in the Settlement Rate shall be required unless such adjustment would require
an increase or decrease of at least one percent therein; provided, however,
that any adjustments which by reason of this subparagraph are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. If an adjustment is made to the Settlement Rate pursuant to
paragraph (1), (2), (3), (4), (5), (6), (7) or (10) of this Section 5.6(a), an
adjustment shall also be made to the Applicable Market Value solely to
determine which of clauses (a), (b) or (c) of the definition of Settlement Rate
in Section 5.1 will apply on the Purchase Contract Settlement Date. Such
adjustment shall be made by multiplying the Applicable Market Value by a
fraction of which the numerator shall be the Settlement Rate immediately after
such adjustment pursuant to paragraph (1), (2), (3), (4), (5), (6), (7) or (10)
of this Section 5.6(a) and the denominator shall be the Settlement Rate
immediately before such adjustment.
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(10) The Company may make such increases in the Settlement Rate, in
addition to those required by this Section, as it considers to be advisable in
order to avoid or diminish any income tax to any holders of shares of Common
Stock resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event treated
as such for income tax purposes or for any other reasons.
(b) Adjustment for Consolidation, Merger or Other Reorganization
Event. In the event of (i) any consolidation or merger of the Company, with or
into another Person (other than a merger or consolidation in which the Company
is the continuing corporation and in which the Common Stock outstanding
immediately prior to the merger or consolidation is not exchanged for cash,
securities or other property of the Company or another corporation), (ii) any
sale, transfer, lease or conveyance to another Person of the property of the
Company as an entirety or substantially as an entirety, (iii) any statutory
exchange of securities of the Company with another Person (other than in
connection with a merger or acquisition) or (iv) any liquidation, dissolution
or winding up of the Company other than as a result of or after the occurrence
of a Termination Event (any such event, a "Reorganization Event"), the
Settlement Rate will be adjusted to provide that each Holder of Securities will
receive on the Purchase Contract Settlement Date with respect to each Purchase
Contract forming a part thereof, the kind and amount of securities, cash and
other property receivable upon such Reorganization Event by a Holder of the
number of shares of Common Stock issuable on account of each Purchase Contract
if the Purchase Contract Settlement Date had occurred immediately prior to such
Reorganization Event, assuming such Holder of Common Stock is not a Person with
which the Company consolidated or into which the Company merged or which merged
into the Company or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an Affiliate of a constituent Person, and failed to
exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such Reorganization Event
(provided that if the kind or amount of securities, cash and other property
receivable upon such Reorganization Event is not the same for each share of
Common Stock held
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immediately prior to such Reorganization Event by other than a constituent
Person or an Affiliate thereof and in respect of which such rights of election
shall not have been exercised ("non-electing share"), then for the purpose of
this Section the kind and amount of securities, cash and other property
receivable upon such Reorganization Event by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). In the event of such a Reorganization Event, the Person
formed by such consolidation, merger or exchange or the Person which acquires
the assets of the Company or, in the event of a liquidation or dissolution of
the Company, the Company or a liquidating trust created in connection
therewith, shall execute and deliver to the Agent an agreement supplemental
hereto providing that the Holders of each Outstanding Security shall have the
rights provided by this Section 5.6. Such supplemental agreement shall provide
for adjustments which, for events subsequent to the effective date of such
supplemental agreement, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section. The above provisions of this
Section shall similarly apply to successive Reorganization Events.
Section 5.7. Notice of Adjustments and Certain Other Events.
(a) Whenever the Settlement Rate is adjusted as herein provided,
the Company shall:
(i) forthwith compute the adjusted Settlement Rate in
accordance with Section 5.6 and prepare and transmit to the Agent an
Officer Certificate setting forth the Settlement Rate, the method of
calculation thereof in reasonable detail, and the facts requiring such
adjustment and upon which such adjustment is based; and
(ii) within 10 Business Days following the occurrence of an
event that permits or requires an adjustment to the Settlement Rate
pursuant to Section 5.6 (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware), provide a
written notice to the Holders of the Securities of the occurrence of
such event and a statement in reasonable detail setting forth the
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method by which the adjustment to the Settlement Rate was determined
and setting forth the adjusted Settlement Rate.
(b) The Agent shall not at any time be under any duty or
responsibility to any Holder of Securities to determine whether any facts exist
which may require any adjustment of the Settlement Rate, or with respect to the
nature or extent or calculation of any such adjustment when made, or with
respect to the method employed in making the same. The Agent shall not be
accountable with respect to the validity or value (or the kind or amount) of
any shares of Common Stock, or of any securities or property, which may at the
time be issued or delivered with respect to any Purchase Contract; and the
Agent makes no representation with respect thereto. The Agent shall not be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock pursuant to a Purchase Contract or to comply with any of
the duties, responsibilities or covenants of the Company contained in this
Article.
Section 5.8. Termination Event; Notice.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of the
Holders to receive and the obligation of the Company to pay any Contract
Adjustment Payments, shall immediately and automatically terminate, without the
necessity of any notice or action by any Holder, the Agent or the Company, if,
on or prior to the Purchase Contract Settlement Date, a Termination Event shall
have occurred. Upon and after the occurrence of a Termination Event, the
Securities shall thereafter represent the right to receive the Preferred
Securities forming a part of such Securities in the case of Income PRIDES, or
Treasury Securities in the case of Growth PRIDES, in accordance with the
provisions of Section 4.2 and the Pledge Agreement, as applicable. Upon the
occurrence of a Termination Event, the Company shall promptly but in no event
later than two Business Days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in the
Register.
Section 5.9. Early Settlement.
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(a) Subject to and upon compliance with the provisions of this
Section 5.9, at the option of the Holder thereof, Purchase Contracts underlying
Securities, having an aggregate Stated Amount equal to $1,000 or an integral
multiple thereof, may be settled early ("Early Settlement") as provided herein.
In order to exercise the right to effect Early Settlement with respect to any
Purchase Contracts, the Holder of the Certificate evidencing such Purchase
Contracts shall deliver such Certificate to the Agent at the Corporate Trust
Office duly endorsed for transfer to the Company or in blank with the form of
Election to Settle Early on the reverse thereof duly completed and accompanied
by payment in the form of a certified or cashier's check payable to the order
of the Company in an amount (the "Early Settlement Amount") equal to (i) the
product of (A) the Stated Amount times (B) the number of Purchase Contracts
with respect to which the Holder has elected to effect Early Settlement plus
(ii) if such delivery is made with respect to any Purchase Contracts during the
period from the close of business on any Record Date next preceding any Payment
Date to the opening of business on such Payment Date, an amount equal to the
sum of (x) the Contract Adjustment Payments payable on such Payment Date with
respect to such Purchase Contracts plus (y) in the case of Income PRIDES
Certificate, the distributions on the related Preferred Securities payable on
such Payment Date. Except as provided in the immediately preceding sentence
and subject to the second to last paragraph of Section 5.2, no payment or
adjustment shall be made upon Early Settlement of any Purchase Contract on
account of any Contract Adjustment Payments accrued on such Purchase Contract
or on account of any dividends on the Common Stock issued upon such Early
Settlement. If the foregoing requirements are first satisfied with respect to
Purchase Contracts underlying any Securities at or prior
to 5:00 p.m., New York City time, on a Business Day, such day shall be the
"Early Settlement Date" with respect to such Securities and if such
requirements are first satisfied after 5:00 p.m., New York City time, on a
Business Day or on a day that is not a Business Day, the "Early Settlement
Date" with respect to such Securities shall be the next succeeding Business
Day.
(b) Upon Early Settlement of Purchase Contracts by a Holder of the
related Securities, the Company shall issue, and the Holder shall be entitled
to receive,
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________ shares of Common Stock on account of each Purchase Contract as to
which Early Settlement is effected (the "Early Settlement Rate"); provided,
however, that upon the Early Settlement of the Purchase Contracts, the Holder
of such related Securities will forfeit the right to receive any Deferred
Contract Adjustment Payments. The Early Settlement Rate shall initially be
equal to and shall be adjusted in the same manner and at the same time as the
Settlement Rate is adjusted. As promptly as practicable after Early Settlement
of Purchase Contracts in accordance with the provisions of this Section 5.9,
the Company shall issue and shall deliver to the Agent at the Corporate Trust
Office a certificate or certificates for the full number of shares of Common
Stock issuable upon such Early Settlement together with payment in lieu of any
fraction of a share, as provided in Section 5.10.
(c) The Company shall cause the shares of Common Stock issuable
upon Early Settlement of Purchase Contracts, and the related Preferred
Securities, in the case of Income PRIDES, or the related Treasury Securities,
in the case of Growth PRIDES, deliverable, to be issued and delivered, in the
case of such shares of Common Stock, and released from the Pledge by the
Collateral Agent and transferred, in the case of such Preferred Securities or
Treasury Securities, to the Agent, for delivery to the Holder thereof or its
designee, no later than the third Business Day after the applicable Early
Settlement Date.
(d) Upon Early Settlement of any Purchase Contracts, and subject
to receipt of shares of Common Stock from the Company and Preferred Securities
or Treasury Securities, as the case may be, from the Collateral Agent, as
applicable, the Agent shall, in accordance with the instructions provided by
the Holder thereof on the applicable form of Election to Settle Early on the
reverse of the Certificate evidencing the related Securities, (i) transfer to
the Holder the Preferred Securities or Treasury Securities, as the case may be,
forming a part of such Securities, and (ii) deliver to the Holder a certificate
or certificates for the full number of shares of Common Stock issuable upon
such Early Settlement together with payment in lieu of any fraction of a share,
as provided in Section 5.10.
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(e) In the event that Early Settlement is effected with respect to
Purchase Contracts underlying less than all the Securities evidenced by a
Certificate, upon such Early Settlement the Company shall execute and the Agent
shall authenticate, countersign and deliver to the Holder thereof, at the
expense of the Company, a Certificate evidencing the Securities as to which
Early Settlement was not effected.
(f) Holders may settle Securities early only in integral multiples
of 20 Income PRIDES or one GROWTH PRIDES.
Section 5.10. No Fractional Shares.
No fractional shares or scrip representing fractional shares of Common
Stock shall be issued or delivered upon settlement on the Purchase Contract
Settlement Date or upon Early Settlement of any Purchase Contracts or with
respect to the payment of Deferred Contract Adjustment Payments, if any, on the
Purchase Contract Settlement Date. If Certificates evidencing more than one
Purchase Contract shall be surrendered for settlement at one time by the same
Holder, the number of full shares of Common Stock which shall be delivered upon
settlement shall be computed on the basis of the aggregate number of Purchase
Contracts evidenced by the Certificates so surrendered. Instead of any
fractional share of Common Stock which would otherwise be deliverable upon
settlement of any Purchase Contracts on the Purchase Contract Settlement Date
or upon Early Settlement or with respect to the payment of any Deferred
Contract Adjustment Payments, the Company, through the Agent, shall make a cash
payment in respect of such fractional interest in an amount equal to the value
of such fractional shares times the Applicable Market Value. The Company shall
provide the Agent from time to time with sufficient funds to permit the Agent
to make all cash payments required by this Section 5.10 in a timely manner.
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Section 5.11. Charges and Taxes.
The Company will pay all stock transfer and similar taxes attributable
to the initial issuance and delivery of the shares of Common Stock pursuant to
the Purchase Contracts and in payment of any Deferred Contract Adjustment
Payments; provided, however, that the Company shall not be required to pay any
such tax or taxes which may be payable in respect of any exchange of or
substitution for a Certificate evidencing a Purchase Contract or any issuance
of a share of Common Stock in a name other than that of the registered Holder
of a Certificate surrendered in respect of the Purchase Contracts evidenced
thereby, other than in the name of the Agent, as custodian for such Holder, and
the Company shall not be required to issue or deliver such share certificates
or Certificates unless or until the Person or Persons requesting the transfer
or issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
ARTICLE VI
Remedies
Section 6.1. Unconditional Right of Holders to Receive Contract Adjustment
Payments and to Purchase Common Stock.
The Holder of any Income PRIDES or Growth PRIDES shall have the right,
which is absolute and unconditional (subject to the right of the Company to
defer payment thereof pursuant to Section 5.3 and subject to the forfeiture of
any Deferred Contract Adjustment Payments upon Early Settlement pursuant to
Section 5.9(b) or upon the occurrence of a Termination Event), to receive
payment of each installment of the Contract Adjustment Payments with respect to
the Purchase Contract constituting a part of such Security on the respective
Payment Date for such Security and to purchase Common Stock pursuant to such
Purchase Contract and, in each such case, to institute suit for the enforcement
of any such payment and right to purchase Common Stock, and such
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rights shall not be impaired without the consent of such Holder.
Section 6.2. Restoration of Rights and Remedies.
If any Holder has instituted any proceeding to enforce any right or
remedy under this Agreement and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to such Holder, then
and in every such case, subject to any determination in such proceeding, the
Company and such Holder shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of such
Holder shall continue as though no such proceeding had been instituted.
Section 6.3. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Certificates in the last
paragraph of Section 3.10, no right or remedy herein conferred upon or reserved
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
Section 6.4. Delay or Omission Not Waiver.
No delay or omission of any Holder to exercise any right or remedy
upon a default shall impair any such right or remedy or constitute a waiver of
any such right. Every right and remedy given by this Article or by law to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by such Holders.
Section 6.5. Undertaking for Costs.
All parties to this Agreement agree, and each Holder of Income PRIDES
or Growth PRIDES, by its acceptance of such Income PRIDES or Growth PRIDES
shall be deemed to have agreed, that any court may in its discretion
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require, in any suit for the enforcement of any right or remedy under this
Agreement, or in any suit against the Agent for any action taken, suffered or
omitted by it as Agent, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; provided that
the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Agent, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% of the
Outstanding Securities, or to any suit instituted by any Holder for the
enforcement of distributions on any Preferred Securities or Contract Adjustment
Payments on any Purchase Contract on or after the respective Payment Date
therefor in respect of any Security held by such Holder, or for enforcement of
the right to purchase shares of Common Stock under the Purchase Contracts
constituting part of any Security held by such Holder.
Section 6.6. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Agreement; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Agent or the Holders, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
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ARTICLE VII
The Agent
Section 7.1. Certain Duties and Responsibilities.
(a)(1) The Agent undertakes to perform, with respect to the
Securities, such duties and only such duties as are specifically set
forth in this Agreement and the Pledge Agreement, and no implied
covenants or obligations shall be read into this Agreement against
the Agent; and
(2) in the absence of bad faith or negligence on its part, the
Agent may, with respect to the Securities, conclusively rely, as to
the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the
Agent and conforming to the requirements of this Agreement, but in the
case of any certificates or opinions which by any provision hereof are
specifically required to be furnished to the Agent, the Agent shall be
under a duty to examine the same to determine whether or not they
conform to the requirements of this Agreement.
(b) No provision of this Agreement shall be construed to relieve
the Agent from liability for its own negligent action, its own negligent
failure to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the
effect of Subsection (a) of this Section;
(2) the Agent shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it shall be proved
that the Agent was negligent in ascertaining the pertinent facts;
and
(3) no provision of this Agreement shall require the Agent to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if adequate indemnity is not
provided to it.
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(c) Whether or not therein expressly so provided, every provision
of this Agreement relating to the conduct or affecting the liability of or
affording protection to the Agent shall be subject to the provisions of this
Section.
(d) The Agent is authorized to execute and deliver the Pledge
Agreement in its capacity as Agent.
Section 7.2. Notice of Default.
Within 30 days after the occurrence of any default by the Company
hereunder, of which a Responsible Officer of the Agent has actual knowledge,
the Agent shall transmit by mail to the Company and the Holders of Securities,
as their names and addresses appear in the Register, notice of such default
hereunder, unless such default shall have been cured or waived.
Section 7.3. Certain Rights of Agent.
Subject to the provisions of Section 7.1:
(a) the Agent may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by an Officer Certificate, Issuer Order or Issuer
Request, and any resolution of the Board of Directors of the Company may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Agreement the Agent
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Agent (unless other evidence be
herein specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officer Certificate of the Company;
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(d) the Agent may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Agent shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the Agent,
in its discretion, may make reasonable further inquiry or investigation into
such facts or matters related to the execution, delivery and performance of the
Purchase Contracts as it may see fit, and, if the Agent shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(f) the Agent may execute any of the powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or an
Affiliate and the Agent shall not be responsible for any misconduct or
negligence on the part of any agent or attorney or an Affiliate appointed with
due care by it hereunder.
Section 7.4. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Certificates shall be taken
as the statements of the Company and the Agent assumes no responsibility for
their accuracy. The Agent makes no representations as to the validity or
sufficiency of either this Agreement or of the Securities, or of the Pledge
Agreement or the Pledge. The Agent shall not be accountable for the use or
application by the Company of the proceeds in respect of the Purchase
Contracts.
Section 7.5. May Hold Securities.
Any Registrar or any other agent of the Company, or the Agent and its
Affiliates, in their individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with the Company, the Collateral
Agent or any other Person with the same rights
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it would have if it were not Registrar or such other agent, or the Agent.
Section 7.6. Money Held in Custody.
Money held by the Agent in custody hereunder need not be segregated
from the other funds except to the extent required by law. The Agent shall be
under no obligation to invest or pay interest on any money received by it
hereunder except as otherwise agreed in writing with the Company.
Section 7.7. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Agent from time to time reasonable
compensation for all services rendered by it hereunder;
(2) except as otherwise expressly provided herein, to
reimburse the Agent upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Agent in accordance
with any provision of this Agreement (including the reasonable
compensation and the expenses and disbursements of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(3) to indemnify the Agent and any predecessor Agent for, and
to hold it harmless against, any loss, liability or expense incurred
without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of its duties
hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
Section 7.8. Corporate Agent Required; Eligibility.
There shall at all times be an Agent hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under
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such laws to exercise corporate trust powers, having (or being a member of a
bank holding company having) a combined capital and surplus of at least
$50,000,000, subject to supervision or examination by Federal or State
authority and having a Corporate Trust Office in the Borough of Manhattan, The
City of New York, if there be such a corporation in the Borough of Manhattan,
The City of New York qualified and eligible under this Article and willing to
act on reasonable terms. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Agent shall cease to be eligible in accordance
with the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 7.9. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Agent and no appointment of a
successor Agent pursuant to this Article shall become effective until the
acceptance of appointment by the successor Agent in accordance with the
applicable requirements of Section 7.10.
(b) The Agent may resign at any time by giving written notice
thereof to the Company 60 days prior to the effective date of such resignation.
If the instrument of acceptance by a successor Agent required by Section 7.10
shall not have been delivered to the Agent within 30 days after the giving of
such notice of resignation, the resigning Agent may petition any court of
competent jurisdiction for the appointment of a successor Agent.
(c) The Agent may be removed at any time by Act of the Holders of
a majority in number of the Outstanding Securities delivered to the Agent and
the Company.
(d) if at any time
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(1) the Agent fails to comply with Section 310(b) of the TIA,
as if the Agent were an indenture trustee under an indenture qualified
under the TIA, after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, or
(2) the Agent shall cease to be eligible under Section 7.8
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Agent shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Agent or of its
property shall be appointed or any public officer shall take charge or
control of the Agent or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Agent, or (ii) any Holder who has been a bona fide Holder of a Security for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Agent and
the appointment of a successor Agent.
(e) If the Agent shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Agent for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Agent and
shall comply with the applicable requirements of Section 7.10. If no successor
Agent shall have been so appointed by the Company and accepted appointment in
the manner required by Section 7.10, any Holder who has been a bona fide Holder
of a Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Agent.
(f) The Company shall give, or shall cause such successor Agent to
give, notice of each resignation and each removal of the Agent and each
appointment of a successor Agent by mailing written notice of such event by
first-class mail, postage prepaid, to all Holders as their names and addresses
appear in the applicable
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Register. Each notice shall include the name of the successor Agent and the
address of its Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Agent,
every such successor Agent so appointed shall execute, acknowledge and deliver
to the Company and to the retiring Agent an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Agent
shall become effective and such successor Agent, without any further act, deed
or conveyance, shall become vested with all the rights, powers, agencies and
duties of the retiring Agent; but, on the request of the Company or the
successor Agent, such retiring Agent shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Agent all the
rights, powers and trusts of the retiring Agent and shall duly assign, transfer
and deliver to such successor Agent all property and money held by such
retiring Agent hereunder.
(b) Upon request of any such successor Agent, the Company shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Agent all such rights, powers and agencies
referred to in paragraph (a) of this Section.
(c) No successor Agent shall accept its appointment unless at the
time of such acceptance such successor Agent shall be qualified and eligible
under this Article.
Section 7.11. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Agent shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Agent, shall be the successor of the Agent hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Certificates shall have been
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authenticated and executed on behalf of the Holders, but not delivered, by the
Agent then in office, any successor by merger, conversion or consolidation to
such Agent may adopt such authentication and execution and deliver the
Certificates so authenticated and executed with the same effect as if such
successor Agent had itself authenticated and executed such Securities.
Section 7.12. Preservation of Information; Communications to Holders.
(a) The Agent shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders received by the
Agent in its capacity as Registrar.
(b) If three or more Holders (herein referred to as "applicants")
apply in writing to the Agent, and furnish to the Agent reasonable proof that
each such applicant has owned a Security for a period of at least six months
preceding the date of such application, and such application states that the
applicants desire to communicate with other Holders with respect to their
rights under this Agreement or under the Securities and is accompanied by a
copy of the form of proxy or other communication which such applicants propose
to transmit, then the Agent shall, within five Business Days after the receipt
of such application, afford such applicants access to the information preserved
at the time by the Agent in accordance with Section 7.12(a).
(c) Every Holder agrees with the Company and the Agent that none
of the Company, the Agent nor any agent of any of them shall be held
accountable by reason of the disclosure of any such information as to the names
and addresses of the Holders in accordance with Section 7.12(b), regardless of
the source from which such information was derived.
Section 7.13. No Obligations of Agent.
Except to the extent otherwise provided in this Agreement, the Agent
assumes no obligations and shall not be subject to any liability under this
Agreement, the Pledge Agreement or any Purchase Contract in respect of the
obligations of the Holder of any Security thereunder. The Company agrees, and
each Holder of a Certificate, by
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his acceptance thereof, shall be deemed to have agreed, that the Agent's
execution of the Certificates on behalf of the Holders shall be solely as agent
and attorney-in-fact for the Holders, and that the Agent shall have no
obligation to perform such Purchase Contracts on behalf of the Holders, except
to the extent expressly provided in Article Five hereof.
Section 7.14. Tax Compliance.
(a) The Agent, on its own behalf and on behalf of the Company,
will comply with all applicable certification, information reporting and
withholding (including "backup" withholding) requirements imposed by applicable
tax laws, regulations or administrative practice with respect to (i) any
payments made with respect to the Securities or (ii) the issuance, delivery,
holding, transfer, redemption or exercise of rights under the Securities. Such
compliance shall include, without limitation, the preparation and timely filing
of required returns and the timely payment of all amounts required to be
withheld to the appropriate taxing authority or its designated agent.
(b) The Agent shall comply with any written direction received
from the Company with respect to the application of such requirements to
particular payments or Holders or in other particular circumstances, and may
for purposes of this Agreement rely on any such direction in accordance with
the provisions of Section 7.1(a)(2) hereof.
(c) The Agent shall maintain all appropriate records documenting
compliance with such requirements, and shall make such records available, on
written request, to the Company or its authorized representative within a
reasonable period of time after receipt of such request.
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ARTICLE VIII
Supplemental Agreements
Section 8.1. Supplemental Agreements Without Consent of Holders.
Without the consent of any Holders, the Company and the Agent, at any
time and from time to time, may enter into one or more agreements supplemental
hereto, in form satisfactory to the Company and the Agent, for any of the
following purposes:
(1) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the covenants of
the Company herein and in the Certificates; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Agent; or
(4) to make provision with respect to the rights of Holders
pursuant to the requirements of Section 5.6(b); or
(5) except as provided for in Section 5.6, to cure any
ambiguity, to correct or supplement any provisions herein which may be
inconsistent with any other provisions herein, or to make any other
provisions with respect to such matters or questions arising under
this Agreement, provided such action shall not adversely affect the
interests of the Holders.
Section 8.2. Supplemental Agreements with Consent of Holders.
With the consent of the Holders of not less than 66 2/3% of the
outstanding Purchase Contracts voting together as one Class, by Act of said
Holders delivered to the Company and the Agent, the Company when authorized
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by a Board Resolution, and the Agent may enter into an agreement or agreements
supplemental hereto for the purpose of modifying in any manner the terms of the
Purchase Contracts, or the Pledge Agent provisions of this Agreement or the
rights of the Holders in respect of the Securities; provided, however, that no
such supplemental agreement shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) change any Payment Date;
(2) change the amount or the type of Collateral required to be
Pledged to secure a Holder's Obligations under the Purchase Contract,
impair the right of the Holder of any Purchase Contract to receive
distributions on the related Collateral (except for the rights of
Holders of Income PRIDES to substitute the Treasury Securities for the
Pledge Preferred Securities or the rights of holders of Growth PRIDES
to substitute Preferred Securities for the Pledged Treasury
Securities) or otherwise adversely affect the Holder's rights in or to
such Collateral or adversely alter the rights in or to such
Collateral;
(3) reduce any Contract Adjustment Payments or any Deferred
Contract Adjustment Payment, or change any place where, or the coin or
currency in which, any Contract Adjustment Payments is payable;
(4) impair the right to institute suit for the enforcement of
any Purchase Contract;
(5) reduce the number of shares of Common Stock to be
purchased pursuant to any Purchase Contract, increase the price to
purchase shares of Common Stock upon settlement of any Purchase
Contract, change the Purchase Contract Settlement Date or otherwise
adversely affect the Holder's rights under any Purchase Contract; or
(6) reduce the percentage of the outstanding Purchase
Contracts the consent of whose Holders is required for any such
supplemental agreement;
provided, that if any amendment or proposal referred to above would adversely
affect only the Income PRIDES or
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the Growth PRIDES, then only the affected class of Holder will be entitled to
vote on such amendment or proposal and such amendment or proposal shall not be
effective except with the consent of Holders of not less than 66 2/3% of such
class.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental agreement, but it
shall be sufficient if such Act shall approve the substance thereof.
Section 8.3. Execution of Supplemental Agreements.
In executing, or accepting the additional agencies created by, any
supplemental agreement permitted by this Article or the modifications thereby
of the agencies created by this Agreement, the Agent shall be entitled to
receive and (subject to Section 7.1) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental agreement
is authorized or permitted by this Agreement. The Agent may, but shall not be
obligated to, enter into any such supplemental agreement which affects the
Agent's own rights, duties or immunities under this Agreement or otherwise.
Section 8.4. Effect of Supplemental Agreements.
Upon the execution of any supplemental agreement under this Article,
this Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Agreement for all purposes; and every
Holder of Certificates theretofore or thereafter authenticated, executed on
behalf of the Holders and delivered hereunder shall be bound thereby.
Section 8.5. Reference to Supplemental Agreements.
Certificates authenticated, executed on behalf of the Holders and
delivered after the execution of any supplemental agreement pursuant to this
Article may, and shall if required by the Agent, bear a notation in form
approved by the Agent as to any matter provided for in such supplemental
agreement. If the Company shall so determine, new Certificates so modified as
to conform, in the opinion of the Agent and the Company, to any such
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supplemental agreement may be prepared and executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Agent in
exchange for Outstanding Certificates.
ARTICLE IX
Consolidation, Merger, Sale or Conveyance
Section 9.1. Covenant Not to Merge, Consolidate, Sell or Convey Property
Except Under Certain Conditions.
The Company covenants that it will not merge or consolidate with any
other Person or sell, assign, transfer, lease or convey all or substantially
all of its properties and assets to any Person or group of affiliated Persons
in one transaction or a series of related transactions, unless (i) either the
Company shall be the continuing corporation, or the successor (if other than
the Company) shall be a corporation organized and existing under the laws of
the United States of America or a State thereof or the District of Columbia and
such corporation shall expressly assume all the obligations of the Company
under the Purchase Contracts, this Agreement and the Pledge Agreement by one or
more supplemental agreements in form satisfactory to the Agent and the
Collateral Agent, executed and delivered to the Agent and the Collateral Agent
by such corporation, and (ii) the Company or such successor corporation, as the
case may be, shall not, immediately after such merger or consolidation, or such
sale, assignment, transfer, lease or conveyance, be in default in the
performance of any covenant or condition hereunder, under any of the Securities
or under the Pledge Agreement.
Section 9.2. Rights and Duties of Successor Corporation.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance and upon any such assumption by the successor corporation
in accordance with Section 9.1, such successor corporation shall succeed to and
be substituted for the Company with the same effect as if it had been named
herein as the
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Company. Such successor corporation thereupon may cause to be signed, and may
issue either in its own name or in the name of American Heritage Life
Investment Corporation, any or all of the Certificates evidencing Securities
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Agent; and, upon the order of such successor corporation,
instead of the Company, and subject to all the terms, conditions and
limitations in this Agreement prescribed, the Agent shall authenticate and
execute on behalf of the Holders and deliver any Certificates which previously
shall have been signed and delivered by the officers of the Company to the
Agent for authentication and execution, and any Certificate evidencing
Securities which such successor corporation thereafter shall cause to be signed
and delivered to the Agent for that purpose. All the Certificates so issued
shall in all respects have the same legal rank and benefit under this Agreement
as the Certificates theretofore or thereafter issued in accordance with the
terms of this Agreement as though all of such Certificates had been issued at
the date of the execution hereof.
In case of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance such change in phraseology and form (but not in substance)
may be made in the Certificates evidencing Securities thereafter to be issued
as may be appropriate.
Section 9.3. Opinion of Counsel to Agent.
The Agent, subject to Sections 7.1 and 7.3, shall receive an Opinion
of Counsel as conclusive evidence that any such consolidation, merger, sale,
assignment, transfer, lease or conveyance, and any such assumption, complies
with the provisions of this Article and that all conditions precedent to the
consummation of any such consolidation, merger, sale, assignment, transfer,
lease or conveyance have been met.
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ARTICLE X
Covenants
Section 10.1. Performance Under Purchase Contracts.
The Company covenants and agrees for the benefit of the Holders from
time to time of the Securities that it will duly and punctually perform its
obligations under the Purchase Contracts in accordance with the terms of the
Purchase Contracts and this Agreement.
Section 10.2. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York an office or agency where Certificates may be presented or surrendered for
acquisition of shares of Common Stock upon settlement of the Purchase Contracts
or Early Settlement and for transfer of Collateral upon occurrence of a
Termination Event, where Certificates may be surrendered for registration of
transfer or exchange, for a Collateral Substitution or re-establishment of an
Income PRIDES and where notices and demands to or upon the Company in respect
of the Securities and this Agreement may be served. The Company will give
prompt written notice to the Agent of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Agent
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Company hereby
appoints the Agent as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where Certificates may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Agent of any such designation or rescission
and of any change in
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the location of any such other office or agency. The Company hereby designates
as the place of payment for the Securities the Corporate Trust Office and
appoints the Agent at its Corporate Trust Office as paying agent in such city.
Section 10.3. Company to Reserve Common Stock.
The Company shall at all times prior to the Purchase Contract
Settlement Date reserve and keep available, free from preemptive rights, out of
its authorized but unissued Common Stock the full number of shares of Common
Stock issuable (x) against tender of payment in respect of all Purchase
Contracts constituting a part of the Securities evidenced by Outstanding
Certificates and (y) in payment of Deferred Contract Adjustment Payments, if
any, owed by the Company to the Holders.
Section 10.4. Covenants as to Common Stock.
The Company covenants that all shares of Common Stock which may be
issued against tender of payment in respect of any Purchase Contract
constituting a part of the Outstanding Securities and in payment of any
Deferred Contract Adjustment Payments will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable.
Section 10.5. Statements of Officers of the Company as to Default.
The Company will deliver to the Agent, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officer
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions hereof, and if the Company shall be in
default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
Attested by
By:
- ---------------------- ----------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO
Attested by
By:
- --------------------- ----------------------------------
Name:
Title:
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<PAGE> 87
EXHIBIT A
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF, EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT AGREEMENT.
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
Company or its agent for registration of transfer, exchange or payment, and any
Certificate issued is registered in the name of Cede & Co., or such other name
as requested by an authorized representative of The Depository Trust Company,
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.
No. _____ Number of Income PRIDES ___ Cusip No. ______
Form of Face of Income PRIDES Certificate
_____% Income PRIDES
This Income PRIDES Certificate certifies that ___________ is the
registered Holder of the number of Income PRIDES set forth above. Each Income
PRIDES represents (i) beneficial ownership by the Holder of one __% Trust
Originated Preferred Security (the "Preferred Security") of AHL Financing, a
Delaware statutory business trust (the "Trust"), having a liquidation amount of
$50, subject to the Pledge of such Preferred Security by such Holder pursuant
to the Pledge Agreement, and (ii) the rights and obligations of the Holder
under one Purchase Contract with American Heritage Life Investment Corporation,
a Florida corporation (the "Company"). All capitalized terms used herein which
are defined in the Purchase Contract Agreement have the meaning set forth
therein.
A-1
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Pursuant to the Pledge Agreement, the Preferred Securities
constituting part of each Income PRIDES evidenced hereby have been pledged to
the Collateral Agent, for the benefit of the Company, to secure the obligations
of the Holder under the Purchase Contract comprising a portion of such Income
PRIDES.
The Pledge Agreement provides that all payments of the Stated Amount
of, or cash distributions on, any Pledged Preferred Securities (as defined in
the Pledge Agreement) constituting part of the Income PRIDES received by the
Collateral Agent shall be paid by the Collateral Agent by wire transfer in same
day funds (i) in the case of (A) cash distributions with respect to Pledged
Preferred Securities and (B) any payments of the Stated Amount with respect to
any Preferred Securities that have been released from the Pledge pursuant to
the Pledge Agreement, to the Agent to the account designated by the Agent, no
later than 2:00 p.m., New York City time, on the Business Day such payment is
received by the Collateral Agent (provided that in the event such payment is
received by the Collateral Agent on a day that is not a Business Day or after
12:30 p.m., New York City time, on a Business Day, then such payment shall be
made no later than 10:30 a.m., New York City time, on the next succeeding
Business Day) and (ii) in the case of payments of the Stated Amount of any
Pledged Preferred Securities, to the Company on the relevant Payment Date (as
defined herein) in accordance with the terms of the Pledge Agreement, in full
satisfaction of the respective obligations of the Holders of the Income PRIDES
of which such Pledged Preferred Securities are a part under the Purchase
Contracts forming a part of such Income PRIDES. Distributions on any Preferred
Security forming part of an Income PRIDES evidenced hereby which are payable
quarterly in arrears on March 31, June 30, September 30 and December 31 each
year, commencing _______ __, 1997 (a "Payment Date"), shall, subject to receipt
thereof by the Agent from the Collateral Agent, be paid to the Person in whose
name this Income PRIDES Certificate (or a Predecessor Income PRIDES
Certificate) is registered at the close of business on the Record Date for such
Payment Date.
Each Purchase Contract evidenced hereby obligates the Holder of this
Income PRIDES Certificate to purchase, and the Company to sell, on _______ __,
2000 (the
A-2
<PAGE> 89
"Purchase Contract Settlement Date"), at a price equal to $50 (the "Stated
Amount"), a number of shares of Common Stock, par value $1.00 per share
("Common Stock"), of the Company, equal to the Settlement Rate or the Cash
Settlement Rate, as applicable, unless on or prior to the Purchase Contract
Settlement Date there shall have occurred a Termination Event with respect to
the Income PRIDES of which such Purchase Contract is a part, all as provided in
the Purchase Contract Agreement and more fully described on the reverse hereof.
The purchase price (the "Purchase Price") for the shares of Common Stock
purchased pursuant to each Purchase Contract evidenced hereby, if not paid
earlier, shall be paid on the Purchase Contract Settlement Date by application
of payment received in respect of the Stated Amount of the Pledged Preferred
Securities pledged to secure the obligations under such Purchase Contract of
the Holder of the Income PRIDES of which such Purchase Contract is a part. A
Holder may cause the Preferred Security pledged to secure the obligations under
the Purchase Contract of the Holder of the Income PRIDES of which such Purchase
Contract is a part to be repaid and the proceeds therefrom to be used to pay
the Purchase Price of the shares of Common Stock of the Company.
The Company shall pay, on each Payment Date, in respect of each
Purchase Contract forming part of an Income PRIDES evidenced hereby an amount
(the "Contract Adjustment Payments") equal to __% per annum of the Stated
Amount, computed on the basis of a 360 day year of twelve 30 day months,
subject to deferral at the option of the Company as provided in the Purchase
Contract Agreement and more fully described on the reverse hereof. Such
Contract Adjustment Payments shall be payable to the Person in whose name this
Income PRIDES Certificate (or a Predecessor Income PRIDES Certificate) is
registered at the close of business on the Record Date for such Payment Date.
Distributions on the Preferred Securities and Contract Adjustment
Payments will be payable at the office of the Agent in The City of New York or,
at the option of the Company, by check mailed to the address of the Person
entitled thereto as such address appears on the Income PRIDES Register.
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<PAGE> 90
Reference is hereby made to the further provisions set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Agent by manual signature, this Income PRIDES Certificate shall not be
entitled to any benefit under the Pledge Agreement or the Purchase Contract
Agreement or be valid or obligatory for any purpose.
A-4
<PAGE> 91
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
AMERICAN HERITAGE LIFE
INVESTMENT CORPORATION
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Attest:
- -------------------
Name:
Title:
HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts evidenced hereby)
By: THE FIRST NATIONAL BANK OF CHICAGO,
not individually but solely as
Attorney-in-Fact of such Holder
By:
-----------------------------------
Name:
Title:
Dated:
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Income PRIDES Certificates referred to in the
within mentioned Purchase Contract Agreement.
By: THE FIRST NATIONAL BANK
OF CHICAGO as Agent
By:
----------------------------------
Authorized Officer
A-5
<PAGE> 92
(Form of Reverse of Income PRIDES Certificate)
Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as of ______ __, 1997 (as supplemented from time to
time, the "Purchase Contract Agreement"), between the Company and The First
National Bank of Chicago, as Purchase Contract Agent (herein called the
"Agent"), to which Purchase Contract Agreement and supplemental agreements
thereto reference is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities thereunder of the
Agent, the Company, and the Holders and of the terms upon which the Income
PRIDES Certificates are, and are to be, executed and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of this
Income PRIDES Certificate to purchase, and the Company to sell, on the Purchase
Contract Settlement Date at a price equal to the Stated Amount (the "Purchase
Price"), a number of shares of Common Stock of the Company equal to the
Settlement Rate or the Cash Settlement Rate, as applicable, unless, on or prior
to the Purchase Contract Settlement Date, there shall have occurred a
Termination Event with respect to the Security of which such Purchase Contract
is a part. The "Settlement Rate" is equal to (a) if the Applicable Market
Value (as defined below) is equal to or greater than $____ (the "Threshold
Appreciation Price"), ____ shares of Common Stock per Purchase Contract, (b) if
the Applicable Market Value is less than the Threshold Appreciation Price but
is greater than $__, the number of shares of Common Stock per Purchase Contract
equal to the Stated Amount divided by the Applicable Market Value and (c) if
the Applicable Market Amount is less than or equal to $__, _____ shares of
Common Stock per Purchase Contract, in each case subject to adjustment as
provided in the Purchase Contract Agreement. No fractional shares of Common
Stock will be issued upon settlement of Purchase Contracts, as provided in the
Purchase Contract Agreement.
Each Purchase Contract evidenced hereby, which is settled either
through Early Settlement or Cash Settlement, shall obligate the Holder of the
related Income PRIDES to purchase at the Purchase Price, and the company to
sell, a number of new shares of Common Stock equal to the Early Settlement Rate
or the Cash Settlement
A-6
<PAGE> 93
Rate, as applicable. The "Cash Settlement Rate" is equal to 1.00125 times the
Settlement Rate. The Early Settlement Rate is equal to _____ shares of common
stock per Purchase Contract.
The "Applicable Market Value" means the average of the Closing Prices
per share of Common Stock on each of the thirty consecutive Trading Days ending
on the second Trading Day immediately preceding the Purchase Contract
Settlement Date. The "Closing Price" of the Common Stock on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of the Common Stock on the New York
Stock Exchange (the "NYSE") on such date or, if the Common Stock is not listed
for trading on the NYSE on any such date, as reported in the composite
transactions for the principal United States securities exchange on which the
Common Stock is so listed, or if the Common Stock is not so listed on a United
States national or regional securities exchange, as reported by The Nasdaq
Stock Market, or, if the Common Stock is not so reported, the last quoted bid
price for the Common Stock in the over-the-counter market as reported by the
National Quotation Bureau or similar organization, or, if such bid price is not
available, the market value of the Common Stock on such date as determined by a
nationally recognized independent investment banking firm retained for this
purpose by the Company. A "Trading Day" means a day on which the Common Stock
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
In accordance with the terms of the Purchase Contract Agreement, the
Holder of this Income PRIDES Certificate shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced
hereby by effecting a Cash Settlement or an Early Settlement. A Holder of an
Income PRIDES who fails to make an effective Cash Settlement or an Early
Settlement in respect of a Purchase Contract prior to a Purchase Contract
Settlement Date will be deemed to have elected to have requested the Trust to
deliver to the Company a principal amount of the Junior Subordinated
A-7
<PAGE> 94
Debenture, underlying the Preferred Security equal to the Stated Amount of the
Purchase Contract for application to the Purchase Price of the Common Stock.
The Company shall not be obligated to issue any shares of Common Stock
in respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate purchase
price for the shares of Common Stock to be purchased thereunder in the manner
herein set forth.
Each Purchase Contract evidenced hereby and the obligations and rights
of the Company and the Holder thereunder shall terminate if a Termination Event
shall have occurred. Upon the occurrence of a Termination Event, the Company
shall give written notice to the Agent and to the Holders, at their addresses
as they appear in the Income PRIDES Register. Upon and after the occurrence of
a Termination Event, the Collateral Agent shall release the Pledged Preferred
Security (as defined in the Pledge Agreement) forming a part of each Income
PRIDES, or the Liquidation Distribution received in respect of such Pledged
Preferred Security, from the Pledge. An Income PRIDES shall thereafter
represent the right to receive the Preferred Security forming a part of such
Income PRIDES, or the Liquidation Distribution received in respect of such
Preferred Security, and any accrued Contract Adjustment Payments on the
Purchase Contract forming a part of such Income PRIDES in accordance with the
terms of the Purchase Contract Agreement and the Pledge Agreement. Contract
Adjustment Payments shall cease to accrue in respect of any period from and
after the date of a Termination Event.
Under the terms of the Pledge Agreement, the Agent will be entitled to
exercise the voting and any other consensual rights pertaining to the Pledged
Preferred Securities. Upon receipt of notice of any meeting at which holders of
Preferred Securities are entitled to vote or solicitation of consents, waivers
or proxies of holders of Preferred Securities, the Agent shall, as soon as
practicable thereafter, mail to the Income PRIDES holders a notice (a)
containing such information as is contained in the notice or solicitation, (b)
stating that each Income PRIDES holder on the record date set by the Agent
therefor (which, to the extent possible, shall be the same date as the record
date for determining the holders of
A-8
<PAGE> 95
Preferred Securities entitled to vote) shall be entitled to instruct the Agent
as to the exercise of the voting rights pertaining to the Preferred Securities
constituting a part of such holder's Income PRIDES and (c) stating the manner
in which such instructions may be given. Upon the written request of the Income
PRIDES holders on such record date, the Agent shall endeavor insofar as
practicable to vote or cause to be voted, in accordance with the instructions
set forth in such requests, the maximum number of Preferred Securities as to
which any particular voting instructions are received. In the absence of
specific instructions from the Holder of an Income PRIDES, the Agent shall
abstain from voting the Preferred Security evidenced by such Income PRIDES.
Upon the occurrence of a Tax Event, Investment Company Event or
liquidation of the Trust, a principal amount of the Junior Subordinated
Debentures constituting the assets of the Trust and underlying the Preferred
Securities equal to the aggregate Stated Amount of the Pledged Preferred
Securities shall be delivered to the Collateral Agent in exchange for Pledged
Preferred Securities. Thereafter, the Junior Subordinated Debentures shall be
held by the Collateral Agent to secure the obligations of each Holder of Income
PRIDES to purchase shares of Common Stock under the Purchase Contracts
constituting a part of such Income PRIDES. Following the liquidation of the
Trust, the Holders and the Collateral Agent shall have such security interests,
rights and obligations with respect to the Junior Subordinated Debentures as
the Holders and the Collateral Agent had in respect of the Pledged Preferred
Securities, and any reference in the Purchase Contract Agreement or Pledge
Agreement to the Preferred Securities shall be deemed to be a reference to the
Junior Subordinated Debentures.
The Income PRIDES Certificates are issuable only in registered form
and only in denominations of a single Income PRIDES and any integral multiple
thereof. The transfer of any Income PRIDES Certificate will be registered and
Income PRIDES Certificates may be exchanged as provided in the Purchase
Contract Agreement. The Income PRIDES Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
permitted by the Purchase Contract Agreement. No service charge shall be
required for any such
A-9
<PAGE> 96
registration of transfer or exchange, but the Company and the Agent may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. A holder who elects to substitute a Treasury
Security for Preferred Securities, thereby creating Growth PRIDES, shall be
responsible for any fees or expenses payable in connection therewith. Except as
provided in the Purchase Contract Agreement, for so long as the Purchase
Contract underlying an Income PRIDES remains in effect, such Income PRIDES
shall not be separable into its constituent parts, and the rights and
obligations of the Holder of such Income PRIDES in respect of the Preferred
Security and Purchase Contract constituting such Income PRIDES may be
transferred and exchanged only as an Income PRIDES. The holder of an Income
PRIDES may substitute for the Pledged Preferred Securities securing its
obligation under the related Purchase Contract Treasury Securities in an
aggregate principal amount equal to the aggregate Stated Amount of the Pledged
Preferred Securities in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. From and after such Collateral
Substitution, the Security for which such Pledged Treasury Securities secures
the holder's obligation under the Purchase Contract shall be referred to as a
"Growth PRIDES." A Holder may make such Collateral Substitution only in
integral multiples of 20 Income PRIDES for each Growth PRIDES. Such Collateral
Substitution may cause the aggregate principal amount of this Certificate to be
increased or decreased; provided, however, the aggregate principal amount
outstanding under this Income PRIDES Certificate shall not exceed $_____. All
such adjustments to the aggregate principal amount of this Income PRIDES
Certificate shall be duly recorded by placing an appropriate notation on the
Schedule attached hereto.
A Holder of a Growth PRIDES may recreate Income PRIDES by delivering
to the Collateral Agent Preferred Securities with a Stated Amount equal to the
aggregate principal amount of the Pledged Treasury Securities in exchange for
the release of such Pledged Treasury Securities in accordance with the terms of
the Purchase Contract Agreement and the Pledge Agreement.
Subject to the next succeeding paragraph, the Company shall pay, on
each Payment Date, the Contract Adjustment Payments payable in respect of each
Purchase Contract to
A-10
<PAGE> 97
the Person in whose name the Income PRIDES Certificate evidencing such Purchase
Contract is registered at the close of business on the Record Date for such
Payment Date. Contract Adjustment Payments will be payable at the office of the
Agent in The City of New York or, at the option of the Company, by check mailed
to the address of the Person entitled thereto at such address as it appears on
the Income PRIDES Register.
The Company shall have the right, at any time prior to the Purchase
Contract Settlement Date, to defer the payment of any or all of the Contract
Adjustment Payments otherwise payable on any Payment Date, but only if the
Company shall give the Holders and the Agent written notice of its election to
defer such payment (specifying the amount to be deferred) as provided in the
Purchase Contract Agreement. Any Contract Adjustment Payments so deferred
shall bear additional Contract Adjustment Payments thereon at the rate of __%
per annum (computed on the basis of a 360 day year of twelve 30 day months),
compounding on each succeeding Payment Date, until paid in full (such deferred
installments of Contract Adjustment Payments together with the additional
Contract Adjustment Payments accrued thereon, are referred to herein as the
"Deferred Contract Adjustment Payments"). Deferred Contract Adjustment
Payments shall be due on the next succeeding Payment Date except to the extent
that payment is deferred pursuant to the Purchase Contract Agreement. No
Contract Adjustment Payments may be deferred to a date that is after the
Purchase Contract Settlement Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, the Holder of this Income PRIDES Certificate will receive on
the Purchase Contract Settlement Date, in lieu of a cash payment, a number of
shares of Common Stock (in addition to a number of shares of Common Stock equal
to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract
Adjustment Payments payable to the Holder of the Income PRIDES Certificate of
Securities divided by (y) the Applicable Market Value. No fractional shares of
Common Stock will be issued with respect to the payment of Deferred Contract
Adjustment Payments on the Purchase Contract Settlement Date, as provided in
the Purchase Contract Agreement.
A-11
<PAGE> 98
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then, until the Deferred Contract Adjustment
Payments have been paid, (a) the Company shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchase or acquisitions of shares of Common Stock in connection with the
satisfaction by the Company of its obligations under any employee benefit plans
or the satisfaction by the Company of its obligations pursuant to any contract
or security outstanding on the date of such event requiring the Company to
purchase shares of Common Stock, (ii) as a result of a reclassification of the
Company's capital stock or the exchange or conversion of one class or series of
the Company's capital stock for another class or series of the Company's
capital stock or (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or the security being converted or exchanged) or make any
guarantee payments with respect to the foregoing), (b) the Company shall not
make any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities (including guarantees) issued by the
Company that rank pari passu with such Contract Adjustment Payments and (c) the
Company shall not make any guarantee payments with respect to the foregoing.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of the
Holders to receive and the obligation of the Company to pay any Contract
Adjustment Payments or any Deferred Contract Adjustment Payments, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Agent or the Company, if, on or prior to the Purchase
Contract Settlement Date, a Termination Event shall have occurred. Upon the
occurrence of a Termination Event, the Company shall promptly but in no event
later than two business days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in the
Income PRIDES Register. Upon and after the occurrence of a Termination Event,
the Collateral Agent shall release the Preferred Securities from the Pledge in
accordance with the provisions of the Pledge Agreement.
A-12
<PAGE> 99
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement at the option of the Holder thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $1,000 or an
integral multiple thereof may be settled early ("Early Settlement") as provided
in the Purchase Contract Agreement. In order to exercise the right to effect
Early Settlement with respect to any Purchase Contracts evidenced by this
Income PRIDES Certificate, the Holder of this Income PRIDES Certificate shall
deliver this Income PRIDES Certificate to the Agent at the Corporate Trust
Office duly endorsed for transfer to the Company or in blank with the form of
Election to Settle Early set forth below duly completed and accompanied by
payment in the form of a certified or cashier's check payable to the order of
the Company in an amount (the "Early Settlement Amount") equal to (i) the
product of (A) the Stated Amount times (B) the number of Purchase Contracts
with respect to which the Holder has elected to effect Early Settlement, plus
(ii) if such delivery is made with respect to any Purchase Contracts during the
period from the close of business on any Record Date for any Payment Date to
the opening of business on such Payment Date, an amount equal to the sum of (x)
the Contract Adjustment Payments payable on such Payment Date with respect to
such Purchase Contracts plus from the period from, but not including the Early
Settlement Date, to the Payment Date (y) the distributions with respect to the
related Pledged Preferred Securities payable on such Payment Date from the
period from, but not including the Early Settlement Date, to the Payment Date.
Upon Early Settlement of Purchase Contracts by a Holder of the related
Securities, the Pledged Preferred Securities underlying such Securities shall
be released from the Pledge as provided in the Pledge Agreement and the Holder
shall be entitled to receive, a number of shares of Common Stock on account of
each Purchase Contract forming part of a Income PRIDES as to which Early
Settlement is effected equal to the Early Settlement Rate; provided however,
that upon the Early Settlement of the Purchase Contracts, the Holder thereof
will forfeit the right to receive any Deferred Contract Adjustment Payments on
such Purchase Contracts. The Early Settlement Rate shall initially be equal to
____ shares of Common Stock and shall be adjusted in the same manner and at the
same time as the Settlement Rate is adjusted as provided in the Purchase
Contract Agreement.
A-13
<PAGE> 100
Upon registration of transfer of this Income PRIDES Certificate, the
transferee shall be bound (without the necessity of any other action on the
part of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement), under the terms of the Purchase Contract
Agreement and the Purchase Contracts evidenced hereby and the transferor shall
be released from the obligations under the Purchase Contracts evidenced by this
Income PRIDES Certificate. The Company covenants and agrees, and the Holder,
by his acceptance hereof, likewise covenants and agrees, to be bound by the
provisions of this paragraph.
The Holder of this Income PRIDES Certificate, by his acceptance
hereof, authorizes the Agent to enter into and perform the related Purchase
Contracts forming part of the Income PRIDES evidenced hereby on his behalf as
his attorney-in-fact, expressly withholds any consent to the assumption (i.e.,
affirmance) of the Purchase Contracts by the Company or its trustee in the
event that the Company becomes the subject of a case under the Bankruptcy Code,
agrees to be bound by the terms and provisions thereof, covenants and agrees to
perform his obligations under such Purchase Contracts, consents to the
provisions of the Purchase Contract Agreement, authorizes the Agent to enter
into and perform the Pledge Agreement on his behalf as his attorney-in-fact,
and consents to the Pledge of the Preferred Securities underlying this Income
PRIDES Certificate pursuant to the Pledge Agreement. The Holder further
covenants and agrees, that, to the extent and in the manner provided in the
Purchase Contract Agreement and the Pledge Agreement, but subject to the terms
thereof, payments in respect to the Stated Amount of the Pledged Preferred
Securities on the Purchase Contract Settlement Date shall be paid by the
Collateral Agent to the Company in satisfaction of such Holder's obligations
under such Purchase Contract and such Holder shall acquire no right, title or
interest in such payments.
Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of at least 66 2/3% of
the Purchase Contracts.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
A-14
<PAGE> 101
The Company, the Agent and its Affiliates and any agent of the Company
or the Agent may treat the Person in whose name this Income PRIDES Certificate
is registered as the owner of the Income PRIDES evidenced hereby for the
purpose of receiving payments of distributions payable quarterly on the
Preferred Securities, receiving payments of Contract Adjustment Payments and
any Deferred Contract Adjustment Payments, performance of the Purchase
Contracts and for all other purposes whatsoever, whether or not any payments in
respect thereof be overdue and notwithstanding any notice to the contrary, and
neither the Company, the Agent nor any such agent shall be affected by notice
to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for inspection
at the offices of the Agent.
A-15
<PAGE> 102
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ------------Custodian------------
(cust) (minor)
Under Uniform Gifts to Minors Act
---------------------------------
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above list.
---------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
----------------------------------------------------------
- -------------------------------------------------------------------------------
Please insert Social Security or Taxpayer I.D. or other
Identifying Number of Assignee
-------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please Print or Type Name and Address Including Postal Zip Code
- -----------------------------------------------------------------------------
of Assignee the within Income PRIDES Certificates and all rights
- -----------------------------------------------------------------------------
thereunder, hereby irrevocably constituting and appointing
- -----------------------------------------------------------------------------
attorney to transfer said Income PRIDES Certificates on the books of American
Heritage Life Investment Corporation with full power of substitution in the
premises.
Dated:
------------------ ------------------------------------------
Signature
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Income PRIDES
Certifi- cates in every particular, without
alteration or enlargement or any change
whatsoever.
A-16
<PAGE> 103
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Purchase Contract Settlement
Date of the Purchase Contracts underlying the number of Income PRIDES evidenced
by this Income PRIDES Certificate be registered in the name of, and delivered,
together with a check in payment for any fractional share, to the undersigned
at the address indicated below unless a different name and address have been
indicated below. If shares are to be registered in the name of a Person other
than the undersigned, the undersigned will pay any transfer tax payable
incident thereto.
Dated:
------------------------ --------------------------------
Signature
If shares are to be registered
in the name of and delivered to REGISTERED HOLDER
a Person other than the Holder,
please print such Person's name
and address:
Please print name and address of
Registered Holder:
- -------------------------------- -----------------------------------
Name Name
- -------------------------------- -----------------------------------
Address Address
- -------------------------------- -----------------------------------
- -------------------------------- -----------------------------------
- -------------------------------- -----------------------------------
Social Security or other
Taxpayer Identification
Number, if any
-----------------------------------
A-17
<PAGE> 104
ELECTION TO SETTLE EARLY
The undersigned Holder of this Income PRIDES Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Income PRIDES evidenced by this Income
PRIDES Certificate specified below. The option to effect Early Settlement may
be exercised only with respect to Purchase Contracts underlying Income PRIDES
with an aggregate Stated Amount equal to $1,000 or an integral multiple
thereof. The undersigned Holder directs that a certificate for shares of
Common Stock deliverable upon such Early Settlement be registered in the name
of, and deliv- ered, together with a check in payment for any fractional share
and any Income PRIDES Certificate representing any Income PRIDES evidenced
hereby as to which Early Settlement of the related Purchase Contracts is not
effected, to the undersigned at the address indicated below unless a different
name and address have been indicated below. Pledged Preferred Securities
deliverable upon such Early Settlement will be transferred in accordance with
the transfer instructions set forth below. If shares are to be registered in
the name of a Person other than the undersigned, the undersigned will pay any
transfer tax payable incident thereto.
Dated:
--------------------- -------------------------
Signature
A-18
<PAGE> 105
Number of Securities evidenced hereby as to which Early Settlement of
the related Purchase Contracts is being elected:
If shares of Common Stock REGISTERED HOLDER
or Income PRIDES Certificates
are to be registered in the
name of and delivered to and
Pledged Preferred Securities
0are to be transferred to a
Person other than the Holder, please
print such Person's name and address:
Please print name and address
of Registered Holder:
- ------------------------------ -----------------------------------
Name Name
- ------------------------------ -----------------------------------
Address Address
- ------------------------------ -----------------------------------
- ------------------------------ -----------------------------------
Social Security or other
Taxpayer Identification
Number, if any
-----------------------------------
Transfer Instructions for Pledged Preferred Securities Transferable Upon Early
Settlement or a Termination Event:
- --------------------------------------------------
- --------------------------------------------------
- --------------------------------------------------
A-19
<PAGE> 106
[TO BE ATTACHED TO GLOBAL CERTIFICATES]
SCHEDULE OF INCREASES OF DECREASED IN GLOBAL CERTIFICATE
The following increases or decreases in this Global
Certificate have been made:
<TABLE>
<CAPTION>
=================================================================================================
Principal Amount Signature of
Amount of Amount of of this Global authorized
decrease in increase in Certificate officer of
Principal Amount Principal Amount following such Trustee or
of this Global of this Global decrease or Securities
Date Certificate Certificate increase Custodian
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
=================================================================================================
</TABLE>
A-20
<PAGE> 107
EXHIBIT B
THIS CERTIFICATE IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
PURCHASE CONTRACT AGREEMENT (AS HEREINAFTER DEFINED) AND IS REGISTERED IN THE
NAME OF THE CLEARING AGENCY OR A NOMINEE THEREOF. THIS CERTIFICATE MAY NOT BE
EXCHANGED IN WHOLE OR IN PART FOR A CERTIFICATE REGISTERED, AND NO TRANSFER OF
THIS CERTIFICATE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH CLEARING AGENCY OR A NOMINEE THEREOF,
B-1
<PAGE> 108
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PURCHASE CONTRACT
AGREEMENT.
Unless this Certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) to the
Company or its agent for registration of transfer, exchange or payment, and any
Certificate issued is registered in the name of Cede & Co., or such other name
as requested by an authorized representative of The Depository Trust Company,
and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered
owner hereof, Cede & Co., has an interest herein.
No. ______ Number of Growth PRIDES _______ Cusip No. _______
Form of Face of Growth PRIDES Certificate
This Growth PRIDES Certificate certifies that __________ is the
registered Holder of the number of Growth PRIDES set forth above. Each Growth
PRIDES represents (i) beneficial ownership, of a Treasury Security having a
principal amount at maturity equal to $1,000, subject to the Pledge of such
Preferred security by such Holder pursuant to the Pledge Agreement, and (ii)
the rights and obligations of the Holder under 20 Purchase Contracts with
American Heritage Life Investment Corporation, a Florida Corporation (the
"Company"). All capitalized terms used herein which are defined in the
Purchase Contract Agreement have the meaning set forth therein.
Pursuant to the Pledge Agreement, the Treasury Securities constituting
part of each Growth PRIDES evidenced hereby have been pledged to the Collateral
Agent, for the benefit of the Company, to secure the obligations of the Holder
under the Purchase Contract comprising a portion of such Growth PRIDES.
Each Purchase Contract evidenced hereby obligates the Holder of this
Growth PRIDES Certificate to purchase, and the Company, to sell, on ________
__, 2000 (the "Purchase Contract Settlement Date"), at a price equal to $50
(the "Stated Amount"), a number of shares of Common stock, par value $1.00 per
share ("Common Stock"), of the Company equal to the Settlement Rate or the Cash
Settlement Rate, as applicable, unless on or prior to the Purchase Contract
Settlement Date there shall have occurred a Termination Event with respect to
the Growth PRIDES of which such Purchase Contract is a part, all as provided in
the Purchase Contract Agreement and more fully described on the reverse hereof.
The purchase price for the shares of Common Stock
B-2
<PAGE> 109
purchased pursuant to each Purchase Contract evidenced hereby will be paid by
application of the Proceeds from the Treasury Securities pledged to secure the
obligations under such Purchase Contract in accordance with the terms of the
Pledge Agreement.
The Company shall pay on each Payment Date in respect of each Purchase
Contract evidenced hereby an amount (the "Contract Adjustment Payments") equal
to __% per annum of the Stated Amount, computed on the basis of the actual
number of days elapsed in a year of 360 day year of twelve 30 day months, as
the case may be, subject to deferral at the option of the Company as provided
in the Purchase Contract Agreement and more fully described on the reverse
hereof. Such Contract Adjustment Payments shall be payable to the Person in
whose name this Growth PRIDES Certificate (or a Predecessor Growth PRIDES
Certificate) is registered at the close of business on the Record Date for such
Payment Date.
Contract Adjustment Payments will be payable at the office of the
Agent in The City of New York or, at the option of the Company, by check mailed
to the address of the Person entitled thereto as such address appears on the
Growth PRIDES Register.
Reference is hereby made to the further provisions set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Agent by manual signature, this Growth PRIDES Certificate shall not be
entitled to any benefit under the Pledge Agreement or the Purchase Contract
Agreement or be valid or obligatory for any purpose.
B-3
<PAGE> 110
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
Attest:
- ----------------------
Name:
Title:
HOLDER SPECIFIED ABOVE (as to
obligations of such Holder under the
Purchase Contracts evidenced hereby)
By: THE FIRST NATIONAL BANK OF CHICAGO
not individually but solely as
Attorney-in-Fact of such Holder
By:
-----------------------------------------
Name:
Title:
Dated:
AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Growth PRIDES referred to in the within-mentioned
Purchase Contract Agreement.
By: THE FIRST NATIONAL BANK
OF CHICAGO as Agent
By:
------------------------------------------
Authorized Officer
B-4
<PAGE> 111
(Form of Reverse of
Growth PRIDES Certificate)
Each Purchase Contract evidenced hereby is governed by a Purchase
Contract Agreement, dated as OF _______ __, 1997 (as supplemented from time to
time, the "Purchase Contract Agreement") between the Company and The First
National Bank of Chicago, as Purchase Contract Agent (including its successors
thereunder, herein called the "Agent"), to which the Purchase Contract
Agreement and supplemental agreements thereto reference is hereby made for a
description of the respective rights, limitations of rights, obligations,
duties and immunities thereunder of the Agent, the Company and the Holders and
of the terms upon which the Growth PRIDES Certificates are, and are to be,
executed and delivered.
Each Purchase Contract evidenced hereby obligates the Holder of this
Growth PRIDES Certificate to purchase, and the Company to sell, on the Purchase
Contract Settlement Date at a price equal to the Stated Amount (the "Purchase
Price"), a number of shares of Common Stock of the Company equal to the
Settlement Rate times 1.00125 (the "Cash Settlement Rate"), unless, on or prior
to the Purchase Contract Settlement Date, there shall have occurred a
Termination Event or an Early Settlement with respect to the Security of which
such Purchase Contract is a part. The "Settlement Rate" is equal to (a) if the
Applicable Market Value (as defined below) is equal to or greater than $____
(the "Threshold Appreciation Price"), _____ shares of Common Stock per Purchase
Contract, (b) if the Applicable Market Value is less than the Threshold
Appreciation Price but is greater than $__, _____ shares of Common Stock per
Purchase Contract equal to the Stated Amount divided by the Applicable Market
Value and (c) if the Applicable Market Amount is less than or equal to $__,
_____ shares of Common Stock per Purchase Contract, in each case subject to
adjustment as provided in the Purchase Contract Agreement. No fractional
shares of Common Stock will be issued upon settlement of Purchase Contracts, as
provided in the Purchase Contract Agreement.
The "Applicable Market Value" means the average of the Closing Prices
per share of Common Stock on each of the thirty consecutive Trading Days ending
on the second Trading Day immediately preceding the Purchase Contract
Settlement Date. The "Closing Price" of the Common Stock on any date of
determination means the closing sale price (or, if no closing price is
reported, the last reported sale price) of the Common Stock on the New York
Stock Exchange (the "NYSE") on such date or, if the Common Stock is not listed
for trading on the NYSE on any such date, as reported in the composite
transactions for the principal
B-5
<PAGE> 112
United States securities exchange on which the Common Stock is so listed, or if
the Common Stock is not so listed on a United States national or regional
securities exchange, as reported by The Nasdaq Stock Market, or, if the Common
Stock is not so reported, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by the National Quotation Bureau or similar
organization, or, if such bid price is not available, the market value of the
Common Stock on such date as determined by a nationally recognized independent
investment banking firm retained for this purpose by the Company. A "Trading
Day" means a day on which the Common Stock (A) is not suspended from trading on
any national or regional securities exchange or association or over-the-counter
market at the close of business and (B) has traded at least once on the
national or regional securities exchange or association or over-the-counter
market that is the primary market for the trading of the Common Stock.
In accordance with the terms of the Purchase Contract Agreement, the
Holder of this Growth PRIDES Certificate shall pay the Purchase Price for the
shares of Common Stock purchased pursuant to each Purchase Contract evidenced
hereby by effecting either an Early Settlement of each such Purchase Contract
or by applying a principal amount of the Pledged Treasury Securities underlying
such Holder's Growth PRIDES equal to the Stated Amount of such Purchase
Contract to the purchase of the Common Stock.
The Company shall not be obligated to issue any shares of Common Stock
in respect of a Purchase Contract or deliver any certificates therefor to the
Holder unless it shall have received payment in full of the aggregate purchase
price for the shares of Common Stock to be purchased thereunder in the manner
herein set forth.
Each Purchase Contract evidenced hereby and the obligations and rights
of the Company and the Holder thereunder shall terminate if a Termination Event
shall have occurred. Upon the occurrence of a Termination Event, the Company
shall give written notice to the Agent and to the Holders, at their addresses
as they appear in the Growth PRIDES Register. Upon and after the occurrence of
a Termination Event, the Collateral Agent shall release the Pledged Treasury
Securities (as defined in the Pledge Agreement) forming a part of each Growth
PRIDES. A Growth PRIDES shall thereafter represent the right to receive any
accrued Contract Adjustment Payments on the Purchase Contract forming a part of
such Growth PRIDES in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. Contract Adjustment Payments shall cease
to accrue in respect of any period from and after the date of a Termination
Event.
B-6
<PAGE> 113
The Growth PRIDES Certificates are issuable only in registered form
and only in denominations of a single Growth PRIDES and any integral multiple
thereof. The transfer of any Growth PRIDES Certificate will be registered and
Growth PRIDES Certificates may be exchanged as provided in the Purchase
Contract Agreement. The Growth PRIDES Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents
permitted by the Purchase Contract Agreement. No service charge shall be
required for any such registration of transfer or exchange, but the Company and
the Agent may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. A holder who elects to
substitute Preferred Securities for a Treasury Security, thereby creating
Income PRIDES, shall be responsible for any fees or expenses associated
therewith. Except as provided in the Purchase Contract Agreement, for so long
as the Purchase Contract underlying a Growth PRIDES remains in effect, such
Growth PRIDES shall not be separable into its constituent parts, and the rights
and obligations of the Holder of such Growth PRIDES in respect of the Treasury
Security and Purchase Contract constituting such Growth PRIDES may be
transferred and exchanged only as a Growth PRIDES. The holder of a Growth
PRIDES may substitute for the Pledged Treasury Securities securing its
obligations under the related Purchase Contract Preferred Securities with an
aggregate Stated Amount equal to the aggregate principal amount of the Pledged
Treasury Securities in accordance with the terms of the Purchase Contract
Agreement and the Pledge Agreement. From and after such substitution, the
Holder's Security shall be referred to as an "Income PRIDES." Such
substitution may cause the aggregate principal amount of this Certificate to be
increased or decreased; provided, however, the aggregate principal amount
outstanding under this Growth PRIDES Certificate shall not exceed $______. All
such adjustments to the aggregate principal amount of this Growth PRIDES
Certificate shall be duly recorded by placing an appropriate notation on the
Schedule attached hereto.
A Holder of an Income PRIDES may recreate a Growth PRIDES by
delivering to the Collateral Agent Treasury Securities in an aggregate
principal amount equal to the aggregate Stated Amount of the Pledged Preferred
Securities in exchange for the release of such Pledged Preferred Securities in
accordance with the terms of the Purchase Contract Agreement and the Pledge
Agreement. Any such recreation of a Growth PRIDES may be effected only in
multiples of 20 Income PRIDES for each Growth PRIDES.
Subject to the next succeeding paragraph, the Company shall pay, on
each Payment Date, the Contract Adjustment Payments payable in respect of each
Purchase Contract to the Person in
B-7
<PAGE> 114
whose name the Growth PRIDES Certificate evidencing such Purchase Contract is
registered at the close of business on the Record Date for such Payment Date.
Contract Adjustment Payments will be payable at the office of the Agent in The
City of New York or, at the option of the Company, by check mailed to the
address of the Person entitled thereto at such address as it appears on the
Growth PRIDES Register.
The Company shall have the right, at any time prior to the Purchase
Contract Settlement Date, to defer the payment of any or all of the Contract
Adjustment Payments otherwise payable on any Payment Date, but only if the
Company shall give the Holders and the Agent written notice of its election to
defer such payment (specifying the amount to be deferred) as provided in the
Purchase Contract Agreement. Any Contract Adjustment Payments so deferred
shall bear additional Contract Adjustment Payments thereon at the rate of ____%
per annum (computed on the basis of a 360 day year of twelve 30 day months),
compounding on each succeeding Payment Date, until paid in full (such deferred
installments of Contract Adjustment Payments together with the additional
Contract Adjustment Payments accrued thereon, are referred to herein as the
"Deferred Contract Adjustment Payments"). Deferred Contract Adjustment
Payments shall be due on the next succeeding Payment Date except to the extent
that payment is deferred pursuant to the Purchase Contract Agreement. No
Contract Adjustment Payments may be deferred to a date that is after the
Purchase Contract Settlement Date.
In the event that the Company elects to defer the payment of Contract
Adjustment Payments on the Purchase Contracts until the Purchase Contract
Settlement Date, the Holder of this Growth PRIDES Certificate will receive on
the Purchase Contract Settlement Date, in lieu of a cash payment, a number of
shares of Common Stock (in addition to a number of shares of Common Stock equal
to the Settlement Rate) equal to (x) the aggregate amount of Deferred Contract
Adjustment Payments payable to the Holder of the Growth PRIDES Certificate of
Securities divided by (y) the Applicable Market Value. No fractional shares of
Common Stock will be issued with respect to the payment of Deferred Contract
Adjustment Payments on the Purchase Contract Settlement Date, as provided in
the Purchase Contract Agreement.
In the event the Company exercises its option to defer the payment of
Contract Adjustment Payments, then, until the Deferred Contract Adjustment
Payments have been paid, (a) the Company shall not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchase or acquisitions of shares of Common Stock in connection
B-8
<PAGE> 115
with the satisfaction by the Company of its obligations under any employee
benefit plans or the satisfaction by the Company of its obligations pursuant to
any contract or security outstanding on the date of such event requiring the
Company to purchase shares of Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged) or make any guarantee payments with respect to the foregoing), (b)
the Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities (including
guarantees) issued by the Company that rank pari passu with or junior to such
Contract Adjustment Payments and (c) the Company shall not make any guarantee
payments with respect to the foregoing.
The Purchase Contracts and the obligations and rights of the Company
and the Holders thereunder, including, without limitation, the rights of the
Holders to receive and the obligation of the Company to pay any Contract
Adjustment Payments or any Deferred Contract Adjustment Payments, shall
immediately and automatically terminate, without the necessity of any notice or
action by any Holder, the Agent or the Company, if, on or prior to the Purchase
Contract Settlement Date, a Termination Event shall have occurred. Upon the
occurrence of a Termination Event, the Company shall promptly but in no event
later than two business days thereafter give written notice to the Agent, the
Collateral Agent and to the Holders, at their addresses as they appear in the
Growth PRIDES Register. Upon and after the occurrence of a Termination Event,
the Collateral Agent shall release the Treasury Securities from the Pledge in
accordance with the provisions of the Pledge Agreement.
Subject to and upon compliance with the provisions of the Purchase
Contract Agreement at the option of the Holder thereof, Purchase Contracts
underlying Securities having an aggregate Stated Amount equal to $1,000 or an
integral multiple thereof may be settled early ("Early Settlement") as provided
in the Purchase Contract Agreement. In order to exercise the right to effect
Early Settlement with respect to any Purchase Contracts evidenced by this
Growth PRIDES Certificate, the Holder of this Growth PRIDES Certificate shall
deliver this Growth PRIDES Certificate to the Agent at the Corporate Trust
Office duly endorsed for transfer to the Company or in blank with the form of
Election to Settle Early set forth below duly completed and accompanied by
payment in the form of a certified or cashier's check payable get to
B-9
<PAGE> 116
the order of the Company in an amount (the "Early Settlement Amount") equal
to (i) the product of (A) the Stated Amount times (B) the number of Purchase
Contracts with respect to which the Holder has elected to effect Early
Settlement, plus (ii) if such delivery is made with respect to any Purchase
Contracts during the period from the close of business on any Record Date for
any Payment Date to the opening of business on such Payment Date, an amount
equal to the Contract Adjustment Payments payable on such Payment Date with
respect to such Purchase Contracts from the period from, but not including the
Early Settlement Date, to the Payment Date. Upon Early Settlement of Purchase
Contracts by a Holder of the related Securities, the Pledged Treasury
Securities underlying such Securities shall be released from the Pledge as
provided in the Pledge Agreement and the Holder shall be entitled to receive, a
number of shares of Common Stock on account of each Purchase Contract forming
part of a Growth PRIDES as to which Early Settlement is effected equal to
______ shares of Common Stock per Purchase Contract (the "Early Settlement
Rate"); provided however, that upon the Early Settlement of the Purchase
Contracts, the Holder thereof will forfeit the right to receive any Deferred
Contract Adjustment Payments on such Purchase Contracts. The Early Settlement
Rate shall initially be equal to _______ shares of Common Stock per Growth
PRIDES and shall be adjusted in the same manner and at the same time as the
Settlement Rate is adjusted as provided in the Purchase Contract Agreement.
Upon registration of transfer of this Growth PRIDES Certificate, the
transferee shall be bound (without the necessity of any other action on the
part of such transferee, except as may be required by the Agent pursuant to the
Purchase Contract Agreement), under the terms of the Purchase Contract
Agreement and the Purchase Contracts evidenced hereby and the transferor shall
be released from the obligations under the Purchase Contracts evidenced by this
Growth PRIDES Certificate. The Company covenants and agrees, and the Holder,
by his acceptance hereof, likewise covenants and agrees, to be bound by the
provisions of this paragraph.
The Holder of this Growth PRIDES Certificate, by his acceptance
hereof, authorizes the Agent to enter into and perform the related Purchase
Contracts forming part of the Growth PRIDES evidenced hereby on his behalf as
his attorney-in-fact, expressly withholds any consent to the assumption (i.e.,
affirmance) of the Purchase Contracts by the Company or its trustee in the
event that the Company becomes the subject of a case under the Bankruptcy Code,
agrees to be bound by the terms and provisions thereof, covenants and agrees to
perform his obligations under such Purchase Contracts, consents to the
provisions of the
B-10
<PAGE> 117
Purchase Contract Agreement, authorizes the Agent to enter into and perform the
Pledge Agreement on his behalf as his attorney-in-fact, and consents to the
Pledge of the Treasury Securities underlying this Growth PRIDES Certificate
pursuant to the Pledge Agreement. The Holder further covenants and agrees,
that, to the extent and in the manner provided in the Purchase Contract
Agreement and the Pledge Agreement, but subject to the terms thereof, payments
in respect to the Stated Amount of the Pledged Treasury Securities on the
Purchase Contract Settlement Date shall be paid by the Collateral Agent to the
Company in satisfaction of such Holder's obligations under such Purchase
Contract and such Holder shall acquire no right, title or interest in such
payments.
Subject to certain exceptions, the provisions of the Purchase Contract
Agreement may be amended with the consent of the Holders of at least 66 2/3% of
the Purchase Contracts.
The Purchase Contracts shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York.
The Company, the Agent and its Affiliates and any agent of the Company
or the Agent may treat the Person in whose name this Growth PRIDES Certificate
is registered as the owner of the Growth PRIDES evidenced hereby for the
purpose of receiving payments of interest on the Treasury Securities, receiving
payments of Contract Adjustment Payments and any Deferred Contract Adjustment
Payments, performance of the Purchase Contracts and for all other purposes
whatsoever, whether or not any payments in respect thereof be overdue and
notwithstanding any notice to the contrary, and neither the Company, the Agent
nor any such agent shall be affected by notice to the contrary.
The Purchase Contracts shall not, prior to the settlement thereof,
entitle the Holder to any of the rights of a holder of shares of Common Stock.
A copy of the Purchase Contract Agreement is available for inspection
at the offices of the Agent.
B-11
<PAGE> 118
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ------------Custodian------------
(cust) (minor)
Under Uniform Gifts to Minors Act
---------------------------------
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
Additional abbreviations may also be used though not in the above list.
----------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto
----------------------------------------------------------
- -------------------------------------------------------------------------------
Please insert Social Security or Taxpayer I.D. or other Identifying Number of
Assignee
---------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Please Print or Type Name and Address Including Postal Zip Code
- ------------------------------------------------------------------------------
of Assignee the within Growth PRIDES Certificates and all rights
- -------------------------------------------------------------------------------
thereunder, hereby irrevocably constituting and appointing
- -------------------------------------------------------------------------------
attorney to transfer said Growth PRIDES Certificates on the books of MCN
Corporation with full power of substitution in the premises.
Dated:
------------------ ---------------------------------------
Signature
NOTICE: The signature to this assignment
must correspond with the name as it appears
upon the face of the within Growth PRIDES
Certifi- cates in every particular, without
alteration or enlargement or any change
whatsoever.
B-12
<PAGE> 119
SETTLEMENT INSTRUCTIONS
The undersigned Holder directs that a certificate for shares of Common
Stock deliverable upon settlement on or after the Purchase Contract Settlement
Date of the Purchase Contracts underlying the number of Growth PRIDES evidenced
by this Growth PRIDES Certificate be registered in the name of, and delivered,
together with a check in payment for any fractional share, to the undersigned
at the address indicated below unless a different name and address have been
indicated below. If shares are to be registered in the name of a Person other
than the undersigned, the undersigned will pay any transfer tax payable
incident thereto.
Dated:
---------------------------- --------------------------------
Signature
If shares are to be registered
in the name of and delivered to REGISTERED HOLDER
a Person other than the Holder,
please print such Person's name
and address:
Please print name and address
of Registered Holder:
- ---------------------------- --------------------------------
Name Name
- ---------------------------- --------------------------------
Address Address
- ---------------------------- --------------------------------
- ---------------------------- --------------------------------
Social Security or other
Taxpayer Identification
Number, if any
------------------
B-13
<PAGE> 120
ELECTION TO SETTLE EARLY
The undersigned Holder of this Growth PRIDES Certificate hereby
irrevocably exercises the option to effect Early Settlement in accordance with
the terms of the Purchase Contract Agreement with respect to the Purchase
Contracts underlying the number of Growth PRIDES evidenced by this Growth
PRIDES Certificate specified below. The option to effect Early Settlement may
be exercised only with respect to Purchase Contracts underlying Growth PRIDES
with an aggregate Stated Amount equal to $1,000 or an integral multiple
thereof. The undersigned Holder directs that a certificate for shares of
Common Stock deliverable upon such Early Settlement be registered in the name
of, and deliv- ered, together with a check in payment for any fractional share
and any Growth PRIDES Certificate representing any Growth PRIDES evidenced
hereby as to which Early Settlement of the related Purchase Contracts is not
effected, to the undersigned at the address indicated below unless a different
name and address have been indicated below. Pledged Treasury Securities
deliverable upon such Early Settlement will be transferred in accordance with
the transfer instructions set forth below. If shares are to be registered in
the name of a Person other than the undersigned, the undersigned will pay any
transfer tax payable incident thereto.
Dated:
------------------------------- -----------------------------
Signature
B-14
<PAGE> 121
Number of Securities evidenced hereby as to which Early Settlement of
the related Purchase Contracts is being elected:
If shares of Common Stock REGISTERED HOLDER
or Growth PRIDES Certificates
are to be registered
in the name of and delivered
to and Pledged Treasury
Securities are to be
transferred to a Person
other than the Holder, please
print such Person's name and address:
Please print name and address of
Registered Holder:
- ------------------------------------ ------------------------------------
Name Name
- ------------------------------------ ------------------------------------
Address Address
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
Social Security or other
Taxpayer Identification
Number, if any
--------------------
Transfer Instructions for Pledged Treasury Securities Transferable Upon Early
Settlement or a Termination Event:
- ----------------------------------------------------------
- ----------------------------------------------------------
- ----------------------------------------------------------
B-15
<PAGE> 122
[TO BE ATTACHED TO GLOBAL CERTIFICATES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL CERTIFICATE
The following increases or decreases in this Global
Certificate have been made:
<TABLE>
<CAPTION>
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Principal Amount Signature of
Amount of Amount of of this Global authorized
decrease in increase in Certificate officer of
Principal Amount Principal Amount following such Trustee or
of this Global of this Global decrease or Securities
Date Certificate Certificate increase Custodian
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------------------------
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</TABLE>
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<PAGE> 123
EXHIBIT C
INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trust
Administration Department
Re: FELINE PRIDES of American Heritage Life
Investment Corporation (the "Company"), and
AHL Financing
We hereby notify you in accordance with Section 4.1 of the
Pledge Agreement, dated as of ________ __, 1997, among the Company, yourselves,
as Collateral Agent, and ourselves, as Purchase Contract Agent and as
attorney-in- fact for the holders of [Income PRIDES] [Growth PRIDES] from time
to time, that the holder of securities listed below (the "Holder") has elected
to substitute [$_____ aggregate principal amount of Treasury Securities]
[$_______Stated Amount of Preferred Securities] in exchange for the [Pledged
Preferred Securities] [Pledged Treasury Securities] held by you in accordance
with the Pledge Agreement and has delivered to us a notice stating that the
Holder has Transferred [Treasury Securities] [Preferred Securities] to you, as
Collateral Agent. We hereby instruct you, upon receipt of such [Pledged
Treasury Securities] [Pledged Preferred Securities], to release the Preferred
Securities] [Treasury Securities] related to such [Income PRIDES] [Growth
PRIDES] to us in accordance with the Holder's instructions.
Date: THE FIRST NATIONAL BANK OF CHICAGO
---------------
By:
-----------------------------
Name:
Title:
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Preferred Securities] for the [Pledged Preferred
Securities] [Pledged Treasury Securities]:
- -------------------------------- ---------------------------------
Name Social Security or other
Taxpayer Identification
Number, if any
- --------------------------------
Address
- --------------------------------
- --------------------------------
C1
<PAGE> 124
EXHIBIT D
INSTRUCTION TO PURCHASE CONTRACT AGENT
The First National Bank of Chicago
One First National Plaza
Suite 6363
Chicago, IL 60670
Attention: Corporate Trust
Administration Department
Re: FELINE PRIDES of American Heritage Life Investment
Corporation (the "Company"), and AHL Financing
The undersigned Holder hereby notifies you that it has
delivered to The Chase Manhattan Bank, as Collateral Agent, $_______ aggregate
principal amount of [Treasury Securities] [Preferred Securities] in exchange
for the [Pledged Preferred Securities] [Pledged Treasury Securities] held by
the Collateral Agent, in accordance with Section 4.1 of the Pledge Agreement,
dated __________ __, 1997, between you, the Company and the Collateral Agent.
The undersigned Holder hereby instructs you to instruct the Collateral Agent to
release to you on behalf of the undersigned Holder the [Pledged Preferred
Securities] [Pledged Treasury Securities] related to such [Income PRIDES]
[Growth PRIDES].
Dated: --------------------------------
-------------- Signature
Please print name and address of Registered Holder:
- ------------------------- -------------------------
Name Social Security or other
Taxpayer Identification
Number, if any
- -------------------------
Address
- -------------------------
- -------------------------
- -------------------------
D-1
<PAGE> 1
EXHIBIT 4(g)
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION,
THE FIRST NATIONAL BANK
OF CHICAGO
AND
THE CHASE MANHATTAN BANK
FORM OF PLEDGE AGREEMENT
Dated as of ________ __, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Pledge; Control and Perfection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.1. The Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2. Control and Perfection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3. Distributions on Pledged Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4. Substitution, Release, Repledge and Settlement of Preferred Securities . . . . . . . . . . . . . . . 12
Section 4.1. Substitution of Preferred Securities and the Establishment of Growth PRIDES . . . . . . . . . . . . 12
Section 4.2. Pledge of Preferred Securities and Re-establishment of Income PRIDES . . . . . . . . . . . . . . . . 12
Section 4.3. Termination Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.4. Cash Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4.5. Early Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.6. Application of Proceeds Settlement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. Voting Rights -- Preferred Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6. Rights and Remedies; Investment Company Event; Tax Event etc. . . . . . . . . . . . . . . . . . . . 17
Section 6.1. Rights and Remedies of the Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 6.2. Tax Event, Investment Company Event, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 7. Representation and Warranties; Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.1. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.2. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8. The Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.1. Appointment, Powers and Immunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.2. Instructions of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.3. Reliance by Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8.4. Rights in Other Capacities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.5. Non-Reliance on Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.6. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.7. Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.8. Resignation of Collateral Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.9. Right to Appoint Agent or Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.10. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.11. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.1. Amendment Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.2. Amendment with Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.3. Execution of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.4. Effect of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.5. Reference to Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 10.1. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.3. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10.4. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.5. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.7. Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 10.8. Security Interest Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
EXHIBIT A INSTRUCTION TO COLLATERAL AGENT
EXHIBIT B INSTRUCTION TO PURCHASE CONTRACT AGENT
iii
<PAGE> 5
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of ________, 1997 (this "Agreement"), among
American Heritage Life Investment Corporation, a Florida corporation (the
"Company"), The Chase Manhattan Bank, a New York banking corporation, not
individually but solely as collateral agent (in such capacity, together with
its successors in such capacity, the "Collateral Agent") and in its capacity as
a "securities intermediary" as defined in Section 8-102(a)(14) of Revised
Article 8 (as defined herein) (in such capacity, together with its successors
in such capacity, the "Securities Intermediary"), and The First National Bank
of Chicago, not individually but solely as purchase contract agent and as
attorney-in-fact of the Holders (as defined in the Purchase Contract Agreement)
from time to time of the Securities (as hereinafter defined) (in such capacity,
together with its successors in such capacity, the "Purchase Contract Agent")
under the Purchase Contract Agreement (as hereinafter defined).
RECITALS
The Company and the Purchase Contract Agent are parties to the
Purchase Contract Agreement, dated as of the date hereof (as modified and
supplemented and in effect from time to time, the "Purchase Contract
Agreement"), pursuant to which there may be issued up to 1,725,000 FELINE
PRIDES (the "Securities").
Each Security, at issuance, consists of a unit (the "Income PRIDES")
comprised of (a) one stock purchase contract (the "Purchase Contract") under
which (i) the Holder will purchase from the Company on ______ __, 2000, for an
amount equal to the Stated Amount, a number of shares of Common Stock equal to
the Settlement Rate or the Cash Settlement Rate, as applicable, and (ii) the
Company will pay the Holder Contract Adjustment Payments, and (b) beneficial
ownership of a ___% Trust Originated Preferred Security (a "Preferred
Security") issued by AHL Financing (the "Trust"), having a liquidation amount
equal to $50 (the "Stated Amount") and maturing on _______ __, 2002, unless
settled earlier.
Pursuant to the terms of the Purchase Contract Agreement and the
Purchase Contracts, the Holders, from time to time, of the Securities have
irrevocably
<PAGE> 6
authorized the Purchase Contract Agent, as attorney-in-fact of such
Holders, among other things, to execute and deliver this Agreement on behalf of
such Holders and to grant the pledge provided hereby of the Preferred
Securities and any Treasury Securities (as defined below) delivered in exchange
therefor to secure each Holder's obligations under the related Purchase
Contract, as provided herein and subject to the terms hereof. Upon such pledge
the Preferred Securities will be beneficially owned by the Holders but will be
owned of record by the Purchase Contract Agent subject to the Pledge hereunder.
Accordingly, the Company, the Collateral Agent and the Purchase
Contract Agent, on its own behalf and as attorney-in-fact of the Holders from
time to time of the Securities, agree as follows:
Section 1.
Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(b) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Article, Section or other subdivision;
(c) the following terms have the meanings assigned to them in
the Purchase Contract Agreement: (i) Act, (ii) Agent, (iii) Board
Resolution, (iv) Cash Settlement, (v) Cash Settlement Rate, (vi)
Certificate, (vii) Collateral Settlement, (viii) Common Stock, (ix)
Contract Adjustment Payments, (x) Early Settlement, (xi) Early
Settlement Amount, (xii) Early Settlement Date, (xiii) Junior
Subordinated Debentures, (xiv) Opinion of Counsel, (xv) Outstanding
Securities, (xvi) Purchase Contract, (xvii) Purchase Contract
Settlement Date, (xviii) Purchase Price, (xix) Repayment Price, (xx)
Settlement Rate, (xxi) Termination Event, and (xxii) Underwriting
Agreement;
2
<PAGE> 7
(d) the following terms have the meanings assigned to them in the
Declaration: (i) Investment Company Event, (ii) Liquidation
Distribution, (iii) Institutional Trustee, and (iv) Tax Event.
"Agreement" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more agreements
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Bankruptcy Code" means title 11 of the United States Code, or any
other law of the United States that from time to time provides a uniform system
of bankruptcy laws.
"Business Day" means any day other than a Saturday, a Sunday or any
other day on which banking institutions in The City of New York (in the State
of New York) are permitted or required by any applicable law to close.
"Cash" means any coin or currency of the United States as at the time
shall be legal tender for payment of public and private debts.
"Code" has the meaning specified in Section 6.1 hereof.
"Collateral" has the meaning specified in Section 2.1 hereof.
"Collateral Account" means the trust account (number ___________)
maintained at The Chase Manhattan Bank in the name "The First National Bank of
Chicago, as Purchase Contract Agent on behalf of the holders of certain
securities of AHL Financing, Collateral Account subject to the security
interest of The Chase Manhattan Bank, as Collateral Agent, for the benefit of
American Heritage Life Investment Corporation, as pledgee" and any successor
account.
"Collateral Agent" has the meaning specified in the first paragraph of
this instrument.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor
3
<PAGE> 8
shall have become such, and thereafter "Company" shall mean such successor.
"Declaration" means the Amended and Restated Declaration of Trust of
the Trust, dated as of __________ __, 1997, among the Company as sponsor, the
trustees named therein and the holders from time to time of undivided
beneficial interests in the assets of the Trust.
"Growth PRIDES" means a Purchase Contract with respect to which
Treasury Securities have been substituted for Preferred Securities as
collateral to secure the Holder's obligations under such Purchase Contract.
"Holder" when used with respect to a Security, or a Purchase Contract
constituting a part thereof, means The Depository Trust Company (or its
nominee) as the registered holder of an Income PRIDES or a Growth PRIDES, as
the case may be.
"Intermediary" means any entity that in the ordinary course of its
business maintains securities accounts for others and is acting in that
capacity.
"Permitted Investments" means any one of the following which shall
mature on the next succeeding Business Day (i) any evidence of indebtedness
with an original maturity of 365 days or less issued, or directly and fully
guaranteed, or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof or such indebtedness
constitutes a general obligation of it); (ii) deposits, certificates of deposit
or acceptances with an original maturity of 365 days or less of any institution
which is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than US$ 200.0 million at the time of
deposit; (iii) investments with an original maturity of 365 days or less of any
Person that is fully and unconditionally guaranteed by a bank referred to in
clause (ii); (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States Government or issued by any agency thereof
4
<PAGE> 9
and backed by the full faith and credit of the United States Government; (v)
investments in commercial paper, other than commercial paper issued by the
Company or its affiliates, of any corporation incorporated under the laws of the
United States or any State thereof, which commercial paper has a rating at the
time of purchase at least equal to "A-1" by Standard & Poor's Ratings Services
or at least equal to "P-1" by Moody's Investors Service, Inc.; and (vi)
investments in money market funds registered under the Investment Company Act of
1940, as amended, which have net assets of at least $200.0 million and at least
85.0% of whose assets consist of securities and other obligations of the types
described in clauses (i) through (v) above.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Pledge" has the meaning specified in Section 2.1 hereof.
"Pledged Preferred Securities" has the meaning specified in Section
2.1 hereof.
"Pledged Treasury Securities" has the meaning specified in Section
2.1 hereof.
"Preferred Securities" has the meaning specified in the Recitals.
"Proceeds" means all interest, dividends, cash, instruments,
securities, financial assets (as defined in Section 8-102(a)(9) of Revised
Article 8) and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Collateral.
"Purchase Contract" has the meaning specified in the Recitals.
"Purchase Contract Agent" has the meaning specified in the first
paragraph of this instrument.
5
<PAGE> 10
"Purchase Contract Agreement" has the meaning specified in the
Recitals.
"Revised Article 8" means the 1994 Official Text of Revised Article 8
of the Uniform Commercial Code, together with conforming and miscellaneous
amendments to Articles 1, 3, 4, 5, 9 and 10, 1994 Official Text, as adopted
by the American Law Institute and the National Conference of Commissioners on
Uniform State Laws and approved by the American Bar Association on February 14,
1995.
"Securities" has the meaning specified in the Recitals.
"Securities Intermediary" has the meaning specified in the preamble to
this Agreement.
"Security Entitlement" has the meaning set forth in Section
8.102(a)(7) of Revised Article 8.
"Stated Amount" has the meaning specified in the Recitals.
"TRADES" means the Treasury/Reserve Automated Debt Entry System
maintained by the Federal Reserve Bank of New York pursuant to the TRADES
Regulations.
"TRADES Regulations" means the regulations of the United States
Department of the Treasury, published at 31 C.F.R. Part 357, as amended from
time to time. Unless otherwise defined herein, all terms defined in the TRADES
Regulations are used herein as therein defined.
"Transfer" means, with respect to the Collateral and in accordance
with the instructions of the Collateral Agent, the Purchase Contract Agent or
the Holder, as applicable:
(i) in the case of Collateral consisting of securities which
cannot be delivered by book-entry or which the parties agree
are to be delivered in physical form, delivery in
appropriate physical form to the recipient accompanied by
any duly executed instruments of transfer, assignments in
blank, transfer tax stamps and any other documents necessary
6
<PAGE> 11
to constitute a legally valid transfer to the recipient;
(ii) in the case of Collateral consisting of securities
maintained in book-entry form (other than Treasury
Securities) by (A) causing such securities to be credited to
a book-entry securities account of the recipient or an
Intermediary and (B) causing such Intermediary, if any, (i)
to send to the recipient confirmation of the transfer of the
relevant interest in such Collateral to the recipient and
(ii) to identify by book-entry or otherwise such Collateral
as subject to the relevant interest in favor of the
recipient or such other method as may be effective under
applicable law; and
(iii) in the case of Treasury Securities in book-entry form, by
causing a "securities intermediary" (as defined in Section
8-102(a)(14) of Revised Article 8) to (i) credit a
"securities entitlement" (as defined in Section 8-102(a)(17)
of Revised Article 8) with respect to such securities to a
securities account maintained by or on behalf of the
recipient; (ii) to issue a confirmation to the Collateral
Agent with respect to such credit and (iii) to make
appropriate notations in its books to reflect the security
interest of the Collateral Agent in such Treasury
Securities.
"Treasury Security" means a zero-coupon U.S. Treasury Security
maturing on _______ __, 2000 (Cusip Number ___________) which are the principal
strips of the ___% U.S. Treasury Securities which mature on ______ __, 2000.
"Trust" has the meaning specified in the Recitals.
"Value" with respect to any item of Collateral on any date means, as
to (i) a Preferred Security, the Stated Amount, (ii) Cash, the face amount
thereof and (iii) Treasury Securities, the aggregate principal amount thereof
at maturity.
7
<PAGE> 12
Section 2. Pledge; Control and Perfection.
Section 2.1. The Pledge. The Holders from time to time acting through
the Purchase Contract Agent, as their attorney-in-fact, hereby pledge and grant
to the Collateral Agent, for the benefit of the Company, as collateral security
for the performance when due by such Holders of their respective obligations
under the related Purchase Contracts, a security interest in (i) all of the
right, title and interest of such Holders (a) in the Preferred Securities
constituting a part of the securities and all Proceeds thereof (including any
Proceeds from the repayment of the Preferred Securities by the Trust) and any
Treasury Securities delivered in exchange for such Preferred Securities in
accordance with Section 4 hereof, in each case that have been Transferred to or
received by the Collateral Agent and not released by the Collateral Agent to
such Holders under the provisions of this Agreement (the "Collateral"); (b) in
payments made by Holders pursuant to Section 4.4; (c) in the Collateral Account
and all securities, financial assets and other property credited thereto and all
security entitlements related thereto; and (d) in any Junior Subordinated
Debentures delivered to the Collateral Agent upon the occurrence of a Tax Event
or an Investment Company Event or a liquidation of the Trust as provided in
Section 6.3. Prior to or concurrently with the execution and delivery of this
Agreement, the Purchase Contract Agent, on behalf of the initial Holders of the
Income PRIDES, shall cause the Preferred Securities comprising a part of the
Income PRIDES to be delivered to the Collateral Agent for the benefit of the
Company by physically delivering such securities to the Securities Intermediary
endorsed in blank and causing the Securities Intermediary to credit the
Collateral Account with such securities and send the Collateral Agent a
confirmation of the deposit of such securities. In the event a Holder of Income
PRIDES so elects, such Holder may Transfer Treasury Securities to the Collateral
Agent for the benefit of the Company in exchange for the release by the
Collateral Agent on behalf of the Company of Preferred Securities to the
Purchase Contract Agent on behalf of such Holder. Treasury Securities shall be
Transferred to the Collateral Account maintained by the Collateral Agent at the
Securities Intermediary by book-entry transfer to the Collateral Account in
accordance with the TRADES Regulations and by the notation by the
8
<PAGE> 13
Securities Intermediary on its books that a Security Entitlement with respect to
such Treasury Securities has been credited to the Collateral Account. For
purposes of perfecting the Pledge under applicable law, including, to the extent
applicable, the TRADES Regulations, the Uniform Commercial Code as adopted and
in effect in any applicable jurisdiction or Revised Article 8 as made applicable
by the TRADES Regulations, the Collateral Agent shall be the agent of the
Company as provided herein. The pledge provided in this Section 2.1 is herein
referred to as the "Pledge" and the Preferred Securities or Treasury Securities
subject to the Pledge, excluding any Preferred Securities or Treasury Securities
released from the Pledge as provided in Section 4 hereof, are hereinafter
referred to as "Pledged Preferred Securities" or the "Pledged Treasury
Securities," respectively. Subject to the Pledge and the provisions of Section
2.2 hereof, the Holders from time to time shall have full beneficial ownership
of the Collateral. Whenever directed by the Collateral Agent acting on behalf of
the Company, the Securities Intermediary shall have the right to reregister the
Preferred Securities or any other securities held in physical form in its name.
Except as may be required in order to release Preferred Securities in
connection with a Holder's election to convert its investment from an Income
Pride to a Growth Pride, or except as otherwise required to release securities
as specified herein, the Collateral Agent shall not relinquish physical
possession of any certificate evidencing a Preferred Security prior to the
termination of this Agreement. If it becomes necessary for the Collateral
Agent to relinquish physical possession of a certificate in order to release a
portion of the Preferred Securities evidenced thereby from the Pledge, the
Collateral Agent shall use its best efforts to obtain physical possession of a
replacement certificate evidencing any Preferred Securities remaining subject
to the Pledge hereunder registered to it or indorsed in blank within fifteen
days of the date it relinquished possession. The Collateral Agent shall
promptly notify the Company of its failure to obtain possession of any such
replacement certificate as required hereby.
Section 2.2. Control and Perfection. In connection with the Pledge
granted in Section 2.1, and subject to
9
<PAGE> 14
the other provisions of this Agreement, the Holders from time to time acting
through the Purchase Contract Agent, as their attorney-in-fact, hereby authorize
and direct the Securities Intermediary (without the necessity of obtaining the
further consent of the Purchase Contract Agent or any of the Holders), to comply
with and follow any instructions and entitlement orders (as defined in Section
8-102(a)(8) of Revised Article 8) that the Collateral Agent on behalf of the
Company may give in writing with respect to the Collateral Account, the
Collateral credited thereto and any security entitlements with respect to any
thereof. Such instructions and entitlement orders may, without limitation,
direct the Securities Intermediary to transfer, redeem, sell, liquidate, assign,
deliver or otherwise dispose of the Preferred Securities, the Treasury
Securities and any security entitlements with respect thereto and to pay and
deliver any income, proceeds or other funds derived therefrom to the Company.
The Holders from time to time acting through the Purchase Contract Agent hereby
further authorize and direct the Collateral Agent, as agent of the Company, to
itself issue instructions and entitlement orders, and to otherwise take action,
with respect to the Collateral Account, the Collateral credited thereto and any
security entitlements with respect to any thereof, pursuant to the terms and
provisions hereof, all without the necessity of obtaining the further consent of
the Purchase Contract Agent or any of the Holders. In addition, to further
protect and perfect the Pledge, the Securities Intermediary agrees that it will,
until New York adopts Revised Article 8, at all times mark its books with
respect to the Collateral Account to show that all securities credited thereto
are subject to the Pledge in favor of the Collateral Agent for the benefit of
the Company. The Collateral Agent shall be the Agent of the Company and shall
act as directed in writing by the Company. Without limiting the generality of
the foregoing, the Collateral Agent shall issue entitlement orders to the
Securities Intermediary when and as directed by the Company.
Section 3. Distributions on Pledged Collateral. So long as the Purchase
Contract Agent is the registered owner of the Pledged Preferred Securities it
shall receive all payments thereon. If the Pledged Preferred Securities are
reregistered, such that the Collateral Agent becomes the registered holder, all
payments of the
10
<PAGE> 15
Stated Amount of, or cash distributions on, any Pledged Preferred Securities and
all payments of the principal of, or cash distributions on, any Pledged Treasury
Securities received by the Collateral Agent and that are properly payable
hereunder shall be paid by the Collateral Agent by wire transfer in same day
funds:
(i) In the case of (A) cash distributions with respect to
Pledged Preferred Securities and (B) any payments of the Stated Amount
with respect to any Preferred Securities that have been released from
the Pledge pursuant to Section 4.3 hereof, to the Purchase Contract
Agent, for the benefit of the relevant Holders of Securities, to the
account designated by the Purchase Contract Agent for such purpose, no
later than 2:00 p.m., New York City time, on the Business Day such
payment is received by the Collateral Agent (provided that in the
event such payment is received by the Collateral Agent on a day that
is not a Business Day or after 12:30 p.m., New York City time, on a
Business Day, then such payment shall be made no later than 10:30
a.m., New York City time, on the next succeeding Business Day);
(ii) In the case of any principal payments with respect to
any Treasury Securities that have been released from the Pledge
pursuant to Section 4.3 hereof, to the Holders of the Growth PRIDES to
the accounts designated by them in writing for such purpose no later
than 2:00 p.m., New York City time, on the Business Day such payment
is received by the Collateral Agent (provided that in the event such
payment is received by the Collateral Agent on a day that is not a
Business Day or after 12:30 p.m., New York City time, on a Business
Day, then such payment shall be made no later than 10:30 a.m., New
York City time, on the next succeeding Business Day); and
(iii) In the case of payments of the Stated Amount of any
Pledged Preferred Securities or the principal of any Pledged Treasury
Securities, to the Company on the relevant Payment Date in accordance
with the procedure set forth in Section 6.2(a) or 6.2(b) hereof, in
full satisfaction of the respective obligations of the Holders under
the related Purchase Contracts.
11
<PAGE> 16
All payments received by the Purchase Contract Agent as provided
herein shall be applied by the Purchase Contract Agent pursuant to the
provisions of the Purchase Contract Agreement. If, notwithstanding the
foregoing, the Purchase Contract Agent shall receive any payments of
the Stated Amount on account of any Preferred Security that, at the
time of such payment, is a Pledged Preferred Security or a Holder of a
Growth PRIDES shall receive any payments of principal on account of
any Treasury Securities that, at the time of such payment, are Pledged
Treasury Securities, the Purchase Contract Agent or such Holder shall
hold the same as trustee of an express trust for the benefit of the
Company (and promptly deliver the same over to the Company) for
application to the obligations of the Holders under the related
Purchase Contracts, and the Holders shall acquire no right, title or
interest in any such payments of Stated Amount or principal so
received.
Section 4. Substitution, Release, Repledge and Settlement of
Preferred Securities.
Section 4.1. Substitution of Preferred Securities and the
Establishment of Growth PRIDES. At any time on or prior to the second
Business Day immediately preceding the Purchase Contract Settlement
Date, a Holder of Income PRIDES shall have the right to substitute
Treasury Securities for the Pledged Preferred Securities securing such
Holder's obligations under the Purchase Contract(s) comprising a part
of its Income PRIDES in integral multiples of 20 Income PRIDES by (a)
Transferring to the Collateral Agent Treasury Securities having a
Value equal to the Stated Amount of the Pledged Preferred Securities
to be released and (b) delivering the related Income PRIDES to the
Purchase Contract Agent, accompanied by a notice, substantially in the
form of Exhibit B hereto, to the Purchase Contract Agent stating that
such Holder has Transferred Treasury Securities to the Collateral
Agent pursuant to clause (a) above (stating the Value of the Treasury
Securities Transferred by such Holder) and requesting that the
Purchase Contract Agent instruct the Collateral Agent to release from
the Pledge the Pledged Preferred Securities related to such Income
PRIDES. The Purchase Contract Agent shall instruct the Collateral
Agent in the form provided in Exhibit A. Upon receipt of Treasury
Securities from a Holder of Income PRIDES and the related instruction
from the Purchase Contract Agent,
12
<PAGE> 17
the Collateral Agent shall release the Preferred Securities and shall
promptly Transfer such Preferred Securities, free and clear of any
lien, pledge or security interest created hereby, to the Purchase
Contract Agent.
Section 4.2. Pledge of Preferred Securities and
Re-establishment of Income PRIDES. At any time on or prior to the
second Business Day immediately preceding the Purchase Contract
Settlement Date, a Holder of Growth PRIDES shall have the right to
establish or reestablish Income PRIDES consisting of the Purchase
Contracts and Preferred Securities in integral multiples of 20 Income
PRIDES by (a) Transferring to the Collateral Agent Preferred
Securities having a Value equal to the Stated Amount of the Pledged
Treasury Securities to be released and (b) delivering the related
Growth PRIDES to the Purchase Contract Agent, accompanied by a
notice, substantially in the form of Exhibit B hereto, to the
Purchase Contract Agent stating that such Holder has Transferred
Preferred Securities to the Collateral Agent pursuant to clause (a)
above and requesting that the Purchase Contract Agent instruct the
Collateral Agent to release from the Pledge the Pledged Treasury
Securities related to such Growth PRIDES. The Purchase Contract
Agent shall instruct the Collateral Agent in the form provided in
Exhibit A. Upon receipt of the Preferred Securities from such Holder
and the instruction from the Purchase Contract Agent, the Collateral
Agent shall release the Treasury Securities and shall promptly
Transfer such Treasury Securities, free and clear of any lien, pledge
or security interest created hereby, to the Purchase Contract Agent.
Section 4.3. Termination Event. Upon receipt by the Collateral
Agent of written notice from the Company or the Purchase Contract
Agent that there has occurred a Termination Event, the Collateral
Agent shall release all Collateral from the Pledge and shall promptly
Transfer any Pledged Preferred Securities and Pledged Treasury
Securities to the Purchase Contract Agent for the benefit of the
Holders of the Income PRIDES and the Growth PRIDES, respectively,
free and clear of any lien, pledge or security interest created
hereby.
If such Termination Event shall result from the Company's
becoming a debtor under the Bankruptcy Code,
13
<PAGE> 18
and if the Collateral Agent shall for any reason fail promptly to
effectuate the release and Transfer of all Pledged Preferred
Securities or of the Pledged Treasury Securities, as the case may be,
as provided by this Section 4.3, the Purchase Contract Agent shall (i)
use its best efforts to obtain an opinion of a nationally recognized
law firm reasonably acceptable to the Collateral Agent to the effect
that, as a result of the Company's being the debtor in such a
bankruptcy case, the Collateral Agent will not be prohibited from
releasing or Transferring the Collateral as provided in this Section
4.3, and shall deliver such opinion to the Collateral Agent within ten
days after the occurrence of such Termination Event, and if (y) the
Purchase Contract Agent shall be unable to obtain such opinion within
ten days after the occurrence of such Termination Event or (z) the
Collateral Agent shall continue, after delivery of such opinion, to
refuse to effectuate the release and Transfer of all Pledged Preferred
Securities or of the Pledged Treasury Securities, as the case may be,
as provided in this Section 4.3, then the Purchase Contract Agent
shall within fifteen days after the occurrence of such Termination
Event commence an action or proceeding in the court with jurisdiction
of the Company's case under the Bankruptcy Code seeking an order
requiring the Collateral Agent to effectuate the release and transfer
of all Pledged Preferred Securities or of the Pledged Treasury
Securities, as the case may be, as provided by this Section 4.3 or
(ii) commence an action or proceeding like that described in
subsection (i)(z) hereof within ten days after the occurrence of such
Termination Event.
Section 4.4. Cash Settlement. Upon receipt by the Collateral
Agent of (a) notice from the Purchase Contract Agent prior to the
Purchase Contract Settlement Date, as provided in the Purchase
Contract Agreement, that a Holder elects to effect a Cash Settlement
with respect to some or all of such Holder's Purchase Contracts in
accordance with the terms of the Purchase Contracts and the Purchase
Contract Agreement and (b) payment by such Holder on or prior to 5:00
p.m., New York City time, on the second Business Day immediately
preceding the Purchase Contract Settlement Date, of the Purchase Price
of such Purchase Contracts by certified or cashiers check payable to
or upon the order of the Company, or wire transfer in immediately
available funds, then the Collateral Agent shall, upon the written
direction of the
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Purchase Contract Agent, promptly invest any Cash received from a
Holder in connection with a Cash Settlement in Permitted Investments
that will mature on the Purchase Contract Settlement Date. Upon the
receipt of any such funds, the Collateral Agent shall pay such funds
to the Company on the Purchase Contract Settlement Date and the
Collateral Agent shall, after payment of the Purchase Price to the
Company on the Purchase Contract Settlement Date, release from the
Pledge and promptly Transfer to the Purchase Contract Agent Pledged
Preferred Securities or Pledged Treasury Securities with a principal
amount equal to the product of the Stated Amount and the number of
Purchase Contracts as to which such Holder has elected to effect a
Cash Settlement. The Collateral Agent shall distribute, when received,
any funds in respect of the interest earned from any such investment
to the Purchase Contract Agent, for payment to the relevant Holders.
Section 4.5. Early Settlement. Upon written notice to the
Collateral Agent by the Purchase Contract Agent that one or more
Holders of Securities have elected to effect Early Settlement of their
respective obligations under the Purchase Contracts forming a part of
such Securities in accordance with the terms of the Purchase Contracts
and the Purchase Contract Agreement (setting forth the number of such
Purchase Contracts as to which such Holders have elected to effect
Early Settlement), and that the Purchase Contract Agent has received
from such Holders, and paid to the Company as confirmed in writing by
the Company, the related Early Settlement Amounts pursuant to the
terms of the Purchase Contracts and the Purchase Contract Agreement
and that all conditions to such Early Settlement have been satisfied,
then the Collateral Agent shall release from the Pledge, (a) Pledged
Preferred Securities in the case of a holder of Income PRIDES or (b)
Pledged Treasury Securities in the case of a holder of Growth PRIDES,
as the case may be, with a principal amount equal to the product of
(i) the Stated Amount times (ii) the number of such Purchase Contracts
as to which such Holders have elected to effect Early Settlement and
shall Transfer all such Pledged Preferred Securities or Pledged
Treasury Securities, as the case may be, free and clear of the Pledge
created hereby, to the Purchase Contract Agent for the benefit of the
Holders.
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Section 4.6. Application of Proceeds Settlement. (a) In the
event a Holder of Income PRIDES has not made an effective Cash
Settlement or an Early Settlement of the Purchase Contract(s),
underlying its Income PRIDES, such Holder shall be deemed to have
elected to pay for the shares of Common Stock to be issued under such
Purchase Contract(s) from the Proceeds of the related Pledged
Preferred Securities. The Collateral Agent shall, by 10:00 a.m., New
York City time, on the Business Day immediately preceding the Purchase
Contract Settlement Date, without any instruction from such Holder of
Income PRIDES, present the related Preferred Securities to the
Institutional Trustee for repayment at the Repayment Price. The
Collateral Agent shall, at the written direction of the Purchase
Contract Agent, promptly invest any Cash received in respect of the
repayment of the Pledged Preferred Securities in overnight Permitted
Investments. On the Purchase Contract Settlement Date, the Collateral
Agent shall apply the proceeds of any such funds to pay to the Company
an amount equal to the product of the Stated Amount and the number of
Preferred Securities repaid by the Institutional Trustee at the
Purchase Price. The Collateral Agent shall distribute any funds
received in respect of the investment earnings from such investment
when received to the Purchase Contract Agent for payment to the
relevant Holders.
(b) In the event a holder of Growth PRIDES has not made an Early
Settlement of the Purchase Contract(s) underlying its Growth PRIDES,
such holder shall be deemed to have elected to pay for the shares of
Common Stock to be issued under such Purchase Contract(s) from the
Proceeds of the related Pledged Treasury Securities. On the Business
Day immediately prior to the Purchase Contract Settlement Date, the
Collateral Agent shall, at the written direction of the Purchase
Contract Agent, invest the Cash proceeds of the maturing Pledged
Treasury Securities in overnight Permitted Investments. Without
receiving any instruction from the Holder of Growth PRIDES, the
Collateral Agent shall apply the Proceeds of the related Pledged
Treasury Securities to the settlement of such Purchase Contracts on
the Purchase Contract Settlement Date.
In the event the sum of the Proceeds from the related Pledged
Treasury Securities and the investment
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earnings from the investment in overnight Permitted Investments is in
excess of the aggregate Purchase Price of the Purchase Contracts being
settled thereby, the Collateral Agent shall distribute such excess,
when received, to the Purchase Contract Agent for the benefit of the
holder of the related Purchase Contracts.
Section 5. Voting Rights -- Preferred Securities. The Purchase
Contract Agent may exercise, or refrain from exercising, any and all
voting and other consensual rights pertaining to the Pledged Preferred
Securities or any part thereof for any purpose not inconsistent with
the terms of this Agreement and in accordance with the terms of the
Purchase Contract Agreement; provided, that the Purchase Contract
Agent shall not exercise or, as the case may be, shall not refrain
from exercising such right if, in the judgment of the Company, such
action would impair or otherwise have a material adverse effect on the
value of all or any of the Pledged Preferred Securities; and provided,
further, that the Purchase Contract Agent shall give the Company and
the Collateral Agent at least five days' prior written notice of the
manner in which it intends to exercise, or its reasons for refraining
from exercising, any such right. Upon receipt of any notices and other
communications in respect of any Pledged Preferred Securities,
including notice of any meeting at which holders of Preferred
Securities are entitled to vote or solicitation of con- sents, waivers
or proxies of holders of Preferred Securities, the Collateral Agent
shall use reasonable efforts to send promptly to the Purchase Contract
Agent such notice or communication, and as soon as reasonably
practicable after receipt of a written request therefor from the
Purchase Contract Agent, execute and deliver to the Purchase Contract
Agent such proxies and other instruments in respect of such Pledged
Preferred Securities (in form and substance satisfactory to the
Collateral Agent) as are prepared by the Purchase Contract Agent with
respect to the Pledged Preferred Securities.
Section 6. Rights and Remedies; Investment Company Event; Tax
Event etc.
Section 6.1. Rights and Remedies of the Collateral Agent. (a)
The Collateral Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code as in
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effect in the State of New York (the "Code") (whether or not the Code
is in effect in the jurisdiction where the rights and remedies are
asserted), Revised Article 8 and the TRADES Regulations and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted.
(b) Without limiting any rights or powers otherwise granted by
this Agreement to the Collateral Agent, in the event the Collateral
Agent is unable to make payments to the Company on account of
principal payments of any Pledged Treasury Securities as provided in
Section 3 hereof in satisfaction of the obligations of the Holder of
the Securities of which such Pledged Treasury Securities is a part
under the related Purchase Contracts, the Collateral Agent shall have
and may exercise, with reference to such Pledged Treasury Securities
and such obligations of such Holder, any and all of the rights and
remedies available to a secured party under the Code, Revised Article
8 and the TRADES Regulations after default by a debtor, and as
otherwise granted herein or under any other law.
(c) Without limiting any rights or powers otherwise granted by
this Agreement to the Collateral Agent, the Collateral Agent is hereby
irrevocably authorized to receive and collect all payments of (i) the
Stated Amount of, or cash distributions on, the Pledged Preferred
Securities, or (ii) the principal of the Pledged Treasury Securities,
subject, in each case, to the provisions of Section 3, and as
otherwise granted herein.
(d) The Purchase Contract Agent and each Holder of Securities, in
the event such Holder becomes the holder of a Growth PRIDES, agrees
that, from time to time, upon the written request of the Collateral
Agent, the Purchase Contract Agent or such Holder shall execute and
deliver such further documents and do such other acts and things as
the Collateral Agent may reasonably request in order to maintain the
Pledge, and the perfection and priority thereof, and to confirm the
rights of the Collateral Agent hereunder. The Purchase Contract Agent
shall have no liability to any Holder for executing any documents or
taking any such acts requested by the Collateral Agent hereunder,
except for liability for its own negligent
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act, its own negligent failure to act or its own willful misconduct.
Section 6.2. Tax Event, Investment Company Event, etc. Upon the
occurrence of a Tax Event or an Investment Company Event or a
liquidation of the Trust, a principal amount of the Junior
Subordinated Debentures constituting the assets of the Trust and
underlying the Preferred Securities equal to the aggregated Stated
Amount of the Pledged Preferred Securities shall be delivered to the
Collateral Agent in exchange for the Pledged Preferred Securities. In
the event the Collateral Agent receives such Junior Subordinated
Debentures in respect of Pledged Preferred Securities upon the
occurrence of a Tax Event, Investment Company Event or liquidation of
the Trust, the Collateral Agent shall Transfer the Junior Subordinated
Debentures to the Collateral Account in the manner specified herein
for Pledged Preferred Securities to secure the obligations of the
Holders of Income PRIDES to purchase the Company's Common Stock under
the related Purchase Contracts. Thereafter, the Collateral Agent shall
have such security interests, rights and obligations with respect to
the Junior Subordinated Debentures as it had in respect of the Pledged
Preferred Securities as provided in Articles II, III, IV, V and VI
hereof.
Section 7. Representation and Warranties; Covenants.
Section 7.1. Representations and Warranties. The Holders from
time to time, acting through the Purchase Contract Agent as their
attorney-in-fact (it being understood that the Purchase Contract Agent
shall not be liable for any representation or warranty made by or on
behalf of a Holder), hereby represent and warrant to the Collateral
Agent, which representations and warranties shall be deemed repeated
on each day a Holder Transfers Collateral that:
(a) such Holder has the power to grant a security
interest in and lien on the Collateral;
(b) such Holder is the sole beneficial owner of the
Collateral and, in the case of Collateral delivered in
physical form, is
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the sole holder of such Collateral and is the sole
beneficial owner of, or has the right to Transfer,
the Collateral it Transfers to the Collateral Agent,
free and clear of any security interest, lien,
encumbrance, calls, liabilities to pay money or other
restrictions other than the security interest and lien
granted under Section 2 hereof;
(c) upon the Transfer of the Collateral to the
Collateral Account, the Collateral Agent, for the
benefit of the Company, will have a valid and perfected
first priority security interest therein (assuming that
any central clearing operation or any Intermediary or
other entity not within the control of the Holder
involved in the Transfer of the Collateral, including
the Collateral Agent, gives the notices and takes the
action required of it hereunder and under applicable law
for perfection of that interest and assuming the
establishment and exercise of control pursuant to
Section 2.2 hereof); and
(d) the execution and performance by the Holder of its
obligations under this Agreement will not result in the
creation of any security interest, lien or other
encumbrance on the Collateral other than the security
interest and lien granted under Section 2 hereof or
violate any provision of any existing law or regulation
applicable to it or of any mortgage, charge, pledge,
indenture, contract or undertaking to which it is a
party or which is binding on it or any of its assets.
Section 7.2. Covenants. The Holders from time to time, acting
through the Purchase Contract Agent as their attorney-in-fact (it being
understood that the Purchase Contract Agent shall not be liable for any
covenant made by or on behalf of a Holder), hereby covenant to the
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Collateral Agent that for so long as the Collateral remains subject to the
Pledge:
(a) neither the Purchase Contract Agent nor such Holders
will create or purport to create or allow to subsist any
mortgage, charge, lien, pledge or any other security
interest whatsoever over the Collateral or any part of
it other than pursuant to this Agreement; and
(b) neither the Purchase Contract Agent nor such Holders
will sell or otherwise dispose (or at- tempt to dispose)
of the Collateral or any part of it except for the
beneficial interest therein, subject to the pledge
hereunder, transferred in connection with the Transfer
of the Securities.
Section 8. The Collateral Agent. It is hereby agreed as follows:
Section 8.1. Appointment, Powers and Immunities. The Collateral Agent
shall act as agent for the Company hereunder with such powers as are
specifically vested in the Collateral Agent by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto. The
Collateral Agent: (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and no implied covenants or obligations
shall be inferred from this Agreement against the Collateral Agent, nor shall
the Collateral Agent be bound by the provisions of any agreement by any party
hereto beyond the specific terms hereof; (b) shall not be responsible for any
recitals contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by it under, this Agreement, the
Securities or the Purchase Contract Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement
(other than as against the Collateral Agent), the Securities or the Purchase
Contract Agreement or any other document referred to or provided for herein or
therein or for any failure by the Company or any other Person (except the
Collateral Agent) to perform any of its obligations hereunder or thereunder or
for the perfection, priority
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or, except as expressly required hereby, maintenance of any security interest
created hereunder; (c) shall not be required to initiate or conduct any
litigation or collection proceedings hereunder (except pursuant to directions
furnished under Section 8.2 hereof, subject to Section 8.6 hereof); (d) shall
not be responsible for any action taken or omitted to be taken by it hereunder
or under any other document or instrument referred to or provided for herein or
in connection herewith or therewith, except for its own negligence or willful
misconduct; and (e) shall not be required to advise any party as to selling or
retaining, or taking or refraining from taking any action with respect to, any
securities or other property deposited hereunder. Subject to the foregoing,
during the term of this Agreement, the Collateral Agent shall take all
reasonable action in connection with the safekeeping and preservation of the
Collateral hereunder.
No provision of this Agreement shall require the Collateral Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. In no event shall the Collateral
Agent be liable for any amount in excess of the Value of the Collateral.
Notwithstanding the foregoing, the Collateral Agent and Securities Intermediary
in its individual capacity hereby waive any right of setoff, bankers lien, liens
or perfection rights as securities intermediary or any counterclaim with respect
to any of the Collateral.
Section 8.2. Instructions of the Company. The Company shall have the
right, by one or more instruments in writing executed and delivered to the
Collateral Agent, to direct the time, method and place of conducting any
proceeding for the realization of any right or remedy available to the
Collateral Agent, or of exercising any power conferred on the Collateral Agent,
or to direct the taking or refraining from taking of any action authorized by
this Agreement; provided, however, that (i) such direction shall not conflict
with the provisions of any law or of this Agreement and (ii) the Collateral
Agent shall be adequately indemnified as provided herein. Nothing in this
Section 8.2 shall impair the right of the Collateral Agent in its discretion to
take any action or omit to take any action which it deems proper and which is
not inconsistent with such direction.
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Section 8.3. Reliance by Collateral Agent. Each of the Securities
Intermediary and the Collateral Agent shall be entitled to rely upon any
certification, order, judgment, opinion, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telex or
facsimile) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons (without being required to
determine the correctness of any fact stated therein), and upon advice and
statements of legal counsel and other experts selected by the Collateral Agent
and the Securities Intermediary. As to any matters not expressly provided for
by this Agreement, the Collateral Agent and the Securities Intermediary shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with instructions given by the Company in accordance
with this Agreement.
Section 8.4. Rights in Other Capacities. The Collateral Agent and the
Securities Intermediary and their affiliates may (without having to account
therefor to the Company) accept deposits from, lend money to, make their
investments in and generally engage in any kind of banking, trust or other
business with the Purchase Contract Agent and any Holder of Securities (and any
of their respective subsidiaries or affiliates) as if it were not acting as the
Collateral Agent, and the Collateral Agent and its affiliates may accept fees
and other consideration from the Purchase Contract Agent and any Holder of
Securities without having to account for the same to the Company; provided that
each of the Securities Intermediary and the Collateral Agent covenants and
agrees with the Company that it shall not accept, receive or permit there to be
created in favor of itself and shall take no affirmative action to permit there
to be created in favor of any other person, any security interest, lien or
other encumbrance of any kind in or upon the Collateral.
Section 8.5. Non-Reliance on Collateral Agent. Neither the Securities
Intermediary nor the Collateral Agent shall be required to keep itself informed
as to the performance or observance by the Purchase Contract Agent or any
Holder of Securities of this Agreement, the Purchase Contract Agreement, the
Securities or any other document referred to or provided for herein or therein
or to inspect the properties or books of the Purchase
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Contract Agent or any Holder of Securities. The Collateral Agent shall not have
any duty or responsibility to provide the Company with any credit or other
information concerning the affairs, financial condition or business of the
Purchase Contract Agent or any Holder of Securities (or any of their respective
affiliates) that may come into the possession of the Collateral Agent or the
Securities Intermediary or any of their respective affiliates.
Section 8.6. Compensation and Indemnity. The Company agrees: (i) to
pay the Collateral Agent from time to time such compensation as shall be agreed
in writing between the Company and the Collateral Agent for all services
rendered by it hereunder and (ii) to indemnify the Collateral Agent and the
Securities Intermediary for, and to hold each of them harmless from and
against, any loss, liability or expense incurred without negligence, willful
misconduct or bad faith on its part, arising out of or in connection with the
acceptance or administration of its powers and duties under this Agreement,
including the costs and expenses (including reasonable fees and expenses of
counsel) of defending itself against any claim or liability in connection with
the exercise or performance of such powers and duties.
Section 8.7. Failure to Act. In the event of any ambiguity in the
provisions of this Agreement or any dispute between or conflicting claims by or
among the parties hereto and/or any other Person with respect to any funds or
property deposited hereunder, the Collateral Agent shall be entitled, after
prompt notice to the Company and the Purchase Contract Agent, at its sole
option, to refuse to comply with any and all claims, demands or instructions
with respect to such property or funds so long as such dispute or conflict
shall continue, and the Collateral Agent shall not be or become liable in any
way to any of the parties hereto for its failure or refusal to comply with such
conflicting claims, demands or instructions. The Collateral Agent shall be
entitled to refuse to act until either (i) such conflicting or adverse claims
or demands shall have been finally determined by a court of competent
jurisdiction or settled by agreement between the conflicting parties as
evidenced in a writing, satisfactory to the Collateral Agent or (ii) the
Collateral Agent shall have received security or an indemnity satisfactory to
the Collateral
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Agent sufficient to save the Collateral Agent harmless from and against any and
all loss, liability or expense which the Collateral Agent may incur by reason
of its acting. The Collateral Agent may in addition elect to commence an
interpleader action or seek other judicial relief or orders as the Collateral
Agent may deem necessary. Notwithstanding anything contained herein to the
contrary, the Collateral Agent shall not be required to take any action that is
in its opinion contrary to law or to the terms of this Agreement, or which
would in its opinion subject it or any of its officers, employees or directors
to liability.
Section 8.8. Resignation of Collateral Agent. Subject to the
appointment and acceptance of a successor Collateral Agent as provided below,
(a) the Collateral Agent may resign at any time by giving notice thereof to the
Company and the Purchase Contract Agent as attorney-in-fact for the Holders of
Securities, (b) the Collateral Agent may be removed at any time by the Company
and (c) if the Collateral Agent fails to perform any of its material
obligations hereunder in any material respect for a period of not less than 20
days after receiving written notice of such failure by the Purchase Contract
Agent and such failure shall be continuing, the Collateral Agent may be removed
by the Purchase Contract Agent. The Purchase Contract Agent shall promptly
notify the Company of any removal of the Collateral Agent pursuant to clause
(c) of the immediately preceding sentence. Upon any such resignation or
removal, the Company shall have the right to appoint a successor Collateral
Agent. If no successor Collateral Agent shall have been so appointed and shall
have accepted such appointment within 30 days after the retiring Collateral
Agent's giving of notice of resignation or such removal, then the retiring
Collateral Agent may petition any court of competent jurisdiction for the
appointment of a successor Collateral Agent. The Collateral Agent shall be a
bank which has an office in New York, New York with a combined capital and
surplus of at least $50,000,000. Upon the acceptance of any appointment as
Collateral Agent hereunder by a successor Collateral Agent, such successor
Collateral Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Collateral Agent, and the
retiring Collateral Agent shall take all appropriate action to transfer any
money and property held by it hereunder
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(including the Collateral) to such successor Collateral Agent. The retiring
Collateral Agent shall, upon such succession, be discharged from its duties and
obligations as Collateral Agent hereunder. After any retiring Collateral
Agent's resignation hereunder as Collateral Agent, the provisions of this
Section 8 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Collateral Agent.
Section 8.9. Right to Appoint Agent or Advisor. The Collateral Agent
shall have the right to appoint agents or advisors in connection with any of
its duties hereunder, and the Collateral Agent shall not be liable for any
action taken or omitted by, or in reliance upon the advice of, such agents or
advisors selected in good faith. The appointment of agents pursuant to this
Section 8.9 shall be subject to prior consent of the Company, which consent
shall not be unreasonably withheld.
Section 8.10. Survival. The provisions of this Section 8 shall survive
termination of this Agreement and the resignation or removal of the Collateral
Agent.
Section 8.11. Indemnity. Anything in this Agreement to the contrary
notwithstanding, in no event shall the Collateral Agent or the Securities
Intermediary or their officers, employees or agents be liable under this
Agreement to any third party for indirect, special, punitive, or consequential
loss or damage of any kind whatsoever, including lost profits, whether or not
the likelihood of such loss or damage was known to the Collateral Agent or the
Securities Intermediary, or any of them, incurred without any act or deed that
is found to be attributable to gross negligence on the part of the Collateral
Agent or the Securities Intermediary.
Section 9. Amendment.
Section 9.1. Amendment Without Consent of Holders. Without the consent
of any Holders, the Company, the Collateral Agent and the Purchase Contract
Agent, at any time and from time to time, may amend this Agreement, in form
satisfactory to the Company, the Collateral Agent and the Purchase Contract
Agent, for any of the following purposes:
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(1) to evidence the succession of another Person to the
Company, and the assumption by any such successor of the covenants of
the Company; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company so long as such covenants or such surrender do not
adversely affect the validity, perfection or priority of the security
interests granted or created hereunder; or
(3) to evidence and provide for the acceptance of appointment
hereunder by a successor Collateral Agent, Securities Intermediary or
Purchase Contract Agent; or
(4) to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other such
provisions herein, or to make any other provisions with respect to
such matters or questions arising under this Agreement, provided such
action shall not adversely affect the interests of the Holders.
Section 9.2. Amendment with Consent of Holders. With the consent of
the Holders of not less than 66 2/3% of the Purchase Contracts at the time
outstanding, by act of said Holders delivered to the Company, the Purchase
Contract Agent or the Collateral Agent, as the case may be, the Company, when
authorized by a Board Resolution, the Purchase Contract Agent and the
Collateral Agent may amend this Agreement for the purpose of modifying in any
manner the provisions of this Agreement or the rights of the Holders in respect
of the Securities; provided, however, that no such supplemental agreement
shall, without the consent of the Holder of each Outstanding Security affected
thereby,
(1) change the amount or type of Collateral underlying a
Security (except for the rights of holders of Income PRIDES to
substitute the Treasury Securities for the Trust Preferred Securities
or the rights of holders of Growth PRIDES to substitute Trust
Preferred Securities for the Treasury Securities), impair the right of
the Holder of any Security to receive distributions on the underlying
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Collateral or otherwise adversely affect the Holder's rights in or to
such Collateral; or
(2) otherwise effect any action that would require the
consent of the Holder of each Outstanding Security affected thereby
pursuant to the Purchase Contract Agreement if such action were
effected by an agreement supplemental thereto; or
(3) reduce the percentage of Purchase Contracts the consent
of whose Holders is required for any such amendment; or
(4) materially and adversely alter the rights of the holders
of Preferred Securities.
It shall not be necessary for any Act of Holders under this Section to approve
the particular form of any proposed amendment, but it shall be sufficient if
such Act shall approve the substance thereof.
Section 9.3. Execution of Amendments. In executing any amendment
permitted by this Section, the Collateral Agent and the Purchase Contract Agent
shall be entitled to receive and (subject to Section 6.1 hereof, with respect
to the Collateral Agent, and Section 7.1 of the Purchase Contract Agreement,
with respect to the Purchase Contract Agent) shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and that all conditions
precedent, if any, to the execution and delivery of such amendment have been
satisfied.
Section 9.4. Effect of Amendments. Upon the execution of any amendment
under this Section, this Agreement shall be modified in accordance therewith,
and such amendment shall form a part of this Agreement for all purposes; and
every Holder of Certificates theretofore or thereafter authenticated, executed
on behalf of the Holders and delivered under the Purchase Contract Agreement
shall be bound thereby.
Section 9.5. Reference to Amendments. Security Certificates
authenticated, executed on behalf of the Holders and delivered after the
execution of any amendment pursuant to this Section may, and shall if
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required by the Collateral Agent or the Purchase Contract Agent, bear a
notation in form approved by the Purchase Contract Agent and the Collateral
Agent as to any matter provided for in such amendment. If the Company shall so
determine, new Security Certificates so modified as to conform, in the opinion
of the Collateral Agent, the Purchase Contract Agent and the Company, to any
such amendment may be prepared and executed by the Company and authenticated,
executed on behalf of the Holders and delivered by the Purchase Contract Agent
in accordance with the Purchase Contract Agreement in exchange for Outstanding
Security Certificates.
Section 10. Miscellaneous.
Section 10.1. No Waiver. No failure on the part of the Collateral
Agent or any of its agents to exercise, and no course of dealing with respect
to, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise by the
Collateral Agent or any of its agents of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not
exclusive of any remedies provided by law.
Section 10.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Without
limiting the foregoing, the above choice of law is expressly agreed to by the
Securities Intermediary, the Collateral Agent and the Holders from time to time
acting through the Purchase Contract Agent, as their attorney-in-fact, in
connection with the establishment and maintenance of the Collateral Account.
The Company, the Collateral Agent and the Holders from time to time of the
Securities, acting through the Purchase Contract Agent as their
attorney-in-fact, hereby submit to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of any New York
state court sitting in New York City for the purposes of all legal proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby. The Company, the Collateral Agent and the Holders from time to time of
the Securities, acting through the Purchase Contract Agent as their
attorney-in-fact, irrevocably waive, to
29
<PAGE> 34
the fullest extent permitted by applicable law, any objection which they may
now or hereafter have to the laying of the venue of any such proceeding brought
in such a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum.
Section 10.3. Notices. All notices, requests, consents and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telecopy) delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof or, as to any party, at such other address as shall
be designated by such party in a notice to the other parties. Except as
otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telecopier or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
Section 10.4. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent and the Purchase Contract Agent, and the Holders
from time to time of the Securities, by their acceptance of the same, shall be
deemed to have agreed to be bound by the provisions hereof and to have ratified
the agreements of, and the grant of the Pledge hereunder by, the Purchase
Contract Agent.
Section 10.5. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.
Section 10.6. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in
30
<PAGE> 35
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Section 10.7. Expenses, etc. The Company agrees to reimburse the
Collateral Agent for: (a) all reasonable out-of-pocket costs and expenses of
the Collateral Agent (including, without limitation, the reasonable fees and
expenses of counsel to the Collateral Agent), in connection with (i) the
negotiation, preparation, execution and delivery or performance of this
Agreement and (ii) any modification, supplement or waiver of any of the terms
of this Agreement; (b) all reasonable costs and expenses of the Collateral
Agent (including, without limitation, reasonable fees and expenses of counsel)
in connection with (i) any enforcement or proceedings resulting or incurred in
connection with causing any Holder of Securities to satisfy its obligations
under the Purchase Contracts forming a part of the Securities and (ii) the
enforcement of this Section 10.7; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any other document referred
to herein and all costs, expenses, taxes, assessments and other charges
incurred in connection with any filing, registration, recording or perfection
of any security interest contemplated hereby.
Section 10.8. Security Interest Absolute. All rights of the Collateral
Agent and security interests hereunder, and all obligations of the Holders from
time to time hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision
of the Purchase Contracts or the Securities or any other agreement or
instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
any other term of, or any increase in the amount of, all or any of the
obligations of Holders of Securities under the related Purchase
Contracts, or any other amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Purchase
Contract Agreement or any Purchase Contract or
31
<PAGE> 36
any other agreement or instrument relating thereto; or
(c) any other circumstance which might otherwise constitute a
defense available to, or discharge of, a borrower, a guarantor or a
pledgor.
32
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION
By:
------------------------------------
Name:
Title:
Address for Notices:
American Heritage Life Investment
Corporation
1776 American Heritage Life Drive
Jacksonville, FL 32224
Attention:
Telecopy:
The First National Bank of Chicago
as Purchase Contract Agent and as
attorney-in-fact of the Holders
from time to time of the Securities
By:
------------------------------------
Name:
Title:
Address for Notices:
The First National Bank of Chicago
One First National Plaza
Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services
Division
Telecopy: (312) 407-1708
33
<PAGE> 38
The Chase Manhattan Bank
as Collateral Agent and as
Securities Intermediary
By:
----------------------------
Name: L. O'Brien
Title: Senior Trust Officer
Address for Notices:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trust Administration
Department
Telecopy: (212) 946-8159
34
<PAGE> 39
EXHIBIT A
INSTRUCTION FROM PURCHASE CONTRACT AGENT TO COLLATERAL AGENT
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trust
Administration Department
Re: FELINE PRIDES of American Heritage Life Investment
Corporation (the "Company"), and AHL
Financing
We hereby notify you in accordance with Section 4.1 of the
Pledge Agreement, dated as of ______ __, 1997, (the "Pledge Agreement") among
the Company, yourselves, as Collateral Agent, and ourselves, as Purchase
Contract Agent and as attorney-in-fact for the holders of [Income PRIDES]
[Growth PRIDES] from time to time, that the holder of securities listed below
(the "Holder") has elected to substitute [$_____ aggregate principal amount of
Treasury Securities] [$_______Stated Amount of Preferred Securities] in
exchange for an equal Value of [Pledged Preferred Securities] [Pledged Treasury
Securities] held by you in accordance with the Pledge Agreement and has
delivered to us a notice stating that the Holder has Transferred [Treasury
Securities] [Preferred Securities] to you, as Collateral Agent. We hereby
instruct you, upon receipt of such [Pledged Treasury Securities] [Pledged
Preferred Securities], to release the Preferred Securities] [Treasury
Securities] related to such [Income PRIDES] [Growth PRIDES] to us in accordance
with the Holder's instructions. Capitalized terms used herein but not defined
shall have the meaning set forth in the Pledge Agreement.
Date: THE FIRST NATIONAL BANK OF CHICAGO
--------------
By:
-------------------------------
Name:
Title:
Please print name and address of Registered Holder electing to substitute
[Treasury Securities] [Preferred Securities] for the [Pledged Preferred
Securities] [Pledged Treasury Securities]:
- --------------------------- -------------------------
Name Social Security or other
Taxpayer Identification
Number, if any
- ---------------------------
Address
- ---------------------------
- ---------------------------
A-1
<PAGE> 40
EXHIBIT B
INSTRUCTION TO PURCHASE CONTRACT AGENT
The First National Bank of Chicago
One First National Plaza
Suite 6363
Chicago, IL 60670
Attention: Corporate Trust
Administration Department
Re: FELINE PRIDES of American Heritage Life
Investment Corporation (the "Company"), and AHL
Financing
The undersigned Holder hereby notifies you that it has
delivered to The Chase Manhattan Bank, as Collateral Agent, $_______ aggregate
principal amount of [Treasury Securities] [Preferred Securities] in exchange
for an equal Value of [Pledged Preferred Securities] [Pledged Treasury
Securities] held by the Collateral Agent (the "Pledge Agreement"), in
accordance with Section 4.1 of the Pledge Agreement, dated ________ __, 1997,
between you, the Company and the Collateral Agent. The undersigned Holder
hereby instructs you to instruct the Collateral Agent to release to you on
behalf of the undersigned Holder the [Pledged Preferred Securities] [Pledged
Treasury Securities] related to such [Income PRIDES] [Growth PRIDES].
Capitalized terms used herein but not defined shall have the meaning set forth
in the Pledge Agreement.
Dated:
------------- --------------------------
Signature
Please print name and address of Registered Holder:
- ------------------------- -------------------------
Name Social Security or other
Taxpayer Identification
Number, if any
- -------------------------
Address
- -------------------------
- -------------------------
- -------------------------
B-1
<PAGE> 1
EXHIBIT 4 (j)
--------
--------------------------------------------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of ________ , 1997
between
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION,
AS ISSUER
and
THE FIRST NATIONAL BANK OF CHICAGO,
AS TRUSTEE
--------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1. Definition of Terms.............................................................................1
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1. Designation and Principal Amount ...............................................................2
SECTION 2.2. Maturity ......................................................................................3
SECTION 2.3. Form of Payment.................................................................................3
SECTION 2.4. Global Debenture................................................................................3
SECTION 2.5. Interest .......................................................................................4
SECTION 2.6 No Sinking Fund.................................................................................4
ARTICLE III
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 3.1. Extension of Interest Payment Period............................................................5
SECTION 3.2 Notice of Extension.............................................................................5
SECTION 3.3. Limitation of Transactions......................................................................6
SECTION 3.4 Option to Put Debentures........................................................................6
SECTION 3.5 Repurchase Procedure for Debentures.............................................................6
ARTICLE IV
EXPENSES
SECTION 4.1 Payment of Expenses.............................................................................7
SECTION 4.2 Payment Upon Resignation or Removal.............................................................8
ARTICLE V
NOTICE
SECTION 5.1 Notice by the Company...........................................................................8
ARTICLE VI
FORM OF DEBENTURE
SECTION 6.1. Form of Debenture...............................................................................8
ARTICLE VII
ORIGINAL ISSUE OF DEBENTURES
SECTION 7.1. Original Issue of Debentures...................................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Ratification of Indenture......................................................................14
SECTION 8.2. Trustee Not Responsible for Recitals...........................................................14
SECTION 8.3. Governing Law..................................................................................14
SECTION 8.4. Separability...................................................................................14
SECTION 8.5. Counterparts ..................................................................................14
</TABLE>
ii
<PAGE> 4
FIRST SUPPLEMENTAL INDENTURE, dated as of _________, 1997 (the "First
Supplemental Indenture"), between American Heritage Life Investment Corporation,
a corporation duly organized and existing under the laws of the State of
Florida, having its principal office at 1776 American Heritage Life Drive,
Jacksonville,, Florida 32224 (the "Company" ), and The First National Bank of
Chicago, as trustee (the "Trustee").
WHEREAS, the Company executed and delivered the indenture dated as of
________, 1997 (the "Base Indenture"), to the Trustee to provide for the future
issuance of the Company's unsecured debentures, notes or other evidence of
indebtedness (the "Securities" ), to be issued from time to time in one or more
series as might be determined by the Company under the Base Indenture;
WHEREAS, pursuant to the terms of the Base Indenture, the Company desires
to provide for the establishment of a new series of its Securities to be known
as its _______ % Junior Subordinated Debentures due ________________ (the
"Debentures"), the form and substance of such Debentures and the terms,
provisions and conditions thereof to be set forth as provided in the Base
Indenture and this First Supplemental Indenture (together, the "Indenture");
WHEREAS, AHL Financing, a Delaware statutory business trust (the "Trust"),
has offered to the public $ _________ million aggregate liquidation
amount of its _____ % Trust Originated Preferred Securities (the "Preferred
Securities"), representing undivided beneficial interests in the assets of the
Trust and proposes to invest the proceeds from such offering, together with the
proceeds of the issuance and sale by the Trust to the Company of $ __________
million aggregate liquidation amount of its __________ % Trust Originated
Common Securities (the "Common Securities" and together with the Preferred
Securities, the "Trust Securities"), in $_________ million aggregate principal
amount of the Debentures; and
WHEREAS, the Company has requested that the Trustee execute and deliver
this First Supplemental Indenture and all requirements necessary to make this
First Supplemental Indenture a valid instrument in accordance with its terms,
and to make the Debentures, when executed by the Company and authenticated and
delivered by the Trustee, the valid obligations of the Company, have been
performed, and the execution and delivery of this First Supplemental Indenture
has been duly authorized in all respects:
NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Company covenants and agrees with
the Trustee as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS.
Unless the context otherwise requires:
(a) a term defined in the Indenture has the same meaning when used in this
First Supplemental Indenture;
(b) a term defined anywhere in this First Supplemental Indenture has the
same meaning throughout;
(c) the singular includes the plural and vice versa;
(d) headings are for convenience of reference only and do not affect
interpretation;
(e) the following terms have the meanings given to them in the Declaration:
(i) Business Day; (ii) Clearing Agency; (iii) Delaware Trustee; (iv) Depositary;
(v) Preferred Security Certificate; (vi) Pricing Agreement; (vii)
<PAGE> 5
Institutional Trustee; (viii) Regular Trustees; (ix) Special Event; (x) Tax
Event; (xi) Investment Company Event; and (xii) Underwriting Agreement;
(f) the following terms have the meanings given to them in this Section
1.11(f):
"Additional Interest" shall have the meaning set forth in Section 2.5.
"Compounded Interest" shall have the meaning set forth in Section 3.1.
"Coupon Rate" shall have the meaning set forth in Section 2.5.
"Debenture Repayment Price" shall have the meaning set forth in Section
3.4.
"Declaration" means the Amended and Restated Declaration of Trust of AHL
Financing, a Delaware statutory business trust, dated as of _____________, 1997.
"Deferred Interest" shall have the meaning set forth in Section 3.1
hereof.
"Dissolution Event" means that, as a result of the occurrence and
continuation of a Special Event, the Trust is to be dissolved in accordance with
the Declaration, and the Debentures held by the Institutional Trustee are to be
distributed to the holders of the Trust Securities issued by the Trust pro rata
in accordance with the Declaration.
"Extended Interest Payment Period" shall have the meaning set forth in
Section 3.1.
"Global Debentures" shall have the meaning set forth in Section 2.4.
"Maturity Date" means the date on which the Debentures mature and on which
the principal shall be due and payable together with all accrued and unpaid
interest thereon including Compounded Interest and Additional Interest, if any.
"Non Book-Entry Preferred Securities" shall have the meaning set forth in
Section 2.4.
"Purchase Contract" means the Purchase Contract Agreement, dated as of
_________, 1997, between the Company and The First National Bank of Chicago, as
purchase contract agent.
"Put Option" shall have the meaning set forth in Section 3.4.
(g) the following terms shall have the meanings given to them in the
Purchase Contract: (i) Collateral Agent and (ii) Purchase Contract Settlement
Date.
ARTICLE II
GENERAL TERMS AND CONDITIONS OF THE DEBENTURES
SECTION 2.1. DESIGNATION AND PRINCIPAL AMOUNT.
There is hereby authorized a series of Securities designated the "_____ %
Junior Subordinated Debentures due _________, 2002", limited in aggregate
principal amount to $_______ million, which amount shall be as set forth in any
written order of the Company for the authentication and delivery of
Debentures pursuant to Section 303 of the Indenture.
2
<PAGE> 6
SECTION 2.2. MATURITY. The Maturity Date will be _______________, 2002.
SECTION 2.3. FORM AND PAYMENT.
Except as provided in Section 2.4, the Debentures shall be issued in fully
registered certificated form without interest coupons. Principal and interest on
the Debentures issued in certificated form will be payable, the transfer of such
Debentures will be registrable and such Debentures will be exchangeable for
Debentures bearing identical terms and provisions at the office or agency of the
Institutional Trustee; provided, however, that payment of interest may be made
at the option of the Company by check mailed to the Holder at such address as
shall appear in the Security Register. Notwithstanding the foregoing, so long as
the Holder of any Debentures is the Institutional Trustee, the payment of the
principal of and interest (including Compounded Interest and Additional
Interest, if any) on such Debentures held by the Institutional Trustee will be
made at such place and to such account as may be designated by the Institutional
Trustee.
SECTION 2.4. GLOBAL DEBENTURE.
(a) In connection with a Dissolution Event,
(i) the Debentures in certificated form may be presented to the
Trustee by the Institutional Trustee in exchange for a global Debenture in an
aggregate principal amount equal to the aggregate principal amount of all
outstanding Debentures (a "Global Debenture"), to be registered in the name of
the Depositary, or its nominee, and delivered by the Institutional Trustee to
the Depositary for crediting to the accounts of its participants pursuant to the
instructions of the Regular Trustees. The Company upon any such presentation
shall execute a Global Debenture in such aggregate principal amount and deliver
the same to the Trustee for authentication and delivery in accordance with the
Indenture and this First Supplemental Indenture. Payments on the Debentures
issued as a Global Debenture will be made to the Depositary; and
(ii) if any Preferred Securities are held in non book-entry
certificated form, the Debentures in certificated form may be presented to the
Trustee by the Institutional Trustee and any Preferred Security Certificate
which represents Preferred Securities other than Preferred Securities held by
the Clearing Agency or its nominee ("Non Book-Entry Preferred Securities") will
be deemed to represent beneficial interests in Debentures presented to the
Trustee by the Institutional Trustee having an aggregate principal amount equal
to the aggregate liquidation amount of the Non Book-Entry Preferred Securities
until such Preferred Security Certificates are presented to the Security
Registrar for transfer or reissuance at which time such Preferred Security
Certificates will be cancelled and a Debenture, registered in the name of the
holder of the Preferred Security Certificate or the transferee of the holder of
such Preferred Security Certificate, as the case may be, with an aggregate
principal amount equal to the aggregate liquidation amount of the Preferred
Security Certificate cancelled, will be executed by the Company and delivered to
the Trustee for authentication and delivery in accordance with the Indenture and
this First Supplemental Indenture. On issue of such Debentures, Debentures with
an equivalent aggregate principal amount that were presented by the
Institutional Trustee to the Trustee will be deemed to have been cancelled.
(b) Unless and until it is exchanged for the Debentures in registered form,
a Global Debenture may be transferred, in whole but not in part, only to another
nominee of the Depositary, or to a successor Depositary selected or approved by
the Company or to a nominee of such successor Depositary.
(c) If at any time the Depositary notifies the Company that it is unwilling
or unable to continue as Depositary or if at any time the Depositary for such
series shall no longer be registered or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation, and
a successor Depositary for such series is not appointed by the Company within 90
days after the Company receives such notice or becomes aware of such condition,
as the case may be, the Company will execute, and, subject to Article III of the
Indenture, the Trustee, upon written notice from the Company, will authenticate
and deliver the Debentures in definitive registered form
3
<PAGE> 7
without coupons, in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Debenture in exchange for
such Global Debenture. In addition, the Company may at any time determine that
the Debentures shall no longer be represented by Global Debenture. In such event
the Company will execute, and subject to Section 301 of the Indenture, the
Trustee, upon receipt of an Officers Certificate evidencing such determination
by the Company, will authenticate and deliver the Debentures in definitive
registered form without coupons, in authorized denominations, and in an
aggregate principal amount equal to the principal amount of the Global Debenture
in exchange for such Global Debenture. Upon the exchange of the Global Debenture
for such Debentures in definitive registered form without coupons, in authorized
denominations, the Global Debenture shall be cancelled by the Trustee. Such
Debentures in definitive registered form issued in exchange for the Global
Debenture shall be registered in such names and in such authorized denominations
as the Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall deliver
such Securities to the Depositary for delivery to the Persons in whose names
such Securities are so registered.
SECTION 2.5. INTEREST.
(a) Each Debenture will bear interest at the rate of_____ % per annum
(the Coupon Rate") from the original date of issuance until the principal
thereof becomes due and payable, and on any overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the Coupon Rate, compounded quarterly,
payable (subject to the provisions of Article IV) quarterly in arrears on March
31, June 30, September 30, and December 31 of each year (each, an "Interest
Payment Date," commencing on September 30, 1997), to the Person in whose name
such Debenture or any predecessor Debenture is registered, at the close of
business on the regular record date for such interest installment, which, in
respect of (i) Debentures of which the Institutional Trustee is the Holder and
the Preferred Securities are in book-entry only form or (ii) a Global
Debenture, shall be the close of business on the Business Day next preceding
that Interest Payment Date. Notwithstanding the foregoing sentence, if (i) the
Debentures are held by the Institutional Trustee and the Preferred Securities
are no longer in book-entry only form or (ii) the Debentures are not
represented by a Global Debenture, the Company may select a regular record date
for such interest installment which shall be any date at least ten Business
Days before an Interest Payment Date.
(b) The amount of interest payable for any period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Except as provided
in the following sentence, the amount of interest payable for any period shorter
than a full quarterly period for which interest is computed, will be computed on
the basis of the actual number of days elapsed in such a 90-day period. In the
event that any date on which interest is payable on the Debentures is not a
Business Day, then payment of interest payable on such date will be made on the
next succeeding day which is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if such Business Day is in
the next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(c) If, at any time while the Institutional Trustee is the Holder of any
Debentures, the Trust or the Institutional Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Company will pay as additional interest ("Additional
Interest") on the Debentures held by the Institutional Trustee, such additional
amounts as shall be required so that the net amounts received and retained by
the Trust and the Institutional Trustee after paying such taxes, duties,
assessments or other governmental charges will be equal to the amounts the Trust
and the Institutional Trustee would have received had no such taxes, duties,
assessments or other government charges been imposed.
SECTION 2.6. NO SINKING FUND.
The Debentures are not entitled to the benefit of any sinking fund.
4
<PAGE> 8
ARTICLE III
EXTENSION OF INTEREST PAYMENT PERIOD
SECTION 3.1. EXTENSION OF INTEREST PAYMENT PERIOD.
The Company shall have the right at any time, and from time to time, during
the term of the Debentures, to defer payments of interest by extending the
interest payment period of such Debentures for a period not extending, in the
aggregate, beyond the Maturity Date of the Debentures (the "Extended Interest
Payment Period"), during which Extended Interest Payment Period no interest
shall be due and payable. To the extent permitted by applicable law, interest,
the payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 3.1, will bear interest thereon at the
Coupon Rate compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the Extended Interest
Payment Period, the Company shall pay all interest accrued and unpaid on the
Debentures, including any Additional Interest and Compounded Interest (together,
"Deferred Interest") that shall be payable to the Holders of the Debentures in
whose names the Debentures are registered in the Security Register on the first
record date after the end of the Extended Interest Payment Period; provided,
however, that during any such Extended Interest Payment Period (a) the Company
shall not declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock (other than (i) purchase or acquisitions of shares of its
Common Stock in connection with the satisfaction by the Company of its
obligations under any employee benefit plans or the satisfaction by the Company
of its obligations pursuant to any contract or security requiring the Company to
purchase shares of the Company's Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged)
or make any guarantee payments with respect to the foregoing), (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities (including guarantees) issued by
the Company that rank pari passu with or junior to such Debentures and (c) the
Company shall not make any guarantee payments with respect to the foregoing
(other than pursuant to the Preferred Securities Guarantee). Prior to the
termination of any Extended Interest Payment Period, the Company may further
extend such period, provided that such period together with all such previous
and further extensions thereof shall not extend beyond the maturity date of the
Debentures. Upon the termination of any Extended Interest Payment Period and
upon the payment of all Deferred Interest then due, the Company may commence a
new Extended Interest Payment Period, subject to the foregoing requirements. No
interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof, but the Company may prepay at any time all or any
portion of the interest accrued during an Extended Interest Payment Period.
SECTION 3.2. NOTICE OF EXTENSION.
(a) If the Institutional Trustee is the only registered Holder of the
Debentures at the time the Company selects an Extended Interest Payment Period,
the Company shall give written notice to the Regular Trustees, the Institutional
Trustee and the Trustee of its selection of such Extended Interest Payment
Period one Business Day before the earlier of (i) the next succeeding date on
which Distributions on the Trust Securities issued by the Trust are payable, or
(ii) the date the Trust is required to give notice of the record date, or the
date such Distributions are payable, to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the Preferred
Securities issued by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Institutional Trustee is not the only Holder of the Debentures
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the Holders of the Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period at least 10 Business Days
before the earlier of (i) the next succeeding Interest Payment Date, or (ii) the
date the Company is required to give notice of the record or
5
<PAGE> 9
payment date of such interest payment to the New York Stock Exchange or other
applicable self-regulatory organization or to Holders of the Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs (a) or
(b) of this Section 3.2 shall be counted as one of the 20 quarters permitted in
the maximum Extended Interest Payment Period permitted under Section 3.1.
SECTION 3.3. LIMITATION OF TRANSACTIONS.
If (i) the Company shall exercise its right to defer payment of interest as
provided in Section 3.1, or (ii) there shall have occurred any Event of Default,
as defined in the Indenture, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital stock
(other than (i) purchases or acquisitions of shares of its common stock in
connection with the satisfaction by the Company of its obligations under any
employee benefit plans or the satisfaction by the Company of its obligations
pursuant to any contract or security requiring the Company to purchase shares of
its common stock, (ii) as a result of a reclassification of its capital stock or
the exchange or conversion of one class or series of its capital stock for
another class or series of its capital stock or, (iii) the purchase of
fractional interests in shares of its capital stock pursuant to the conversion
or exchange provisions of such capital stock or security being converted or
exchanged) or make any guarantee payment with respect thereto, (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which rank
pari passu with or junior to the Debentures and the Company shall not make any
guarantee payments with respect to the foregoing (other than pursuant to the
Preferred Security Guaranty).
SECTION 3.4. OPTION TO PUT DEBENTURES.
(a) Each Holder of Debentures, including the Institutional Trustee and the
Collateral Agent, shall have the right to require the Company to repurchase the
Debentures on the Purchase Contract Settlement Date and for a period of ninety
days thereafter (the "Put Option"), either in whole or in part, at an amount per
Debenture equal to $50, plus accumulated and unpaid distributions, if any (the
"Debenture Repayment Price").
(b) On the Purchase Contract Settlement Date, each holder of Debentures
that has not settled its Purchase Contract with cash will be deemed to have
requested the Trust to put the aggregate principal amount of its Debentures to
the Company for an amount equal to the Debenture Repayment Price. Upon such
repurchase by the Company, the Trust shall use simultaneously the proceeds from
such repurchase to redeem the Preferred Securities of such holder having an
aggregate Stated Amount equal to the aggregate principal amount of the
Debentures so repurchased and shall be applied to satisfy in full such holder's
obligation to purchase Common Securities under the Purchase Contract and any
accumulated and unpaid distributions with respect to the Debentures so
repurchased shall be paid to the holder thereof in cash.
(c) Each holder of Debentures that has settled its Purchase Contract with
cash shall have the right to require the Company to repurchase the Debentures on
the Purchase Contract Settlement Date and at any time during a period of ninety
days thereafter for an amount equal to the Debenture Repayment Price. Upon such
repurchase by the Company the Trust shall use simultaneously the proceeds from
such repurchase to redeem in cash of such holder having an aggregate Stated
Amount equal to the aggregate principal amount of the Debentures so repurchased
and shall pay in cash any accumulated and unpaid distributions to the holder
thereof.
SECTION 3.5. REPURCHASE PROCEDURE FOR DEBENTURES.
(a) In order for the Debentures to be repurchased on the Purchase Contract
Settlement Date or for a period of ninety days thereafter, the Company must
receive at the Corporate Trust Office in the City of Chicago, Illinois the
Debentures to be repurchased with the form entitled "Option to Elect Repayment"
on the reverse of or otherwise accompanying such Debentures duly completed. All
questions as to the validity, eligibility (including time of receipt)
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<PAGE> 10
and acceptance of the Debentures for repayment shall be determined by the
Company, whose determination shall be final and binding. Notwithstanding the
foregoing, so long as the Holder is the Institutional Trustee or the Collateral
Agent, such Debentures may be received at the Corporate Trust Office at any time
prior to 11:00 a.m., New York City time, on the Purchase Contract Settlement
Date, or on any Business Day during the ninety days immediately thereafter, in
the form and manner as may be designated by the Institutional Trustee or the
Collateral Agent and acceptable to the Trustee.
(b) Payment of the Debentures Repayment Price to Holders of Debentures
shall be made through the Trustee, subject to the Trustee's receipt of payment
from the Company in accordance with the terms of the Indenture. Notwithstanding
the foregoing, so long as the Holder of any Debentures presented for repayment
is the Institutional Trustee or the Collateral Agent, the payment of the
Debentures Repayment Price in respect of such Debentures shall be made, either
through the Trustee or the Company acting as Paying Agent, no later than 12:00
noon, New York City time, on the Purchase Contract Settlement Date, or on any
Business Day during the ninety days immediately thereafter, and to such account
as may be designated by the Institutional Trustee or the Collateral Agent, as
the case may be. If the Trustee holds immediately available funds sufficient to
pay the Debentures Repayment Price of the Debentures presented for repayment
(or, if the Company is acting as Paying Agent or the Institutional Trustee has
received the Debentures Repayment Price), then, immediately prior to the close
of business on the Purchase Contract Settlement Date, or on any Business Day
during the ninety days immediately thereafter, such Debentures will cease to be
outstanding and interest thereon will cease to accrue, whether or not such
Debentures have been received by the Company, and all other rights of the Holder
in respect of the Debentures, including the Holder's right to require the
Company to repay such Debentures, shall terminate and lapse (other than the
right to receive the Debentures Repayment Price upon delivery of such debentures
but without interest on such Debentures Repayment Price). Neither the
Institutional Trustee nor the Company will be required to register or cease to
be registered the transfer of any Debentures for which repayment has been
elected.
ARTICLE IV
EXPENSES
SECTION 4.1. PAYMENT OF EXPENSES.
In connection with the offering, sale and issuance of the Debentures to the
Institutional Trustee and in connection with the sale of the Trust Securities by
the Trust, the Company, in its capacity as borrower with respect to the
Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale and issuance
of the Debentures, including commissions to the underwriters payable pursuant to
the Underwriting Agreement and the Pricing Agreement and compensation of the
Trustee under the Indenture in accordance with the provisions of Section 607 of
the Indenture;
(b) pay all costs and expenses of the Trust (including, but not limited to,
costs and expenses relating to the organization of the Trust, the offering, sale
and issuance of the Trust Securities (including commissions to the underwriters
in connection therewith), the fees and expenses of the Institutional Trustee and
the Delaware Trustee, the costs and expenses relating to the operation of the
Trust, including without limitation, costs and expenses of accountants,
attorneys, statistical or bookkeeping services, expenses for printing and
engraving and computing or accounting equipment, paying agent(s), registrar(s),
transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets).
(c) be primarily liable for any indemnification obligations arising with
respect to the Declaration; and
(d) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.
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SECTION 4.2. PAYMENT UPON RESIGNATION OR REMOVAL.
Upon termination of this First Supplemental Indenture or the Indenture or
the removal or resignation of the Trustee pursuant to this Section 4.2, the
Company shall pay to the Trustee all amounts accrued to the date of such
termination, removal or resignation. Upon termination of the Declaration or the
removal or resignation of the Delaware Trustee or the Institutional Trustee, as
the case may be, pursuant to Section 4.6 of the Declaration, the Company shall
pay to the Delaware Trustee or the Institutional Trustee, as the case may be,
all amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
NOTICE
SECTION 5.1. NOTICE BY THE COMPANY.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company that would prohibit the making of
any payment of monies to or by the Trustee in respect of the Debentures pursuant
to the provisions of this Article V. Notwithstanding the provisions of Article
Fourteen of the Indenture or any other provision of the Indenture and this First
Supplemental Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts that would prohibit the making of any payment of monies
to or by the Trustee in respect of the Debentures pursuant to the provisions of
Article Fourteen of the Indenture, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Senior Indebtedness or from any trustee therefor and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Section 601 of the Indenture, shall be entitled in all respects to assume that
no such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Article V at least two Business Days
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of
(or premium, if any) or interest on any Debenture), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purposes for which
they were received, and shall not be affected by any notice to the contrary that
may be received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 601 of the Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company, as the case may be (or a trustee on behalf of such holder), to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article V, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article V, and, if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
ARTICLE VI
FORM OF DEBENTURE
SECTION 6.1 FORM OF DEBENTURE.
The Debentures and the Trustee's Certificate of Authentication to be
endorsed thereon are to be substantially in the following forms:
8
<PAGE> 12
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - This Debenture is a
Global Debenture within the meaning of the Indenture hereinafter referred to and
is registered in the name of a Depositary or a nominee of a Depositary. This
Debenture is exchangeable for Debentures registered in the name of a person
other than the Depositary or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.
Unless this Debenture is presented by an authorized representative of The
Depository Trust Company (55 Water Street, New York, New York) to the issuer or
its agent for registration of transfer, exchange or payment, and any Debenture
issued is registered in the name of Cede & Co. or such other name as requested
by an authorized representative of The Depository Trust Company and any payment
hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede &
Co., has an interest herein.]
No.___________________________
$_____________________________
CUSIP No._____________________
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
____% JUNIOR SUBORDINATED DEBENTURE
DUE___
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION, a Florida corporation (the
"Company", which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to, or registered assigns, the principal sum of ___________________ Dollars
($______) on _______, 2002, and to pay interest on said principal sum from ____,
1997, or from the most recent interest payment date (each such date, an
"Interest Payment Date") to which interest has been paid or duly provided for,
quarterly (subject to deferral as set forth herein) in arrears on March 31,
June 30, September 30 and December 31 of each year commencing June 30, 1997, at
the rate of % ____ per annum until the principal hereof shall have become due
and payable, and on any overdue principal and premium, if any, and (without
duplication and to the extent that payment of such interest is enforceable
under applicable law) on any overdue installment of interest at the same rate
per annum compounded quarterly. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. In the event that any date on which interest is payable
on this Debenture is not a Business Day, then payment of interest payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture, be paid to the person
in whose name this Debenture (or one or more Predecessor Securities, as defined
in said Indenture) is registered at the close of business on the regular record
date for such interest installment which shall be the close of business on the
business day next preceding such Interest Payment Date. [IF PURSUANT TO THE
PROVISIONS OF THE INDENTURE THE DEBENTURES ARE NO LONGER REPRESENTED BY A
GLOBAL Debenture -- which shall be the close of business on the ___________
business day next preceding such Interest Payment Date.] Any such interest
installment not punctually paid or duly provided for shall forthwith cease to
be payable to the registered Holders on such regular record date and may be
paid to the Person in whose name this Debenture (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the registered Holders of this series of Debentures
not less than 10 days prior to such special record date, or may be paid at any
time in any other lawful manner not inconsistent with the requirements of any
securities exchange on
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<PAGE> 13
which the Debentures may be listed, and upon such notice as may be required by
such exchange all as more fully provided in the Indenture. The principal of (and
premium, if any) and the interest on this Debenture shall be payable at the
office or agency of the Trustee maintained for that purpose in any coin or
currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
registered Holder at such address as shall appear in the Security Register.
Notwithstanding the foregoing, so long as the Holder of this Debenture is the
Institutional Trustee or the Collateral Agent, the payment of the principal of
(and premium, if any) and interest on this Debenture will be made at such place
and to such account as may be designated in writing by the Institutional Trustee
or the Collateral Agent.
The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and junior in right of payment to the prior payment
in full of all Senior Indebtedness and pari passu in right of payment with the
Company's other junior subordinated debentures, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Debenture by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each Holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
The provisions of this Debenture are continued on the reverse side hereof
and such continued provisions shall for all purposes have the same effect as
though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
Dated
--------------------
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
By:
------------------------------------------
Name:
Title:
Attest:
By:
-------------------------
Name:
Title:
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<PAGE> 14
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in the
within-mentioned Indenture.
Dated
------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By
--------------------------------
Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Securities of the
Company (herein sometimes referred to as the "Securities"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of _____, 1997 (the "Base Indenture"), duly executed
and delivered between the Company and The First National Bank of Chicago, as
Trustee (the "Trustee") (as supplemented by a First Supplemental Indenture,
dated _______, 1997, (the Base Indenture as so supplemented, the "Indenture"),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a description of the rights, limitations of rights, obligations, duties
and immunities thereunder of the Trustee, the Company and the Holders of the
Securities. By the terms of the Indenture, the Securities are issuable in series
that may vary as to amount, date of maturity, rate of interest and in other
respects as provided in the Indenture. This series of Securities is limited in
aggregate principal amount as specified in said First Supplemental Indenture.
The Debentures are not entitled to the benefit of any sinking fund.
The Holder of this Debenture, including the Institutional Trustee and the
Collateral Agent, shall have the right to require the Company to repurchase this
Debenture on the Purchase Contract Settlement Date and for a period of ninety
days thereafter (the "Put Option"), either in whole or in part, at an amount per
Debenture equal to $50, plus accumulated and unpaid distributions, if any (the
"Debenture Repurchase Price"). On the Purchase Contract Settlement Date, each
Holder of Debentures that has not settled its Purchase Contract with cash will
be deemed to have requested the Trust to put the aggregate principal amount of
its Debentures to the Company for an amount equal to the Debenture Repayment
Price. Upon such repurchase by the Company, the Trust shall use simultaneously
the proceeds from such repurchase to redeem the Preferred Securities of such
Holder having an aggregate Stated Amount equal to the aggregate principal amount
of the Debentures so repurchased and shall be applied to satisfy in full such
Holder's obligation to purchase Common Securities under the Purchase Contract
and any accumulated and unpaid distributions with respect to the Debentures so
repurchased shall be paid to the Holder thereof in cash. Each Holder of
Debentures that has settled its Purchase Contract with cash shall have the right
to request the Company to repurchase the Debentures on the Purchase Contract
Settlement Date and at any time during a period of ninety days thereafter for an
amount equal to the Debenture Repayment Price. Upon such repurchase by the
Company the Trust shall use simultaneously the proceeds from such repurchase to
redeem in cash the Preferred Securities of such Holder having an aggregate
Stated Amount equal to the aggregate principal amount of the Debentures so
repurchased and shall pay in cash any accumulated and unpaid distributions to
the Holder thereof. In order for the Debentures to be repurchased on the
Purchase Contract Settlement Date or for a period of ninety days thereafter, the
Company must receive at the Corporate Trust Office in the City of Chicago,
Illinois the Debentures to be repurchased with the form
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<PAGE> 15
entitled "Option to Elect Repayment" on the reverse of or otherwise accompanying
such Debentures duly completed. All questions as to the validity, eligibility
(including time of receipt) and acceptance of the Debentures for repurchase
shall be determined by the Company, whose determination shall be final and
binding. Notwithstanding the foregoing, so long as the Holder is the
Institutional Trustee or the Collateral Agent this Debenture may be received at
the Corporate Trust Office at any time prior to 11:00 a.m., New York City time,
on the Purchase Contract Settlement Date in the form and manner as may be
designated by the Institutional Trustee or the Collateral Agent and acceptable
to the Trustee. So long as the Holder of any Debentures presented for repayment
is the Institutional Trustee or the Collateral Agent, the payment of the
Debentures Repayment Price in respect of such Debentures shall be made, either
through the Trustee or the Company acting as Paying Agent, no later than 12:00
noon, New York City time, on the Purchase Contract Settlement Date or on any
Business Day during the ninety days immediately thereafter.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of not less than a majority in aggregate
principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
however, that no such supplemental indenture shall (i) reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, without the
consent of the Holder of each Debenture so affected, or (ii) reduce the
aforesaid percentage of Debentures, the Holders of which are required to consent
to any such supplemental indenture, without the consent of the Holders of each
Debenture then outstanding and affected thereby. The Indenture also contains
provisions permitting the Holders of a majority in aggregate principal amount of
the Securities of any series at the time outstanding affected thereby, on behalf
of all of the Holders of the Debentures of such series, to waive Default or
Event of Default with respect to such series, and its consequences, except a
Default or Event of Default in the payment of the principal of or premium, if
any, or interest on any of the Securities of such series. Any such consent or
waiver by the registered Holder of this Debenture (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future Holders and owners of this Debenture and of any Debenture issued in
exchange he for or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Debenture at the time and place and at the rate and in the
money herein prescribed.
So long as the Company is not in default in the payment of interest on the
Debenture, the Company shall have the right at any time during the term of the
Debentures from time to time to extend the interest payment period of such
Debentures for a period not extending, in the aggregate, beyond the maturity
date of the Debentures (an "Extended Interest Payment Period"). At the end of an
Extended Interest Payment Period, the Company shall pay all interest then
accrued and unpaid (together with the interest thereon at the rate specified for
the Debentures to the extent that payment of such interest is enforceable under
applicable law). In the event that the Company exercises this right, then (a)
the Company shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock (other than (i) purchases or acquisitions
of shares of its Common Stock in connection with the satisfaction by the Company
of its obligations under any employee benefit plans or the satisfaction by the
Company of its obligations pursuant to any contract or security requiring the
Company to purchase shares of the Company's Common Stock, (ii) as a result of a
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock or (iii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being
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<PAGE> 16
converted or exchanged) or make any guarantee payments with respect to the
foregoing), (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees) issued by the Company that rank pari passu with or junior
to such Debentures and (c) the Company shall not make any guarantee payments
with respect to the foregoing (other than pursuant to the Preferred Securities
Guarantee). Prior to the termination of any such Extended Interest Payment
Period, the Company may further extend the interest payment period; provided,
that such Extended Interest Payment Period, together with all such previous and
further extensions thereof, may not extend beyond the maturity date of the
Debenture. At the termination of any such Extended Interest Payment Period and
upon the payment of all accrued and unpaid interest and any additional amount
then due, the Company may commence a new Extended Interest Payment Period,
subject to the above requirements.
As provided in the Indenture and subject to certain limitations therein set
forth, this Debenture is transferable by the registered Holder hereof on the
Security Register of the Company, upon surrender of this Debenture for
registration of transfer at the office or agency of the Trustee in the City of
Chicago and State of Illinois accompanied by a written instrument or instruments
of transfer in form satisfactory to the Company or the Trustee duly executed by
the registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debenture,
the Company, the Trustee, any paying agent and the Security Registrar may deem
and treat the registered holder hereof as the absolute owner hereof (whether or
not this Debenture shall be overdue and notwithstanding any notice of ownership
or writing hereon made by anyone other than the Security Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Security Registrar
shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, shareholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The Indenture imposes certain limitations on the ability of the Company to,
among other things, merge or consolidate with any other Person or sell, assign,
transfer or lease all or substantially all of its properties or assets. All such
covenants and limitations are subject to a number of important qualifications
and exceptions. The Company must report periodically to the Trustee on
compliance with the covenants in the Indenture.
The Debentures of this series are issuable only in registered form without
coupons in denominations of $50 and any integral multiple thereof. This Global
Debenture is exchangeable for Debentures in definitive form only under certain
limited circumstances set forth in the Indenture. Debentures of this series so
issued are issuable only in registered form without coupons in denominations of
$50 and any integral multiple thereof. As provided in the Indenture and subject
to certain limitations therein set forth, Debentures of this series so issued
are exchangeable for a like aggregate principal amount of Debentures of this
series of a different authorized denomination, as requested by the Holder
surrendering the same.
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<PAGE> 17
All terms used in this Debenture that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
ARTICLE VII
ORIGINAL ISSUE OF DEBENTURES
SECTION 7.1. ORIGINAL ISSUE OF DEBENTURES.
Debentures in the aggregate principal amount of $_______________ may, upon
execution of this First Supplemental Indenture, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures to or upon the written order of the
Company, signed by its Chairman, its Vice Chairman, its President, or any Vice
President and its Treasurer or an Assistant Treasurer, without any further
action by the Company.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. RATIFICATION OF INDENTURE.
The Indenture as supplemented by this First Supplemental Indenture, is in
all respects ratified and confirmed, and this First Supplemental Indenture shall
be deemed part of the Indenture in the manner and to the extent herein and
therein provided.
SECTION 8.2. TRUSTEE NOT RESPONSIBLE FOR RECITALS.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.
SECTION 8.3. GOVERNING LAW.
This First Supplemental Indenture and each Debenture shall be deemed to be
a contract made under the internal laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.
SECTION 8.4 SEPARABILITY.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Debentures shall for any reason be held to be
invalid illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this First
Supplemental Indenture or of the Debentures, but this First Supplemental
Indenture and the Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
SECTION 8.5. COUNTERPARTS.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
14
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
berwind affixed and attested, on the date or dates indicated in the
acknowledgments and as of the day and year first above written.
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
as Issuer
By
---------------------------------
Name:
Title:
Attest:
By:
-----------------------------
THE FIRST NATIONAL BANK OF CHICAGO
as Trustee
By
--------------------------------
Name:
Title:
Attest:
By:
----------------------------
15
<PAGE> 1
EXHIBIT 4(k)
================
AMENDED AND RESTATED DECLARATION
OF TRUST
AHL FINANCING
Dated as of ______, 1997
================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions............................................................................1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.......................................................6
SECTION 2.2 Lists of Holders of Securities.........................................................6
SECTION 2.3 Reports by the Institutional Trustee...................................................7
SECTION 2.4 Periodic Reports to Institutional Trustee..............................................7
SECTION 2.5 Evidence of Compliance with Conditions Precedent.......................................7
SECTION 2.6 Events of Default; Waiver..............................................................7
SECTION 2.7 Event of Default; Notice...............................................................8
ARTICLE III
ORGANIZATION
SECTION 3.1 Name...................................................................................9
SECTION 3.2 Office.................................................................................9
SECTION 3.3 Purpose................................................................................9
SECTION 3.4 Authority..............................................................................9
SECTION 3.5 Title to Property of the Trust........................................................10
SECTION 3.6 Powers and Duties of the Regular Trustees.............................................10
SECTION 3.7 Prohibition of Actions by the Trust and the Trustees..................................12
SECTION 3.8 Powers and Duties of the Institutional Trustee........................................12
SECTION 3.9 Certain Duties and Responsibilities of the Institutional Trustee......................14
SECTION 3.10 Certain Rights of Institutional Trustee...............................................15
SECTION 3.11 Delaware Trustee......................................................................17
SECTION 3.12 Execution of Documents................................................................17
SECTION 3.13 Not Responsible for Recitals or Issuance of Securities................................17
SECTION 3.14 Duration of Trust.....................................................................17
SECTION 3.15 Mergers...............................................................................17
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities...............................................18
SECTION 4.2 Responsibilities of the Sponsor.......................................................19
SECTION 4.3 Right to Proceed......................................................................19
SECTION 4.4 Expenses..............................................................................19
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees....................................................................20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.2 Delaware Trustee......................................................................20
SECTION 5.3 Institutional Trustee; Eligibility....................................................21
SECTION 5.4 Certain Qualifications of Regular Trustees and Delaware Trustee Generally.............21
SECTION 5.5 Regular Trustees......................................................................21
SECTION 5.6 Appointment, Removal and Resignation of Trustees......................................22
SECTION 5.7 Vacancies among Trustees..............................................................23
SECTION 5.8 Effect of Vacancies...................................................................23
SECTION 5.9 Meetings..............................................................................23
SECTION 5.10 Delegation of Power...................................................................24
SECTION 5.11 Merger, Conversion. Consolidation or Succession to Business...........................24
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.........................................................................24
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities...............................................25
SECTION 7.2 Paying Agent..........................................................................25
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust..................................................................26
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 Transfer of Securities................................................................26
SECTION 9.2 Transfer of Certificates..............................................................27
SECTION 9.3 Deemed Security Holders...............................................................27
SECTION 9.4 Book Entry Interests..................................................................27
SECTION 9.5 Notices to Clearing Agency............................................................28
SECTION 9.6 Appointment of Successor Clearing Agency..............................................28
SECTION 9.7 Definitive Preferred Security Certificates............................................28
SECTION 9.8 Mutilated, Destroyed Lost or Stolen Certificates......................................28
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS
SECTION 10.1 Liability.............................................................................29
SECTION 10.2 Exculpation...........................................................................29
SECTION 10.3 Fiduciary Duty........................................................................29
SECTION 10.4 Indemnification.......................................................................30
SECTION 10.5 Outside Businesses....................................................................32
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year...........................................................................32
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 11.2 Certain Accounting Matters............................................................32
SECTION 11.3 Banking...............................................................................33
SECTION 11.4 Withholding...........................................................................33
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments............................................................................33
SECTION 12.2 Meetings of the Holders of Securities; Action by Written Consent......................35
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Institutional Trustee...............................36
SECTION 13.2 Representations and Warranties of Delaware Trustee....................................36
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Notices...............................................................................37
SECTION 14.2 Governing Law.........................................................................38
SECTION 14.3 Intention of the Parties..............................................................38
SECTION 14.4 Headings..............................................................................38
SECTION 14.5 Successors and Assigns................................................................38
SECTION 14.6 Partial Enforceability................................................................38
SECTION 14.7 Counterparts..........................................................................38
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
AHL FINANCING
________, 1997
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of __________, 1997, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the assets of the Trust to be issued pursuant to this
Declaration;
WHEREAS, the Trustees and the Sponsor established AHL Financing (the
"Trust"), a trust under the Delaware Business Trust Act pursuant to a
Declaration of Trust dated as of March 20, 1997 (the "Original Declaration")
and a Certificate of Trust filed with the Secretary of State of the State of
Delaware on March 20, 1997, for the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in the assets of the
Trust and investing the proceeds thereof in certain Debentures of the Debenture
Issuer;
WHEREAS, as of the date hereof, no interests in the Trust have been
issued;
WHEREAS, all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original
Declaration; and
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act and that
this Declaration constitute the governing instrument of such business trust,
the Trustees declare that all assets contributed to the Trust will be held in
trust for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 DEFINITIONS.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) a term defined anywhere in this Declaration has the same
meaning throughout;
(c) all references to "the Declaration" or "this Declaration"
are to this Declaration as modified, supplemented or amended from time to time;
(d) all references in this Declaration to Articles and
Sections and Annexes and Exhibits are to Articles and Sections of and Annexes
and Exhibits to this Declaration unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same
meaning when used in this Declaration unless otherwise defined in this
Declaration or unless the context otherwise requires; and
(f) a reference to the singular includes the plural and vice
versa.
<PAGE> 6
"Affiliate" has the same meaning as given to that term in
Rule 405 of the Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent.
"Authorized Officer" of a Person means any Person that is
authorized to bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.4.
"Business Day" means any day other than Saturday, Sunday or
any day on which banking institutions in New York City, in the State of New
York, are permitted or required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.3801 et seq., as it may be amended from time to
time, or any successor legislation.
"Certificate" means a Common Security Certificate or a
Preferred Security Certificate.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depositary for the Preferred Securities and in whose name or in the name of a
nominee of that organization shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities
deposited with the Clearing Agency.
"Closing Date" means the "Closing Time" and each "Date of
Delivery" under the Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Common Security" has the meaning specified in Section 7.1.
"Common Securities Guarantee" means the guarantee agreement
to be dated as of ________, 1997 of the Sponsor in respect of the Common
Securities.
"Common Security Certificate" means a definitive certificate
in fully registered form representing a Common Security substantially in the
form of Exhibit A-2.
"Company Indemnified Person" means (a) any Regular Trustee;
(b) any Affiliate of any Regular Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Regular Trustee; or (d) any officer, employee or agent of the Trust or its
Affiliates.
"Corporate Trust Office" means the office of the
Institutional Trustee at which the corporate trust business of the Preferred
Guarantee Trustee shall, at any particular time, be principally administered,
which office at the date of execution of this Declaration is located at
2
<PAGE> 7
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
"Covered Person" means: (a) any officer, director,
shareholder, partner, member, representative, employee or agent of (i) the
Trust or (ii) the Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means American Heritage Life Investment
Corporation, a Florida corporation, in its capacity as issuer of the Debentures
under the Indenture.
"Debenture Trustee" means The First National Bank of Chicago,
as trustee under the Indenture until a successor is appointed thereunder, and
thereafter means such successor trustee.
"Debentures" means the series of Debentures to be issued by
the Debenture Issuer under the Indenture to be held by the Institutional
Trustee, a specimen certificate for such series of Debentures being Exhibit B.
"Debenture Repayment Price" means, with respect to any
Debentures put to the Sponsor on the Purchase Contract Settlement Date or for a
period of ninety days thereafter, at an amount per Debenture equal to $50, plus
accumulated and unpaid distributions, if any.
"Definitive Preferred Security Certificates" has the meaning
set forth in Section 9.4.
"Delaware Trustee" has the meaning set forth in Section 5.2.
"Direction" by a Person means a written direction signed:
(a) if the Person is a natural person, by that Person; or
(b) in any other case, in the name of such Person by one or
more Authorized Officers of that Person.
"Direct Action" has the meaning specified in Section 3.8(e).
"Distribution" means a distribution payable to Holders of
Securities in accordance with Section 6.1.
"DTC" means The Depository Trust Company, the initial
Clearing Agency.
"Event of Default" in respect of the Securities means an
Event of Default (as defined in the Indenture) has occurred and is continuing
in respect of the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor legislation.
"FELINE PRIDES(SM)" means a security which, upon issuance,
will consist of a unit (referred to as an Income PRIDES(SM) comprised of (i) a
stock purchase contract under which (a) the holder of the unit will purchase
from the Sponsor, for an amount in cash, a certain number of shares of common
stock of the Sponsor and (b) the Sponsor will pay the holder contract adjustment
payments, and (ii) a ______% Preferred Security. After issuance, FELINE
PRIDES(SM) units with respect to which Treasury Securities have been substituted
for Preferred Securities will be referred to as Growth PRIDES(SM.)
"Fiduciary Indemnified Person" has the meaning set forth in
Section 10.4(b).
"Global Certificate" has the meaning set forth in Section 9.4.
3
<PAGE> 8
"Holder" or "holder" means a Person in whose name a
Certificate representing a Security is registered, such Person being a
beneficial owner within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a
Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of __________, 1997,
among the Debenture Issuer and the Debenture Trustee, and any indenture
supplemental thereto pursuant to which the Debentures are to be issued.
"Institutional Trustee" means the Trustee meeting the
eligibility requirements set forth in Section 5.3.
"Institutional Trustee Account" has the meaning set forth in
Section 3.8(c).
"Investment Company" means an investment company as defined
in the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex
I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Majority in liquidation amount of the Securities" means,
except as provided in the terms of the Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Preferred
Securities or Holders of outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the aggregate liquidation
amount (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date
upon which the voting percentages are determined) of all outstanding Securities
of the relevant class.
"Ministerial Action" has the meaning set forth in the terms
of the Securities as set forth in Annex I.
"Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Declaration shall include:
(a) a statement that the officer signing the Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by the officer in rendering the
Certificate;
(c) a statement that such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether, in the opinion of such
officer, such condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 7.2.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
4
<PAGE> 9
"Pledge Agreement" means the Pledge Agreement dated as of
_________, 1997 among the Sponsor, The Chase Manhattan Bank, as collateral
agent (the "Collateral Agent") and The First National Bank of Chicago as
purchase contract agent (the "Purchase Contract Agent").
"Preferred Securities Guarantee" means the guarantee
agreement to be dated as of ________, 1997, of the Sponsor in respect of the
Preferred Securities.
"Preferred Security" has the meaning specified in Section 7.1.
"Preferred Security Beneficial Owner" means, with respect to
a Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Preferred Security Certificate" means a certificate
representing a Preferred Security substantially in the form of Exhibit A-1.
"Pricing Agreement" means the pricing agreement between the
Trust, the Debenture Issuer, and the underwriters designated by the Regular
Trustees with respect to the offer and sale of the Preferred Securities.
"Purchase Contract Agreement" means the Purchase Contract
Agreement dated as of __________, 1997 among The First National Bank of
Chicago, as Purchase Contract Agent, and the Sponsor.
"Put Option" has the meaning set forth in Annex I hereto.
"Quorum" means a majority of the Regular Trustees or, if
there are only two Regular Trustees, both of them.
"Regular Trustee" has the meaning set forth in Section 5.1.
"Related Party" means, with respect to the Sponsor, any
direct or indirect wholly owned subsidiary of the Sponsor or any other Person
that owns, directly or indirectly, 100% of the outstanding voting securities of
the Sponsor.
"Responsible Officer" means, with respect to the
Institutional Trustee, any officer within the Corporate Trust Office of the
Institutional Trustee, including any vice-president, any assistant
vice-president, any assistant secretary, the treasurer, any assistant treasurer
or other officer of the Corporate Trust Office of the Institutional Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act.
"Securities" means the Common Securities and the Preferred
Securities.
"Securities Guarantees" means the Common Securities
Guarantee and the Preferred Securities Guarantee.
"Securities Act" means the Securities Act of 1933, as amended
from time to time or any successor legislation.
"Special Event" has the meaning set forth in Annex I hereto.
5
<PAGE> 10
"Sponsor" means American Heritage Life Investment
Corporation, a Florida corporation, or any successor entity in a merger,
consolidation or amalgamation, in its capacity as sponsor of the Trust.
"Super Majority" has the meaning set forth in Section
2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"10% in liquidation amount of the Securities" means, except
as provided in the terms of the Preferred Securities or by the Trust Indenture
Act, Holder(s) of outstanding Securities voting together as a single class or,
as the context may require, Holders of outstanding Preferred Securities or
Holders of outstanding Common Securities voting separately as a class, who are
the record owners of 10% or more of the aggregate liquidation amount (including
the stated amount that would be paid on repayment, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant
class.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with
the provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended from time to time, or any successor legislation.
"Underwriting Agreement" means the Underwriting Agreement for
the offering and sale of Preferred Securities in the form of Exhibit C.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Declaration is subject to the provisions of the
Trust Indenture Act that are required to be part of this Declaration and shall,
to the extent applicable, be governed by such provisions.
(b) The Institutional Trustee shall be the only Trustee which
is a Trustee for the purposes of the Trust Indenture Act.
(c) If and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by ss.ss.
310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(d) The application of the Trust Indenture Act to this
Declaration shall not affect the nature of the Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) Each of the Sponsor and the Regular Trustees on behalf of
the Trust shall provide the Institutional Trustee (i) within 14 days after each
record date for payment of Distributions, a list, in such form as the
Institutional Trustee may reasonably require, of the names and addresses of the
Holders of the Securities ("List of Holders") as of such record date, provided
that neither the Sponsor nor the Regular Trustees, on behalf of the Trust,
shall be obligated
6
<PAGE> 11
to provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Institutional Trustee by the
Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Institutional Trustee. The Institutional Trustee shall preserve, in as
current a form as is reasonably practicable, all information contained in Lists
of Holders given to it or which it receives in the capacity as Paying Agent (if
acting in such capacity) provided that the Institutional Trustee may destroy
any List of Holders previously given to it on receipt of a new List of Holders.
(b) The Institutional Trustee shall comply with its
obligations under ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.3 REPORTS BY THE INSTITUTIONAL TRUSTEE.
Within 60 days after __________ 1 of each year, the
Institutional Trustee shall provide to the Holders of the Preferred Securities
such reports as are required by ss. 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by ss. 313 of the Trust Indenture Act. The
Institutional Trustee shall also comply with the requirements of ss. 313(d) of
the Trust Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO INSTITUTIONAL TRUSTEE.
Each of the Sponsor and the Regular Trustees, on behalf of
the Trust, shall provide to the Institutional Trustee such documents, reports
and information as required by ss. 314 (if any) and the compliance certificate
required by ss. 314 of the Trust Indenture Act in the form, in the manner and
at the times required by ss. 314 of the Trust Indenture Act.
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Sponsor and the Regular Trustees, on behalf of
the Trust, shall provide to the Institutional Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this
Declaration that relate to any of the matters set forth in ss. 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given by an
officer pursuant to ss. 314(c) (1) may be given in the form of an Officers'
Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
(a) The Holders of a Majority in liquidation amount of
Preferred Securities may, by vote, on behalf of the Holders of all of the
Preferred Securities, waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that, if the underlying
Event of Default under the Indenture:
(i) is not waivable under the Indenture, the Event
of Default under the Declaration shall also not be waivable;
or
(ii) requires the consent or vote of greater than a
majority in principal amount of the holders of the Debentures
(a "Super Majority") to be waived under the Indenture, the
Event of Default under the Declaration may only be waived by
the vote of the Holders of at least the proportion in
liquidation amount of the Preferred Securities that the
relevant Super Majority represents of the aggregate principal
amount of the Debentures outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of ss. 316(a)
(1)(B) of the Trust Indenture Act and such ss. 316(a) (1) (B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with
7
<PAGE> 12
respect to the Preferred Securities or impair any right consequent thereon. Any
waiver by the Holders of the Preferred Securities of an Event of Default with
respect to the Preferred Securities shall also be deemed to constitute a waiver
by the Holders of the Common Securities of any such Event of Default with
respect to the Common Securities for all purposes of this Declaration without
any further act, vote, or consent of the Holders of the Common Securities.
(b) The Holders of a Majority in liquidation amount of the
Common Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(i) is not waivable under the Indenture, except
where the Holders of the Common Securities are deemed to have
waived such Event of Default under the Declaration as
provided below in this Section 2.6(b), the Event of Default
under the Declaration shall also not be waivable; or
(ii) requires the consent or vote of a Super
Majority to be waived, except where the Holders of the Common
Securities are deemed to have waived such Event of Default
under the Declaration as provided below in this Section
2.6(b), the Event of Default under the Declaration may only
be waived by the vote of the Holders of at least the
proportion in liquidation amount of the Common Securities
that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding;
provided further, each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with respect to the
Common Securities and its consequences until all Events of Default with respect
to the Preferred Securities have been cured, waived or otherwise eliminated,
and until such Events of Default have been so cured, waived or otherwise
eliminated, the Institutional Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Institutional Trustee in
accordance with the terms of the Securities. The foregoing provisions of this
Section 2.6(b) shall be in lieu of ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the
Trust Indenture Act and such ss.ss. 316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Subject to the foregoing
provisions of this Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to the Common Securities
arising therefrom shall be deemed to have been cured for every purpose of this
Declaration, but no such waiver shall extend to any subsequent or other default
or Event of Default with respect to the Common Securities or impair any right
consequent thereon.
(c) A waiver of an Event of Default under the Indenture by
the Institutional Trustee at the direction of the Holders of the Preferred
Securities, constitutes a waiver of the corresponding Event of Default with
respect to the Preferred Securities under this Declaration. Any waiver of an
Event of Default under the Indenture by the Institutional Trustee at the
direction of the Holders of the Preferred Securities shall also be deemed to
constitute a waiver by the Holders of the Common Securities of the
corresponding Event of Default under this Declaration with respect to the
Common Securities for all purposes of this Declaration without further act,
vote or consent of the Holders of the Common Securities. The foregoing
provisions of this Section 2.6(c) shall be in lieu of ss. 316(a)(1)(B) of the
Trust Indenture Act and such ss. 316(a)(1)(B) of the Trust Indenture Act is
hereby expressly excluded from this Declaration and the Securities, as
permitted by the Trust Indenture Act.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Institutional Trustee shall, within 90 days after the
occurrence of an Event of Default, actually known to a Responsible Officer of
the Institutional Trustee, transmit by mail, first class postage prepaid, to
the Holders of the Securities, notices of all such defaults with respect to the
Securities, unless such defaults have been cured before the giving of such
notice (the term "defaults" for the purposes of this Section 2.7(a) being
hereby defined to be an Event of Default as defined in the Indenture, not
including any periods of grace provided for therein and irrespective of the
giving of any notice provided therein); provided that, except for a default in
the payment of principal of (or premium, if any) or interest on any of the
Debentures, the Institutional Trustee shall be protected in withholding such
notice if and so long as
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a Responsible Officer of the Institutional Trustee in good faith determines
that the withholding of such notice is in the interests of the Holders of the
Securities.
(b) The Institutional Trustee shall not be deemed to have
knowledge of any default except:
(i) a default under Sections 501 and 503 of the
Indenture; or
(ii) any default as to which the Institutional
Trustee shall have received written notice or of which a
Responsible Officer of the Institutional Trustee charged with
the administration of the Declaration shall have actual
knowledge.
ARTICLE III
ORGANIZATION
SECTION 3.1 NAME.
The Trust is named "AHL Financing," as such name may be
modified from time to time by the Regular Trustees following written notice to
the Holders of the Securities. The Trust's activities may be conducted under
the name of the Trust or any other name deemed advisable by the Regular
Trustees.
SECTION 3.2 OFFICE.
The address of the principal office of the Trust is c/o
American Heritage Life Investment Corporation, 1776 American Heritage Life
Drive, Jacksonville, Florida 32224. On ten Business Days written notice to the
Holders of the Securities, the Regular Trustees may designate another principal
office.
SECTION 3.3 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to
issue and sell Securities and use the proceeds from such sale to acquire the
Debentures, and (b) except as otherwise set forth herein, to engage in only
those other activities necessary, or incidental thereto. The Trust shall not
borrow money, issue debt or reinvest proceeds derived from investments, pledge
any of its assets, or otherwise undertake (or permit to be undertaken) any
activity that would cause the Trust not to be classified for United States
federal income tax purposes as a grantor trust. The Trust will be classified as
a grantor trust for United States federal income tax purposes under Subpart E
of Subchapter J of the Code, pursuant to which the owners of the Preferred
Securities and the Common Securities will be the owners of the Trust for United
States federal income tax purposes, and such owners will include directly in
their gross income the income, gain, deduction or loss of the Trust as if the
Trust did not exist. By the acceptance of this Trust neither the Trustees, the
Sponsor nor the owners of the Preferred Securities or Common Securities will
take any position for United States federal income tax purposes which is
contrary to the classification of the Trust as a grantor trust.
SECTION 3.4 AUTHORITY.
Subject to the limitations provided in this Declaration and
to the specific duties of the Institutional Trustee, the Regular Trustees shall
have exclusive and complete authority to carry out the purposes of the Trust.
An action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee on behalf of the Trust in accordance with its powers
shall constitute the act of and serve to bind the Trust. In dealing with the
Trustees acting on behalf of the Trust, no person shall be required to inquire
into the authority of the Trustees to bind the Trust. Persons dealing with the
Trust are entitled to rely conclusively on the power and authority of the
Trustees as set forth in this Declaration.
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SECTION 3.5 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Section 3.8 with respect to the
Debentures and the Institutional Trustee Account or as otherwise provided in
this Declaration, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial interest in the assets of the
Trust.
SECTION 3.6 POWERS AND DUTIES OF THE REGULAR TRUSTEES.
The Regular Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities in accordance with this Declaration; provided, however, that the
Trust may issue no more than one series of Preferred Securities and no more
than one series of Common Securities, and, provided further, that there shall
be no interests in the Trust other than the Securities, and the issuance of
Securities shall be limited to a simultaneous issuance of both Preferred
Securities and Common Securities on each Closing Date;
(b) in connection with the issue and sale of the Preferred
Securities, at the direction of the Sponsor, to:
(i) execute and file with the Commission the
registration statement on Form S-3 prepared by the Sponsor,
including any amendments thereto, pertaining to the Preferred
Securities;
(ii) execute and file any documents prepared by the
Sponsor, or take any acts as determined by the Sponsor to be
necessary in order to qualify or register all or part of the
FELINE PRIDES in any State in which the Sponsor has
determined to qualify or register such Preferred Securities
for sale;
(iii) execute and file an application, prepared by
the Sponsor, to the New York Stock Exchange, Inc. or any
other national stock exchange or the Nasdaq Stock Market's
National Market for listing upon notice of issuance of any
Preferred Securities;
(iv) execute and file with the Commission a
registration statement on Form 8-A, including any amendments
thereto, prepared by the Sponsor, relating to the
registration of the Preferred Securities under Section 12(b)
of the Exchange Act; and
(v) execute and enter into the Underwriting
Agreement and Pricing Agreement providing for the sale of the
FELINE PRIDES;
(c) to acquire the Debentures with the proceeds of the sale
of the Preferred Securities and the Common Securities; provided, however, that
the Regular Trustees shall cause legal title to the Debentures to be held of
record in the name of the Institutional Trustee for the benefit of the Holders
of the Preferred Securities and the Holders of Common Securities;
(d) to give the Sponsor and the Institutional Trustee prompt
written notice of the occurrence of a Special Event; provided that the Regular
Trustees shall consult with the Sponsor and the Institutional Trustee before
taking or refraining from taking any Ministerial Action in relation to a
Special Event;
(e) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including and
with respect to, for the purposes of ss.316(c) of the Trust Indenture Act,
Distributions, voting rights, repayments and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
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(f) to take all actions and perform such duties as may be
required of the Regular Trustees pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 3.8(e), the Institutional
Trustee has the exclusive power to bring such Legal Action;
(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(i) to cause the Trust to comply with the Trust's obligations
under the Trust Indenture Act;
(j) to give the certificate required by ss. 314(a)(4) of the
Trust Indenture Act to the Institutional Trustee, which certificate may be
executed by any Regular Trustee;
(k) to incur expenses that are necessary, appropriate,
convenient or incidental to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to act as, registrar
and transfer agent for the Securities;
(m) to give prompt written notice to the Holders of the
Securities of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;
(n) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction in which such existence
is necessary to protect the limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes for which the Trust
was created;
(o) to take any action, not inconsistent with this
Declaration or with applicable law, that the Regular Trustees determine in
their discretion to be necessary or desirable in carrying out the activities of
the Trust as set out in this Section 3.6, including, but not limited to:
(i) causing the Trust not to be deemed to be an
Investment Company required to be registered under the
Investment Company Act;
(ii) causing the Trust to be classified for United
States federal income tax purposes as a grantor trust; and
(iii) cooperating with the Debenture Issuer to
ensure that the Debentures will be treated as indebtedness of
the Debenture Issuer for United States federal income tax
purposes, provided that such action does not adversely affect
the interests of Holders;
(p) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with respect
to the Trust to be duly prepared and filed by the Regular Trustees, on behalf
of the Trust; and
(q) to execute all documents or instruments, perform all
duties and powers, and do all things for and on behalf of the Trust in all
matters necessary or incidental to the foregoing;
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The Regular Trustees must exercise the powers set forth in
this Section 3.6 in a manner that is consistent with the purposes and functions
of the Trust set out in Section 3.3, and the Regular Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust
set forth in Section 3.3.
Subject to this Section 3.6, the Regular Trustees shall have
none of the powers or the authority of the Institutional Trustee set forth in
Section 3.8.
Any expenses incurred by the Regular Trustees pursuant to
this Section 3.6 shall be reimbursed by the Debenture Issuer.
SECTION 3.7 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.
(a) The Trust shall not, and the Trustees (including the
Institutional Trustee) shall cause the Trust not to, engage in any activity
other than as required or authorized by this Declaration. In particular, the
Trust shall not and the Trustees (including the Institutional Trustee) shall
cause the Trust not to:
(i) invest any proceeds received by the Trust from
holding the Debentures, but shall distribute all such
proceeds to Holders of Securities pursuant to the terms of
this Declaration and of the Securities;
(ii) acquire any assets other than as expressly
provided herein;
(iii) possess Trust property for other than a Trust
purpose;
(iv) make any loans or incur any indebtedness other
than loans represented by the Debentures;
(v) possess any power or otherwise act in such a
way as to vary the Trust assets or the terms of the
Securities in any way whatsoever;
(vi) issue any securities or other evidences of
beneficial ownership of, or beneficial interest in, the Trust
other than the Securities; or
(vii) other than as provided in this Declaration or
Annex I, (A) direct the time, method and place of exercising
any trust or power conferred upon the Indenture Trustee with
respect to the Debentures, (B) waive any past default that is
waivable under the Indenture, (C) exercise any right to
rescind or annul any declaration that the principal of all
the Debentures shall be due and payable, or (D) consent to
any amendment, modification or termination of the Indenture
or the Debentures where such consent shall be required unless
the Trust shall have received an opinion of counsel to the
effect that such modification will not cause more than an
insubstantial risk that for United States federal income tax
purposes the Trust will not be classified as a grantor trust.
SECTION 3.8 POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.
(a) The legal title to the Debentures shall be owned by and
held of record in the name of the Institutional Trustee in trust for the
benefit of the Trust and the Holders of the Securities. The right, title and
interest of the Institutional Trustee to the Debentures shall vest
automatically in each Person who may hereafter be appointed as Institutional
Trustee in accordance with Section 5.6. Such vesting and cessation of title
shall be effective whether or not conveyancing documents with regard to the
Debentures have been executed and delivered.
(b) The Institutional Trustee shall not transfer its right,
title and interest in the Debentures to the Regular Trustees or to the Delaware
Trustee (if the Institutional Trustee does not also act as Delaware Trustee).
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(c) The Institutional Trustee shall:
(i) establish and maintain a segregated non-interest
bearing trust account (the "Institutional Trustee Account")
in the name of and under the exclusive control of the
Institutional Trustee on behalf of the Holders of the
Securities and, upon the receipt of payments of funds made in
respect of the Debentures held by the Institutional Trustee,
deposit such funds into the Institutional Trustee Account and
make payments to the Holders of the Preferred Securities and
Holders of the Common Securities from the Institutional
Trustee Account in accordance with Section 6.1. Funds in the
Institutional Trustee Account shall be held uninvested until
disbursed in accordance with this Declaration. The
Institutional Trustee Account shall be an account that is
maintained with a banking institution the rating on whose
long-term unsecured indebtedness is rated at least "A" or
above by a "nationally recognized statistical rating
organization", as that term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(ii) engage in such ministerial activities as shall
be necessary or appropriate to effect the repayment of the
Preferred Securities and the Common Securities to the extent
the Debentures mature or the Put Option is exercised; and
(iii) upon written notice of distribution issued by
the Regular Trustees in accordance with the terms of the
Securities, engage in such ministerial activities as shall be
necessary or appropriate to effect the distribution of the
Debentures to Holders of Securities upon the occurrence of
certain special events (as may be defined in the terms of the
Securities) arising from a change in law or a change in legal
interpretation or other specified circumstances pursuant to
the terms of the Securities.
(d) The Institutional Trustee shall take all actions and
perform such duties as may be specifically required of the Institutional
Trustee pursuant to the terms of the Securities.
(e) The Institutional Trustee shall take any Legal Action
which arises out of or in connection with an Event of Default of which a
Responsible Officer of the Institutional Trustee has actual knowledge or the
Institutional Trustee's duties and obligations under this Declaration or the
Trust Indenture Act; provided, however, that if the Institutional Trustee fails
to enforce its rights under the Debentures after a holder of Preferred
Securities has made a written request, such holder of record of Preferred
Securities may institute a legal proceeding against the Debenture Issuer
without first instituting any legal proceeding against the Institutional
Trustee or any other person or entity. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest on or
principal of the Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, on the redemption date), then such
holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder (a "Direct Action") on or after the
respective due date specified in the Debentures. In connection with such Direct
Action, the rights of the holders of Common Securities will be subrogated to
the rights of the holders of Preferred Securities. In connection with such
Direct Action, the Debenture Issuer shall be subrogated to the rights of such
holder of Preferred Securities with respect to payments on the Preferred
Securities under this Declaration to the extent of any payment made by the
Debenture Issuer to such holder of Preferred Securities in such Direct Action.
Except as provided in the preceding sentences, the holders of Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Debentures.
(f) The Institutional Trustee shall continue to serve as a
Trustee until either:
(i) the Trust has been completely liquidated and the
proceeds of the liquidation distributed to the Holders of
Securities pursuant to the terms of the Securities; or
(ii) a Successor Institutional Trustee has been
appointed and has accepted that appointment in accordance
with Section 5.6.
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(g) The Institutional Trustee shall have the legal power to
exercise all of the rights, powers and privileges of a holder of Debentures
under the Indenture and, if an Event of Default actually known to a Responsible
Officer of the Institutional Trustee occurs and is continuing, the
Institutional Trustee shall, for the benefit of Holders of the Securities,
enforce its rights as holder of the Debentures subject to the rights of the
Holders pursuant to the terms of such Securities.
(h) Subject to this Section 3.8, the Institutional Trustee
shall have none of the duties, liabilities, powers or the authority of the
Regular Trustees set forth in Section 3.6.
The Institutional Trustee must exercise the powers set forth
in this Section 3.8 in a manner that is consistent with the purposes and
functions of the Trust set out in Section 3.3, and the Institutional Trustee
shall not take any action that is inconsistent with the purposes and functions
of the Trust set out in Section 3.3.
SECTION 3.9 CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL
TRUSTEE.
(a) The Institutional Trustee, before the occurrence of any
Event of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically set
forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Institutional Trustee has actual knowledge, the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) No provision of this Declaration shall be construed to
relieve the Institutional Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event of Default
and after the curing or waiving of all such Events of Default
that may have occurred:
(A) the duties and obligations of the
Institutional Trustee shall be determined solely by
the express provisions of this Declaration and the
Institutional Trustee shall not be liable except for
the performance of such duties and obligations as
are specifically set forth in this Declaration, and
no implied covenants or obligations shall be read
into this Declaration against the Institutional
Trustee; and
(B) in the absence of bad faith on the
part of the Institutional Trustee, the Institutional
Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Institutional Trustee and
conforming to the requirements of this Declaration;
but in the case of any such certificates or opinions
that by any provision hereof are specifically
required to be furnished to the Institutional
Trustee, the Institutional Trustee shall be under a
duty to examine the same to determine whether or not
they conform to the requirements of this
Declaration;
(ii) the Institutional Trustee shall not be liable
for any error of judgment made in good faith by a Responsible
Officer of the Institutional Trustee, unless it shall be
proved that the Institutional Trustee was negligent in
ascertaining the pertinent facts;
(iii) the Institutional Trustee shall not be liable
with respect to any action taken or omitted to be taken by it
in good faith in accordance with the direction of the Holders
of not less than a Majority in liquidation amount of the
Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power
conferred upon the Institutional Trustee under this
Declaration;
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(iv) no provision of this Declaration shall require
the Institutional Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is
not reasonably assured to it under the terms of this
Declaration or indemnity reasonably satisfactory to the
Institutional Trustee against such risk or liability is not
reasonably assured to it;
(v) the Institutional Trustee's sole duty with
respect to the custody, safe keeping and physical
preservation of the Debentures and the Institutional Trustee
Account shall be to deal with such property in a similar
manner as the Institutional Trustee deals with similar
property for its own account, subject to the protections and
limitations on liability afforded to the Institutional
Trustee under this Declaration and the Trust Indenture Act;
(vi) the Institutional Trustee shall have no duty or
liability for or with respect to the value, genuineness,
existence or sufficiency of the Debentures or the payment of
any taxes or assessments levied thereon or in connection
therewith;
(vii) the Institutional Trustee shall not be liable
for any interest on any money received by it except as it may
otherwise agree with the Sponsor. Money held by the
Institutional Trustee need not be segregated from other funds
held by it except in relation to the Institutional Trustee
Account maintained by the Institutional Trustee pursuant to
Section 3.8(c)(i) and except to the extent otherwise required
by law; and
(viii) the Institutional Trustee shall not be
responsible for monitoring the compliance by the Regular
Trustees or the Sponsor with their respective duties under
this Declaration, nor shall the Institutional Trustee be
liable for any default or misconduct of the Regular Trustees
or the Sponsor.
SECTION 3.10 CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE.
(a) Subject to the provisions of Section 3.9:
(i) the Institutional Trustee may conclusively rely
and shall be fully protected in acting or refraining from
acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be
genuine and to have been signed, sent or presented by the
proper party or parties;
(ii) any direction or act of the Sponsor or the
Regular Trustees contemplated by this Declaration shall be
sufficiently evidenced by a Direction or an Officers'
Certificate;
(iii) whenever in the administration of this
Declaration, the Institutional Trustee shall deem it
desirable that a matter be proved or established before
taking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be
promptly delivered by the Sponsor or the Regular Trustees;
(iv) the Institutional Trustee shall have no duty to
see to any recording, filing or registration of any
instrument (including any financing or continuation statement
or any filing under tax or securities laws) or any
rerecording, refiling or registration thereof;
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(v) the Institutional Trustee may consult with
counsel or other experts and the advice or opinion of such
counsel and experts with respect to legal matters or advice
within the scope of such experts' area of expertise shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion, such
counsel may be counsel to the Sponsor or any of its
Affiliates, and may include any of its employees. The
Institutional Trustee shall have the right at any time to
seek instructions concerning the administration of this
Declaration from any court of competent jurisdiction;
(vi) the Institutional Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Declaration at the request or direction of any
Holder, unless such Holder shall have provided to the
Institutional Trustee security and indemnity, reasonably
satisfactory to the Institutional Trustee, against the costs,
expenses (including attorneys' fees and expenses and the
expenses of the Institutional Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such
reasonable advances as may be requested by the Institutional
Trustee provided, that, nothing contained in this Section
3.10(a)(vi) shall be taken to relieve the Institutional
Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by
this Declaration;
(vii) the Institutional Trustee shall not be bound
to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Institutional Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(viii) the Institutional Trustee may execute any of
the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents,
custodians, nominees or attorneys and the Institutional
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) any action taken by the Institutional Trustee
or its agents hereunder shall bind the Trust and the Holders
of the Securities, and the signature of the Institutional
Trustee or its agents alone shall be sufficient and effective
to perform any such action and no third party shall be
required to inquire as to the authority of the Institutional
Trustee to so act or as to its compliance with any of the
terms and provisions of this Declaration, both of which shall
be conclusively evidenced by the Institutional Trustee's or
its agent's taking such action;
(x) whenever in the administration of this
Declaration the Institutional Trustee shall deem it desirable
to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the
Institutional Trustee (i) may request instructions from the
Holders of the Securities which instructions may only be
given by the Holders of the same proportion in liquidation
amount of the Securities as would be entitled to direct the
Institutional Trustee under the terms of the Securities in
respect of such remedy, right or action, (ii) may refrain
from enforcing such remedy or right or taking such other
action until such instructions are received, and (iii) shall
be protected in conclusively relying on or acting in or
accordance with such instructions; and
(xi) except as otherwise expressly provided by this
Declaration, the Institutional Trustee shall not be under any
obligation to take any action that is discretionary under the
provisions of this Declaration.
(b) No provision of this Declaration shall be deemed to
impose any duty or obligation on the Institutional Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or imposed
on it, in any jurisdiction in which it shall be illegal, or in which the
Institutional Trustee shall be unqualified or incompetent in
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accordance with applicable law, to perform any such act or acts, or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Institutional Trustee shall be construed to be a duty.
SECTION 3.11 DELAWARE TRUSTEE.
Notwithstanding any other provision of this Declaration other
than Section 5.2, the Delaware Trustee shall not be entitled to exercise any
powers, nor shall the Delaware Trustee have any of the duties and
responsibilities of the Trustees (except as required under the Business Trust
Act) described in this Declaration. Except as set forth in Section 5.2, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of ss. 3807 of the Business Trust Act.
SECTION 3.12 EXECUTION OF DOCUMENTS.
Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act, a majority of or, if
there are only two, any Regular Trustee or, if there is only one, such Regular
Trustee is authorized to execute on behalf of the Trust any documents that the
Regular Trustees have the power and authority to execute pursuant to Section
3.6; provided that, the registration statement referred to in Section
3.6(b)(i), including any amendments thereto, shall be signed by all of the
Regular Trustees.
SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained in this Declaration and the Securities
shall be taken as the statements of the Sponsor, and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 3.14 DURATION OF TRUST.
The Trust, unless terminated pursuant to the provisions of
Article VIII hereof, shall have existence for seven (7) years from the Closing
Date.
SECTION 3.15 MERGERS.
(a) The Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 3.15(b) and (c).
(b) The Trust may, with the consent of the Regular Trustees
or, if there are more than two, a majority of the Regular Trustees and without
the consent of the Holders of the Securities, the Delaware Trustee or the
Institutional Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any State; provided
that:
(i) such successor entity (the "Successor Entity")
either:
(A) expressly assumes all of the
obligations of the Trust under the Securities; or
(B) substitutes for the Securities other
securities having substantially the same terms as
the Preferred Securities (the "Successor
Securities") so long as the Successor Securities
rank the same as the Preferred Securities rank with
respect to Distributions and payments upon
liquidation, repayment and otherwise;
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(ii) the Debenture Issuer expressly acknowledges a
trustee of the Successor Entity that possesses the same
powers and duties as the Institutional Trustee as the Holder
of the Debentures;
(iii) if necessary, the Preferred Securities or any
Successor Securities will be listed, or any Successor
Securities will be listed upon notification of issuance, on
any national securities exchange or with an other
organization on which the Preferred Securities are then
listed or quoted;
(iv) such merger, consolidation, amalgamation or
replacement does not cause the Preferred Securities
(including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization;
(v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences
and privileges of the Holders of the Securities (including
any Successor Securities) in any material respect (other than
with respect to any dilution of such Holders' interests in
the Preferred Securities as a result of such merger,
consolidation, amalgamation or replacement);
(vi) such Successor Entity has a purpose identical
to that of the Trust;
(vii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has received an
opinion of a nationally recognized independent counsel to the
Trust experienced in such matters to the effect that:
(A) such merger, consolidation,
amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the
Holders of the Securities (including any Successor
Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in
the new entity); and
(B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor
the Successor Entity will be required to register as
an Investment Company;
(C) following such merger, consolidation,
amalgamation or replacement, the Trust (or the
Successor Entity) will continue to be classified as
a grantor trust for United States federal income tax
purposes and such merger, consolidation,
amalgamation, or replacement does not result in a
taxable event to any Holders of Preferred Securities
or FELINE PRIDES or otherwise effect the United
States federal income tax consequences of any
investment in the Preferred Securities or FELINE
PRIDES; and
(viii) the Sponsor guarantees the obligations of
such Successor Entity under the Successor Securities at least
to the extent provided by the Preferred Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust shall not,
except with the consent of Holders of 100% in liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 SPONSOR'S PURCHASE OF COMMON SECURITIES.
On the Closing Date the Sponsor will purchase all of the
Common Securities issued by the Trust, in an amount at least equal to 3.0% of
the capital of the Trust, at the same time as the Preferred Securities are
sold.
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SECTION 4.2 RESPONSIBILITIES OF THE SPONSOR.
In connection with the issue and sale of the Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare for filing by the Trust with the Commission a
registration statement on Form S-3 in relation to the Preferred Securities,
including any amendments thereto;
(b) to determine the States in which to take appropriate
action to qualify or register for sale all or part of the FELINE PRIDES and to
do any and all such acts, other than actions which must be taken by the Trust,
and advise the Trust of actions it must take, and prepare for execution and
filing any documents to be executed and filed by the Trust, as the Sponsor
deems necessary or advisable in order to comply with the applicable laws of any
such States;
(c) if necessary, to prepare for filing by the Trust of an
application to the New York Stock Exchange or any other national stock exchange
or the Nasdaq National Market for listing upon notice of issuance of any
Preferred Securities;
(d) if necessary, to prepare for filing by the Trust with the
Commission of a registration statement on Form 8-A relating to the registration
of the Preferred Securities under Section 12(b) of the Exchange Act, including
any amendments thereto; and
(e) to negotiate the terms of the Underwriting Agreement and
Pricing Agreement providing for the sale of the FELINE PRIDES.
SECTION 4.3 RIGHT TO PROCEED.
The Sponsor acknowledges the rights of Holders to institute a
Direct Action as set forth in Section 3.8(e) hereto.
SECTION 4.4 EXPENSES.
In connection with the offering, sale and issuance of the
Debentures to the Institutional Trustee and in connection with the sale of the
Securities by the Trust, the Debenture Issuer, in its capacity as borrower with
respect to the Debentures, shall:
(a) pay all costs and expenses relating to the offering, sale
and issuance of the Debentures, including commissions to the underwriter
payable pursuant to the Underwriting Agreement and compensation of the Trustee
under the Indenture in accordance with the provisions of the Indenture;
(b) be responsible for and shall pay all debts and
obligations (other than with respect to the Securities) and all costs and
expenses of the Trust (including, but not limited to, costs and expenses
relating to the organization, maintenance and dissolution of the Trust, the
offering, sale and issuance of the Securities (including commissions to the
underwriters in connection therewith), the fees and expenses (including
reasonable counsel fees and expenses) of the Institutional Trustee, the
Delaware Trustee and the Regular Trustees (including any amounts payable under
Article X of this Declaration), the costs and expenses relating to the
operation of the Trust, including, without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of Trust assets and the enforcement
by the Institutional Trustee of the rights of the Holders of the Preferred
Securities);
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(c) be primarily liable for any indemnification obligations
arising with respect to this Declaration; and
(d) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and all liabilities,
costs and expenses with respect to such taxes of the Trust.
The Debenture Issuer's obligations under this Section 4.4
shall be for the benefit of, and shall be enforceable by, any person to whom
such debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice hereof. Any such Creditor may
enforce the Debenture Issuer's obligations under this Section 4.4 directly
against the Debenture Issuer and the Debenture Issuer irrevocably waives any
right or remedy to require that any such Creditor take any action against the
Trust or any other Person before proceeding against the Debenture Issuer. The
Debenture Issuer agrees to execute such additional agreements as may be
necessary or desirable in order to give full effect to the provisions of this
Section 4.4.
ARTICLE V
TRUSTEES
SECTION 5.1 NUMBER OF TRUSTEES.
The number of Trustees initially shall be four (4), and:
(a) at any time before the issuance of any Securities, the
Sponsor may, by written instrument, increase or decrease the number of
Trustees; and
(b) after the issuance of any Securities, the number of
Trustees may be increased or decreased by vote of the holders of a majority in
liquidation amount of the Common Securities voting as a class at a meeting of
the Holders of the Common Securities; provided, however, that, the number of
Trustees shall in no event be less than two (2); provided further that (1) one
Trustee, in the case of a natural person, shall be a person who is a resident
of the State of Delaware or that, if not a natural person, is an entity which
has its principal place of business in the State of Delaware (the "Delaware
Trustee"); (2) there shall be at least one Trustee who is an employee or
officer of, or is affiliated with the Sponsor (a "Regular Trustee"); and (3)
one Trustee shall be the Institutional Trustee for so long as this Declaration
is required to qualify as an indenture under the Trust Indenture Act, and such
Trustee may also serve as Delaware Trustee if it meets the applicable
requirements.
SECTION 5.2 DELAWARE TRUSTEE.
If required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be:
(a) a natural person who is a resident of the State of
Delaware; or
(b) if not a natural person, an entity which has its
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law,
provided that, if the Institutional Trustee has its principal place of business
in the State of Delaware and otherwise meets the requirements of applicable
law, then the Institutional Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.
(c) The initial Delaware Trustee shall be:
First Chicago Delaware Inc.
300 King Street
Wilmington, DE 19801
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SECTION 5.3 INSTITUTIONAL TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act
as Institutional Trustee which shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State
or Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Commission to act as
an institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000), and subject to
supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to
the requirements of the supervising or examining authority
referred to above, then for the purposes of this Section
5.3(a)(ii), the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition
so published.
(b) If at any time the Institutional Trustee shall cease to
be eligible to so act under Section 5.3(a), the Institutional Trustee shall
immediately resign in the manner and with the effect set forth in Section
5.6(c).
(c) If the Institutional Trustee has or shall acquire any
"conflicting interest" within the meaning of ss. 310(b) of the Trust Indenture
Act, the Institutional Trustee and the Holder of the Common Securities (as if
it were the obligor referred to in ss. 310(b) of the Trust Indenture Act) shall
in all respects comply with the provisions of ss. 310(b) of the Trust Indenture
Act.
(d) The Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Institutional Trustee shall be:
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
SECTION 5.4 CERTAIN QUALIFICATIONS OF REGULAR TRUSTEES AND DELAWARE
TRUSTEE GENERALLY.
Each Regular Trustee and the Delaware Trustee (unless the
Institutional Trustee also acts as Delaware Trustee) shall be either a natural
person who is at least 21 years of age or a legal entity that shall act through
one or more Authorized Officers.
SECTION 5.5 REGULAR TRUSTEES.
The initial Regular Trustees shall be:
C. Richard Morehead
T. O'Neal Douglas
c/o American Heritage Life Investment Corporation
1776 American Heritage Life Drive
Jacksonville, Florida 32224
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(a) Except as expressly set forth in this Declaration and
except if a meeting of the Regular Trustees is called with respect to any
matter over which the Regular Trustees have power to act, any power of the
Regular Trustees may be exercised by, or with the consent of, any one such
Regular Trustee.
(b) Unless otherwise determined by the Regular Trustees, and
except as otherwise required by the Business Trust Act or applicable law, any
Regular Trustee is authorized to execute on behalf of the Trust any documents
which the Regular Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6, provided, that, the registration statement
referred to in Section 3.6, including any amendments thereto, shall be signed
by all of the Regular Trustees; and
(c) a Regular Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purposes of signing any documents that the Regular
Trustees have power and authority to cause the Trust to execute pursuant to
Section 3.6.
SECTION 5.6 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 5.6(b), Trustees may be appointed or
removed without cause at any time:
(i) until the issuance of any Securities, by written
instrument executed by the Sponsor; and
(ii) after the issuance of any Securities, by vote
of the Holders of a Majority in liquidation amount of the
Common Securities voting as a class at a meeting of the
Holders of the Common Securities.
(b) (i) The Trustee that acts as Institutional Trustee
shall not be removed in accordance with Section 5.6(a)
until a Successor Institutional Trustee has been appointed
and has accepted such appointment by written instrument
executed by such Successor Institutional Trustee and
delivered to the Regular Trustees and the Sponsor; and
(ii) The Trustee that acts as Delaware Trustee shall
not be removed in accordance with this Section 5.6(a) until a
successor Trustee possessing the qualifications to act as
Delaware Trustee under Sections 5.2 and 5.4 (a "Successor
Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor
Delaware Trustee and delivered to the Regular Trustees and
the Sponsor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Sponsor and the Trust, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
that:
(i) no such resignation of the Trustee that acts as
the Institutional Trustee shall be effective:
(A) until a Successor Institutional Trustee
has been appointed and has accepted such appointment
by instrument executed by such Successor
Institutional Trustee and delivered to the Trust,
the Sponsor and the resigning Institutional Trustee;
or
(B) until the assets of the Trust have been
completely liquidated and the proceeds thereof
distributed to the holders of the Securities; and
(ii) no such resignation of the Trustee that acts as
the Delaware Trustee shall be effective until a Successor
Delaware Trustee has been appointed and has accepted such
appointment by instrument executed by such Successor Delaware
Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.
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(d) The Holders of the Common Securities shall use their best
efforts to promptly appoint a Successor Delaware Trustee or Successor
Institutional Trustee as the case may be if the Institutional Trustee or the
Delaware Trustee delivers an instrument of resignation in accordance with this
Section 5.6.
(e) If no Successor Institutional Trustee or Successor
Delaware Trustee shall have been appointed and accepted appointment as provided
in this Section 5.6 within 60 days after delivery to the Sponsor and the Trust
of an instrument of resignation, the resigning Institutional Trustee or
Delaware Trustee, as applicable, may petition any court of competent
jurisdiction for appointment of a Successor Institutional Trustee or Successor
Delaware Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper and prescribe, appoint a Successor Institutional
Trustee or Successor Delaware Trustee, as the case may be.
(f) No Institutional Trustee or Delaware Trustee shall be
liable for the acts or omissions to act of any Successor Institutional Trustee
or successor Delaware Trustee, as the case may be.
SECTION 5.7 VACANCIES AMONG TRUSTEES.
If a Trustee ceases to hold office for any reason and the
number of Trustees is not reduced pursuant to Section 5.1, or if the number of
Trustees is increased pursuant to Section 5.1, a vacancy shall occur. A
resolution certifying the existence of such vacancy by the Regular Trustees or,
if there are more than two, a majority of the Regular Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.6.
SECTION 5.8 EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy,
dissolution, liquidation, incompetence or incapacity to perform the duties of a
Trustee shall not operate to annul the Trust. Whenever a vacancy in the number
of Regular Trustees shall occur, until such vacancy is filled by the
appointment of a Regular Trustee in accordance with Section 5.6, the Regular
Trustees in office, regardless of their number, shall have all the powers
granted to the Regular Trustees and shall discharge all the duties imposed upon
the Regular Trustees by this Declaration.
SECTION 5.9 MEETINGS.
If there is more than one Regular Trustee, meetings of the
Regular Trustees shall be held from time to time upon the call of any Regular
Trustee. Regular meetings of the Regular Trustees may be held at a time and
place fixed by resolution of the Regular Trustees. Notice of any in-person
meetings of the Regular Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 48 hours before such meeting. Notice of any telephonic meetings of
the Regular Trustees or any committee thereof shall be hand delivered or
otherwise delivered in writing (including by facsimile, with a hard copy by
overnight courier) not less than 24 hours before a meeting. Notices shall
contain a brief statement of the time, place and anticipated purposes of the
meeting. The presence (whether in person or by telephone) of a Regular Trustee
at a meeting shall constitute a waiver of notice of such meeting except where a
Regular Trustee attends a meeting for the express purpose of objecting to the
transaction of any activity on the ground that the meeting has not been
lawfully called or convened. Unless provided otherwise in this Declaration, any
action of the Regular Trustees may be taken at a meeting by vote of a majority
of the Regular Trustees present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided that a Quorum is
present, or without a meeting by the unanimous written consent of the Regular
Trustees. In the event there is only one Regular Trustee, any and all action of
such Regular Trustee shall be evidenced by a written consent of such Regular
Trustee.
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SECTION 5.10 DELEGATION OF POWER.
(a) Any Regular Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21
his or her power for the purpose of executing any documents contemplated in
Section 3.6, including any registration statement or amendment thereto filed
with the Commission, or making any other governmental filing; and
(b) the Regular Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise as the Regular Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
SECTION 5.11 MERGER, CONVERSION. CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Institutional Trustee or the
Delaware Trustee, as the case may be, may be merged or converted or with which
either may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be a party, or any corporation succeeding to
all or substantially all the corporate trust business of the Institutional
Trustee or the Delaware Trustee, as the case may be, shall be the successor of
the Institutional Trustee or the Delaware Trustee, as the case may be,
hereunder, provided such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper or any further
act on the part of any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 DISTRIBUTIONS.
Holders shall receive Distributions (as defined herein) in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Preferred Securities and the Common
Securities in accordance with the preferences set forth in their respective
terms. If and to the extent that the Debenture Issuer makes a payment of
interest (including Compounded Interest (as defined in the Indenture) and
Additional Interest (as defined in the Indenture)), premium and/or principal on
the Debentures held by the Institutional Trustee (the amount of any such
payment being a "Payment Amount"), the Institutional Trustee shall and is
directed, to the extent funds are available for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders.
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ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 GENERAL PROVISIONS REGARDING SECURITIES.
(a) The Regular Trustees shall, on behalf of the Trust, issue
one class of preferred securities representing undivided beneficial interests
in the assets of the Trust having such terms as are set forth in Annex I (the
"Preferred Securities") and one class of common securities representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I (the "Common Securities.") The Trust shall issue no
securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
(b) The Certificates shall be signed on behalf of the Trust
by a Regular Trustee. Such signature shall be the manual signature of any
present or any future Regular Trustee. In case any Regular Trustee of the Trust
who shall have signed any of the Securities shall cease to be such Regular
Trustee before the Certificates so signed shall be delivered by the Trust, such
Certificates nevertheless may be delivered as though the person who signed such
Certificates had not ceased to be such Regular Trustee; and any Certificate may
be signed on behalf of the Trust by such persons who, at the actual date of
execution of such Security, shall be the Regular Trustees of the Trust,
although at the date of the execution and delivery of the Declaration any such
person was not such a Regular Trustee. Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is
reasonably acceptable to the Regular Trustees, as evidenced by their execution
thereof, and may have such letters, numbers or other marks of identification or
designation and such legends or endorsements as the Regular Trustees may deem
appropriate, or as may be required to comply with any law or with any rule or
regulation of any stock exchange on which Securities may be listed, or to
conform to usage.
(c) The consideration received by the Trust for the issuance
of the Securities shall constitute a contribution to the capital of the Trust
and shall not constitute a loan to the Trust.
(d) Upon issuance of the Securities as provided in this
Declaration, the Securities so issued shall be deemed to be validly issued,
fully paid and non-assessable.
(e) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
SECTION 7.2 PAYING AGENT.
In the event that the Preferred Securities are not in
book-entry only form, the Trust shall maintain in the borough of Manhattan,
City of New York, State of New York, an office or agency where the Preferred
Securities may be presented for payment ("Paying Agent"), and any such Paying
Agent shall comply with Section 317(b) of the Trust Indenture Act. The Trust
may appoint the Paying Agent and may appoint one or more additional paying
agents in such other locations as it shall determine. The term "Paying Agent"
includes any additional paying agent. The Trust may change any Paying Agent
without prior notice to any Holder. The Trust shall notify the Institutional
Trustee of the name and address of any Paying Agent not a party to this
Declaration. If the Trust fails to appoint or maintain another entity as Paying
Agent, the Institutional Trustee shall act as such. The Trust or any of its
Affiliates may act as Paying Agent. The Institutional Trustee shall initially
act as Paying Agent for the Preferred Securities and the Common Securities.
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ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 TERMINATION OF TRUST.
(a) The Trust shall terminate:
(i) upon the bankruptcy of the Sponsor;
(ii) upon the filing of a certificate of dissolution
or its equivalent with respect to the Sponsor; the filing of
a certificate of cancellation with respect to the Trust after
having obtained the consent of a majority in liquidation
amount of the Securities voting together as a single class to
file such certificate of cancellation or the revocation of
the Sponsor's charter and the expiration of 90 days after the
date of revocation without a reinstatement thereof;
(iii)upon the entry of a decree of judicial
dissolution of the Holder of the Common Securities, the
Sponsor or the Trust;
(iv) upon the occurrence and continuation of a
Special Event pursuant to which the Trust shall have been
dissolved in accordance with the terms of the Securities and
all of the Debentures endorsed thereon shall have been
distributed to the Holders of Securities in exchange for all
of the Securities; or
(v) before the issuance of any Securities, with the
consent of all of the Regular Trustees and the Sponsor.
(b) As soon as is practicable after the occurrence of an
event referred to in Section 8.1(a) and upon completion of the winding-up of
the Trust and its termination, the Trustees shall file a certificate of
cancellation with the Secretary of State of the State of Delaware.
(c) The provisions of Section 3.9 and Article X shall survive
the termination of the Trust.
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 9.1 TRANSFER OF SECURITIES.
(a) Securities may only be transferred, in whole or in part,
in accordance with the terms and conditions set forth in this Declaration and
in the terms of the Securities. Any transfer or purported transfer of any
Security not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Preferred Securities shall be
freely transferable.
(c) Subject to this Article IX, the Sponsor and any Related
Party may only transfer Common Securities to the Sponsor or a Related Party of
the Sponsor; provided that, any such transfer is subject to the condition
precedent that the transferor obtain the written opinion of nationally
recognized independent counsel experienced in such matters that such transfer
would not cause more than an insubstantial risk that:
(i) the Trust would not be classified for United
States federal income tax purposes as a grantor trust; and
(ii) the Trust would be an Investment Company or the
transferee would become an Investment Company.
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SECTION 9.2 TRANSFER OF CERTIFICATES.
The Regular Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the Regular Trustees may
require) in respect of any tax or other government charges that may be imposed
in relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to
be issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by this
Declaration.
SECTION 9.3 DEEMED SECURITY HOLDERS.
The Trustees may treat the Person in whose name any
Certificate shall be registered on the books and records of the Trust as the
sole holder of such Certificate and of the Securities represented by such
Certificate for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Securities represented
by such Certificate on the part of any Person, whether or not the Trust shall
have actual or other notice thereof.
SECTION 9.4 BOOK ENTRY INTERESTS.
The Preferred Securities Certificates, on original issuance,
in addition to being issued in the form of one or more definitive, fully
registered Preferred Securities Certificate (each a "Definitive Preferred
Securities Certificate") registered initially in the books and records of the
Trust in the name of The First National Bank of Chicago, as Purchase Contract
Agent, will be issued in the form of one or more, fully registered, global
Preferred Security Certificates (each a "Global Certificate"), to be delivered
to DTC, the initial Clearing Agency, by, or on behalf of, the Trust. Such
Global Certificate(s) shall initially be registered on the books and records of
the Trust in the name of Cede & Co., the nominee of DTC, and no Preferred
Security Beneficial Owner will receive a definitive Preferred Security
Certificate representing such Preferred Security Beneficial Owner's interests
in such Global Certificate(s), except as provided in Section 9.7. Except for
the Definitive Preferred Security Certificates as specified herein and the
definitive, fully registered Preferred Securities Certificates that have been
issued to the Preferred Security Beneficial Owners pursuant to Section 9.7:
(a) the provisions of this Section 9.4 shall be in full force
and effect;
(b) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including the payment
of Distributions on the Global Certificate(s) and receiving approvals, votes or
consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the Global Certificate(s) and shall have no obligation to the
Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this Section 9.4
conflict with any other provisions of this Declaration, the provisions of this
Section 9.4 shall control; and
(d) the rights of the Preferred Security Beneficial Owners
shall be exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Preferred Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants and receive and transmit payments of Distributions on the Global
Certificates to such Clearing Agency Participants. DTC will make book entry
transfers among the Clearing Agency Participants; provided, that solely for the
purposes of determining whether the Holders of the requisite amount of
Preferred Securities have voted on any matter provided for in this Declaration,
so long as Definitive Preferred Security Certificates have not been issued, the
Trustees may conclusively rely on, and shall be protected in relying on, any
written
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instrument (including a proxy) delivered to the Trustees by the Clearing Agency
setting froth the Preferred Security Beneficial Owners' votes or assigning the
right to vote on any matter to any other Persons either in whole or in part.
SECTION 9.5 NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Preferred
Security Holders is required under this Declaration, unless and until
definitive fully registered Preferred Security Certificates shall have been
issued to the Preferred Security Beneficial Owners pursuant to Section 9.7 or
otherwise, the Regular Trustees shall give all such notices and communications
specified herein to be given to the Preferred Security Holders to the Clearing
Agency, and shall have no notice obligations to the Preferred Security
Beneficial Owners.
SECTION 9.6 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.
If any Clearing Agency elects to discontinue its services as
securities depositary with respect to the Preferred Securities, the Regular
Trustees may, in their sole discretion, appoint a successor Clearing Agency
with respect to such Preferred Securities.
SECTION 9.7 DEFINITIVE PREFERRED SECURITY CERTIFICATES.
If:
(a) a Clearing Agency elects to discontinue its services as
securities depositary with respect to the Preferred Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 9.6; or
(b) the Regular Trustees elect after consultation with the
Sponsor to terminate the book entry system through the Clearing Agency with
respect to the Preferred Securities, then:
(c) Definitive fully registered Preferred Security
Certificates shall be prepared by the Regular Trustees on behalf of the Trust
with respect to such Preferred Securities; and
(d) upon surrender of the Global Certificate(s) by the
Clearing Agency, accompanied by registration instructions, the Regular Trustees
shall cause definitive fully registered Preferred Securities Certificates to be
delivered to Preferred Security Beneficial Owners in accordance with the
instructions of the Clearing Agency. Neither the Trustees nor the Trust shall
be liable for any delay in delivery of such instructions and each of them may
conclusively rely on and shall be protected in relying on, said instructions of
the Clearing Agency. The definitive fully registered Preferred Security
Certificates shall be printed, lithographed or engraved or may be produced in
any other manner as is reasonably acceptable to the Regular Trustees, as
evidenced by their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements
as the Regular Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which Preferred Securities may be
listed, or to conform to usage.
SECTION 9.8 MUTILATED, DESTROYED LOST OR STOLEN CERTIFICATES.
If:
(a) any mutilated Certificates should be surrendered to the
Regular Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and
(b) there shall be delivered to the Regular Trustees such
security or indemnity as may be required by them to keep each of them harmless.
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then, in the absence of notice that such Certificate shall have been acquired
by a bona fide purchaser, any Regular Trustee on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like denomination.
In connection with the issuance of any new Certificate under this Section 9.8,
the Regular Trustees may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant Securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS
OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 LIABILITY.
(a) Except as expressly set forth in this Declaration, the
Debentures, the Securities Guarantees and the terms of the Securities, the
Sponsor shall not be:
(i) personally liable for the return of any portion
of the capital contributions (or any return thereon) of the
Holders of the Securities which shall be made solely from
assets of the Trust; and
(ii) required to pay to the Trust or to any
Holder of Securities any deficit upon dissolution of the
Trust or otherwise.
(b) The Holder of the Common Securities shall be liable for
all of the debts and obligations of the Trust (other than with respect to the
Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to ss. 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 10.2 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on behalf of the Trust and in
a manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Declaration or by
law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross
negligence or willful misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information,
opinions, reports or statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses, or any other facts pertinent to the existence and amount of
assets from which Distributions to Holders of Securities might properly be
paid.
SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified
Person has duties (including fiduciary duties) and liabilities relating thereto
to the Trust or to any other Covered Person, an Indemnified Person acting under
this Declaration shall not be liable to the Trust or to any other Covered
Person for its good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of an Indemnified
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Person otherwise existing at law or in equity (other than the duties imposed on
the Institutional Trustee under the Trust Indenture Act), are agreed by the
parties hereto to replace such other duties and liabilities of such Indemnified
Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or arises
between any Covered Persons; or
(ii) whenever this Declaration or any other
agreement contemplated herein or therein provides that an
Indemnified Person shall act in a manner that is, or provides
terms that are, fair and reasonable to the Trust or any
Holder of Securities,
the Indemnified Person shall resolve such conflict of interest, take such
action or provide such terms, considering in each case the relative interest of
each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating to such
interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Indemnified Person, the resolution, action or term so made, taken
or provided by the Indemnified Person shall not constitute a breach of this
Declaration or any other agreement contemplated herein or of any duty or
obligation of the Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar
authority, the Indemnified Person shall be entitled to
consider such interests and factors as it desires, including
its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express
standard, the Indemnified Person shall act under such express
standard and shall not be subject to any other or different
standard imposed by this Declaration or by applicable law.
SECTION 10.4 INDEMNIFICATION.
(a) (i) The Debenture Issuer shall indemnify, to the full
extent permitted by law, any Company Indemnified Person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified
Person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the Company Indemnified
Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the
full extent permitted by law, any Company Indemnified Person
who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in
the right of the Trust to procure a judgment in its favor by
reason of the fact that he is or was a Company Indemnified
Person against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and except that no
such indemnification shall be made in respect of any claim,
issue or matter as to which such Company Indemnified Person
shall have been adjudged to be liable to the
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Trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or
suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper.
(iii) Any indemnification under paragraphs (i) and
(ii) of this Section 10.4(a) (unless ordered by a court)
shall be made by the Debenture Issuer only as authorized in
the specific case upon a determination that indemnification
of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of
conduct set forth in paragraphs (i) and (ii). Such
determination shall be made (1) by the Regular Trustees by a
majority vote of a quorum consisting of such Regular Trustees
who were not parties to such action, suit or proceeding, (2)
if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Regular Trustees so directs, by
independent legal counsel in a written opinion, or (3) by the
Common Security Holder of the Trust.
(iv) Expenses (including attorneys' fees) incurred
by a Company Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (i) and (ii) of this
Section 10.4(a) shall be paid by the Debenture Issuer in
advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of
such Company Indemnified Person to repay such amount if it
shall ultimately be determined that he is not entitled to be
indemnified by the Debenture Issuer as authorized in this
Section 10.4(a). Notwithstanding the foregoing, no advance
shall be made by the Debenture Issuer if a determination is
reasonably and promptly made (i) by the Regular Trustees by a
majority vote of a quorum of disinterested Regular Trustees,
(ii) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so
directs, by independent legal counsel in a written opinion or
(iii) the Common Security Holder of the Trust, that, based
upon the facts known to the Regular Trustees, counsel or the
Common Security Holder at the time such determination is
made, such Company Indemnified Person acted in bad faith or
in a manner that such person did not believe to be in or not
opposed to the best interests of the Trust, or, with respect
to any criminal proceeding, that such Company Indemnified
Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made
in instances where the Regular Trustees, independent legal
counsel or Common Security Holder reasonably determine
that such person deliberately breached his duty to the Trust
or its Common or Preferred Security Holders.
(v) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other paragraphs of
this Section 10.4(a) shall not be deemed exclusive of any
other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement,
vote of shareholders or disinterested directors of the
Debenture Issuer or Preferred Security Holders of the Trust
or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office.
All rights to indemnification under this Section 10.4(a)
shall be deemed to be provided by a contract between the
Debenture Issuer and each Company Indemnified Person who
serves in such capacity at any time while this Section
10.4(a) is in effect. Any repeal or modification of this
Section 10.4(a) shall not affect any rights or obligations
then existing.
(vi) The Debenture Issuer or the Trust may purchase
and maintain insurance on behalf of any person who is or was
a Company Indemnified Person against any liability asserted
against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the
Debenture Issuer would have the power to indemnify him
against such liability under the provisions of this Section
10.4(a).
(vii) For purposes of this Section 10.4(a),
references to "the Trust" shall include, in addition to the
resulting or surviving entity, any constituent entity
(including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a
director, trustee, officer or
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employee of such constituent entity, or is or was serving at
the request of such constituent entity as a director,
trustee, officer, employee or agent of another entity, shall
stand in the same position under the provisions of this
Section 10.4(a) with respect to the resulting or surviving
entity as he would have with respect to such constituent
entity if its separate existence had continued.
(viii) The indemnification and advancement of
expenses provided by, or granted pursuant to, this Section
10.4(a) shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a
Company Indemnified Person and shall inure to the benefit of
the successors, heirs, executors and administrators of such a
person.
(b) The Debenture Issuer agrees to indemnify the (i)
Institutional Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the
Institutional Trustee and the Delaware Trustee, and (iv) any officers,
directors, shareholders, members, partners, employees, representatives,
custodians, nominees or agents of the Institutional Trustee and the Delaware
Trustee (each of the Persons in (i) through (iv) being referred to as a
"Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified
Person harmless against, any loss, liability or expense incurred without gross
negligence( or, in the case of the Institutional Trustee, pursuant to Section
3.9, negligence) or bad faith on its part, arising out of or in connection with
the acceptance or administration or the trust or trusts hereunder, including
the costs and expenses (including reasonable legal fees and expenses) of
defending itself against or investigating any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder. The
provisions of this Section 10.4(b) shall survive the satisfaction and discharge
of this Declaration or the resignation or removal of the Institutional Trustee
or the Delaware Trustee, as the case may be.
SECTION 10.5 OUTSIDE BUSINESSES.
Any Covered Person, the Sponsor, the Delaware Trustee and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the
Trust, shall not be deemed wrongful or improper. No Covered Person, the
Sponsor, the Delaware Trustee, or the Institutional Trustee shall be obligated
to present any particular investment or other opportunity to the Trust even if
such opportunity is of a character that, if presented to the Trust, could be
taken by the Trust, and any Covered Person, the Sponsor, the Delaware Trustee
and the Institutional Trustee shall have the right to take for its own account
(individually or as a partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered Person, the Delaware
Trustee and the Institutional Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the
Sponsor, or may act as depositary for, trustee or agent for, or act on any
committee or body of holders of, securities or other obligations of the Sponsor
or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall be the
calendar year, or such other year as is required by the Code.
SECTION 11.2 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the
Regular Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail,
each transaction of the Trust. The books of account shall be maintained on the
accrual method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The Trust shall use the accrual method of
accounting for United States federal
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income tax purposes. The books of account and the records of the Trust shall be
examined by and reported upon as of the end of each Fiscal Year of the Trust by
a firm of independent certified public accountants selected by the Regular
Trustees.
(b) The Regular Trustees shall cause to be duly prepared and
delivered to each of the Holders of Securities, any annual United States
federal income tax information statement, required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Regular Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust.
(c) The Regular Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Regular Trustees on behalf of the Trust with any state or local
taxing authority.
SECTION 11.3 BANKING.
The Trust shall maintain one or more bank accounts in the
name and for the sole benefit of the Trust; provided however, that all payments
of funds in respect of the Debentures held by the Institutional Trustee shall
be made directly to the Institutional Trustee Account and no other funds of the
Trust shall be deposited in the Institutional Trustee Account. The sole
signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Institutional Trustee shall designate the
signatories for the Institutional Trustee Account.
SECTION 11.4 WITHHOLDING.
The Trust and the Regular Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably
be requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Regular Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed over withholding, Holders shall be limited
to an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 AMENDMENTS.
(a) Except as otherwise provided in this Declaration or by
any applicable terms of the Securities, this Declaration may only be amended by
a written instrument approved and executed by the Regular Trustees (or, if
there are more than two Regular Trustees a majority of the Regular Trustees);
and
(i) if the amendment affects the rights, powers,
duties, obligations or immunities of the Institutional
Trustee, also by the Institutional Trustee; and
(ii) if the amendment affects the rights, powers,
duties, obligations or immunities of the Delaware Trustee,
also by the Delaware Trustee;
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(b) no amendment shall be made, and any such purported
amendment shall be void and ineffective:
(i) unless, in the case of any proposed amendment,
the Institutional Trustee shall have first received an
Officers' Certificate from each of the Trust and the Sponsor
that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the
Securities);
(ii) unless, in the case of any proposed amendment
which affects the rights, powers, duties, obligations or
immunities of the Institutional Trustee, the Institutional
Trustee shall have first received:
(A) an Officers' Certificate from each of
the Trust and the Sponsor that such amendment is
permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
and
(B) opinion of counsel (who may be counsel
to the Sponsor or the Trust) that such amendment is
permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
and
(iii) to the extent the result of such amendment
would be to:
(A) cause the trust to fail to continue to
be classified for purposes of United States federal
income taxation as a grantor trust;
(B) reduce or otherwise adversely affect
the powers of the Institutional Trustee in
contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to be an
Investment Company required to be registered under
the Investment Company Act;
(c) at such time after the Trust has issued any Securities
that remain outstanding, any amendment that would adversely affect the rights,
privileges or preferences of any Holder of Securities may be effected only with
such additional requirements as may be set forth in the terms of such
Securities;
(d) Section 9.1(c) and this Section 12.1 shall not be amended
without the consent of all of the Holders of the Securities;
(e) Article IV shall not be amended without the consent of
the Holders of a Majority in liquidation amount of the Common Securities and;
(f) the rights of the holders of the Common Securities under
Article V to increase or decrease the number of, and appoint and remove
Trustees shall not be amended without the consent of the Holders of a Majority
in liquidation amount of the Common Securities; and
(g) withstanding Section 12.1(c), this Declaration may be
amended without the consent of the Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision in this
Declaration that may be defective or inconsistent with any
other provision of this Declaration;
(iii) add to the covenants, restrictions or
obligations of the Sponsor;
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(iv) to conform to any change in Rule 3a-5 or
written change in interpretation or application of Rule 3a-5
by any legislative body, court, government agency or
regulatory authority which amendment does not have a material
adverse effect on the right, preferences or privileges of the
Holders; and
(v) to modify, eliminate and add to any provision of
the Declaration to such extent as may be necessary.
SECTION 12.2 MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holders of any class of Securities may be
called at any time by the Regular Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms
of the Securities or the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading. The Regular Trustees shall call
a meeting of the Holders of such class if directed to do so by the Holders of
at least 10% in liquidation amount of such class of Securities. Such direction
shall be given by delivering to the Regular Trustees one or more calls in
a writing stating that the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Securities calling a meeting shall specify in writing
the Security Certificates held by the Holders of Securities exercising the
right to call a meeting and only those Securities specified shall be counted
for purposes of determining whether the required percentage set forth in the
second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of
the Securities, the following provisions shall apply to meetings of Holders of
Securities:
(i) notice of any such meeting shall be given to all
the Holders of Securities having a right to vote thereat at
least 7 days and not more than 60 days before the date of
such meeting. Whenever a vote, consent or approval of the
Holders of Securities is permitted or required under this
Declaration or the rules of any stock exchange on which the
Preferred Securities are listed or admitted for trading, such
vote, consent or approval may be given at a meeting of the
Holders of Securities. Any action that may be taken at a
meeting of the Holders of Securities may be taken without a
meeting if a consent in writing setting forth the action so
taken is signed by the Holders of Securities owning not less
than the minimum amount of Securities in liquidation amount
that would be necessary to authorize or take such action at a
meeting at which all Holders of Securities having a right to
vote thereon were present and voting. Prompt notice of the
taking of action without a meeting shall be given to the
Holders of Securities entitled to vote who have not consented
in writing. The Regular Trustees may specify that any written
ballot submitted to the Security Holder for the purpose of
taking any action without a meeting shall be returned to the
Trust within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any
Person to act for it by proxy on all matters in which a
Holder of Securities is entitled to participate, including
waiving notice of any meeting, or voting or participating at
a meeting. No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the
Holder of Securities executing it. Except as otherwise
provided herein, all matters relating to the giving, voting
or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were
a Delaware corporation and the Holders of the Securities were
stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Securities
shall be conducted by the Regular Trustees or by such other
Person that the Regular Trustees may designate; and
(iv) unless the Business Trust Act, this
Declaration, the terms of the Securities, the Trust Indenture
Act or the listing rules of any stock exchange on which the
Preferred Securities are then listed or trading, otherwise
provides, the Regular Trustees, in their sole discretion,
shall establish all other
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provisions relating to meetings of Holders of Securities,
including notice of the time, place or purpose of any meeting
at which any matter is to be voted on by any Holders of
Securities, waiver of any such notice, action by consent
without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other
matter with respect to the exercise of any such right to
vote.
ARTICLE XIII
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE.
The Trustee that acts as initial Institutional Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants
to the Trust and the Sponsor at the time of the Successor Institutional
Trustee's acceptance of its appointment as Institutional Trustee that:
(a) the Institutional Trustee is a national banking
association with trust powers, duly organized, validly existing and in good
standing under the laws of the United States of America, with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, the Declaration;
(b) the Institutional Trustee satisfies the requirements set
forth in Section 5.3(a);
(c) the execution, delivery and performance by the
Institutional Trustee of the Declaration has been duly authorized by all
necessary corporate action on the part of the Institutional Trustee. The
Declaration has been duly executed and delivered by the Institutional Trustee,
and it constitutes a legal, valid and binding obligation of the Institutional
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the enforcement
of such remedies is considered in a proceeding in equity or at law);
(d) the execution, delivery and performance of the
Declaration by the Institutional Trustee does not conflict with or constitute a
breach of the Articles of Organization or By-laws of the Institutional Trustee;
(e) no consent, approval or authorization of, or registration
with or notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Institutional Trustee, of the
Declaration; and
(f) the Institutional Trustee, pursuant to this Declaration,
shall hold legal title and a valid ownership interest in the Debentures.
SECTION 13.2 REPRESENTATIONS AND WARRANTIES OF DELAWARE TRUSTEE.
The Trustee that acts as initial Delaware Trustee represents
and warrants to the Trust and to the Sponsor at the date of this Declaration,
and each Successor Delaware Trustee represents and warrants to the Trust and
the Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:
(a) The Delaware Trustee is a Delaware corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, the Declaration;
(b) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Declaration. The Declaration
under Delaware law constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency, and other
similar laws affecting creditors' rights generally and to general principles of
equity and
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the discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law);
(c) No consent, approval or authorization of, or registration
with or notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee, of the Declaration;
and
(d) The Delaware Trustee is a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 NOTICES.
All notices provided for in this Declaration shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Holders of the Securities):
AHL Financing
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Attention: Corporate Secretary
(b) if given to the Delaware Trustee, at the mailing address
set forth below (or such other address as Delaware Trustee may give notice of
to the Holders of the Securities):
First Chicago Delaware Inc.
300 King Street
Wilmington, DE 19801
Attention: Michael J. Majchrzak
(c) if given to the Institutional Trustee, at its Corporate
Trust Office to the attention of Corporate Trust Administration (or such other
address as the Institutional Trustee may give notice of to the Holders of the
Securities):
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention: Corporate Trust Services Division
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address as the
Holder of the Common Securities may give notice to the Trust):
American Heritage Life Investment Corporation
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Attention: Corporate Secretary
(e) if given to any other Holder, at the address set forth on
the books and records of the Trust.
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All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 14.2 GOVERNING LAW.
This Declaration and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State
of Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 14.3 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be
classified for United States federal income tax purposes as a grantor trust.
The provisions of this Declaration shall be interpreted to further this
intention of the parties.
SECTION 14.4 HEADINGS.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the interpretation of this
Declaration or any provision hereof.
SECTION 14.5 SUCCESSORS AND ASSIGNS.
Whenever in this Declaration any of the parties hereto is
named or referred to, the successors and assigns of such party shall be deemed
to be included, and all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the benefit of their
respective successors and assigns, whether so expressed.
SECTION 14.6 PARTIAL ENFORCEABILITY.
If any provision of this Declaration, or the application of
such provision to any Person or circumstance, shall be held invalid, the
remainder of this Declaration, or the application of such provision to persons
or circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 14.7 COUNTERPARTS.
This Declaration may contain more than one counterpart of the
signature page and this Declaration may be executed by the affixing of the
signature of each of the Trustees to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
------------------------------------------------
T. O'Neal Douglas, as Regular Trustee
------------------------------------------------
C. Richard Morehead, as Regular Trustee
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<PAGE> 43
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee
By:
-----------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Institutional Trustee
By:
-----------------------------------------
Name:
Title:
39
<PAGE> 44
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION, as Sponsor
By:
-----------------------------------------
Name:
Title:
40
<PAGE> 45
ANNEX I
TERMS OF
______% TRUST ORIGINATED PREFERRED SECURITIES
______% TRUST ORIGINATED COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of ________, 1997 (as amended from time to time,
the "Declaration"), the designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred Securities and the
Common Securities are set out below (each capitalized term used but not defined
herein has the meaning set forth in the Declaration or, if not defined in the
Declaration, as defined in the Prospectus referred to below):
1. Designation and Number.
(a) Preferred Securities. ____________ Preferred Securities
of the Trust with an aggregate liquidation amount with respect to the assets of
the Trust of Dollars ( $ ____________) and a liquidation amount with respect to
the assets of the Trust of $50 per preferred security, are hereby designated
for the purposes of identification only as "____% Trust Originated Preferred
Securities (FELINE PRIDES(SM)" (the "Preferred Securities"). The Preferred
Security Certificates evidencing the Preferred Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such changes
and additions thereto or deletions therefrom as may be required by ordinary
usage, custom or practice or to conform to the rules of any stock exchange on
which the Preferred Securities are listed.
(b) Common Securities. __________ Common Securities of the
Trust with an aggregate liquidation amount with respect to the assets of the
Trust of Dollars ($____________) and a liquidation amount with respect to the
assets of the Trust of $50 per common security, are hereby designated for the
purposes of identification only as "_____% Trust Originated Common Securities"
(the "Common Securities"). The Common Security Certificates evidencing the
Common Securities shall be substantially in the form of Exhibit A-2 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice.
2. Distributions.
(a) Distributions payable on each Security will be fixed at a
rate per annum of _____% (the "Coupon Rate") of the stated liquidation amount
of $50 per Security, such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. Distributions in arrears
for more than one quarter will bear interest thereon compounded quarterly at
the Coupon Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year consisting of twelve 30-day months, and for any period shorter than a full
quarterly Distribution period for which Distributions are computed,
Distributions will be computed on the basis of the actual number of days
elapsed per 30-day month.
(b) Distributions on the Securities will be cumulative, will
accrue from _______, 1997, and will be payable quarterly in arrears, on March
31, June 30, September 30, and December 31 of each year, commencing on
September 30, 1997, except as otherwise described below. The Debenture Issuer
has the right under the Indenture to defer payments of interest by extending
the interest payment period from time to time on the Debentures for a period
not extending, in the aggregate, beyond the maturity date of the Debentures
(each an "Extension Period"). During such Extension Period no interest shall be
due and payable on the Debentures. As a consequence of such deferral,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Payments of accrued Distributions will be payable to
Holders as they appear on the books and records of the Trust on the first
record date after
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the end of the Extension Period. Upon the termination of any Extension Period
and the payment of all amounts then due, the Debenture Issuer may commence a
new Extension Period; provided that such Extension Period together with all
such previous and further extensions thereof may not exceed beyond the maturity
date of the Debentures.
(c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust at the
close of business on the Business Day immediately preceding each of the
relevant payment dates on the Debentures. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment in respect
of the Preferred Securities will be made as described under the heading
"Description of the Trust Preferred Securities -- Book Entry Only Issuance -The
Depository Trust Company" in the Prospectus dated _______, 1997 (the
"Prospectus"), of the Trust included in the Registration Statement on Form S-3
(file no. 333-24153) of the Sponsor and the Trust. The relevant record dates
for the Common Securities shall be the same record date as for the Preferred
Securities. If the Preferred Securities shall not continue to remain in
book-entry only form, the relevant record dates for the Preferred Securities,
shall conform to the rules of any securities exchange on which the securities
are listed and, if none, shall be selected by the Regular Trustees, which dates
shall be at least one Business Day before the relevant payment dates, which
payment dates correspond to the interest payment dates on the Debentures.
Distributions payable on any Securities that are not punctually paid on any
Distribution payment date, as a result of the Debenture Issuer having failed to
make a payment under the Debentures, will cease to be payable to the Person in
whose name such Securities are registered on the relevant record date, and such
defaulted Distribution will instead be payable to the Person in whose name such
Securities are registered on the special record date or other specified date
determined in accordance with the Indenture. If any date on which Distributions
are payable on the Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. So
long as the Holder of any Preferred Securities is the Collateral Agent, the
payment of Distributions on such Preferred Securities held by the Collateral
Agent will be made at such place and to such account as may be designated by
the Collateral Agent.
(d) In the event that there is any money or other property
held by or for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined herein) among the Holders of the
Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary dissolution,
winding-up or termination of the Trust, the Holders of the Securities on the
date of the dissolution, winding-up or termination, as the case may be, will be
entitled to receive Debentures in an aggregate principal amount equal to the
aggregate stated liquidation amount of such Securities, with an interest rate
equal to the Coupon Rate of, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on, such Securities and
which shall be distributed on a Pro Rata basis to the Holders of the Securities
in exchange for such Securities (such amount being "Liquidation Distribution").
If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.
4. Repayment and Distribution.
(a) Upon the repayment of the Debentures in whole (but not in
part), at maturity, the proceeds from such repayment shall be simultaneously
applied to repay Securities having an aggregate liquidation amount equal to the
aggregate principal amount of the Debentures so repaid at a repayment price of
$50 per Security plus an amount equal to accrued and unpaid Distributions
thereon at the date of the repayment, payable in cash (the "Repayment Price").
Holders will be given not less than 30 nor more than 60 days notice of such
repayment.
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(b) Upon the distribution of the Debentures (after
satisfaction of creditors), in whole (but not in part), pursuant to a Special
Event (as described below), Debentures with an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the Coupon Rate of, and accrued and unpaid interest equal to accrued and
unpaid Distributions on, and having the same record date for payment as the
Securities, shall be distributed to the Holders of the Securities in
liquidation of such Holders' interests in the Trust on a Pro Rata basis, within
90 days following the occurrence of such Special Event.
(c) If a Tax Event or an Investment Company Event (each as
defined below, and each a "Special Event") shall occur and be continuing the
Regular Trustees shall dissolve the Trust and, after satisfaction of creditors,
cause Debentures held by the Institutional Trustee, having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Coupon Rate of, and accrued and unpaid interest
equal to accrued and unpaid Distributions on, and having the same record date
for payment as the Securities, to be distributed to the Holders of the
Securities in liquidation of such Holders' interests in the Trust on a Pro Rata
basis, within 90 days following the occurrence of such Special Event (the "90
Day Period"); and provided, however, that, if at the time there is available to
the Trust the opportunity to eliminate, within the 90 Day Period, the Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure that has no adverse
effect on the Trust, the Debenture Issuer, the Sponsor or the Holders of the
Securities ("Ministerial Action"), the Trust will pursue such Ministerial
Action in lieu of dissolution.
"Tax Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "Tax Event Opinion") to the effect that on or
after the date of the Prospectus, as a result of (a) any amendment to, or
change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority therefor or therein, or (b) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority, which
amendment or change is enacted, promulgated, issued or announced or which
interpretation or pronouncement is issued or announced or which action is
taken, in each case on or after the date of the Prospectus, there is more than
an insubstantial risk that (i) the Trust is or will be within 90 days of the
date thereof, subject to United States federal income tax with respect to
interest accrued or received on the Debentures, (ii) the Trust is, or will be
within 90 days of the date thereof, subject to more than a de minimis amount of
taxes, duties or other governmental charges, or (iii) interest payable by the
Debenture Issuer to the Trust on the Debentures is not, or within 90 days of
the date thereof will not be, deductible, in whole or in part, by the Debenture
Issuer for United States federal income tax purposes.
"Investment Company Event" means that the Regular Trustees
shall have received an opinion of a nationally recognized independent counsel
experienced in practice under the Investment Company Act (an "Investment
Company Event Opinion") that, as a result of the occurrence of a change in law
or regulation or a written change in interpretation or application of law or
regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is a more than an insubstantial
risk that the Trust is or will be considered an Investment Company which is
required to be registered under the Investment Company Act, which Change in
1940 Act Law becomes effective on or after the date of the Prospectus .
On and from the date fixed by the Regular Trustees for any
distribution of Debentures and dissolution of the Trust: (i) the Securities
will no longer be deemed to be outstanding, (ii) The Depository Trust
Company (the "Depository") or its nominee (or any successor Clearing Agency or
its nominee) or the Collateral Agent, as the record Holder of the Preferred
Securities, will receive a registered global certificate or certificates
representing the Debentures to be delivered upon such distribution and any
certificates representing Securities, except for certificates representing
Preferred Securities held by the Depository or its nominee (or any successor
Clearing Agency or its nominee), will be deemed to represent beneficial
interests in the Debentures having an aggregate principal amount equal to the
aggregate stated liquidation amount of, with an interest rate identical to the
Coupon Rate of, and accrued and unpaid interest equal to accrued and unpaid
Distributions on such Securities until such certificates are presented to the
Debenture Issuer or its agent for transfer or reissue.
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(d) Repayment or Distribution Procedures.
(i)Notice of any repayment of, or notice of distribution of
Debentures in exchange for, the Securities (a "Repayment/Distribution
Notice") will be given by the Trust by mail to each Holder of
Securities to be repaid or exchanged not fewer than 30 nor more than
60 days before the date fixed for repayment or exchange thereof which,
in the case of a repayment, will be the date fixed for repayment of
the Debentures. For purposes of the calculation of the date of
repayment or exchange and the dates on which notices are given
pursuant to this Section 4(d)(i), a Repayment/Distribution Notice
shall be deemed to be given on the day such notice is first mailed by
first-class mail, postage prepaid, to Holders of Securities. Each
Repayment/Distribution Notice shall be addressed to the Holders of
Securities at the address of each such Holder appearing in the books
and records of the Trust. No defect in the Repayment/Distribution
Notice or in the mailing of either thereof with respect to any Holder
shall affect the validity of the repayment or exchange proceedings
with respect to any other Holder.
(ii) If Securities are to be repaid and the Trust gives a
Repayment/Distribution Notice, which notice may only be issued if the
Debentures are repaid as set out in this Section 4 (which notice will
be irrevocable), then (A) while the Preferred Securities are in
book-entry only form, with respect to the Preferred Securities, by
12:00 noon, New York City time, on the repayment date, provided that
the Debenture Issuer has paid the Institutional Trustee a sufficient
amount of cash in connection with the related repayment on maturity of
the Debentures, the Institutional Trustee will deposit irrevocably
with the Depository or its nominee (or successor Clearing Agency or
its nominee) funds sufficient to pay the applicable Repayment Price
with respect to the Preferred Securities and will give the Depository
irrevocable instructions and authority to pay the Repayment Price to
the Holders of the Preferred Securities, and (B) with respect to
Preferred Securities issued in definitive form and Common Securities,
provided that the Debenture Issuer has paid the Institutional Trustee
a sufficient amount of cash in connection with the related repayment
on maturity of the Debentures, the Institutional Trustee will pay the
relevant Repayment Price to the Holders of such Securities by check
mailed to the address of the relevant Holder appearing on the books
and records of the Trust on the repayment date. If a
Repayment/Distribution Notice shall have been given and funds
deposited as required, if applicable, then immediately prior to the
close of business on the date of such deposit, or on the repayment
date, as applicable, distributions will cease to accrue on the
Securities so repaid and all rights of Holders of such Securities so
repaid will cease, except the right of the Holders of such Securities
to receive the Repayment Price, but without interest on such Repayment
Price. Neither the Regular Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Securities that
have been so repaid. If any date fixed for repayment of Securities is
not a Business Day, then payment of the Repayment Price payable on
such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such
delay) except that, if such Business Day falls in the next calendar
year, such payment will be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such
date fixed for repayment. If payment of the Repayment Price in respect
of any Securities is improperly withheld or refused and not paid
either by the Institutional Trustee or by the Sponsor as guarantor
pursuant to the relevant Securities Guarantee, Distributions on such
Securities will continue to accrue from the original repayment date to
the actual date of payment, in which case the actual payment date will
be considered the date fixed for repayment for purposes of calculating
the Repayment Price.
(iii) Repayment/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to (A) in respect of the
Preferred Securities, the Depository or its nominee (or any successor
Clearing Agency or its nominee) if the Global Certificates have been
issued or, if Definitive Preferred Security Certificates have been
issued, to the Holder thereof, and (B) in respect of the Common
Securities to the Holder thereof.
(iv) Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws), provided
the acquiror is not the Holder of the Common Securities or the obligor
under the Indenture, the Sponsor or any of its subsidiaries may at any
time and from time to time purchase outstanding Preferred Securities
by tender, in the open market or by private agreement.
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5. Repayment at Option of Holders.
(a) Each Holder of Preferred Securities, including the
Collateral Agent, if applicable, shall have the right to require the Trust to
repay all or a portion of the Preferred Securities owned or pledged with such
Holder (the "Put Option") on _________, the Purchase Contract Settlement Date
and for a period of ninety days thereafter (the "Put Option Exercise Date") at
a repayment price of $50 per Security plus an amount equal to accrued
Distributions thereon to the date of payment (the "Put Option Repayment
Price").
(b) The Trust will obtain funds to pay the Put Option
Repayment Price of Preferred Securities being repaid under the Put Option by
presenting to the Debenture Issuer, pursuant to the Trust's right under the
Debentures to require the Debenture Issuer to repay all or a portion of the
Debenture on the Put Option Exercise Date, Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of such Preferred
Securities for repayment on the Put Option Exercise Date at the Debenture
Repayment Price.
(c) In order for the Preferred Securities to be repaid on the
Put Option Exercise Date, the Trust must receive at the Corporate Trust Office
of the Institutional Trustee, the Preferred Securities to be repaid with the
form entitled "Option to Elect Repayment" on the reverse thereof or otherwise
accompanying such Preferred Security duly completed. Any such notice received
by the Trust shall be irrevocable. All questions as to the validity,
eligibility (including time of receipt) and acceptance of the Preferred
Securities for repayment shall be determined by the Trust, whose determination
shall be final and binding. Notwithstanding the foregoing, so long as the
Holder is the Collateral Agent, such notice to elect repayment may be delivered
to the Trust at any time prior to 10:00 a.m., New York City time, on the Put
Option Exercise Date and in the form and manner as may be designated by the
Collateral Agent.
(d) Payment of the Put Option Repayment Price to Holders of
Preferred Securities shall be made at the Corporate Trust Office of the
Institutional Trustee, provided that the Debenture Issuer has paid the
Institutional Trustee a sufficient amount of cash in connection with the
related repayment of the Debenture. Notwithstanding the foregoing, so long as
the Holder of any Preferred Securities is the Collateral Agent, the payment of
the Put Option Repayment Price in respect of such Preferred Securities held by
the Collateral Agent shall be made no later than 1:00 p.m., New York City time,
on the Put Option Exercise Date by check or wire transfer in immediately
available funds at such place and to such account as may be designated by the
Collateral Agent. If the Institutional Trustee holds immediately available
funds sufficient to pay the Put Option Repayment Price of such Preferred
Securities, then, immediately prior to the close of business on the Put Option
Exercise Date, such Preferred Securities will cease to be outstanding and
distributions thereon will cease to accrue, whether or not Preferred Securities
are delivered to the Institutional Trustee, and all other rights of the Holder
in respect of the Preferred Securities, including the Holder's right to require
the Trust to repay such Preferred Securities, shall terminate and lapse (other
than the right to receive the Put Option Repayment Price but without interest
on such Put Option Repayment Price). Neither the Regular Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Preferred Securities for which repayment has been elected. If payment of the
Put Option Repayment Price in respect of Preferred Securities is (i) improperly
withheld or refused and not paid either by the Institutional Trustee or by the
Sponsor as guarantor pursuant to the Preferred Securities Guarantee, or (ii)
not paid by the Institutional Trustee as the result of an Event of Default with
respect to the Debentures presented for repayment as described in paragraph
5(b), Distributions on such Preferred Securities will continue to accrue, from
the original Put Option Exercise Date to the actual date of payment, in which
case the actual payment date will be considered the Put Option Exercise Date
for purposes of calculating the Put Option Repayment Price.
6. Voting Rights - Preferred Securities.
(a) Except as provided under Sections 6(b) and 8 and as
otherwise required by law and the Declaration, the Holders of the Preferred
Securities will have no voting rights.
(b) Subject to the requirements set forth in this paragraph,
the Holders of a Majority in liquidation amount of the Preferred Securities,
voting separately as a class may direct the time, method, and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any trust or power conferred upon the
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Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under the Indenture, or (iii) exercise any right
to rescind or annul a declaration that the principal of all the Debentures
shall be due and payable, provided, however, that, where a consent under the
Indenture would require the consent or act of the Holders of greater than a
majority of the Holders in principal amount of Debentures affected thereby (a
"Super Majority"), the Institutional Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Preferred Securities which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding. The Institutional Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred Securities.
Other than with respect to directing the time, method and place of conducting
any remedy available to the Institutional Trustee or the Debenture Trustee as
set forth above, the Institutional Trustee shall not take any action in
accordance with the directions of the Holders of the Preferred Securities under
this paragraph unless the Institutional Trustee has obtained an opinion of tax
counsel to the effect that for the purposes of United States federal income tax
the Trust will not be classified as other than a grantor trust on account of
such action. If the Institutional Trustee fails to enforce its rights under the
Declaration, any Holder of Preferred Securities may institute a legal
proceeding directly against any person to enforce the Institutional Trustee's
rights under the Declaration without first instituting a legal proceeding
against the Institutional Trustee or any other Person. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Debenture Issuer to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a holder of Preferred Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Debentures. Except as provided in the preceding sentence, the
Holders of Preferred Securities will not be able to exercise directly any other
remedy available to the holders of the Debentures.
Any approval or direction of Holders of Preferred Securities
may be given at a separate meeting of Holders of Preferred Securities convened
for such purpose, at a meeting of all of the Holders of Securities in the Trust
or pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of record of Preferred Securities. Each such notice
will include a statement setting forth (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to
vote or of such matter upon which written consent is sought and (iii)
instructions for the delivery of proxies or consents.
No vote or consent of the Holders of the Preferred Securities
will be required for the Trust to repay and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities. Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities that are owned by the Sponsor or any Affiliate of
the Sponsor shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if they were not outstanding.
7. Voting Rights - Common Securities.
(a) Except as provided under Sections 7(b), (c) and as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote to appoint, remove or
replace any Trustee or to increase or decrease the number of Trustees.
(c) Subject to Section 2.6 of the Declaration and only after
the Event of Default with respect to the Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second
to last sentence of this paragraph, the Holders of a Majority in liquidation
amount of the Common Securities, voting separately as a class, may direct the
time, method, and place of conducting any proceeding for any remedy available
to the Institutional
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Trustee, or exercising any trust or power conferred upon the Institutional
Trustee under the Declaration, including (i) directing the time, method, place
of conducting any proceeding for any remedy available to the Debenture Trustee,
or exercising any trust or power conferred on the Debenture Trustee with
respect to the Debentures, (ii) waive any past default and its consequences
that is waivable under Section 513 of the Indenture, or (iii) exercise any
right to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable, provided that, where a consent or action
under the Indenture would require the consent or act of the Holders of greater
than a majority in principal amount of Debentures affected thereby (a "Super
Majority"), the Institutional Trustee may only give such consent or take such
action at the written direction of the Holders of at least the proportion in
liquidation amount of the Common Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding.
Pursuant to this Section 7(c), the Institutional Trustee shall not revoke any
action previously authorized or approved by a vote of the Holders of the
Preferred Securities. Other than with respect to directing the time, method and
place of conducting any remedy available to the Institutional Trustee or the
Debenture Trustee as set forth above, the Institutional Trustee shall not take
any action in accordance with the directions of the Holders of the Common
Securities under this paragraph unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that for the purposes of United States
federal income tax the Trust will not be classified as other than a grantor
trust on account of such action. If the Institutional Trustee fails to enforce
its rights under the Declaration, any Holder of Common Securities may institute
a legal proceeding directly against any Person to enforce the Institutional
Trustee's rights under the Declaration, without first instituting a legal
proceeding against the Institutional Trustee or any other Person.
Any approval or direction of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for
such purpose, at a meeting of all of the Holders of Securities in the Trust or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
No vote or consent of the Holders of the Common Securities
will be required for the Trust to repay and cancel Common Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.
8. Amendments to Declaration and Indenture.
(a) In addition to any requirements under Section 1.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Securities,
whether by way of amendment to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust, other than as described in
Section 8.1 of the Declaration, then the Holders of outstanding Securities as a
class, will be entitled to vote on such amendment or proposal (but not on any
other amendment or proposal) and such amendment or proposal shall not be
effective except with the approval of the Holders of at least a Majority in
liquidation amount of the Securities, voting together as a single class;
provided, however, if any amendment or proposal referred to in clause (i) above
would adversely affect only the Preferred Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in liquidation amount of such class of
Securities.
(b) In the event the consent of the Institutional Trustee as
the holder of the Debentures is required under the Indenture with respect to
any amendment, modification or termination on the Indenture or the Debentures,
the Institutional Trustee shall request the written direction of the Holders of
the Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a Majority in liquidation amount of the Securities voting together
as a single class; provided, however, that where a consent under the Indenture
would require the consent of the holders of greater than a majority in
aggregate principal amount of the Debentures (a "Super Majority"), the
Institutional Trustee may only give such consent at the direction of the
Holders of at least the proportion in liquidation amount of the Securities
which the relevant Super Majority represents of the aggregate
I-7
<PAGE> 52
principal amount of the Debentures outstanding; provided, further, that the
Institutional Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this Section 8(b) unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each
Holder of Securities according to the aggregate liquidation amount of the
Securities held by the relevant Holder in relation to the aggregate liquidation
amount of all Securities outstanding unless, in relation to a payment, an Event
of Default under the Declaration has occurred and is continuing, in which case
any funds available to make such payment shall be paid first to each Holder of
the Preferred Securities pro rata according to the aggregate liquidation amount
of Preferred Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Preferred Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Preferred Securities, to
each Holder of Common Securities pro rata according to the aggregate
liquidation amount of Common Securities held by the relevant Holder relative to
the aggregate liquidation amount of all Common Securities outstanding.
10. Ranking.
The Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event
of Default occurs and is continuing under the Indenture in respect of the
Debentures held by the Institutional Trustee, the rights of Holders of the
Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Preferred Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common Securities by
the acceptance thereof, agrees to the provisions of the Preferred Securities
Guarantee and the Common Securities Guarantee, respectively, including the
subordination provisions therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights
to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee or the Common Securities Guarantee (as may be
appropriate), and the Indenture to a Holder without charge on written request
to the Sponsor at its principal place of business.
I-8
<PAGE> 53
EXHIBIT A-1
FORM OF PREFERRED SECURITY CERTIFICATE
[IF THE PREFERRED SECURITY IS TO BE A GLOBAL CERTIFICATE INSERT - This
Preferred Security is a Global Certificate within the meaning of the
Declaration hereinafter referred to and is registered in the name of The
Depository Trust Company (the "Depositary") or a nominee of the Depositary.
This Preferred Security is exchangeable for Preferred Securities registered in
the name of a person other than the Depositary or its nominee only in the
limited circumstances described in the Declaration and no transfer of this
Preferred Security (other than a transfer of this Preferred Security as a whole
by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.
Unless this Preferred Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) to the Trust or its agent for registration of transfer, exchange or
payment, and any Preferred Security issued is registered in the name of Cede &
Co. or such other name as requested by an authorized representative of The
Depository Trust Company and any payment hereon is made to Cede & Co., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL since the registered owner hereof, Cede & Co., has an interest
herein.]
Certificate Number Number of Preferred Securities
CUSIP NO.
Certificate Evidencing Preferred Securities
of
AHL FINANCING
_____% Trust Originated Preferred Securities(SM) ("FELINE PRIDES"(SM))
(liquidation amount $50 per Preferred Security)
AHL FINANCING, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that __________
(the "Holder") is the registered owner of preferred securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the ____ Trust Originated Preferred Securities (liquidation Amount
$50 per Preferred Security) (the "Preferred Securities"). The Preferred
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer. The designation rights, privileges,
restrictions preferences and other terms and provisions of the Preferred
Securities represented hereby are issued and shall in all respects be subject
to the provisions of the Amended and Restated Declaration of Trust of the Trust
dated as of _______, 1997, as the same may be amended from time to time (the
"Declaration"), including the designation of the terms of the Preferred
Securities as set forth in Annex I to the Declaration. Capitalized terms used
herein but not defined shall have the meaning given them in the Declaration.
The Holder is entitled to the benefits of the Preferred Securities Guarantee to
the extent provided therein. The Sponsor will provide a copy of the
Declaration, the Preferred Securities Guarantee and the Indenture to a Holder
without charge upon written request to the Trust at its principal place of
business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
A1-1
<PAGE> 54
IN WITNESS WHEREOF, the Trust has executed this certificate
this _____ day of ________, 1997.
AHL FINANCING
By:
------------------------------------
Name:
Title: Regular Trustee
A1-2
<PAGE> 55
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will be
fixed at a rate per annum of ______% (the "Coupon Rate") of the stated
liquidation amount of $50 per Preferred Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears for more than one quarter will bear interest thereon
compounded quarterly at the Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes such cash distributions
and any such interest payable unless otherwise stated. A Distribution is
payable only to the extent that payments are made in respect of the Debentures
held by the Institutional Trustee and to the extent the Institutional Trustee
has funds available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution period on the basis
of a 360-day year consisting of twelve 30-day months, and for any period
shorter than a full quarterly Distribution period for which Distributions are
computed, Distributions will be computed on the basis of the actual number of
days elapsed per 30-day month.
Except as otherwise described below, Distributions on the
Preferred Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year, commencing on September 30, 1997, to
holders of record, if in book-entry only form, one day prior to such payment
date, which payment dates shall correspond to the interest payment dates on the
Debentures. In the event that the Preferred Securities are not in book-entry
form, the Regular Trustees will have the right to select relevant record dates,
which will be more than one Business Day but less than 60 Business Days prior
to the relevant payment dates. The Debenture Issuer has the right under the
Indenture to defer payments of interest by extending the interest payment
period from time to time on the Debentures for a period not exceeding beyond
the date of maturity of the Debentures (each an "Extension Period") and, as a
consequence of such deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at the Coupon Rate
compounded quarterly during any such Extension Period. Payments of accrued
Distributions will be payable to Holders as they appear on the books and
records of the Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, the Debenture Issuer may commence a new Extension Period;
provided that such Extension Period together with all such previous and further
extensions thereof may not exceed beyond the maturity date of the Debenture.
The Preferred Securities shall be repayable as provided in
the Declaration
A1-3
<PAGE> 56
OPTION TO ELECT REPAYMENT
The undersigned hereby irrevocably requests and instructs the
Trust to repay $__________ stated liquidation amount of the within Preferred
Security, pursuant to its terms, on the "Put Option Exercise Date" first
occurring after the date of receipt of the within Preferred Security as
specified below, together with distributions thereon accrued to the date of
repayment, to the undersigned at:
(Please print or type Name and Address of the Undersigned)
and to issue to the undersigned, pursuant to the terms of the Declaration, a
new Preferred Security or Preferred Securities representing the remaining
stated liquidation amount of this Preferred Security.
For this Option to Elect Repayment to be effective, this Preferred Security
with the Option to Elect Repayment duly completed must be received by the Trust
at the Corporate Trust Office of the Institutional Trustee at One First
National Plaza, Suite 0126, Chicago, Illinois 60670-0126, Attention: Corporate
Trust Administration.
Dated: Signature:
------------------------------
Note: The signature to this Option to Elect Repayment must correspond with the
name as written upon the face of the within Preferred Security in every
particular without alternation or enlargement or any change whatsoever.
A1-4
<PAGE> 57
----------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security Certificate to:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
and irrevocably appoints
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.
Date:
---------------------
Signature:
----------------
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
A1-5
<PAGE> 58
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
Certificate Number Number of Common Securities
Certificate Evidencing Common Securities
of
AHL FINANCING
___% Trust Originated Common Securities
(liquidation amount $50 per Common Security)
AHL FINANCING, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that_____________
(the "Holder") is the registered owner of common securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the ____% Trust Originated Common Securities (liquidation amount $50
per Common Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities represented
hereby are issued and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as of ________,
1997, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration. Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Common Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Common Securities Guarantee
and the Indenture to a Holder without charge upon written request to the
Sponsor at its principal place of business.
Upon receipt of this certificate, the Sponsor is bound by the
Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Common
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate
this day of _________, 1997.
AHL FINANCING
By:
--------------------------------------
Name:
Title: Regular Trustee
A2-1
<PAGE> 59
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be fixed
at a rate per annum of _____% (the "Coupon Rate") of the stated liquidation
amount of $ _ per Common Security, such rate being the rate of interest payable
on the Debentures to be held by the Institutional Trustee. Distributions in
arrears for more than one quarter will bear interest thereon compounded
quarterly at the Coupon Rate (to the extent permitted by applicable law). The
term "Distributions" as used herein includes such cash distributions and any
such interest payable unless otherwise stated. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period for which Distributions are computed, Distributions will be
computed on the basis of the actual number of days elapsed per 30-day month.
Except as otherwise described below, distributions on the
Common Securities will be cumulative, will accrue from the date of original
issuance and will be payable quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year, commencing on September 30, 1997, to
Holders of record one day prior to such payment dates, which payment dates
shall correspond to the interest payment dates on the Debentures. The Debenture
Issuer has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Debentures for a
period not exceeding beyond the date of maturity of the Debentures (each an
"Extension Period") and, as a consequence of such deferral, Distributions will
also be deferred. Despite such deferral, quarterly Distributions will continue
to accrue with interest thereon (to the extent permitted by applicable law) at
the Coupon Rate compounded quarterly during any such Extension Period. Payments
of accrued Distributions will be payable to Holders as they appear on the books
and records of the Trust on the first record date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, the Debenture Issuer may commence a new Extension
Period; provided, that such Extension Period together with all such previous
and further extensions thereof may not exceed beyond the maturity date of the
Debentures.
The Common Securities shall be repayable as provided in the
Declaration.
A2-2
<PAGE> 60
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Common Security
Certificate to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-----------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
agent to transfer this Common Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
---------------
Signature:
----------
(sign exactly as your name appears on the other side of this Common Security
Certificate)
A2-3
<PAGE> 61
EXHIBIT B
SPECIMEN OF DEBENTURE
B-1
<PAGE> 62
EXHIBIT C
UNDERWRITING AGREEMENT
C-1
<PAGE> 1
EXHIBIT 5(a)
American Heritage Life Investment Corporation
1776 American Heritage Life Drive
Jacksonville, FL 32224
Phone: (904) 992-2570
Fax: (904) 992-2658
W. Michael Heekin, Esq.
Senior Vice President
and Corporate
Secretary
June 3, 1997
American Heritage Life Investment Corporation
AHL Financing
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
I am acting as counsel to (i) American Heritage Life Investment
Corporation, a corporation organized under the laws of the State of Florida
(the "Company"), and (ii) AHL Financing, a statutory business trust formed
under the Business Trust Act of the State of Delaware (the "Trust"), in
connection with the preparation of a Registration Statement on Form S-3 (File
No. 333-24153), filed by the Company and the Trust with the Securities and
Exchange Commission (the "Commission") on March 28, 1997 under the Securities
Act of 1933, as amended (the "Act")(such Registration Statement being
hereinafter referred to as the "Registration Statement") and certain other
securities.
The Preferred Securities are to be issued pursuant to the Amended and
Restated Declaration of Trust of the Trust (the "Declaration") among the
Company, as sponsor, The First National Bank of Chicago, as the institutional
trustee (the "Institutional Trustee"), First Chicago Delaware, Inc., as the
Delaware Trustee, and T. O'Neal Douglas and C. Richard Morehead, as regular
trustees.
This opinion is being delivered in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Act.
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of (i) the certificate of
trust of the Trust (the "Certificate of Trust") filed with the Secretary of
State of the State of Delaware on March 20, 1997, (ii) the form of the
Declaration (including the designation of the terms of the Preferred Securities
annexed thereto); and (iii) the form of the Preferred Securities. I have also
originals or copies, certified
<PAGE> 2
<PAGE> 3
American Heritage Life Investment Corporation
June 3, 1997
Page 2
or otherwise identified to my satisfaction, of such other documents,
certificates and records as I have deemed necessary or appropriate as a basis
for the opinions set forth herein.
In my examination, I have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to me as originals, the conformity to original documents of all
documents submitted to me as certified or photostatic copies and the
authenticity of the originals of such copies. In making my examination of
documents executed by parties other than the Trust, I have assumed that such
parties had the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such parties
of such documents and that such documents constitute valid and binding
obligations of such parties. In addition, I have assumed that the Declaration,
and the Preferred Securities, when executed, will be in substantially the form
reviewed by me. As to any facts material to the opinions expressed herein that
were not independently established or verified, I have relied upon oral or
written statements and representations of officers, trustees and other
representatives of the Company, the Trust and others,
Based on and subject to the foregoing and to the other qualifications
and limitations set forth herein, I am of the opinion that the Preferred
Securities, when the Declaration is duly executed and delivered and the terms
of the Preferred Securities are established in accordance with the terms of the
Declaration, will be duly authorized for issuance and, when issued and
executed in accordance with the Declaration and delivered and paid for as set
forth in the form of prospectus for the Preferred Securities included in the
Registration Statement, will be validly issued, fully paid and nonassessable,
representing undivided beneficial interests in the assets of the Trust. I bring
to your attention, however, that the holders of the Preferred Securities may be
obligated pursuant to the Declaration, to (i) provide indemnity and/or security
in connection with and pay taxes or governmental charges arising from transfers
of the Preferred Securities and (ii) provide security and indemnity in
connection with the requests of or directions to the Institutional Trustee to
exercise its rights and powers under the Declaration.
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. I also consent to the use of my name
under the headings "Legal Matters" in the prospectus included in the
Registration Statement. In giving this consent, I do not hereby admit that I
am within the category of persons whose consent is required under Section 7 of
the
<PAGE> 4
American Heritage Life Investment Corporation
June 3, 1997
Page 3
Act or the rules and regulations of the Commission promulgated thereunder. This
opinion is expressed as of the date hereof unless otherwise expressly stated
and I disclaim any undertaking to advise you of any subsequent changes of the
facts stated or assumed herein or of any subsequent changes in applicable law.
Very truly yours,
W. Michael Heekin
<PAGE> 1
EXHIBIT 5(b)
American Heritage Life Investment Corporation
1776 American Heritage Life Drive
Jacksonville, FL 32224
Phone: (904) 992-2570
Fax: (904) 992-2658
W. Michael Heekin, Esq.
Senior Vice President
and Corporate
Secretary
June 2, 1997
American Heritage Life
Investment Corporation
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Ladies and Gentlemen:
I am acting as counsel for American Heritage Life Investment
Corporation ("AHLIC"), and AHL Financing, a Delaware business trust (the "AHL
Trust"), in connection with their filing with the Securities and Exchange
Commission (the "Commission") of a Registration Statement (File No. 333-24153)
on Form S-3 (the "Registration Statement") with respect to the Company's (i)
junior subordinated debentures (the "Junior Subordinated Debentures"), (ii)
shares of common stock, $1.00 par value per share (collectively, the "Common
Stock"), (iv) stock purchase contracts to purchase the Common Stock (the "Stock
Purchase Contracts") and (v) stock purchase units, each representing ownership
of a Stock Purchase Contract and Junior Subordinated Debentures, the Preferred
Securities (as defined below) or debt obligations of third parties, including
U.S. Treasury Securities, securing the holder's obligation to purchase the
Common Stock under the Stock Purchase Contract ("Stock Purchase Units"). The
Registration Statement also relates to the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of preferred securities of the
AHL Trust (the "Preferred Securities") and guarantees of the Preferred
Securities by AHLIC (the "Preferred Securities Guarantees"). Capitalized terms
used but not defined herein are used as defined in the Registration Statement.
In preparation for rendering the opinions hereafter expressed, I have
examined the originals or copies certified to my satisfaction of corporate
records and other documents and certificates as I have deemed necessary.
Based on the above, I am of the opinion that:
1. AHLIC is a corporation duly incorporated and validly existing
pursuant to the laws of the State of Florida.
<PAGE> 2
American Heritage Life Investment Corporation
June 2, 1997
Page 2
2. The Junior Subordinated Debentures, the Common Stock, the Stock
Purchase Contracts and the Stock Purchase Units, which
are covered by the Registration Statement, when sold will be
legally issued by AHLIC, duly authorized, fully paid and
non-assessable and, in the case of the Junior Subordinated
Debentures, will constitute valid and binding obligations of
AHLIC, enforceable against AHLIC in accordance with their
terms except as such enforcement is subject to any applicable
bankruptcy insolvency, reorganization or other laws relating
to or affecting creditors' rights generally and general
principles of equity.
3. Upon issuance, the Preferred Securities Guarantees will
constitute the legal, valid and binding obligations of AHLIC,
enforceable against AHLIC in accordance with their terms,
except as such enforcement is subject to any applicable
bankruptcy, insolvency, reorganization or other law relating
to or affecting creditors' rights generally and general
principles of equity.
I hereby consent to the use of this opinion as Exhibit 5(b) to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Prospectus. In giving this consent, I do not hereby admit
that I come within the category of persons whose consent is required under
Section 7 of the Securities Act or the rules or regulations of the
Commission promulgated thereunder.
Very truly yours,
W. Michael Heekin
<PAGE> 1
EXHIBIT 8
Form of Tax Opinion
From
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
212-424-8162
June __, 1997
American Heritage Life Investment Corporation
AHL Financing
1776 American Heritage Life Drive
Jacksonville, Florida 32224
Merrill Lynch & Co., Inc.
Merrill Lynch World Headquarters
World Financial Center - North Tower
New York, New York 10281
Re: 1,500,000 FELINE PRIDES(SM) of American Heritage
Life Investment Corporation and AHL Financing
Ladies and Gentlemen:
We have acted as special United States tax counsel to American
Heritage Life Investment Corporation, a Florida corporation ("AHLIC" or the
"Company") and AHL Financing, a Delaware statutory business trust (the "Trust")
in connection with the issuance of 1,500,000 FELINE PRIDES(SM) (the
"Securities") consisting of a unit (referred to an Income PRIDES(SM)) comprised
of the Purchase Contracts of AHLIC, obligating the holder to purchase a number
of shares of common stock of AHLIC equal to the Settlement Rate or Cash
Settlement Rate and obligating AHLIC to make Contract Adjustment Payments, and
the Trust Preferred Securities with a stated liquidation amount of $50. In
addition, we have assisted in preparing the Prospectus dated ________, 1997
(the "Prospectus") describing the Securities and including certain information
regarding AHLIC and the Trust.
<PAGE> 2
American Heritage Life Investment Corporation
AHL Financing
June --, 1997
Page 2
This opinion is being rendered pursuant to Section __ of the
Underwriting Agreement dated June __, 1997 among the Company, the Trust and the
Underwriters. All capitalized terms not otherwise defined herein have the
meaning set forth in the Prospectus.
The Trust Preferred Securities will represent a preferred undivided
beneficial interest in the assets of the Trust, primarily consisting of the
Junior Subordinated Debentures issued by AHLIC. AHLIC, as the Guarantor, will
guaranty certain obligations of the Trust and the Company. The Trust Preferred
Securities initially will be pledged to secure the obligations of the holders
to purchase the Common Stock. A holder of the Securities may settle a Purchase
Contract by presenting the related Trust Preferred Security to the Trust for
repayment and to apply the proceeds therefrom in satisfaction of the Purchase
Contract or by delivering cash to the Collateral Agent. In addition, a holder
of the Securities may, at any time, substitute Treasury Securities, in a
principal amount per Purchase Contract equal to the Stated Amount per Trust
Preferred Security. Upon the substitution of Treasury Securities for Trust
Preferred Securities as collateral, the Trust Preferred Securities will be
released to the holder and thereafter are traded separately from the resulting
Growth PRIDES. A holder of Growth PRIDES will have the right to subsequently
recreate Income PRIDES by delivering a Growth PRIDES to the Purchase Contract
Agent plus 20 Trust Preferred Securities per Growth PRIDES to the Collateral
Agent in exchange for 20 Income PRIDES and the release of the underlying
Treasury Securities to such holder.
On the Purchase Contract Settlement Date, ______ __, 2000,
unless a holder of the Income PRIDES has settled the underlying Purchase
Contract either through the early delivery of cash or has notified the Purchase
Contract Agent of its intention to settle the related Purchase Contract with
separate cash on the Purchase Contract Settlement Date and has so settled the
related Purchase Contract, such a holder will be deemed to have requested
<PAGE> 3
American Heritage Life Investment Corporation
AHL Financing
June __, 1997
Page 3
the Trust to put the related Junior Subordinated Debenture to AHLIC, and the
principal amount of such Junior Subordinated Debenture will automatically be
applied to satisfy in full such holder's obligation to purchase Common Stock
under the Purchase Contract. However, to the extent that holders settle the
Purchase Contracts with cash or have substituted Treasury Securities for the
Trust Preferred Securities held by the Collateral Agent, the Trust Preferred
Securities will not be redeemed on the Purchase Contract Settlement Date, and
the holders of such Trust Preferred Securities will have the right on the
Contract Purchase Settlement Date and for a period of 90 days thereafter to
require the Trust to put to the Company the related Junior Subordinated
Debentures or to hold the Junior Subordinated Debentures until maturity.
Holders of Income PRIDES who settle the Purchase Contracts with cash or
Treasury Securities will receive on the Purchase Contract Settlement Date
0.125% more shares of Common Stock per Purchase Contract than will be received
by a holder of Income PRIDES who settles the related Purchase Contracts through
the put of the Junior Subordinated Debentures and the redemption of the related
Trust Preferred Securities.
The Junior Subordinated Debentures will mature on _______ __, 2002 and
will bear interest at the rate of __% per annum payable quarterly in arrears on
each March 31, June 30, September 30 and December 31. Interest payments may be
deferred from time to time by AHLIC for successive Extension Periods not
extending beyond the stated maturity date of the Junior Subordinated
Debentures. During any Extension Period, interest will continue to accrue and
compound quarterly. During an Extension Period, AHLIC will be prohibited from
paying dividends on or purchasing any of its capital stock and making certain
other restricted payments until quarterly interest payments are resumed and all
amounts due on the Junior Subordinated Debentures are made current. The Junior
Subordinated Debentures will be subordinate in right, payment of principal and
interest to all Senior indebtedness of AHLIC and will rank pari passu in right
of
<PAGE> 4
American Heritage Life Investment Corporation
AHL Financing
June __, 1997
Page 4
payment with other subordinated debentures issued by AHLIC and with all
unsecured trade creditors of AHLIC.
In rendering our opinions, we have reviewed and relied upon the
Prospectus, the Indenture, the Purchase Contract Agreement, the Pledge
Agreement, the Guarantee, the AHLIC Officer's Certificate and a letter from
Merrill Lynch & Co., Inc., dated as of the date hereof, and such other
documents, agreements and matters of fact of law as we have deemed necessary or
appropriate for purposes of rendering our opinions expressed herein.
In such examination, we have assumed, without inquiry, the genuineness
of all signatures on all documents examined by us, the authenticity of all
documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as copies and the authenticity of
the originals of such latter documents. In addition, we have assumed the truth
and accuracy of the representations, covenants and information contained in the
documents and instruments described herein and that the transactions described
in those documents or instruments will be carried out in accordance with their
terms.
Based on the foregoing and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
(i) the Trust will be classified as a grantor trust for U.S.
Federal income tax purposes and not as an association taxable as a
corporation; for U.S. Federal income tax purposes, each holder of
Trust Preferred Securities will be considered the owner of an
undivided interest in the Junior Subordinated Debentures, and
each holder will be required to include in its gross income any
original issue discount accrued with respect to its allocable share
of the Junior Subordinated Debentures;
<PAGE> 5
American Heritage Life Investment Corporation
AHL Financing
June __, 1997
Page 5
(ii) the Junior Subordinated Debentures will be classified for
United States Federal income tax purposes as indebtedness of the
Company, and interest on the Junior Subordinated Debentures will be
deductible by the Company for Federal income tax purposes in
accordance with the Company's method of accounting subject to any
applicable limitations or restrictions; and
(iii) the statements set forth under the heading "Certain
Federal Income Tax Consequences" in the Prospectus, insofar as such
statements purport to summarize the United States Federal income tax
consequences of the purchase, ownership and disposition of the
Securities provide a fair summary of such consequences.
The above opinions are based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), its legislative history, the
Treasury regulations thereunder and published rulings and other decisions in
effect as of the date hereof, all of which are subject to change, possibly
retroactively. No assurance can be given that the Internal Revenue Service
will not take positions contrary to our opinions. No opinion is expressed or
implied with respect to any matter not expressly set forth herein. The
opinions rendered herein are for your sole benefit and may not be relied upon
by any other party or in any other transaction.
Very truly yours,
<PAGE> 1
EXHIBIT 12
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
Computation of Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
($ in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED DECEMBER 31,
---------------------- -----------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS
Operating earnings
before tax $11,447 9,795 39,439 35,435 32,652 27,720 23,913
------- ------ ------ ------ ------ ------ ------
ADD:
FIXED CHARGES
Interest expense on
existing debt 1,683 1,529 6,075 5,555 4,017 3,570 2,823
------- ------ ------ ------ ------ ------ ------
TOTAL FIXED CHARGES 1,683 1,529 6,075 5,555 4,017 3,570 2,823
------- ------ ------ ------ ------ ------ ------
EARNINGS, AS DEFINED $13,130 11,324 45,514 40,990 36,669 31,290 26,736
======= ====== ====== ====== ====== ====== ======
RATIO OF EARNINGS
TO FIXED CHARGES 7.80 7.41 7.49 7.38 9.13 8.76 9.47
==== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
American Heritage Life Investment Corporation
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus (Amended S-3).
KPMG PEAT MARWICK LLP
Jacksonville, Florida
June 2, 1997
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of American Heritage Life Investment Corporation on Form S-3 (File No.
333-24153) of our report dated February 18, 1997, on our audits of the
consolidated financial statements of Columbia Universal Corporation and
subsidiaries as of December 31, 1996 and 1995, and for each of the three years
in the period ended December 31, 1996, which report is included in the American
Heritage Life Investment Corporation Current Report on Form 8-K dated March 3,
1997 filed with the Securities Exchange Commission. We also consent to the
reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Austin, Texas
June 2, 1997
<PAGE> 1
EXHIBIT 25(a)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
-----
--------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF
AGENT FOR SERVICE)
------------------
AMERICAN HERITAGE LIFE INVESTMENT CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1219710
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1776 AMERICAN HERITAGE LIFE DRIVE
JACKSONVILLE, FLORIDA 32224
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
JUNIOR SUBORDINATED DEBENTURES DUE 2002
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF
THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE> 3
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /S/ RICHARD D. MANELLA
----------------------
RICHARD D. MANELLA
VICE PRESIDENT
* EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 28, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between American Heritage
Life Investment Corporation and The First National Bank of Chicago, the
undersigned, in accordance with Section 321(b) of the Trust Indenture Act of
1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
----------------------
RICHARD D. MANELLA
VICE PRESIDENT
4
<PAGE> 5
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<CAPTION>
C400
DOLLAR AMOUNTS IN ------------
THOUSANDS RCFD BIL MIL THOU <-
----------------- ---- ------------ ----
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . 0081 4,041,784 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . 0071 5,184,890 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . . . 1773 3,173,481 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . 0276 3,505,874 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . 0277 145,625 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 22,835,958 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . RCFD 3123 418,851 4.b
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . RCFD 3128 0 4.c
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . 2125 22,417,107 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . 3545 8,121,948 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . 2145 707,971 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . 2150 9,184 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . 2130 53,803 8.
9. Customers' liability to this bank on acceptances outstanding . . . . 2155 626,690 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . 2143 310,246 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 1,658,123 11.
12. Total assets (sum of items 1 through 11). . . . . . . . . . . . . . . 2170 49,956,726 12.
</TABLE>
- ------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 6
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK:17-1630 FFIEC031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
---------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . RCON 2200 22,369,341 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . RCON 6631 9,726,987 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCON 6636 12,642,354 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . RCFN 2200 10,026,286 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . RCFN 6631 336,746 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCFN 6636 9,689,540 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . RCFD 0278 884,553 14.a.
b. Securities sold under agreements to repurchase . . . . . . RCFD 0279 717,211 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . RCON 2840 14,120 15.a.
b. Trading Liabilities........................................ RFCD 3548 5,409,585 15b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . RCFD 2332 3,414,577 16.a.
b. With original maturity of more than one year . . . . . . RCFD 2333 46,685 16b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 626,690 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . RCFD 3200 1,250,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . RCFD 2930 1,005,205 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . RCFD 2948 46,049,924 21.
22. Limited-Life preferred stock and related surplus . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . RCFD 3838 0 23.
24. Common stock. . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock). . . RCFD 3839 2,925,894 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . RCFD 3632 770,670 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 10,194 26.b.
27. Cumulative foreign currency translation adjustments . . . . . RCFD 3284 (814) 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . RCFD 3210 3,906,802 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . . RCFD 3300 49,956,726 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . . . . . .....RCFD6724.... N/A M.1.
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
<PAGE> 1
EXHIBIT 25(b)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
-----
------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO ONE
FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF
AGENT FOR SERVICE)
------------------
AMERICAN HERITAGE LIFE INVESTMENT
CORPORATION (EXACT NAME OF OBLIGOR AS
SPECIFIED IN ITS CHARTER)
FLORIDA 59-1219710
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1776 AMERICAN HERITAGE LIFE DRIVE
JACKSONVILLE, FLORIDA 32224
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF TRUST PREFERRED SECURITIES
OF AHL FINANCING
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF
THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE> 3
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /S/ RICHARD D. MANELLA
----------------------
RICHARD D. MANELLA
VICE PRESIDENT
* EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY
SECTION 321(b) OF THE ACT
April 28, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a Guarantee of American Heritage Life
Investment Corporation, relating to the Trust Preferred Securities of AHL
Financing, the undersigned, in accordance with Section 321(b) of the Trust
Indenture Act of 1939, as amended, hereby consents that the reports of
examinations of the undersigned, made by Federal or State authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ RICHARD D. MANELLA
----------------------
RICHARD D. MANELLA
VICE PRESIDENT
4
<PAGE> 5
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK:17-1630 FFIEC031
Address: One First National Plaza, Ste 0460
Page RC-1 City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
</TABLE>
<TABLE>
<CAPTION>
C400
DOLLAR AMOUNTS IN ------------
THOUSANDS RCFD BIL MIL THOU <-
----------------- ---- ------------ ----
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . 0081 4,041,784 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . 0071 5,184,890 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A). . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . . 1773 3,173,481 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . 0276 3,505,874 3.a.
b. Securities purchased under agreements to resell . . . . . . . . 0277 145,625 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 22,835,958 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . RCFD 3123 418,851 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . 2125 22,417,107 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . 3545 8,121,948 5.
6. Premises and fixed assets (including capitalized leases) . . . . . 2145 707,971 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . 2150 9,184 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . 2130 53,803 8.
9. Customers' liability to this bank on acceptances outstanding . . . 2155 626,690 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . 2143 310,246 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . 2160 1,658,123 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . 2170 49,956,726 12.
</TABLE>
- ------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 6
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK:17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
---------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . RCON 2200 22,369,341 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . RCON 6631 9,726,987 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCON 6636 12,642,354 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . RCFN 2200 10,026,286 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . RCFN 6631 336,746 13.b.(1)
(2) Interest-bearing
RCFN 6636 9,689,540 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . RCFD 0278 884,553 14.a.
b. Securities sold under agreements to repurchase . . . . . . RCFD 0279 717,211 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . RCON 2840 14,120 15.a.
b. Trading Liabilities . . . . . . . . . . . . . . . . . . . RCFD 3548 5,409,585 15b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . RCFD 2332 3,414,577 16.a.
b. With original maturity of more than one year . . . . . . RCFD 2333 46,685 16b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 626,690 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . RCFD 3200 1,250,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . RCFD 2930 1,005,205 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . RCFD 2948 46,049,924 21.
22. Limited-Life preferred stock and related surplus . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,925,894 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . RCFD 3632 770,670 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 10,194 26.b.
27. Cumulative foreign currency translation adjustments . . . . . RCFD 3284 (814) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 3,906,802 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . . RCFD 3300 49,956,726 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . . . ...RCFD 6724 . .... N/A M.1.
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
<PAGE> 1
EXHIBIT 25(c)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS
TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
-----------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF
AGENT FOR SERVICE)
-----------------
AHL FINANCING
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
DELAWARE APPLIED FOR
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1776 AMERICAN HERITAGE LIFE DRIVE
JACKSONVILLE, FLORIDA 32224
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
% TRUST PREFERRED SECURITIES
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF
THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE> 3
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 28th day of April, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
BY /s/ RICHARD D. MANELLA
----------------------
RICHARD D. MANELLA
VICE PRESIDENT
* EXHIBITS 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA INC. FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
April 28, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of the Amended and Restated Declaration of
Trust of AHL Financing, the undersigned, in accordance with Section 321(b) of
the Trust Indenture Act of 1939, as amended, hereby consents that the reports
of examinations of the undersigned, made by Federal or State authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /s/ RICHARD D. MANELLA
----------------------
RICHARD D. MANELLA
VICE PRESIDENT
4
<PAGE> 5
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK:17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<CAPTION>
C400
DOLLAR AMOUNTS IN ------------
THOUSANDS RCFD BIL MIL THOU <-
----------------- ---- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . 0081 4,041,784 1.a.
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . 0071 5,184,890 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) . . . 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D). . 1773 3,173,481 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . 0276 3,505,874 3.a.
b. Securities purchased under agreements to resell . . . . . . . . 0277 145,625 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 22,835,958 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . RCFD 3123 418,851 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . 2125 22,417,107 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . 3545 8,121,948 5.
6. Premises and fixed assets (including capitalized leases) . . . . . 2145 707,971 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . 2150 9,184 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . 2130 53,803 8.
9. Customers' liability to this bank on acceptances outstanding . . . 2155 626,690 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . 2143 310,246 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . 2160 1,658,123 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . 2170 49,956,726 12.
</TABLE>
- ------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 6
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
---------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . . . . . RCON 2200 22,369,341 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . . . . . RCON 6631 9,726,987 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCON 6636 12,642,354 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . . . . . RCFN 2200 10,026,286 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . . . . . RCFN 6631 336,746 13.b.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . . . . . RCFN 6636 9,689,540 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . . . . . RCFD 0278 884,553 14.a.
b. Securities sold under agreements to repurchase . . . . . . RCFD 0279 717,211 14.b.
15. a. Demand notes issued to the U.S. Treasury . . . . . . . . RCON 2840 14,120 15.a.
b. Trading Liabilities. . . . . . . . . . . . . . . . . . . . RCFD 3548 5,409,585 15b.
16. Other borrowed money:
a. With original maturity of one year or less . . . . . . . . RCFD 2332 3,414,577 16.a.
b. With original maturity of more than one year . . . . . . RCFD 2333 46,685 16b.
17. Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding . . . RCFD 2920 626,690 18.
19. Subordinated notes and debentures . . . . . . . . . . . . . . RCFD 3200 1,250,000 19.
20. Other liabilities (from Schedule RC-G) . . . . . . . . . . . RCFD 2930 1,005,205 20.
21. Total liabilities (sum of items 13 through 20) . . . . . . . RCFD 2948 46,049,924 21.
22. Limited-Life preferred stock and related surplus . . . . . . RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus . . . . . . . . RCFD 3838 0 23.
24. Common stock . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) . . RCFD 3839 2,925,894 25.
26. a. Undivided profits and capital reserves . . . . . . . . . . RCFD 3632 770,670 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . RCFD 8434 10,194 26.b.
27. Cumulative foreign currency translation adjustments . . . . . RCFD 3284 (814) 27.
28. Total equity capital (sum of items 23 through 27) . . . . . . RCFD 3210 3,906,802 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28) . . . . . . . . . . . . RCFD 3300 49,956,726 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . .. . . . ....RCFD 6724 . .... N/A M.1.
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed
with generally accepted auditing standards by a certified by other external auditors (may be required by state
public accounting firm which submits a report on the bank chartering authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation
3 = Directors' examination of the bank conducted in work)
accordance with generally accepted auditing standards 8 = No external audit work
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
