<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1997
REGISTRATION NUMBER 333-21205
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
ORION CAPITAL CORPORATION ORION CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS
SPECIFIED IN ITS CHARTER) SPECIFIED IN ITS CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION (STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION)
6749 6719
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
95-6069054 APPLIED FOR
(I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NUMBER) IDENTIFICATION NUMBER)
------------------------
MICHAEL P. MALONEY, ESQ. MICHAEL P. MALONEY, ESQ.
SENIOR VICE PRESIDENT, ADMINISTRATIVE TRUSTEE
GENERAL COUNSEL AND SECRETARY 600 FIFTH AVENUE
600 FIFTH AVENUE NEW YORK, NEW YORK 10020-2302
NEW YORK, NEW YORK 10020-2302 (212) 332-8080
(212) 332-8080 (NAME, ADDRESS, INCLUDING
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE ZIP CODE, AND TELEPHONE NUMBER,
NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE) INCLUDING AREA CODE, OF AGENT FOR SERVICE),
</TABLE>
------------------------
Copies to:
JOHN J. MCCANN, ESQ.
DONOVAN LEISURE NEWTON & IRVINE
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 632-3345
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [ ].
------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1)(2)(3) PRICE(1)(2)(3) FEE(2)(3)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Exchange Capital Securities, Liquidation Amount
$1,000 per Exchange Capital Security of Orion
Capital Trust I (4).......................... $125,000,000 100% $125,000,000 $37,878.79
- -----------------------------------------------------------------------------------------------------------------------------
Exchange Junior Subordinated Deferrable
Interest Debentures of Orion Capital
Corporation(2)...............................
- -----------------------------------------------------------------------------------------------------------------------------
Exchange Guarantee by Orion Capital Corporation
with respect to the Exchange Capital
Securities(3)(4).............................
- -----------------------------------------------------------------------------------------------------------------------------
Total................................. $125,000,000(4) 100% $125,000,000(5) $37,878.79
=============================================================================================================================
</TABLE>
(1) Estimated for the sole purpose of computing the registration fee. Pursuant
to Rule 457(n) under the Securities Act, no separate fee is payable with
respect to the Exchange Capital Securities Guarantee (the "Exchange
Guarantee").
(2) No separate consideration will be received for the Exchange Junior
Subordinated Deferrable Interest Debentures (the "Exchange Junior
Subordinated Debentures") distributed upon any liquidation of Orion Capital
Trust I.
(3) No separate consideration will be received for the Orion Capital Corporation
Exchange Guarantee.
(4) This Registration Statement (as the same may be amended from time to time
(the "Registration Statement")) is deemed to cover rights of holders of
Exchange Capital Securities of Orion Capital Trust I under the Amended and
Restated Declaration of Trust (the "Trust Agreement"), the rights of holders
of Exchange Junior Subordinated Debentures under the Indenture, the rights
of the holders of such Exchange Capital Securities under the Exchange
Guarantee and certain backup undertakings as described herein.
(5) Such amount represents the liquidation amount of the Orion Capital Trust I
Exchange Capital Securities to be exchanged hereunder and the principal
amount of Exchange Junior Subordinated Debentures that may be distributed to
holders of such Exchange Capital Securities upon any liquidation of Orion
Capital Trust I.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
================================================================================
<PAGE> 2
PROSPECTUS
ORION CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.73% EXCHANGE CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER EXCHANGE CAPITAL SECURITY)
FOR ANY AND ALL OF ITS OUTSTANDING
8.73% CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
ORION CAPITAL CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON APRIL 23, 1997 UNLESS EXTENDED.
------------------------
Orion Capital Trust I is a statutory business trust formed under the laws of
the State of Delaware (the "Trust"),at the instance of Orion Capital
Corporation, a Delaware corporation ("Orion" or "the Corporation"), which has
agreed to pay all fees, expenses, debts, and obligations (other than the Trust
Securities as defined below) related to the Trust. The Trust hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus (as the
same may be amended or supplemented from time to time, the "Prospectus") and in
the accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"), to exchange up to $125,000,000 aggregate liquidation amount determined
on the basis of $1,000 per Capital Security ("Liquidation Amount") of its 8.73%
Exchange Capital Securities (the "Exchange Capital Securities") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this Prospectus constitutes a
part, for a like Liquidation Amount of its outstanding 8.73% Capital Securities
(the "Old Capital Securities") of which $125,000,000 aggregate Liquidation
Amount is outstanding. Pursuant to the Exchange Offer, Orion Capital
Corporation, a Delaware Corporation ("Orion" or the "Corporation"), is also
offering to exchange (i) its guarantee of payments of cash distributions and
payments on liquidation of the Trust or redemption of the Old Capital
Securities, to the extent the Trust has funds legally available therefor, (the
"Old Guarantee") for a like guarantee in respect of the Exchange Capital
Securities (the "Exchange Guarantee") and (ii) all of its 8.73% Junior
Subordinated Interest Deferrable Debentures due January 1, 2037 (the "Old Junior
Subordinated Debentures") for a like aggregate principal amount of its 8.73%
Exchange Junior Subordinated Deferrable Interest Debentures due January 1, 2037
(the "Exchange Junior Subordinated Debentures"), which Exchange Guarantee and
Exchange Junior Subordinated Debentures also have been registered under the
Securities Act. The Old Capital Securities, the Old Guarantee and the Old Junior
Subordinated Debentures are collectively referred to herein as the "Old
Securities" and the Exchange Capital Securities, the Exchange Guarantee and the
Exchange Junior Subordinated Debentures are collectively referred to herein as
the "Exchange Securities."
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Old Securities, except that (i) the Exchange
Securities have been registered under the Securities Act and therefore will not
be subject to certain restrictions on transfer applicable to the Old Securities,
(ii) the Exchange Capital Securities will not contain the $100,000 minimum
Liquidation Amount transfer restrictions (and to the extent such restriction
might be deemed applicable to the Exchange Offer, it is being waived by the
Corporation and the Trust), (iii) the Exchange Securities will not provide for
the increase in the Distribution (as defined below) rate thereon which is
payable on the Old Capital Securities if the Corporation and the Trust do not or
cannot fulfill certain obligations under a Registration Rights Agreement dated
as of January 13, 1997 (the "Registration Rights Agreement") among the
Corporation, the Trust and the Initial Purchasers (as defined in "Summary -- The
Exchange Securities -- Absence of Market for the Exchange Capital Securities"
(which obligations are satisfied upon the effectiveness of the Registration
Statement of which this Prospectus is a part), (iv) the Exchange Junior
Subordinated Debentures will be issued in denominations of $1,000 but will not
contain the $100,000 minimum principal amount transfer restriction and (v) the
Exchange Junior Subordinated Debentures will not provide for any increase in the
interest rate thereon which is payable on the Old Junior Subordinated Debentures
if the Corporation and the Trust do not or cannot fulfill certain obligations
under the Registration Rights Agreement (which obligations are satisfied upon
the effectiveness of the Registration Statement of which this Prospectus is a
part). See "Description of Exchange Securities" and "Description of Old
Securities." The Exchange Capital Securities are being offered for exchange in
order to satisfy certain obligations of the Corporation and the Trust under the
Registration Rights Agreement. In the event that the Exchange Offer is
consummated, any Old Securities which remain outstanding after consummation of
the Exchange Offer and the corresponding Exchange Securities issued in the
Exchange Offer will vote together as a single class for purposes of determining
whether holders of the requisite percentage thereof have taken certain actions
or exercised certain rights under the Trust Agreement.
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Capital Securities on March 25, 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 18 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is March 25, 1997.
<PAGE> 3
The Exchange Capital Securities and the Old Capital Securities
(collectively, the "Capital Securities") will represent preferred beneficial
interests in the Trust. The Corporation is the owner of all of the beneficial
interests represented by common securities of the Trust (the "Common
Securities"). The Common Securities and the Capital Securities, are together
referred to herein as the "Trust Securities". The Bank of New York is the
Property Trustee of the Trust. The Trust exists for the sole purpose of issuing
the Trust Securities, investing the proceeds thereof in the Old Junior
Subordinated Debentures and the Exchange Junior Subordinated Debentures for
which they may be exchanged (together, the "Junior Subordinated Debentures") and
making Distributions. The Junior Subordinated Debentures are scheduled to mature
on January 1, 2037 (the "Stated Maturity"). The Capital Securities may be
redeemed, at the option of the Trust, at any time after January 1, 2007 and the
Stated Maturity may under certain circumstances be shortened in the event of a
Tax Event or an Investment Company Event. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Conditional Right to
Shorten Maturity and Special Event Redemption." The Capital Securities will have
a preference over the Common Securities under certain circumstances with respect
to cash distributions and amounts payable on liquidation, redemption or
otherwise. See "Description of Exchange Securities -- Description of Exchange
Capital Securities -- Subordination of Common Securities." As more fully
described below, the Corporation, in addition to agreeing to pay all fees,
expenses, debts and obligations (other than the Trust Securities) related to the
Trust has entered into several contractual undertakings which, the Corporation
believes, taken together, guarantee to the holders of the Capital Securities a
full and unconditional right to enforce the payment of distributions, the
payment of the redemption price upon redemption of the Capital Securities and
the payment of the Liquidation Amount with respect to the Capital Securities
upon liquidation of the Trust. (See "Risk Factors -- Rights Under the Guarantee;
Direct Action For Payment.") Those contractual arrangements include the
Corporation's obligations under (i) the Guarantee for the benefit of the holders
of Capital Securities, (ii) the Trust Agreement, (iii) the Junior Subordinated
Debentures and (iv) the Indenture.
As used herein, (i) the "Indenture" means the Indenture, dated as of
January 13, 1997, as amended and supplemented from time to time, between the
Corporation and The Bank of New York as trustee (the "Debenture Trustee"),
relating to the Junior Subordinated Debentures, (ii) the "Trust Agreement" means
the Amended and Restated Declaration of Trust relating to the Trust among the
Corporation as Sponsor, The Bank of New York as Property Trustee (the "Property
Trustee"), Delaware Trust Capital Management, Inc. as Delaware Trustee (the
"Delaware Trustee"), and the Administrative Trustees named therein
(collectively, with the Property Trustee and Delaware Trustee, the "Issuer
Trustees"), and (iii) the "Common Guarantee" means the Common Securities
Guarantee Agreement executed and delivered by the Corporation for the benefit of
the holders of the Common Securities. In addition, as the context may require,
(i) "Capital Securities" and "Trust Securities" include the Old Capital
Securities and the Exchange Capital Securities, (ii) "Trust Securities" includes
the Capital Securities and the Common Securities, (iii) "Junior Subordinated
Debentures" includes the Old Junior Subordinated Debentures and the Exchange
Junior Subordinated Debentures, and (iv) "Guarantee" includes the Old Guarantee
and the Exchange Guarantee.
Except as provided below, the Capital Securities will be represented by
global Capital Securities in fully registered form, deposited with a custodian
for and registered in the name of a nominee of DTC. Beneficial interests in such
Capital Securities will trade in DTC's Same-Day Funds Settlement System and
secondary market trading activity in such interests will therefore settle in
immediately available funds.
Holders of the Exchange Capital Securities will be entitled to receive
preferential cumulative cash distributions arising from the payment of interest
on the Junior Subordinated Debentures, accruing from January 13, 1997 and
payable semi-annually in arrears on January 1 and July 1 of each year,
commencing July 1, 1997, at the annual rate of 8.73% of the Liquidation Amount
of $1,000 per Trust Security ("Distributions"). So long as no Debenture Event of
Default (as defined in "Description of the Exchange Securities -- Description of
Junior Subordinated Debentures -- Debenture Events of Default") has occurred and
is continuing, the Corporation will have the right to defer payments of interest
on the Junior Subordinated Debentures at any time and from time to time for a
period not exceeding 10 consecutive semi-annual periods with respect to each
deferral period (each, an "Extension Period"), provided that no Extension Period
may extend beyond the Stated Maturity. Upon the termination of any Extension
Period and the payment of all
2
<PAGE> 4
amounts then due, the Corporation may elect to begin a new Extension Period,
subject to the requirements set forth herein. If and for so long as interest
payments on the Junior Subordinated Debentures are so deferred, Distributions on
the Capital Securities will also be deferred and the Corporation and its
subsidiaries will not be permitted, subject to certain exceptions described
herein, to declare or pay any cash distributions with respect to the
Corporation's capital stock (which includes common and preferred stock) or to
make any payment with respect to debt securities of the Corporation that rank
pari passu with or junior to the Junior Subordinated Debentures. None of the
Corporation's subsidiaries will be prohibited from declaring and paying cash
distributions with respect to its capital stock or from making payments with
respect to its debt securities. During an Extension Period, interest on the
Junior Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of Capital Securities are entitled will continue
to accumulate) at the rate of 8.73% per annum, compounded semi-annually. From
and after the commencement of any such Extension Period, holders of Capital
Securities will be required to include the accruals of interest in gross income
for United States federal income tax purposes (as original issue discount) prior
to the receipt of cash attributable to such interest. See "Description of
Exchange Securities -- Description of Exchange Junior Subordinated
Debentures -- Option to Extend Interest Payment Date" and "Certain Federal
Income Tax Consequences -- Interest Income and OID."
The Corporation will, through the Guarantee, the Common Guarantee, the
Trust Agreement, the Junior Subordinated Debentures and the Indenture (each as
defined below), taken together, fully, irrevocably and unconditionally guarantee
all of the Trust's obligations under the Trust Securities. See "Description of
Exchange Securities -- Relationship Among the Exchange Capital Securities, the
Exchange Junior Subordinated Debentures and the Exchange Guarantee -- Full and
Unconditional Guarantee." The Guarantee and the Common Guarantee will guarantee
payments of Distributions and payments on liquidation or redemption of the Trust
Securities, but in each case only to the extent that the Trust holds funds on
hand legally available therefor and has failed to make such payments, as
described herein. See "Description of Exchange Securities -- Description of
Exchange Guarantee." If the Corporation fails to make a required payment on the
Junior Subordinated Debentures, the Trust will not have sufficient funds to make
the related payments, including Distributions, on the Trust Securities. The
Guarantee and the Common Guarantee will not cover any such payment when the
Trust does not have sufficient funds on hand legally available therefor. In such
event, a holder of Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights in respect of such payment. See
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Enforcement of Certain Rights by Holders of Exchange
Capital Securities." The Junior Subordinated Debentures will be subordinate and
junior in right of payment to all Senior Indebtedness (as defined in
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Subordination"). The obligations of the Corporation
under the Guarantee and the Common Guarantee will be (i) subordinate and junior
in right of payment to all other liabilities of the Corporation; (ii) pari passu
with (A) the most senior preferred or preference stock now or hereafter issued
by the Corporation, and (B) any guarantee now or hereafter entered into by the
Corporation in respect of any capital securities or common securities of any
other trust similar to the Trust, or of a trustee of such trust, or of a
partnership or other entity affiliated with the Corporation that is a financing
vehicle of the Corporation (collectively, "Other Trusts"); and (iii) senior to
the Corporation's common stock.
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined in "Description of the Exchange Securities -- Description of
Exchange Capital Securities -- Redemption"), (i) in whole but not in part, on
the Stated Maturity upon repayment of the Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued and unpaid
interest on, the Junior Subordinated Debentures (the "Maturity Redemption
Price"), (ii) in whole but not in part, at any time, contemporaneously with the
optional prepayment of the Junior Subordinated Debentures, upon the occurrence
and continuation of a Special Event (as defined in "Description of the Exchange
Securities -- Description of Junior Subordinated Debentures -- Conditional Right
to Shorten Maturity and Special Event Prepayment") at a redemption price equal
to the Special Event Prepayment Price of the Junior Subordinated Debentures (as
defined below in this paragraph) (the "Special Event Redemption Price"), and
(iii) in whole or in part, on or after January 1, 2007, contemporaneously with
the optional prepayment by the Corporation of the Junior Subordinated
Debentures, at a redemption price equal to the Optional Prepayment Price of the
3
<PAGE> 5
Junior Subordinated Debentures (as defined below in this paragraph) (the
"Optional Redemption Price"). Any of the Maturity Redemption Price, the Special
Event Redemption Price and the Optional Redemption Price may be referred to
herein as the "Redemption Price." See "Description of Exchange Securities --
Description of Capital Securities -- Redemption." The Junior Subordinated
Debentures will be prepayable prior to the Stated Maturity at the option of the
Corporation (i) on or after January 1, 2007, in whole or in part, at a
prepayment price (the "Optional Prepayment Price") equal to the principal amount
thereof outstanding, plus accrued and unpaid interest thereon to the date of
prepayment, or (ii) at any time, in whole but not in part, upon the occurrence
and continuation of a Special Event, at a prepayment price (the "Special Event
Prepayment Price") equal to the greater of (a) 100% of the principal amount
thereof or (b) the sum, as determined by a Quotation Agent (as defined in
"Descriptions of the Exchange Securities -- Description of Junior Subordinated
Debentures -- Conditional Right to Shorten Maturity and Special Event
Prepayment"), of the present values of the remaining scheduled payments of
principal and the interest thereon to January 1, 2007, the first date on which
the Junior Subordinated Debentures are subject to optional prepayment,
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined in "Descriptions of the Exchange Securities -- Description of Junior
Subordinated Debentures -- Conditional Right to Shorten Maturity and Special
Event Prepayment") plus, in either case, accrued and unpaid interest thereon to
the date of prepayment. Either of the Optional Prepayment Price or the Special
Event Prepayment Price may be referred to herein as the "Prepayment Price." See
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Optional Prepayment" and "-- Conditional Right to
Shorten Maturity and Special Event Prepayment."
The Corporation, as the holder of all of the outstanding Common Securities,
will have the right at any time to terminate the Trust and cause a Like Amount
of the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities in liquidation of the Trust, subject to the Corporation's
having received an opinion of counsel to the effect that such distribution will
not be a taxable event for United States federal income tax purposes to holders
of Capital Securities. Unless the Junior Subordinated Debentures are distributed
to the holders of the Trust Securities, in the event of a liquidation of the
Trust as described herein, after satisfaction of liabilities to creditors of the
Trust as required by applicable law, the holders of the Capital Securities
generally will be entitled to receive a Liquidation Amount of $1,000 per Capital
Security plus accumulated and unpaid Distributions thereon to the date of
payment. See "Description of Exchange Securities -- Description of Exchange
Capital Securities -- Liquidation of the Trust and Distribution of Exchange
Junior Subordinated Debentures."
------------------------
The Trust is making the Exchange Offer of the Exchange Capital Securities
in reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Corporation nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Corporation and the Trust believe that the Exchange
Capital Securities issued pursuant to this Exchange Offer in Exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Capital Securities are acquired in
the ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act), of
such Exchange Capital Securities. However, any holder of Old Capital Securities
who is an "affiliate" of the Corporation or the Trust or who intends to
participate in the Exchange Offer for the purpose of distributing Exchange
Capital Securities, or any broker-dealer who purchased Old Capital Securities
from the Trust to resell pursuant to Rule 144A under the Securities Act ("Rule
144A") or any other available exemption under the Securities Act, (a) will not
be able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set
4
<PAGE> 6
forth in the above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Old Capital Securities in the Exchange Offer and (c)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Capital
Securities unless such sale is made pursuant to an exemption from such
requirements. In addition, as described below, if any broker-dealer holds Old
Capital Securities acquired for its own account as a result of market-making or
other trading activities and exchanges such Old Capital Securities for Exchange
Capital Securities, then such broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of such
Exchange Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for Exchange Capital Securities in the Exchange Offer will be
required to represent that (i) such holder is not an "affiliate" of the
Corporation or the Trust, (ii) any Exchange Capital Securities to be received by
such holder are being acquired in the ordinary course of its business, (iii)
such holder has no arrangement or understanding with any person to participate
in a distribution (within the meaning of the Securities Act) of such Exchange
Capital Securities, and (iv) if such holder is not a broker-dealer, such holder
is not engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such Exchange Capital Securities. In addition,
the Corporation and the Trust may require such holder, as condition to such
holder's eligibility to participate in the Exchange Offer, to furnish to the
Corporation and the Trust (or an agent thereof) in writing information as to the
number of "beneficial owners" (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) on behalf of
whom such holder holds the Old Capital Securities to be exchanged pursuant to
the Exchange Offer. Each broker-dealer that receives Exchange Capital Securities
for its own account pursuant to the Exchange Offer must acknowledge that the Old
Capital Securities tendered by it for exchange were acquired for its own account
as the result of market-making activities or other trading activities and must
agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Capital
Securities. The Letter of Transmittal acknowledges that by so stating and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Corporation and the Trust believe that broker-dealers who own Old Capital
Securities acquired for their own accounts as a result of market-making
activities or other trading activities ("Participating Broker-Dealers"), may
fulfill their prospectus delivery requirements with respect to the Exchange
Capital Securities received upon exchange of such Old Capital Securities (other
than Old Capital Securities which represent an unsold allotment from the
original sale of the Old Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the Prospectus prepared for
this Exchange Offer so long as it contains a description of the plan of
distribution with respect to the resale of such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer during the period referred to below
in connection with resales of Exchange Capital Securities received in exchange
for Old Capital Securities where such Old Capital Securities were acquired by
such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Corporation and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of
such Exchange Capital Securities for the period ending 90-days after the
Expiration Date (as defined below) (subject to extension under certain limited
circumstances described below) or, if earlier, when all such Exchange Capital
Securities have been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of Exchange Capital Securities received
in exchange for Old Capital Securities pursuant to the Exchange Offer must
notify the Corporation or the Trust, or cause the Corporation or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one of
the addresses set forth herein under "The Exchange Offer -- Exchange Agent." Any
Participating Broker-Dealer who is an "affiliate" of the Corporation or the
5
<PAGE> 7
Trust may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer -- Resales of
Exchange Capital Securities."
Each Participating Broker-Dealer who surrenders Old Capital Securities
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that upon receipt of notice from the Corporation or
the Trust of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or which causes this Prospectus to omit to state
a material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which they
were made, not misleading or of the occurrence of certain other events specified
in the Registration Rights Agreement, such Participating Broker-Dealer will
suspend the sale of Exchange Capital Securities (or the Exchange Guarantee or
the Exchange Junior Subordinated Debentures, as applicable) pursuant to this
Prospectus until the Corporation or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented Prospectus to such Participating Broker-Dealer or
the Corporation or the Trust has given notice that the sale of the Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be. If
the Corporation or the Trust gives such notice to suspend the sale of the
Exchange Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable), it shall extend the 90-day period
referred to above during which Participating Broker-Dealers are entitled to use
this Prospectus in connection with the resale of Exchange Capital Securities by
the number of days during the period from and including the date of the giving
of such notice to and including the date when Participating Broker-Dealers shall
have received copies of the amended or supplemented Prospectus necessary to
permit resales of the Exchange Capital Securities or to and including the date
on which the Corporation or the Trust has given notice that the sale of Exchange
Capital Securities (or the Exchange Guarantee or the Exchange Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Although the Initial Purchasers have orally informed the Corporation and
the Trust that each of them currently intends to make a market in the Exchange
Capital Securities, they are not obligated to do so, and any such market making
may be discontinued by any or all of them at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Capital Securities. The Corporation and the Trust
currently do not intend to apply for listing of the Exchange Capital Securities
on any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System ("NASDAQ").
The Corporation and the Trust have agreed to keep the Registration
Statement, of which this Prospectus is a part, effective for a period of 30
calendar days (or longer if required by applicable law or in order to allow
Participating Broker-Dealers to satisfy their prospectus delivery requirements)
after notice of the Exchange Offer is mailed to holders of the Old Securities.
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Trust Agreement
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of Old Capital
Securities will continue to be subject to all of the existing restrictions upon
transfer thereof and neither the Corporation nor the Trust will have any further
obligation to such holders (other than under certain limited circumstances) to
provide for registration under the Securities Act of the Old Capital Securities
held by them. To the extent that Old Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old
Capital Securities could be adversely affected. See "Risk Factors --
Consequences of Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
6
<PAGE> 8
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE
DECIDING WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on April 23, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Corporation or the Trust (in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended). Tenders
of Old Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Corporation or the Trust and to the terms and provisions of
the Registration Rights Agreement. Old Capital Securities may be tendered in any
integral multiple of $1,000 Liquidation Amount (one Old Capital Security). The
Corporation has agreed to pay all expenses of the Exchange Offer. See "The
Exchange Offer -- Fees and Expense." Holders of the Old Capital Securities whose
Old Capital Securities are accepted for exchange will not receive Distributions
on such Old Capital Securities and will be deemed to have waived the right to
receive any Distributions on such Old Capital Securities accumulated from and
after January 13, 1997. See "The Exchange Offer -- Distributions on Exchange
Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. No
dealer-manager is being used in connection with this Exchange Offer. See "Use Of
Proceeds" and "Plan of Distribution."
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION 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.
------------------------
7
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................................................................. 9
Incorporation of Certain Documents By Reference....................................... 9
Summary............................................................................... 11
Risk Factors.......................................................................... 18
Use of Proceeds....................................................................... 24
Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends............ 24
Accounting Treatment.................................................................. 25
Capitalization........................................................................ 26
Summary Financial Data................................................................ 27
Orion Capital Corporation............................................................. 29
Orion Capital Trust I................................................................. 29
The Exchange Offer.................................................................... 30
Description of the Exchange Securities................................................ 39
Description of the Old Securities..................................................... 60
Relationship Among the Exchange Capital Securities, the Exchange Junior Subordinated
Debentures, the Exchange Guarantee and the Trust Agreement.......................... 60
Certain Federal Income Tax Consequences............................................... 62
ERISA Considerations.................................................................. 66
Plan of Distribution.................................................................. 66
Validity of Exchange Securities....................................................... 67
Experts............................................................................... 67
</TABLE>
8
<PAGE> 10
AVAILABLE INFORMATION
Orion is subject to the informational requirements of the Exchange Act, and
in accordance therewith files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information filed
by Orion with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission in New York (Seven World Trade Center, Suite 1300, New York, New York
10048) and Chicago (500 West Madison Street, Suite 1400, Chicago, Illinois
60661). Copies of such materials also may be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material may also be inspected at the offices of
the New York Stock Exchange, Inc. (20 Broad Street, New York, New York 10005).
Orion is an electronic filer, and the Commission maintains a Web site that
contains certain reports, proxy and information statements and other information
regarding registrants (including Orion) that file electronically with the
Commission. The address of the Commission's Web site is: http://www.sec.gov.
Orion and the Trust have filed with the Commission a Registration Statement
on Form S-4 (of which this Prospectus is a part) under the Securities Act with
respect to the Exchange Securities being offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus as to the
contents of any contract, agreement, instrument or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract, agreement, instrument or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto.
No separate financial statements of the Trust have been included herein.
The Corporation and the Trust do not consider that such financial statements
would be material to holders of the Exchange Capital Securities because the
Trust is a newly formed special purpose entity, has no significant operating
history or independent operations and is not engaged in and does not propose to
engage in any activity other than holding as trust assets the Old Junior
Subordinated Debentures and the Exchange Junior Subordinated Debentures and
issuing the Trust Securities. See "Orion Capital Trust I" and "Description of
the Exchange Securities." The Corporation and the Trust intend to apply to the
Securities and Exchange Commission pursuant to Staff Accounting Bulletin No. 53
("SAB 53") for exemption from the periodic reporting requirements of the
Exchange Act and confirmation that the Corporation need not include either
separate financial statements of the Trust or summarized financial information
with respect to the Trust in its periodic reports filed pursuant to the Exchange
Act. See "Accounting Treatment."
The Trust is not currently subject to the information reporting
requirements of the Exchange Act. The Trust will become subject to such
requirements upon the effectiveness of the Registration Statement, although it
intends to seek and expects to receive exemptions therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Orion (File No.
1-7801) are incorporated herein by reference and made a part hereof:
1. The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996; and
3. The Corporation's Current Report on Form 8-K filed on July 16,
1996, as amended by Amendment No. 1 filed on September 13, 1996, the
Corporation's Current Report on Form 8-K filed on September 25, 1996 and
the Corporation's Current Report on Form 8-K filed on January 8, 1997.
All documents filed by Orion pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Exchange
9
<PAGE> 11
Securities being offered hereby shall be deemed to be incorporated by reference
in this Prospectus and made a part hereof from the date of filing of such
documents.
Incorporated by reference into the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1995 are the financial statements for the year
ended December 31, 1995 of Guaranty National Corporation ("Guaranty National")
and the information set forth under the caption "Reserves" (on pages 13 through
17) included in Guaranty National's Annual Report on Form 10-K for the year
ended December 31, 1995.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other document subsequently filed with the Commission which also is or
is deemed to be incorporated by reference herein or in any Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or to the
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or to the document. Orion hereby undertakes to
provide without charge to each person to whom a copy of this Prospectus is
delivered, upon written or oral request of any such person, a copy of any and
all documents that have been incorporated by reference in this Prospectus, other
than exhibits to any such documents unless such exhibits themselves are
specifically incorporated by reference in such document. Such requests should be
directed to the Secretary of Orion Capital Corporation, 600 Fifth Avenue, New
York, New York 10020-2302, telephone number (212) 332-8080.
10
<PAGE> 12
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
ORION CAPITAL CORPORATION
Orion Capital Corporation is a property and casualty insurance holding
company. The Corporation's insurance subsidiaries and affiliates are authorized
to underwrite and sell most types of property and casualty insurance. The
Corporation's insurance businesses are concentrated in niche insurance markets,
particularly workers' compensation, professional liability, nonstandard
automobile insurance and underwriting ocean marine, inland marine and property
insurance through underwriting pools. For the five-year period ended December
31, 1995, the Corporation's return on equity from operating earnings (earnings
after taxes, excluding the effects of the adoption of new accounting principles,
extraordinary items and after-tax realized investment gains) averaged 15.7% per
year. The combined ratio for the Corporation's insurance operations, computed on
the basis of generally accepted accounting principles, has steadily improved
from 109.4% in 1991 to 100.3% in 1995. These trends continued for the first nine
months of 1996, as the annualized return on equity from operating earnings was
14.1%, and the combined ratio declined further to 99.9%. Orion's principal
executive offices are located at 600 Fifth Avenue, New York, New York 10020-2302
and its telephone number is (212) 332-8080.
ORION CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration of Trust executed by the Corporation as Sponsor and
Delaware Trust Capital Management, Inc. as Delaware Trustee, and (ii) the filing
of a certificate of trust with the Delaware Secretary of State on January 3,
1997. The Trust's business and affairs are conducted by the Property Trustee and
the three individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Trust exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the proceeds from the
sale of the Trust Securities to acquire the Junior Subordinated Debentures
issued by the Corporation, (iii) making Distributions to holders of the Trust
Securities as provided in the Trust Agreement and (iv) engaging in only those
other activities necessary, advisable or incidental thereto (such as registering
the transfer of the Trust Securities). Accordingly, the Junior Subordinated
Debentures will be the sole assets of the Trust, and payments under the Junior
Subordinated Debentures will be the sole revenue of the Trust. All of the Common
Securities will be owned by the Corporation. Orion Capital Trust I's principal
executive offices are located at 600 Fifth Avenue, New York, New York 10020-2302
and its telephone number is (212) 332-8080.
THE EXCHANGE OFFER
The Exchange Offer......... Up to $125,000,000 aggregate Liquidation Amount of
Exchange Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount
of Old Capital Securities. Old Capital Securities
may be tendered in the Exchange Offer for
exchange in whole or in part in any integral
multiple of $1,000 (one Old Capital Security)
notwithstanding the requirement, applicable to
all other transfers of a minimum transfer amount
of $100,000 in Liquidation Amount. The
Corporation and the Trust are making the Exchange
Offer in order to satisfy their obligations under
the Registration Rights Agreement relating to the
Old Capital Securities. For a description of the
procedures for tendering Old Capital Securities,
see "The Exchange Offer -- Procedures for
Tendering Old Capital Securities."
Expiration Date............ 5:00 p.m., New York City time, on April 23, 1997,
unless the Exchange offer is extended by the
Corporation or the Trust (in which case the
11
<PAGE> 13
Expiration Date will be the latest date and time
to which the Exchange Offer is extended). See
"The Exchange Offer -- terms of the Exchange
Offer."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain
conditions, which may be waived by the
Corporation and the Trust in their sole
discretion. The Exchange Offer is not conditioned
upon any minimum Liquidation Amount of Old
Capital Securities being tendered. See "The
Exchange Offer -- Conditions to the Exchange
Offer."
Offer...................... The Corporation and the Trust expressly reserve the
right in their sole and absolute discretion,
reasonably exercised in accordance with
applicable law and the terms of this Exchange
Offer, at any time and from time to time, (i) to
delay the acceptance of the Old Capital
Securities for exchange, (ii) to terminate the
Exchange Offer if certain specified conditions
have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain
all Old Capital Securities tendered pursuant to
the Exchange Offer, subject, however, to the
right of holders of Old Capital Securities to
withdraw their tendered Old Capital Securities,
or (iv) to waive any condition or otherwise amend
the terms of the Exchange Offer in any respect.
See "The Exchange Offer -- Terms of the Exchange
Offer."
Withdrawal Rights.......... Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to
the Exchange Agent in conformity with certain
procedures set forth below under "The Exchange
Offer -- Withdrawal Rights."
Procedures for Tendering
Old Capital Securities... Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile
or hand delivery, together with any other
required documents, to the Exchange Agent, either
with the Old Capital Securities to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Capital Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Old
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities pursuant to the Exchange Offer. See
"The Exchange Offer -- Procedures for Tendering
Old Capital Securities."
Letters of Transmittal and certificates
representing Old Capital Securities should not be
sent to the Corporation or the Trust. Such
documents should only be sent to the Exchange
Agent.
Resales of Exchange Capital
Securities............... The Corporation and the Trust are making the
Exchange Offer in reliance on the position of the
Division of Corporation Finance of the Commission
as set forth in certain interpretive letters
addressed to third parties in other transactions.
However, neither the Corporation nor the Trust
has sought its own interpretive letter and there
can be no assurance that the staff of the
Division of Corporation Finance of the
12
<PAGE> 14
Commission would make a similar determination
with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based
on these interpretations by the staff of the
Division of Corporation Finance of the
Commission, and subject to the two immediately
following sentences, the Corporation and the
Trust believe that Exchange Capital Securities
issued pursuant to this Exchange Offer in
exchange for Old Capital Securities may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than a
holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act
provided that such Exchange Capital Securities
are acquired in the ordinary course of such
holder's business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in
a distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. However, any holder of Old Capital
Securities who is an "affiliate" of the
Corporation or the Trust or who intends to
participate in the Exchange Offer for the purpose
of distributing the Exchange Capital Securities,
or any broker-dealer who purchased the Old
Capital Securities from the Trust to resell
pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not
be able to rely on the interpretation of the
staff of the Division of Corporation Finance of
the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted
or entitled to tender such Old Capital Securities
in the Exchange Offer and (c) must comply with
the registration and prospectus delivery
requirements of the Securities Act in connection
with any sale or other transfer of such Old
Capital Securities unless such sale is made
pursuant to an exemption from such requirements.
In addition, as described below, if any
broker-dealer holds Old Capital Securities
acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Capital Securities for
Exchange Capital Securities, then such
broker-dealer must deliver a prospectus meeting
the requirements of the Securities Act in
connection with any resales of such Exchange
Capital Securities.
Each holder of Old Capital Securities who wishes to
exchange Old Capital Securities for Exchange
Capital Securities in the Exchange Offer will be
required to represent that (i) such holder is not
an "affiliate" of the Corporation or the Trust,
(ii) any Exchange Capital Securities to be
received by such holder are being acquired in the
ordinary course of its business, (iii) such
holder has no arrangement or understanding with
any person to participate in a distribution
(within the meaning of the Securities Act) of
such Exchange Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder
is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the
Securities Act) of such Exchange Capital
Securities. Each broker-dealer that receives
Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge
that the Old Capital Securities tendered by it
for exchange were acquired for its own account as
the result of market-making activities or other
trading activities and must agree that it will
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale
of such Exchange Capital Securities. The Letter
of Transmittal
13
<PAGE> 15
acknowledges that, by so stating and by
delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
Based on the position taken by the staff of the
Division of Corporation Finance of the Commission
in the interpretive letters referred to above,
the Corporation and the Trust believe that
Participating Broker-Dealers who acquire Old
Capital Securities for their own accounts as a
result of market-making activities or other
trading activities may fulfill their prospectus
delivery requirements with respect to the
Exchange Capital Securities received upon
exchange of such Old Capital Securities (other
than Old Capital Securities which represent an
unsold allotment from the original sale of the
Old Capital Securities) with a prospectus meeting
the requirements of the Securities Act, which may
be the Prospectus prepared for this Exchange
Offer so long as it contains a description of the
plan of distribution with respect to the resale
of such Exchange Capital Securities.
Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by
a Participating Broker-Dealer in connection with
resales of Exchange Capital Securities received
in exchange for Old Capital Securities where such
Old Capital Securities were acquired by such
Participating Broker-Dealer for its own account
as a result of market-making or other trading
activities. Subject to certain provisions set
forth in the Registration Rights Agreement and to
the limitations described below under "The
Exchange Offer -- Resales of Exchange Capital
Securities," the Corporation and the Trust have
agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by
a Participating Broker-Dealer in connection with
resales of such Exchange Capital Securities for a
period of 90 days after the Expiration Date
(subject to extension under certain limited
circumstances) or, if earlier, when all such
Exchange Capital Securities have been disposed of
by such Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer
who is an "affiliate" of the Corporation or the
Trust may not rely on such interpretive letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. See " The Exchange Offer -- Resales
of Exchange Capital Securities."
Effect of Not Accepting the
Exchange Offer........... Old Capital Securities which are not tendered in
the Exchange Offer will continue to have all the
rights presently accruing to them except the
right to an increased Distribution rate on the
Old Capital Securities in certain events if the
Corporation and the Trust do not or cannot
fulfill certain obligations under the
Registration Rights Agreement (which obligations
are satisfied upon the effectiveness of the
Registration Statement of which this Prospectus
is a part and consummation of the Exchange
Offer). See "Risk Factors -- Consequences of a
Failure to exchange Old Capital Securities." The
Old Capital Securities will vote as a single
class with Exchange Capital Securities. However,
the Old Capital Securities will continue to be
subject to restrictions on transfer and, except
for limited exceptions for certain
broker-dealers, will have no registration rights.
To the extent that Old Capital Securities are not
14
<PAGE> 16
tendered and accepted in the Exchange Offer, a
holder's ability to freely sell untendered Old
Capital Securities could be adversely affected.
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is The Bank of New York (the "Exchange
Agent"). The addresses, and telephone and
facsimile numbers, of the Exchange Agent are set
forth in "The Exchange Offer -- Exchange Agent"
and in the Letter of Transmittal.
Use of Proceeds............ Neither the Corporation nor the Trust will receive
any cash proceeds from the issuance of the
Exchange Capital Securities offered hereby. See
"Use Of Proceeds."
Certain Federal Income Tax
Consequences; ERISA
Considerations........... Holders of Old Capital Securities should review the
information set forth under "Certain Federal
Income Tax Consequences" and "ERISA
Considerations" prior to tendering Old Capital
Securities in the Exchange Offer.
THE EXCHANGE SECURITIES
Securities Offered......... Up to 125,000 of the Trust's Exchange Capital
Securities (Liquidation Amount $1,000 per
Exchange Capital Security) which have been
registered under the Securities Act. The Exchange
Capital Securities will be issued and the Old
Capital Securities were issued under the Trust
Agreement. The Exchange Capital Securities and
any Old Capital Securities which remain
outstanding after consummation of the Exchange
Offer will vote together as a single class for
purposes of determining whether holders of the
requisite percentage in outstanding Liquidation
Amount thereof have taken certain actions or
exercised certain rights under the Trust
Agreement. See "Description of Exchange
Securities -- Description of Exchange Capital
Securities -- Voting Rights; Amendment of the
Trust Agreement." The terms of the Exchange
Capital Securities are identical in all material
respects to the terms of the Old Capital
Securities, except that the Exchange Capital
Securities have been registered under the
Securities Act and will not be subject to the
$100,000 minimum Liquidation Amount transfer
restriction and certain other restrictions on
transfer applicable to the Old Capital Securities
and will not provide for any increase in the
Distribution rate thereon which is payable on the
Old Capital Securities if the Corporation and the
Trust do not or cannot fulfill certain
obligations under the Registration Rights
Agreement (which obligations are satisfied upon
the effectiveness of the Registration Statement
of which this Prospectus is a part and
consummation of the Exchange Offer) See "The
Exchange Offer -- Purpose of the Exchange Offer,"
"Description of Exchange Securities" and
"Description of Old Securities."
Distribution Dates......... January 1 and July 1 of each year, commencing July
1, 1997.
Extension Periods.......... So long as no Debenture Event of Default has
occurred and is continuing, Distributions on the
Exchange Capital Securities may be deferred for
the duration of any Extension Period elected by
the Corporation with respect to the payment of
interest on the Exchange Junior
15
<PAGE> 17
Subordinated Debentures. No Extension Period will
exceed 10 consecutive semi-annual periods or
extend beyond the Stated Maturity. The
Corporation has no current intention to exercise
its right to defer payment of interest on the
Exchange Junior Subordinated Debentures. See
"Description of Exchange
Securities -- Description of Exchange Junior
Subordinated Debentures -- Option to Extend
Interest Payment Date" and "Certain Federal
Income Tax Consequences -- Interest Income and
Original Issue Discount."
Ranking.................... The Exchange Capital Securities will rank pari
passu, and payments thereon will be made pro
rata, with the Old Capital Securities and Common
Securities except as described under "Description
of Exchange Securities -- Description of Exchange
Capital Securities -- Subordination of Common
Securities." The Exchange Junior Subordinated
Debentures will rank pari passu with the Old
Junior Subordinated Debentures and all other
junior subordinated debentures to be issued by
the Corporation (collectively, with the Old
Junior Subordinated Debentures, the "Other
Debentures"), which may be issued and sold (if at
all) to Other Trusts, and will be unsecured and
subordinate and junior in right of payment to all
Senior Indebtedness to the extent and in the
manner set forth in the Indenture. See
"Description of Exchange
Securities -- Description of Exchange Junior
Subordinated Debentures." The Exchange Guarantee
will rank pari passu with the Old Guarantee and
all other guarantees issued by the Corporation
with respect to capital securities issued or to
be issued by Other Trusts (the "Other
Guarantees"). The Guarantee and the Common
Guarantee will be (i) subordinate and junior in
right of payment to all other liabilities of the
Corporation; (ii) pari passu with (A) the most
senior preferred or preference stock now or
hereafter issued by the Corporation, and (B) any
guarantee now or hereafter entered into by the
Corporation in respect of any capital securities
or common securities of any Other Trusts; and
(iii) senior to the Corporation's common stock.
See "Description of Exchange
Securities -- Description of Exchange
Guarantee -- Status of the Guarantee."
Redemption................. The Trust Securities will be subject to mandatory
redemption in a Like Amount, (i) in whole but not
in part, on the Stated Maturity upon repayment of
the Junior Subordinated Debentures, (ii) in whole
but not in part, at any time contemporaneously
with the optional prepayment of the Junior
Subordinated Debentures by the Corporation upon
the occurrence and continuation of a Special
Event and (iii) in whole or in part, on or after
January 1, 2007 contemporaneously with the
optional prepayment by the Corporation of the
Junior Subordinated Debentures, at the applicable
Redemption Price. See "Description of Exchange
Securities -- Description of Exchange Capital
Securities -- Redemption."
Ratings.................... The Old Capital Securities are rated "BBB" by
Standard & Poor's Ratings Services, "BBB" by Duff
& Phelps Credit Rating Co., and "baa3" by Moody's
Investors Service. In connection with the rating
of the Old Capital Securities, Moody's revised
its rating outlook for the Corporation from
stable to negative in light of Moody's concern
about the Corporation's "increased leverage
appetite." The Corporation has no present plans
to incur additional indebtedness for money
borrowed.
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<PAGE> 18
The Exchange Capital Securities are expected to
have the same ratings as the Old Capital
Securities.
Absence of Market for the
Exchange Capital
Securities............... The Exchange Capital Securities will be a new issue
of securities for which there currently is no
market. Although each of Donaldson Lufkin &
Jenrette Securities Corporation, Lehman Brothers
Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchasers") has
orally informed the Trust and the Corporation
that it currently intends to make a market in the
Exchange Capital Securities, the Initial
Purchasers are not obligated to do so, and any
such market making may be discontinued at any
time by any or all of them without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the
Exchange Capital Securities. The Trust and the
Corporation do not intend to apply for listing of
the Old Capital Securities or the Exchange
Capital Securities on any securities exchange or
for quotation through NASDAQ. See "Plan of
Distribution."
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<PAGE> 19
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus and should particularly consider the following
matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Corporation under the Junior Subordinated Debentures
will be unsecured and rank subordinate and junior in right of payment to all
Senior Indebtedness (as defined in "Description of Exchange
Securities -- Description of Exchange Junior Subordinated
Debentures -- Subordination"). At September 30, 1996, the aggregate principal
amount of outstanding Senior Indebtedness was approximately $210 million.
Because the Corporation is a holding company, the right of the Corporation to
participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise (and thus the ability of
holders of the Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and holders of Junior Subordinated Debentures should look only to
the assets of the Corporation for payments on the Junior Subordinated
Debentures. The Guarantee and the Common Guarantee will be (i) subordinate and
junior in right of payment to all other liabilities of the Corporation; (ii)
pari passu with (A) the most senior preferred or preference stock now or
hereafter issued by the Corporation, and (B) any guarantee now or hereafter
entered into by the Corporation in respect of the capital securities or common
securities of any Other Trusts; and (iii) senior to the Corporation's common
stock. At September 30, 1996, the Corporation's subsidiaries had total
liabilities of $2.5 billion. In addition, since the Corporation's insurance
subsidiaries are subject to regulatory control by various state insurance
departments, the ability of such subsidiaries to pay dividends to the
Corporation without prior regulatory approval is limited by applicable laws and
regulations. None of the Indenture, the Guarantee or the Trust Agreement places
any limitation on the amount of secured or unsecured debt, including Senior
Indebtedness, that may be incurred by the Corporation. See "Description of
Exchange Securities -- Description of Exchange Junior Subordinated
Debentures -- Subordination" and "Description of Exchange
Securities -- Description of Exchange Guarantee -- Status of the Exchange
Guarantee."
The ability of the Trust to pay amounts due on the Capital Securities is
solely dependent upon the Corporation making payments on the Junior Subordinated
Debentures as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity. As a consequence of any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.73% per annum,
compounded semi-annually, but not exceeding the interest rate then accruing on
the Junior Subordinated Debentures) from the relevant payment date for such
Distributions during any Extension Period.
Prior to the termination of any Extension Period, the Corporation may
further extend an Extension Period, provided that such extension does not cause
such Extension Period to exceed 10 consecutive semi-annual periods or to extend
beyond the Stated Maturity. Upon the termination of any Extension Period and the
payment of all interest then accrued and unpaid on the Junior Subordinated
Debentures (together with interest thereon at the annual rate of 8.73%,
compounded semi-annually, to the extent permitted by applicable law), the
Corporation may elect to begin a new Extension Period, subject to the above
requirements. There is no limitation on the number of times that the Corporation
may elect to begin an Extension Period. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Distributions" and
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<PAGE> 20
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Option to Extend Interest Payment Date."
The Corporation has no current intention to exercise its right to defer
payments of interest on the Junior Subordinated Debentures. However, should the
Corporation exercise this right, each holder of Trust Securities will be
required to accrue income (as original issue discount ("OID")) in respect of the
deferred stated interest allocable to its Trust Securities for United States
federal income tax purposes. As a result, each such holder of Capital Securities
will be required to include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive the cash related to such income from the Trust if the holder disposes of
the Capital Securities prior to the record date for the payment of Distributions
thereafter. See "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount" and "-- Sales of Capital Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures in the future, the market price
of the Capital Securities is likely to be affected. A holder that disposes of
its Capital Securities during an Extension Period, therefore, might not receive
the same return on its investment as a holder that continues to hold its Capital
Securities. In addition, merely as a result of the existence of the
Corporation's right to defer payments of interest on the Junior Subordinated
Debentures, the market price of the Capital Securities may be more volatile than
the market prices of other securities on which OID accrues and that are not
subject to such deferrals.
CONDITIONAL RIGHT TO SHORTEN MATURITY AND SPECIAL EVENT PREPAYMENT
If a Tax Event (as defined below) occurs, then the Corporation will have
the right, prior to the termination of the Trust, either (i) to shorten the
Stated Maturity of the Junior Subordinated Debentures to the minimum extent
required, but not less than 20 years from the date of original issuance thereof,
such that in the written opinion of counsel experienced in such matters
delivered to the Corporation, after shortening the maturity, interest paid on
the Junior Subordinated Debentures will be deductible for federal income tax
purposes (the action referred to above being referred to herein as a "Tax Event
Maturity Shortening") or (ii) to prepay the Junior Subordinated Debentures, as
described below. Prospective investors should be aware that the Corporation's
exercise of its right to shorten the maturity of the Junior Subordinated
Debentures will be a taxable event to holders of Capital Securities if the
Junior Subordinated Debentures are treated as equity for purposes of United
States federal income taxation before the maturity is shortened. See
"Description of Exchange Securities -- Description of Exchange Capital
Securities -- Conditional Right to Shorten Maturity and Special Event
Redemption" and "Description of Exchange Securities -- Description of Exchange
Junior Subordinated Debentures -- Conditional Right to Shorten Maturity and
Special Event Prepayment."
If a Tax Event or an Investment Company Event (as defined below) occurs,
then the Corporation will have the right, within 90 days following the
occurrence of such Tax Event or Investment Company Event, as the case may be, to
prepay the Junior Subordinated Debentures in whole (but not in part) in the
manner set forth under "Description of Exchange Securities -- Description of
Exchange Junior Subordinated Debentures -- Conditional Right to Shorten Maturity
and Special Event Prepayment," and therefore to cause a mandatory redemption of
the Capital Securities prior to the Stated Maturity (the circumstances under
which the Corporation has the right so to prepay the Junior Subordinated
Debentures in connection with a Tax Event being referred to herein as a
"Conditional Tax Redemption Event"). Each of a Conditional Tax Redemption Event
or an Investment Company Event are sometimes referred to herein as a "Special
Event."
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel to the Corporation experienced in such matters to the effect
that, as a result of 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 as
a result of any administrative pronouncement or judicial decision interpreting
or applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after the date of issuance of
the Old Capital Securities under the Trust Agreement, or as a result of a final
determination, as evidenced by the execution of a Form 870 AD (or successor
forms), arising from an audit or examination by the Internal
19
<PAGE> 21
Revenue Service, there is more than an insubstantial risk that (i) the Trust is,
or within 90 days of the date of such opinion will be, subject to United States
federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures, (ii) interest payable by the Corporation on the Junior
Subordinated Debentures is not, or within 90 days of such opinion, will not be,
deductible by the Corporation, in whole or in part, for United States federal
income tax purposes or (iii) the Trust is, or will be within 90 days of the date
of such opinion, subject to more than a de minimis amount of other taxes, duties
or other governmental charges (each of the circumstances referred to in clauses
(i), (ii) and (iii) being referred to herein as an "Adverse Tax Consequence").
An "Investment Company Event" means that the Corporation shall have
received an opinion of an independent counsel experienced in practice under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), to
the effect that, as a result of the occurrence of a change in law or regulation
or a change in interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in Investment Company Act Law"), there is more than 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 Investment Company
Act Law becomes effective on or after the date of this Prospectus.
EXCHANGE OF CAPITAL SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES
The Corporation, as the holder of all of the outstanding Common Securities,
will have the right at any time to terminate the Trust and cause a Like Amount
of the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities in liquidation of the Trust, subject to the Corporation's
having received an opinion by independent tax counsel experienced in such
matters to the effect that the holders will not recognize any gain or loss for
United States federal income tax purposes as a result of the dissolution of the
Trust and such distribution to holders of Capital Securities. See "Description
of Exchange Securities -- Description of Capital Securities -- Liquidation of
the Trust and Distribution of Exchange Junior Subordinated Debentures."
POSSIBLE TAX LAWS AFFECTING THE CAPITAL SECURITIES
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of certain debt obligations, such as the
Junior Subordinated Debentures, issued on or after December 7, 1995 if such debt
obligations have a maximum term in excess of 20 years and are not shown as
indebtedness on the issuer's applicable consolidated balance sheet. On March 29,
1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways and
Means Committee Chairman Bill Archer issued a joint statement (the "Joint
Statement") indicating their intent that the Proposed Legislation, if adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of "appropriate Congressional action." In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to the Treasury Department (the "Democrat Letters"), which concurred
with the view expressed in the Joint Statement. If the principles contained in
the Joint Statement and the Democrat Letters were followed and if the Proposed
Legislation were enacted, such legislation would not apply to the Junior
Subordinated Debentures. There can be no assurance, however, that the effective
date guidance contained in the Joint Statement and the Democrat Letters will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Corporation to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give rise to a Tax Event, which may
permit the Corporation to cause a redemption of the Trust Securities at the
Special Event Redemption Price by electing to prepay the Junior Subordinated
Debentures at the Special Event Prepayment Price or to shorten the maturity of
the Junior Subordinated Debentures. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Conditional Right to
Shorten Maturity and Special Event Redemption" and "Description of Exchange
Junior Subordinated
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<PAGE> 22
Debentures -- Conditional Right to Shorten Maturity and Special Event
Prepayment." See also "Certain Federal Income Tax Consequences -- Proposed Tax
Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for Capital Securities or
Junior Subordinated Debentures distributed to the holders of Capital Securities
if a termination of the Trust were to occur. Accordingly, the Capital Securities
or the Junior Subordinated Debentures may trade at a discount from the price
that the investor paid to purchase the Capital Securities offered hereby.
RIGHTS UNDER THE JUNIOR SUBORDINATED DEBENTURES
Because holders of Capital Securities may receive Junior Subordinated
Debentures in liquidation of the Trust and because Distributions are otherwise
limited to payments on the Junior Subordinated Debentures, prospective
purchasers of Capital Securities 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 Exchange Securities -- Description of Exchange Junior
Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE; DIRECT ACTION FOR PAYMENT
The Bank of New York will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Bank of
New York will also act as Property Trustee under the Trust Agreement and as
Debenture Trustee under the Indenture. Delaware Trust Capital Management, Inc.
will act as Delaware Trustee under the Trust Agreement. The Old Guarantee and
the Exchange Guarantee each will guarantee to the holders of the Capital
Securities the following payments, to the extent not paid by the Trust: (i) any
accumulated and unpaid Distributions required to be paid on the Capital
Securities, to the extent that the Trust has funds on hand legally available
therefor at such time, (ii) the applicable Redemption Price with respect to any
Capital Securities called for redemption, to the extent that the Trust has funds
on hand legally available therefor at such time, and (iii) upon a voluntary or
involuntary termination and liquidation of the Trust (unless the Junior
Subordinated Debentures are distributed to holders of the Capital Securities),
the lesser of (a) the aggregate of the Liquidation Amount and all accumulated
and unpaid Distributions to the date of payment, to the extent that the Trust
has funds on hand legally available therefor at such time or (b) the amount of
assets of the Trust remaining available for distribution to holders of the
Capital Securities upon a termination and liquidation of the Trust.
The holders of a majority in Liquidation Amount of the Capital Securities
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust power conferred upon the
Guarantee Trustee. Any holder of Capital Securities may institute a legal
proceeding directly against the Corporation 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. If the Corporation defaults on
its obligation to pay amounts payable under the Junior Subordinated Debentures,
the Trust will not have sufficient funds for the payment of Distributions or
amounts payable on redemption of the Capital Securities or otherwise, and, in
such event, holders of the Capital Securities will not be able to rely upon the
Guarantee for payment of such amounts. Instead, in the event a Debenture Event
of Default shall have occurred and be continuing and such event is attributable
to the failure of the Corporation to pay principal of (or premium, if any) or
interest on the Junior Subordinated Debentures on the payment date on which such
payment is due and payable, then a holder of Capital Securities may, if it
elects to exercise its right to proceed against the Corporation, be required to
institute a legal proceeding directly against the Corporation for payment to
such holder of the principal of (or premium, if any) or unpaid interest on such
Junior Subordinated Debentures having a principal amount equal to the
Liquidation Amount of the Capital Securities of such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Capital Securities by the
Corporation in connection with a Direct Action, the Corporation shall remain
obligated to pay the principal of (and premium, if any) and interest on the
Junior Subordinated Debentures, and the Corporation shall be subrogated to the
rights of the holder of such Capital
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<PAGE> 23
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Corporation to such holder in any Direct Action. Except
as described herein, holders of Capital Securities will not be able to exercise
directly any other remedy available to the holders of the Junior Subordinated
Debentures or to assert directly any other rights in respect of the Junior
Subordinated Debentures. See "Description of Exchange Securities -- Description
of Exchange Junior Subordinated Debentures -- Enforcement of Certain Rights by
Holders of Capital Securities," "Description of Exchange Securities --
Description of Exchange Junior Subordinated Debentures -- Debenture Events of
Default" and "Description of Exchange Securities -- Description of Exchange
Guarantee." The Trust Agreement provides that each holder of Capital Securities
by acceptance thereof agrees to the provisions of the Indenture.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, the dissolution,
termination or liquidation of the Trust, and the exercise of the Trust's rights
as holder of Junior Subordinated Debentures. Holders of Capital Securities will
not be entitled to vote to appoint, remove or replace the Property Trustee or
the Delaware Trustee, and such voting rights are vested exclusively in the
holder of the Common Securities except upon the occurrence of certain events
described herein. The Property Trustee, the Administrative Trustees and the
Corporation, as the holder of all of the outstanding Common Securities, may
amend the Trust Agreement without the consent of holders of Capital Securities
to ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust unless such action materially adversely affects the
interests of such holders. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement" and "-- Removal of Issuer Trustees."
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions for certain broker-dealers). The Corporation and the Trust do
not intend to register under the Securities Act any Old Capital Securities which
remain outstanding after consummation of the Exchange Offer (subject to such
limited exceptions, if applicable). To the extent that Old Capital Securities
are not tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected.
The Exchange Securities and any Old Securities which remain outstanding
after consummation of the Exchange Offer will vote together as a single class
for purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Trust Agreement. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement."
The Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by June
12, 1997 or declared effective by July 12, 1997, additional Distributions will
thereupon accrue on the Old Capital Securities commencing on June 13, 1997 or
July 13, 1997 as the case may be, at a rate of 0.25% per annum of the
Liquidation Amount of such Old Capital Securities until the Exchange Offer is
consummated. Upon the effectiveness of the Registration Statement of which this
Prospectus is a part and the consummation of the Exchange Offer, the Trust and
the Corporation will have satisfied their obligations in this regard and holders
of Old Capital Securities will not be entitled to any such additional
Distributions or any further registration rights under the Registration Rights
Agreement, except under limited circumstances with respect to certain
broker-dealers. See "Description of Old Capital Securities."
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<PAGE> 24
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Corporation believes
such securities are currently owned by, a relatively small number of beneficial
owners. The Old Capital Securities have not been registered under the Securities
Act and will be subject to restrictions on transferability if they are not
exchanged for the Exchange Capital Securities. Although the Exchange Capital
Securities may be resold or otherwise transferred by holders who are not
affiliates of the Corporation or the Trust without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. Old Capital Securities
may be transferred by the holders thereof only in blocks having a Liquidation
Amount of not less than $100,000 (100 Old Capital Securities). Exchange Capital
Securities may be transferred by the holders thereof in blocks having a
Liquidation Amount of $1,000 (one Exchange Capital Security) or integral
multiples thereof. The Corporation and the Trust have been orally advised by the
Initial Purchasers that each of the Initial Purchasers presently intends to make
a market in the Exchange Capital Securities. However, the Initial Purchasers are
not obligated to do so and any market-making activity with respect to the
Exchange Capital Securities may be discontinued by any or all of them at any
time without notice. In addition, such market-making activity will be subject to
the limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer. Accordingly, no assurance can be given that an active
public or other market will develop for the Exchange Capital Securities or the
Old Capital Securities or as to the liquidity of or the trading market for the
Exchange Capital Securities or the Old Capital Securities. If an active public
market does not develop, the market price and liquidity of the Exchange Capital
Securities may be adversely affected.
If a public trading market develops for the Exchange Capital Securities,
future trading prices will depend on many factors, including, among other
things, prevailing interest rates, applicable income tax treatments, the
Corporation's results and the market for similar securities. Depending on
prevailing interest rates, the market for similar securities and other factors,
including the financial condition of the Corporation, the Exchange Capital
Securities may trade at a discount.
Notwithstanding the registration of the Exchange Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Corporation or the Trust may publicly offer for sale or
resell the Exchange Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives Exchange Capital Securities for its own
account in exchange for Old Capital Securities, where such Old Capital
Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Capital Securities.
See "Plan of Distribution."
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Capital Securities, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Capital Securities desiring to tender such Old Capital
Securities in exchange for Exchange Capital Securities should allow sufficient
time to ensure timely delivery. Neither the Corporation nor the Trust is under
any duty to give notification of defects or irregularities with respect to the
tenders of Old Capital Securities for exchange.
FLUCTUATION AND UNCERTAINTY OF PROPERTY AND CASUALTY INSURANCE INDUSTRY RESULTS
The results of companies in the property and casualty insurance industry
historically have been subject to significant fluctuations and uncertainties.
The industry's profitability can be affected significantly by volatile and
unpredictable developments (including catastrophes); changes in reserves
resulting from the general claims and legal environments as different types of
claims arise and judicial interpretations relating to the scope of insurers'
liability develop; fluctuations in interest rates and other changes in the
investment environment which affect returns on invested capital; and
inflationary pressures that affect the size of losses.
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<PAGE> 25
The demand for property and casualty insurance can also vary significantly,
generally rising as the overall level of economic activity increases and falling
as such activity decreases. The property and casualty insurance industry
historically has been cyclical, and the industry as a whole has been in a soft
market since the late 1980s primarily due to premium rate competition, which has
resulted in lower underwriting profitability. The Corporation's results of
operations may be adversely affected by these fluctuations and uncertainties.
UNCERTAINTY REGARDING ADEQUACY OF LOSS RESERVES
The Corporation maintains loss reserves to cover its estimated ultimate
liability for losses and loss adjustment expenses with respect to reported and
unreported claims incurred as of the end of each accounting period. Reserves do
not represent an exact calculation of liability, but instead represent
estimates, generally involving actuarial projections at a given time, of what
the Corporation expects the ultimate settlement and administration of claims
will cost based on its assessment of facts and circumstances then known,
estimates of future trends in claims severity, frequency, judicial theories of
liability and other factors. These variables are affected by both internal and
external events, such as changes in claims handling procedures, economic
inflation, judicial trends and legislative changes. Many of these items are not
directly quantifiable, particularly on a prospective basis. Additionally, there
may be significant reporting lags between the occurrence of the insured event
and the time it is actually reported to the insurer. Reserve estimates are
continually refined in a regular ongoing process as experience develops and
further claims are reported and settled. Adjustments to reserves are reflected
in the results of the periods in which such estimates are changed. Because
establishment of reserves is an inherently uncertain process involving estimates
of future losses, there can be no certainty that currently established reserves
will prove adequate in light of subsequent actual experience. The inherent
uncertainties of estimating loss reserves are generally greater for casualty
coverages than for property coverages, due primarily to the longer period of
time that typically elapses before a definitive determination of ultimate loss
can be made, changing theories of legal liability involving certain types of
claims and changing political climates.
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. In consideration
for issuing the Exchange Capital Securities in exchange for Old Capital
Securities as described in this Prospectus, the Trust will receive Old Capital
Securities in the same Liquidation Amount. The Old Capital Securities
surrendered in exchange for the Exchange Capital Securities will be retired and
cancelled.
The proceeds to the Trust (without giving effect to expenses of the
offering payable by the Corporation) from the offering of the Old Capital
Securities were $125,000,000. All of the proceeds from the sale of Old Capital
Securities were invested by the Trust in the Junior Subordinated Debentures. The
Corporation intends that the net proceeds from the sale of the Old Junior
Subordinated Debentures will be used for general corporate purposes, which may
include investments in and advances to subsidiaries, the financing of growth and
expansion, the financing of future acquisitions and the financing of other
business opportunities.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the historical ratios of earnings to
combined fixed charges and preferred stock dividends of the Corporation for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- ---------------------------------------- NINE MONTHS ENDED
1991 1992 1993 1994 1995 SEPTEMBER 30, 1996
- ---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
2.6 2.7 4.7 4.6 5.0 4.9
</TABLE>
The ratios of earnings to combined fixed charges and preferred stock
dividends represent the number of times fixed charges (interest, debt expense
and preferred stock dividends and one-third of all rent and related costs,
considered to represent an appropriate interest factor, charged to income) are
covered by income before
24
<PAGE> 26
income taxes, minority interest expense, cumulative effect of changes in
accounting principles, extraordinary items and fixed charges.
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the
Corporation's consolidated financial statements. Future consolidated financial
statements of the Corporation will include (i) the presentation of the Capital
Securities as a separate line item on its balance sheet as "Company-obligated
mandatorily redeemable capital securities of subsidiary trust holding solely the
Junior Subordinated Debentures of Orion" and (ii) a footnote to the
Corporation's financial statements indicating that the sole assets of the Trust
are the $125,000,000 aggregate principal amount of 8.73% Junior Subordinated
Debentures due January 1, 2037 and (iii) an audited footnote to the
Corporation's financial statements that (a) the Trust is wholly owned by the
Corporation, (b) its sole assets are the $125,000,000 aggregate principal amount
of 8.73% Junior Subordinated Debentures due January 1, 2037 and (c) that the
Guarantee, when taken together with the Corporation's obligations under the
Trust Agreement, Junior Subordinated Debentures and the Indenture 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 the Trust's obligations under the Capital Securities. The
Corporation will record Distributions payable on the Capital Securities as an
expense in its consolidated statement of earnings.
25
<PAGE> 27
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation as of September 30, 1996 and as adjusted to give effect to the
consummation of the offering of the Capital Securities and the application of
the proceeds thereof. The following data should be read in conjunction with the
financial information included in the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1995, and Quarterly Report on Form 10-Q for the
period ended September 30, 1996, which are incorporated herein by reference. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Borrowings under bank loan and credit facility agreement........... $100,000 $ 100,000
6 1/2% Term loan................................................... 1,875 1,875
9 1/8% Senior notes due 2002....................................... 109,902 109,902
7 1/4% Senior notes due 2005....................................... 99,296 99,296
-------- ----------
Total debt................................................. 311,073 311,073
-------- ----------
Minority interest.................................................... 43,058 43,058
-------- ----------
Company-obligated mandatorily redeemable capital securities of
subsidiary trust holding solely 8.73% Junior Subordinated
Debentures of Orion due January 1, 2037(1)......................... -- 125,000
-------- ----------
Stockholders' equity:
Common stock....................................................... 15,338 15,338
Capital surplus.................................................... 146,408 146,408
Net unrealized investment gains.................................... 57,825 57,825
Net unrealized foreign exchange translation losses................. (3,710) (3,710)
Retained earnings.................................................. 350,837 350,837
Treasury stock at cost............................................. (35,329) (35,329)
Deferred compensation on restricted stock.......................... (1,479) (1,479)
-------- ----------
Total stockholders' equity................................. 529,890 529,890
-------- ----------
Total capitalization....................................... $884,021 $ 1,009,021
======== ==========
</TABLE>
- ---------------
(1) The proceeds from the sale of the Old Capital Securities of the Trust, for
which Exchange Capital Securities are hereby being offered, were used to
purchase $125,000,000 aggregate principal amount of 8.73% Junior
Subordinated Debentures due January 1, 2037 issued by Orion.
26
<PAGE> 28
SUMMARY FINANCIAL DATA
The summary below should be read in connection with the financial
information included in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1995 and Quarterly Report on Form 10-Q for the period
ended September 30, 1996. Interim unaudited data for the nine months ended
September 30, 1996 and 1995 reflect, in the opinion of management of the
Corporation, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of such data. Results for the nine months
ended September 30, 1996 are not necessarily indicative of results which may be
expected for any other interim period or for the year as a whole.
In November 1991, the Corporation reduced its ownership of Guaranty
National from 100% to 49.3%. The Corporation owned slightly less than 50% of
Guaranty National from November 1991 until the Corporation increased its
ownership to 81% in July 1996. For the nine months ended September 30, 1996 and
the period from January 1, 1991 through November 20, 1991, the results of
operations of Guaranty National are included in the financial statements of the
Corporation on a consolidated basis. For all other periods presented, the
Corporation's investment in Guaranty National is accounted for using the equity
method.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------------ ------------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums
written.............. $ 868,107 $ 690,742 $ 780,128 $ 812,344 $ 926,729 $ 699,024 $1,213,875
Premiums earned........ 701,386 560,205 617,404 691,223 749,003 545,669 954,447
Net investment
income............... 100,206 82,483 91,803 84,915 99,040 73,860 106,821
Realized investment
gains (losses)....... (1,009) 3,667 9,478 3,437 11,885 9,171 16,606
Total
revenues...... 837,294 647,718 720,155 780,947 874,280 636,129 1,095,347
Earnings before federal
income taxes,
minority interest
expense, cumulative
effect of accounting
changes and
extraordinary item... 46,069 46,714 72,505 71,546 88,035 65,927 91,252
Earnings before
cumulative effect of
accounting changes
and extraordinary
item................. 44,668 45,792 56,988 55,245 67,622 50,368 62,821
Net earnings........... 44,668 42,872 68,813 55,245 67,622 50,368 62,821
Operating
earnings(a).......... 46,472 42,679 51,100 52,818 59,914 44,421 54,028
Net earnings per share:
Primary.............. 3.75 3.35 4.69 3.85 4.77 3.55 4.52
Fully diluted........ 3.05 2.85 4.67 3.85 4.76 3.55 4.52
Operating earnings per
share(a):
Primary.............. 3.93 3.33 3.47 3.68 4.22 3.13 3.89
Fully diluted........ 3.18 2.84 3.46 3.68 4.22 3.13 3.89
RATIOS:
GAAP combined ratios:
Loss................. 76.8% 75.7% 74.4% 72.1% 68.4% 68.9% 68.6%
Expense.............. 30.2 27.3 26.8 27.0 29.0 28.9 29.6
Policyholders'
dividends......... 2.4 2.4 2.0 2.1 2.9 2.5 1.7
-------- -------- -------- -------- -------- -------- ----------
Combined.......... 109.4% 105.4% 103.2% 101.2% 100.3% 100.3% 99.9%
======== ======== ======== ======== ======== ======== ==========
</TABLE>
27
<PAGE> 29
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statutory combined
ratios:
Loss................. 78.6% 77.0% 74.4% 71.5% 67.7% 68.3% 67.7%
Expense.............. 29.9 25.8 25.6 27.4 29.2 28.9 30.7
Policyholders'
dividends......... 3.1 2.1 2.1 2.2 2.0 1.7 1.5
-------- -------- -------- -------- -------- -------- ----------
Combined.......... 111.6% 104.9% 102.1% 101.1% 98.9% 98.9% 99.9%
======== ======== ======== ======== ======== ======== ==========
Industry statutory
combined ratios(b)... 108.8% 115.8% 106.9% 108.5% 106.4% (c) (c)
======== ======== ======== ======== ======== ======== ==========
Ratio of statutory net
premiums written to
policyholders'
surplus.............. 1.9 1.5 1.4 1.6 1.5 1.4(d) 2.1(d)
======== ======== ======== ======== ======== ======== ==========
BALANCE SHEET DATA (AT
END OF PERIOD):
Total cash and
investments.......... $1,087,454 $1,169,379 $1,328,969 $1,325,241 $1,606,445 $1,553,775 $2,254,392
Total assets........... 1,827,069 1,937,408 2,117,454 2,112,761 2,473,588 2,388,471 3,354,324
Total policy
liabilities.......... 1,228,951 1,326,872 1,412,285 1,450,835 1,596,033 1,550,539 2,240,021
Notes payable and
debentures........... 142,311 129,863 160,372 152,382 209,148 209,131 311,073
Adjustable rate
preferred stock...... 19,125 18,705 -- -- -- -- --
Minority interest...... -- -- -- -- -- -- 43,058
Stockholders' equity... 249,829 311,287 394,195 365,088 490,903 463,839 529,890
Book value per common
share................ 19.00 21.48 27.43 26.00 35.18 32.97 38.52
Statutory
policyholders'
surplus.............. 300,097 385,803 460,986 458,676 521,510 520,709 617,599
</TABLE>
- ---------------
(a) Earnings after taxes, excluding the effects of the adoption of new
accounting principles, extraordinary items and after-tax realized investment
gains.
(b) Source: A.M. Best Company
(c) Nine month data not available.
(d) Annualized based on net premiums written during the period.
28
<PAGE> 30
ORION CAPITAL CORPORATION
The Corporation is a property and casualty insurance holding company. The
Corporation's insurance subsidiaries and affiliates are authorized to underwrite
and sell most types of property and casualty insurance. The Corporation's
insurance businesses are concentrated in niche insurance markets, particularly
workers compensation, professional liability, nonstandard automobile insurance
and underwriting ocean marine, inland marine and property insurance through
underwriting pools. The Corporation provides workers compensation insurance
products through the EBI Companies. The Corporation sells its professional
liability insurance through the DPIC Companies and writes other specialty
property and casualty insurance, principally through Connecticut Specialty. The
Corporation provides underwriting management and related services principally in
ocean marine, inland marine and property insurance coverages through Wm. H.
McGee & Co., Inc. The Corporation also participates in the nonstandard
commercial and personal automobile insurance business through its 81% interest
in Guaranty National and owns approximately 24.8% of the outstanding common
stock of Intercargo Corporation, an insurance holding company whose subsidiaries
specialize in international trade and transportation coverages. The principal
executive office of the Corporation is 600 Fifth Avenue, 24th Floor, New York,
New York 10020-2302 and its telephone number is (212) 332-8080.
The Corporation's insurance, brokerage and management subsidiaries are
licensed to transact business throughout the United States and in all Canadian
provinces. They obtain substantially all of their business from independent
insurance agents and brokers. The Corporation and its majority-owned
subsidiaries have approximately 3,100 employees, substantially all of whom are
employed in insurance-related operations.
For the five-year period ended December 31, 1995, the Corporation's return
on equity from operating earnings (earnings after taxes, excluding the effects
of the adoption of new accounting principles, extraordinary items and after-tax
realized investment gains) averaged 15.7% per year. The combined ratio for the
Corporation's insurance operations, computed on the basis of generally accepted
accounting principles, has steadily improved from 109.4% in 1991 to 100.3% in
1995. These trends continued for the first nine months of 1996, as the
annualized return on equity from operating earnings was 14.1%, and the combined
ratio declined further to 99.9%.
ORION CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) the Declaration of Trust executed by the Corporation as Sponsor and
Delaware Trust Capital Management, Inc. as Delaware Trustee, and (ii) the filing
of a certificate of trust with the Delaware Secretary of State on January 3,
1997. The Trust has a term of 45 years, but may terminate earlier as provided in
the Trust Agreement. The Trust exists for the exclusive purposes of (i) issuing
and selling the Trust Securities, (ii) using the proceeds from the sale of Trust
Securities to acquire the Junior Subordinated Debentures, (iii) making
Distributions to holders of the Trust Securities as provided in the Trust
Agreement and (iv) engaging in only those other activities necessary, advisable
or incidental thereto (such as registering the transfer of the Trust
Securities). Accordingly, the Junior Subordinated Debentures will be the sole
assets of the Trust, and payments under the Junior Subordinated Debentures will
be the sole revenues of the Trust.
All of the Common Securities are owned by the Corporation. The Common
Securities will rank pari passu, and payments will be made thereon pro rata with
the Capital Securities, except that upon the occurrence and continuance of an
event of default under the Trust Agreement resulting from a Debenture Event of
Default, the rights of the Corporation as holder of the Common Securities to
payments in respect of Distributions and payments upon liquidation, redemption
or otherwise will be subordinated to the rights of the holders of the Capital
Securities. See "Description of Exchange Securities -- Description of Exchange
Capital Securities -- Subordination of Common Securities." The Corporation has
acquired Common Securities in a Liquidation Amount equal to $4,000,000.
The Trust's business and affairs are conducted by the Property Trustee and
its Administrative Trustees, each appointed by the Corporation as holder of the
Common Securities. The trustees for the Trust will be The Bank of New York as
the Property Trustee, Delaware Trust Capital Management, Inc. as the Delaware
29
<PAGE> 31
Trustee, and three individual trustees as the Administrative Trustees who are
employees or officers of or affiliated with the Corporation (collectively, the
"Issuer Trustees"). The Bank of New York, as Property Trustee, will act as sole
indenture trustee under the Trust Agreement. The Bank of New York will also act
as indenture trustee under the Guarantee and the Indenture. See "Description of
Exchange Securities -- Description of Exchange Guarantee" and "Description of
Exchange Securities -- Description of Exchange Junior Subordinated Debentures."
The holder of the Common Securities of the Trust or, if an Event of Default
under the Trust Agreement has occurred and is continuing, the holders of a
majority in Liquidation Amount of the Capital Securities will be entitled to
appoint, remove or replace the Property Trustee and/or the Delaware Trustee. In
no event will the holders of the Capital Securities have the right to vote to
appoint, remove or replace the Administrative Trustees; such voting rights will
be vested exclusively in the holder of the Common Securities. The duties and
obligations of each Issuer Trustee are governed by the Trust Agreement. The
Corporation will pay all fees, expenses, debts and obligations (other than with
respect to the Trust Securities) related to the Trust and the offering of the
Capital Securities and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Trust. The principal executive office of the
Trust is 600 Fifth Avenue, 24th Floor, New York, New York 10020-2302 and its
telephone number is (212) 332-8080.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Corporation
and the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Corporation and the Trust agreed to file and
to use their reasonable efforts to cause to become effective with the Commission
a registration statement with respect to the exchange of the Old Capital
Securities for other capital securities with terms identical in all material
respects to the terms of the Old Capital Securities. A copy of the Registration
Rights Agreement has been filed as an Exhibit to the Registration Statement of
which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation and the Trust under the Registration Rights Agreement. The form
and terms of the Exchange Capital Securities are the same as the form and terms
of the Old Capital Securities except that the Exchange Capital Securities have
been registered under the Securities Act and will not be subject to the $100,000
minimum Liquidation Amount transfer restriction and certain other restrictions
on transfer applicable to the Old Capital Securities. The Exchange Capital
Securities will not provide as do the Old Capital Securities that if a
registration statement relating to the Exchange Offer has not been filed by June
12, 1997 or has not been declared effective by July 12, 1997, then additional
Distributions will accrue on the Old Capital Securities commencing on June 13,
1997 or July 13, 1997, as the case may be, at a rate of 0.25% per annum of the
Liquidation Amount of such Old Capital Securities until such events have
occurred. Upon the effectiveness of the Registration Statement of which this
Prospectus is a part and consummation of the Exchange Offer, the Corporation and
the Trust will have satisfied their obligations under the Registration Rights
Agreement and holders of Old Capital Securities will not be entitled to any such
additional Distributions or any further registration rights under the
Registration Rights Agreement, except under limited circumstances with respect
to certain broker-dealers. See "Risk Factors -- Consequences of a Failure to
Exchange Old Capital Securities" and "Description of Old Capital Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Old Capital Securities in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Capital Securities are held of record by The Depository Trust Company
("DTC") who desires to deliver such Old Capital Securities by book-entry
transfer at DTC.
30
<PAGE> 32
Pursuant to the Exchange Offer, the Corporation will exchange as soon as
practicable after the date hereof, the Old Guarantee for the Exchange Guarantee
and the Old Debentures, in an amount corresponding to the Old Capital Securities
accepted for exchange, for a like aggregate principal amount of the Exchange
Debentures. The Exchange Guarantee and Exchange Debentures have been registered
under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $125,000,000 aggregate Liquidation Amount of Exchange Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$125,000,000 of Exchange Capital Securities in exchange for a like principal
amount of outstanding Old Capital Securities tendered and accepted in connection
with the Exchange Offer. Holders may tender their Old Capital Securities in any
integral multiple of $1,000 Liquidation Amount (one Old Capital Security); for
purposes of tenders of Old Capital Securities in the Exchange Offer, the
requirement for minimum transfers of $100,000 Liquidation Amount will be waived.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
$125,000,000 aggregate Liquidation Amount of the Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters
rights in connection with the Exchange Offer.
Old Capital Securities which are not tendered for or are tendered but not
accepted in connection with the Exchange Offer will remain outstanding and be
entitled to the benefits of the Trust Agreement, but will not be entitled to any
further registration rights under the Registration Rights Agreement, except
under limited circumstances with respect to certain broker-dealers. See "Risk
Factors -- Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital Securities
will be returned, without expense, to the tendering holder thereof promptly
after the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Corporation will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "-- Fees and
Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL
SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO
TENDER BASED ON SUCH HOLDER'S OWN FINANCIAL POSITION AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on April
23, 1997 unless the Exchange Offer is extended by the Corporation or the Trust
(in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended). The Corporation and the Trust have no
present expectation that the Expiration Date will be extended but if it is
extended for any reason each such extension will be for a minimum of five
business days from the date thereof.
31
<PAGE> 33
The Corporation and the Trust expressly reserve the right in their sole and
absolute discretion, reasonably exercised in accordance with applicable law and
the terms of this Exchange Offer, at any time and from time to time, (i) to
delay the acceptance of the Old Capital Securities for exchange, (ii) to
terminate the Exchange Offer (whether or not any Old Capital Securities have
theretofore been accepted for exchange) if the Trust determines, in its sole and
absolute discretion, that any of the events or conditions referred to under
"-- Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all Old Capital Securities tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Capital Securities to withdraw their
tendered Old Capital Securities as described under "-- Withdrawal Rights" and
(iv) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Corporation and the Trust to constitute a material change, or if the Corporation
and the Trust waive a material condition of the Exchange Offer, the Corporation
and the Trust will promptly disclose such amendment by means of a post-effective
amendment to the Registration Statement and distribution of a prospectus
supplement to the holders of the Old Capital Securities. The Corporation and the
Trust will extend the Exchange Offer to the extent required by Rule 14e-1 under
the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Corporation and the Trust may choose to make any public
announcement and subject to applicable law, the Corporation and the Trust shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement other than by issuing a release to an appropriate news
agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, Exchange Capital
Securities for Old Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of Exchange Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of Old
Capital Securities into the Exchange Agent's account at DTC, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation satisfactory
to the Exchange Agent and the Trust of a book-entry transfer of Old Capital
Securities into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Trust will
be deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Old Capital Securities for exchange pursuant to the Exchange offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
Old Capital Securities, Letters of Transmittal and related documents, and as
agent for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting Exchange Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for exchange
or the exchange of any Old Capital Securities tendered pursuant to the Exchange
offer is delayed (whether before or after the Trust's acceptance for exchange of
Old Capital Securities) or the Trust extends the Exchange Offer or is unable to
accept for exchange, or exchange, Old Capital Securities tendered pursuant to
the Exchange offer, then, without prejudice to the Trust's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Trust and subject
to Rule 14e-l(c) under the Exchange Act, retain tendered Old Capital Securities
and such Old Capital Securities may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described under
"-- Withdrawal Rights."
32
<PAGE> 34
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital Securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered Old Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and that the Old Capital Securities tendered for
exchange are not subject to any adverse claims or proxies. The holder also will
warrant and agree that it will, upon request, execute and deliver any additional
documents deemed by the Trust or the Exchange Agent to be necessary or desirable
to complete the exchange, sale, assignment, and transfer of the Old Capital
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at one of its addresses set forth under
"-- Exchange Agent," and either (i) tendered Old Capital Securities must be
received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a book-entry confirmation must be received by the Exchange Agent, in each case
on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures
set forth below must be complied with.
If less than all of a holder's Old Capital Securities are tendered, the
tendering holder should fill in the amount of Old Capital Securities being
tendered in the appropriate box on the Letter of Transmittal. The entire amount
of Old Capital Securities delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-entry Transfer. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
no later than two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duty executed, with any required signature
guarantees and any other required documents, must in any case be delivered to
and received by the Exchange Agent at its address set forth under "-- Exchange
Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure
set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Capital Securities need not
be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the Letter of Transmittal. In the case of (a)
or (b) above, such certificates for Old Capital Securities must be duly endorsed
or accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer;
33
<PAGE> 35
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, such
Old Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange
Capital Securities in exchange for Old Capital Securities tendered and accepted
for exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
Exchange Capital Securities might not be made to all tendering holders at the
same time, and will depend upon when Old Capital Securities, book-entry
confirmations with respect to Old Capital Securities and other required
documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Corporation and
the Trust, in their sole discretion, which determination shall be final and
binding on all parties. The Corporation and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the Corporation and the Trust,
be unlawful. The Corporation and the Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange Offer
as set forth under "-- Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Capital securities of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Corporation,
the Trust, any affiliates or assigns of the Corporation or the Trust, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
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If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing and, unless waived by the
Corporation and the Trust, proper evidence satisfactory in their sole discretion
to the Corporation and the Trust of such person's authority to so act must be
submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF EXCHANGE CAPITAL SECURITIES
The Trust is making the Exchange Offer for the Exchange Capital Securities
in reliance on the position of the staff of the Division of Corporation Finance
of the Commission as set forth in certain interpretive letters addressed to
third parties in other transactions. However, neither the Corporation nor the
Trust sought its own interpretive letter and there can be no assurance that the
staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Corporation and the Trust believe
that Exchange Capital Securities issued pursuant to this Exchange Offer in
exchange for Old Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such Exchange Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the Corporation or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing
Exchange Capital Securities, or any broker-dealer who purchased Old Capital
Securities from the Trust to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be able to rely on the
interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for Exchange Capital Securities, then such broker-dealer must deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resales of such Exchange Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for Exchange Capital Securities in the Exchange offer will be
required to represent that (i) such holder is not an "affiliate" of the
Corporation or the Trust, (ii) any Exchange Capital Securities to be received by
such holder are being acquired in the ordinary course of such holder's business,
(iii) such holder has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
Exchange Capital Securities, and (iv) if such holder is not a broker-dealer,
such holder is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Capital Securities.
In addition, the Corporation and the Trust may require such holder, as a
condition to such holder's eligibility to participate in the Exchange Offer, to
furnish to the Corporation and the Trust (or an agent thereof) in writing
information as to the number of "beneficial owners" (within the meaning of Rule
13d-3 under the Exchange Act) on behalf of whom such holder holds the Old
Capital Securities to be exchanged pursuant to the Exchange Offer. Each
broker-dealer that receives Exchange Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that the Old Capital Securities
tendered by it for exchange were acquired for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
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connection with any resale of such Exchange Capital Securities. The Letter of
Transmittal acknowledges that by so stating and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation
Finance of the Commission in the interpretive letters referred to above, the
Corporation and the Trust believe that Participating Broker-Dealers who own Old
Capital Securities acquired for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the Exchange Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the Prospectus prepared for this Exchange Offer so long as it
contains a description of the plan of distribution with respect to the resale of
such Exchange Capital Securities.
This Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer during the period referred to below
in connection with resales of Exchange Capital Securities received in exchange
for Old Capital Securities where such Old Capital Securities were acquired by
such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Corporation and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of
such Exchange Capital Securities for the period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described below) or, if earlier, when all such Exchange Capital Securities have
been disposed of by such Participating Broker-Dealer. See "Plan of
Distribution." A Participating Broker-Dealer who intends to use this Prospectus
in connection with the resale of Exchange Capital Securities received in
exchange for Old Capital Securities pursuant to the Exchange Offer must notify
the Corporation or the Trust, or cause the Corporation or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating Broker-
Dealer. Such notice may be given in the space provided for that purpose in the
Letter of Transmittal or may be delivered to the Exchange Agent at one of the
addresses set forth herein under "-- Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Corporation or the Trust may not rely
on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
Each Participating Broker-Dealer who surrenders Old Capital Securities
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Corporation or
the Trust of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or which causes this Prospectus to omit to state
a material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which they
were made, not misleading or of the occurrence of certain other events specified
in the Registration Rights Agreement, such Participating Broker-Dealer will
suspend the sale of Exchange Capital Securities (or the Exchange Guarantee or
the Exchange Debentures, as applicable) pursuant to this Prospectus until the
Corporation or the Trust has amended or supplemented this Prospectus to correct
such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer or the Corporation
or the Trust has given notice that the sale of the Exchange Capital Securities
(or the Exchange Guarantee or the Exchange Debentures, as applicable) may be
resumed, as the case may be. If the Corporation or the Trust gives such notice
to suspend the sale of the Exchange Capital Securities (or the Exchange
Guarantee or the Exchange Debentures, as applicable), it shall extend the 90-day
period referred to above during which Participating Broker-Dealers are entitled
to use this Prospectus in connection with the resale of Exchange Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the Exchange Capital Securities or to
and including the date on which the Corporation or the Trust has given notice
that the sale of Exchange Capital Securities
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(or the Exchange Guarantee or the Exchange Debentures, as applicable) may be
resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "-- Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Capital Securities to be withdrawn,
the aggregate principal amount of Old Capital Securities to be withdrawn, and
(if certificates for such Old Capital Securities have been tendered) the name of
the registered holder of the Old Capital Securities as set forth on the Old
Capital Securities, if different from that of the person who tendered such Old
Capital Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such Old
Capital Securities, the tendering holder must submit the serial numbers shown on
the particular Old Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an Eligible
Institution. If Old Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "-- Procedures for Tendering Old
Capital Securities," the notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written, telegraphic, telex or facsimile transmission.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be tendered again at any subsequent time
on or prior to the Expiration Date by following any of the procedures described
above under "-- Procedures for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Corporation, the Trust, any affiliates or assigns of the Corporation
or the Trust, the Exchange Agent nor any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give any such notification. Any Old Capital
Securities which have been tendered but which are withdrawn will be returned to
the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON EXCHANGE CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive Distributions on such Old Capital Securities and
will be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and after January 13, 1997. Accordingly,
holders of Exchange Capital Securities as of the record date for the payment of
Distributions on July 1, 1997 will be entitled to receive Distributions
accumulated from and after January 13, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Corporation and the Trust will not be
required to accept for exchange, or to exchange, any Old Capital Securities for
any Exchange Capital Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore been
accepted for exchange) or may waive any conditions to or amend the Exchange
Offer, if any of the following conditions has occurred or exists or has not been
satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Capital Securities
issued pursuant to the Exchange Offer in exchange for Old Capital
Securities to be offered for resale, resold and otherwise transferred by
the holder thereof (other
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than broker-dealers and any such holder which is an "affiliate" of the
Corporation or the Trust within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange
Capital Securities are acquired in the ordinary course of such holder's
business and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Capital
Securities; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Corporation or the Trust, threatened for that purpose any governmental
approval has not been obtained, which approval the Corporation or the Trust
shall, in its reasonable discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby.
If the Corporation or the Trust determines in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, it may, subject to applicable law, terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Corporation or the
Trust will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old Capital
Securities and will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent as follows:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
101 Barclay Street, 7E (212) 571-3080 101 Barclay Street
New York, New York 10286 Corporation Trust Services Window
(212) 815-6333 (For Eligible Institutions Only) Ground Level
Attn: Reorganization Section, Confirm by Telephone New York, New York 10286
Arwen Gibbons (212) 815-6333 Attn: Reorganization Section
Arwen Gibbons
For Information Call:
(212) 815-6333
</TABLE>
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Capital Securities, and in
handling or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Capital Securities are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of the Old Capital
Securities tendered, or if
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a transfer tax is imposed for any reason other than the exchange of Old Capital
Securities in connection with the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF THE EXCHANGE SECURITIES
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
Pursuant to the terms of the Trust Agreement, the Trust has issued the Old
Capital Securities and the Common Securities and will issue the Exchange Capital
Securities. The Exchange Capital Securities will represent preferred beneficial
interests in the Trust and the holders thereof will be entitled to a preference
over the Common Securities in certain circumstances with respect to
Distributions and amounts payable on redemption of the Trust Securities or
liquidation of the Trust. See "-- Subordination of Common Securities." The Trust
Agreement has been qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). This summary description of all the material
provisions of the Exchange Capital Securities, the Common Securities and the
Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Exchange
Capital Securities, the Common Securities and the Trust Agreement, including the
definitions therein of certain terms.
General
The Capital Securities (including the Old Capital Securities and the
Exchange Capital Securities) are limited to $125,000,000 aggregate Liquidation
Amount at any one time outstanding. The Capital Securities will rank pari passu,
and payments will be made thereon pro rata, with the Common Securities except as
described under "-- Subordination of Common Securities." Legal title to the
Junior Subordinated Debentures will be held by the Property Trustee in trust on
behalf of the Trust for the benefit of the holders of the Capital Securities and
Common Securities. The Exchange Guarantee will not guarantee payment of
Distributions or amounts payable on redemption of the Exchange Capital
Securities or liquidation of the Trust when the Trust does not have funds on
hand legally available for such payments. See "Description of Exchange
Guarantee."
Distributions
Distributions on the Exchange Capital Securities will be cumulative, will
accumulate from January 13, 1997 and will be payable semi-annually in arrears on
January 1 and July 1 of each year, commencing on July 1, 1997, at the annual
rate of 8.73% of the Liquidation Amount to the holders of the Exchange Capital
Securities on the relevant record dates. The record date for each Distribution
will be the fifteenth day preceding the relevant Distribution Date (as defined
below). The amount of Distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months and for any period less than
6 months, the actual months elapsed and the actual days elapsed in a partial
month in a period. In the event that any date on which Distributions are payable
on the Exchange Capital Securities is not a Business Day (as defined below),
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), in each case with the same force and effect as if
made on such date (each date on which Distributions are payable in accordance
with the foregoing, a "Distribution Date"). A "Business Day" shall mean any day
other than a Saturday or a Sunday, or a day on which banking institutions in The
City of New York, New York are authorized or required by law or executive order
to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer the
payment of interest on the Exchange Junior Subordinated
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Debentures at any time or from time to time for a period not exceeding 10
consecutive semi-annual periods with respect to each Extension Period, provided
that no Extension Period may extend beyond the Stated Maturity. Semi-annual
Distributions on the Exchange Capital Securities will be deferred by the Trust
during any Extension Period. Distributions to which holders of the Exchange
Capital Securities are entitled during any Extension Period will accumulate
additional Distributions thereon at the rate per annum of 8.73% thereof,
compounded semi-annually from the relevant Distribution Date, on the basis of a
360-day year of twelve 30-day months and for any period less than 6 months, the
actual months elapsed and the actual days elapsed in a partial month in a
period, but not exceeding the interest rate then accruing on the Exchange Junior
Subordinated Debentures. The term "Distributions," as used herein, shall include
any such additional Distributions.
Prior to the termination of any Extension Period, the Corporation may
further extend it provided that no Extension Period may exceed 10 consecutive
semi-annual periods or extend beyond the Stated Maturity. Upon the termination
of any Extension Period and the payment of all amounts then due, and subject to
the foregoing limitations, the Corporation may elect to begin a new Extension
Period. The Corporation must give the Property Trustee, the Administrative
Trustees and the Debenture Trustee notice of its election of any Extension
Period at least five Business Days prior to the earlier of (i) the date the
Distributions on the Capital Securities would have been payable except for the
election to begin or extend such Extension Period or (ii) the date the
Administrative Trustees are required to give notice to any securities exchange
or to holders of such Exchange Capital Securities of the record date or the date
such Distributions are payable but in any event not less than five Business Days
prior to such record date. There is no limitation on the number of times that
the Corporation may elect to begin an Extension Period. See "Description of
Exchange Junior Subordinated Debentures -- Option to Extend Interest Payment
Period" and "Certain Federal Income Tax Consequences -- Interest Income and
Original Issue Discount."
During any Extension Period, the Corporation may not, and may not permit
any subsidiary to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any, or repay,
repurchase or redeem any debt securities of the Corporation (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Exchange Junior Subordinated Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a direct
result of, and only to the extent necessary to avoid the issuance of fractional
shares of the Corporation's capital stock following, a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit plans for its directors, officers
or employees or any of the Corporation's dividend reinvestment plans). None of
the Corporation's subsidiaries will be prohibited from declaring and paying cash
distributions with respect to its capital stock or from making payments with
respect to its debt securities.
Although the Corporation may in the future exercise its right to defer
payments of interest on the Exchange Junior Subordinated Debentures, the
Corporation has no such current intention.
The revenue of the Trust available for distribution to holders of the
Exchange Capital Securities will be limited to payments under the Exchange
Junior Subordinated Debentures in which the Trust has invested the proceeds from
the issuance and sale of the Trust Securities. See "-- Description of Exchange
Junior Subordinated Debentures -- General." If the Corporation does not make
interest payments on the Exchange Junior Subordinated Debentures, the Property
Trustee will not have funds available to pay Distributions on
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the Exchange Capital Securities. The payment of Distributions (if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions) will be guaranteed by the Corporation on a limited basis as set
forth herein under "-- Description of Exchange Guarantee."
Conditional Right to Shorten Maturity and Special Event Redemption
If a Tax Event occurs, then the Corporation will have the right, prior to
the termination of the Trust, either (i) to shorten the Stated Maturity of the
Exchange Junior Subordinated Debentures to the minimum extent required, but not
less than 20 years from the date of original issuance thereof, such that, in the
written opinion of counsel experienced in such matters delivered to the
Corporation, after shortening the maturity, interest paid on the Exchange Junior
Subordinated Debentures will be deductible for federal income tax purposes (the
action referred to above being referred to herein as a "Tax Event Maturity
Shortening") or (ii) to prepay the Exchange Junior Subordinated Debentures, as
described below.
If a Tax Event or an Investment Company Event occurs, then the Corporation
shall have the right, within 90 days following the occurrence of such Tax Event
or Investment Company Event, as the case may be, to prepay the Exchange Junior
Subordinated Debentures in whole (but not in part) in the manner and at the
price determined as set forth under "-- Description of Exchange Junior
Subordinated Debentures -- Conditional Right to Shorten Maturity and Special
Event Prepayment," and therefore to cause a mandatory redemption of the Exchange
Capital Securities prior to the Stated Maturity (the circumstances under which
the Corporation has the right so to prepay the Exchange Junior Subordinated
Debentures in connection with a Tax Event being referred to herein as a
"Conditional Tax Redemption Event"). Each of a Conditional Tax Redemption Event
or an Investment Company Event are sometimes referred to herein as a "Special
Event".
Redemption
Upon the repayment on the Stated Maturity or prepayment prior to the Stated
Maturity of the Exchange Junior Subordinated Debentures, the proceeds from such
repayment or prepayment shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of the date of redemption (the "Redemption Date"),
at the applicable Redemption Price, which shall be equal to (i) in the case of
the repayment of the Exchange Junior Subordinated Debentures on the Stated
Maturity, the Maturity Redemption Price of the Capital Securities (equal to the
principal of, and accrued and unpaid interest on, the Exchange Junior
Subordinated Debentures), (ii) in the case of the optional prepayment of the
Exchange Junior Subordinated Debentures upon the occurrence and continuation of
a Special Event, the Special Event Redemption Price (equal to the Special Event
Prepayment Price of the Capital Securities in respect of the Exchange Junior
Subordinated Debentures) and (iii) in the case of the optional prepayment of the
Exchange Junior Subordinated Debentures other than as contemplated in clause
(ii) above, the Optional Redemption Price of the Capital Securities (equal to
the Optional Prepayment Price in respect of the Junior Subordinated Debentures).
See "-- Description of Exchange Junior Subordinated Debentures -- Optional
Prepayment" and "-- Conditional Right to Shorten Maturity and Special Event
Prepayment."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Exchange Junior Subordinated Debentures to be paid in accordance with
their terms and (ii) with respect to a distribution of Exchange Junior
Subordinated Debentures upon the liquidation of the Trust, Exchange Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Trust Securities of the holder to whom such Exchange Junior
Subordinated Debentures are distributed.
The Corporation will have the option to prepay the Exchange Junior
Subordinated Debentures, (i) in whole or in part, on or after January 1, 2007,
at the applicable Optional Prepayment Price and (ii) in whole but not in part,
at any time, upon the occurrence of a Special Event, at the Special Event
Prepayment Price.
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Liquidation of the Trust and Distribution of Exchange Junior Subordinated
Debentures
The Corporation, as the holder of all of the outstanding Common Securities,
will have the right at any time to dissolve the Trust and cause a Like Amount of
the Exchange Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities in liquidation of the Trust, subject to the Corporation's
having received an opinion from independent tax counsel experienced in such
matters to the effect that the holders will not recognize any gain or loss for
United States federal income tax purposes as a result of the dissolution of the
Trust and such distribution to holders of Exchange Capital Securities.
The Trust shall automatically dissolve upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Exchange Junior Subordinated
Debentures to the holders of the Trust Securities if the Corporation, as
Sponsor, has given a written direction to the Property Trustee to terminate the
Trust (which direction is optional and, except as described above, wholly within
the discretion of the Corporation, as the holder of all of the outstanding
Common Securities); (iii) redemption of all of the Trust Securities as described
under "-- Redemption"; (iv) expiration of the term of the Trust; and (v) the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a dissolution occurs as described in clause (i), (ii), (iv) or (v)
above, the Trust shall be liquidated by the Administrative Trustees as
expeditiously as the Administrative Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust as
provided by applicable law, to the holders of the Trust Securities a Like Amount
of the Exchange Junior Subordinated Debentures, unless such distribution is
determined by the Property Trustee not to be practicable, in which event such
holders will be entitled to receive out of the assets of the Trust legally
available for distribution to holders, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, an amount equal to the
aggregate of the Liquidation Amount plus accumulated and unpaid Distributions
thereon to the date of payment (such amount being the "Liquidation
Distribution"). If such Liquidation Distribution can be paid only in part
because the Trust has insufficient assets on hand legally available to pay in
full the aggregate Liquidation Distribution, then the amounts payable directly
by the Trust on the Capital Securities and the Common Securities shall be paid
on a pro rata basis, except that if a Debenture Event of Default has occurred
and is continuing, the Capital Securities shall have a priority over the Common
Securities. See "-- Subordination of Common Securities." If an early dissolution
occurs as described in clause (v) above, the Exchange Junior Subordinated
Debentures will be subject to optional prepayment, in whole but not in part, on
or after January 1, 2007.
If the Corporation elects not to prepay the Junior Subordinated Debentures
prior to maturity in accordance with their terms and either elects not to or is
unable to liquidate the Trust and distribute the Exchange Junior Subordinated
Debentures to holders of the Trust Securities, the Trust Securities will remain
outstanding until the repayment of the Junior Subordinated Debentures on the
Stated Maturity.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by DTC or its
nominee 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 Securities not held
by DTC or its nominee will be deemed to represent Exchange Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of such
Trust Securities, and bearing accrued and unpaid interest in an amount equal to
the accumulated and unpaid Distributions on such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon the Corporation will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such Junior
Subordinated Debentures. See "-- Form, Denomination, Book-Entry Procedures and
Transfer."
There can be no assurance as to the market prices for the Exchange Capital
Securities or the Exchange Junior Subordinated Debentures that may be
distributed in exchange for the Trust Securities if a dissolution and
liquidation of the Trust were to occur. Accordingly, the Exchange Capital
Securities that an investor may purchase, or the Exchange Junior Subordinated
Debentures that the investor may receive on dissolution and
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liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the Exchange Capital Securities offered hereby.
Redemption Procedures
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment or
prepayment of the Exchange Junior Subordinated Debentures. Any redemption of
Trust Securities shall be made and the applicable Redemption Price shall be
payable on the Redemption Date only to the extent that the Trust has funds
legally available for the payment of such applicable Redemption Price. See also
"-- Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Exchange
Capital Securities, then, by 12:00 noon, New York City time, on the Redemption
Date, to the extent funds are legally available, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price with respect to the Exchange Capital Securities held by DTC or its
nominees. See "-- Form, Denomination, Book-Entry Procedures and Transfer." With
respect to the Exchange Capital Securities held in certificated form, the
Property Trustee, to the extent funds are legally available, will irrevocably
deposit with the paying agent for the Exchange Capital Securities funds
sufficient to pay the applicable Redemption Price and will give such paying
agent irrevocable instructions and authority to pay the applicable Redemption
Price to the holders thereof upon surrender of their certificates evidencing the
Exchange Capital Securities. See "-- Payment and Paying Agency." Notwithstanding
the foregoing, Distributions payable on or prior to the Redemption Date shall be
payable to the holders of such Exchange Capital Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of the Exchange Capital Securities will
cease, except the right of the holders of the Exchange Capital Securities to
receive the applicable Redemption Price, but without interest on such Redemption
Price, and the Exchange Capital Securities will cease to be outstanding. In the
event that any Redemption Date of Exchange Capital Securities is not a Business
Day, then the applicable Redemption Price payable on such date will be paid 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 the event that payment of the applicable Redemption
Price is improperly withheld or refused and not paid either by the Trust or by
the Corporation pursuant to the Exchange Guarantee as described under
"Description of Exchange Guarantee," (i) Distributions on Exchange Capital
Securities will continue to accumulate at the then applicable rate, from the
Redemption Date originally established by the Trust to the date such applicable
Redemption Price is actually paid, and (ii) the actual payment date will be the
Redemption Date for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Exchange Capital Securities by tender, in
the open market or by private agreement.
If less than all of the Capital Securities and Common Securities are to be
redeemed on a Redemption Date, then the aggregate Liquidation Amount of such
Trust Securities to be redeemed shall generally be allocated pro rata among the
Capital Securities and Common Securities based upon the relative Liquidation
Amounts of such classes.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
on and after the Redemption Date Distributions will cease to accrue on the Trust
Securities called for redemption.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and Common Securities, as applicable, shall be made pro rata based on
the Liquidation Amount of the Capital Securities
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and Common Securities outstanding; provided, however, that if on any
Distribution Date or Redemption Date a Debenture Event of Default shall have
occurred and be continuing, no payment of any Distribution on, or applicable
Redemption Price of, any of the Common Securities, and no other payment on
account of the redemption, liquidation or other acquisition of the Common
Securities, shall be made unless payment in full in cash of all accumulated and
unpaid Distributions on all of the outstanding Capital Securities for all
Distribution periods terminating on or prior thereto, or in the case of payment
of the applicable Redemption Price the full amount of such Redemption Price,
shall have been made or provided for, and all funds available to the Property
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Capital Securities then due and
payable.
In the case of any Event of Default, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Corporation as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
Events of Default; Notice
The occurrence of a Debenture Event of Default (see "Description of
Exchange Junior Subordinated Debentures -- Debenture Events of Default")
constitutes an "Event of Default" under the Trust Agreement.
Within ninety days after the occurrence of any Event of Default actually
known to the Property Trustee, the Property Trustee shall transmit notice of
such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation as Sponsor, unless such Event of
Default shall have been cured or waived. The Corporation as Sponsor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described under
"-- Liquidation of the Trust and Distribution of Exchange Junior Subordinated
Debentures" and "-- Subordination of Common Securities."
Removal of Issuer Trustees
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint, remove or replace the Administrative Trustees, which
voting rights are vested exclusively in the Corporation as the holder of the
Common Securities. No resignation or removal of an Issuer Trustee and no
appointment of a successor trustee shall be effective until the acceptance of
appointment by the successor trustee in accordance with the provisions of the
Trust Agreement.
Merger or Consolidation of Issuer Trustees
Any corporation into which the Property Trustee, the Delaware Trustee or
any Administrative Trustee that is not a natural person 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 Issuer Trustee shall
be a party, or any corporation succeeding to all or substantially all the
corporate trust business of such Issuer Trustee, shall be the successor of such
Issuer Trustee under the Trust Agreement, provided such corporation shall be
otherwise qualified and eligible.
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Mergers, Consolidations, Amalgamation or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other person,
except as described below. The Trust may, at the request of the Corporation as
the holder of all of the outstanding Common Securities, with the consent of the
Administrative Trustees but without the consent of the Property Trustee, the
Delaware Trustee or the holders of the Capital Securities, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to a trust
organized as such under the laws of any State; provided, that (i) such successor
entity either (a) expressly assumes all of the obligations of the Trust with
respect to the Capital Securities or (b) substitutes for the Capital Securities
other securities having substantially the same terms as the Capital Securities
(the "Successor Securities") so long as the Successor Securities rank in
priority the same as the Capital Securities with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Corporation
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee with respect to the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Capital Securities are
then listed or quoted, if any, (iv) such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital Securities
(including any Successor Securities) to be downgraded by any two nationally
recognized statistical rating organizations, (v) such merger, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the holders of the Capital
Securities (including any Successor Securities) in any material respect (other
than any dilution of such holders' interests in the new entity), (vi) such
successor entity has a purpose identical to that of the Trust, (vii) prior to
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Corporation has received an opinion from independent counsel to the
Trust experienced in such matters to the effect that (a) such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect
(other than any dilution of such holders' interests in the new entity), and (b)
following such merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be required
to register as an investment company under the Investment Company Act, (viii)
the Corporation or any permitted successor or assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee and (ix) 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 or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease would cause the Trust or the successor entity not
to be classified as a grantor trust for United States federal income tax
purposes.
Voting Rights; Amendment of the Trust Agreement
Except as described below and under "-- Removal of Issuer Trustees,"
"-- Mergers, Consolidations, Amalgamation or Replacements of the Trust" and
"Description of Exchange Guarantee -- Amendments and Assignment" and as
otherwise required by law and the terms of the Trust Securities and the Trust
Agreement, the holders of the Exchange Capital Securities will have no voting
rights.
The Trust Agreement may be amended from time to time by the Corporation as
the holder of all of the outstanding Common Securities, the Property Trustee and
the Administrative Trustees without the consent of the holders of the Trust
Securities or the Delaware Trustee (i) to cure any ambiguity, correct or
supplement any provisions in the Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement, which shall not be inconsistent
with the other provisions of the Trust Agreement, (ii) to modify, eliminate or
add to any provisions of the Trust Agreement to such extent as shall be
necessary to ensure that the Trust will be
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classified for United States federal income tax purposes as a grantor trust at
all times that any Trust Securities are outstanding or to ensure that the Trust
will not be required to register as an "investment company" under the Investment
Company Act, or (iii) to qualify or maintain qualification of the Trust
Agreement under the Trust Indenture Act; provided, however, that in each case,
such action shall not adversely affect in any material respect the interests of
the holders of the Trust Securities. Any amendments of the Trust Agreement
pursuant to the foregoing shall become effective when notice thereof is sent to
the holders of the Trust Securities. The Trust Agreement may be amended by the
Property Trustee, the Administrative Trustees and the Corporation as the holder
of all of the outstanding Common Securities with the consent of holders
representing a majority (based upon Liquidation Amount) of the outstanding Trust
Securities and upon receipt by the Property Trustee and the Administrative
Trustees of an opinion of counsel to the effect that such amendment or the
exercise of any power granted to the Property Trustee and the Administrative
Trustees in accordance with such amendment will not affect the Trust's status as
a grantor trust for United States federal income tax purposes or the Trust's
exemption from status as an "investment company" under the Investment Company
Act, provided that, without the consent of each holder of Trust Securities, the
Trust Agreement may not be amended (i) to change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date or (ii) to restrict the right of a holder of Trust Securities to
institute suit for the enforcement of any such payment on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee for the benefit of the holders of the Trust Securities, the Property
Trustee and the Administrative Trustees shall not (i) direct the time, method
and place of conducting any proceeding for any remedy available to the Debenture
Trustee, or execute any trust or power conferred on such Debenture Trustee with
respect to the Junior Subordinated Debentures, (ii) waive certain past defaults
under the Indenture, (iii) exercise any right to rescind or annul a declaration
of acceleration of the maturity of the Junior Subordinated Debentures or (iv)
consent to any amendment, modification or termination of the Indenture or the
Junior Subordinated Debentures, where such consent shall be required, without in
each case obtaining the prior approval of the holders of a majority in
Liquidation Amount of all outstanding Capital Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debentures affected thereby, no such consent shall
be given by the Property Trustee without the prior approval of each holder of
the Capital Securities. The Issuer Trustees shall not revoke any action
previously authorized or approved by a vote of the holders of the Capital
Securities except by subsequent vote of such holders. The Property Trustee shall
notify each holder of Capital Securities of any notice of default with respect
to the Junior Subordinated Debentures. In addition to obtaining the foregoing
approvals of such holders of the Capital Securities, prior to taking any of the
foregoing actions, the Issuer Trustees shall obtain an opinion of counsel
experienced in such matters to the effect that there is no more than an
insubstantial risk that the Trust would not be classified for United States
federal income tax purposes as a grantor trust on account of such action.
Any required approval of holders of Exchange Capital Securities may be
given at a meeting of such holders convened for such purpose or pursuant to
written consent. The Administrative Trustees will cause a notice of any meeting
at which holders of Exchange Capital Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Exchange Capital Securities in the manner
set forth in the Trust Agreement.
No vote or consent of the holders of Exchange Capital Securities will be
required for the Trust to redeem and cancel the Exchange Capital Securities in
accordance with the Trust Agreement.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
affiliate of the Corporation or any Issuer Trustees, shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
If a Debenture Event of Default has occurred and is continuing, the
Property Trustee and the Delaware Trustee may be removed at such time by the
holders of a majority in Liquidation Amount of the outstanding Capital
Securities. In no event will the holders of the Capital Securities have the
right to vote to appoint,
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remove or replace the Administrative Trustees, which voting rights are vested
exclusively in the Corporation as the holder of all the outstanding Common
Securities.
Form, Denomination, Book-Entry Procedures and Transfer
The Exchange Capital Securities initially will be represented by one or
more Exchange Capital Securities certificates in registered, global form
(collectively, the "Global Capital Securities"). The Global Capital Securities
will be deposited upon issuance with the Property Trustee as custodian for DTC,
in New York, New York, and registered in the name of DTC or its nominee, in each
case for credit to an account of a direct or indirect participant in DTC as
described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described below. See "-- Exchange of
Book-Entry Capital Securities for Certificated Capital Securities."
Depositary Procedures
DTC has advised the Trust and the Corporation that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership interest
of each actual purchaser of each security held by or on behalf of DTC are
recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants designated by the Initial
Purchasers with portions of the Liquidation Amount of the Global Capital
Securities and (ii) ownership of such interests in the Global Capital Securities
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Capital Securities).
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the Trust
Agreement for any purpose.
Payments in respect of the Global Capital Security registered in the name
of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Trust Agreement. Under the terms of
the Trust Agreement, the Property Trustee will treat the persons in whose names
the Capital Securities, including the Global Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global Capital Securities, or for maintaining, supervising or reviewing any of
DTC's records or any Participant's or Indirect Participant's records relating to
the beneficial ownership interests in the Global Capital Securities or (ii) any
other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the
Corporation that its current practice, upon receipt of any payment in respect of
securities such as the Capital Securities, is to credit the accounts of
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the relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in Liquidation Amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of
Capital Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Property Trustee,
the Trust or the Corporation. Neither the Trust nor the Corporation nor the
Property Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Capital Securities, and the Trust,
the Corporation and the Property Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Beneficial interests in the Global Capital Securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of Exchange Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in the
Global Capital Securities are credited and only in respect of such portion of
the Liquidation Amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event of
Default under the Trust Agreement, DTC reserves the right to exchange the Global
Capital Securities for Exchange Capital Securities in certificated form and to
distribute such Exchange Capital Securities to its Participants.
The information in this section concerning DTC, and its book-entry systems,
has been obtained from sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes responsibility for the
accuracy thereof.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global Capital Security is exchangeable for Exchange Capital Securities
in registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as depositary for the Global Capital Security
and the Trust thereupon fails to appoint a successor depositary within 90 days
or (y) has ceased to be a clearing agency registered under the Exchange Act,
(ii) the Corporation in its sole discretion elects to cause the issuance of the
Exchange Capital Securities in certificated form or (iii) there shall have
occurred and be continuing an Event of Default or any event which after notice
or lapse of time or both would be an Event of Default under the Trust Agreement.
In addition, beneficial interests in a Global Capital Security may be exchanged
for certificated Exchange Capital Securities upon request but only upon at least
20 days prior written notice given to the Property Trustee by or on behalf of
DTC in accordance with its customary procedures as in effect at that time. In
all cases, certificated Exchange Capital Securities delivered in exchange for
any Global Capital Security or beneficial interests therein will be registered
in the names, and issued in any approved denominations, requested by or on
behalf of DTC (in accordance with its customary procedures).
Payment and Paying Agency
The clearing agency for the Exchange Capital Securities (the "Clearing
Agency") shall initially be DTC. Payments in respect of the Exchange Capital
Securities held in global form shall be made to the Clearing Agency, which shall
credit the relevant accounts at the Clearing Agency on the applicable
Distribution Dates or, in respect of the Exchange Capital Securities that are
not held by the Clearing Agency, 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 for the Exchange Capital Securities (the "Paying
Agent") shall initially be the Property Trustee. The Paying Agent shall be
permitted to resign as Paying Agent upon 30 days' written notice to the Property
Trustee and the Corporation. In the event that the Property Trustee shall no
longer be the
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Paying Agent, the Administrative Trustees shall appoint a successor (which shall
be a bank or trust company acceptable to the Administrative Trustees and the
Corporation) to act as Paying Agent.
Registrar and Transfer Agent
The Property Trustee will act as registrar and transfer agent for the
Exchange Capital Securities.
Registration of transfers of the Exchange Capital Securities will be
effected without charge by or on behalf of the Trust, subject to payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The Trust will not be required to register or cause to be
registered the transfer of the Exchange Capital Securities after they have been
called for redemption.
Information Concerning the Property Trustee
The Property Trustee, other than during the occurrence and continuance of
an Event of Default, undertakes to perform only such duties as are specifically
set forth in the Trust Agreement and, after such Event of Default, must exercise
the same degree of care and skill as a prudent person would exercise or use in
the conduct of his or her own affairs. Subject to this provision, the Property
Trustee is under no obligation to exercise any of the powers vested in it by the
Trust Agreement at the request of any holder of Trust Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby. If no Event of Default has occurred and is continuing
and the Property Trustee is required to decide between alternative causes of
action, construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of the Capital Securities or the Common Securities are entitled
under the Trust Agreement to vote, then the Property Trustee shall take such
action as is directed by the Corporation and, if not so directed, shall take
such action as it deems advisable and in the best interests of the holders of
the Trust Securities and will have no liability except for its own bad faith,
negligence or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust (i) will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act, (ii) will continue to be classified for United States
federal income tax purposes as a grantor trust, and (iii) will cooperate with
the Corporation to ensure that the Junior Subordinated Debentures will be
treated as indebtedness of the Corporation for United States federal income tax
purposes. In this connection, the Corporation and the Administrative Trustees
are authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Trust Agreement, that the Corporation
and the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued and the Exchange Junior
Subordinated Debentures will be issued under the Indenture between the
Corporation and the Debenture Trustee. The Indenture has been qualified under
the Trust Indenture Act. This summary of certain terms and provisions of the
Junior Subordinated Debentures and the Indenture does not purport to be
complete, and where reference is made to particular provisions of the Indenture,
such provisions, including the definitions of certain terms, some of which are
not otherwise defined herein, are qualified in their entirety by reference to
all of the provisions of the Indenture and those terms made a part of the
Indenture by the Trust Indenture Act.
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General
Concurrently with the issuance of the Trust Securities, the Trust invested
the proceeds thereof, together with the consideration paid by the Corporation
for the Common Securities, in Junior Subordinated Debentures issued by the
Corporation. Pursuant to the Exchange Offer, the Corporation will exchange
Exchange Junior Subordinated Debentures, in an amount corresponding to the Old
Capital Securities accepted for exchange, for a like aggregate principal amount
of the Old Junior Subordinated Debentures as soon as practicable after the date
hereof.
The Exchange Junior Subordinated Debentures will bear interest from January
13, 1997 at the annual rate of 8.73% of the principal amount thereof, payable
semi-annually in arrears on January 1 and July 1 of each year (each, an
"Interest Payment Date"), commencing July 1, 1997, to the person in whose name
each Exchange Junior Subordinated Debenture is registered, subject to certain
exceptions, at the close of business on the fifteenth day preceding the relevant
payment date. It is anticipated that, until the liquidation, if any, of the
Trust, each Exchange Junior Subordinated Debenture will be held in the name of
the Property Trustee in trust for the benefit of the holders of the Trust
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months and for any period less than
6 months, the actual months elapsed and the actual days elapsed in a partial
month in a period. In the event that any date on which interest is payable on
the Exchange 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) with the same force and effect as if made on the date such
payment was originally payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest on the amount
thereof (to the extent permitted by law) at the rate per annum of 8.73% thereof,
compounded semi-annually. The term "interest", as used herein, shall include
semi-annual interest payments, interest on semi-annual interest payments not
paid on the applicable Interest Payment Date and Additional Sums (as defined
below), as applicable.
The Exchange Junior Subordinated Debentures will be issued in denominations
of $1,000 and integral multiples thereof. The Exchange Junior Subordinated
Debentures will mature on January 1, 2037.
The Exchange Junior Subordinated Debentures will rank pari passu with the
Old Junior Subordinated Debentures and with all Other Debentures and will be
unsecured and subordinate and junior in right of payment to the extent and in
the manner set forth in the Indenture to all Senior Indebtedness. See
"-- Subordination." Because the Corporation is a non-operating holding company,
the right of the Corporation to participate in any distribution of assets of any
subsidiary upon such subsidiary's liquidation or reorganization or otherwise
(and thus the ability of holders of the Exchange Capital Securities to benefit
indirectly from such distribution), is subject to the prior claims of creditors
of that subsidiary, except to the extent that the Corporation may itself be
recognized as a creditor of that subsidiary. Accordingly, the Exchange Junior
Subordinated Debentures will be effectively subordinated to all existing and
future liabilities of the Corporation's subsidiaries, and holders of Exchange
Junior Subordinated Debentures should look only to the assets of the Corporation
for payments on the Exchange Junior Subordinated Debentures. In addition, since
many of the Corporation's subsidiaries are insurance companies subject to
regulatory control by various state insurance departments, the ability of such
subsidiaries to pay dividends to the Corporation without prior regulatory
approval is limited by applicable laws and regulations. The Indenture does not
limit the incurrence or issuance of other secured or unsecured debt of the
Corporation, including Senior Indebtedness. See "-- Subordination."
Form, Registration and Transfer
If the Exchange Junior Subordinated Debentures are distributed to the
holders of the Trust Securities, the Exchange Junior Subordinated Debentures may
be represented by one or more global certificates registered in the name of Cede
& Co. as the nominee of DTC. The depositary arrangements for such Exchange
Junior Subordinated Debentures are expected to be substantially similar to those
in effect for the Exchange Capital Securities. For a description of DTC and the
terms of the depositary arrangements relating to payments, transfers, voting
rights, redemptions and other notices and other matters, see "Description of
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Exchange Securities -- Description of Exchange Capital Securities -- Form,
Denomination, Book-Entry Procedures and Transfer."
Payment and Paying Agents
Payment of principal of and any interest on Exchange Junior Subordinated
Debentures will be made at the office of the Debenture Trustee in The City of
New York or at the office of such Paying Agent or Paying Agents as the
Corporation may designate from time to time, except that at the option of the
Corporation payment of any interest may be made (i) by check mailed to the
address of the person entitled thereto as such address shall appear in the
register for Exchange Junior Subordinated Debentures or (ii) by transfer to an
account maintained by the person entitled thereto as specified in such register,
provided that proper transfer instructions have been received by the relevant
Record Date. Payment of any interest on any Exchange Junior Subordinated
Debenture will be made to the person in whose name such Exchange Junior
Subordinated Debenture is registered at the close of business on the Record Date
for such interest, except in the case of defaulted interest. The Corporation may
at any time designate additional Paying Agents or rescind the designation of any
Paying Agent.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of or
interest on any Exchange Junior Subordinated Debenture and remaining unclaimed
for two years after such principal or interest has become due and payable shall,
at the request of the Corporation, be repaid to the Corporation and the holder
of such Exchange Junior Subordinated Debenture shall thereafter look, as a
general unsecured creditor, only to the Corporation for payment thereof.
Option to Extend Interest Payment Date
So long as no Debenture Event of Default has occurred and is continuing,
the Corporation will have the right under the Indenture at any time during the
term of the Exchange Junior Subordinated Debentures to defer the payment of
interest at any time or from time to time for a period not exceeding 10
consecutive semi-annual periods with respect to each Extension Period, provided
that no Extension Period may extend beyond the Stated Maturity. At the end of an
Extension Period, the Corporation must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of 8.73%, compounded
semi-annually, to the extent permitted by applicable law). During an Extension
Period, interest will continue to accrue and holders of Exchange Junior
Subordinated Debentures (and holders of Exchange Capital Securities while
Exchange Capital Securities are outstanding) will be required to include the
accruals of such interest in gross income for United States federal income tax
purposes (as original issue discount) prior to the receipt of cash attributable
to such interest. See "Certain Federal Income Tax Consequences -- Interest
Income and OID."
During any Extension Period, the Corporation may not, and may not permit
any subsidiary to, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock (which includes common and preferred stock),
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Corporation (including Other
Debentures) that rank pari passu with or junior in right of payment to the
Exchange Junior Subordinated Debentures or (iii) make any guarantee payments
with respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including Other Guarantees) if such guarantee
ranks pari passu with or junior in right of payment to the Exchange Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a direct
result of, and only to the extent necessary to avoid the issuance of fractional
shares of the Corporation's capital stock following, a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged
and (f) purchases of common stock related to the issuance of common stock or
rights under any of
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the Corporation's benefit plans for its directors, officers or employees or any
of the Corporation's dividend reinvestment plans). None of the Corporation's
subsidiaries will be prohibited from declaring and paying cash distributions
with respect to its capital stock or from making payments with respect to its
debt securities.
Prior to the termination of any Extension Period, the Corporation may
further extend it, provided that no Extension Period may exceed 10 consecutive
semi-annual periods or extend beyond the Stated Maturity. Upon the termination
of any Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Corporation may elect to begin a new Extension Period, subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Corporation must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Trust Securities would have been payable except for the election to begin or
extend such Extension Period or (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to holders of Capital
Securities of the record date or the date such Distributions are payable, but in
any event not less than five Business Days prior to such record date. The
Property Trustee shall give notice of the Corporation's election to begin or
extend a new Extension Period to the holders of the Capital Securities. There is
no limitation on the number of times that the Corporation may elect to begin an
Extension Period.
Optional Prepayment
The Exchange Junior Subordinated Debentures will be prepayable, in whole or
in part, at the option of the Corporation on or after January 1, 2007, at a
prepayment price equal to the outstanding principal amount of the Exchange
Junior Subordinated Debentures to be prepaid, plus accrued and unpaid interest
thereon to the date of prepayment and any Additional Sums (as defined in
"Description of the Exchange Securities -- Description of Junior Subordinated
Debentures -- Conditional Right to Shorten Maturity and Special Event
Prepayment").
Conditional Right to Shorten Maturity and Special Event Prepayment
If a Tax Event occurs, then the Corporation will have the right, prior to
the termination of the Trust, either (i) to shorten the Stated Maturity of the
Junior Subordinated Debentures to the minimum extent required, but not less than
20 years from the date of original issuance thereof, such that in the written
opinion of counsel experienced in such matters delivered to the Corporation,
after shortening the maturity, interest paid on the Junior Subordinated
Debentures will be deductible for federal income tax purposes or (ii) to prepay
the Junior Subordinated Debentures as described below.
If a Special Event (as defined below) shall occur and be continuing, the
Corporation may, at its option, prepay the Junior Subordinated Debentures in
whole (but not in part) at any time within 90 days of the occurrence of such
Special Event, at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (i) 100% of the principal amount of such Junior
Subordinated Debentures or (ii) the sum, as determined by a Quotation Agent, of
the present values of the remaining scheduled payments of principal and interest
thereon to January 1, 2007, the first date on which the Junior Subordinated
Debentures are subject to optional prepayment, in each case discounted to the
prepayment date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate, plus, in each case, accrued
and unpaid interest thereon to the date of prepayment and any Additional Sums
(as defined below).
A "Special Event" means a Conditional Tax Redemption Event (as defined
under "Description of the Exchange Capital Securities -- Conditional Right to
Shorten Maturity and Special Event Redemption") or an Investment Company Event,
as the case may be.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such prepayment date plus (i) 1.25% if such prepayment date
occurs on or prior to January 1, 1998 and (ii) 0.50% in all other cases.
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"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term to the Stated Maturity of the Junior Subordinated Debentures to be prepaid
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the Junior Subordinated
Debentures.
"Quotation Agent" means: (i) Donaldson, Lufkin & Jenrette Securities
Corporation and its successors; provided, however, that if the foregoing shall
cease to be a primary U.S. Government securities dealer in New York City (a
"Primary Treasury Dealer"), the Corporation shall substitute therefor another
Primary Treasury Dealer; and (ii) any other Primary Treasury Dealer selected by
the Debenture Trustee after consultation with the Corporation.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of the Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Debenture Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted to
the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such prepayment date.
"Additional Sums" as hereinafter used means the additional amounts as may
be necessary in order that the amount of Distributions then due and payable by
the Trust on the outstanding Capital Securities and Common Securities shall not
be reduced as a result of any additional taxes, duties and other governmental
charges to which the Trust has become subject as a result of a Tax Event.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Exchange Junior
Subordinated Debentures to be prepaid at its registered address. Unless the
Corporation defaults in payment of the prepayment price, on and after the
prepayment date, interest ceases to accrue on such Exchange Junior Subordinated
Debentures called for prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Corporation will pay as
additional amounts on the Exchange Junior Subordinated Debentures the Additional
Sums.
Restrictions on Certain Payments; Covenants as to the Trust
The Corporation will covenant that if, at any time, (1) there shall have
occurred any event of which the Corporation has actual knowledge that (x) is, or
with the giving of notice or the lapse of time, or both, would be, a Debenture
Event of Default and (y) in respect of which the Corporation shall not have
taken reasonable steps to cure, (2) the Corporation shall be in default with
respect to its payment of any obligations under the Guarantee and the Junior
Subordinated Debentures are held by the Trust or (3) the Corporation shall have
given notice of its election of an Extension Period as provided in the Indenture
and shall not have rescinded such notice, and such Extension Period, or any
extension thereof, shall have commenced, then the Corporation will not, and will
not permit any subsidiary to, (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Corporation's capital stock (which includes common and preferred
stock), (ii) make any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any debt securities of the Corporation (including
Other Debentures) that rank pari passu with or junior in right of payment to the
Exchange Junior Subordinated Debentures or
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(iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including under Other Guarantees) if such guarantee ranks pari passu or junior
in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a direct result of, and only to the extent
necessary to avoid the issuance of fractional shares of the Corporation's
capital stock following, a reclassification of the Corporation's capital stock
or the exchange or conversion of one class or series of the Corporation's
capital stock for another class or series of the Corporation's capital stock,
(e) the purchase of fractional interests in shares of the Corporation's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, and (f) purchases of common stock
related to the issuance of common stock or rights under any of the Corporation's
benefit plans for its directors, officers or employees or any of the
Corporation's dividend reinvestment plans).
The Corporation's covenants will not prevent its subsidiaries from
declaring and paying cash distributions with respect to capital stock of the
subsidiaries or from making payments with respect to debt securities of the
subsidiaries.
The Corporation has covenanted in the Indenture that, for so long as the
Exchange Junior Subordinated Debentures are issued to the Trust or a trustee of
the Trust, the Corporation will (i) directly or indirectly maintain ownership of
all of the outstanding Common Securities of the Trust, provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Corporation's ownership of the Common Securities, and (ii) to use its reasonable
efforts to cause the Trust (a) to remain a business trust, except in connection
with a distribution of Capital Securities, the redemption of all of the Trust
Securities or certain mergers, consolidations or amalgamations each as permitted
by the Trust Agreement, and (b) consistent with the terms and provisions of the
Trust Agreement, to continue to be classified as a grantor trust and not as an
association taxable as a corporation for United States federal income tax
purposes and (iii) use its reasonable efforts to cause each Holder to be treated
as owning an individual beneficial interest in the Capital Securities.
Modification of Indenture
From time to time the Corporation and the Debenture Trustee may, without
the consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies (provided that any such action
does not materially adversely affect the interest of the holders of Junior
Subordinated Debentures) and qualifying, or maintaining the qualification of,
the Indenture under the Trust Indenture Act. The Indenture contains provisions
permitting the Corporation and the Debenture Trustee, with the consent of the
holders of a majority in principal amount of Junior Subordinated Debentures, to
modify the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided, that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected, (i) change the Stated Maturity, or reduce the principal amount of the
Junior Subordinated Debentures, or reduce the rate or extend the time of payment
of interest thereon or (ii) reduce the percentage of principal amount of Junior
Subordinated Debentures, the holders of which are required to consent to any
such modification of the Indenture.
Debenture Events of Default
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or 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): (i)
failure for 30 days to pay any interest on the Exchange Junior Subordinated
Debentures or any Other Debentures, when due (subject to the deferral of any due
date in the case of an Extension Period); or (ii) failure to pay any principal
of or premium, if any, on the Exchange Junior
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Subordinated Debentures or any Other Debentures when due whether at maturity,
upon redemption, by declaration of acceleration of maturity or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Corporation from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the nonpayment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default, except a default
in the payment of principal or interest (unless such default has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee) or
a default in respect of a covenant or provision which under the Indenture cannot
be modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
Enforcement of Certain Rights by Holders of Capital Securities
If a Debenture Event of Default shall have occurred and be continuing and
shall be attributable to the failure of the Corporation to pay principal of or
premium, if any, or interest on the Junior Subordinated Debentures on the due
date, a holder of Capital Securities may institute a Direct Action. The
Corporation may not amend the Indenture to remove the foregoing right to bring a
Direct Action without the prior written consent of the holders of all of the
Capital Securities. If the right to bring a Direct Action is removed following
the Exchange Offer, the Trust may become subject to the reporting obligations
under the Exchange Act. Notwithstanding any payments made to a holder of
Exchange Capital Securities by the Corporation in connection with a Direct
Action, the Corporation shall remain obligated to pay the principal of or
premium, if any, or interest on the Exchange Junior Subordinated Debentures, and
the Corporation shall be subrogated to the rights of the holder of such Exchange
Capital Securities with respect to payments on the Exchange Capital Securities
to the extent of any payments made by the Corporation to such holder in any
Direct Action.
The holders of the Exchange Capital Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Exchange Junior Subordinated Debentures unless
there shall have been an Event of Default under the Trust Agreement. See
"Description of Exchange Capital Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions
The Indenture provides that the Corporation shall not consolidate with or
merge into any other person or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any person, and no
person shall consolidate with or merge into the Corporation or convey, transfer
or lease its properties and assets as an entirety or substantially as an
entirety to the Corporation, unless: (i) in case the Corporation consolidates
with or merges into another person or conveys or transfers its properties and
assets substantially as an entirety to any person, the successor person is
organized under the laws of the United States or any State or the District of
Columbia, and such successor person expressly assumes the Corporation's
obligations on the Junior Subordinated Debentures; (ii) immediately after giving
effect thereto, no Debenture Event of Default,
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and no event which, after notice or lapse of time or both, would become a
Debenture Event of Default, shall have occurred and be continuing; and (iii)
certain other conditions as prescribed in the Indenture are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Exchange Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all Exchange Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at maturity within one year, and the Corporation deposits or causes to be
deposited with the Debenture Trustee funds, in trust, for the purpose and in an
amount sufficient to pay and discharge the entire indebtedness on the Exchange
Junior Subordinated Debentures not previously delivered to the Debenture Trustee
for cancellation, for the principal and premium, if any, and interest to the
date of the deposit or to the Stated Maturity, as the case may be, then the
Indenture will cease to be of further effect (except as to the Corporation's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Corporation will be deemed to have satisfied and discharged the Indenture.
Subordination
In the Indenture, the Corporation has covenanted and agreed that any
Exchange Junior Subordinated Debentures issued thereunder will be subordinate
and junior in right of payment to all Senior Indebtedness to the extent provided
in the Indenture. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Indebtedness
will first be entitled to receive payment in full before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or premium, if any, or interest in
respect of the Junior Subordinated Debentures may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Senior Indebtedness" shall mean, with respect to the Corporation, (i) the
principal, premium, if any, and interest in respect of (A) Indebtedness for
Money Borrowed and (B) indebtedness evidenced by securities, notes, debentures,
bonds or other similar instruments issued by the Corporation, (ii) all capital
lease obligations of the Corporation, (iii) all obligations of the Corporation
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of the Corporation and all obligations of the Corporation under
any conditional sale or title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations,
contingent or otherwise of the Corporation in respect of any letter of credit,
banker's acceptance, security purchase facilities or similar credit transaction,
(v) all obligations in respect of interest rate swap, cap or other agreements,
interest rate future or option contracts, currency swap agreements, currency
future or option contracts and other similar agreements, (vi) all obligations of
the type referred to in clauses (i) through (v) above of other persons for the
payment of which the Corporation is responsible or liable as obligor, guarantor
or otherwise and (vii) all obligations of the type referred to in clauses (i)
through (vi) above of other persons secured by any lien on any property or asset
of the Corporation (whether or not such obligation is assumed by the
Corporation), except for (1) any such
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indebtedness that is by its terms subordinated to or pari passu with the Junior
Subordinated Debentures and (2) any indebtedness between or among the
Corporation or its affiliates, including all other debt securities and
guarantees in respect of those debt securities issued to (a) any other Orion
Capital Trust or a trustee of such trust and (b) any other trust, or a trustee
of such trust, partnership or other entity affiliated with the Corporation that
is a financing vehicle of the Corporation (a "financing entity") in connection
with the issuance by such a financing entity of preferred securities or other
securities that rank pari passu with, or junior to, the Capital Securities. Such
Senior Indebtedness shall continue to be Senior Indebtedness and be entitled to
the benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments.
By reason of such subordination, in the event of an insolvency, creditors
of the Corporation who are holders of Senior Indebtedness, as well as certain
general creditors of the Corporation, may recover more, ratably, than the
holders of the Junior Subordinated Debentures. Additionally, the Corporation
currently conducts substantially all of its operations through subsidiaries, and
the holders of Junior Subordinated Debentures will be structurally subordinated
to the creditors of the Corporation's subsidiaries. The Corporation relies
primarily on dividends from such subsidiaries to meet its obligations for
payment of its corporate expenses and principal and interest on its outstanding
debt obligations. See "Risk Factors -- Ranking of Subordinated Obligations Under
the Exchange Guarantee and the Exchange Junior Subordinated Debentures."
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Governing Law
The Indenture and the Exchange Junior Subordinated Debentures will be
governed by and construed in accordance with the laws of the State of New York.
Information Concerning the Debenture Trustee
Following the Exchange Offer and the qualification of the Indenture under
the Trust Indenture Act, the Debenture Trustee shall have and be subject to all
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. Subject to such provisions, the Debenture Trustee
is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Exchange Junior Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The Debenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Debenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
DESCRIPTION OF EXCHANGE GUARANTEE
The Old Guarantee was executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Old Capital Securities for
the benefit of the holders from time to time of the Old Capital Securities. As
soon as practicable after the date hereof, the Exchange Guarantee will be
exchanged by the Corporation for the Old Guarantee for the benefit of the
holders from time to time of the Exchange Capital Securities. To the extent that
Old Capital Securities are not tendered and accepted pursuant to the Exchange
Offer for Exchange Capital Securities, the Corporation will continue to provide
such holders of Old Capital Securities with the guarantees set forth under the
Old Guarantee. The Bank of New York will act as trustee ("Guarantee Trustee")
under the Guarantee. The Guarantee has been qualified under the Trust Indenture
Act. This summary description of all the material provisions of the Guarantee
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Guarantee, including
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the definitions therein of certain terms, and the Trust Indenture Act. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Capital Securities.
General
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent summarized herein, the Guarantee Payments (as defined
below) to the holders of the Exchange Capital Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert other than the defense of payment. The following payments with
respect to the Exchange Capital Securities, to the extent not paid by or on
behalf of the Trust (the "Guarantee Payments"), will be subject to the
Guarantee: (i) any accumulated and unpaid Distributions required to be paid on
Exchange Capital Securities, to the extent that the Trust has funds on hand
legally available therefor at such time, (ii) the applicable Redemption Price
with respect to Exchange Capital Securities called for redemption, to the extent
that the Trust has funds on hand legally available therefor at such time, or
(iii) upon a voluntary or involuntary termination and liquidation of the Trust,
the lesser of (a) the Liquidation Distribution and (b) the amount of assets of
the Trust remaining available for distribution to holders of Exchange Capital
Securities. The Corporation's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Corporation to the
holders of the Exchange Capital Securities or by causing the Trust to pay such
amounts to such holders.
Because the Corporation is a holding company, the right of the Corporation
to participate in any distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization or otherwise, is subject to the prior
claims of creditors of that subsidiary, except to the extent the Corporation may
itself be recognized as a creditor of that subsidiary. Accordingly, the
Corporation's obligations under the Exchange Guarantee will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries, and claimants should look only to the assets of the Corporation
for payments thereunder. See "Description of Exchange Securities -- Description
of the Exchange Junior Subordinated Debentures -- General." The Exchange
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Corporation, including Senior Indebtedness, whether under
the Indenture, any other indenture that the Corporation has entered into or may
enter into in the future or otherwise.
The Corporation will, through the Exchange Guarantee, the Trust Agreement,
the Exchange Junior Subordinated Debentures and the Indenture, taken together,
fully, irrevocably and unconditionally guarantee all of the Trust's obligations
under the Exchange Capital Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the Exchange Capital Securities. See "Relationship
Among the Exchange Capital Securities, the Exchange Junior Subordinated
Debentures and the Exchange Guarantee."
Status of the Guarantee
The Exchange Guarantee will constitute an unsecured obligation of the
Corporation. The Exchange Guarantee and the Common Guarantee will be (i)
subordinate and junior in right of payment to all other liabilities of the
Corporation; (ii) pari passu with (A) the most senior preferred or preference
stock now or hereafter issued by the Corporation, and (B) any guarantee now or
hereafter entered into by the Corporation, in respect of any capital securities
or common securities of any Other Trusts; and (iii) senior to the Corporation's
common stock.
The Exchange Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The Exchange
Guarantee will be held for the benefit of the holders of the Capital Securities.
The Exchange Guarantee will not be discharged except by payment of the Guarantee
Payments in full to the extent not paid by the Trust or upon distribution to the
holders of the Exchange Capital Securities of the Exchange Junior Subordinated
Debentures. The Exchange Guarantee does not place a limitation on the amount of
additional Senior
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Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Exchange Capital Securities (in which case no vote
will be required), the Exchange Guarantee may not be amended without the prior
approval of the holders of a majority of the Liquidation Amount of such
outstanding Exchange Capital Securities. The manner of obtaining any such
approval will be as set forth under "Description of Exchange
Securities -- Description of the Exchange Capital Securities -- Voting Rights;
Amendment of the Trust Agreement." All guarantees and agreements contained in
the Guarantee Agreement shall bind the successors, assigns, receivers, trustees
and representatives of the Corporation and shall inure to the benefit of the
holders of the Exchange Capital Securities then outstanding.
Events of Default
An event of default under the Exchange Guarantee will occur upon the
failure of the Corporation to perform any of its payment or other obligations
thereunder. The holders of a majority in Liquidation Amount of the Exchange
Capital Securities will 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 Exchange Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Exchange Guarantee.
Any holder of the Exchange Capital Securities may institute a legal
proceeding directly against the Corporation to enforce its rights under the
Exchange Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the
Exchange Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the continuance of a default by
the Corporation in performance of the Exchange Guarantee, will undertake to
perform only such duties as are specifically set forth in the Exchange Guarantee
and, during the continuance of such a default, must exercise the same degree of
care and skill as a prudent person would exercise or use in the conduct of his
or her own affairs. Subject to this provision, the Guarantee Trustee will be
under no obligation to exercise any of the powers vested in it by the Exchange
Guarantee at the request of any holder of the Exchange Capital Securities unless
it is offered reasonable indemnity against the costs, expenses and liabilities
that might be incurred thereby.
Termination of the Guarantee
The Exchange Guarantee will terminate and be of no further force and effect
upon full payment of the applicable Redemption Price of the Exchange Capital
Securities, upon full payment of the Liquidation Amount payable upon liquidation
of the Trust or upon distribution of Exchange Junior Subordinated Debentures to
the holders of the Capital Securities. The Exchange Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the Exchange Capital Securities must restore payment of any sums paid
under the Exchange Capital Securities or the Exchange Guarantee.
Governing Law
The Exchange Guarantee will be governed by and construed in accordance with
the laws of the State of New York.
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DESCRIPTION OF OLD SECURITIES
The information contained in this section is relevant to holders of Old
Securities whose Old Securities are not tendered and accepted for exchange by
the Expiration Date of the Exchange Offer. See "Risk Factors -- Certain
Consequences of a Failure to Exchange Old Capital Securities."
The terms of the Old Securities are identical in all material respects to
the Exchange Securities, except that (i) the Old Securities have not been
registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the applicable Registration
Rights Agreement (which rights will terminate upon consummation of the Exchange
Offer, except under limited circumstances with respect to certain
broker-dealers), (ii) the Old Capital Securities contain a $100,000 minimum
Liquidation Amount transfer restriction (which will be waived in respect of
tenders of Old Capital Securities in the Exchange Offer) and certain other
restrictions on transfer, (iii) the Old Capital Securities provide for
additional Distributions which will terminate as set forth below, (iv) the Old
Junior Subordinated Debentures contain a $100,000 minimum principal amount
transfer restriction and (v) the Old Junior Subordinated Debentures provide for
additional interest which will terminate as set forth below. The Old Securities
provide that, in the event that a registration statement relating to the
Exchange Offer has not been filed by June 12, 1997 or has not been declared
effective by July 12, 1997 or, in certain limited circumstances, in the event a
shelf registration statement (the "Shelf Registration Statement") with respect
to the resale of the Old Capital Securities is not declared effective by July
12, 1997, then additional interest will accrue (in addition to the stated
interest rate on the Old Junior Subordinated Debentures) at the rate of 0.25%
per annum on the principal amount of the Old Junior Subordinated Debentures and
additional Distributions will accrue (in addition to the stated Distribution
rate on the Old Capital Securities) at the rate of 0.25% per annum on the
Liquidation Amount of the Old Capital Securities, for the period from June 13,
or July 13, as the case may be, until such time as such events have occurred.
Upon the effectiveness of the Registration Statement of which this Prospectus is
a part and upon consummation of the Exchange Offer, the Trust and the
Corporation will have satisfied their obligations in this regard and the Old
Securities will not be, entitled to any such additional interest or additional
Distributions. Accordingly, holders of Old Capital Securities should review the
information set forth under "Risk Factors -- Certain Consequences of a Failure
to Exchange Old Capital Securities" and "Description of Exchange Securities."
RELATIONSHIP AMONG THE EXCHANGE CAPITAL
SECURITIES, THE EXCHANGE JUNIOR SUBORDINATED
DEBENTURES, THE EXCHANGE GUARANTEE AND THE TRUST AGREEMENT
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Exchange Capital
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed by the Corporation
as and to the extent set forth under "Description of Exchange
Securities -- Description of Exchange Guarantee." Taken together, the
Corporation's obligations under the Exchange Junior Subordinated Debentures, the
Indenture, the Trust Agreement and the Exchange Guarantee will provide, in the
aggregate, a full, irrevocable and unconditional guarantee of payment of
Distributions and other amounts due on the Exchange Capital Securities. No
single document standing alone or operating in conjunction with fewer than all
of the other documents constitutes such guarantee. It is only the combined
operation of these documents that has the effect of providing a full,
irrevocable and unconditional guarantee of the Trust's obligations under the
Exchange Capital Securities. If and to the extent that the Corporation does not
make the required payments on the Exchange Junior Subordinated Debentures, the
Trust will not have sufficient funds to make the related payments, including
Distributions, on the Exchange Capital Securities. The Exchange Guarantee will
not cover any such payment when the Trust does not have sufficient funds on hand
legally available therefor. In such event, the remedy of a holder of Exchange
Capital Securities is to institute a Direct Action. The obligations of the
Corporation under the Exchange Guarantee and the Common Guarantee will be
subordinate and junior in right of payment to all Senior Indebtedness and all
other liabilities of the Corporation.
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SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Exchange Junior Subordinated Debentures, such payments will be sufficient to
cover Distributions and other payments due on the Exchange Capital Securities,
primarily because: (i) the aggregate principal amount or Prepayment Price of the
Exchange Junior Subordinated Debentures will be equal to the sum of the
Liquidation Amount or Redemption Price, as applicable, of the Exchange Capital
Securities and Common Securities; (ii) the interest rate and interest and other
payment dates on the Exchange Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the Trust
Securities; (iii) the Corporation shall pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities under such Trust Securities; and (iv) the Trust Agreement will
provide that the Trust is not authorized to engage in any activity that is not
consistent with the limited purposes thereof.
ENFORCEMENT RIGHTS OF HOLDERS OF EXCHANGE CAPITAL SECURITIES
A holder of any Exchange Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the Exchange
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee, the Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Trust Agreement. However, in
the event of payment defaults under or acceleration of Senior Indebtedness, the
subordination provisions of the Indenture will provide that no payments may be
made in respect of the Exchange Junior Subordinated Debentures until such Senior
Indebtedness has been paid in full or any payment default thereunder has been
cured or waived. Failure to make required payments on Exchange Junior
Subordinated Debentures would constitute an Event of Default under the Trust
Agreement.
LIMITED PURPOSE OF THE TRUST
The Exchange Capital Securities will represent preferred beneficial
interests in the Trust, and the Trust exists for the sole purpose of issuing and
selling the Trust Securities, using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures and engaging in only
those other activities necessary, advisable or incidental thereto. A principal
difference between the rights of a holder of an Exchange Capital Security and a
holder of an Exchange Junior Subordinated Debenture is that a holder of an
Exchange Junior Subordinated Debenture will be entitled to receive from the
Corporation the principal of and premium, if any, and interest on Exchange
Junior Subordinated Debentures held, while a holder of Exchange Capital
Securities is entitled to receive Distributions from the Trust (or, in certain
circumstances, from the Corporation under the Exchange Guarantee) if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions.
RIGHTS UPON DISSOLUTION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary dissolution and liquidation
of the Trust, the holders of the Trust Securities will be entitled to receive
out of assets held by the Trust, after satisfaction of any liabilities to
creditors, the Liquidation Distribution in cash. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Liquidation of the
Trust and Distribution of Exchange Junior Subordinated Debentures." Upon any
voluntary or involuntary liquidation or bankruptcy of the Corporation, the
Property Trustee, as holder of the Exchange Junior Subordinated Debentures,
would be a subordinated creditor of the Corporation, subordinated in right of
payment to all Senior Indebtedness as set forth in the Indenture, but entitled
to receive payment in full of principal, premium, if any, and interest, before
any stockholders of the Corporation receive payments or distributions. Since the
Corporation will be the guarantor under the Exchange Guarantee and will agree to
pay for all costs, expenses and liabilities of the Trust (other than the Trust's
obligations to the holders of its Trust Securities), the positions of a holder
of Exchange Capital Securities and a holder of Exchange Junior Subordinated
Debentures relative to other creditors and to stockholders of the Corporation in
the event of liquidation or bankruptcy of the Corporation are expected to be
substantially the same.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Donovan Leisure Newton & Irvine, special tax counsel to
the Corporation and the Trust ("Tax Counsel"), the following is a summary of
certain of the material United States federal income tax consequences of the
purchase, ownership and disposition of Capital Securities held as capital assets
(generally, assets held for investment) by a holder who purchases Old Capital
Securities upon original issuance. It does not deal with special classes of
holders such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or currencies,
tax-exempt investors, or persons that will hold the Capital Securities as a
position in a "straddle," as part of a "synthetic security" or "hedge," as part
of a "conversion transaction" or other integrated investment, or as other than a
capital asset, or, except to the extent described below, foreign taxpayers. This
summary also does not address the tax consequences to persons that have a
functional currency other than the U.S. dollar or the tax consequences to
shareholders, partners or beneficiaries of a holder of Capital Securities.
Further, it does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Capital Securities. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations thereunder, the administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis. Each investor is urged to consult his tax advisor as to the
particular tax consequences of purchasing, owning, and disposing of the Capital
Securities, including the application and effect of United States federal,
state, local, foreign and other tax laws.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for Exchange Capital Securities will
not be a taxable event to holders for United States federal income tax purposes.
Accordingly a holder will have the same adjusted basis and holding period in the
Exchange Capital Securities as the holder had in the Old Capital Securities
immediately before the exchange.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Old Junior Subordinated Debentures,
Tax Counsel has rendered its opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the Indenture and
certain other documents, and based on certain facts and assumptions contained in
such opinion, the Old Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Corporation. An
opinion of Tax Counsel, however, is not binding on the Internal Revenue Service
(the "IRS") or the courts. Prospective investors should note that no rulings
have been or are expected to be sought from the IRS with respect to any of these
issues and no assurance can be given that the IRS will not take contrary
positions. Moreover, no assurance can be given that any of the opinions
expressed herein will not be challenged by the IRS or, if challenged, that such
a challenge would not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Old Capital Securities, Tax Counsel
has rendered its opinion generally to the effect that, under then current law
and assuming full compliance with the terms of the Trust Agreement and the
Indenture and certain other documents, and based on certain facts and
assumptions
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contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation. Accordingly, for United States federal income tax purposes,
each holder of Capital Securities will generally 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 as ordinary income any interest
income (or original issue discount ("OID")) paid or accrued with respect to its
allocable share of those Junior Subordinated Debentures.
INTEREST INCOME AND OID
Under recently issued Treasury regulations (the "Regulations"), a "remote"
contingency, within the meaning of the Regulations, that stated interest will
not be timely paid will be ignored in determining whether a debt instrument is
issued with OID. The Corporation believes that the likelihood of its exercising
its option to defer payments of interest is "remote" since exercising that
option would prevent the Corporation from declaring dividends on any class of
its equity securities. Accordingly, the Corporation intends to take the
position, based on the advice of Tax Counsel, that the Junior Subordinated
Debentures will not be considered to be issued with OID and, accordingly, stated
interest on the Junior Subordinated Debentures generally will be taxable to a
holder as ordinary income at the time it is paid or accrued in accordance with
such holder's method of accounting.
Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. In such event, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures would
thereafter be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
would not be reported as taxable income. Consequently, a holder of Capital
Securities would be required to include in gross income OID even though the
Corporation would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer the payment of interest
was determined not to be "remote", the Junior Subordinated Debentures would be
treated as having been originally issued with OID. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for on an economic accrual basis regardless of
such holder's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Corporation will have the right at any time to dissolve the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust. Under current
law, such a distribution, for United States federal income tax purposes, would
be treated as a nontaxable event to each holder, and each holder would receive
an aggregate tax basis in the Junior Subordinated Debentures equal to such
holder's aggregate tax basis in its Capital Securities. A holder's holding
period in the Junior Subordinated Debentures so received in liquidation of the
Trust would include the period during which the Capital Securities were held by
such holder. If, however, the Trust is characterized for United States federal
income tax purposes as an association taxable as a corporation at the time of
its dissolution, the distribution of the Junior Subordinated Debentures may
constitute a taxable event to holders of Capital Securities and a holder's
holding period in Junior Subordinated Debentures would begin on the date such
Junior Subordinated Debentures were received.
Under certain circumstances described herein (see "Description of Exchange
Securities -- Description of Exchange Capital Securities"), the Junior
Subordinated Debentures may be prepaid in cash and the proceeds of such
prepayment distributed to holders in redemption of their Capital Securities.
Under current
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law, such a prepayment would, for United States federal income tax purposes,
constitute a taxable disposition of the redeemed Capital Securities, and a
holder could recognize gain or loss as if it sold such redeemed Capital
Securities for cash. See "-- Sales of Capital Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including a holder whose Capital
Securities are redeemed either upon the Stated Maturity or upon an optional
prepayment of the Junior Subordinated Debentures by the Corporation) will
recognize gain or loss equal to the difference between its adjusted tax basis in
the Capital Securities and the amount realized on the sale of such Capital
Securities (other than with respect to accrued and unpaid interest which has not
yet been included in income, which will be treated as ordinary income). A
holder's adjusted tax basis in the Capital Securities generally will be its
initial purchase price increased by OID (if any) previously includable in such
holder's gross income to the date of disposition and decreased by payments (if
any) received on the Capital Securities in respect of OID. Such gain or loss
generally will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Capital Securities have been held for more than one
year.
Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest (or OID if the Junior Subordinated
Debentures are treated as having been issued, or reissued, with OID) with
respect to the underlying Junior Subordinated Debentures. A holder who uses the
accrual method of accounting for tax purposes (and a cash method holder, if the
Junior Subordinated Debenture are deemed to have been issued, or reissued, with
OID) who disposes of his Capital Securities will be required to include in
ordinary income (i) any portion of the amount realized that is attributable to
accrued but unpaid interest or (ii) any OID on the Junior Subordinated
Debentures through the date of disposition in income as ordinary income, and to
add such amount to his adjusted tax basis in his pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include
all accrued but unpaid interest) a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to offset
ordinary income for United States federal income tax purposes.
CONDITIONAL RIGHT TO SHORTEN MATURITY
Prospective investors should be aware that the Corporation's exercise of
its right to shorten the maturity of the Junior Subordinated Debentures will be
a taxable event to holders of Capital Securities if the Junior Subordinated
Debentures are treated as equity for purposes of United States federal income
taxation before the maturity is shortened. See "Description of Exchange
Securities -- Description of Exchange Capital Securities -- Conditional Right to
Shorten Maturity and Special Event Redemption" and "Description of Exchange
Securities -- Description of Exchange Junior Subordinated
Debentures -- Conditional Right to Shorten Maturity and Special Event
Prepayment."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation,
which would, among other things, generally deny corporate issuers a deduction
for interest in respect of certain debt obligations, such as the Junior
Subordinated Debentures, issued on or after December 7, 1995 if such debt
obligations have a maximum term in excess of 20 years and are not shown as
indebtedness on the issuer's applicable consolidated balance sheet. On March 29,
1996, Senate Finance Committee Chairman William V. Roth, Jr. and House Ways and
Means Committee Chairman Bill Archer issued the Joint Statement indicating their
intent that the Proposed Legislation, if adopted by either of the tax-writing
committees of Congress, would have an effective date that is no earlier than the
date of "appropriate Congressional action." In addition, subsequent to the
publication of the Joint Statement, Senator Daniel Patrick Moynihan and
Representatives Sam M. Gibbons and Charles B. Rangel wrote the Democrat Letters,
which concurred with the view expressed in the Joint Statement. If the
principles contained in the Joint Statement and the Democrat Letters were
followed and if the Proposed Legislation were enacted, such legislation would
not apply to the Junior Subordinated Debentures. There can be no assurance,
however, that the effective date guidance contained in the Joint
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Statement and the Democrat Letters will be incorporated into the Proposed
Legislation, if enacted, or that other legislation enacted after the date hereof
will not otherwise adversely affect the ability of the Corporation to deduct the
interest payable on the Junior Subordinated Debentures. Accordingly, there can
be no assurance that a Tax Event will not occur. The occurrence of a Tax Event
may result in the prepayment of the Junior Subordinated Debentures for cash, in
which event the holders of the Capital Securities would receive cash in
redemption of their Capital Securities. See "Description of Exchange
Securities -- Description of the Exchange Capital Securities -- Redemption" and
"Description of Exchange Securities -- Description of Exchange Junior
Subordinated Debentures -- Special Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is a citizen
or individual resident (or is treated as a citizen or individual resident) of
the United States for federal income tax purposes, a corporation or partnership
created or organized (or treated as created or organized for federal income tax
purposes) in or under the laws of the United States or any political subdivision
thereof, or a trust or estate the income of which is includable in its gross
income for federal income tax purposes without regard to its source. A trust is
a U.S. Holder for federal income tax purposes if, and only if, (i) a court
within the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States trustees have the
authority to control all substantial decisions of the trust.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Corporation entitled to
vote, (b) the beneficial owner of the Capital Security is not a controlled
foreign corporation that is related to the Corporation through stock ownership,
and (c) either (A) the beneficial owner of the Capital Security certifies to the
Trust or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Capital Security in such capacity, certifies to the
Trust or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Trust or its agent with a copy
thereof; and (ii) a United States Alien Holder of a Capital Security will not be
subject to United States federal withholding tax on any gain realized upon the
sale or other disposition of a Capital Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will be
allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING
65
<PAGE> 67
THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Corporation, the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust, and its affiliates and the Property
Trustee may be considered a "party in interest" (within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many employee benefit plans ("Plans") that are subject to ERISA. Any
purchaser proposing to acquire Exchange Capital Securities with assets of any
Plan should consult with its counsel. The purchase and/or holding of Exchange
Capital Securities by a Plan that is subject to the fiduciary responsibility
provisions of ERISA or the prohibited transaction provisions of Section 4975 of
the Code (including individual retirement arrangements and other plans described
in Section 4975(e)(1) of the Code) and with respect to which the Corporation,
the Property Trustee or any affiliate is a service provider (or otherwise is a
party in interest or a disqualified person) may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
Capital Securities are acquired pursuant to and in accordance with an applicable
exemption, such as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an
exemption for certain transactions determined by an independent qualified
professional asset manager), PTCE 91-38 (an exemption for certain transactions
involving bank collective investment funds), PTCE 90-1 (an exemption for certain
transactions involving insurance company pooled separate accounts), PTCE 95-60
(an exemption for transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exemption for certain transactions determined by an
in-house asset manager). The acquisition of Exchange Capital Securities by any
person who is, or who in acquiring such Exchange Capital Securities is using the
assets of, an ERISA Plan shall be deemed to constitute a representation by such
person to the Trust that such person is eligible for exemptive relief available
pursuant to either one of PTE 90-1, PTE 91-38, PTE 84-14, PTE 96-23, PTE 95-60
or another applicable exemption with respect to the acquisition and holding of
such Exchange Capital Securities. In addition, a Plan fiduciary considering the
purchase of Exchange Capital Securities should be aware that the assets of the
Trust may be considered "plan assets" for ERISA purposes. In this case, any
person exercising discretion with respect to the Exchange Junior Subordinated
Debentures would be a fiduciary and a party in interest with respect to the
investing Plans. To avoid certain prohibited transactions under ERISA and the
Code that could thereby result, each investing Plan, by purchasing the Exchange
Capital Securities, will be deemed to have directed the Trust to invest in the
Exchange Junior Subordinated Debentures and to have appointed the Trustees.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account in connection with the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Capital
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by Participating Broker-Dealers during the period referred to
below in connection with resales of Exchange Capital Securities received in
exchange for Old Capital Securities if such Old Capital Securities were acquired
by such Participating Broker-Dealers for their own accounts as result of
market-making activities or other trading activities. The Corporation and the
Trust have agreed that this Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of such Exchange Capital Securities for a period ending 90 days
after the Expiration Date (subject to extension under certain limited
circumstances described herein) or, if earlier, when all such Exchange Capital
Securities have been disposed of by such Participating Broker-Dealer. However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Capital Securities received in exchange for Old
Capital Securities pursuant to the Exchange Offer must notify the Corporation or
the Trust, or cause the Corporation or the Trust to be notified, on or prior to
the Expiration Date, that it is a Participating Broker-Dealer. Such notice may
be given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth herein
66
<PAGE> 68
under "The Exchange Offer -- Exchange Agent." See "The Exchange Offer -- Resales
of Exchange Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the Exchange Capital Securities offered hereby. Exchange Capital
Securities received by broker-dealers for their own accounts in connection with
the Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Capital Securities.
Any broker-dealer that resells Exchange Capital Securities that were
received by it for its own account in connection with the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Capital
Securities may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such sale of Exchange Capital Securities
and any commissions or concessions received by any such person may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
VALIDITY OF EXCHANGE SECURITIES
Certain matters relating to the validity of the Exchange Capital
Securities, the Exchange Guarantee and the Exchange Junior Subordinated
Debentures will be passed upon for the Corporation by Donovan Leisure Newton &
Irvine, New York, New York. Certain matters relating to the validity of the
Exchange Capital Securities under Delaware law will be passed on by Potter
Anderson & Corroon, Wilmington, Delaware. Certain matters relating to United
States federal income tax considerations will be passed upon for the Corporation
by Donovan Leisure Newton & Irvine, New York, New York.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this Prospectus by reference from Orion's Annual
Report on Form 10-K for the year ended December 31, 1995 and the financial
statements of Guaranty National incorporated therein have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
With respect to the unaudited interim financial information of Orion which
is incorporated herein by reference, Deloitte & Touche LLP have applied limited
procedures in accordance with professional standards for a review of such
information. However, as stated in their reports included in Orion's Quarterly
Reports on Form 10-Q and incorporated by reference herein, they did not audit
and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act.
67
<PAGE> 69
======================================================
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 THE CORPORATION, THE TRUST
OR BY THE INITIAL PURCHASERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION OR
THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION 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................. 9
Incorporation of Certain Documents By
Reference........................... 9
Summary............................... 11
Risk Factors.......................... 18
Use of Proceeds....................... 24
Ratios of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................ 24
Accounting Treatment.................. 25
Capitalization........................ 26
Summary Financial Data................ 27
Orion Capital Corporation............. 29
Orion Capital Trust I................. 29
The Exchange Offer.................... 30
Description of the Exchange
Securities.......................... 39
Description of the Old Securities..... 60
Relationship Among the Exchange
Capital Securities, the Exchange
Junior Subordinated Debentures, the
Exchange Guarantee and the Trust
Agreement........................... 60
Certain Federal Income Tax
Consequences........................ 62
ERISA Considerations.................. 66
Plan of Distribution.................. 66
Validity of Exchange Securities....... 67
Experts............................... 67
</TABLE>
======================================================
======================================================
$125,000,000
ORION CAPITAL TRUST I
8.73% EXCHANGE CAPITAL
SECURITIES
FULLY AND UNCONDITIONALLY
GUARANTEED, AS DESCRIBED
HEREIN, BY
ORION CAPITAL
CORPORATION
------------------------
PROSPECTUS
------------------------
March 25, 1997
======================================================
<PAGE> 70
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Orion is a Delaware corporation. Reference is made to Section 145 of the
Delaware General Corporation Law as to indemnification by Orion of its officers
and directors. The general effect of such law is to empower a corporation to
indemnify any of its officers and directors against certain expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person to be indemnified in connection with certain
actions, suits or proceedings (threatened, pending or completed) if the person
to be indemnified acted in good faith and in a manner he 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 conduct was unlawful.
Article VII of Orion's Restated Certificate of Incorporation, as amended
and Article IX of Orion's By-Laws, as amended, provide for the indemnification
of Orion's officers and directors in accordance with the Delaware General
Corporation Law, and include, as permitted by the Delaware General Corporation
Law, certain limitations on the potential personal liability of members of
Orion's Board of Directors for monetary damages as a result of actions taken in
their capacity as Board members.
Orion has entered into indemnification agreements (approved by its
stockholders) with each of its directors and senior officers which, among other
things, contractually confirm the indemnity provided under Orion's Restated
Certificate of Incorporation, its By-Laws and the Delaware General Corporation
Law.
The directors and officers of Orion are covered by insurance policies
indemnifying them against certain liabilities arising under the Securities Act
which might be incurred by them in such capacities.
The Trust Agreement limits the liability to the Trust and certain other
persons, and provides for indemnification by the Trust or Orion, of Trustees,
their officers, directors and employees and certain other persons.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The documents listed hereunder are filed as exhibits hereto.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
4.1 Indenture between Orion Capital Corporation and The Bank of New York*
4.2 Form of Exchange Debenture Certificate*
4.3 Certificate of Trust of Orion Capital Trust I*
4.4 Declaration of Trust of Orion Capital Trust I*
4.5 Amended and Restated Declaration of Trust for Orion Capital Trust I*
4.6 Form of Exchange Capital Security Certificate*
4.7 Form of Exchange Guarantee relating to the Exchange Capital Securities*
4.8 Registration Rights Agreement*
5.1 Opinion of Donovan Leisure Newton & Irvine as to the legality of the Exchange
Junior Subordinated Debentures and the Exchange Guarantee to be issued by Orion
Capital Corporation
5.2 Opinion of Potter Anderson & Corroon as to the legality of the Exchange Capital
Securities to be issued by Orion Capital Trust I
8.1 Tax Opinion of Donovan Leisure Newton & Irvine
12.1 Computation of Ratio of Earnings to Fixed Charges*
15.1 Letter in Lieu of Consent of Deloitte and Touche LLP re Unaudited Interim Financial
Information
23.1 Consents of Deloitte & Touche LLP
</TABLE>
II-1
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<C> <S>
23.2 Consent of Donovan Leisure Newton & Irvine (included in Exhibit 5.1)
23.3 Consent of Potter Anderson & Corroon (included in Exhibit 5.2)
24.1 Powers of Attorney for Orion Capital Corporation*
24.2 Powers of Attorney for Orion Capital Trust I*
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Debenture Trustee under the Indenture*
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Property Trustee under the Amended and
Restated Declaration of Trust*
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as Guarantee Trustee under the Exchange
Guarantee*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ---------------
* Previously filed.
The following fiscal statement schedules are filed as part of this
Registration Statement:
None.
ITEM 22. 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 by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of 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;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of Orion's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934), that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrants pursuant to the foregoing provisions, or otherwise,
II-2
<PAGE> 72
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 to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first-class mail or equally
prompt means. This includes information contained in documents filed subsequent
to the effective date of the Registration Statement through the date responding
to the request.
The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 73
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 24th day of March, 1997.
ORION CAPITAL CORPORATION
By: /s/ W. MARSTON BECKER*
--------------------------------------
W. Marston Becker
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: March 24, 1997 By: /s/ W. MARSTON BECKER*
---------------------------------------------
W. Marston Becker
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 24, 1997 By: /s/ DANIEL L. BARRY*
---------------------------------------------
Daniel L. Barry
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
Date: March 24, 1997 By: /s/ BERTRAM J. COHN*
---------------------------------------------
Bertram J. Cohn
Director
*By: /s/ MICHAEL P. MALONEY
- ---------------------------------------------
Michael P. Maloney
Attorney-in-fact
</TABLE>
II-4
<PAGE> 74
<TABLE>
<S> <C>
Date: March 24, 1997 By: /s/ GORDON F. CHEESBROUGH*
---------------------------------------------
Gordon F. Cheesbrough
Director
Date: March 24, 1997 By: /s/ JOHN C. COLMAN*
---------------------------------------------
John C. Colman
Director
Date: March 24, 1997 By: /s/ VICTORIA R. FASH*
---------------------------------------------
Victoria R. Fash
Director
Date: March 24, 1997 By: /s/ ALAN R. GRUBER*
---------------------------------------------
Alan R. Gruber
Director
Date: March 24, 1997 By: /s/ ROBERT H. JEFFREY*
---------------------------------------------
Robert H. Jeffrey
Director
Date: March 24, 1997 By: /s/ WARREN R. LYONS*
---------------------------------------------
Warren R. Lyons
Director
Date: March 24, 1997 By: /s/ JAMES K. MCWILLIAMS*
---------------------------------------------
James K. McWilliams
Director
Date: March 24, 1997 By: /s/ RONALD W. MOORE*
---------------------------------------------
Ronald W. Moore
Director
Date: March 24, 1997 By: /s/ ROBERT B. SANBORN*
---------------------------------------------
Robert B. Sanborn
Director
*By: /s/ MICHAEL P. MALONEY
- ---------------------------------------------
Michael P. Maloney
Attorney-in-fact
</TABLE>
II-5
<PAGE> 75
<TABLE>
<S> <C>
Date: March 24, 1997 By: /s/ WILLIAM J. SHEPHERD*
---------------------------------------------
William J. Shepherd
Director
Date: March 24, 1997 By: /s/ JOHN R. THORNE*
---------------------------------------------
John R. Thorne
Director
Date: March 24, 1997 By: /s/ ROGER B. WARE*
---------------------------------------------
Roger B. Ware
Director
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York, on the 24th day of March, 1997.
ORION CAPITAL TRUST I
<TABLE>
<S> <C>
Date: March 24, 1997 By: /s/ W. MARSTON BECKER
---------------------------------------------
W. Marston Becker
Administrative Trustee
Date: March 24, 1997 By: /s/ DANIEL L. BARRY
---------------------------------------------
Daniel L. Barry
Administrative Trustee
Date: March 24, 1997 By: /s/ MICHAEL P. MALONEY
---------------------------------------------
Michael P. Maloney
Administrative Trustee
*By: /s/ MICHAEL P. MALONEY
- ---------------------------------------------
Michael P. Maloney
Attorney-in-fact
</TABLE>
II-6
<PAGE> 76
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------
<C> <S> <C>
4.1 Indenture between Orion Capital Corporation and The Bank of New York*
4.2 Form of Exchange Debenture Certificate*
4.3 Certificate of Trust of Orion Capital Trust I*
4.4 Declaration of Trust of Orion Capital Trust I*
4.5 Amended and Restated Declaration of Trust for Orion Capital Trust I*
4.6 Form of Exchange Capital Security Certificate*
4.7 Form of Exchange Guarantee relating to the Exchange Capital Securities*
4.8 Registration Rights Agreement*
5.1 Opinion of Donovan Leisure Newton & Irvine as to the legality of the
Exchange Junior Subordinated Debentures and the Exchange Guarantee to be
issued by Orion Capital Corporation
5.2 Opinion of Potter Anderson & Corroon as to legality of the Exchange
Capital Securities to be issued by Orion Capital Trust I
8.1 Tax Opinion of Donovan Leisure Newton & Irvine
12.1 Computation of Ratio of Earnings to Fixed Charges*
15.1 Letter in Lieu of Consent of Deloitte and Touche LLP re Unaudited
Interim Financial Information
23.1 Consents of Deloitte & Touche LLP
23.2 Consent of Donovan Leisure Newton & Irvine (included in Exhibit 5.1)
23.3 Consent of Potter Anderson & Corroon (included in Exhibit 5.2)
24.1 Powers of Attorney for Orion Capital Corporation*
24.2 Powers of Attorney for Orion Capital Trust I*
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Debenture Trustee under the
Indenture*
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Property Trustee under the
Amended and Restated Declaration of Trust*
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939,
as amended, of The Bank of New York, as Guarantee Trustee under the
Exchange Guarantee*
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
Exhibit 5.1
March 24, 1997
Orion Capital Corporation
600 Fifth Avenue
24th Floor
New York, New York 10020-2302
Re: Orion Capital Corporation
Registration Statement on Form S-4
Filed With The Securities and Exchange
Commission on February 5, 1997
--------------------------------------
Gentlemen:
We are acting as counsel for Orion Capital Corporation, a Delaware
corporation ("Orion" or the "Company"), in connection with the registration by
the Company and Orion Capital Trust I, a Delaware business trust (the "Trust")
under the Securities Act of 1933, as amended (the "Act"), of (i) 8.73% Capital
Securities (liquidation amount $1,000 per security) of the Trust, aggregating
$125,000 Capital Securities (the "Capital Securities"), (ii) $125,000,000 in
aggregate principal amount of 8.73% Junior Subordinated Deferrable Interest
Debentures due January 1, 2037 (the "Subordinated Debentures") to be issued
under the Indenture dated as of January 13, 1997 (the "Indenture") by and
between the Company and The Bank of New York, as Trustee, and (iii) the Capital
Securities Guarantee Agreement dated as of January 13, 1997, by and between the
Company as guarantor, and The Bank of New York, as trustee (the "Capital
Securities Guarantee," together with the Capital Securities and the Junior
Subordinated Debentures, the "Securities"), under the Registration Statement on
Form S-4, as filed with the Securities and Exchange Commission (Registration No.
333-21205) on February 5, 1997 (the "Registration Statement").
We are familiar with the proceedings of the Company relating to the
authorization of the Securities and the Indenture filed as an Exhibit to the
Registration Statement. In addition, we have made such further examinations of
law and fact as we have deemed appropriate in connection with the opinion
hereinafter set forth.
<PAGE> 2
March 24, 1997
Page 2
Based on the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that:
(i) The Capital Securities Guarantee has been duly authorized,
executed and delivered by the Company and, assuming due authorization, execution
and delivery by all other parties thereto, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws relating to or affecting creditors' rights generally or by general
equitable principles (regardless of whether considered in a proceeding in
equity or at law).
(ii) The execution and delivery of the Subordinated Debentures have
been duly authorized by all necessary corporate action of the Company, and the
Subordinated Debentures, when executed, authenticated and delivered in
accordance with the Indenture, will be entitled to the benefits of the
Indenture, and will constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether considered in a proceeding in equity or at law).
As contemplated by the qualifications set forth in the foregoing
paragraph, we express no opinion as to Federal or state laws relating to
fraudulent transfers.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the references to our firm as set forth under the
caption "Validity of Exchange Securities" in the Prospectus constituting part
of the Registration Statement. In giving such consent, we do not hereby admit
that we are within the category of persons whose consent is required by Section
7 of the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
Very truly yours,
/s/ Donovan Leisure Newton & Irvine
DONOVAN LEISURE NEWTON & IRVINE
<PAGE> 1
Exhibit 5.2
March 24, 1997
Orion Capital Trust I
c/o Orion Capital Corporation
600 Fifth Avenue
New York, NY 10020-2302
Re: Orion Capital Trust I
8.73% Capital Securities
Ladies and Gentlemen:
We have acted as special Delaware counsel for Orion Capital Trust I, a
Delaware business trust (the "Trust") in connection with the matters set forth
herein and that certain Amended and Restated Declaration of Trust (the
"Declaration") dated as of January 13, 1997 by and among Orion Capital
Corporation, as Sponsor, Delaware Trust Capital Management, Inc., as Delaware
Trustee, The Bank of New York, as Property Trustee, and the Administrative
Trustees named therein. Initially capitalized terms used herein and not
otherwise defined are used herein as defined in the Declaration.
For purposes of giving the opinions hereinafter set forth, we have
examined only the following documents and have conducted no independent factual
investigations of our own:
1. The Certificate of Trust for the Trust, dated as of January 3, 1997
(the "Certificate"), as filed in the Office of the Secretary of State of the
State of Delaware (the "Secretary of State") on January 3, 1997;
2. The original declaration of trust of the Trust, dated as of January
3, 1997, by and between Orion Capital Corporation, as Sponsor and Delaware
Trust Capital Management, Inc., as Delaware Trustee, (the "Original
Declaration");
3. The Declaration;
4. A Certificate of Good Standing for the Trust, dated March 24, 1997,
obtained from the Secretary of State; and
<PAGE> 2
Orion Capital Trust I
March 24, 1997
Page 2
5. The Registration Statement on Form S-4 (the "Registration
Statement"), including a prospectus with respect to the Trust (the
"Prospectus"), relating to the 8.73% Capital Securities of the Trust
representing preferred, undivided beneficial interests in the assets of the
Trust (each, an "Exchange Security" and collectively, the "Exchange
Securities"), filed by the Sponsor and the Trust with the Securities and
Exchange Commission.
As to certain facts material to the opinions expressed herein, we have
relied upon the representations and warranties contained in the documents
examined by us all of which we have assumed to be true, complete and accurate
in all material respects.
Based upon the foregoing, and upon an examination of such questions of
law of the State of Delaware as we have considered necessary or appropriate,
and subject to the assumptions, qualifications, limitations and exceptions set
forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Exchange Securities will represent valid, and, subject to
the qualifications set forth in number 3 below, fully paid and non-assessable
undivided beneficial interests in the assets of the Trust.
3. The Holders of Exchange Securities, as beneficial owners of
Exchange Securities 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, except
that the Holders of Exchange Securities may be obligated to (a) provide
indemnity and/or security in connection with and pay taxes or governmental
charges arising from transfers or exchanges of certificates representing Trust
Securities and the issuance of replacement certificates representing Trust
Securities, (b) provide Security or indemnity in connection with requests of or
directions to the Property Trustee to exercise its rights and powers under the
Declaration, and (c) provide indemnity in connection with violations of the
Declaration or Federal or state securities laws arising from transfers or
exchanges of certificates representing Trust Securities and the issuance of
replacement certificates representing Trust Securities.
All of the foregoing opinions contained herein are subject to the
following assumptions, qualifications, limitations and exceptions:
a. The foregoing opinions are limited to the laws of the State of
Delaware presently in effect, excluding the securities laws thereof. We have
not considered and express no opinion on the laws of any other jurisdiction,
including, without limitation, federal laws and rules and regulations relating
thereto.
<PAGE> 3
Orion Capital Trust I
March 24, 1997
Page 3
b. We have assumed the due execution and delivery by each party
listed as a party to each document examined by us. We have assumed further the
due authorization by each party thereto (exclusive of the Trust) of each
document examined by us, and that each of such parties (exclusive of the Trust)
has the full corporate, or trust or banking, power, authority, and legal right
to execute, deliver and perform each such document. We also have assumed that
each of the parties to each of the Agreements (exclusive of the Trust) is a
corporation, bank, national banking association or trust company, validly
existing and in good standing under the laws of their respective jurisdictions
of organization and that the Agreements to which they are a party do not result
in the breach of the terms of, and do not contravene their respective
constituent documents, any contractual restriction binding on them or any law,
rule or regulation applicable to them. In addition, we have assumed the legal
capacity of any natural persons who are parties to any of the documents
examined by us.
c. We have assumed that all signatures on documents examined by us
are genuine, that all documents submitted to us as originals are authentic and
that all documents submitted to us as copies conform with the originals.
d. We have assumed that the Original Declaration and the
Declaration collectively, constitute the entire agreement among each of the
respective parties thereto with respect to the subject matter thereof,
including with respect to the creation, operation, dissolution and winding up
of the Trust and that the Declaration and the Certificate are in full force and
effect.
e. We have assumed that no event set forth in Article 8 of the
Declaration has occurred.
f. We have assumed that the Exchange Securities will be issued and
sold in accordance with the Declaration and the Prospectus. We have further
assumed the receipt of each Person to whom an Exchange Security is to be issued
by the Trust of a Certificate for such Exchange Security and the payment by it
in accordance with the Declaration and the Prospectus.
g. We note that we have not participated in the preparation, and
do not assume responsibility for the contents, of the Registration Statement or
the Prospectus.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Validity of
Exchange Securities" in the Prospectus. In giving the foregoing consents, we do
not thereby admit that we come within the category of Persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission thereunder.
<PAGE> 4
Orion Capital Trust I
March 24, 1997
Page 4
Very truly yours,
/s/ Potter Anderson & Corroon
POTTER ANDERSON & CORROON
<PAGE> 1
Exhibit 8.1
March 24, 1997
Orion Capital Corporation
600 Fifth Avenue
24th Floor
New York, New York 10020
Orion Capital Trust I
600 Fifth Avenue
24th Floor
New York, New York 10020
Re: Orion Capital Corporation
Dear Sirs:
We have acted as special tax counsel to Orion Capital Corporation, a
Delaware corporation (the "Company"), and Orion Capital Trust I, a statutory
business trust created under the Business Trust Act of the State of Delaware
(the "Trust"), in connection with the transactions contemplated by the Purchase
Agreement, dated January 8, 1997, by and among Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Lehman Brothers Inc., the Company, and the Trust.
We have also acted as special tax counsel to the Company in connection
with the registration by the Company and the Trust under the Securities Act of
1933, as amended, of (i) 8.73% Capital Securities (liquidation amount $1,000
per security) of the Trust, aggregating 125,000 Capital Securities (the
"Capital Securities"), (ii) $125,000,000 in aggregate principal amount of 8.73%
Junior Subordinated Deferrable Interest Debentures due January 1, 2037, issued
under the Indenture, dated as of January 13, 1997, by and between the Company
and The Bank of New York, as Trustee, and (iii) the Capital Securities
Guarantee Agreement, dated as of January 13, 1997, by and between the Company,
as guarantor, and The Bank of New York, as trustee, under the Registration
Statement on Form S-4, as filed with the Securities and Exchange Commission
(Registration No. 333-21205) on February 5, 1997 (the "Registration Statement").
<PAGE> 2
2.
In rendering the opinion set forth below, we have examined and are
relying upon, without independent investigation, the representations contained
in an Officer's Certificate, dated March 24, 1997, a copy of which is attached
hereto.
Based upon the foregoing, we are of the opinion that the discussion set
forth in the Registration Statement under the heading "Certain Federal Income
Tax Consequences" is, in all material respects, a fair and accurate summary of
the United States federal income tax consequences of the purchase, ownership
and disposition of the Capital Securities under current law, subject to the
qualifications set forth in the Registration Statement to the effect that it
does not purport to discuss all possible United States federal income tax
consequences of the purchase, ownership and disposition of the Capital
Securities.
No other opinions are expressed as to any tax consequences under United
States federal, state or local or other law relating to, or affecting, the
Company, the Trust, any shareholder of the Company or any holder of Trust
Securities, as a result of the activities of the Company or the Trust.
Very truly yours,
/s/ Donovan Leisure Newton & Irvine
DONOVAN LEISURE NEWTON & IRVINE
<PAGE> 1
Exhibit 15.1
March 21, 1997
Orion Capital Corporation
600 Fifth Avenue
New York, New York
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited interim financial
information of Orion Capital Corporation and subsidiaries for the periods ended
March 31, 1996 and 1995, June 30, 1996 and 1995, and September 30, 1996 and
1995, as indicated in our reports dated April 29, 1996, July 24, 1996 and
October 23, 1996, respectively; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996, June 30,
1996 and September 30, 1996, are being incorporated by reference in Amendment
No. 2 to Registration Statement No. 333-21205 on Form S-4.
We also are aware that the aforementioned reports, pursuant to Rule 436(c) under
the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Hartford, Connecticut
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENTS
We consent to the incorporation by reference in Amendment No. 2 to Registration
Statement No. 333-21205 of Orion Capital Corporation on Form S-4 of our report
dated February 21, 1996 appearing in the Annual Report on Form 10-K of Orion
Capital Corporation for the year ended December 31, 1995, and to the reference
to us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/S/ Deloitte & Touche LLP
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DELOITTE & TOUCHE LLP
Hartford, Connecticut
March 21, 1997
We consent to the incorporation by reference in Amendment No. 2 to Registration
Statement No. 333-21205 of Orion Capital Corporation on Form S-4 of our reports
dated February 21, 1996 appearing in the Annual Report on Form 10-K of Guaranty
National Corporation for the year ended December 31, 1995 that is incorporated
by reference in the Annual Report on Form 10-K of Orion Capital Corporation, and
to the reference to us under the heading "Experts" in the Prospectus, which is
part of this Registration Statement
/S/ Deloitte & Touche LLP
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DELOITTE & TOUCHE LLP
Denver, Colorado
March 21, 1997
