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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998.
REGISTRATION NO. 333-44565
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MMI COMPANIES, INC. MMI CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER)
DELAWARE DELAWARE
(STATE OF OTHER JURISDICTION OF (STATE OF OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
6331 6159
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
36-3263253 52-2073764
(I.R.S. EMPLOYER IDENTIFICATION (I.R.S. EMPLOYER IDENTIFICATION
NUMBER) NUMBER)
540 LAKE COOK ROAD
DEERFIELD, IL 60015-5290
(847) 940-7550
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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COPIES TO:
WAYNE A. SINCLAIR, ESQ. JOHN E. MCGOVERN, JR.
SENIOR VICE PRESIDENT AND GENERAL WILDMAN, HARROLD, ALLEN & DIXON
COUNSEL 225 WEST WACKER DRIVE
MMI COMPANIES, INC. SUITE 3000
540 LAKE COOK ROAD, DEERFIELD, CHICAGO, IL 60606
ILLINOIS 60015-5290 (312) 201-2000
(847) 940-7550
(NAME, ADDRESS AND TELEPHONE NUMBER OF
AGENT FOR SERVICE)
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 being offered in
connection with the formation of a holding company and there is compliance
with general instruction G, please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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PROSPECTUS
MMI CAPITAL TRUST I
OFFER TO EXCHANGE ITS 7 5/8% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER SERIES B CAPITAL SECURITY)
WHICH ARE BEING REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING 7 5/8% SERIES A CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER SERIES A CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY
MMI COMPANIES, INC.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON MAY 13, 1998 UNLESS EXTENDED.
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MMI Capital Trust I, a trust created under the laws of the State of Delaware
(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, this "Prospectus") and in the accompanying Letter of Transmittal
(which together constitute the "Exchange Offer"), to exchange up to
$125,000,000 aggregate Liquidation Amount of its 7 5/8% Series B Capital
Securities (the "Exchange Capital Securities") which are being 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 7 5/8% Series A Capital Securities
(the "Original Capital Securities"), of which $125,000,000 aggregate
Liquidation Amount are issued and outstanding. Pursuant to the Exchange Offer,
MMI Companies, Inc., a Delaware corporation ("MMI" 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 Original Capital
Securities (the "Original Guarantee") for a like guarantee in respect of the
Exchange Capital Securities (the "Exchange Guarantee") and (ii) all of its 7
5/8% Series A Junior Subordinated Deferrable Interest Debentures due December
15, 2027 (the "Original Junior Subordinated Debentures") for a like aggregate
principal amount of its 7 5/8% Series B Junior Subordinated Deferrable
Interest Debentures due December 15, 2027 (the "Exchange Junior Subordinated
Debentures"), which Exchange Guarantee and Exchange Junior Subordinated
Debentures also are being registered under the Securities Act.
The Original Capital Securities, the Original Guarantee and the Original
Junior Subordinated Debentures are collectively referred to herein as the
"Original 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 Trust sold the Original Capital Securities in an offering exempt from
the registration requirements of the Securities Act, which was consummated on
December 23, 1997 (the "Closing Date").
(Continued on following page)
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This Prospectus and the Letter of Transmittal are first being mailed to all
holders of the Original Capital Securities on April 13, 1998.
SEE "RISK FACTORS" COMMENCING ON PAGE 19 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER ORIGINAL CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
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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 April 9, 1998.
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(Continued from the Previous Page)
The terms of the Exchange Securities are identical in all material respects
to the respective terms of the Original Securities, except that (i) the
Exchange Securities are being registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable
to the Original Securities, (ii) the Exchange Capital Securities will not
contain the $100,000 minimum Liquidation Amount transfer restriction, (iii)
the Exchange Capital Securities will not provide for any increase in the
Distribution rate thereon and (iv) the Exchange Junior Subordinated Debentures
will not provide for any increase in the interest rate thereon. See
"Description of Exchange 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 dated as of
December 23, 1997 (the "Registration Rights Agreement") among the Corporation,
the Trust and the Initial Purchasers (as defined herein). In the event that
the Exchange Offer is consummated, any Original Capital Securities which
remain outstanding after consummation of the Exchange Offer and the Exchange
Capital Securities issued in 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.
The Exchange Capital Securities and the Original Capital Securities
(collectively, the "Capital Securities") represent undivided beneficial
interests in the assets of the Trust. The Corporation is the owner of all of
the beneficial interests represented by common securities of the Trust (the
"Common Securities," and together with the Capital Securities, the "Trust
Securities"). The Chase Manhattan Bank is the Property Trustee (the "Property
Trustee") of the Trust. The Trust exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in the Junior Subordinated
Debentures (as defined herein). The Junior Subordinated Debentures will mature
on December 15, 2027 (the "Stated Maturity Date"). 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 used herein, (i) the "Indenture" means the Indenture, dated as of
December 23, 1997, as amended and supplemented from time to time, between the
Corporation and The Chase Manhattan Bank, as trustee (the "Debenture
Trustee"), relating to the Junior Subordinated Debentures, (ii) the "Trust
Agreement" means the Amended and Restated Declaration of Trust dated as of
December 23, 1997 relating to the Trust among the Corporation, as Sponsor, The
Chase Manhattan Bank, as Property Trustee, Chase Manhattan Bank Delaware, an
affiliate of the Property Trustee, as Delaware Trustee (the "Delaware
Trustee"), the Administrative Trustees named therein (collectively, with the
Property Trustee and Delaware Trustee, the "Issuer Trustees"), and holders,
from time to time, of the Trust Securities, (iii) the "Guarantee" means the
Guarantee Agreement relating to the Capital Securities between the Corporation
and The Chase Manhattan Bank, as trustee (the "Guarantee Trustee") and (iv)
the "Common Guarantee" means the Guarantee Agreement relating to the Common
Securities between the Corporation and The Chase Manhattan Bank, as trustee.
In addition, as the context may require, (i) "Junior Subordinated Debentures"
includes the Original Junior Subordinated Debentures and the Exchange Junior
Subordinated Debentures and (ii) "Guarantee" includes the Original 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 The Depository Trust Company
("DTC"). Beneficial interests in such Capital Securities will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants. 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. The
Exchange Capital Securities will be issued, and may be transferred, only in
integral multiples of $1,000. See "Description of Exchange Securities--
Description of Exchange Capital Securities--Restrictions on Transfer."
Holders of the Capital Securities and the Common Securities will be entitled
to receive cumulative cash distributions arising from the payment of interest
on the Junior Subordinated Debentures, accruing from the date of original
issuance and payable semi-annually in arrears on June 15 and December 15 of
each year, commencing June 15, 1998, at the annual rate of 7 5/8% of the
Liquidation Amount of $1,000 per Trust Security
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("Distributions"). So long as no Debenture Event of Default (as defined
herein) 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 (i) no Extension Period may extend beyond the Stated Maturity
Date, (ii) any Extension Period will terminate as to all Junior Subordinated
Debentures upon an acceleration thereof (subject to reinstatement, upon cure
or waiver as provided in the Indenture (as defined herein)) and (iii) any
Extension Period will terminate as to any Junior Subordinated Debenture to be
redeemed on a Redemption Date (as defined herein). See "Description of Junior
Subordinated Debentures--Debenture Events of Default." Upon the termination of
any such Extension Period and the payment of all 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 Trust
Securities will also be deferred and the Corporation 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, preferred and preference 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. During an Extension Period, interest on the
Junior Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Securities are entitled will
continue to accumulate) at the rate of 7 5/8% per annum, compounded semi-
annually, and holders of Trust Securities will be required to accrue interest
income for United States federal income tax purposes prior to receipt of the
cash attributable to such income. 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."
The Corporation will, through the Guarantee, the Common Guarantee, the Trust
Agreement, the Junior Subordinated Debentures and the Indenture (each as
defined herein), taken together, fully, irrevocably and unconditionally
guarantee all of the Trust's obligations under the Trust Securities. See
"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 Capital Securities." The obligations of the Corporation
under the Guarantee, the Common Guarantee and 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 Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated
Maturity Date upon repayment of the Junior Subordinated Debentures at a
redemption price equal to the principal amount of, plus accrued interest on,
the Junior Subordinated Debentures (the "Maturity Redemption Price"), and (ii)
in whole but not in part, at any time upon the occurrence and continuation of
a Tax Event (as defined herein) or an Investment Company Event (as defined
herein) at a redemption price equal to the Special Event Prepayment Price (as
defined below). The Maturity Redemption Price or the Special Event Redemption
Price may be referred to herein as the "Redemption Price." See "Description of
Exchange Securities--Description of Exchange Capital Securities--Redemption."
The Junior Subordinated Debentures will be prepayable prior to the Stated
Maturity Date at the option of the Corporation at any time upon the occurrence
and continuation of a Tax Event or an Investment Company Event (each, a
"Special Event") at a prepayment price (the "Special Event Prepayment Price")
equal to the greater of (a)
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100% of the principal amount thereof or (b) the sum, as determined by a
Quotation Agent (as hereinafter defined), of the present values of the
remaining scheduled payments of principal and interest on the Junior
Subordinated Debentures to the Stated Maturity Date, 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 herein) plus,
in either case, accrued interest thereon to the date of prepayment. See
"Description of Exchange Securities--Description of Exchange Junior
Subordinated Debentures--Special Event Prepayment."
The Corporation will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities of creditors of the Trust as required by
applicable law, 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 having received an opinion of counsel to the
effect that such distribution will not be a taxable event 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 Distributions thereon to the date of
payment. See "Description of Exchange Securities--Description of Exchange
Capital Securities--Liquidation of the Trust and Distribution of Junior
Subordinated Debentures."
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Original Capital Securities. The Exchange Capital
Securities will be a new issue of securities for which there currently is no
market. Although Salomon Brothers Inc, ABN AMRO Chicago Corporation and
BancAmerica Robertson Stephens, the initial purchasers of the Original Capital
Securities (the "Initial Purchasers"), have informed the Corporation and the
Trust that they each currently intend to make a market in the Exchange Capital
Securities, they are not obligated to do so, and any such market-making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the 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 Nasdaq.
Any Original 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
Original 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 Original Capital Securities held by them. To the extent that Original
Capital Securities are tendered and accepted in the Exchange Offer, a holder's
ability to sell untendered Original Capital Securities could be adversely
affected. See "Risk Factors--Consequences of a Failure to Exchange Original
Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER.
Original Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on May 13, 1998 (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 Original 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 Original 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. Original Capital
Securities may be
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tendered in whole or in part having an aggregate Liquidation Amount of not
less than $100,000 (100 Capital Securities) or any integral multiple of $1,000
Liquidation Amount (one Capital Security) in excess thereof, provided that, if
any Original Capital Securities are tendered for exchange in part, the
untendered Liquidation Amount thereof must be $100,000 (100 Capital
Securities) or any integral multiple of $1,000 in excess thereof. The
Corporation has agreed to pay all expenses of the Exchange Offer. See "The
Exchange Offer--Fees and Expenses." Holders of the Original Capital Securities
whose Original Capital Securities are accepted for exchange will not receive
Distributions on such Original Capital Securities and will be deemed to have
waived the right to receive any Distributions on such Original Capital
Securities accumulated from and after December 23, 1997. Accordingly, holders
of Exchange Capital Securities as of the record date for the payment of
Distributions on June 15, 1998 will be entitled to receive Distributions
accumulated from and after December 23, 1997. See "The Exchange Offer--
Description of Exchange Capital Securities--Distributions."
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."
For North Carolina Residents:
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS THE COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
NO EMPLOYEE BENEFIT OR OTHER PLAN OR INDIVIDUAL RETIREMENT ACCOUNT SUBJECT
TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
(ERISA), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
CODE) (EACH, A PLAN), NO ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY
REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY (A PLAN ASSET ENTITY), AND NO
PERSON INVESTING PLAN ASSETS OF ANY PLAN, MAY ACQUIRE OR HOLD THE CAPITAL
SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASE AND HOLDING IS
COVERED BY THE EXEMPTIVE RELIEF PROVIDED BY U.S. DEPARTMENT OF LABOR
PROHIBITED TRANSACTION CLASS EXEMPTION (PTCE) 96-23, 95-60, 91-38, 90-1, OR
84-14 OR ANOTHER APPLICABLE EXEMPTION WITH RESPECT TO SUCH PURCHASE AND
HOLDING AND, IN THE CASE OF ANY PURCHASER OR HOLDER RELYING ON ANY EXEMPTION
OTHER THAN PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14, SUCH PURCHASER HAS
COMPLIED WITH ANY REQUEST BY THE CORPORATION OR THE TRUST FOR AN OPINION OF
COUNSEL OR OTHER EVIDENCE WITH RESPECT TO THE APPLICABILITY OF SUCH EXEMPTION.
ANY PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY INTEREST THEREIN WILL
BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND/OR HOLDING THEREOF THAT
EITHER (A) THE PURCHASER AND HOLDER ARE NOT PLANS OR PLAN ASSET ENTITIES AND
ARE NOT PURCHASING SUCH SECURITIES ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY
PLAN OR (B) THE PURCHASE AND HOLDING OF THE CAPITAL SECURITIES IS COVERED BY
THE EXEMPTIVE RELIEF PROVIDED BY PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 OR
ANOTHER APPLICABLE EXEMPTION. PROSPECTIVE PURCHASERS MUST CAREFULLY CONSIDER
THE RESTRICTIONS ON PURCHASE SET FORTH IN "NOTICE TO INVESTORS" AND "ERISA
CONSIDERATIONS."
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 EXCHANGE
OFFER COVERED BY THIS PROSPECTUS. 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
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CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR 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 ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
MMI INVESTOR RELATIONS, MMI COMPANIES, INC., 540 LAKE COOK ROAD, DEERFIELD, IL
60015, (847) 374-2254. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE
EXPIRATION DATE (AS DEFINED HEREIN).
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AVAILABLE INFORMATION
On December 11, 1997 the Corporation acquired 99% of the issued and
outstanding Ordinary Shares, all of which are represented by American
Depositary Shares (the "Unionamerica ADSs"), of Unionamerica Holdings plc (the
"Unionamerica Acquisition"). Unionamerica Holdings plc is hereinafter referred
to singly, and, where the context so requires, with its subsidiaries, as
"Unionamerica." As of March 18, 1998 MMI completed the compulsory acquisition
procedures set forth in the Companies Act 1985 of Great Britain to acquire all
of the remaining Unionamerica ADSs. See "MMI Companies, Inc.--Description of
Unionamerica."
As used in this Prospectus, unless the context otherwise requires, "MMI" and
the "Corporation" refer to MMI Companies, Inc. and its subsidiaries including
Unionamerica, and "Unionamerica" refers to Unionamerica Holdings plc and its
subsidiaries.
The Corporation is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance with the Exchange Act, the Corporation files reports, proxy
statements and other information with the Commission. Unionamerica was also
subject to the same filing requirements as MMI, but on January 28, 1998 filed
with the Commission a Notice of Termination of Registration and Duty to File
Reports under the Exchange Act. Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
DC 20549 and at the Commission's regional offices at 7 World Trade Center,
13th Floor, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
may also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, DC 20549 at prescribed
rates. Such information filed by MMI may also be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov.). In
addition, such reports, proxy statements and other information concerning MMI
and Unionamerica may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005, on which the common
stock of the Corporation is listed and traded and the Unionamerica ADSs were
formerly traded.
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 Capital Securities because the Trust is a newly
created special purpose entity, has no 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 Junior Subordinated
Debentures, issuing the Trust Securities and engaging in incidental
activities. See "MMI Capital Trust I," "Description of Exchange Securities--
Description of Exchange Capital Securities,"
"--Description of Exchange Junior Subordinated Debentures" and "--Description
of Exchange Guarantee." In addition, the Corporation does not expect that the
Trust will file reports, proxy statements and other information under the
Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Corporation and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Corporation, the
Trust and the Exchange Securities. Any statements contained herein concerning
the provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated into this
Prospectus by reference:
1. The Corporation's Annual Report on Form 10-K for the year ended December
31, 1997.
2. The Corporation's Proxy Statement dated March 19, 1998 for its Annual
Meeting of Stockholders to be held April 16, 1998.
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior
to the termination of any offering of securities made by this Prospectus shall
be deemed to be incorporated by reference into this Prospectus and to be a
part of this Prospectus from the date of filing of such document. 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 subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
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. Unless otherwise indicated, all references in this Prospectus to
documents "incorporated by reference" are to documents incorporated by
reference into this Prospectus. The Corporation will provide without charge to
any person to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of its documents incorporated by
reference herein (other than exhibits not specifically incorporated by
reference into the texts of such documents). Requests for such documents
should be directed to: MMI Investor Relations, MMI Companies, Inc., 540 Lake
Cook Road, Deerfield, IL 60015. Telephone requests may be directed to MMI
Investor Relations at (847) 374-2254.
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FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking information. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-
looking information to encourage companies to provide prospective information
about themselves so long as such information is identified as forward-looking
and is accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
projected in the information. The Corporation identifies the following
important factors which could cause actual results to differ materially from
any such results which might be projected, forecast, estimated or budgeted by
the Corporation in forward-looking information. All of such factors are
difficult to predict and many are beyond the control of the Corporation.
Accordingly, while the Corporation believes that the assumptions underlying
the forward-looking information are reasonable, there can be no assurance that
such assumptions will approximate actual experience. These important factors
include, among others, those set forth under "Risk Factors" and: (i) general
economic and business conditions, changes in interest rates and the
performance of securities markets, each of which may impact the profitability
of the Corporation, the market value of the Corporation's investment
portfolio, the credit quality of the Corporation's loan portfolio and the
demand for insurance; (ii) changes in U.S. and non-U.S. laws and regulatory
developments affecting financial institutions, generally, and insurance and
reinsurance companies, specifically; (iii) industry consolidation and
increased competition; (iv) the impact on the Corporation's insurance
subsidiaries of losses of significant magnitude; and (v) the integration of
the Corporation's and Unionamerica's operations in a timely and cost effective
manner. Investors are also directed to consider other risks and uncertainties
discussed in documents filed by the Corporation and Unionamerica with the
Commission. The Corporation disclaims any obligation to update forward-looking
information.
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<PAGE>
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more detailed
information (including financial information) appearing elsewhere in this
Prospectus or incorporated by reference herein. The information contained in
this Prospectus reflects the Unionamerica Acquisition. The Corporation and
Unionamerica are insurance holding companies. Each conducts its operations
through its subsidiaries and has no direct operations, and the principal assets
of each are the shares of capital stock of their subsidiaries.
Unless otherwise indicated, financial information and operating statistics
applicable to the Corporation and Unionamerica set forth in this Prospectus or
incorporated by reference herein are based upon United States generally-
accepted accounting principles ("GAAP").
See "Risk Factors," immediately following this Prospectus Summary, for
certain information that should be considered by holders in deciding whether to
tender Original Capital Securities in the Exchange Offer.
MMI COMPANIES, INC.
OVERVIEW
MMI offers a comprehensive set of specialized insurance products and
consulting services that are designed to assist healthcare providers to manage
the business, clinical, insurable and financial risks associated with the
delivery of healthcare. Since MMI's formation in 1983, the Corporation has,
through acquisitions and internal growth, substantially increased its insurance
assets and capital as well as the breadth of its products and services and its
capacity to deliver them. According to A.M. Best Company ("A.M. Best"), as of
December 31, 1996 MMI ranked as the 8th largest medical malpractice insurer in
the United States based on direct premiums written. The Corporation's business
is organized into three operating groups, consisting of the Insurance Group,
the Strategic Management Consulting Group and the Healthcare Services Group.
MMI's principal property and casualty insurance subsidiaries other than
Unionamerica are rated "A" (Excellent), by A.M. Best.
UNIONAMERICA ACQUISITION
On December 11, 1997 the Corporation acquired 99% of the issued and
outstanding Ordinary Shares of Unionamerica, all of which are represented by
Unionamerica ADSs. As of March 18, 1998 MMI completed the compulsory
acquisition procedures set forth in the Companies Act 1985 of Great Britain to
acquire all of the remaining Unionamerica ADSs. Founded in 1971, Unionamerica
is a specialty casualty and property reinsurer and insurer operating in the
London-based reinsurance and insurance market. Unionamerica's core business is
professional indemnity reinsurance (including malpractice reinsurance for
groups of healthcare providers, lawyers and other professionals), as well as
casualty reinsurance and insurance for a variety of U.S. single industry and/or
single state risks. In addition, Unionamerica selectively underwrites other
risks where it has underwriting expertise and when management believes market
conditions relating to pricing and terms are attractive. In 1997 these
coverages primarily included individual property risk, automobile physical
damage and property catastrophe coverages. Unionamerica's principal property
and casualty insurance subsidiary, Unionamerica Insurance Company Limited, is
rated "A-" (Excellent), by A.M. Best.
MMI CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, The Chase
Manhattan Bank, as Property Trustee, and Chase Manhattan Bank Delaware, as
Delaware Trustee and the three individual Administrative Trustees named
therein, and (ii) the filing of a certificate of trust with the Delaware
Secretary of State on December 15, 1997. The Trust's activities are conducted
by the Issuer Trustees which are the Property Trustee, the Delaware Trustee,
and the three individual Administrative Trustees who are officers of 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
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<PAGE>
to acquire the Junior Subordinated Debentures issued by the Corporation, and
(iii) engaging in only those other activities necessary, advisable or
incidental thereto. Accordingly, the Junior Subordinated Debentures are 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 are owned
by the Corporation.
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 Original
Capital Securities. Original Capital
Securities may be tendered for exchange
in whole or in part in a Liquidation
Amount of $100,000 (100 Capital
Securities) or any integral multiple of
$1,000 (one Capital Security) in excess
thereof, provided that, if any Original
Capital Securities are tendered for
exchange in part, the untendered
Liquidation Amount thereof must be
$100,000 (100 Capital Securities) or any
integral multiple of $1,000 in excess
thereof. The Corporation and the Trust
are making the Exchange Offer in order to
satisfy their obligations under the
Registration Rights Agreement relating to
the Original Capital Securities. For a
description of the procedures for
tendering Original Capital Securities,
see "The Exchange Offer--Procedures for
Tendering Original Capital Securities."
Expiration Date.................
5:00 p.m., New York time, on May 13,
1998, unless the Exchange Offer is
extended by the Corporation (in which
case the 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 The Exchange Offer is subject to certain
Offer........................... 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 Original Capital Securities
being tendered. See "The Exchange Offer--
Conditions to the Exchange Offer."
Offer........................... The Corporation and the Trust reserve the
right in their sole and absolute
discretion, subject to applicable law, at
any time and from time to time (i) to
delay the acceptance of the Original
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
Original Capital Securities tendered
pursuant to the Exchange Offer, subject,
however, to the right of holders of
Original Capital Securities to withdraw
their tendered Original 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."
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<PAGE>
Withdrawal Rights............... Tenders of Original 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 (as defined herein) in
conformity with certain procedures set
forth in "The Exchange Offer--Withdrawal
Rights."
Procedures for tendering
Original Capital Securities....
Brokers, dealers, commercial banks, trust
companies and other nominees who hold
Original Capital Securities through The
Depository Trust Company ("DTC") may
effect tenders by book-entry transfer in
accordance with DTC's Automated Tender
Offer Program ("ATOP"). Holders of such
Original 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 Original Capital
Securities. In order for Original Capital
Securities to be tendered by a means
other than by book-entry transfer, a
Letter of Transmittal must be completed
and signed in accordance with the
instructions contained therein. The
Letter of Transmittal and any other
documents required by the Letter of
Transmittal must be delivered to The
Chase Manhattan Bank (the "Exchange
Agent") by mail, facsimile, hand delivery
or overnight courier and either such
Original Capital Securities must be
delivered to the Exchange Agent or
specified procedures for guaranteed
delivery must be complied with. See "The
Exchange Offer--Procedures for Tendering
Original Capital Securities."
Letters of Transmittal and certificates
representing Original Capital Securities
should not be sent to the Corporation. Such
documents should be sent only to the Exchange
Agent.
Resales of Exchange Capital The Trust is making the Exchange Offer in
Securities...................... reliance upon 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 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 upon 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 Original 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
12
<PAGE>
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 Original 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 Original 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 forth in
the above-mentioned interpretive letters,
(b) will not be permitted or entitled to
tender such Original 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 Original Capital
Securities unless such sale is made
pursuant to an exemption from such
requirements. In addition, as described
below, if any broker-dealer holds
Original Capital Securities acquired for
its own account as a result of market-
making or other trading activities and
exchanges such Original 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 Original Capital
Securities who wishes to exchange
Original Capital Securities for Exchange
Capital Securities in the Exchange Offer
will be required to represent that (i) it
is not an "affiliate" of the Corporation
or the Trust, (ii) any Exchange Capital
Securities to be received by it are being
acquired in the ordinary course of its
business, (iii) it 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
Capital Securities to be exchanged in the
Exchange Offer. Each broker-dealer that
receives Exchange Capital Securities for
its own account pursuant to the Exchange
Offer must acknowledge that it acquired
the Original Capital
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<PAGE>
Securities 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 states that by so
acknowledging 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 acquired Original
Capital Securities 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 Original Capital Securities
(other than Original Capital Securities
which represent an unsold allotment from
the initial sale of the Original Capital
Securities) with a prospectus meeting the
requirements of the Securities Act, which
may be the prospectus prepared for an
exchange offer so long as it contains a
description of the plan of distribution
with respect to the resale 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 it will deliver a prospectus in
connection with any resale of such
Exchange Capital Securities. The Letter
of Transmittal states that by so
acknowledging and by delivery of a
prospectus, a broker-dealer will not be
deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a broker-dealer
in connection with resales of Exchange
Capital Securities received in exchange
for Original Capital Securities acquired
by such broker-dealer as a result of
market-making activities or other trading
activities. The Trust and the Corporation
have agreed that, prior to the close of
business on the 180th day following the
Expiration Date this Prospectus will be
available to any broker-dealer for use in
connection with any such resale. 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 Original 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 in "The
Exchange Offer
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<PAGE>
--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. See "The Exchange
Offer--Resales of Exchange Capital
Securities."
In that regard, each Participating Broker-
Dealer who surrenders Original 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 180-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.
Exchange Agent.................. The exchange agent with respect to the
Exchange Offer is The Chase Manhattan Bank.
The addresses, and telephone and
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<PAGE>
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 or the Trust will
receive any cash proceeds from the issuance
of the Exchange Capital Securities offered
hereby. See "Use of Proceeds."
Certain United States Federal
Income Tax Consequences; ERISA
Considerations.................
Holders of Original Capital Securities should
review the Information set forth in "Certain
Federal Income Tax Consequences" and "ERISA
Considerations" prior to tendering Original
Capital Securities in the Exchange Offer.
THE EXCHANGE CAPITAL SECURITIES
Securities offered.............. Up to $125,000,000 aggregate principal
Liquidation Amount of the Trust's Exchange
Capital Securities which have been registered
under the Securities Act (Liquidation Amount
$1,000 per Exchange Capital Security). The
Exchange Capital Securities will be issued
and the Original Capital Securities were
issued under the Trust Agreement. The
Exchange Capital Securities and any Original
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
Original Capital Securities, except that the
Exchange Capital Securities have been
registered under the Securities Act and will
not be subject to certain restrictions on
transfer applicable to the Original Capital
Securities and will not provide for any
increase in the Distribution rate thereon.
See "The Exchange Offer--Purpose of the
Exchange Offer and Description of Exchange
Securities."
Distribution dates.............. June 15 and December 15 of each year,
commencing June 15, 1998.
Extension periods............... Distributions on Exchange Capital
Securities will be deferred for the
duration of any Extension Period elected
by the Corporation with respect to the
payment of interest on the Exchange
Junior Subordinated Debentures. No
Extension Period will exceed 10
consecutive semi-annual periods or extend
beyond the Stated Maturity Date, each
extension period will terminate as to all
Exchange Junior Subordinated Debentures
upon an acceleration thereof (subject to
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<PAGE>
reinstatement, upon cure or waiver as
provided in the Indenture), and any
Extension Period will terminate as to any
Exchange Junior Subordinated Debenture to
be redeemed pursuant to the occurrence
and continuation of a Special Event on
the applicable Redemption Date. 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 Original Capital
Securities and the Common Securities
except as described in "Description of
Exchange Securities--Description of
Exchange Capital Securities--
Subordination of Common Securities." The
Exchange Junior Subordinated Debentures
will rank pari passu with the Original
Junior Subordinated Debentures and all
other junior subordinated debentures to
be issued by the Corporation ("Other
Debentures"), which will be issued and
sold (if at all) to other trusts to be
established by the Corporation (if any),
in each case similar to the Trust ("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 Original Guarantee and all other
guarantees (if any) to be issued by the
Corporation with respect to capital or
preferred securities (if any) issued by
Other Trusts ("Other Guarantees") and
will constitute an unsecured obligation
of the Corporation and will rank
subordinate and junior in right of
payment to all Senior Indebtedness to the
extent and in the manner set forth in the
Guarantee Agreement. See "Description of
Exchange Securities--Description of
Exchange 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 Date upon repayment of
the Junior Subordinated Debentures, at a
redemption price equal to the principal
amount of, plus accrued interest on, the
Junior Subordinated Debentures, and (ii)
in whole but not in part, at any time
upon the occurrence and continuation of a
Special Event at a Redemption Price equal
to the Special Event Prepayment Price.
See "Description of Exchange Securities--
Description of Exchange Capital
Securities--Redemption."
Ratings......................... The Original Capital Securities are rated
"a3" by Moody's Investors Service, Inc.
and "BBB+" by Standard & Poor's Rating
Services, a division of The McGraw Hill
Companies, Inc.
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<PAGE>
Transfer restrictions........... The Exchange Capital Securities will be
issued, and may be transferred, only in
minimum denominations of not less than
$1,000. See "Description of Exchange
Securities--Description of Exchange
Capital Securities--Restrictions on
Transfer." Any such transfer of Exchange
Capital Securities in denominations of
less than $1,000 shall be deemed to be
void and of no legal effect whatsoever.
Absence of market for the The Exchange Capital Securities will be a new
Capital Securities............. issue of securities for which there currently
is no market. Although the Initial Purchasers
have informed the Trust and the Corporation
that they each currently intend to make a
market in the Capital Securities, the Initial
Purchasers are not obligated to do so, and
any such market-making may be discontinued at
any time without notice. Accordingly, there
can be no assurance as to the development or
liquidity of any market for the Capital
Securities. The Trust and the Corporation do
not intend to apply for listing of the
Capital Securities on any securities exchange
or for quotation through Nasdaq. See "Plan of
Distribution."
For additional information regarding the Capital Securities, see "Description
of Exchange Securities" and "Certain Federal Income Tax Consequences."
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<PAGE>
RISK FACTORS
Holders of Original Capital Securities 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 Guarantee issued by it for the
benefit of the holders of Capital Securities, as well as under the Junior
Subordinated Debentures, will be unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness (as defined). In addition, in the
case of a bankruptcy or insolvency proceeding, the Corporation's obligations
under the Guarantee will also rank subordinate and junior in right of payment
to all liabilities (other than Other Guarantees) of the Corporation. As of
December 31, 1997, the Corporation did not have any Senior Indebtedness
outstanding; however, at the date hereof, the Corporation has obtained a $100
million credit facility, borrowings under which, if incurred, would constitute
Senior Indebtedness. See "Description of Exchange Securities--Description of
Exchange Junior Subordinated Debentures--Subordination." 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 or by any subsidiary. See "Description of
Exchange Securities--Description of Exchange Guarantee--Status of the Exchange
Guarantee" and "--Description of Exchange Junior Subordinated Debentures--
Subordination." The ability of the Trust to pay amounts due on the Capital
Securities is solely dependent upon the Trust's receipt of payments on the
Junior Subordinated Debentures from the Corporation as and when required.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default (as defined below) 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 (i)
no Extension Period may extend beyond the Stated Maturity Date, (ii) any
Extension Period will terminate as to all Junior Subordinated Debentures upon
an acceleration thereof (subject to reinstatement, upon cure or waiver as
provided in the Indenture), and (iii) any Extension Period will terminate as
to any Junior Subordinated Debenture to be redeemed on the applicable
Redemption Date. 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 7
5/8% per annum to the extent permitted by applicable law as respects the
Debentures, compounded semi-annually from the relevant payment date for such
Distributions during any such Extension Period.
Prior to the termination of any such Extension Period, the Corporation may
further extend such 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 Date. 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
7 5/8%, 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 "--Description of Exchange Junior Subordinated Debentures--
Option to Extend Interest Payment Date."
Should the Corporation exercise its right to defer payments of interest on
the Junior Subordinated Debentures, 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, which will be allocated but not
distributed to holders of Trust Securities. As a result, each
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<PAGE>
such holder of Capital Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and will not
receive 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 exercise its right to defer payments of interest on
the Junior Subordinated Debentures, 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 that are not subject to such deferrals.
Although the Corporation has the right to exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Corporation
has no current intention to defer payments of interest on such Junior
Subordinated Debentures.
SPECIAL EVENT REDEMPTION
Upon the occurrence and continuation of a Special Event (as defined under
"Description of Exchange Securities--Description of Exchange Junior
Subordinated Debentures--Special Event Prepayment"), the Corporation will have
the right to prepay the Junior Subordinated Debentures in whole (but not in
part) at the Special Event Prepayment Price within 90 days following the
occurrence of such Special Event and therefore cause a mandatory redemption of
the Trust Securities at the Special Event Redemption Price. See "Description
of Exchange Securities--Description of Exchange Capital Securities--
Redemption" and "Certain Federal Income Tax Consequences."
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the United States Treasury proposed legislation that, among other
things, would have denied an issuer a deduction for United States federal
income tax purposes for the payment of interest on instruments with
characteristics similar to the Junior Subordinated Debentures. The Taxpayer
Relief Act of 1997, enacted on August 7, 1997, did not contain these
provisions. There can be no assurance, however, that developments such as a
change in law or applicable Regulations or a decided case will not occur after
the date hereof, which would adversely affect the tax treatment of the Junior
Subordinated Debentures, or that any legislation enacted after the date hereof
would not cause a Tax Event that may result in a redemption of the Junior
Subordinated Debentures at the Special Event Prepayment Price and,
consequently, the Trust Securities at the Special Event Redemption Price. See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Redemption" and
"--Description of Exchange Junior Subordinated Debentures--Special Event
Prepayment."
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. 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 Exchange Capital Securities are also
making an investment decision with regard to the Exchange Junior Subordinated
Debentures and should carefully review all the information regarding the
Exchange Junior Subordinated Debentures contained herein. See "Description of
Exchange Securities--Description of Exchange Junior Subordinated Debentures."
20
<PAGE>
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Chase
Manhattan Bank will also act as Property Trustee and as Debenture Trustee
under the Indenture. Chase Manhattan Bank Delaware will act as Delaware
Trustee under the Trust Agreement. The Guarantee 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 and (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 the 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 institute a legal
proceeding directly against the Corporation for enforcement of payment to such
holder of the principal of (or premium, if any) or 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 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," "--Debenture Events of Default" and "--Description of Exchange
Guarantee." The Trust Agreement provides that each holder of Capital
Securities by acceptance thereof agrees to the provisions of the Indenture.
CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving the Corporation that may adversely affect such holders.
LIMITED VOTING RIGHTS
Holders of Capital Securities will generally have limited voting rights
relating only to the modification of the Capital Securities, 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
21
<PAGE>
upon the occurrence of certain events described herein. The Property Trustee
and the holders of all of the Common Securities may, subject to certain
conditions, amend the Trust Agreement without the consent of holders of
Capital Securities to cure any ambiguity or make other provisions not
inconsistent with other provisions of the Trust Agreement or to ensure that
the Trust (i) will not be classified as a corporation or any other entity
subject to taxation for United States federal income tax purposes or (ii) will
not be required to register as an "investment company" under the Investment
Company Act of 1940, as amended (the "Investment Company Act"). See
"Description of Exchange Securities--Description of Exchange Capital
Securities--Voting Rights; Amendment of the Trust Agreement" and "--Removal of
Administrative Trustees."
INTEGRATION OF MMI AND UNIONAMERICA
MMI believes that the Unionamerica Acquisition will result in certain
benefits. Achieving these benefits will depend in part upon the integration of
the businesses of MMI and Unionamerica in an efficient manner, and there can
be no assurance that this will occur. The transition to a combined company
will require substantial attention from management. The diversion of
management attention and any difficulties encountered in the transition
process could have an adverse effect on the revenues and operating results of
the Corporation.
INDUSTRY FACTORS AND COMPETITION MAY INFLUENCE FUTURE RESULTS
The medical malpractice business environment is currently in a prolonged
soft market, where competitive pricing pressures have reduced the opportunity
for MMI to obtain rate increases and thereby revenue growth. Many factors
influence the financial results of the medical malpractice insurance and
reinsurance businesses, several of which are beyond the control of MMI. The
supply of insurance, or the industry's underwriting capacity, is determined
principally by the industry's level of capitalization, historical underwriting
results, returns on investment and perceived premium rate adequacy. MMI
competes with numerous insurance companies and consulting businesses, many of
which have greater financial resources than does MMI. These factors, together
with competitive pricing, could result in fluctuations in underwriting results
and net income.
UNDERWRITING LOSSES AND RESERVES ARE BASED UPON ESTIMATES
The reserves for losses and loss adjustment expenses established by MMI are
estimates of amounts needed to pay reported and unreported claims and related
loss adjustment expenses. The estimates are based on assumptions related to
the ultimate cost of settling such claims. If the reserves are inadequate, MMI
will be required to increase its reserves and thus reduce its net income in
the period in which the deficiency is identified. Unanticipated underwriting
losses or materially underestimated reserves could have a material adverse
effect on MMI.
ABILITY OF REINSURERS TO PAY CLAIMS
In order to reduce risk and to increase its underwriting capacity, MMI
obtains reinsurance from unaffiliated reinsurers, although it generally
retains a portion of each risk reinsured. MMI is subject to credit risk with
respect to its reinsurers because reinsurance does not relieve the ceding
company of liability to its insureds for the risks ceded to reinsurers.
Although MMI believes that its and Unionamerica's reinsurance is maintained
with financially stable reinsurers and that any reinsurance security
maintained is adequate to protect its interests, a reinsurer's insolvency or
inability to make payments under the terms of a reinsurance treaty could have
a material adverse effect on MMI.
HOLDING COMPANY STRUCTURE AND RESTRICTIONS ON INSURANCE SUBSIDIARIES
As a holding company, MMI depends on dividends and other permitted payments
from its subsidiaries to meet its cash needs, including servicing its debt
(including the Junior Subordinated Debentures) and paying stockholder
dividends. The Missouri and Illinois insurance laws and regulations impose
restrictions on the amount of dividends that may be paid to stockholders by
insurance companies domiciled in the respective states
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<PAGE>
without prior approval of the Director of Insurance in such states. American
Continental Insurance Company, a subsidiary of MMI ("ACIC"), may not, without
the prior approval of the Missouri Director of Insurance, pay a dividend that,
together with any other dividends paid within the twelve month period ending
on the date when the dividend will be paid, exceeds the lesser of ACIC's net
investment income for the prior calendar year or ten percent of its statutory
surplus as of December 31 of the prior calendar year. Health Providers
Insurance Company, another MMI subsidiary ("HPIC"), may not, without the prior
approval of the Illinois Director of Insurance, pay a dividend that, together
with any other dividends paid within the twelve-month period ending on the
date when the dividend will be paid, exceeds the greater of ten percent of its
statutory surplus as of December 31 of the prior calendar year or net income
for the prior calendar year.
In connection with Unionamerica's authorization in the U.K., the Secretary
of State for Trade and Industry acting through the Insurance Directorate of
the U.K. Department of Trade and Industry ("DTI") has set forth Unionamerica
Insurance Company Limited's Notice of Requirements, the provisions of which
include, among other things, that Unionamerica Insurance Company Limited may
not pay any dividends unless it has given the DTI 14 days advance notice and
the DTI has not objected. The DTI has the power to prohibit or require
Unionamerica Insurance Company Limited to reduce the amount of a dividend,
restrict the amount of its writings and to prohibit transactions by
Unionamerica Insurance Company Limited with affiliates.
REGULATION
MMI's insurance subsidiaries, and Unionamerica and its subsidiaries, are
subject to supervision and regulation of their businesses and financial
condition by the jurisdictions in which they transact business. The primary
purpose of such supervision and regulation is the protection of the interests
of policyholders as opposed to the interests of the holders of securities of
MMI or the Trust. Such supervision and regulation generally derives from
statutes which delegate broad regulatory, supervisory and administrative
authority to insurance departments and other governmental entities. In
addition to state-imposed insurance laws and regulations, MMI is subject to
statutory accounting practices and the reporting format of the National
Association of Insurance Commissioners (the "NAIC"). The NAIC and many states
have adopted risk based capital formulae to establish minimum capital and
surplus requirements for insurance companies and a model act for regulation of
such companies. The risk based capital formula measures a company's asset
risk, insurance risk, interest rate risk and business risk. As of December 31,
1997, the surplus of each of MMI's insurance subsidiaries exceeded the minimum
requirements under the NAIC formula. The impact on MMI of any changes in these
laws, or of changes in or the adoption of any other laws or regulations,
cannot be predicted. Unionamerica Insurance Company Limited is a U.K.-
authorized insurance company subject to regulation and supervision in the U.K.
under U.K. domestic and European Community law. The U.K. Insurance Companies
Act 1982, as amended, imposes on U.K. insurance companies solvency and
liquidity standards and auditing and reporting requirements, and further
grants to the DTI powers to supervise, investigate and intervene in the
affairs of insurance companies. Unionamerica Insurance Company Limited is
subject to a Notice of Requirements issued by the DTI which, among other
things, restricts Unionamerica Insurance Company Limited from entering into
certain transactions with affiliates and sets a ceiling on the annual amount
of gross premiums that may be written by it. In addition, before it may pay
any dividend, Unionamerica Insurance Company Limited is required to give 14
days' advance notice to the DTI, which has the ability to reduce or prohibit
such payment. Unionamerica Insurance Company Limited is permitted to seek the
approval of the DTI for an increase in the gross premiums ceiling in respect
of one or more years and may do so depending on future business conditions.
Neither Unionamerica nor any of its subsidiaries is incorporated or licensed
as an insurance company in any jurisdiction of the U.S. Each state of the U.S.
regulates to an extent the purchase of insurance and reinsurance by its
citizens from alien insurers and reinsurers, such as Unionamerica. Recently,
insurance regulation in the U.S., particularly as it relates to alien insurers
and reinsurers, has been subject to increased scrutiny by the NAIC and
legislative and regulatory bodies.
CONSEQUENCES OF A FAILURE TO EXCHANGE ORIGINAL CAPITAL SECURITIES
The Original 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
23
<PAGE>
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.
Original 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
Original Capital Securities which remain outstanding will not be entitled to
any rights to have such Original Capital Securities registered under the
Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exceptions). The Corporation and the
Trust do not intend to register under the Securities Act any Original Capital
Securities which remain outstanding after consummation of the Exchange Offer
(subject to such limited exceptions, if applicable). To the extent that
Original Capital Securities are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Capital Securities could be
adversely affected.
The Exchange Capital Securities and any Original 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 of Capital Securities 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 Original Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed by
May 22, 1998 and declared effective by June 21, 1998, the Distribution rate
borne by the Original Capital Securities will increase by 0.25% per annum
until such registration statement has been filed or declared effective, as the
case may be. Upon consummation of the Exchange Offer, holders of Original
Capital Securities will not be entitled to any increase in the Distribution
rate thereon or any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of Exchange
Securities."
ABSENCE OF PUBLIC MARKET
The Original Capital Securities were issued to, and the Corporation believes
such securities are currently owned by, a relatively small number of
beneficial owners. The Original 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 the 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. Original Capital Securities may be transferred by
the holders thereof only in blocks having a Liquidation Amount of not less
than $100,000 (100 Capital Securities). The Corporation and the Trust have
been advised by the Initial Purchasers that the Initial Purchasers presently
intend 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 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 Original Capital Securities, or as to the liquidity of or
the trading market for the Exchange Capital Securities or the Original 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, the financial condition of the Corporation
and the market for similar securities. Depending on these and other factors,
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
24
<PAGE>
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
Original Capital Securities, where such Original 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
Subject to the conditions set forth in "The Exchange Offer--Conditions to
the Exchange Offer," delivery of Exchange Capital Securities in exchange for
Original 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) certificates for Original Capital Securities or a book-entry confirmation
of a book-entry transfer of Original Capital Securities into the Exchange
Agent's account at DTC, including an Agent's Message (as defined in "The
Exchange Offer--Acceptance for Exchange and Issuance of Exchange Capital
Securities") if the tendering holder does not deliver a Letter of Transmittal,
(ii) a completed and signed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, or, in the case of a book-entry transfer,
an Agent's Message in lieu of the Letter of Transmittal, and (iii) any other
documents required by the Letter of Transmittal. Therefore, holders of
Original Capital Securities desiring to tender such Original Capital
Securities in exchange for Exchange Capital Securities should allow sufficient
time to ensure timely delivery. Neither the Corporation nor the Trust is under
a duty to give notification of defects or irregularities with respect to the
tenders of Original Capital Securities for exchange.
25
<PAGE>
MMI COMPANIES, INC.
MMI Companies, Inc. (together with its subsidiaries) provides insurance
products and related specialized services in two principal markets: the United
States healthcare industry and international insurance and reinsurance
markets. The Corporation's business is organized into three business segments:
domestic insurance, international insurance and consulting and fee services.
Domestically, the Corporation offers specialized medical malpractice
insurance products and consulting services that are designed to assist
healthcare providers manage the cost and quality of care. The Corporation
integrates its professional liability insurance with certain of its fee-based
risk management services and does not offer such insurance or that set of risk
management services on a stand-alone basis. Accordingly, insurance clients are
required to purchase a specific set of risk modification services consisting
of consulting, education and information in order to have access to the
Corporation's professional liability coverage. In addition, the Corporation
offers a variety of other consulting and fee-based services to healthcare
providers, including strategic and management consulting, employee relations
consulting, risk management services, professional liability claims
management, healthcare credentials verification services and billing,
compliance and reimbursement services.
Internationally, the Corporation operates as a specialty casualty and
property reinsurer and insurer operating in the London-based reinsurance and
insurance market (the "London Market"), primarily through its recently
acquired subsidiary, Unionamerica. Unionamerica's core businesses are
professional liability reinsurance, including malpractice reinsurance for
healthcare providers, as well as lawyers and other professionals, and
reinsurance and insurance for a variety of property and casualty risks. Of
Unionamerica's insurance gross premiums written, approximately 74% are
generated in the U.S. The percentage of business from non-U.S. sources has
grown in recent years. The Corporation intends to continue to operate
Unionamerica as a distinct business entity under its current management.
The Corporation was formed in 1983 to write medical malpractice insurance
and provide risk management services for hospitals and physicians in the
United States. Since the initial public offering of its Common Stock in June
1993, the Corporation has, through acquisitions and internal growth,
substantially increased its insurance assets and capital, the breadth of its
products and services and its capacity to deliver them. The Corporation has
acquired insurance, strategic management consulting, employee relations
consulting, credentials verification services and professional liability
claims management businesses and successfully integrated them into its
operations. It also developed additional services to assist healthcare
providers manage their business operations. In December 1997, the Corporation
acquired Unionamerica in a stock for stock transaction.
At December 31, 1997 on a consolidated basis the Corporation had
stockholders' equity of approximately $399 million, total assets of $1.9
billion and approximately 800 employees. For the year ended December 31, 1997
the Corporation had total consolidated revenues of $408 million, which
included $278 million of premiums earned and $52 million of consulting and fee
income, and net income of $34 million.
STRATEGIC RATIONALE FOR THE UNIONAMERICA ACQUISITION
On December 11, 1997 MMI closed the Unionamerica Acquisition. MMI believes
that its target market, the healthcare industry, is undergoing structural
change and organizational consolidation. MMI further believes that the medical
malpractice industry is also undergoing consolidation, partly in response to
the dynamics of its target market. MMI believes that current market conditions
favor larger, strongly capitalized companies with multiple licenses, broad
distribution systems and a full complement of insurance and risk management
products and services. Consequently, a key element of MMI's business strategy
has been to seek growth through acquisition in order to achieve these
objectives.
MMI believes that the acquisition of Unionamerica offers MMI an opportunity
to improve its competitive position. A substantial portion of Unionamerica's
business involves operating as a reinsurer of medical
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malpractice insurance companies throughout the United States. This
distribution system affords MMI an opportunity to increase significantly its
medical malpractice assumed reinsurance premium writings by virtue of the
Unionamerica Acquisition. It is MMI's present intention to retain the existing
management and business plans of Unionamerica and to continue to operate
Unionamerica as a distinct business entity at its present location in London.
The medical malpractice business environment is currently in a prolonged
soft market, where competitive pricing pressures have reduced the opportunity
for MMI to obtain rate increases and thereby revenue growth. Unionamerica's
business plan includes prospects for premium growth in areas outside of the
medical malpractice line of business, including both United States property
and casualty lines and London market and European property and casualty lines,
and MMI believes that Unionamerica's management has the background and
experience to manage such growth profitably.
DESCRIPTION OF UNIONAMERICA
Founded in 1971, Unionamerica is a specialty casualty and property reinsurer
and insurer operating in the London-based reinsurance and insurance market.
Unionamerica's core business is professional indemnity reinsurance (including
malpractice reinsurance for groups of healthcare providers, lawyers and other
professionals), as well as casualty reinsurance and insurance for a variety of
U.S. single industry and/or single state risks. In addition, Unionamerica
selectively underwrites other risks where it has underwriting expertise and
when management believes market conditions relating to pricing and terms are
attractive. In 1997 these coverages primarily included individual property
risk, automobile physical damage and property catastrophe coverages. The
claims paying ability of Unionamerica's principal property and casualty
insurance subsidiary, Unionamerica Insurance Company Limited, is rated "A"
(Good) by Standard & Poor's Rating Service. Unionamerica Insurance Company
Limited is rated "A-" (Excellent), by A.M. Best.
THE UNIONAMERICA ACQUISITION
On December 11, 1997 the Corporation acquired 99% of the issued and
outstanding Ordinary Shares of Unionamerica, all of which are represented by
Unionamerica ADSs. As of March 18, 1998, MMI completed the compulsory
acquisition procedures set forth in the Companies Act 1985 of Great Britain to
acquire all of the remaining Unionamerica ADSs. Pursuant to the Unionamerica
Acquisition, each Unionamerica ADS was converted into the right to receive
0.836 shares of common stock of MMI. MMI and Unionamerica intend that the
Unionamerica Acquisition be treated as a tax-free reorganization and it was
accounted for as a pooling-of-interests under generally accepted accounting
principles ("GAAP").
Ian G. Sinclair and Robert A. Spass were elected to the MMI Board of
Directors effective January 1, 1998 and MMI agreed to use its best efforts at
MMI's 1998 Annual Meeting to nominate and to cause them to be elected to one
full three-year term. Ian G. Sinclair is Chief Executive Officer of
Unionamerica Insurance Company Limited and Robert A. Spass is the former
Chairman of the Board of Directors of Unionamerica. Mr. Spass has been
nominated for election at MMI's 1998 Annual Meeting and Mr. Sinclair has
elected not to stand for election.
MMI is a Delaware corporation with its principal office located at 540 Lake
Cook Road, Deerfield, Illinois, 60015. MMI's telephone number is (847) 940-
7550.
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UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
The following unaudited pro forma condensed statement of income for the year
ended December 31, 1997 is derived from the historical financial statements of
MMI incorporated by reference in this Prospectus and gives effect to the
offering of the Original Capital Securities.
The pro forma condensed statement of income does not purport to represent
what the financial results of operations actually would have been if the
offering of the Original Capital Securities had been completed at the
beginning of the period presented or which may be obtained in the future. The
pro forma adjustments are based upon available information and certain
assumptions that the Corporation currently believes are reasonable under the
circumstances. The information presented below should be read in conjunction
with the historical financial statements of MMI incorporated by reference in
this Prospectus.
The pro forma condensed statement of income is prepared assuming the
offering of the Original Capital Securities occurred at the beginning of the
period presented. The unaudited pro forma condensed statement of income has
been included for information purposes only and was prepared pursuant to the
rules and regulations of the Commission.
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<PAGE>
MMI COMPANIES, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA NOTE
ACTUAL ADJUSTMENTS REFERENCE PRO FORMA
-------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Insurance premiums earned........... $278,237 $278,237
Consulting and fee income........... 51,626 51,626
Net investment income............... 75,490 75,490
Realized gains on investments....... 2,182 2,182
-------- --------
Total revenues.................... 407,535 407,535
Losses and expenses
Losses and loss adjustment expenses. 199,761 199,761
Insurance and administrative
expense............................ 156,969 156,969
Interest expense.................... 6,489 $ 3,251 (a) 9,740
-------- ------- --------
Total losses and expenses......... 363,219 3,251 366,470
-------- ------- --------
Income from continuing operations
before income taxes and
extraordinary loss............... 44,316 (3,251) 41,065
Income taxes.......................... 9,249 (1,138) (a) 8,111
-------- ------- --------
Income from continuing operations
before extraordinary loss........ 35,067 (2,113) 32,954
Extraordinary loss, net of income
taxes................................ 707 707
-------- ------- --------
Income from continuing operations. $ 34,360 $(2,113) $ 32,247
======== ======= ========
Income from continuing operations
before extraordinary loss per common
and common equivalent share.......... $ 1.81 $ 1.70
Income from continuing operations per
common and common equivalent share... $ 1.77 $ 1.66
Weighted average number of common and
common equivalent shares outstanding. 19,396 19,396
</TABLE>
- --------
a) Note to unaudited pro forma condensed statement of income:
The following adjustments reflect the transactions contemplated by the
offering of the Original Capital Securities (dollars in thousands):
<TABLE>
<S> <C>
Interest expense--to eliminate interest expense due to payment of
bank debt....................................................... $(6,489)
Interest expense--distributions on capital securities and
amortization of issuance costs, losses on interest rate lock and
discount over 30 years.......................................... 9,740
-------
3,251
Income taxes--to record income tax effect of the pro forma
adjustment above................................................ 1,138
</TABLE>
29
<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain obligations of the
Corporation under the Registration Rights Agreement. Neither the Corporation
nor the Trust will receive any proceeds from the issuance of the Exchange
Capital Securities and the Exchange Guarantee offered hereby. The Corporation
has agreed to pay the expenses of the Exchange Offer. In consideration for
issuing the Exchange Capital Securities as contemplated in this Prospectus,
the Trust will receive, in exchange, Original Capital Securities in like
Liquidation Amount. The Original Capital Securities surrendered in exchange
for the Exchange Capital Securities will be retired and canceled and cannot be
re-issued.
The proceeds to the Trust (without giving effect to expenses of the offering
payable by the Corporation) from the offering of the Original Capital
Securities were approximately $125 million. All of the proceeds from the sale
of the Capital Securities were invested by the Trust in the Junior
Subordinated Debentures. The Corporation used approximately $103 million of
net proceeds from the sale of the Junior Subordinated Debentures to pay all of
the Corporation's previously existing bank debt of approximately $58 million
and Unionamerica's previously existing bank debt of approximately $45 million.
None of such bank debt of the Corporation was incurred within the last twelve
months; and $10 million of such Unionamerica bank debt was incurred within the
last twelve months to acquire a minority interest in JMA Holdings Limited, the
parent of Jago Managing Agency Limited. The remaining net proceeds of
approximately $16 million will be used for general corporate purposes, which
may include other acquisitions and investments in, or extensions of credit to,
MMI's subsidiaries. Pending such uses of the remaining net proceeds, the
Corporation will invest the remaining net proceeds of the offering of the
Original Capital Securities in short-term, interest-bearing obligations.
At the date hereof, the Corporation had obtained a new $100 million credit
facility.
30
<PAGE>
RATIOS OF EARNINGS TO FIXED CHARGES
AND EARNINGS TO FIXED CHARGES AND DISTRIBUTIONS ON CAPITAL SECURITIES
The following table sets forth the Corporation's ratios of earnings to fixed
charges and earnings to fixed charges and distributions on Capital Securities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges (1)................ 9.5 1.5 4.4 7.9 6.1
Pro forma ratio of earnings to fixed charges and
distributions on Capital Securities.................. -- -- -- -- 4.7
</TABLE>
- --------
(1) Does not include distributions on Capital Securities.
For purposes of computing the ratios of earnings to fixed charges, earnings
represent income from continuing operations before income taxes and fixed
charges. Fixed charges include all interest expense, distributions on Capital
Securities (except where noted) and the proportion deemed representative of
the interest factor of rent expense.
31
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation as of December 31, 1997. The issuance of Exchange Capital
Securities will have no effect on the capitalization of the Corporation. 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, 1997 which is incorporated herein by reference. See "Incorporation
of Certain Documents by Reference."
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
(IN THOUSANDS)
<S> <C>
Corporation-obligated, mandatorily redeemable preferred
capital securities of subsidiary trust holding solely
junior subordinated debentures of the Corporation(1)....... $118,724
Total stockholders' equity.................................. 399,002
--------
Total capitalization........................................ $517,726
========
</TABLE>
- --------
(1) The Trust is a subsidiary of the Corporation and holds the Junior
Subordinated Debentures as its sole asset.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated financial information
of MMI for each of the years in the five-year period ended December 31, 1997.
The balance sheet data as of December 31, 1993, 1994, 1995, 1996 and 1997 and
the premium and income data for the years ended December 31, 1993, 1994, 1995,
1996 and 1997 are derived from the audited consolidated financial statements
of MMI. The selected consolidated financial information should be read in
conjunction with MMI's consolidated financial statements and notes thereto
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PREMIUMS AND INCOME DATA
(1):
Gross premiums written.. $ 305,274 $ 323,071 $ 366,802 $ 357,718 $ 372,173
Net premiums earned..... 241,988 267,976 272,903 281,391 278,237
Consulting and fee
income................. 6,962 18,602 22,336 34,535 51,626
Net investment income... 53,207 51,150 62,936 73,681 75,490
Net realized gains
(losses) on
investments............ 7,144 (35,261) 1,692 (890) 2,182
Total revenues.......... 309,301 302,467 359,867 388,717 407,535
Income from continuing
operations(2)(5)....... 32,937 6,798 34,131 45,220 35,067
Per share(4)........... 2.92 0.54 2.54 2.50 1.81
Cash dividends per
common share........... 0.09 0.11 0.15 0.17 0.22
Weighted average number
of common and common
equivalent shares(4)... 11,265 12,634 13,446 18,087 19,396
BALANCE SHEET DATA (AT
END OF YEAR)(1):
Investments............. $ 853,148 $ 849,049 $1,166,825 $1,212,556 $1,230,800
Total assets............ 1,432,457 1,401,315 1,741,758 1,804,421 1,884,067
Loss and loss adjustment
expense reserves....... 1,018,129 1,002,839 1,199,870 1,149,918 1,125,146
Long-term notes payable. 92,000 97,000 89,000 93,000 --
Mandatorily redeemable
preferred capital
securities............. 15,437 16,899 -- -- 118,724
Unrealized gains
(losses) on
investments(3)......... -- (9,470) 22,709 13,456 24,332
Stockholders' equity(3). 137,435 136,952 272,266 355,166 399,002
Book value per share(3). 11.09 11.04 16.39 19.01 21.16
GAAP RATIOS (6):
Loss ratio.............. 79.6% 74.8% 75.6% 74.2% 71.8%
Expense ratio........... 27.7 28.5 33.3 33.0 41.8
---------- ---------- ---------- ---------- ----------
Combined ratio.......... 107.3% 103.3% 108.9% 107.2% 113.6%
========== ========== ========== ========== ==========
</TABLE>
- --------
(1) The Corporation acquired Unionamerica Holdings plc in December 1997 in a
transaction accounted for as a pooling of interests. As such, the
consolidated financial statements include Unionamerica's balance sheet and
results of operations for all periods presented.
(2) Income from continuing operations in 1996 excludes a loss from
discontinued operations of $5,100,000, net of tax, related to a former
affiliate. See Note 15 to the Consolidated Financial Statements.
(3) The Corporation adopted a new standard on accounting for investments in
1994.
(4) The Corporation adopted a new standard on earnings per share in 1997. All
earnings per share amounts have been restated to conform to the new
requirements. Per share and weighted average shares are presented on a
diluted basis.
(5) In 1997, income from continuing operations includes a charge, net of tax,
of $8,937,000 or $.46 per share related to the acquisition of
Unionamerica.
(6) GAAP ratios have been derived from the results of the Corporation's
domestic and international insurance segments. The 1997 expense ratio
includes 3.5 percentage points related to expenses incurred in connection
with the Unionamerica acquisition.
33
<PAGE>
MMI CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law pursuant
to (i) the Trust Agreement executed by the Corporation, as Sponsor, The Chase
Manhattan Bank, as Property Trustee, Chase Manhattan Bank Delaware, as
Delaware Trustee, and the Administrative Trustees named therein, and (ii) the
filing of a certificate of trust with the Delaware Secretary of State on
December 15, 1997. 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, and (iii)
engaging in only those other activities necessary, advisable or incidental
thereto. 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 will be
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, 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 approximately 3% of the total capital of the Trust. The Trust
has a term of 31 years, but may terminate earlier as provided in the Trust
Agreement. The Trust's activities are conducted by its trustees, each
appointed by the Corporation as holder of the Common Securities. The trustees
for the Trust are The Chase Manhattan Bank, as the Property Trustee, Chase
Manhattan Bank Delaware, as the Delaware Trustee, and three Administrative
Trustees who are officers of the Corporation.
The Chase Manhattan Bank, as Property Trustee, will act as sole indenture
trustee under the Trust Agreement. The Chase Manhattan Bank 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 Junior Subordinated Debentures." ChaseMellon Shareholder Services
LLC, an affiliate of The Chase Manhattan Bank, acts for MMI as (i) transfer
agent for its Common Stock and (ii) Agent under the Corporation's Shareholders
Rights Plan, and served as Information Agent in connection with the
Unionamerica Acquisition.
The holders of the Common Securities of the Trust are, 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 are 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 the Trust Securities) related to the Trust and the
Exchange Offer and will pay, directly or indirectly, all ongoing costs,
expenses and liabilities of the Trust. The principal executive office of the
Trust is 540 Lake Cook Road, Deerfield, IL 60015.
34
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Original 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
Original Capital Securities for capital securities with terms identical in all
material respects to the terms of the Original 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 Original Capital Securities except that the Exchange Capital
Securities have been registered under the Securities Act and will not be
subject to certain restrictions on transfer applicable to the Original Capital
Securities, and will not provide for any increase in the Distribution rate
thereon. In that regard, the Original Capital Securities provide, among other
things, that, if a registration statement relating to the Exchange Offer has
not been filed by May 22, 1998 and declared effective by June 21, 1998, the
Distribution rate borne by the Original Capital Securities will increase by
0.25% per annum until such registration statement is filed or declared
effective, as the case may be. Upon consummation of the Exchange Offer,
holders of Original Capital Securities will not be entitled to any increase in
the Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Original Capital Securities"
and "Description of Exchange Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Original 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 Original 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 Original Capital Securities are held of record by The Depository Trust
Company ("DTC") who desires to deliver such Original Capital Securities by
book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will exchange as soon as
practicable after the Expiration Date, the Original Guarantee for the Exchange
Guarantee and the Original Junior Subordinated Debentures, in an amount
corresponding to the Original Capital Securities accepted for exchange, for a
like aggregate principal amount of the Exchange Junior Subordinated
Debentures. The Exchange Guarantee and Exchange Junior Subordinated Debentures
are being registered under the Securities Act concurrently with the Exchange
Capital Securities.
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 Original 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 million of Exchange Capital Securities in
exchange for a like principal amount of outstanding Original Capital
Securities tendered and accepted in connection with the Exchange Offer.
Holders may tender their Original Capital Securities in whole or in part in a
Liquidation Amount of not less than $100,000 (100 Capital Securities) or any
integral multiple of $1,000 Liquidation Amount (one Capital Security) in
excess thereof, provided that, if any Original Capital Securities are tendered
for exchange in part, the untendered Liquidation Amount thereof must be
$100,000 (100 Capital Securities) or any integral multiple of $1,000 in excess
thereof.
35
<PAGE>
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Original Capital Securities being tendered. As of the date of this Prospectus,
$125,000,000 aggregate Liquidation Amount of the Original Capital Securities
is outstanding.
Holders of Original Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Original 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. See "Risk Factors--Consequences of a Failure to
Exchange Original Capital Securities" and "Description of Exchange
Securities."
If any tendered Original 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 Original Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Original 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 Original 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" hereunder.
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF ORIGINAL
CAPITAL SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR
ANY PORTION OF THEIR ORIGINAL CAPITAL SECURITIES PURSUANT TO THE EXCHANGE
OFFER. IN ADDITION, NO OTHER PERSON HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF ORIGINAL CAPITAL SECURITIES MUST MAKE THEIR OWN
DECISIONS WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE
AGGREGATE AMOUNT OF ORIGINAL CAPITAL SECURITIES TO TENDER BASED ON SUCH
HOLDERS' OWN FINANCIAL POSITIONS AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on May 13,
1998 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 expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Original Capital Securities for
exchange, (ii) to terminate the Exchange Offer (whether or not any Original
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 in "--Conditions to the Exchange Offer" hereunder have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Original Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Original Capital Securities to withdraw their tendered Original Capital
Securities as described in "--Withdrawal Rights" hereunder, 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 prospectus
supplement that will be distributed to the holders of the Original Capital
Securities, and the Corporation and the Trust will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
36
<PAGE>
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 Exchange Capital Securities for Original Capital
Securities validly tendered and not withdrawn (pursuant to the withdrawal
rights described in "--Withdrawal Rights" hereunder) promptly after the
Expiration Date.
Subject to the conditions set forth in "--Conditions to the Exchange Offer"
hereunder, delivery of Exchange Capital Securities in exchange for Original
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)
certificates for Original Capital Securities or a book-entry confirmation of a
book-entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message in lieu of the
Letter of Transmittal, and (iii) 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 certificates for Original Capital Securities, book-entry confirmations
with respect to Original Capital Securities and other required documents are
received by the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Original Capital Securities into the Exchange Agent's
account at DTC. See "--Procedures for Tendering Original Capital Securities--
Book-Entry Transfer" hereunder. The term "Agent's Message" means a message,
transmitted by DTC to and received by the Exchange Agent and forming a part of
a book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states
that such participant has received and agrees to be bound by the Letter of
Transmittal and that the Trust and the Corporation may enforce such Letter of
Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Corporation
and the Trust will be deemed to have accepted for exchange, and thereby
exchanged, Original Capital Securities validly tendered and not withdrawn as,
if and when the Trust gives oral or written notice to the Exchange Agent of
the Corporation's and the Trust's acceptance of such Original Capital
Securities for exchange pursuant to the Exchange Offer. The Exchange Agent
will act as agent for the Corporation and the Trust for the purpose of
receiving tenders of Original Capital Securities, Letters of Transmittal and
related documents, and as agent for tendering holders for the purpose of
receiving Original Capital Securities, Letters of Transmittal and related
documents and transmitting Exchange Capital Securities which will not be held
in global form by DTC or a nominee of DTC 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 Original Capital
Securities tendered pursuant to the Exchange Offer is delayed (whether before
or after the Corporation's and the Trust's acceptance for exchange of Original
Capital Securities) or the Corporation and the Trust extend the Exchange Offer
or are unable to accept for exchange or exchange Original Capital Securities
tendered pursuant to the Exchange Offer, then, without prejudice to the
Corporation's and the Trust's rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Corporation and the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Original Capital Securities
and such Original Capital Securities may not be withdrawn except to the extent
tendering holders are entitled to withdrawal rights as described in "--
Withdrawal Rights" hereunder.
37
<PAGE>
Pursuant to an Agent's Message or a Letter of Transmittal, a holder of
Original Capital Securities will represent, warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Original Capital Securities, that the Trust will acquire
good, marketable and unencumbered title to the tendered Original Capital
Securities, free and clear of all liens, restrictions, charges and
encumbrances, and the Original 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 Original Capital
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING ORIGINAL CAPITAL SECURITIES
Valid Tender
Except as set forth below, in order for Original Capital Securities to be
validly tendered by book-entry transfer, an Agent's Message or a completed and
signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and in either case any other documents required by the
Letter of Transmittal, must be delivered to the Exchange Agent by mail,
facsimile, hand delivery or overnight courier at one of the Exchange Agent's
addresses set forth in "--Exchange Agent" hereunder on or prior to the
Expiration Date and either (i) such Original Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below or
(ii) the guaranteed delivery procedures set forth below must be complied with.
Except as set forth below, in order for Original Capital Securities to be
validly tendered by a means other than by book-entry transfer, a completed and
signed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal must be delivered to the Exchange Agent by mail, facsimile, hand
delivery or overnight courier at one of the Exchange Agent's addresses set
forth in "--Exchange Agent" hereunder on or prior to the Expiration Date and
either (i) such Original Capital Securities must be delivered to the Exchange
Agent on or prior to the Expiration Date or (ii) the guaranteed delivery
procedures set forth below must be complied with.
If less than all Original Capital Securities are tendered, a tendering
holder should fill in the amount of Original Capital Securities being tendered
in the appropriate box on the Letter of Transmittal. The entire amount of
Original 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 TO BE BY MAIL, THE USE OF 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 and DTC have confirmed that any Participant (as defined
in "Description of Exchange Securities--Description of Exchange Capital
Securities--Depositary Procedures") in DTC's book-entry transfer facility
system may utilize DTC's ATOP procedures to tender Original Capital
Securities. The Exchange Agent will establish an account with respect to the
Original Capital Securities at DTC for purposes of the Exchange Offer within
two business days after the date of this Prospectus. Any Participant may make
a book-entry delivery of the Original Capital Securities by causing DTC to
transfer such Original Capital Securities into the Exchange Agent's account at
DTC in accordance with DTC's ATOP procedures for transfer. However, although
delivery of Original Capital Securities may be effected through book-entry
transfer into the Exchange Agent's account at DTC, an Agent's Message or a
completed and signed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other documents required by the Letter
of Transmittal, must in any case
38
<PAGE>
be delivered to and received by the Exchange Agent at one of its addresses set
forth in "--Exchange Agent" hereunder 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 Original Capital Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (a) a
certificate for the Original 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 Original 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; (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 Original Capital Securities pursuant to the
Exchange Offer and the certificates for such Original 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 Original
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 Original 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 mailed 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 Original 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 Original Capital Securities, or
of a book-entry confirmation with respect to such Original 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 Original Capital Securities, book-entry
confirmations with respect to Original Capital Securities and other required
documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Original 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.
39
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Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Original Capital
Securities will be determined by the Corporation and the Trust, in their sole
discretion, whose 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 in "--Conditions to the Exchange Offer" hereunder or any condition or
irregularity in any tender of Original 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 Original 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.
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 to the Corporation and
the Trust, in their sole discretion, of such person's authority to so act must
be submitted.
A beneficial owner of Original 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 upon
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 Original 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 Original 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 Original
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 Original 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 Original Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer
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holds Original Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Original 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 Original Capital Securities who wishes to exchange Original
Capital Securities for Exchange Capital Securities in the Exchange Offer will
be required to represent that (i) it is not an "affiliate" of the Corporation
or the Trust, (ii) any Exchange Capital Securities to be received by it are
being acquired in the ordinary course of its business, (iii) it 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
Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives Exchange Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Original Capital
Securities 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 states that by
so acknowledging 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 upon 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 acquired Original 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 Original Capital Securities (other
than Original Capital Securities which represent an unsold allotment from the
initial sale of the Original Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be the prospectus prepared for
an 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 during the period
referred to below in connection with resales of Exchange Capital Securities
received in exchange for Original Capital Securities where such Original
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 a period ending 180 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."
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of Exchange Capital Securities received in exchange
for Original 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 in "--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.
In that regard, each Participating Broker-Dealer who surrenders Original
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 (i) any fact which
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makes any statement contained or incorporated by reference in this Prospectus
untrue in any material respect or (ii) any fact 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 (iii) 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 180-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.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Original Capital Securities
may be withdrawn at any time on or prior to the close of business, New York
time, on 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 in "--Exchange Agent" hereunder on or prior to the
Expiration Date. Any such notice of withdrawal must specify the name of the
person who tendered the Original Capital Securities to be withdrawn, the
aggregate principal amount of Original Capital Securities to be withdrawn, and
(if certificates for such Original Capital Securities have been tendered) the
name of the registered holder of the Original Capital Securities as set forth
on the Original Capital Securities, if different from that of the person who
tendered such Original Capital Securities. If Original Capital Securities have
been delivered or otherwise identified to the Exchange Agent, then, prior to
the physical release of such Original Capital Securities, the tendering holder
must submit the serial numbers shown on the particular Original 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 Original
Capital Securities tendered for the account of an Eligible Institution. If
Original Capital Securities have been tendered pursuant to the procedures for
book-entry transfer set forth in "--Procedures for Tendering Original Capital
Securities" hereunder, the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Original
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 Original Capital Securities may not be
rescinded. Original Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above in "--Procedures for Tendering Original Capital
Securities." Any Original 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 Original Capital Securities whose Original Capital Securities are
accepted for exchange will not receive Distributions on such Original Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Original Capital Securities accumulated from and after
December 23, 1997. Accordingly, holders of Exchange Capital Securities as of
the record date for the payment of Distributions on June 15, 1998 will be
entitled to receive Distributions accumulated from and after December 23,
1997.
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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 Original Capital Securities for any
Exchange Capital Securities, and, as described below, may terminate the
Exchange Offer (whether or not any Original 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 Original Capital Securities
to be offered for resale, resold and otherwise transferred by holders
thereof (other 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
holders' business and such holders have 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, or any
governmental approval has not been obtained, which approval the Corporation
or the Trust shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or
(d) the Corporation shall receive an opinion of counsel experienced in
such matters to the effect that there is more than an insubstantial risk
that consummation of the Exchange Offer would result in interest payable to
the Trust on the Junior Subordinated Debentures being not deductible by the
Corporation for United States federal income tax purposes.
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 Original 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 original Capital Securities and will extend the Exchange Offer
to the extent required by Rule 14e-1 under the Exchange Act.
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EXCHANGE AGENT
The Chase Manhattan Bank 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:
BY MAIL: BY FACSIMILE BY HAND:
The Chase Manhattan TRANSMISSION: The Chase Manhattan
Bank (FOR ELIGIBLE Bank
55 Water Street INSTITUTIONS 55 Water Street
Room 234, North ONLY) Room 234, North
Building (212) 638-7375 or Building
New York, NY 10041 (212) 344-9367 New York, NY 10041
Attn: Carlos Esteves Attn: Carlos Esteves
TO CONFIRM BY TELEPHONE OR
FOR INFORMATION:
(212) 638-0828
BY OVERNIGHT DELIVERY:
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, NY 10041
Attn: Carlos Esteves
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 Original Capital
Securities, and in handling or tendering for their customers.
Holders who tender their Original 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 Original Capital
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Original 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.
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DESCRIPTION OF EXCHANGE SECURITIES
The terms of the Original Securities are identical in all material respects
to the Exchange Securities, except that (i) the Original 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), (ii) the Exchange
Capital Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction and certain other restrictions on transfer applicable to
Original Capital Securities, (iii) the Exchange Capital Securities will not
provide for any increase in the Distribution rate thereon and (iv) the
Exchange Junior Subordinated Debentures will not provide for any increase in
the interest rate thereon. The Original Securities provide that, in the event
that a registration statement relating to the Exchange Offer has not been
filed by May 22, 1998 and been declared effective by June 21, 1998, or, in
certain limited circumstances, in the event a shelf registration statement
with respect to the resale of the Original Capital Securities is not declared
effective by the time required by the Registration Rights Agreement, then
liquidated damages ("Additional Interest") will accrue at the rate of 0.25%
per annum on the principal amount of the Original Junior Subordinated
Debentures and Distributions will accrue at the rate of 0.25% per annum on the
Liquidation Amount of the Original Capital Securities, for the period from the
occurrence of such event until such time as such registration statement has
been filed or declared effective, as the case may be. The Exchange Securities
are not, and upon consummation of the Exchange Offer the Original Securities
will not be, entitled to any such Additional Interest or Distributions.
Accordingly, holders of Original Capital Securities should review the
information set forth in "Risk Factors--Consequences of a Failure to Exchange
Original Capital Securities" and "Description of Exchange Securities."
DESCRIPTION OF EXCHANGE CAPITAL SECURITIES
The Capital Securities represent preferred beneficial interests in the Trust
and the holders thereof are 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 of certain 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 Trust Agreement, including the definitions therein of
certain terms.
General
The Exchange Capital Securities will be limited to $125,000,000 aggregate
Liquidation Amount at any one time outstanding. The Exchange 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 for the benefit of the holders of the
Trust 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 Guarantee."
Distributions
Distributions on the Capital Securities will be cumulative, will accumulate
from December 23, 1997 and will be payable semi-annually in arrears on June 15
and December 15 of each year, commencing June 15, 1998, at the annual rate of
7 5/8% of the Liquidation Amount to the holders of record of the Exchange
Capital Securities on the June 1 or December 1 immediately preceding such
date. The amount of Distributions payable for any period will be computed on
the basis of a 360-day year consisting of twelve 30-day months. In the event
that any date on which Distributions are payable on the Capital Securities is
not a Business Day (as defined below), payment of the Distributions 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 to any such delay), in each
case with the same force
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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 or Chicago, Illinois 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 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 (i) no
Extension Period may extend beyond the Stated Maturity Date, (ii) any
Extension Period will terminate as to all Junior Subordinated Debentures upon
an acceleration thereof (subject to reinstatement, upon cure or waiver as
provided in the Indenture), and (iii) any Extension Period will terminate as
to any Junior Subordinated Debenture to be redeemed pursuant to the occurrence
and continuation of a Special Event on the applicable Redemption Date. Upon
any such election, semi-annual Distributions on the Capital Securities will be
deferred by the Trust during any such Extension Period. Distributions to which
holders of the Exchange Capital Securities are entitled during any such
Extension Period will accumulate additional Distributions thereon at the rate
per annum of 7 5/8% thereof, compounded semi-annually, to the extent permitted
by applicable law, from the relevant Distribution Date. The term
"Distributions," as used herein, shall include any such additional
Distributions.
Prior to the termination of any such Extension Period, the Corporation may
further extend such 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 Date. Upon the termination of any such
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 to begin any such
Extension Period at least five Business Days prior to the earlier of (i) the
date the Distributions on the Exchange Capital Securities would have been
payable if the election to begin such Extension Period had not been made 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. So long as no
Debenture Event of Default has occurred and is continuing, there is no
limitation on the number of times that the Corporation may elect to begin an
Extension Period. The Property Trustee will give notice of the Corporation's
election to commence or continue an Extension Period to the holders of the
Exchange Capital Securities. See "--Description of Exchange Junior
Subordinated Debentures--Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Consequences--Interest Income and Original Issue Discount."
During any such Extension Period, the Corporation may not (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, preferred and preference stock) or (ii) make any
payment of principal of or premium, if any, or interest 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 shareholders' 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) the purchase of fractional shares resulting from 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, and (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).
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Although the Corporation may in the future exercise its option 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
Capital Securities will be limited to payments under the Junior Subordinated
Debentures in which the Trust will invest 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 Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the 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."
Redemption
Upon the repayment on the Stated Maturity Date or payment of the Special
Event Prepayment Price prior to the Stated Maturity Date of the 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 a 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 Junior
Subordinated Debentures on the Stated Maturity Date, the Maturity Redemption
Price (equal to the principal of, and accrued interest on, the Junior
Subordinated Debentures) and (ii) in the case of the optional prepayment of
the Junior Subordinated Debentures upon the occurrence and continuation of a
Special Event, the Special Event Redemption Price (equal to the Special Event
Prepayment Price in respect of the Junior Subordinated Debentures). See "--
Description of Exchange Junior Subordinated Debentures--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 Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
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.
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, with respect to the Exchange
Capital Securities held by DTC or its nominees, the Property Trustee will
deposit irrevocably with DTC funds sufficient to pay the applicable Redemption
Price. 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 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,
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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 Guarantee as described under "--Description of
Guarantee," 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, in which case 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 Capital Securities by tender, in
the open market or by private agreement.
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 Redemption 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.
Liquidation of the Trust and Distribution of Junior Subordinated Debentures
The Corporation will have the right at any time to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust as required by
applicable law, cause the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Corporation having received an opinion of counsel to the effect
that such distribution will not be a taxable event to holders of Capital
Securities.
The Trust shall automatically dissolve, and its affairs shall be wound up,
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
Junior Subordinated Debentures to the holders of the Trust Securities, if the
Corporation, as Sponsor, has given 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 Sponsor); (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 Issuer Trustees as expeditiously
as the Issuer 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
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."
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 be exchanged for a
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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 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.
There can be no assurance as to the market prices for the Capital Securities
or the 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 Capital Securities that an investor may purchase, or
the Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Capital Securities offered hereby.
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 and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date an
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 five Business 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 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
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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.
Mergers, Consolidations, Amalgamations 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 and except as described in "--Liquidation of the
Trust and Distribution of Junior Subordinated Debentures." The Trust may, at
the request of the Corporation, as Sponsor, with the consent of the
Administrative Trustees but without the consent of the holders of the Capital
Securities, the Delaware Trustee or the Property Trustee, 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 the same as the Capital Securities rank in priority 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, 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 nationally recognized statistical rating organization, (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, (vi) such successor entity has a purpose substantially
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 with
respect to any dilution of the holders' interest 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
of 1940, as amended (the "Investment Company Act"), and (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. Notwithstanding the foregoing, the Trust shall not, except with the
consent of holders of 100% in Liquidation Amount of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by 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
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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.
In addition, the Property Trustee will be required pursuant to the Indenture
to exchange, as a part of the Exchange Offer, the Junior Subordinated
Debentures for the Exchange Debentures, which will have terms identical to the
Junior Subordinated Debentures except for the transfer restrictions under the
Securities Act, the $100,000 minimum aggregate principal amount transfer
restrictions and the provision for an increase in the interest rate thereon
under certain circumstances.
Voting Rights; Amendment of the Trust Agreement
Except as provided in the following paragraph and under "--Mergers,
Consolidations, Amalgamations or Replacements of the Trust" and "--Description
of Exchange Guarantee--Amendments and Assignment" and as otherwise required by
law and the Trust Agreement, the holders of the Capital Securities will have
no voting rights.
The Trust Agreement may be amended from time to time by the Corporation, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (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, or (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 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; provided, however, that such action shall not adversely affect in any
material respect the interests of the holders of the Trust Securities, and any
amendments of the Trust Agreement shall become effective when notice thereof
is given to the holders of the Trust Securities. The Trust Agreement may be
amended by the Issuer Trustees and the Corporation (i) with the consent of
holders representing a majority (based upon Liquidation Amount) of the
outstanding Trust Securities, and (ii) upon receipt by the Issuer Trustees of
an opinion of counsel to the effect that such amendment or the exercise of any
power granted to the Issuer 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 to
(i) change the amount or timing of any Distribution on or redemption of 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) restrict the right of a holder of Trust Securities to institute suit
for the enforcement of any such payment on or after such date. The Exchange
Capital Securities and any Original 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.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing 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 principal 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
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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 the Trust will not be
classified as an association taxable as a corporation for United States
federal income tax purposes on account of such action.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee 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 Capital Securities will be required for
the Trust to redeem and cancel the 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 the purposes
of such vote or consent, be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer
The Exchange Capital Securities initially will be represented by one or more
Capital Securities 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, and such transfer shall be reflected only when reflected
in the securities register maintained by or on behalf of the Trust. 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."
Other Capital Securities will be issued only in registered, certificated
(i.e., non-global) form. Other Capital Securities may not be exchanged for
beneficial interests in any Global Capital Securities except in the limited
circumstances described below. See "--Exchange of Certificated Capital
Securities for Book-Entry Capital Securities."
Exchange Capital Securities (including beneficial interests in the
restricted Global Capital Securities) may be transferred only in blocks with a
Liquidation Amount of $1,000 and integral multiples of $1,000 in excess
thereof. In addition, transfer of beneficial interests in the Global Capital
Securities will be subject to the applicable rules and procedures of DTC and
its direct or indirect participants, which may change from time to time.
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
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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, ownership of 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).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants in such system, or indirectly
through organizations which are Participants in such system. All interests in
a Global Capital Security may be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global Capital Security to such
persons will be limited to that extent. Because DTC can act only on behalf of
Participants, which in turn act on behalf of Indirect Participants and certain
banks, the ability of a person having beneficial interests in the Global
Capital Securities to pledge such interests to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests. For certain other restrictions on the transferability of the
Capital Securities, see "--Exchange of Book-Entry Capital Securities for
Certificated Capital Securities" and "--Exchange of Certificated Capital
Securities for Book-Entry 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. Investors who hold their interests in the Global
Capital Securities indirectly through Participants in DTC will be limited to
proceeding against such Participants in the event of any claim relating to
their beneficial ownership in the Global Capital Securities; and in the event
that such a Participant becomes bankrupt or insolvent, such remedy may be
limited to the amount available to a customer under SIPC insurance.
Payments in respect of the Global Capital Securities 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 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
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Corporation nor the Property Trustee will be liable for any delay by DTC or
any of its Participants in identifying or paying the beneficial owners of the
Capital Securities, and the Trust or 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.
Secondary market trading activity in interests in the Global Capital
Securities will 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 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 legended Capital Securities in certificated form
and to distribute such 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.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Capital Securities among participants in DTC, they
are under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Trust or the
Corporation nor the Property Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
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
Securities 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 customary
procedures. In all cases, certificated 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 the Depositary (in accordance with its customary
procedures).
Exchange of Certificated Capital Securities for Book-Entry Capital Securities
Prior to registration under the Securities Act, Other Capital Securities
(Original Capital Securities sold to institutional accredited investors in
exempt transactions not made in reliance upon Rule 144A), which will be issued
in certificated form, may not be exchanged for beneficial interests in any
Global Capital Security unless such exchange occurs in connection with a
transfer of such Other Capital Securities and the transferor first delivers to
the Property Trustee a written certificate (in the form provided in the Trust
Agreement) to the effect that such transfer will comply with the appropriate
transfer restrictions applicable to such Capital Securities.
Payment and Paying Agency
Payments in respect of the Exchange Capital Securities held in global form
shall be made (i) to the Depositary, which shall credit the relevant accounts
at the Depositary on the applicable Distribution Dates or (ii)
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in respect of the Exchange Capital Securities that are not held by the
Depositary, 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 (the "Paying Agent") shall initially be the Property Trustee and
any co-paying agent chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Corporation. 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 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.
Restrictions on Transfer
The Exchange Capital Securities will be issued and may be transferred only
in blocks having a Liquidation Amount of $1,000 and integral multiples of
$1,000 in excess thereof. Any such transfer of Exchange Capital Securities in
a denomination of less than $1,000 shall be deemed to be void and of no legal
effect whatsoever. Any such transferee shall be deemed not to be the holder of
such Exchange Capital Securities for any purpose, including but not limited to
the receipt of Distributions on such Exchange Capital Securities, and such
transferee shall be deemed to have no interest whatsoever in such Exchange
Capital Securities.
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, but
upon 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 will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a
corporation for United States federal income tax purposes and so 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.
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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 EXCHANGE JUNIOR SUBORDINATED DEBENTURES
The Original Junior Subordinated Debentures were issued and the Exchange
Junior Subordinated Debentures will be issued under an Indenture, as
supplemented from time to time (as so supplemented, the "Indenture"), between
the Corporation and The Chase Manhattan Bank, as trustee (the "Debenture
Trustee"). The Indenture has been qualified under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). This summary of certain terms
and provisions of the Exchange 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.
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 the Original Junior Subordinated Debentures
issued by the Corporation. The Exchange Junior Subordinated Debentures will
bear interest at the annual rate of 7 5/8% of the principal amount thereof,
payable semi-annually in arrears on June 15 and December 15 of each year
(each, an "Interest Payment Date"), commencing June 15, 1998, to the person in
whose name each Exchange Junior Subordinated Debenture is registered, subject
to certain exceptions, at the close of business on the June 1 or December 1
immediately preceding such Interest Payment Due. 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. 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 7 5/8% 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 December 15, 2027 (the "Stated Maturity Date").
The Exchange Junior Subordinated Debentures will rank pari passu with the
Original Junior Subordinated Debentures and all Other Debentures 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
"--Subordination." 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 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
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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. or other nominee of DTC. The depositary arrangements for such
Exchange Junior Subordinated Debentures are expected to be substantially
similar to those in effect for the 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 Exchange Capital Securities--Form, Denomination, Book-Entry
Procedures and Transfer."
Payment and Paying Agents
Payment of principal of (and premium, if any) 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 except in
the case of Exchange Junior Subordinated Debentures in global form, (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 wire 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 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; however, the Corporation will
at all times be required to maintain a Paying Agent in each Place of Payment
for the Exchange Junior Subordinated Debentures.
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 (and
premium, if any) or interest on any Exchange Junior Subordinated Debenture and
remaining unclaimed for two years after such principal (and premium, if any)
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 (i) no Extension Period may extend beyond the Stated Maturity
Date, (ii) any Extension Period will terminate as to all Exchange Junior
Subordinated Debentures upon an acceleration thereof (subject to
reinstatement, upon cure or waiver as provided in the Indenture), and (iii)
any Extension Period will terminate as to any Exchange Junior Subordinated
Debenture to be redeemed pursuant to the occurrence and continuation of a
Special Event on the applicable Redemption Date. At the end of such Extension
Period, the Corporation must pay all interest then accrued and unpaid
(together with interest thereon at the annual rate of 7 5/8%, 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 the Trust Securities while Trust
Securities are outstanding) will be required to accrue interest income for
United States federal income tax purposes prior to the receipt of cash
attributable to such income. See "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount."
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During any such Extension Period, the Corporation may not (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) or (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Corporation (including any Other Debentures) that rank
pari passu with or junior in right of payment to the 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 any Other Guarantees) if such guarantee ranks pari passu with 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
shareholders' 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) the purchase of fractional shares
resulting from 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 and (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).
Prior to the termination of any such Extension Period, the Corporation may
further extend such 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 Date. Upon the termination of any such
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. Although interest shall accrue, 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 Debenture 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.
Special Event Prepayment
If a Special Event 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
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 on the Junior Subordinated
Debentures to the Stated Maturity Date, 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 interest thereon to
the date of prepayment.
A "Special Event" means a Tax Event or an Investment Company Event.
A "Tax Event" means the receipt by the Corporation and the Trust of an
opinion of counsel 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 any amendment
to or change in an interpretation or application of such laws or regulations,
or any decided case, which amendment or change or case is effective or is
announced on or after the Issue Date, there is more than an insubstantial risk
that (i) the Trust would 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
would not be deductible by the Corporation,
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in whole or in part, for United States federal income tax purposes, or (iii)
the Trust would be subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
An "Investment Company Event" means the receipt by the Corporation and the
Trust of an opinion of counsel experienced in such matters to the effect that,
as a result of any amendment to, or change (including any announced
prospective change) in, the Investment Company Act or any regulations
thereunder, or any amendment to or change in interpretation or application of
such law or regulations, or any decided case, which amendment or change or
case is effective or is announced on or after the Issue Date, there is more
than an insubstantial risk that the Trust would be required to register as an
"investment company" under the Investment Company Act.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15(519)" or any successor
publication which is published weekly by the Federal Reserve and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity date corresponding to the Stated Maturity Date
(if no maturity date is within three months before or after the Stated
Maturity Date, yields for the first two published maturities most closely
corresponding to the Stated Maturity Date shall be interpolated and the
Adjusted Treasury Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, 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, in either case (A) 1.25% if such prepayment date
occurs on or prior to December 23, 1998 and (B) 0.50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity date corresponding to the
Stated Maturity Date that would be utilized at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities with a maturity date corresponding to the Stated
Maturity Date. If no United States Treasury security has a maturity date which
is within three months before or after the Stated Maturity Date, the two most
closely corresponding United States Treasury securities shall be used as the
Comparable Treasury Issue, and the calculation of the Adjusted Treasury Rate
pursuant to clause (ii) of the definition thereof shall be interpolated or
extrapolated on a straight-line basis, rounding to the nearest month using
such securities.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means: (i) initially, Salomon
Brothers Inc 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; or (ii) any other Primary Treasury Dealer
selected by 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 five 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
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Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing 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.
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 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 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 Junior Subordinated Debentures the Additional Sums.
"Additional Sums" means the additional amounts as may be necessary in order
that the amount available to pay 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.
Restrictions on Certain Payments
The Corporation will also covenant that it will not, (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) or (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 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 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
shareholder'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) the purchase of fractional shares
resulting from 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 and (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), if at such time (1) there shall
have occurred and be continuing an Event of Default under the Trust Agreement,
(2) there shall have occurred and be continuing a Debenture Event of Default,
(3) there shall have occurred and be continuing a payment default under the
Trust Agreement or the Indenture, (4) if such Junior Subordinated Debentures
are held by the Trust, the Corporation shall be in default with respect to its
payment of any obligations under the Guarantee or (5) 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.
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 (or holders of a majority in liquidation amount of
Trust Securities when the Junior Subordinated Debentures are held by the
Property Trustee), 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) extend the
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Stated Maturity Date, 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 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 (or premium, if any) on the Junior
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 of bankruptcy, insolvency or reorganization of the
Corporation.
The Debenture Trustee shall give notice to the holders of the Debentures
within 90 days after the occurrence of any of the events described in (i)
through (iv) above (irrespective of any periods of grace). 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 non-payment 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 premium, if any) on or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and principal (and premium, if any) 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 interest on or
principal (or premium, if any) of 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
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) or interest on the Junior
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Subordinated Debentures, and the Corporation shall be subrogated to the rights
of the holder of such Capital 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.
The holders of the 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 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, 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
Junior Subordinated Debentures.
Satisfaction and Discharge
The Indenture provides that when, among other things, all 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
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 Date, 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
The Indenture provides that the Junior Subordinated Debentures issued
thereunder will be subordinate and junior in right of payment to all Senior
Indebtedness. No payment of principal (including redemption payments and
premium, if any) or interest on the Junior Subordinated Debentures may be made
at any time when (i) any Senior Indebtedness is not paid when due, (ii) any
applicable grace period with respect to such default has ended and such
default has not been cured or waived or ceased to exist, or (iii) the maturity
of any Senior Indebtedness has been accelerated because of a default and not
been rescinded.
Upon any 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, all Senior Indebtedness must be paid
in full before the holders of the Junior Subordinated Debentures are entitled
to receive or retain any payment in respect thereof.
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No payment on account 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.
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.
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, unless the terms thereof specifically provide
that it is not superior in right of payment to the Junior Subordinated
Debentures, and any deferrals, renewals or extensions 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, but shall not include (i) any trade accounts payable in the
ordinary course of business, (ii) any such indebtedness that by its terms
ranks pari passu with or junior in right of payment to the Junior Subordinated
Debentures, (iii) all other debt securities, and guarantees in respect of
those debt securities, issued to 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 financing entity of equity securities or other securities
guaranteed by the Corporation pursuant to an instrument that ranks pari passu
with or junior in right of payment to the Guarantee, and (iv) any other
indebtedness that would otherwise qualify as "Indebtedness for Money Borrowed"
to the extent that such indebtedness by its terms ranks pari passu with or
junior in right of payment to any of the indebtedness described in (i), (ii)
or (iii).
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. See "Risk
Factors--Ranking of Subordinated Obligations Under the Guarantee and the
Junior Subordinated Debentures; Holding Company Structure."
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.
Restrictions on Transfer
The Exchange Junior Subordinated Debentures will be issued, and may be
transferred only, in blocks having an aggregate principal amount of $1,000 and
integral multiples of $1,000 in excess thereof. Any such transfer of Exchange
Junior Subordinated Debentures in a block having an aggregate principal amount
of less than $1,000 shall be deemed to be void and of no legal effect
whatsoever. Any such transferee shall be deemed not to be the holder of such
Exchange Junior Subordinated Debentures for any purpose, including but not
limited to the receipt of payments on such Exchange Junior Subordinated
Debentures, and such transferee shall be deemed to have no interest whatsoever
in such Exchange Junior Subordinated Debentures.
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.
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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 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 Exchange Guarantee will be executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Exchange Capital Securities
for the benefit of the holders from time to time of the Exchange Capital
Securities. The Chase Manhattan Bank will act as indenture trustee ("Guarantee
Trustee") under the Exchange Guarantee. The Exchange Guarantee has been
qualified under the Trust Indenture Act. This summary of certain provisions of
the Exchange 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
Exchange Guarantee, including the definitions therein of certain terms, and
the Trust Indenture Act. The Guarantee Trustee will hold the Exchange
Guarantee for the benefit of the holders of the Exchange Capital Securities.
General
The Corporation will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth 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
Exchange 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.
The Exchange Guarantee will rank subordinate and junior in right of payment
to all Senior Indebtedness to the extent provided therein. See "--Status of
the Exchange Guarantee" and "--Description of Exchange Junior Subordinated
Debentures--General." Because the Corporation is a holding company, the right
of any 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 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 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.
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No single document standing alone or operating in conjunction with fewer
than all of the other documents constitutes such a full, irrevocable and
unconditional 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 Capital Securities. See
"Relationship Among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee."
Status of the Exchange Guarantee
The Exchange Guarantee will constitute an unsecured obligation of the
Corporation and will rank subordinate and junior in right of payment to all
Senior Indebtedness in the same manner as Exchange Junior Subordinated
Debentures, except in the case of a bankruptcy or insolvency proceeding in
respect of the Corporation, in which case the Exchange Guarantee will rank
subordinate and junior in right of payment to all liabilities (other than
Other Guarantees) of the Corporation.
The Exchange Guarantee will rank pari passu with all Other Guarantees issued
by the Corporation. 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 Exchange 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 Exchange 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 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 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.
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Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and 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, after default with respect to the Exchange Guarantee,
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 Exchange 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 Exchange 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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RELATIONSHIP AMONG THE EXCHANGE CAPITAL SECURITIES, THE EXCHANGE JUNIOR
SUBORDINATED DEBENTURES AND THE EXCHANGE GUARANTEE
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 payments 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 will be
subordinate and junior in right of payment to all Senior Indebtedness.
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 Special Event
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 Indenture, the Trust Agreement or the Exchange Guarantee.
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 undivided
beneficial interests in the assets of 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 a
Capital Security and a holder of a Junior Subordinated Debenture is that a
holder of a Junior Subordinated
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Debenture will be entitled to receive from the Corporation the principal
amount of and interest on Junior Subordinated Debentures held, while a holder
of Capital Securities is entitled to receive Distributions from the Trust (or,
in certain circumstances, from the Corporation under the Guarantee) if and to
the extent the Trust has funds on hand legally available for the payment of
such Distributions.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and
liquidation of the Trust, the holders of the Trust Securities will be entitled
to receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of Exchange Securities--Description of Exchange Capital
Securities--Liquidation of the Trust and Distribution of 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 (and
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 Wildman, Harrold, Allen & Dixon, counsel to the
Corporation and the Trust ("Tax Counsel"), the following is a summary of the
material United States federal income tax consequences of the exchange of
Original Capital Securities for Exchange Capital Securities and the ownership
and disposition of Exchange Capital Securities held as "capital assets" as
that term is defined in the Internal Revenue Code of 1986, as amended (the
"Code") by a holder who purchased such Original Capital Securities upon
initial issuance and who is the beneficial owner of such Capital Securities.
This summary 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
(including pension funds), 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. 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 upon 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.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Original Securities for Exchange Securities should not be a
taxable event to holders for United States federal income tax purposes. The
exchange of Original Capital Securities for Exchange Capital Securities
pursuant to the Exchange Offer should not be taxable for United States federal
income tax purposes because the Exchange Capital Securities should not be
considered to differ materially in kind or extent from the Original Capital
Securities and because the exchange will occur by operation of the terms of
the Original Capital Securities. Accordingly, the Exchange Capital Securities
should have the same issue price as the Original Capital Securities and a
holder should have the same adjusted tax basis and holding period in the
Exchange Capital Securities as the holder had in the Original Capital
Securities immediately before the exchange. Moreover, a holder which had
acquired Original Capital Securities with either market discount or bond
premium will be treated as holding Exchange Capital Securities with the same
amount of market discount or bond premium and will be required to include such
market discount in or deduct such bond premium from its income in the same
manner as on the Original Capital Securities. Holders are urged to consult
their tax advisors regarding the applicability of the market discount and bond
premium rules.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Corporation intends to, and by acceptance of an Original Capital
Security each holder covenanted to, treat the Junior Subordinated Debentures
as debt for U.S. federal income tax purposes. In connection with the issuance
of the Junior Subordinated Debentures, Tax Counsel rendered its opinion
generally to the effect that, under the law in effect at the time of issuance
of the Original Capital Securities and assuming full compliance with the terms
of the Indenture (and certain other documents), and based upon certain facts
and assumptions contained in such opinion and certain representations of the
Corporation to Tax Counsel, the Original Junior Subordinated Debentures will
be classified for United States federal income tax purposes as indebtedness of
the Corporation. In connection with the issuance of the Exchange Junior
Subordinated Debentures, Tax Counsel will render its opinion generally to the
effect that under the law in effect at the time of the issuance of the
Exchange Junior Subordinated Debentures and assuming that there has been full
compliance with the terms of the Indenture (and certain other documents), and
based upon certain facts and assumptions in such opinion and certain
representations of the Corporation to Tax Counsel, the Exchange 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
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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 Capital Securities, Tax Counsel
rendered its opinion generally to the effect that, under the law in effect at
the time of issuance of the opinion and assuming full compliance with the
terms of the Trust Agreement and the Indenture (and certain other documents),
and based upon certain facts and assumptions 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 (and not the Trust) generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures, and each holder will
be required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
Even if the Trust were to be denied grantor trust status, it would not be
treated as a corporation for U.S. federal income tax purposes under the
"check-the-box" Regulations. Treas. Reg. (S)(S) 301.7701-3 and 301.7701-4.
Those Regulations provide that, if there is no election to the contrary, a
trust that has multiple beneficiaries and that is treated as a "business
entity" will be classified as a partnership for federal income tax purposes.
If the Corporation were to exercise its right to terminate the Trust and to
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities in liquidation of the Trust, the distribution could give
rise to gain to the holders if the Trust were treated as a partnership for
federal income tax purposes and if the Junior Subordinated Debentures
constituted "marketable securities" as that term is defined in the Code. Based
upon the relevant portions of the current Code, the regulations, and
applicable administrative and judicial interpretations thereof, all of which
are subject to change, the Junior Subordinated Debentures should not
constitute "marketable securities" for this purpose. Accordingly, if the Trust
is characterized as a partnership for federal income tax purposes, there would
be no material difference in the federal income tax treatment of the holders
(other than possibly the Non-U.S. holders as described below under "Non-U.S.
Holders"). However, there can be no assurance that the IRS would not assert
that the Junior Subordinated Debentures are marketable securities for this
purpose.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under certain Regulations applicable to debt instruments, a "remote"
contingency 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 upon the
advice of Tax Counsel in reliance on such representation, 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
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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 dealing with the issue of remoteness 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.
The interest on the Junior Subordinated Debentures may be adjusted under the
terms of the Exchange Offer in certain circumstances and upon the occurrence
of a Special Event the Junior Subordinated Debentures may be redeemed early.
See "Description of Exchange Securities--Description of Exchange Junior
Subordinated Debentures--Special Event Prepayment." If, based upon all the
facts and circumstances, one or more such contingencies are more likely than
not to occur, the Junior Subordinated Debentures could also be deemed to have
been issued with OID. The Corporation believes that the possibility that any
of these contingencies will occur is remote. Accordingly, the Corporation
takes the position, based upon the advice of its Tax Counsel in accordance
with such representation, that the Junior Subordinated Debentures will not be
issued with OID. However, it is possible that the IRS would take a contrary
position.
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.
Holders of Capital Securities other than initial holders may be considered
to have acquired their undivided interests in the Junior Subordinated
Debentures with market discount or acquisition premium (as each phrase is
defined for income tax purposes).
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
The Corporation will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of
the Trust Securities. 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, as
a result of a change in law the Trust were 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 redeemed for cash and the proceeds of such
redemption distributed to holders in redemption of their Capital Securities.
Under current law, such a redemption 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 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, OID, or market discount which has not
yet been included in income,
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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. Under current law,
long-term capital gain generally is subject to a maximum marginal rate of tax
of 28% if the capital asset has been held for more than one year but not more
than 18 months, and a maximum marginal rate of tax of 20% if the capital asset
has been held by an individual for more than 18 months.
The Taxpayer Relief Act of 1997 reduces the maximum rates on long-term
capital gains recognized on capital assets held by individual taxpayers for
more than 18 months as of the date of disposition (and would further reduce
the maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Holders should consult
their own tax advisors concerning these tax law changes.
The Capital Securities may trade at a price that does not accurately reflect
the value of accrued but unpaid interest 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
Debentures are deemed to have been issued with OID) which disposes of its
Capital Securities between record dates for payments of distributions thereon
will be required to include accrued but unpaid interest on the Junior
Subordinated Debentures through the date of disposition in income as ordinary
income (i.e., interest or, possibly, OID), and to add such amount to its
adjusted tax basis in its 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.
FUTURE TAX LAW CHANGES
On February 6, 1997, as part of the fiscal 1998 budget proposal submitted to
Congress, the Clinton Administration proposed certain changes to federal
income tax law which would, among other things, deny an issuer an interest
deduction for federal income tax purposes on certain instruments similar to
the Junior Subordinated Debentures (the "Clinton Proposal"). The Clinton
Proposal was not enacted as part of the Taxpayer Relief Act of 1997. However,
there can be no assurance that developments such as a change in law or
applicable Regulations or a decided case will not occur after the date hereof
that would adversely affect the tax treatment of the Junior Subordinated
Debentures, or that any legislation enacted would not cause a Tax Event that
may result in the redemption of the Junior Subordinated Debentures at the
Special Event Prepayment Price and, consequently, the Trust Securities at the
Special Event Redemption Price. See "Description of Exchange Securities--
Description of Exchange Capital Securities--Redemption" and "--Description of
Exchange Junior Subordinated Debentures--Special Event Prepayment." Any such
change after the date hereof and on or before the date the Exchange Capital
Securities are issued could affect Tax Counsel's opinion described above.
NON-U.S. HOLDERS
For purposes of this discussion, a "Non-U.S. Holder" is any holder 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.
For taxable years beginning after December 31, 1996 (or for the immediately
preceding taxable year, if the trustee of a trust so elects), a trust is a
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.
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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 Non-U.S. 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) the beneficial owner of the Capital Securities is not
a bank whose receipt of interest with respect to the Capital Securities (or
the Junior Subordinated Debentures) is described in Section 881(c)(3)(A) of
the Code and (d) either (1) 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 (2) 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 Non-U.S. 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.
If the Trust were denied grantor trust status and instead were treated as a
trade or business conducted as a partnership for U.S. federal income tax
purposes, it is possible that a Non-U.S. Holder could be subject to federal
income tax (including withholding) with respect to income (including OID)
generated by the Junior Subordinated Debentures.
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% 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 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.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA) subject to Title I of ERISA, (b) plans (as
defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the
Code, including individual retirement accounts and Keogh plans, (c) entities
whose underlying assets include plan assets by reason of a plan's investment
in such entities (each of (a), (b) and (c), a "Plan") and (d) persons who have
certain specified relationships to such Plans ("Parties in Interest" under
ERISA and "Disqualified Persons" under the Code). Moreover, based on the
reasoning of the United States Supreme Court in John Hancock Mutual Life
Insurance Co. v. Harris Trust and Savings Bank, 114 S. Ct. 517 (1993), an
insurance company's general account may be deemed to include the assets of the
Plans investing in the general account (e.g., through the purchase of an
annuity contract), and the insurance company might be treated as a Party in
Interest and a Disqualified Person with respect to such Plans by virtue of
such investment. ERISA also imposes certain duties on persons who are
fiduciaries of Plans, and both ERISA and the Code prohibit certain
transactions involving "plan assets" between a Plan and Parties in Interest or
Disqualified Persons with respect to such Plans.
Each of the Corporation (the obligor with respect to the Exchange Junior
Subordinated Debentures held by the Trust), the Property Trustee and
affiliates of either of them may be considered a Party in Interest or a
Disqualified Person with respect to many Plans. The purchase and/or holding of
Exchange Capital Securities by (or on behalf of) a Plan with respect to which
the Corporation, the Property Trustee or any affiliate of either of them 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 Exchange 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).
A Plan fiduciary considering the purchase of Exchange Capital Securities
should also be aware that the assets of the Trust may be considered "plan
assets" for ERISA purposes. In such event, service providers with respect to
the assets of the Trust may become Parties in Interest or Disqualified Persons
with respect to investing Plans, and any discretionary authority exercised
with respect to the Junior Subordinated Debentures by such persons could be
deemed to constitute a prohibited transaction under ERISA or the Code. In
order to minimize the likelihood that such prohibited transactions will occur,
each investing Plan (and each person acting on behalf of, or investing with
the assets of, a 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 Property Trustee. However,
none of the Corporation, the Property Trustee or any affiliate of either of
them can guarantee that such prohibited transactions will not occur.
Any purchaser proposing to acquire Exchange Capital Securities with assets
of any Plan should consult with its legal counsel concerning the impact of
ERISA and the Code and the potential consequences of acquiring and holding
Exchange Capital Securities with respect to its specific circumstances.
Moreover, each Plan fiduciary should take into account, among other
considerations, whether the fiduciary has the authority to make the
investment; the composition of the Plan's portfolio with respect to
diversification by type of asset; the Plan's funding objectives; the tax
effects of the investment; whether under the general fiduciary standards of
investment prudence and diversification an investment in Exchange Capital
Securities is appropriate for the Plan, taking into account the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio; and whether the Exchange Capital Securities will be traded with
sufficient regularity to permit such fiduciary to satisfy ERISA's annual
valuation requirement.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Capital Securities for its own
account pursuant to 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 in connection with resales of Exchange
Capital Securities received in exchange for Original Capital Securities where
such Original Capital Securities were acquired by such Participating Broker-
Dealers as a result of market-making activities or other trading activities.
The Trust and the Corporation have agreed that, starting on the Expiration
Date and ending on the close of business on the 180th day following the
Expiration Date, this Prospectus, as amended or supplemented, will be made
available to any Participating Broker-Dealers for use in connection with any
such resale.
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of Exchange Capital Securities received in exchange
for Original Capital Securities pursuant to the Exchange Offer must notify the
Corporation and/or the Trust, or cause the Corporation and 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."
See "The Exchange Offer--Resale of Exchange Capital Securities."
The Trust and the Corporation will not receive any proceeds from any sale of
Exchange Capital Securities by broker-dealers. Exchange Capital Securities
received by Participating Broker-Dealers for their own account pursuant to 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 Participating Broker-Dealer and/or the purchasers of any such
Exchange Capital Securities. Any Participating Broker-Dealer that resells
Exchange Capital Securities that were received by it for its own account
pursuant to 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 of any
such resale of Exchange Capital Securities and any commissions or concessions
received by any such persons 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.
For a period of 180 days after the Expiration Date, the Trust and the
Corporation will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any Participating Broker-Dealer
that requests such documents in the Letter of Transmittal. The Trust and the
Corporation have agreed to pay all expenses incident to the Exchange Offer.
VALIDITY OF EXCHANGE SECURITIES
The validity of the Exchange Guarantee and the Exchange Junior Subordinated
Debentures will be passed upon for MMI and the Trust by Wildman, Harrold,
Allen & Dixon, Chicago, Illinois. Certain matters of Delaware law relating to
the validity of the Exchange Capital Securities will be passed upon on behalf
of the Trust by Richards, Layton & Finger, P.A., Wilmington, Delaware, special
Delaware counsel to the Trust and MMI. Certain matters relating to United
States federal income tax considerations will be passed upon for MMI by
Wildman, Harrold, Allen & Dixon. Wildman, Harrold, Allen & Dixon has, from
time to time, represented one of the Initial Purchasers, and may represent
such party in the future, in connection with matters unrelated to the offering
of the Exchange Capital Securities.
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INDEPENDENT AUDITORS
The consolidated financial statements including schedules of the Corporation
and subsidiaries, at December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997, in the Corporation's Annual
Report on Form 10-K for the year ended December 31, 1997, have been
incorporated by reference into this Prospectus and the Registration Statement
and have been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon incorporated by reference herein which, as to years
1996 and 1995, are based in part on the reports of independent auditors KPMG
and KPMG Audit Plc, respectively. The financial statements referred to above
are included in reliance upon such reports given upon the authority of such
firms as experts in accounting and auditing.
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NO DEALER, SALESMAN OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED 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 AF-
FAIRS OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR 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 IN SUCH JURISDICTION.
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TABLE OF CONTENTS
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PAGE
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Available Information..................................................... 7
Incorporation of Certain Documents by Reference........................... 8
Forward-Looking Information............................................... 9
Prospectus Summary........................................................ 10
Risk Factors.............................................................. 19
MMI Companies, Inc........................................................ 26
Pro Forma Condensed Statement of Income................................... 28
Use of Proceeds........................................................... 30
Ratios of Earnings to Fixed Charges and Earnings to Fixed Charges and
Distributions on Capital Securities...................................... 31
Capitalization............................................................ 32
Selected Consolidated Financial Information............................... 33
MMI Capital Trust I....................................................... 34
The Exchange Offer........................................................ 35
Description of Exchange Securities........................................ 45
Relationship Among the Exchange Capital Securities, the Exchange Junior
Subordinated Debentures and the Exchange Guarantee....................... 67
Certain Federal Income Tax Consequences................................... 69
ERISA Considerations...................................................... 74
Plan of Distribution...................................................... 75
Validity of Exchange Securities........................................... 75
Independent Auditors...................................................... 76
</TABLE>
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MMI CAPITAL TRUST I
OFFER TO EXCHANGE ITS
7 5/8% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER SERIES B CAPITAL SECURITY) WHICH ARE BEING
REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING
7 5/8% SERIES A CAPITAL SECURITIES (LIQUIDATION AMOUNT $1,000 PER SERIES A
CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY
GUARANTEED, TO THE EXTENT
DESCRIBED HEREIN, BY
MMI COMPANIES, INC.
-------
PROSPECTUS
-------
APRIL 9, 1998
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION
(1) Indemnification of Directors and Officers of MMI.
MMI, being incorporated under the General Corporation Law of the State of
Delaware, as amended from time to time (the "DGCL"), is empowered by Selection
145 of the DGCL, subject to the procedures and limitations stated therein, to
indemnify any person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him
or her in connection with any threatened, pending or completed action, suit or
proceeding to which such person is made a party or threatened to be made a
party by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise ("Corporate
Persons"). Section 145 provides that indemnification pursuant to its
provisions is not exclusive of other rights of indemnification to which a
person may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
Article XIII of MMI's by-laws provides for indemnification and insurance on
behalf of the Corporate Persons. Article XIII provides that MMI will indemnify
any Corporate Person who is or was a party, or is threatened to be made a
party, to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (an "Action") by
reason of the fact that he or she is or was a Corporate Person against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such Action, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of MMI
and, with respect to any criminal Action, had no reasonable cause to believe
his or her conduct was unlawful. With respect to an Action by or in the right
of MMI, Article XIII also provides that no indemnification shall be made in
respect of any claim, issue or matter as to which the Corporate Person is
adjudged to be liable for negligence or misconduct in the performance of his
or her duty to MMI, except to the extent that, the court in which the Action
was brought determines upon application that in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses as the court shall deem proper. To the extent that a Corporate
Person has been successful in the defense of any Action, or in the defense of
any claim, issue or matter therein, Article XIII provides that he or she will
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith. Any indemnification
under Article XIII (unless ordered by a court) will be made only as authorized
in the specific case, upon a determination, reasonably made, that
indemnification is proper in the circumstances because the Corporate Person
has met the applicable standards of conduct. Such determination may be made
(i) by the board of directors of MMI by a majority vote of a quorum consisting
of directors who were not parties to such Action, or (ii) if such quorum is
not obtainable, or, even if obtainable, if a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders of MMI by a majority vote of a quorum consisting of stockholders
who were not parties to such action. Also, Article XIII provides that MMI will
pay the expenses incurred in defending an Action in advance of the final
disposition of such Action as authorized by the board of directors of MMI in
the specific case upon receipt of an undertaking by or on behalf of the
Corporate Person to repay such amount. The indemnification provided by Article
XIII is not exclusive of any other rights of indemnification to which
Corporate Persons may be entitled. Article XIII also authorizes MMI to
purchase insurance on behalf of any Corporate Person against any liability
incurred by him or her in, or arising out of, his or her status as a Corporate
Person, whether or not MMI would have the power to indemnify him or her
against such liability.
Article Ninth of MMI's certificate of incorporation eliminates, to the
fullest extent permitted by paragraph (7) of subsection (b) of Section 102 of
the DGCL, as the same may be amended or supplemented, or any corresponding
provision of the DGCL, the personal liability of directors. That paragraph
allows corporations incorporated under the DGCL to eliminate the personal
liability of a director to the corporation or its stockholders for monetary
damages for a breach of fiduciary duty as a director. However, that paragraph
does not allow
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corporations to limit the liability of a director (i) for any breach of his or
her duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payment of a dividend or unlawful
stock purchase or redemption, or (iv) for any transaction for which the
director derived an improper personal benefit.
MMI maintains liability insurance for its directors and officers.
(2) Indemnification of Company Indemnified Persons and Fiduciary Indemnified
Persons.
MMI Capital Trust I provides in Section 10.4 for the indemnification of
"Company Indemnified Persons" and "Fiduciary Indemnified Persons" as defined.
Section 1.1 states that: "Company Indemnified Persons means (a) any
Administrative Trustee; (b) any Affiliate of any Administrative Trustee; (c)
any officers, directors, shareholders, members, partners, employees,
representatives or agents of any Administrative Trustee; or (d) any officer,
employee or agent of the Trust or its Affiliates." Section 10.4(b) set forth
below defines "Fiduciary Indemnified Person."
10.4 Indemnification
(a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees and expenses), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the Company
Indemnified Person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Trust, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(ii) The Debenture Issuer shall indemnify, to the full extent permitted
by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Trust to procure judgment in its
favor by reason of the fact that he is or was a Company Indemnified Person
against expenses (including attorneys' fees and expenses) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust and
except that no such indemnification shall be made in respect of any claim,
issue or matter as to which such Company Indemnified Person shall have been
adjudged to be liable to the Trust unless and only to the extent that the
Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
Court of Chancery or such other court shall deem proper.
(iii) Any indemnification under paragraphs (i) and (ii) of this Section
10.4(a) (unless ordered by a court) shall be made by the Debenture Issuer
only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the
circumstances because he has met the applicable standard of conduct set
forth in paragraphs (i) and (ii). Such determination shall be made (1) by
the Administrative Trustees by a majority vote of a quorum consisting of
such Administrative Trustees who were not parties to such action, suit or
proceeding, (2) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Administrative Trustees so directs,by
independent legal counsel in a written opinion, or (3) by the Common
Security Holder of the Trust.
(iv) Expenses (including attorneys' fees and expenses) incurred by a
Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in
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paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by the
Debenture Issuer in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
Company Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Debenture
Issuer as authorized in this Section 10.4(a). Notwithstanding the
foregoing, no advance shall be made by the Debenture Issuer if a
determination is reasonably and promptly made (i) by the Administrative
Trustees by a majority vote of a quorum of disinterested Administrative
Trustee, (ii) if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested Administrative Trustees so directs, by
independent legal counsel in a written opinion or (iii) the Common Security
Holder of the Trust, that, based upon the facts known to the Administrative
Trustees, counsel or the Common Security Holder at the time such
determination is made, such Company Indemnified Person acted in bad faith
or in a manner that such person did not believe to be in or not opposed to
the best interests of the Trust, or, with respect to any criminal
proceeding, that such Company Indemnified Person believed or had reasonable
cause to believe his conduct was unlawful. In no event shall any advance be
made in instances where the Administrative Trustees, independent legal
counsel or Common Security Holder reasonably determine that such person
deliberately breached his duty to the Trust or its Common or Capital
Security Holders.
(v) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a) shall not
be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any
agreement, vote of stockholders or disinterested directors of the Debenture
Issuer or Capital Security Holders of the Trust or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office. All rights to indemnification under this Section
10.4(a) shall be deemed to be provided by a contract between the Debenture
Issuer and each Company Indemnified Person who serves in such capacity at
any time while this Section 10.4(a) is in effect. Any repeal or
modification of this Section 10.4(a) shall not affect any rights or
obligations then existing.
(vi) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Debenture Issuer would have the power to indemnify him against such
liability under the provisions of this Section 10.4(a).
(vii) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in
a consolidation or merger, so that any person who is or was a director,
trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, trustee,
officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 10.4(a) with respect to the
resulting or surviving entity as he would have with respect to such
constituent entity if its separate existence had continued.
(viii) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be a
Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee or
the Delaware Trustee, and (iv) any officers, directors, shareholders,
members, partners, employees, representatives, custodians, nominees or
agents of the Property Trustee or the Delaware Trustee (each of the Persons
in (i) through (iv) being referred to as a "Fiduciary Indemnified Person")
for, and to hold each Fiduciary Indemnified Person harmless against, any
and all loss, liability, damage, claim or expense including taxes (other
than taxes based on the income of such Fiduciary Indemnified Person)
incurred without negligence or willful misconduct on its part, arising out
of or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses (including reasonable
legal fees and expenses) of defending itself against or investigating any
claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder.
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The provisions of this Section 10.4(b) shall survive the satisfaction and
discharge of this Declaration or the resignation or removal of the Property
Trustee or the Delaware Trustee, as the case may be.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
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4.1 Indenture of MMI Companies, Inc. relating to the Junior Subordinated
Debentures
4.2 Form of Certificate of Exchange Junior Subordinated Debentures
4.3 Certificate of Trust of MMI Capital Trust I
4.4 Amended and Restated Declaration of Trust of MMI Capital Trust I
4.5 Form of Exchange Capital Security Certificate for MMI Capital Trust I
4.6 Form of Exchange Guarantee of MMI Companies, Inc. relating to the Exchange
Capital Securities
4.7 Registration Rights Agreement
5.1 Opinion and Consent of Richards, Layton & Finger, P.A., special Delaware
counsel to MMI Companies, Inc. and MMI Capital Trust I, as to legality of
the Exchange Capital Securities to be issued by MMI Capital Trust I
5.2 Opinion and Consent of Wildman, Harrold, Allen & Dixon, as to legality of
the Exchange Junior Subordinated Debentures and the Exchange Guarantee to
be issued by MMI Companies, Inc.
8 Opinion and Consent of Wildman, Harrold, Allen & Dixon, special tax
counsel, as to certain federal income tax matters
12 Computation of ratio of earnings to fixed charges*
23.1 Consent of Ernst & Young LLP*
23.2 Consent of KPMG Audit plc*
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.1)
23.4 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 5.2)
23.5 Consent of Wildman, Harrold, Allen & Dixon (included in Exhibit 8)
24.1 Power of Attorney
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as
trustee under the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as
Property Trustee under the Amended and Restated Declaration of Trust of
MMI Capital Trust I
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank under the
Exchange Guarantee for the benefit of the holders of Exchange Capital
Securities of MMI Capital Trust I
27 Financial Data Schedule*
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
</TABLE>
- --------
*Filed herewith
II-4
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the registrant or related
notes thereto.
ITEM 22. UNDERTAKINGS
Each of the Undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant'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 herein, 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
each Registrant pursuant to the provisions, or otherwise, each Registrant has
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 each Registrant of expenses incurred or paid by a
director, officer of controlling person or each Registrant 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, each Registrant will, unless in the opinion of its counsel the
matter has been settled by the 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.
Each of the Undersigned Registrants hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
Each of the Undersigned Registrants hereby undertakes 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-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO.
44565 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DEERFIELD, STATE OF ILLINOIS, ON THE 9TH DAY OF
APRIL, 1998.
MMI Companies, Inc.
/s/ Paul M. Orzech
By___________________________________
Paul M. Orzech
Executive Vice Presidentand Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 44565 HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED BELOW ON THE 9TH DAY OF APRIL,
1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ B. Frederick Becker Chairman, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
B. Frederick Becker
/s/ Paul M. Orzech Executive Vice President and Chief
___________________________________________ Financial Officer (Principal Financial
Paul M. Orzech Officer)
/s/ Joseph R. Herman Senior Vice President and Controller
___________________________________________ (Principal Accounting Officer)
Joseph R. Herman
Director
___________________________________________
Richard R. Barr
* Director
___________________________________________
George B. Caldwell
* Director
___________________________________________
K. James Ehlen, M.D.
* Director
___________________________________________
F. Laird Facey, M.D.
* Director
___________________________________________
William M. Kelley
* Director
___________________________________________
Andrew D. Kennedy
* Director
___________________________________________
Timothy R. McCormick
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Director
___________________________________________
Gerald L. McManis
* Director
___________________________________________
Scott S. Parker
* Director
___________________________________________
Edward C. Peddie
* Director
___________________________________________
Joseph D. Sargent
Director
___________________________________________
Ian G. Sinclair
</TABLE>
<TABLE>
<S> <C>
Director
___________________________________________
Robert A. Spass
</TABLE>
<TABLE>
<S> <C>
* Director
___________________________________________
Alan C. Guy
</TABLE>
/s/ B. Frederick Becker
*By:_________________________________
B. Frederick Becker
Attorney-in-fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO.
44565 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF DEERFIELD, STATE OF ILLINOIS, ON THE 9TH DAY OF
APRIL, 1998.
MMI Capital Trust I
/s/ Joseph Herman
By___________________________________
Joseph R. Herman
Administrative Trustee
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT NO. 44565 HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED BELOW ON THE 9TH DAY OF APRIL,
1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Joseph Herman Administrative Trustee
___________________________________________
Joseph R. Herman
/s/ Scott T. Veech Administrative Trustee
___________________________________________
Scott T. Veech
Administrative Trustee
___________________________________________
Wayne A. Sinclair
</TABLE>
II-7
<PAGE>
EXHIBIT 12
MMI Companies, Inc. and Subsidiaries
Ratio of earnings to fixed charges
(in thousands except ratios)
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from continuing operations
before income taxes and extraordinary losses........... $44,316 $ 55,449 $ 42,213 $ 5,330 $ 43,797
Add fixed charges:
Interest expense....................................... 6,489 6,083 10,889 10,084 4,150
Amortization of issuance costs......................... -- 70 -- 123 38
Portion of rents representative of
interest factor........................................ 2,150 1,850 1,625 1,345 982
------- -------- -------- -------- --------
8,639 8,003 12,514 11,552 5,170
------- -------- -------- -------- --------
Income as adjusted....................................... $52,955 $ 63,452 $ 54,727 $ 16,882 $ 48,967
======== ======== ======== ======== ========
Fixed charges............................................ $ 8,639 $ 8,003 $ 12,514 $ 11,552 $ 5,170
======= ======== ======== ======== ========
Ratio of earnings to fixed charges....................... 6.1 7.9 4.4 1.5 9.5
</TABLE>
<PAGE>
Exhibit 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors"
in Amendment No. 1 to the Registration Statement (Form S-4 No. 333-44565) and
related Prospectus of MMI Companies, Inc. and MMI Capital Trust I for the
registration of $125,000,000 of 7 5/8% Capital Securities of MMI Capital Trust I
and to the incorporation by reference therein of our reports dated February 26,
1998, with respect to the consolidated financial statements of MMI Companies,
Inc. incorporated by reference in its Annual Report (Form 10-K) for the year
ended December 31, 1997 and the related financial statement schedules included
therein, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
Chicago, Illinois
April 9, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the Amendment No. 1 to the
Registration Statement (333-44565) on Form S-4 of MMI Companies, Inc. of our
report dated 18 March 1996 with respect to the consolidated statements of
operations, shareholders' equity and cash flows of Unionamerica Holdings plc for
the year ended 31 December 1995, which report appears in the 31 December 1997
Form 10-K of MMI Companies, Inc.
/s/ KPMG
------------------
KPMG
London
England
8 April 1998
We consent to incorporation by reference in the Amendment No. 1 to the
Registration Statement (333-44565) on Form S-4 of MMI Companies, Inc. of our
report dated 11 March 1997, with respect to the consolidated balance sheet of
Unionamerica Holdings plc as of 31 December 1996, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year ended
31 December 1996, which report appears in the 31 December 1997 Form 10-K of MMI
Companies, Inc.
/s/ KPMG Audit Plc
------------------
KPMG Audit Plc
London
England
8 April 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from the
consolidated financial statements of MMI Companies, Inc. and subsidiaries for
the three month period ended March 31, 1997, and is qualified in its entirety by
reference to such financial statements. The financial data schedule has been
restated for the acquisition of Unionamerica Holdings plc accounted for as a
pooling of interests for the periods prior to December 11, 1997.
</LEGEND>
<RESTATED>
<CIK> 0001053699
<NAME> MMI CAPITAL TRUST I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<DEBT-HELD-FOR-SALE> 1,093,418
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 30,874
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 1,169,486
<CASH> 3,203
<RECOVER-REINSURE> 34,793
<DEFERRED-ACQUISITION> 35,653
<TOTAL-ASSETS> 1,890,218
<POLICY-LOSSES> 1,149,232
<UNEARNED-PREMIUMS> 198,935
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 93,000
<COMMON> 1,874
0
0
<OTHER-SE> 355,646
<TOTAL-LIABILITY-AND-EQUITY> 1,890,218
71,423
<INVESTMENT-INCOME> 18,094
<INVESTMENT-GAINS> (1,141)
<OTHER-INCOME> 12,067
<BENEFITS> 52,010
<UNDERWRITING-AMORTIZATION> 11,326
<UNDERWRITING-OTHER> 24,014
<INCOME-PRETAX> 13,385
<INCOME-TAX> 2,760
<INCOME-CONTINUING> 10,625
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,625
<EPS-PRIMARY> .57
<EPS-DILUTED> .55
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0<F1>
<PROVISION-PRIOR> 0<F1>
<PAYMENTS-CURRENT> 0<F1>
<PAYMENTS-PRIOR> 0<F1>
<RESERVE-CLOSE> 0<F1>
<CUMULATIVE-DEFICIENCY> 0<F1>
<FN>
<F1> Available on an annual basis only
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from
the consolidated financial statements of MMI Companies, Inc. and subsidiaries
for the six month periods ended June 30, 1997 and June 30, 1996, and is
qualified in its entirety by reference to such financial statements. The
financial data schedule has been restated for the acquisition of Unionamerica
Holdings plc accounted for as a pooling of interests for the periods prior to
December 11, 1997.
</LEGEND>
<RESTATED>
<CIK> 0001053699
<NAME> MMI CAPITAL TRUST I
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,077,691 1,052,070
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 52,823 16,107
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 1,180,602 1,130,021
<CASH> 3,347 4,438
<RECOVER-REINSURE> 25,549 38,562
<DEFERRED-ACQUISITION> 31,845 24,636
<TOTAL-ASSETS> 1,864,630 1,793,118
<POLICY-LOSSES> 1,147,224 1,187,300
<UNEARNED-PREMIUMS> 173,197 151,701
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 93,000 95,500
<COMMON> 1,871 1,691
0 0
0 0
<OTHER-SE> 372,210 275,470
<TOTAL-LIABILITY-AND-EQUITY> 1,864,630 1,793,118
142,759 149,054
<INVESTMENT-INCOME> 36,980 35,516
<INVESTMENT-GAINS> 970 1,188
<OTHER-INCOME> 25,308 16,109
<BENEFITS> 103,767 110,831
<UNDERWRITING-AMORTIZATION> 23,914 22,118
<UNDERWRITING-OTHER> 48,099 36,648
<INCOME-PRETAX> 27,321 29,359
<INCOME-TAX> 5,614 6,038
<INCOME-CONTINUING> 21,707 23,321
<DISCONTINUED> 0 0
<EXTRAORDINARY> (267) 0
<CHANGES> 0 0
<NET-INCOME> 21,440 23,321
<EPS-PRIMARY> 1.15 1.38
<EPS-DILUTED> 1.11 1.33
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0<F1> 0<F1>
<PROVISION-PRIOR> 0<F1> 0<F1>
<PAYMENTS-CURRENT> 0<F1> 0<F1>
<PAYMENTS-PRIOR> 0<F1> 0<F1>
<RESERVE-CLOSE> 0<F1> 0<F1>
<CUMULATIVE-DEFICIENCY> 0<F1> 0<F1>
<FN>
<F1>Available on an annual basis only.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND> This schedule contains summary financial information extracted from
the consolidated financial statements of MMI Companies, Inc. and subsidiaries
for the nine month periods ended September 30, 1997 and September 30, 1996, and
is qualified in its entirety by reference to such financial statements. The
financial data schedule has been restated for the acquisition of Unionamerica
Holdings plc accounted for as a pooling of interests for the periods prior to
December 11, 1997.
</LEGEND>
<RESTATED>
<CIK> 0001053699
<NAME> MMI CAPITAL TRUST I
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 SEP-30-1996
<DEBT-HELD-FOR-SALE> 1,097,158 1,066,826
<DEBT-CARRYING-VALUE> 0 0
<DEBT-MARKET-VALUE> 0 0
<EQUITIES> 55,024 20,456
<MORTGAGE> 0 0
<REAL-ESTATE> 0 0
<TOTAL-INVEST> 1,201,468 1,187,215
<CASH> 5,205 2,562
<RECOVER-REINSURE> 20,550 30,304
<DEFERRED-ACQUISITION> 31,298 25,779
<TOTAL-ASSETS> 1,852,198 1,817,307
<POLICY-LOSSES> 1,113,798 1,173,295
<UNEARNED-PREMIUMS> 155,851 131,238
<POLICY-OTHER> 0 0
<POLICY-HOLDER-FUNDS> 0 0
<NOTES-PAYABLE> 103,000 95,500
<COMMON> 1,881 1,822
0 0
0 0
<OTHER-SE> 391,984 327,187
<TOTAL-LIABILITY-AND-EQUITY> 1,852,198 1,817,307
202,753 217,021
<INVESTMENT-INCOME> 57,215 55,170
<INVESTMENT-GAINS> 1,619 (1,175)
<OTHER-INCOME> 38,800 25,952
<BENEFITS> 145,343 161,814
<UNDERWRITING-AMORTIZATION> 35,517 33,100
<UNDERWRITING-OTHER> 72,780 55,863
<INCOME-PRETAX> 42,224 41,805
<INCOME-TAX> 8,287 8,093
<INCOME-CONTINUING> 33,937 33,712
<DISCONTINUED> 0 0
<EXTRAORDINARY> (267) 0
<CHANGES> 0 0
<NET-INCOME> 33,670 33,712
<EPS-PRIMARY> 1.80 1.99
<EPS-DILUTED> 1.73 1.91
<RESERVE-OPEN> 0 0
<PROVISION-CURRENT> 0<F1> 0<F1>
<PROVISION-PRIOR> 0<F1> 0<F1>
<PAYMENTS-CURRENT> 0<F1> 0<F1>
<PAYMENTS-PRIOR> 0<F1> 0<F1>
<RESERVE-CLOSE> 0<F1> 0<F1>
<CUMULATIVE-DEFICIENCY> 0<F1> 0<F1>
<FN>
<F1>Available on an annual basis only
</FN>
</TABLE>
