<PAGE>
File Pursuant to Rule 424(b)(5)
Registration No. 333-12439
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 1, 1996)
400,000 TRUST PREFERRED SECURITIES
TRAVELERS CAPITAL II
7 3/4% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $1,000 PER TRUST PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TRAVELERS GROUP INC.
------------
The 7 3/4% Trust Preferred Securities (the "Preferred Securities") offered
hereby represent preferred undivided beneficial interests in the assets of
Travelers Capital II, a statutory business trust formed under the laws of the
State of Delaware ("TRV Capital" or the "Trust"). Travelers Group Inc., a
Delaware corporation (the "Company"), will directly or indirectly own all the
common securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities") representing undivided beneficial interests
in the assets of TRV Capital. TRV Capital exists for the sole purpose of issuing
the Preferred Securities and Common Securities and investing the proceeds
thereof in an equivalent amount of 7 3/4% Junior Subordinated Deferrable
Interest Debentures due December 1, 2036 (the "Junior Subordinated Debt
Securities") of the Company.
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE S-8 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS, INCLUDING THE PERIOD AND
CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF SUCH DEFERRAL.
The Preferred Securities have been approved for listing on the New York Stock
Exchange, Inc. (the "New York Stock Exchange") subject to official notice of
issuance. Trading of the Preferred Securities on the New York Stock Exchange is
expected to commence within a 30-day period after the initial delivery of the
Preferred Securities. See "Underwriting."
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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 SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO TRV
OFFERING PRICE(1) COMMISSIONS(2) CAPITAL(3)(4)
<S> <C> <C> <C>
Per Preferred Security $988.80 (3) $988.80
Total $395,520,000 (3) $395,520,000
</TABLE>
(1) Plus accrued distributions from December 1, 1996.
(2) For information regarding indemnification of the Underwriters, see
"Underwriting."
(3) Because the proceeds of the sale of the Preferred Securities will be
invested in the Junior Subordinated Debt Securities, the Company has agreed
to pay to the Underwriters, as compensation for their arranging the
investment therein of such proceeds, $10 per Preferred Security ($4,000,000
in the aggregate). See "Underwriting."
(4) Expenses of the offering, which are payable by the Company, are estimated to
be $150,000.
------------
The Preferred Securities offered hereby are being offered by the several
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that delivery of the
Preferred Securities will be made only in book-entry form through the facilities
of The Depository Trust Company, on or about December 3, 1996.
------------
SMITH BARNEY INC.
HSBC SECURITIES, INC.
J.P. MORGAN & CO.
SALOMON BROTHERS INC
UBS SECURITIES
November 27, 1996
<PAGE>
(continued from previous page)
Upon the event of a default under the Declaration (as defined herein), the
holders of Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distributions and
payments upon redemption, liquidation and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of 7 3/4% of the liquidation amount of $1,000
per Preferred Security, accruing from, and including, December 1, 1996 and
payable semi-annually in arrears on June 1 and December 1 of each year,
commencing June 1, 1997 ("distributions"). The payment of distributions out of
monies held by TRV Capital and payments on liquidation of TRV Capital or the
redemption of Preferred Securities out of monies held by TRV Capital, as set
forth below, are guaranteed by the Company (the "Guarantee") to the extent
described under "Description of Guarantee." The Guarantee covers payments of
distributions and other payments on the Preferred Securities only if and to the
extent that the Company has made a payment of interest or principal or other
payments on the Junior Subordinated Debt Securities held by TRV Capital as its
sole asset. The Guarantee, when taken together with the Company's obligations
under the Junior Subordinated Debt Securities, the Indenture (as defined herein)
pursuant to which the Junior Subordinated Debt Securities are issued and its
obligations under the Declaration, including its liabilities to pay costs,
expenses, debts and liabilities of TRV Capital (other than with respect to the
Trust Securities), provides a full and unconditional guarantee of amounts due on
the Preferred Securities. The obligations of the Company under the Guarantee
rank (i) subordinate and junior in right of payment to all other liabilities of
the Company, (ii) pari passu with the most senior preferred or preference stock
now or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock of
any subsidiary of the Company and (iii) senior to the Company's common stock.
The obligations of the Company under the Junior Subordinated Debt Securities are
subordinate and junior in right of payment to all present and future Senior
Indebtedness (as defined herein) of the Company.
The distribution rate and the distribution payment date and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities, which will be the sole assets of TRV Capital. As a result, if
principal or interest is not paid on the Junior Subordinated Debt Securities by
the Company, no amounts will be paid on the Preferred Securities because TRV
Capital will not have sufficient funds to make distributions on the Preferred
Securities. In such event, the Guarantee will not apply to such distributions
until TRV Capital has sufficient funds available therefor.
The Company has the right to defer payments of interest on the Junior
Subordinated Debt Securities by extending the interest payment period on the
Junior Subordinated Debt Securities at any time for up to 10 consecutive
semi-annual periods (each, an "Extension Period"), provided, that no Extension
Period may extend beyond the maturity of the Junior Subordinated Debt
Securities. If interest payments are so deferred, distributions on the Preferred
Securities will also be deferred. During any Extension Period, distributions on
the Preferred Securities will continue to accrue with interest thereon (to the
extent permitted by applicable law) at an annual rate of 7 3/4% per annum
compounded semi-annually. Additionally, during any Extension Period, holders of
Preferred Securities will be required to include deferred interest income in the
form of original issue discount ("OID") in their gross income for United States
federal income tax purposes in advance of receipt of the cash distributions with
respect to such deferred interest payments. There could be up to 40 Extension
Periods of varying lengths throughout the term of the Junior Subordinated Debt
Securities. See "Description of the Junior Subordinated Debt Securities--Option
to Extend Interest Payment Period," "Risk Factors--Option to Extend Interest
Payment Period" and "United States Federal Income Taxation--Interest Income and
Original Issue Discount."
The Junior Subordinated Debt Securities are redeemable by the Company, in
whole or in part, from time to time, on or after December 1, 2006, or at any
time, in whole or in part, in certain circumstances upon the occurrence of a Tax
Event (as defined herein). If the Company redeems Junior Subordinated Debt
Securities, TRV Capital must redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the Junior
Subordinated Debt Securities so redeemed at the applicable Redemption Price (as
defined herein), to the date fixed for redemption. See "Description of the
Preferred Securities--Mandatory Redemption of Trust Securities." The Preferred
Securities will be redeemed upon maturity of the Junior Subordinated Debt
Securities. The Junior Subordinated Debt Securities mature on December 1, 2036.
In addition, upon the occurrence of a Special Event arising from a change in law
or a change in legal interpretation regarding tax or investment company matters,
unless the Junior Subordinated Debt Securities are redeemed in the limited
circumstances described herein, TRV Capital shall be dissolved, with the result
that the Junior Subordinated Debt Securities will be distributed to the holders
of the Trust Securities, on a pro rata basis, in lieu of any cash distribution.
See "Description of the Preferred Securities--Special Event Redemption or
Distribution." In certain circumstances, the Company will have the right to
redeem the Junior Subordinated Debt Securities prior to December 1, 2006, which
would result in the redemption by TRV Capital of Trust Securities in the same
amount on a pro rata basis. If the Junior Subordinated Debt Securities are
distributed to the holders of the Preferred
S-2
<PAGE>
Securities, the Company will use its best efforts to have the Junior
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed. See "Description of
the Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Junior Subordinated Debt Securities."
In the event of the involuntary or voluntary dissolution, winding up or
termination of TRV Capital, the holders of the Preferred Securities will be
entitled to receive for each Preferred Security a liquidation amount of $1,000
plus accrued and unpaid distributions thereon (including interest thereon) to
the date of payment, unless, in connection with such dissolution, the Junior
Subordinated Debt Securities are distributed to the holders of the Preferred
Securities. See "Description of the Preferred Securities--Liquidation
Distribution Upon Dissolution."
Following the initial distribution of Preferred Securities, Smith Barney
Inc. ("Smith Barney"), an indirect wholly owned subsidiary of the Company and an
affiliate of TRV Capital, may offer and sell previously issued Preferred
Securities in the course of its business as a broker-dealer (subject to
obtaining any necessary approval of the New York Stock Exchange for any such
offers and sales). Smith Barney may act as a principal or agent in such
transactions.
This Prospectus Supplement, together with an appropriate Prospectus, may be
used by Smith Barney in connection with offers and sales of an indeterminate
amount of the Preferred Securities in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale. Smith Barney may
act as principal or agent in such transactions.
-------------------
FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER RULED UPON THE ACCURACY OR THE ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
SUMMARY
The following information is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus.
THE COMPANY
The Company is a financial services holding company engaged, through its
subsidiaries, principally in four business segments: Investment Services,
Consumer Finance Services, Life Insurance Services and Property & Casualty
Insurance Services.
The Company's Investment Services segment consists of investment banking,
asset management, brokerage and other financial services provided through Smith
Barney Holdings Inc. and its subsidiaries. The Company's Consumer Finance
Services segment includes consumer lending services and credit card and
credit-related insurance services provided through Commercial Credit Company and
its subsidiaries. The Company's Life Insurance Services segment includes
individual life insurance, annuities and pension programs which are offered
primarily through The Travelers Insurance Company, The Travelers Life and
Annuity Company and the Primerica Financial Services group of companies,
including Primerica Life Insurance Company. The Company's Property & Casualty
Insurance Services segment provides insurance products including workers'
compensation, liability, automobile, property and multiple-peril. In addition,
this segment provides commercial and personal property and casualty products
throughout the United States. Property and casualty insurance policies are
issued primarily by subsidiaries of the Company's newly formed indirect
majority-owned subsidiary Travelers/Aetna Property Casualty Corp. ("TAP") and
affiliated property-casualty insurance companies, including Gulf Insurance
Company.
In addition to its four business segments, the Company's Corporate and Other
segment consists of unallocated expenses and earnings primarily related to
interest, corporate administration, and certain corporate investments.
On April 2, 1996, TAP purchased from Aetna Life and Casualty Company all of
the outstanding capital stock of The Aetna Casualty and Surety Company and The
Standard Fire Insurance Company for $4.16 billion in cash.
The principal offices of the Company are located at 388 Greenwich Street,
New York, New York 10013 and its telephone number is (212) 816-8000.
TRV CAPITAL
TRV Capital is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of September 19, 1996, executed by the
Company, as sponsor (the "Sponsor"), and the trustees of TRV Capital (as
described below) and (ii) the filing of a certificate of trust with the
Secretary of State of the State of Delaware on September 19, 1996. Such
declaration will be amended and restated in its entirety (as so amended and
restated, the "Declaration") substantially in the form filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration has been qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company."
The Company will directly or indirectly acquire Common Securities in an
aggregate liquidation amount equal to 3% or more of the total capital of TRV
Capital. TRV Capital exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the Junior
Subordinated Debt Securities and (iii) engaging in only those other activities
necessary or incidental thereto.
TRV Capital's business and affairs are conducted by its trustees, each
appointed by the Company as holder of the Common Securities. Pursuant to the
Declaration, the number of trustees of TRV Capital will be four: The Chase
Manhattan Bank, a New York banking association that is unaffiliated with the
Company, as the institutional trustee (the "Institutional Trustee"), Chase
Manhattan Bank Delaware, a banking association with its principal place of
business in the State of Delaware, as the Delaware trustee (the "Delaware
Trustee"), and two individual trustees (the "Regular Trustees" and, together
with the Institutional Trustee and the Delaware Trustee, the "TRV Trustees")
will be persons who are employees or officers of, or who are affiliated with the
Company. Initially, the Regular Trustees will be Heidi G. Miller and Irwin
Ettinger, each of whom is an officer of the Company. The Institutional Trustee
will act as the sole indenture trustee under the Declaration for purposes of
compliance with the Trust Indenture Act until removed or replaced by the holder
of the Common Securities. The Chase Manhattan Bank will also act as indenture
trustee (the "Guarantee Trustee") under the Guarantee. See "Description of
Guarantee" and "Description of Junior Subordinated Debt Securities."
S-4
<PAGE>
The Institutional Trustee will hold title to the Junior Subordinated Debt
Securities for the benefit of the holders of the Trust Securities and, in its
capacity as the holder, the Institutional Trustee will have the power to
exercise all rights, powers and privileges under the indenture pursuant to which
the Junior Subordinated Debt Securities are issued. In addition, the
Institutional Trustee will maintain exclusive control of a segregated non-
interest bearing bank account (the "Property Account") to hold all payments made
in respect of the Junior Subordinated Debt Securities for the benefit of the
holders of the Trust Securities. The Institutional Trustee will make payments of
distributions and payments on liquidation, redemption and otherwise to the
holders of the Trust Securities out of funds from the Property Account. The
Guarantee Trustee will hold the Guarantee for the benefit of the holders of the
Preferred Securities. The Company, as the direct or indirect holder of all the
Common Securities, will have the right, subject to certain restrictions
contained in the Declaration, to appoint, remove or replace any TRV Trustee and
to increase or decrease the number of TRV Trustees. The Company will pay all
fees and expenses related to TRV Capital and the offering of the Trust
Securities. See "Description of the Junior Subordinated Debt
Securities--Miscellaneous."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities."
PREFERRED SECURITIES OFFERING
<TABLE>
<S> <C>
General...................... The Preferred Securities represent undivided beneficial interests in
TRV Capital's assets, which will consist solely of the Junior
Subordinated Debt Securities. The Junior Subordinated Debt Securities,
in which the proceeds of the Preferred Securities offered hereby will
be invested, mature on December 1, 2036, unless the Junior
Subordinated Debt Securities are redeemed by the Company prior to such
maturity as described under "Description of the Preferred
Securities--Mandatory Redemption of Trust Securities" and "Description
of the Preferred Securities--Special Event Redemption or
Distribution."
Distributions................ The distributions payable on each Preferred Security will be fixed at
a rate per annum of 7 3/4% of the stated liquidation amount of $1,000
per Preferred Security, will be cumulative, will accrue from December
1, 1996 and will be payable semi-annually in arrears, on June 1 and
December 1 of each year, commencing June 1, 1997. See "Description of
the Preferred Securities-- Distributions."
Option to Extend Interest
Payment Period...............
The Company has the right, at any time, to defer payments of interest
on the Junior Subordinated Debt Securities for a period not exceeding
10 consecutive semi-annual periods; provided, that no Extension Period
may extend beyond the maturity date of the Junior Subordinated Debt
Securities. As a consequence of the Company's extension of the
interest payment period, semi-annual distributions on the Preferred
Securities would be deferred (though such distributions would continue
to accrue with interest thereon compounded semi-annually, since
interest would continue to accrue on the Junior Subordinated Debt
Securities) during any such extended interest payment period. In the
event that the Company exercises its right to extend an interest
payment period, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any
of its capital stock or make any guarantee payment with respect
thereto, and (b) the Company shall not make any payment of interest on
or principal of (or premium, if any, on), or repay, repurchase or
redeem, any debt securities issued by the Company which rank pari
passu with or junior to the Junior Subordinated Debt Securities. The
foregoing, however, will not apply (i) to any stock dividends paid by
the Company where the dividend stock is the same stock as that on
which the dividend is being paid or (ii) in certain other limited
events. Prior to the termination of any Extension Period, the Company
may further extend such Extension Period, provided that such Extension
Period together with all such
</TABLE>
S-5
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<TABLE>
<S> <C>
previous and further extensions thereof may not exceed 10 consecutive
semi-annual periods. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new
Extension Period, subject to the foregoing requirements. See
"Description of the Junior Subordinated Debt Securities--Interest
Income and Option to Extend Interest Payment Period."
Should an Extension Period occur, Preferred Security holders will
continue to recognize interest income for United States federal income
tax purposes. As a result, such holders will be required to include
such interest in gross income for United States federal income tax
purposes in advance of the receipt of cash, and such holders will not
receive the cash from TRV Capital related to such income if such
holders dispose of Preferred Securities prior to the record date for
payment of distributions. See "United States Federal Income Taxation--
Interest Income and Original Issue Discount."
Mandatory Redemption......... Upon the repayment of the Junior Subordinated Debt Securities, whether
at maturity or upon earlier redemption as provided in the Indenture,
the proceeds from such repayment will be applied by the Institutional
Trustee to redeem a like amount of Trust Securities, upon the terms
and conditions described herein. See "Description of the Preferred
Securities--Mandatory Redemption of Trust Securities."
Optional Redemption.......... The Company has the right to redeem the Junior Subordinated Debt
Securities (a) on or after December 1, 2006, in whole at any time or
in part from time to time, subject to the conditions described in
"Description of the Junior Subordinated Debt Securities--Optional
Redemption" or (b) at any time, in whole or in part, in certain
circumstances upon the occurrence of a Tax Event (as defined herein)
as described under "Description of the Preferred Securities--Special
Event Redemption or Distribution," in each case at the applicable
redemption price. See "Description of the Junior Subordinated Debt
Securities--Optional Redemption." If the Company redeems any Junior
Subordinated Debt Securities, the proceeds from such redemption will
be applied by the Institutional Trustee to redeem a like amount of
Trust Securities.
Special Event Distribution... Subject to certain conditions and except in limited circumstances, if
at any time a Special Event (as defined herein) shall occur and be
continuing, TRV Capital shall be dissolved with the result that Junior
Subordinated Debt Securities with an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and with accrued and unpaid
interest thereon equal to accrued and unpaid distributions on, the
Trust Securities outstanding at such time, would be distributed to the
holders of the Trust Securities in liquidation of such holders'
interests in TRV Capital on a pro rata basis within 90 days following
the occurrence of such Special Event. See "Description of the
Preferred Securities--Special Event Redemption or Distribution."
Voting Rights................ Generally, the holders of the Preferred Securities will not have any
voting rights. See "Description of the Preferred Securities--Voting
Rights."
Subject to certain conditions, including that the Institutional
Trustee obtain the opinion of counsel described under "Description of
the Preferred Securities--Voting Rights" prior to taking certain
actions, the holders of a majority in aggregate liquidation amount of
the Preferred Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
Institutional Trustee, or direct the exercise of any trust or power
conferred upon the Institutional Trustee under the Declaration
including the right to direct the Institutional Trustee, as holder of
the Junior Subordinated Debt Securities, to (i) exercise the remedies
available under the Indenture with respect to the Junior Subordinated
Debt Securities, (ii) waive any past Indenture Event of Default that
is waivable under the Indenture (as
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
defined herein), (iii) exercise any right to rescind or annul a
declaration that the principal of all the Junior Subordinated Debt
Securities shall be due and payable, or (iv) consent to any amendment,
modification or termination of the Indenture or the Junior
Subordinated Debt Securities where such consent shall be required;
provided, however, that where a consent or action under the Indenture
would require the consent or act of a Super Majority (as defined
herein) of holders of the Junior Subordinated Debt Securities affected
thereby, only the holders of at least such Super Majority in aggregate
liquidation amount of the Preferred Securities may direct the
Institutional Trustee to give such consent or take such action. See
"Description of the Preferred Securities--Voting Rights."
Use of Proceeds.............. The proceeds from the sale of the Preferred Securities offered hereby
will be used by TRV Capital to purchase the Junior Subordinated Debt
Securities issued by the Company. The Company expects to use such
proceeds for general corporate purposes. See "Use of Proceeds."
Listing...................... The Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance. Trading
of the Preferred Securities on the New York Stock Exchange is expected
to commence within a 30-day period after the initial delivery of the
Preferred Securities.
</TABLE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus Supplement and the accompanying
Prospectus, the matters set forth under the caption "Risk Factors" in this
Prospectus Supplement before purchasing the Preferred Securities offered hereby.
S-7
<PAGE>
RISK FACTORS
Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus Supplement and the accompanying
Prospectus, the following risk factors before purchasing the Preferred
Securities offered hereby.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE JUNIOR SUBORDINATED DEBT SECURITIES
AND THE GUARANTEE
The obligations of the Company under the Junior Subordinated Debt Securities
are subordinate and junior in right of payment to all present and future Senior
Indebtedness of the Company. No payment of principal (including redemption
payments, if any), premium, if any, or interest on the Junior Subordinated Debt
Securities may be made if (i) any Senior Indebtedness of the Company is not paid
when due and any applicable grace period with respect to such default has ended
with such default not having been cured or waived or ceasing to exist, or (ii)
the maturity of any Senior Indebtedness of the Company has been accelerated
because of a default. The Company's obligations under the Guarantee rank (i)
subordinate and junior in right of payment to all other liabilities of the
Company, (ii) pari passu with the most senior preferred or preference stock now
or hereafter issued by the Company and with any guarantee now or hereafter
entered into by the Company in respect of any preferred or preference stock of
any subsidiary of the Company and (iii) senior to the Company's Common Stock.
There are no terms in the Preferred Securities, the Junior Subordinated Debt
Securities or the Guarantee that limit the Company's ability to incur additional
indebtedness, including indebtedness that ranks senior to the Junior
Subordinated Debt Securities and the Guarantee. See "Description of
Guarantee--Status of the Guarantee" and "Description of the Junior Subordinated
Debt Securities--Subordination."
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. The Chase Manhattan Bank will act as indenture trustee under the Guarantee
for the purposes of compliance with the provisions of the Trust Indenture Act.
The Guarantee Trustee will hold the Guarantee for the benefit of the holders of
the Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i) any accrued and unpaid distributions that are required to be paid
on the Preferred Securities, to the extent TRV Capital has funds available
therefor, (ii) the applicable Redemption Price with respect to Preferred
Securities called for redemption by TRV Capital, to the extent TRV Capital has
funds available therefor, and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of TRV Capital (other than in connection with the
distribution of Junior Subordinated Debt Securities to the holders of Preferred
Securities or a redemption of all the Preferred Securities), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred Securities to the date of the payment and (b) the amount of
assets of TRV Capital remaining available for distribution to holders of the
Preferred Securities in liquidation of TRV Capital. The holders of a majority in
liquidation amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee or to direct the exercise of any trust or power conferred
upon the Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails
to enforce the Guarantee, any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a legal
proceeding against TRV Capital, the Guarantee Trustee or any other person or
entity. A holder of Preferred Securities may also directly institute a legal
proceeding against the Company to enforce such holder's right to receive payment
under the Guarantee without first (i) directing the Guarantee Trustee to enforce
the terms of the Guarantee or (ii) instituting a legal proceeding against TRV
Capital or any other person or entity. If the Company were to default on its
obligation to pay amounts payable on the Junior Subordinated Debt Securities,
TRV Capital would lack available funds for the payment of distributions or
amounts payable on redemption of the Preferred Securities or otherwise, and, in
such event, holders of the Preferred Securities would not be able to rely upon
the Guarantee for payment of such amounts. Instead, a holder of the Preferred
Securities would rely on the enforcement (1) by the Institutional Trustee of its
rights as registered holder of the Junior Subordinated Debt Securities against
the Company pursuant to the terms of the Junior Subordinated Debt Securities or
(2) by such holder of Preferred Securities of its right against the Company to
enforce payments on the Junior Subordinated Debt Securities. See
S-8
<PAGE>
"Description of Guarantees" and "Description of Junior Subordinated Debt
Securities" in the accompanying Prospectus. The Declaration provides that each
holder of Preferred Securities, by acceptance thereof, agrees to the provisions
of the Guarantee, including the subordination provisions thereof, and the
Indenture (as defined herein).
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Institutional Trustee of its rights as a holder of the Junior
Subordinated Debt Securities against the Company. In addition, the holders of a
majority in liquidation amount of the Preferred Securities will have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Institutional Trustee or to direct the exercise of any
trust or power conferred upon the Institutional Trustee under the Declaration,
including the right to direct the Institutional Trustee to exercise the remedies
available to it as a holder of the Junior Subordinated Debt Securities. If the
Institutional Trustee fails to enforce its rights under the Junior Subordinated
Debt Securities, any holder of Preferred Securities may directly institute a
legal proceeding against the Company to enforce the Institutional Trustee's
rights under the Junior Subordinated Debt Securities without first instituting
any legal proceeding against the Institutional Trustee or any other person or
entity. If a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay interest or
principal on the Junior Subordinated Debt Securities on the date such interest
or principal is otherwise payable (or in the case of redemption, on the
redemption date), then a holder of Preferred Securities may also directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder (a "Direct Action") on or after the respective due
date specified in the Junior Subordinated Debt Securities without first (i)
directing the Institutional Trustee to enforce the terms of the Junior
Subordinated Debt Securities or (ii) instituting a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debt Securities. In connection with such Direct Action, the Company
will be subrogated to the rights of such holder of Preferred Securities under
the Declaration to the extent of any payment made by the Company to such holder
of Preferred Securities in such Direct Action. Consequently, the Company will be
entitled to payment of amounts that a holder of Preferred Securities receives in
respect of an unpaid distribution that resulted in the bringing of a Direct
Action to the extent that such holder receives or has already received full
payment with respect to such unpaid distribution from TRV Capital. The holders
of Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debt Securities.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debt Securities by extending the interest payment
period from time to time on the Junior Subordinated Debt Securities for an
Extension Period not exceeding 10 consecutive semi-annual interest periods
during which no interest shall be due and payable, provided, that no Extension
Period may extend beyond the maturity of the Junior Subordinated Debt
Securities. As a consequence of such an extension, semi-annual distributions on
the Preferred Securities would be deferred (but despite such deferral would
continue to accrue with interest thereon compounded semi-annually) by TRV
Capital during any such extended interest payment period. In the event that the
Company exercises this right to defer interest payments, then (a) the Company
shall not declare or pay any dividend on, make any distributions with respect
to, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock or make any guarantee payment with respect thereto
(other than (i) repurchases, redemptions or other acquisitions of shares of
capital stock of the Company in connection with any employment contract, benefit
plan or other similar arrangement with or for the benefit of employees,
officers, directors or consultants, (ii) as a result of an exchange or
conversion of any class or series of the Company's capital stock for any other
class or series of the Company's capital stock, or (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged), and (b) the Company shall not make any payment of
interest on or principal of (or premium, if any, on), or repay, repurchase or
redeem, any debt securities issued by the Company which rank pari passu with or
junior to such Junior Subordinated Debt Securities. The foregoing, however, will
not apply to any stock dividends paid by the Company where the dividend stock is
the same stock as that on which the dividend is being paid. Prior to the
termination of any Extension Period, the Company may further extend such
Extension Period; provided, that such Extension Period, together with all such
previous and further extensions
S-9
<PAGE>
thereof, may not exceed 10 consecutive semi-annual interest periods; provided,
further, that no Extension Period may extend beyond the maturity of the Junior
Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new Extension
Period, subject to the above requirements. Consequently, there could be up to 40
Extension Periods of varying lengths throughout the term of the Junior
Subordinated Debt Securities. See "Description of the Preferred Securities--
Distributions" and "Description of the Junior Subordinated Debt
Securities--Option to Extend Interest Payment Period."
The junior subordinated debt securities issued from time to time in
connection with the issuance of trust preferred securities by a Trust will
contain the same restrictive covenants described in the preceding paragraph. The
effect of such restrictive covenants will be to limit the rights of holders of
Preferred Securities to receive payments with respect thereto if there has been
a deferral of interest under any such junior subordinated debt securities.
Should the Company exercise its right to defer any payment of interest on
the Junior Subordinated Debt Securities by extending the interest payment
period, under recently issued Treasury regulations, each holder of Preferred
Securities will accrue income in the form of OID in respect of the deferred
interest allocable to its Preferred Securities for United States federal income
tax purposes, which will be allocated but not distributed, to holders of record
of Preferred Securities. As a result, during any Extension Period, each such
holder of Preferred Securities will recognize income for United States federal
income tax purposes in advance of the receipt of cash and will not receive the
cash from TRV Capital related to such income if such holder disposes of its
Preferred Securities prior to the record date for the date on which
distributions of such amounts are made. The Company has no current intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Junior Subordinated Debt Securities. However, should the
Company exercise such right in the future, the market price of the Preferred
Securities is likely to be affected. A holder that disposes of its Preferred
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Preferred
Securities. In addition, as a result of the existence of the Company's right to
defer interest payments, the market price of the Preferred Securities (which
represent an undivided beneficial interest in the Junior Subordinated Debt
Securities) may be more volatile than other similar securities where the issuer
does not have such rights to defer interest payments. See "United States Federal
Income Taxation--Interest Income and Original Issue Discount" and "--Sales of
Preferred Securities."
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event (as defined herein), TRV Capital will
be dissolved, except in the limited circumstance described below, with the
result that the Junior Subordinated Debt Securities will be distributed to the
holders of the Trust Securities in connection with the liquidation of TRV
Capital. In certain circumstances in connection with a Tax Event, the Company
has the right to redeem the Junior Subordinated Debt Securities, in whole or in
part, in lieu of a distribution of the Junior Subordinated Debt Securities to
holders of Trust Securities by TRV Capital, in which event TRV Capital will
redeem the Trust Securities on a pro rata basis to the same extent as the Junior
Subordinated Debt Securities are redeemed by the Company. See "Description of
the Preferred Securities--Special Event Redemption or Distribution."
Under current United States federal income tax law, a distribution of Junior
Subordinated Debt Securities upon the dissolution of TRV Capital would not be a
taxable event to holders of the Preferred Securities. Upon the occurrence of a
Tax Event, however, a dissolution of TRV Capital in which holders of the
Preferred Securities receive cash would be a taxable event to such holders. See
"United States Federal Income Taxation--Receipt of Junior Subordinated Debt
Securities or Cash Upon Liquidation of TRV Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a dissolution or liquidation of TRV Capital
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Junior Subordinated Debt Securities that a holder of Preferred Securities
may receive on dissolution and liquidation of TRV Capital, may trade at a
discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Junior Subordinated Debt Securities upon the occurrence of a Special Event,
prospective purchasers of Preferred Securities are also making an investment
decision with regard to the Junior Subordinated
S-10
<PAGE>
Debt Securities and should carefully review all the information regarding the
Junior Subordinated Debt Securities contained herein and in the accompanying
Prospectus. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Junior Subordinated Debt
Securities--General."
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny corporate
issuers a deduction for interest in respect of certain debt obligations, such as
the Junior Subordinated Debt Securities, issued on or after December 7, 1995. On
March 29, 1996, Senate Finance Committee Chairman William V. Roth, Jr. and House
Ways and Means Committee Chairman Bill Archer issued a joint statement (the
"Joint Statement") indicating their intent that the Proposed Legislation, if
adopted by either of the tax-writing committees of Congress, would have an
effective date that is no earlier than the date of "appropriate Congressional
action." Based upon the Joint Statement, it is expected that if the Proposed
Legislation were to be enacted, such legislation would not apply to the Junior
Subordinated Debt Securities. There can be no assurance, however, that the
effective date guidance contained in the Joint Statement will be incorporated
into the Proposed Legislation, if enacted, or that other legislation enacted
after the date hereof will not otherwise adversely affect the ability of the
Company to deduct the interest payable on the Junior Subordinated Debt
Securities. Accordingly, there can be no assurance that a Tax Event will not
occur. The occurrence of a Tax Event may, among other things, result in a
dissolution of TRV Capital in which holders of the Preferred Securities may
receive cash, which would be a taxable event to such holders. See "--Special
Event Redemption or Distribution" and "Description of the Preferred
Securities--Special Event Redemption or Distribution."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, TRV Trustees, which voting rights are vested exclusively in the
holder of the Common Securities. See "Description of the Preferred
Securities--Voting Rights."
TRADING PRICE
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debt Securities, the Preferred Securities may trade at a
price that does not fully reflect the value of accrued but unpaid interest with
respect to the underlying Junior Subordinated Debt Securities. In the event of
such a deferral, a holder of Preferred Securities who disposes of its Preferred
Securities between record dates for payments of distributions thereon will be
required to include in income as ordinary income accrued but unpaid interest on
the Junior Subordinated Debt Securities to the date of disposition, and to add
such amount to its adjusted tax basis in its pro rata share of the underlying
Junior Subordinated Debt Securities deemed disposed of. To the extent the
selling price is less than such holder's adjusted tax basis (which will include,
in the form of OID, all accrued but unpaid interest), such 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.
See "United States Federal Income Taxation--Interest Income and Original Issue
Discount" and "--Sales of Preferred Securities."
S-11
<PAGE>
USE OF PROCEEDS
All of the net proceeds from the sale of the Preferred Securities offered
hereby will be invested by TRV Capital in Junior Subordinated Debt Securities of
the Company. The Company will use the proceeds from the sale of the Junior
Subordinated Debt Securities to TRV Capital for general corporate purposes,
which may include capital contributions to subsidiaries of the Company, the
redemption of shares of preferred stock of the Company, and/or the reduction or
refinancing of borrowings of the Company or its subsidiaries. See
"Capitalization."
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------
1996 1995 1994 1993 1992(1) 1991
----------------- ----- ---- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed charges
and preferred stock dividends 2.23 2.09 2.12 2.64 2.57 1.85
</TABLE>
- ------------
(1) Included in earnings from continuing operations before income taxes (used in
this computation) is a net gain of $216.8 million from the sale of the
Company's ownership interests in Margaretten & Company, Inc., Fingerhut
Companies, Inc. and other affiliated companies. Without giving effect to
this net gain, the ratio for 1992 would have been 2.33.
The ratio of earnings to combined fixed charges and preferred stock
dividends has been computed by dividing earnings from continuing operations
before income taxes and fixed charges by the combined fixed charges and
preferred stock dividends. For purposes of these ratios, fixed charges consist
of interest expense and that portion of rentals deemed representative of the
appropriate interest factor.
ACCOUNTING TREATMENT
The financial statements of TRV Capital will be reflected in the Company's
consolidated financial statements with the Preferred Securities shown as
"TRV-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
holding solely Junior Subordinated Debt Securities."
S-12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June 30,
1996, and as adjusted to give effect to (i) the issuance and sale of additional
long-term debt of certain subsidiaries of the Company after September 30, 1996
through the date hereof, (ii) the issuance of preferred securities of TRV
Capital I after September 30, 1996 through the date hereof, (iii) the issuance
of preferred securities of TRV Capital III simultaneously with the issuance of
the Preferred Securities, (iv) the issuance of the Preferred Securities, (v) the
application of the proceeds from the issuance of such long-term debt and the
preferred securities referred to in clause (ii) above to the repayment of
investment banking and brokerage borrowings and short-term borrowings, as if
such transactions had occurred on September 30, 1996 and (vi) the application of
the proceeds from the issuance of the preferred securities referred to in clause
(iii) above and the Preferred Securities for general working capital purposes.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
------------------------
OUTSTANDING AS ADJUSTED
----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Debt:
Investment banking and brokerage borrowings.................................... $ 2,781 $ 2,381
Short-term borrowings.......................................................... 2,425 1,075
Long-term debt................................................................. 10,276 11,626
----------- -----------
Total debt................................................................. $15,482 $15,082
TRV-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
holding solely Junior Subordinated Debt Securities (1)............................. 1,000
TAP-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trusts
holding solely Junior Subordinated Debt Securities (2)............................. 900 900
Stockholders' equity:
Preferred stock at aggregate liquidation value................................. 675 675
Common stock ($.01 par value; authorized shares: 1,500,000,000; issued shares:
743,098,811 outstanding and as adjusted)..................................... 7 7
Additional paid-in capital..................................................... 7,131 7,131
Retained earnings.............................................................. 6,900 6,900
Treasury stock at cost (103,534,657 shares outstanding and as adjusted)........ (2,181) (2,181)
Unrealized gain (loss) on investment securities................................ 136 136
Other, principally unearned compensation and minimum pension liability......... (372) (372)
----------- -----------
Total stockholders' equity............................................... 12,296 12,296
----------- -----------
Total capitalization..................................................... $28,678 $29,278
----------- -----------
----------- -----------
</TABLE>
- ------------
(1) The sole asset of each trust will be junior subordinated deferrable interest
debentures of the Company. The sole asset of TRV Capital I is $412,372,000
aggregate principal amount of 8% junior subordinated deferrable interest
debentures of the Company due September 30, 2036. The sole asset of TRV
Capital will be $412,372,000 aggregate principal amount of 7 3/4% junior
subordinated deferrable interest debentures of the Company due December 1,
2036. The sole asset of TRV Capital III will be $206,186,000 aggregate
principal amount of 7 5/8% junior subordinated deferrable interest
debentures of the Company due December 1, 2036.
(2) The sole asset of TAP Capital I is $824,743,000 aggregate principal amount
of 8.08% junior subordinated deferrable interest debentures of TAP due April
30, 2036. The sole asset of TAP Capital II is $103,093,000 aggregate
principal amount of 8% junior subordinated deferrable interest debentures of
TAP due May 15, 2036.
S-13
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration has been qualified as an indenture under the Trust
Indenture Act. The Institutional Trustee, The Chase Manhattan Bank, will act as
indenture trustee under the Declaration for purposes of compliance with the
provisions of the Trust Indenture Act. The terms of the Preferred Securities
will include those stated in the Declaration and those made part of the
Declaration by the Trust Indenture Act. This description supplements the
description of the general terms and provisions of the Preferred Securities set
forth in the accompanying Prospectus under the caption "Description of Preferred
Securities." The following summary of the material terms and provisions of the
Preferred Securities does not purport to be complete and is subject to, and
qualified in its entirety by reference to, the Declaration (a copy of which is
filed as an exhibit to the Registration Statement of which this Prospectus
Supplement is a part), the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of TRV
Capital the Trust Securities, which represent undivided beneficial interests in
the assets of TRV Capital. All of the Common Securities will be owned, directly
or indirectly, by the Company. The Common Securities rank pari passu, and
payments will be made thereon on a pro rata basis, with the Preferred
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Preferred Securities. The Declaration does not permit the issuance by TRV
Capital of any securities other than the Trust Securities or the incurrence of
any indebtedness by TRV Capital. Pursuant to the Declaration, the Institutional
Trustee will hold title to the Junior Subordinated Debt Securities purchased by
TRV Capital for the benefit of the holders of the Trust Securities. The payment
of distributions out of money held by TRV Capital, and payments upon redemption
of the Preferred Securities or liquidation of TRV Capital out of money held by
TRV Capital, are guaranteed by the Company to the extent described under
"Description of Guarantee." The Guarantee will be held by The Chase Manhattan
Bank, the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Guarantee does not cover payment of distributions when TRV
Capital does not have sufficient available funds to pay such distributions. In
such event, the remedy of a holder of Preferred Securities is to (i) vote to
direct the Institutional Trustee to enforce the Institutional Trustee's rights
under the Junior Subordinated Debt Securities or (ii) if the failure of TRV
Capital to pay distributions is attributable to the failure of the Company to
pay interest or principal on the Junior Subordinated Debt Securities, institute
a proceeding directly against the Company for enforcement of payment to such
holder of the principal or interest on the Junior Subordinated Debt Securities
having a principal amount equal to the aggregate liquidation amount of the
Preferred Securities of such holder on or after the respective due date
specified in the Junior Subordinated Debt Securities. See "--Voting Rights."
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of 7 3/4% of the stated liquidation amount of $1,000 per Preferred Security.
Distributions in arrears beyond the first date such distributions are payable
(or would be payable, if not for any Extension Period or default by the Company
on the Junior Subordinated Debt Securities) will bear interest thereon at the
rate per annum of 7 3/4% thereof compounded semi-annually. The term
"distribution" as used herein includes any such interest payable unless
otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will accrue
from and including December 1, 1996, and will be payable semi-annually in
arrears on June 1 and December 1 of each year, commencing June 1, 1997. When, as
and if available for payment, distributions will be made by the Institutional
Trustee, except as otherwise described below.
The distribution rate and the distribution payment dates and other payment
dates for the Preferred Securities will correspond to the interest rate and
interest payment dates and other payment dates on the Junior Subordinated Debt
Securities.
The Company has the right under the Indenture to defer payments of interest
on the Junior Subordinated Debt Securities by extending the interest payment
period from time to time on the Junior Subordinated Debt Securities for an
Extension Period not exceeding 10 consecutive semi-annual interest periods
during which no
S-14
<PAGE>
interest shall be due and payable, provided, that no Extension Period may extend
beyond the maturity of the Junior Subordinated Debt Securities. As a consequence
of the Company's extension of the interest payment period, semi-annual
distributions on the Preferred Securities would be deferred (though such
distributions would continue to accrue with interest thereon compounded
semi-annually, since interest would continue to accrue on the Junior
Subordinated Debt Securities) during any such extended interest payment period.
In the event that the Company exercises its right to extend the interest payment
period, then (a) the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or make any
guarantee payment with respect thereto (other than (i) repurchases, redemptions
or other acquisitions of shares of capital stock of the Company in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of employees, officers, directors or consultants, (ii) as a
result of an exchange or conversion of any class or series of the Company's
capital stock for any other class or series of the Company's capital stock, or
(iii) the purchase of fractional interests in shares of the Company's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged), and (b) the Company shall not make
any payment of interest on or principal of (or premium, if any, on), or repay,
repurchase or redeem, any debt securities issued by the Company which rank pari
passu with or junior to the Junior Subordinated Debt Securities. The foregoing,
however, will not apply to any stock dividends paid by the Company where the
dividend stock is the same stock as that on which the dividend is being paid.
Prior to the termination of any Extension Period, the Company may further extend
such Extension Period; provided, that such Extension Period, together with all
such previous and further extensions thereof, may not exceed 10 consecutive
semi-annual interest periods; provided further, that no Extension Period may
extend beyond the maturity of the Junior Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the above requirements.
Consequently, there could be up to 40 Extension Periods of varying lengths
throughout the term of the Junior Subordinated Debt Securities. See "Description
of the Junior Subordinated Debt Securities--Interest" and "--Option to Extend
Interest Payment Period." The Regular Trustees shall give the holders of the
Preferred Securities notice of any Extension Period upon their receipt of notice
thereof from the Company. See "Description of the Junior Subordinated Debt
Securities--Option To Extend Interest Payment Period." If distributions are
deferred, the deferred distributions and accrued interest thereon shall be paid
to holders of record of the Preferred Securities as they appear on the books and
records of TRV Capital on the record date next following the termination of such
deferral period.
Distributions on the Preferred Securities will be made on the dates payable
to the extent that TRV Capital has funds available for the payment of such
distributions in the Property Account. TRV Capital's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received from the Company on the Junior Subordinated Debt Securities.
See "Description of the Junior Subordinated Debt Securities." The payment of
distributions out of monies held by TRV Capital is guaranteed by the Company to
the extent set forth under "Description of Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of TRV Capital at the close of
business on the relevant record dates, which, as long as the Preferred
Securities remain in book-entry only form, will be one Business Day prior to the
relevant payment dates. Such distributions will be paid through the
Institutional Trustee who will hold amounts received in respect of the Junior
Subordinated Debt Securities in the Property Account for the benefit of the
holders of the Trust Securities. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment will be made as
described under "--Book-Entry Only Issuance--The Depository Trust Company"
below. In the event that the Preferred Securities do not continue to remain in
book-entry only form, the relevant record dates shall conform to the rules of
any securities exchange on which the Preferred Securities are listed and, if
none, the Regular Trustees shall have the right to select relevant record dates,
which shall be more than 14 days but less than 60 days prior to the relevant
payment dates. In the event that any date on which distributions are to be made
on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day which
is a Business Day (and without any interest or other payment in respect of any
such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such record date.
A "Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York City (in the State of New York) are
permitted or required by any applicable law to close.
S-15
<PAGE>
MANDATORY REDEMPTION OF TRUST SECURITIES
The Preferred Securities have no stated maturity date but will be redeemed
upon the maturity of the Junior Subordinated Debt Securities or to the extent
the Junior Subordinated Debt Securities are redeemed. The Junior Subordinated
Debt Securities will mature on December 1, 2036, and may be redeemed, (i) in
whole or in part, at any time on or after December 1, 2006, or (ii) at any time,
in whole or in part, in certain circumstances upon the occurrence of a Tax Event
(as described under "Special Event Redemption or Distribution" below). See
"Description of the Junior Subordinated Debt Securities--Optional Redemption."
Upon the maturity of the Junior Subordinated Debt Securities, the proceeds of
the repayment thereof shall simultaneously be applied to redeem all outstanding
Trust Securities at the Redemption Price described below. Upon the redemption of
the Junior Subordinated Debt Securities, whether in whole or in part (either at
the option of the Company or pursuant to a Tax Event), the proceeds from such
redemption shall simultaneously be applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Junior Subordinated Debt Securities so redeemed at the applicable Redemption
Price; provided, that holders of Trust Securities shall be given not less than
30 nor more than 60 days' notice of such redemption. In the event that fewer
than all of the outstanding Preferred Securities are to be redeemed, the
Preferred Securities will be redeemed pro rata as described under "--Book-Entry
Only Issuance--The Depository Trust Company" below.
Redemption Price shall mean, (a) in the case of a redemption under (i)
above, the following prices, expressed in percentages of the liquidation amount
of each Preferred Security, together with accumulated distributions to the date
fixed for redemption, if redeemed during the 12-month period beginning December
1:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- -------------------------------------------------------------------------- ----------
<S> <C>
2006...................................................................... 103.3150%
2007...................................................................... 102.9835
2008...................................................................... 102.6520
2009...................................................................... 102.3205
2010...................................................................... 101.9890
2011...................................................................... 101.6575
2012...................................................................... 101.3260
2013...................................................................... 100.9945
2014...................................................................... 100.6630
2015...................................................................... 100.3315
</TABLE>
and 100% on or after December 1, 2016 and (b) in the case of a redemption under
(ii) above, 100% of the liquidation amount, together with accumulated
distributions to the date fixed for redemption.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have received an opinion
of a nationally recognized independent tax counsel experienced in such matters
(a "Dissolution Tax Opinion") to the effect that, as a result of (a) any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or (b) any amendment to or
change in an interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory authority (including
the enactment of any legislation and the publication of any judicial decision or
regulatory determination on or after the date of this Prospectus Supplement), in
either case after the date of this Prospectus Supplement, there is more than an
insubstantial risk that (i) TRV Capital would be subject to United States
federal income tax with respect to income accrued or received on the Junior
Subordinated Debt Securities, (ii) interest payable to TRV Capital on the Junior
Subordinated Debt Securities would not be deductible, in whole or in part, by
the Company for United States federal income tax purposes or (iii) TRV Capital
would be subject to more than a de minimis amount of other taxes, duties or
other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel experienced
in practicing under the 1940 Act (as defined herein) to the effect that, as a
result of the occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act Law"),
there is more than an insubstantial risk that TRV Capital is or will be
considered an "investment
S-16
<PAGE>
company" which is required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act"), which Change in 1940 Act Law becomes
effective on or after the date of this Prospectus Supplement.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, TRV Capital
shall, except in the limited circumstances described below, be dissolved with
the result that Junior Subordinated Debt Securities with an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and with accrued and unpaid interest
equal to accrued and unpaid distributions on, the Trust Securities outstanding
at such time would be distributed to the holders of the Trust Securities in
liquidation of such holders' interests in TRV Capital on a pro rata basis within
90 days following the occurrence of such Special Event; provided, however, that
in the case of the occurrence of a Tax Event, such dissolution and distribution
shall be conditioned on the Regular Trustees' receipt of an opinion of
nationally recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on, among other things, published
revenue rulings of the Internal Revenue Service, to the effect that the holders
of the Trust Securities will not recognize any gain or loss for United States
federal income tax purposes as a result of such dissolution and distribution of
Junior Subordinated Debt Securities and, provided further, that, if at the time
there is available to the Company or TRV Capital the opportunity to eliminate,
within such 90 day period, the Special Event by taking some ministerial action,
such as filing a form or making an election, or pursuing some other similar
reasonable measure, that will have no adverse effect on TRV Capital, the Company
or the holders of the Trust Securities, the Company or TRV Capital will pursue
such measure in lieu of dissolution. Furthermore, if in the case of the
occurrence of a Tax Event, (i) the Company has received an opinion (a
"Redemption Tax Opinion") of nationally recognized independent tax counsel
experienced in such matters that, as a result of such Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Junior Subordinated Debt Securities for United States
federal income tax purposes, even after the Junior Subordinated Debt Securities
were distributed to the holders of Trust Securities in liquidation of such
holders' interests in TRV Capital as described above, or (ii) the Regular
Trustees shall have been informed by such tax counsel that it cannot deliver a
No Recognition Opinion to the Regular Trustees, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the Junior
Subordinated Debt Securities, in whole or in part, for cash within 90 days
following the occurrence of such Tax Event, and, following such redemption,
Trust Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the Junior Subordinated Debt Securities so redeemed shall be
redeemed by TRV Capital at the applicable Redemption Price on a pro rata basis;
provided, however, that if at the time there is available to the Company or TRV
Capital the opportunity to eliminate, within such 90-day period, the Tax Event
by taking some ministerial action, such as filing a form or making an election
or pursuing some other similar reasonable measure that will have no adverse
effect on TRV Capital, the Company or the holders of the Trust Securities, the
Company or TRV Capital will pursue such measure in lieu of redemption.
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to cause the
Junior Subordinated Debt Securities to be listed on the New York Stock Exchange
or on such other exchange as the Preferred Securities are then listed.
After the date for any distribution of Junior Subordinated Debt Securities
upon dissolution of TRV Capital, (i) the Preferred Securities will no longer be
deemed to be outstanding, (ii) the securities depositary or its nominee, as the
record holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Junior Subordinated Debt Securities
to be delivered upon such distribution, and (iii) any certificates representing
Preferred Securities not held by the Depositary or its nominee will be deemed to
represent Junior Subordinated Debt Securities having an aggregate principal
amount equal to the aggregate stated liquidation amount of, with an interest
rate identical to the distribution rate of, and with accrued and unpaid interest
equal to accrued and unpaid distributions on, such Preferred Securities until
such certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for either the Preferred
Securities or the Junior Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a dissolution and liquidation of TRV
Capital were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer made hereby or in the secondary
market, or the Junior Subordinated Debt Securities that an investor may receive
if a dissolution and liquidation of TRV Capital were to occur, may trade at a
discount to the price that the investor paid to purchase the Preferred
Securities offered hereby.
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REDEMPTION PROCEDURES
TRV Capital may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Preferred Securities for all semi-annual distribution periods terminating on or
prior to the date of redemption.
If TRV Capital gives a notice of redemption in respect of the Preferred
Securities (which notice will be irrevocable), then, by 12:00 noon, New York
City time, on the redemption date, and if the Company has paid to the
Institutional Trustee a sufficient amount of cash in connection with the related
redemption or maturity of the Junior Subordinated Debt Securities, the
Institutional Trustee will irrevocably deposit with the Depositary (as defined
in the accompanying Prospectus) funds sufficient to pay the applicable
Redemption Price and will give the Depositary irrevocable instructions and
authority to pay the applicable Redemption Price to the holders of the Preferred
Securities. See "--Book-Entry Only Issuance--The Depository Trust Company." If
notice of redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of Preferred
Securities so called for redemption will cease, except the right of the holders
of such Preferred Securities to receive the applicable Redemption Price but
without interest on such Redemption Price. In the event that any date fixed for
redemption of Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (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 Redemption Price in respect of Preferred Securities is
improperly withheld or refused and not paid either by TRV Capital, or by the
Company pursuant to the Guarantee, distributions on such Preferred Securities
will continue to accrue at the then applicable rate from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed in accordance with the
Depositary's standard procedures. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries,
including, without limitation, Smith Barney, may at any time, and from time to
time, purchase outstanding Preferred Securities by tender, in the open market or
by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of TRV Capital (each a "Liquidation"), the holders of
the Preferred Securities will be entitled to receive out of the assets of TRV
Capital, after satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of $1,000 per
Preferred Security plus accrued and unpaid distributions thereon to the date of
payment (the "Liquidation Distribution"), unless, in connection with such
Liquidation, Junior Subordinated Debt Securities in an aggregate stated
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and with accrued and unpaid
interest equal to accrued and unpaid distributions on, the Preferred Securities
outstanding at such time have been distributed on a pro rata basis to the
holders of such Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because TRV Capital has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by TRV
Capital on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive distributions upon
any such Liquidation pro rata with the holders of the Preferred Securities,
except that if a Declaration Event of Default has occurred and is continuing the
Preferred Securities shall have a preference over the Common Securities with
regard to such distributions.
Pursuant to the Declaration, TRV Capital shall terminate (i) on December 1,
2051, the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the holder of the
Common Securities or the Company, the filing of a certificate of cancellation
with respect to TRV Capital, or the revocation of the charter of the holder of
the Common Securities or the Company and the expiration of 90 days after the
date of revocation without a reinstatement thereof, (iv) upon the distribution
of Junior Subordinated Debt Securities upon the occurrence of a Special Event,
(v) upon the entry of a decree of a judicial dissolution of the holder of the
Common Securities, the Company or TRV Capital, or (vi) upon the redemption of
all the Trust Securities.
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Under the terms of the Indenture, the Company has covenanted that, for so
long as the Preferred Securities remain outstanding, it will not voluntarily
dissolve, wind-up or terminate TRV Capital, except in connection with a
distribution of Junior Subordinated Debt Securities upon a Special Event or in
connection with certain mergers, consolidations or amalgamations permitted by
the Declaration.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the Trust
Securities (a "Declaration Event of Default"); provided, that pursuant to the
Declaration the holder of the Common Securities will be deemed to have waived
any Declaration Event of Default with respect to the Common Securities until all
Declaration Events of Default with respect to the Preferred Securities have been
cured, waived or otherwise eliminated. Until such Declaration Events of Default
with respect to the Preferred Securities have been so cured, waived, or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the holders of the Preferred Securities and only the holders
of the Preferred Securities will have the right to direct the Institutional
Trustee with respect to certain matters under the Declaration, and therefore the
Indenture. In the event that any Declaration Event of Default with respect to
the Preferred Securities is waived by the holders of the Preferred Securities as
provided in the Declaration, the holders of Common Securities pursuant to the
Declaration have agreed that such waiver also constitutes a waiver of such
Declaration Event of Default with respect to the Common Securities for all
purposes under the Declaration without any further act, vote or consent of the
holders of Common Securities. See "--Voting Rights."
If the Institutional Trustee fails to enforce its rights under the Junior
Subordinated Debt Securities, any holder of Preferred Securities may directly
institute a legal proceeding against the Company to enforce the Institutional
Trustee's rights under the Junior Subordinated Debt Securities without first
instituting any legal proceeding against the Institutional Trustee or any other
person or entity. If a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of the Company to pay
interest or principal on the Junior Subordinated Debt Securities on the date
such interest or principal is otherwise payable (or in the case of redemption,
the redemption date), then a holder of Preferred Securities may also directly
institute a proceeding for enforcement of payment to such holder of the
principal of or interest on the Junior Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date specified in the
Junior Subordinated Debt Securities without first (i) directing the
Institutional Trustee to enforce the terms of the Junior Subordinated Debt
Securities or (ii) instituting a legal proceeding against the Company to enforce
the Institutional Trustee's rights under the Junior Subordinated Debt
Securities. In connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities under the
Declaration to the extent of any payment made by the Company to such holder of
Preferred Securities in such Direct Action. Consequently, the Company will be
entitled to payment of amounts that a holder of Preferred Securities receives in
respect of an unpaid distribution that resulted in the bringing of a Direct
Action to the extent that such holder receives or has already received full
payment with respect to such unpaid distribution from TRV Capital. The holders
of Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debt Securities.
Upon the occurrence of an Indenture Event of Default, the Institutional
Trustee as the sole holder of the Junior Subordinated Debt Securities will have
the right under the Indenture to declare the principal of and interest on the
Junior Subordinated Debt Securities to be immediately due and payable. The
Company and TRV Capital are each required to file annually with the
Institutional Trustee an officers' certificate as to its compliance with all
conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described in this Prospectus Supplement and in the accompanying
Prospectus under "Description of Guarantees--Modification of Guarantees;
Assignment," and except as provided under the Trust Act, the Trust Indenture Act
and as otherwise required by law and the Declaration, the holders of the
Preferred Securities will have no voting rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of this
paragraph, the holders of a majority in aggregate liquidation amount of the
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Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee,
or direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration including the right to direct the Institutional
Trustee, as holder of the Junior Subordinated Debt Securities, to (i) direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or exercising any trust or power conferred on the
Indenture Trustee with respect to the Junior Subordinated Debt Securities, (ii)
waive any past Indenture Event of Default that is waivable under Section 5.13 of
the Indenture, (iii) exercise any right to rescind or annul a declaration that
the principal of all the Junior Subordinated Debt Securities shall be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debt Securities where such consent shall be
required; provided, however, that, where a consent or action under the Indenture
would require the consent or act of holders of more than a majority in principal
amount of the Junior Subordinated Debt Securities (a "Super Majority") affected
thereby, only the holders of at least such Super Majority in aggregate
liquidation amount of the Preferred Securities may direct the Institutional
Trustee to give such consent or take such action. If the Institutional Trustee
fails to enforce its rights under the Junior Subordinated Debt Securities, any
record holder of Preferred Securities may directly institute a legal proceeding
against the Company to enforce the Institutional Trustee's rights under the
Junior Subordinated Debt Securities without first instituting any legal
proceeding against the Institutional Trustee or any other person or entity. The
Institutional Trustee shall notify all holders of the Preferred Securities of
any notice of default received from the Indenture Trustee with respect to the
Junior Subordinated Debt Securities. Such notice shall state that such Indenture
Event of Default also constitutes a Declaration Event of Default. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy available to the Institutional Trustee, the Institutional Trustee, as
holder of the Junior Subordinated Debentures, shall not take any of the actions
described in clauses (i), (ii), (iii) or (iv) above unless the Institutional
Trustee has obtained an opinion of a nationally recognized independent tax
counsel experienced in such matters to the effect that, as a result of such
action, TRV Capital will not fail to be classified as a grantor trust for United
States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Junior Subordinated Debt Securities, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture, the
Institutional Trustee shall request the written direction of the holders of the
Trust Securities with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a majority in liquidation amount of the Trust Securities voting
together as a single class; provided, however, that where any amendment,
modification or termination under the Indenture would require the consent of a
Super Majority, the Institutional Trustee may only give such consent at the
direction of the holders of at least the proportion in aggregate liquidation
amount of the Trust Securities which the relevant Super Majority represents of
the aggregate principal amount of the Junior Subordinated Debt Securities
outstanding. The Institutional Trustee shall be under no obligation to take any
such action in accordance with the directions of the holders of the Trust
Securities unless the Institutional Trustee has obtained an opinion of a
nationally recognized independent tax counsel experienced in such matters to the
effect that for United States federal income tax purposes TRV Capital will not
be classified as other than a grantor trust.
A waiver of an Indenture Event of Default by the Institutional Trustee at
the direction of the holders of the Preferred Securities will constitute a
waiver of the corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be
mailed to each holder of record of Preferred Securities. Each such notice will
include a statement setting forth the following information: (i) the date of
such meeting or the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which such holders
are entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for TRV Capital to
redeem and cancel Preferred Securities or distribute Junior Subordinated Debt
Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, the
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Company, shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Preferred Securities were not
outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
Holders of the Preferred Securities will have no rights to appoint or remove
the TRV Trustees, who may be appointed, removed or replaced solely by the
Company as the indirect or direct holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee and the
Delaware Trustee), provided, that, if any proposed amendment provides for, or
the Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or (ii)
the dissolution, winding-up or termination of TRV Capital other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of holders of at least a majority in liquidation amount of the Trust
Securities affected thereby; provided, that, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Preferred
Securities or the Common Securities, then only holders of the affected class
will be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of holders of a
majority in liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause TRV Capital to
be classified for United States federal income tax purposes as other than a
grantor trust, (ii) reduce or otherwise adversely affect the powers of the
Institutional Trustee or (iii) cause TRV Capital to be deemed an "investment
company" which is required to be registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
TRV Capital may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety, to any corporation or other body except as
described below. TRV Capital may, with the consent of the Regular Trustees and
without the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (x)
expressly assumes all of the obligations of TRV Capital under the Trust
Securities or (y) substitutes for the Preferred Securities other securities
having substantially the same terms as the Trust Securities (the "Successor
Securities"), so long as the Successor Securities rank the same as the Trust
Securities rank with respect to distributions and payments upon liquidation,
redemption and otherwise, (ii) the Company expressly acknowledges a trustee of
such successor entity possessing the same powers and duties as the Institutional
Trustee, in its capacity as the holder of the Junior Subordinated Debt
Securities, (iii) the Preferred Securities or any Successor Securities are
listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (vi) such successor entity
has a purpose identical to that of TRV Capital, (vii) prior to such merger,
consolidation, amalgamation or replacement, TRV Capital has received an opinion
of a nationally recognized independent counsel to TRV Capital experienced in
such matters to the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges of
the holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), and (B) following such merger, consolidation,
amalgamation or replacement, neither TRV Capital nor such successor entity will
be required to register as an "investment
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company" under the 1940 Act; and (viii) the Company guarantees the obligations
of such successor entity under the Successor Securities at least to the extent
provided by the Guarantee. Notwithstanding the foregoing, TRV Capital shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it, if in the opinion of a nationally recognized independent
tax counsel experienced in such matters, such consolidation, amalgamation,
merger or replacement would cause TRV Capital or the Successor Entity to be
classified as other than a grantor trust for United States federal income tax
purposes. In addition, so long as any Preferred Securities are outstanding and
are not held entirely by the Company, TRV Capital may not voluntarily liquidate,
dissolve, wind-up or terminate except as described above under "--Special Event
Redemption Distribution."
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities certificates,
representing the total aggregate number of Preferred Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the global Preferred Securities
as represented by a global certificate.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. (the
"NASD"). Access to the DTC system is also available to others, such as
securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the Preferred Securities, except in the event that
use of the book-entry system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
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Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
that may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to TRV Capital as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co. consenting or voting
rights to those Direct Participants to whose accounts the Preferred Securities
are credited on the record date (identified in a listing attached to the Omnibus
Proxy). The Company and TRV Capital believe that the arrangements among DTC,
Direct and Indirect Participants, and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights that
can be directly exercised by a holder of a beneficial interest in TRV Capital.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers in bearer form or registered in "street name," and such
payments will be the responsibility of such Participant and not of DTC, TRV
Capital or the Company, subject to any statutory or regulatory requirements to
the contrary that may be in effect from time to time. Payment of distributions
to DTC is the responsibility of TRV Capital, disbursement of such payments to
Direct Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners is the responsibility of Direct and Indirect
Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
certificate will not be entitled to receive physical delivery of Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
TRV Capital. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with the consent of
the Company) may decide to discontinue use of the system of book-entry transfers
through DTC (or any successor depositary) with respect to the Preferred
Securities. In that event, certificates for the Preferred Securities will be
printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and TRV Capital believe to be
reliable, but neither the Company nor TRV Capital takes responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities, undertakes to perform only such duties as are
specifically set forth in the Declaration and, after such a default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions, the Institutional
Trustee is under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. Notwithstanding the foregoing, the holders of
Preferred Securities will not be required to offer such indemnity in the event
such holders, by exercising their voting rights, direct the Institutional
Trustee to take any action following a Declaration Event of Default.
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PAYING AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the following provisions will apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected without
charge by or on behalf of TRV Capital, but upon payment (with the giving of such
indemnity as TRV Capital or the Company may require) in respect of any tax or
other government charges that may be imposed in relation to it.
TRV Capital will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate TRV Capital in
such a way so that TRV Capital will not be required to register as an
"investment company" under the 1940 Act or be characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Junior Subordinated
Debt Securities will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the Regular
Trustees are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of TRV Capital or the certificate of incorporation
of the Company, that each of the Company and the Regular Trustees determine in
their discretion to be necessary or desirable to achieve such end, as long as
such action does not adversely affect the interests of the holders of the
Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Junior
Subordinated Debt Securities in which TRV Capital will invest the proceeds from
the issuance and sale of the Trust Securities. This description supplements the
description of the general terms and provisions of the Junior Subordinated Debt
Securities set forth in the accompanying Prospectus under the caption
"Description of Junior Subordinated Debt Securities." The following description
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the description of the Junior Subordinated Debt
Securities in the accompanying Prospectus; the Indenture, dated as of October 7,
1996 (the "Indenture"), between the Company and The Chase Manhattan Bank, as
Trustee (the "Indenture Trustee"), the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part; and the Trust Indenture Act. Certain
capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of TRV Capital
following the occurrence of a Special Event, Junior Subordinated Debt Securities
may be distributed to the holders of the Trust Securities in liquidation of TRV
Capital. See "Description of the Preferred Securities--Special Event Redemption
or Distribution."
If the Junior Subordinated Debt Securities are distributed to the holders of
the Preferred Securities, the Company will use its best efforts to have the
Junior Subordinated Debt Securities listed on the New York Stock Exchange or on
such other national securities exchange or similar organization on which the
Preferred Securities are then listed or quoted.
S-24
<PAGE>
GENERAL
The Junior Subordinated Debt Securities will be issued as unsecured debt
under the Indenture. The Junior Subordinated Debt Securities will be limited in
aggregate principal amount to approximately $412,372,000, such amount being the
sum of the aggregate stated liquidation amount of the Preferred Securities and
the capital contributed by the Company to TRV Capital in exchange for the Common
Securities (the "TRV Payment").
The Junior Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Junior Subordinated Debt
Securities will mature and become due and payable, together with any accrued and
unpaid interest thereon including Compound Interest (as defined herein) and
Additional Interest (as defined herein), if any, on December 1, 2036.
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in TRV Capital,
such Junior Subordinated Debt Securities will initially be issued in the form of
one or more Global Securities (as defined under "Book-Entry and Settlement"
below). As described herein, under certain limited circumstances, Junior
Subordinated Debt Securities may be issued in certificated form in exchange for
a Global Security. See "Book-Entry and Settlement" below. In the event that
Junior Subordinated Debt Securities are issued in certificated form, such Junior
Subordinated Debt Securities will be in denominations of $1,000 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Junior Subordinated Debt Securities issued as a Global
Security will be made to DTC, to a successor depositary or, in the event that no
depositary is used, to a Paying Agent for the Junior Subordinated Debt
Securities. In the event Junior Subordinated Debt Securities are issued in
certificated form, principal and interest will be payable, the transfer of the
Junior Subordinated Debt Securities will be registrable and Junior Subordinated
Debt Securities will be exchangeable for Junior Subordinated Debt Securities of
other denominations of a like aggregate principal amount at the corporate trust
office of the Indenture Trustee in New York, New York; provided, that payment of
interest may be made at the option of the Company by check mailed to the address
of the persons entitled thereto.
The Company does not intend to issue and sell the Junior Subordinated Debt
Securities to any purchasers other than TRV Capital.
There are no covenants or provisions in the Indenture that would afford the
holders of the Junior Subordinated Debt Securities protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect such holders.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company. No payment of principal (including redemption payments), premium, if
any, or interest on the Junior Subordinated Debt Securities may be made if (i)
any Senior Indebtedness of the Company has not been paid when due and 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 (ii) the maturity of any
Senior Indebtedness of the Company has been accelerated because of a default.
Upon any distribution of assets of the Company to creditors upon any
dissolution, winding-up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings,
all principal, premium, if any, and interest due or to become due on all Senior
Indebtedness of the Company must be paid in full before the holders of Junior
Subordinated Debt Securities are entitled to receive or retain any payment. Upon
satisfaction of all claims related to all Senior Indebtedness of the Company
then outstanding, the rights of the holders of the Junior Subordinated Debt
Securities will be subrogated to the rights of the holders of Senior
Indebtedness of the Company to receive payments or distributions applicable to
Senior Indebtedness until all amounts owing on the Junior Subordinated Debt
Securities are paid in full.
S-25
<PAGE>
The term "Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (A) indebtedness of such
obligor for money borrowed and (B) indebtedness evidenced by securities, notes,
debentures, bonds or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations of such obligor
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such obligor under any
conditional sale or title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations,
contingent or otherwise, of such obligor in respect of any letters of credit,
banker's acceptance, security purchase facilities or similar credit
transactions, (v) all obligations in respect of interest rate swap, cap or other
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements, (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons for the payment of which such obligor is responsible or liable as
obligor, guarantor or otherwise and (vii) all obligations of the type referred
to in clauses (i) through (vi) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation is assumed by
such obligor), except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Junior Subordinated Debt Securities and
(2) any indebtedness between or among such obligor or its affiliates, including
all other debt securities and guarantees in respect of those debt securities,
issued to (a) any other TRV Trust or a trustee of such trust and (b) any other
trust, or a trustee of such trust, partnership or other entity affiliated with
the Company that is a financing vehicle of the Company (a "financing entity") in
connection with the issuance by such financing entity of preferred securities or
other securities that rank pari passu with, or junior to, the Preferred
Securities. Such Senior Indebtedness shall continue to be Senior Indebtedness
and be entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued by the Company.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Junior Subordinated Debt
Securities, (i) in whole or in part, from time to time, on or after December 1,
2006, or (ii) at any time in certain circumstances upon the occurrence of a Tax
Event as described under "Description of the Preferred Securities--Special Event
Redemption or Distribution," upon not less than 30 nor more than 60 days'
notice, at the redemption price described below. If a partial redemption of the
Preferred Securities resulting from a partial redemption of the Junior
Subordinated Debt Securities would result in the delisting of the Preferred
Securities, the Company may only redeem the Junior Subordinated Debt Securities
in whole.
Redemption Price for Junior Subordinated Debentures shall mean, (a) in the
case of a redemption under (i) above, the following prices, expressed in
percentages of the principal amount plus any accrued and unpaid interest,
including Additional Interest (as defined herein), if any, to the date of
redemption, if redeemed during the 12-month period beginning December 1:
<TABLE>
<S> <C>
REDEMPTION
YEAR PRICE
- -------------------------------------------------------------------------- ----------
2006...................................................................... 103.3150
2007...................................................................... 102.9835
2008...................................................................... 102.6520
2009...................................................................... 102.3205
2010...................................................................... 101.9890
2011...................................................................... 101.6575
2012...................................................................... 101.3260
2013...................................................................... 100.9945
2014...................................................................... 100.6630
2015...................................................................... 100.3315
</TABLE>
and 100% on or after December 1, 2016 and (b) in the case of a redemption under
(ii) above, 100% of the principal amount thereof plus any accrued and unpaid
interest, including Additional Interest, if any, to the date of redemption.
S-26
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PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations, such as the Junior Subordinated
Debt Securities, issued on or after December 7, 1995. On March 29, 1996, Senate
Finance Committee Chairman William V. Roth, Jr. and House Ways and Means
Committee Chairman Bill Archer issued the Joint Statement indicating their
intent that the Proposed Legislation, if adopted by either of the tax-writing
committees of Congress, would have an effective date that is no earlier than the
date of "appropriate Congressional action." Based upon the Joint Statement, it
is expected that if the Proposed Legislation were to be enacted, such
legislation would not apply to the Junior Subordinated Debt Securities. There
can be no assurances, however, that the effective date guidance contained in the
Joint Statement will be incorporated into the Proposed Legislation, if enacted,
or that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Junior Subordinated Debt Securities. Accordingly, there can be no assurance
that a Tax Event will not occur. See "Description of the Preferred
Securities--Special Event Redemption or Distribution."
INTEREST
Each Junior Subordinated Debt Security shall bear interest at the rate of 7
3/4% per annum, from and including December 1, 1996, payable semi-annually in
arrears on June 1 and December 1 of each year (each an "Interest Payment Date"),
commencing June 1, 1997 to the person in whose name such Junior Subordinated
Debt Security is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. In the
event the Junior Subordinated Debt Securities shall not continue to remain in
book-entry only form, the Company shall have the right to select record dates,
which shall be more than 14 days but less than 60 days prior to the Interest
Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full semi-annual period for which interest is computed
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the Junior
Subordinated Debt Securities is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Junior Subordinated Debt Securities, to defer payments of
interest by extending the interest payment period for a period not exceeding 10
consecutive semi-annual periods, provided, that no Extension Period may extend
beyond the maturity of the Junior Subordinated Debt Securities, at the end of
which Extension Period, the Company shall pay all interest then accrued and
unpaid (including any Additional Interest) together with interest thereon
compounded semi-annually at the rate specified for the Junior Subordinated Debt
Securities to the extent permitted by applicable law ("Compound Interest");
provided further, that during any such Extension Period, (a) the Company shall
not declare or pay any dividend on, make any distributions with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock or make any guarantee payment with respect thereto (other than
(i) repurchases, redemptions or other acquisitions of shares of capital stock of
the Company in connection with any employment contract, benefit plan or other
similar arrangement with or for the benefit of employees, officers, directors or
consultants, (ii) as a result of an exchange or conversion of any class or
series of the Company's capital stock for any other class or series of the
Company's capital stock, or (iii) the purchase of fractional interests in shares
of the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or the security being converted or exchanged), and (b) the
Company shall not make any payment of interest on or principal of (or premium,
if any, on), or repay, repurchase or redeem, any debt securities issued by the
Company which rank pari passu with or junior to the Junior Subordinated Debt
Securities. The foregoing, however, will not apply to any stock dividends paid
by the Company where the dividend stock is the same stock as that on which the
dividend is being paid. Prior to the termination of any Extension Period, the
Company may further defer payments of interest by extending such Extension
Period; provided, however, that such Extension Period, including all such
previous and further extensions, may not exceed 10 consecutive semi-
S-27
<PAGE>
annual interest periods (including the semi-annual interest period in which
notice of such Extension Period (as described below) is given); provided
further, that no Extension Period may extend beyond the maturity of the Junior
Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may commence a new Extension
Period, subject to the terms set forth in this section. No interest during an
Extension Period, except at the end thereof, shall be due and payable. The
Company has no present intention of exercising its right to defer payments of
interest by extending the interest payment period on the Junior Subordinated
Debt Securities. If the Institutional Trustee shall be the sole holder of the
Junior Subordinated Debt Securities, the Company shall give the Regular Trustees
and the Institutional Trustee notice of its selection of such Extension Period
one Business Day prior to the earlier of (i) the date distributions on the
Preferred Securities would be payable, if not for such Extension Period, or (ii)
the date the Regular Trustees are required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders of the
Preferred Securities of the record date or the date such distribution would be
payable, if not for such Extension Period, but in any event one Business Day
prior to such record date. The Regular Trustees shall give notice of the
Company's selection of such Extension Period to the holders of the Preferred
Securities. If the Institutional Trustee shall not be the sole holder of the
Junior Subordinated Debt Securities, the Company shall give the holders of the
Junior Subordinated Debt Securities notice of its selection of such Extension
Period ten Business Days prior to the earlier of (i) the next succeeding
Interest Payment Date or (ii) the date upon which the Company is required to
give notice to the New York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Junior Subordinated Debt Securities of the
record or payment date of such related interest payment.
ADDITIONAL INTEREST
If at any time TRV Capital shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional interest ("Additional Interest")
on the Junior Subordinated Debt Securities such additional amounts as shall be
required so that the net amounts received and retained by TRV Capital after
paying any such taxes, duties, assessments or other governmental charges will be
not less than the amounts TRV Capital would have received had no such taxes,
duties, assessments or other governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Junior Subordinated Debt Securities,
will have the right to declare the principal of and the interest on the Junior
Subordinated Debt Securities (including any Compound Interest and Additional
Interest, if any) and any other amounts payable under the Indenture to be
forthwith due and payable and to enforce its other rights as a creditor with
respect to the Junior Subordinated Debt Securities. See "Description of Junior
Subordinated Debt Securities--Events of Default" in the accompanying Prospectus
for a description of the Indenture Events of Default. An Indenture Event of
Default also constitutes a Declaration Event of Default. The holders of
Preferred Securities in certain circumstances have the right to direct the
Institutional Trustee to exercise its rights as the holder of the Junior
Subordinated Debt Securities. See "Description of the Preferred
Securities--Declaration Events of Default" and "--Voting Rights."
Notwithstanding the foregoing, if a Declaration Event of Default has
occurred and is continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Junior Subordinated Debt Securities
on the date such interest or principal is otherwise payable, the Company
acknowledges that, in such event, a holder of Preferred Securities may institute
a Direct Action for payment on or after the respective due date specified in the
Junior Subordinated Debt Securities. The Company may not amend the Indenture to
remove the foregoing right to bring a Direct Action without the prior written
consent of all of the holders of Preferred Securities of TRV Capital.
Notwithstanding any payment made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall remain obligated
to pay the principal of or interest on the Junior Subordinated Debt Securities
held by TRV Capital or the Institutional Trustee of TRV Capital, and the Company
shall be subrogated to the rights of the holder of such Preferred Securities
with respect to payments on the Preferred Securities to the extent of any
payments made by the Company to such holder in any Direct Action. The holders of
Preferred Securities will not be able to exercise directly any other remedy
available to the holders of the Junior Subordinated Debt Securities.
S-28
<PAGE>
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of TRV Capital
as a result of the occurrence of a Special Event, the Junior Subordinated Debt
Securities will be issued in the form of one or more global certificates (each a
"Global Security") registered in the name of the depositary or its nominee.
Except under the limited circumstances described below, Junior Subordinated Debt
Securities represented by a Global Security will not be exchangeable for, and
will not otherwise be issuable as, Junior Subordinated Debt Securities in
definitive form. The Global Securities described above may not be transferred
except by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Junior
Subordinated Debt Securities in definitive form and will not be considered the
Holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Junior Subordinated Debt
Securities shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the depositary or its
nominee or to a successor depositary or its nominee. Accordingly, each
Beneficial Owner must rely on the procedures of the depositary or if such person
is not a Participant, on the procedures of the Participant through which such
person owns its interest to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Junior Subordinated Debt Securities are distributed to holders of
Preferred Securities in liquidation of such holders' interests in TRV Capital,
DTC will act as securities depositary for the Junior Subordinated Debt
Securities. For a description of DTC and the specific terms of the depositary
arrangements, see "Description of the Preferred Securities--Book-Entry Only
Issuance--The Depository Trust Company." As of the date of this Prospectus
Supplement, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depositary in the event
DTC or such successor depositary is unable or unwilling to continue as a
depositary for the Global Securities.
None of the Company, TRV Capital, the Indenture Trustee, any paying agent
and any other agent of the Company or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Junior Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Junior Subordinated Debt
Securities registered in the names of persons other than the depositary or its
nominee only if (i) the depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default with respect to
such Junior Subordinated Debt Securities. Any Global Security that is
exchangeable pursuant to the preceding sentence shall be exchangeable for Junior
Subordinated Debt Securities registered in such names as the depositary shall
direct. It is expected that such instructions will be based upon directions
received by the depositary from its Participants with respect to ownership of
beneficial interests in such Global Security.
MISCELLANEOUS
The Indenture will provide that the Company will pay all fees and expenses
related to (i) the offering of the Trust Securities and the Junior Subordinated
Debt Securities, (ii) the organization, maintenance and dissolution of TRV
Capital, (iii) the retention of the TRV Trustees and (iv) the enforcement by the
Institutional Trustee of the rights of the holders of the Preferred Securities.
S-29
<PAGE>
DESCRIPTION OF GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities. The Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Chase Manhattan Bank will act as indenture trustee
under the Guarantee (the "Guarantee Trustee"). The terms of the Guarantee will
be those set forth in the Guarantee and those made part of the Guarantee by the
Trust Indenture Act. This description supplements the description of the general
terms and provisions of the Guarantee set forth in the accompanying Prospectus
under the caption "Description of Guarantees." The summary does not purport to
be complete and is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the form of Guarantee, which is filed
as an exhibit to the Registration Statement of which this Prospectus Supplement
forms a part, and the Trust Indenture Act. The Guarantee will be held by the
Guarantee Trustee for the benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to and to the extent set forth in the Guarantee, the Company will
irrevocably and unconditionally agree to pay in full to the holders of the
Preferred Securities (except to the extent paid by TRV Capital), as and when
due, regardless of any defense, right of set-off or counterclaim which TRV
Capital may have or assert, the following payments (the "Guarantee Payments"),
without duplication: (i) any accrued and unpaid distributions that are required
to be paid on the Preferred Securities, to the extent TRV Capital has funds
available therefor, and (ii) the applicable Redemption Price to the extent TRV
Capital has funds available therefor, with respect to any Preferred Securities
called for redemption by TRV Capital, and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of TRV Capital (other than in connection
with the distribution of Junior Subordinated Debt Securities to the holders of
Preferred Securities or the redemption of all of the Preferred Securities) the
lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities to the date of payment or (b) the
amount of assets of TRV Capital remaining for distribution to holders of the
Preferred Securities in liquidation of TRV Capital. The Company's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of Preferred Securities or by causing TRV
Capital to pay such amounts to such holders.
The Guarantee will be a guarantee on a subordinated basis with respect to
the Preferred Securities from the time of issuance of the Preferred Securities
but will not apply to any payment of distributions or Redemption Price, or to
payments upon the dissolution, winding-up or termination of TRV Capital, except
to the extent TRV Capital shall have funds available therefor. If the Company
does not make interest payments on the Junior Subordinated Debt Securities, TRV
Capital will not pay distributions on the Preferred Securities and will not have
funds available therefor. See "Description of Junior Subordinated Debt
Securities." The Guarantee, when taken together with the Company's obligations
under the Junior Subordinated Debt Securities, the Indenture and the
Declaration, including its obligations to pay costs, expenses, debts and
liabilities of TRV Capital (other than with respect to Trust Securities), will
provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Preferred
Securities remain outstanding, if there shall have occurred any event that would
constitute an Event of Default under such Guarantee or the Declaration, then (a)
the Company shall not declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock or make any guarantee payment with respect
thereto (other than (i) repurchases, redemptions or other acquisitions of shares
of capital stock of the Company in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of employees,
officers, directors or consultants, (ii) as a result of an exchange or
conversion of any class or series of the Company's capital stock for any other
class or series of the Company's capital stock, or (iii) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged) and (b) the Company shall not make any payment of
interest on, or principal of (or premium, if any, on), or repay, repurchase or
redeem, any debt securities issued by the Company which rank pari passu with or
junior to the Junior Subordinated Debt Securities. The Guarantee, however, will
except from the foregoing any stock dividends paid by the Company where the
dividend stock is the same stock as that on which the dividend is being paid.
S-30
<PAGE>
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not less
than a majority in aggregate liquidation amount of the outstanding Preferred
Securities. All guarantees and agreements contained in the Guarantee shall bind
the successors, assignees, receivers, trustees and representatives of the
Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
EVENTS OF DEFAULT
An Event of Default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in aggregate liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee fails to enforce
the Guarantee Trustee's rights under the Guarantee, any holder of related
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against TRV Capital, the Guarantee Trustee
or any other person or entity. A holder of Preferred Securities may also
directly institute a legal proceeding against the Company to enforce such
holder's right to receive payment under the Guarantee without first (i)
directing the Guarantee Trustee to enforce the terms of the Guarantee or (ii)
instituting a legal proceeding against TRV Capital or any other person or
entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under the Guarantee and as to any default in such performance.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with respect to
the Guarantee, undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to the Guarantee, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity against the costs, expenses and liabilities that
might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate as to the Preferred Securities upon full
payment of the Redemption Price of all Preferred Securities, upon distribution
of the Junior Subordinated Debt Securities to the holders of the Preferred
Securities or upon full payment of the amounts payable in accordance with the
Declaration upon liquidation of TRV Capital. The Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Preferred Securities must restore payment of any sums paid under the
Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred or
preference stock of any subsidiary of the Company and (iii) senior to the
Company's common stock. The terms of the Preferred Securities provide that each
holder of Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the Guarantee without instituting a
legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
S-31
<PAGE>
EFFECT OF OBLIGATIONS UNDER THE
JUNIOR SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of TRV Capital is to issue
the Trust Securities evidencing undivided beneficial interests in the assets of
TRV Capital, and to invest the proceeds from such issuance and sale in the
Junior Subordinated Debt Securities.
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the following
factors: (i) the aggregate principal amount of Junior Subordinated Debt
Securities will be equal to the sum of the aggregate stated liquidation amount
of the Trust Securities; (ii) the interest rate and the interest and other
payment dates on the Junior Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the Preferred
Securities; (iii) pursuant to the Indenture, the Company shall pay, and TRV
Capital shall not be obligated to pay, directly or indirectly, all costs,
expenses, debt and obligations of TRV Capital other than with respect to the
Trust Securities; and (iv) the Declaration further provides that the TRV
Trustees shall not cause or permit TRV Capital to, among other things, engage in
any activity that is not consistent with the purposes of TRV Capital.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor are
available) are guaranteed by the Company as and to the extent set forth under
"Description of Guarantees" in the accompanying Prospectus. If the Company does
not make interest payments on the Junior Subordinated Debt Securities purchased
by TRV Capital, it is expected that TRV Capital will not have sufficient funds
to pay distributions on the Preferred Securities. The Guarantee is a guarantee
on a subordinated basis with respect to the Preferred Securities from the time
of its issuance but does not apply to any payment of distributions unless and
until TRV Capital has sufficient funds for the payment of such distributions.
The Guarantee covers the payment of distributions and other payments on the
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal or other payments on the Junior Subordinated
Debt Securities held by TRV Capital as its sole asset. The Guarantee, when taken
together with the Company's obligations under the Junior Subordinated Debt
Securities and the Indenture and its obligations under the Declaration,
including its obligations to pay costs, expenses, debts and liabilities of TRV
Capital (other than with respect to the Trust Securities), will provide a full
and unconditional guarantee of distributions, redemption payments and
liquidation payments on the Preferred Securities.
If the Company fails to make interest or other payments on the Junior
Subordinated Debt Securities when due (taking account of any Extension Period),
the Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities--Book Entry Only Issuance--The Depository Trust Company" and
"--Voting Rights," may direct the Institutional Trustee to enforce its rights
under the Junior Subordinated Debt Securities. If the Institutional Trustee
fails to enforce its rights under the Junior Subordinated Debt Securities, any
holder of Preferred Securities may directly institute a legal proceeding against
the Company to enforce the Institutional Trustee's rights under the Junior
Subordinated Debt Securities without first instituting any legal proceeding
against the Institutional Trustee or any other person or entity. If a
Declaration Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Junior Subordinated Debt Securities on the date such interest or principal is
otherwise payable (or in the case of redemption, on the redemption date), then a
holder of Preferred Securities may also institute a Direct Action for payment on
or after the respective due date specified in the Junior Subordinated Debt
Securities without first (i) directing the Institutional Trustee to enforce the
terms of the Junior Subordinated Debt Securities or (ii) instituting a legal
proceeding against the Company to enforce the Institutional Trustee's rights
under the Junior Subordinated Debt Securities. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Preferred
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct Action.
Consequently, the Company will be entitled to payment of amounts that a holder
of Preferred Securities receives in respect of an unpaid distribution that
resulted in the bringing of a Direct Action to the extent that such holder
receives or has already received full payment with respect to such unpaid
distribution from TRV Capital. The Company, under the Guarantee, acknowledges
that the Guarantee Trustee shall enforce the Guarantee on behalf of the holders
of the Preferred Securities. If the Company fails to make payments under the
Guarantee, the Guarantee provides a mechanism whereby the holders of the
Preferred Securities may direct the Guarantee Trustee to enforce its rights
thereunder. If the Guarantee Trustee fails to enforce the Guarantee, any holder
of
S-32
<PAGE>
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against TRV Capital, the Guarantee Trustee,
or any other person or entity. A holder of Preferred Securities may also
directly institute a legal proceeding against the Company to enforce such
holder's right to receive payment under the Guarantee without first (i)
directing the Guarantee Trustee to enforce the terms of the Guarantee or (ii)
instituting a legal proceeding against TRV Capital or any other person or
entity.
The Company and TRV Capital believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by the Company of payments due on the Preferred Securities. See
"Description of Guarantee--General."
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of the material United States federal income tax
consequences of the purchase, ownership and disposition of Preferred Securities.
Unless otherwise stated, this summary deals only with Preferred Securities held
as capital assets by holders who purchase the Preferred Securities upon original
issuance. It does not deal with special classes of holders such as banks,
thrifts, real estate investment trusts, regulated investment companies,
insurance companies, dealers in securities or currencies, tax-exempt investors,
persons that have a functional currency other than the U.S. Dollar or persons
that will hold the Preferred 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. 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 Preferred Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Junior Subordinated Debt Securities,
Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps"), tax counsel to the
Company and TRV Capital, will render its opinion generally to the effect that,
under then current law and assuming full compliance with the terms of the
Indenture (and certain other documents), and based on certain facts and
assumptions contained in such opinion, the Junior Subordinated Debt Securities
held by TRV Capital will be classified for United States federal income tax
purposes as indebtedness of the Company.
CLASSIFICATION OF TRV CAPITAL
In connection with the issuance of the Preferred Securities, Skadden, Arps
will render its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, TRV Capital 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 Preferred Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debt Securities, and each holder
will be required to include in its gross income interest (or OID) with respect
to its allocable share of those Junior Subordinated Debt Securities.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations applicable to debt instruments
issued on or after August 13, 1996 (the "Regulations"), a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with original issue discount ("OID"). The
Company believes that the likelihood of its exercising its option to defer
payments is remote. Based on the foregoing, the Company believes that the Junior
Subordinated Debt Securities will not be considered to be issued with OID at the
time of their original issuance and, accordingly, a holder of the Preferred
Securities should include in gross income such holder's allocable share of
interest (excluding any pre-issuance accrued interest) on the Junior
Subordinated Debt Securities in accordance with such holder's method of tax
accounting.
S-33
<PAGE>
Under the Regulations, if the Company exercised its option to defer any
payment of interest, the Junior Subordinated Debt Securities would at that time
be treated as issued with OID, and all stated interest on the Junior
Subordinated Debt Securities would thereafter be treated as OID as long as the
Junior Subordinated Debt Securities remained outstanding. In such event, all of
a holder's taxable interest income with respect to the Junior Subordinated Debt
Securities would be accounted for as OID 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
Preferred Securities would be required to include in gross income OID even
though the Company would not make any actual cash payments during an Extension
Period.
The Regulations have not been addressed in any rulings or other
interpretations by the Internal Revenue Service (the "IRS"), and it is possible
that the IRS could take a position contrary to the interpretation herein.
Because income on the Preferred Securities will constitute interest or OID,
corporate holders of Preferred Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF TRV
CAPITAL
Under certain circumstances, as described under "Description of the
Preferred Securities--Special Event Redemption or Distribution," Junior
Subordinated Debt Securities may be distributed to holders in exchange for the
Preferred Securities upon the liquidation of TRV Capital. Under current law,
such a distribution, for United States federal income tax purposes, would be
treated as a non-taxable event to each holder, and each holder would receive an
aggregate tax basis in the Junior Subordinated Debt Securities equal to such
holder's aggregate tax basis in its Preferred Securities. A holder's holding
period in the Junior Subordinated Debt Securities received in liquidation of TRV
Capital would include the period during which the Preferred Securities were held
by such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Junior Subordinated Debt Securities may be redeemed
by the Company for cash and the proceeds of such redemption distributed by TRV
Capital to holders in redemption of their Preferred Securities. Under current
law, such a redemption would, for United States federal income tax purposes,
constitute a taxable disposition of the redeemed Preferred Securities, and a
holder could recognize gain or loss as if it sold such redeemed Preferred
Securities for cash. See "United States Federal Income Taxation--Sales of
Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will be considered to have disposed
of all or part of its pro rata share of the Junior Subordinated Debt Securities
and will recognize gain or loss equal to the difference between its adjusted tax
basis in the Preferred Securities and the amount realized on the sale of such
Preferred Securities. Assuming that the Company does not exercise its option to
defer payment of interest on the Junior Subordinated Debt Securities, a holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price. If the Junior Subordinated Debt Securities are deemed to be
issued with OID as a result of the Company's deferral of any interest payment, a
holder's tax basis in the Preferred Securities generally will be its initial
purchase price, increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by distributions or other
payments received on the Preferred Securities since and including the date of
the first Extension Period. Such gain or loss generally will be a capital gain
or loss (except to the extent of any accrued interest with respect to such
holder's pro rata share of the Junior Subordinated Debt Securities required to
be included in income) and generally will be a long-term capital gain or loss if
the Preferred Securities have been held for more than one year.
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debt Securities, the Preferred 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 Debt Securities. In the event
of such a deferral, a holder who disposes of its Preferred Securities between
record dates for payments of distributions thereon will be required to include
in income as ordinary income accrued but unpaid interest on the Junior
Subordinated Debt Securities to the date of disposition and to add such amount
to its adjusted tax basis in its pro rata share of the underlying Junior
Subordinated Debt Securities deemed disposed of. To the extent the selling price
is less than the holder's adjusted tax basis, such 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.
S-34
<PAGE>
PROPOSED TAX LEGISLATION
On March 19, 1996, President Clinton proposed the Proposed Legislation that
would, among other things, generally deny corporate issuers a deduction for
interest in respect of certain debt obligations, such as the Junior Subordinated
Debt Securities, issued on or after December 7, 1995. On March 29, 1996, Senate
Finance Committee Chairman William V. Roth, Jr. and House Ways and Means
Committee Chairman Bill Archer issued the Joint Statement indicating their
intent that the Proposed Legislation, if adopted by either of the tax-writing
committees of Congress, would have an effective date that is no earlier than the
date of "appropriate Congressional action." Based upon the Joint Statement, it
is expected that if the Proposed Legislation were to be enacted, such
legislation would not apply to the Junior Subordinated Debt Securities. There
can be no assurances, however, that the effective date guidance contained in the
Joint Statement will be incorporated into the Proposed Legislation, if enacted,
or that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Junior Subordinated Debt Securities. Accordingly, there can be no assurance
that a Tax Event will not occur. See "Description of the Preferred
Securities--Special Event Redemption or Distribution."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is, as to the United
States, a foreign corporation, a non-resident alien individual, a foreign
partnership, or a non-resident fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments by TRV
Capital or any of its paying agents to any holder of a Preferred Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided, that, (a) the beneficial owner of the
Preferred Security does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) the beneficial owner of the Preferred Security is not a controlled
foreign corporation that is related to the Company through stock ownership, and
(c) either (A) the beneficial owner of the Preferred Security certifies to TRV
Capital or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Preferred Security in such capacity, certifies to
TRV Capital or its agent, under penalties of perjury, that such statement has
been received from the beneficial owner by it or by a Financial Institution
holding such security for the beneficial owner and furnishes TRV Capital or its
agent with a copy thereof; and (ii) a United States Alien Holder of a Preferred
Security will not be subject to United States federal withholding tax on any
gain realized upon the sale or other disposition of a Preferred Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Preferred Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred 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 on a timely basis.
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
PREFERRED 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.
S-35
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated November 27, 1996 (the "Underwriting Agreement"), each Underwriter named
below (the "Underwriters") has severally agreed to purchase from TRV Capital,
and TRV Capital has agreed to sell to such Underwriter, the number of Preferred
Securities set forth opposite the name of such Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS PREFERRED SECURITIES
- --------------------------------------------------------------------- --------------------
<S> <C>
Smith Barney Inc. ................................................... 92,000
HSBC Securities, Inc................................................. 32,000
J.P. Morgan Securities Inc. ......................................... 92,000
Salomon Brothers Inc................................................. 92,000
UBS Securities LLC................................................... 92,000
-------
Total............................................................ 400,000
-------
-------
</TABLE>
The Underwriters are obligated to take and pay for the total number of
Preferred Securities offered hereby if any such Preferred Securities are
purchased. In the event of default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated.
The Underwriting Agreement provides that TRV Capital and the Company will
indemnify the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, and to make certain
contributions in respect thereof.
TRV Capital and the Company have agreed, during the period beginning on the
date of the Underwriting Agreement and continuing to and including the date that
is 60 days after the closing date for the purchase of the Preferred Securities,
not to offer, sell, contract to sell or otherwise dispose of any preferred
securities, any preferred stock or any other securities (including any backup
undertakings of such preferred stock or other securities) of the Company or of
TRV Capital, in each case that are substantially similar to the Preferred
Securities, or any securities convertible into or exchangeable for the Preferred
Securities or such substantially similar securities of either TRV Capital or the
Company, except preferred securities offered pursuant to the accompanying
Prospectus and 200,000 7 5/8% preferred securities issued by Travelers Capital
III simultaneously with the offering of the Preferred Securities, without the
prior written consent of Smith Barney.
In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used to purchase the Junior Subordinated Debt
Securities of the Company, the Underwriting Agreement provides that the Company
will pay as compensation to the Underwriters $10.00 per Preferred Security for
the accounts of the several Underwriters.
The Underwriters propose to offer the Preferred Securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at a price that
represents a concession not in excess of $6.00 per Preferred Security. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $3.50 per Preferred Security to certain brokers and dealers. After the
Preferred Securities are released for sale to the public, the offering price and
other selling terms may from time to time be varied by the Underwriters.
The Preferred Securities have been approved for listing on the New York
Stock Exchange subject to official notice of issuance. Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a
30-day period after the date of this Prospectus Supplement.
Smith Barney is an indirect wholly owned subsidiary of the Company and an
affiliate of TRV Capital. The offering of Preferred Securities will comply with
the requirements of Rule 2720 of the Conduct Rules of the NASD regarding a NASD
member firm's underwriting securities of an affiliate. Certain of the
Underwriters and their affiliates have in the past provided, and may in the
future provide, investment and/or commercial banking services to the Company and
its subsidiaries in the ordinary course of business.
This Prospectus Supplement together with an applicable Prospectus may also
be used by Smith Barney, in connection with offers and sales of the Preferred
Securities (subject to obtaining any necessary approval of the
S-36
<PAGE>
New York Stock Exchange for any such offers and sales) in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. Smith Barney may act as principal or agent in such transactions.
Smith Barney has no obligation to make a market in any of the Preferred
Securities and may discontinue any market-making activities at any time without
notice, at its sole discretion.
LEGAL MATTERS
The validity of the Preferred Securities, the Junior Subordinated Debt
Securities, the Guarantee and certain matters relating thereto and certain
United States federal income tax matters will be passed upon for the Company and
TRV Capital by Skadden, Arps, New York, New York. Certain legal matters will be
passed upon for the Underwriters by Dewey Ballantine, New York, New York. As to
matters governed by Delaware law (other than the Delaware General Corporation
Law), Dewey Ballantine will rely upon the opinion of Skadden, Arps. Kenneth J.
Bialkin, a partner of Skadden, Arps, is a director of the Company and he and
other attorneys in such firm beneficially own an aggregate of less than one
percent of the common stock of the Company. Dewey Ballantine has from time to
time acted as counsel for the Company and certain of its subsidiaries and may do
so in the future.
S-37
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE, ANY SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TRAVELERS
GROUP INC., TRAVELERS CAPITAL II OR ANY UNDERWRITER, DEALER OR AGENT. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY 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 ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF TRAVELERS GROUP INC. OR TRAVELERS CAPITAL II SINCE THE DATE HEREOF.
-------------------
<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Summary.............................. S-4
Risk Factors......................... S-8
Use of Proceeds...................... S-12
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.......................... S-12
Accounting Treatment................. S-12
Capitalization....................... S-13
Description of the Preferred
Securities......................... S-14 400,000
Description of the Junior TRUST PREFERRED SECURITIES
Subordinated Debt Securities....... S-24 TRAVELERS CAPITAL II
Description of Guarantee............. S-30
Effect of Obligations Under the 7 3/4% TRUST PREFERRED SECURITIES
Junior Subordinated Debt Securities GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
and the Guarantee.................. S-32 TRAVELERS GROUP INC.
United States Federal Income ---------
Taxation............................. S-33 PROSPECTUS SUPPLEMENT
Underwriting......................... S-36 NOVEMBER 27, 1996
Legal Matters........................ S-37 (INCLUDING PROSPECTUS
PROSPECTUS DATED OCTOBER 1, 1996)
Available Information................ 3 ---------
Incorporation of Certain Documents by SMITH BARNEY INC.
Reference.......................... 4 HSBC SECURITIES, INC.
The Company.......................... 5 J.P. MORGAN & CO.
TRV Trusts........................... 5 SALOMON BROTHERS INC
Use of Proceeds...................... 6 UBS SECURITIES
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.......................... 6
Description of Junior Subordinated
Debt Securities.................... 7
Description of Preferred
Securities......................... 12
Description of Guarantees............ 14
Plan of Distribution................. 16
Legal Matters........................ 17
Experts.............................. 17
</TABLE>
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