<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1997
FILE NO. 333-29333
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ALLMERICA FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6331 04-3263626
(STATE OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION) INDUSTRIAL IDENTIFICATION NO.)
CLASSIFICATION CODE
NUMBER)
---------------
AFC CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS DECLARATION)
DELAWARE 04-6828272
(STATE OF ORGANIZATION) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
---------------
440 LINCOLN STREET
WORCESTER, MASSACHUSETTS 01653
(508) 855-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN F. KELLY, ESQ.
440 LINCOLN STREET
WORCESTER, MASSACHUSETTS 01653
(508) 855-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
WITH COPIES TO:
LAUREN I. NORTON, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 951-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box: [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
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<PAGE>
PROSPECTUS
AFC CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.207% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.207% SERIES A CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
ALLMERICA FINANCIAL CORPORATION
----------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON AUGUST 1, 1997 UNLESS EXTENDED.
----------------
AFC Capital Trust I, a statutory business trust created under the laws of
the State of Delaware (the "Trust"), hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying
Letter of Transmittal (the "Letter of Transmittal," which together with the
Prospectus constitutes the "Exchange Offer"), to exchange up to $300,000,000
aggregate Liquidation Amount of its 8.207% Series B Capital Securities (the
"New Capital Securities") which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement (as defined herein) of which this Prospectus constitutes a part, for
a like Liquidation Amount of its outstanding 8.207% Series A Capital
Securities (the "Old Capital Securities"), of which $300,000,000 aggregate
Liquidation Amount is outstanding. Pursuant to the Exchange Offer, Allmerica
Financial Corporation, a Delaware corporation (the "Company"), is also
offering to exchange (i) its guarantee of payments of cash distributions and
payments on liquidation of the Trust or redemption of the Old Capital
Securities (the "Old Guarantee") for a like guarantee in respect of the New
Capital Securities (the "New Guarantee") and (ii) all of its 8.207% Series A
Junior Subordinated Deferrable Interest Debentures due February 3, 2027 (the
"Old Junior Subordinated Debentures") for a like aggregate principal amount of
its 8.207% Series B Junior Subordinated Deferrable Interest Debentures due
February 3, 2027 (the "New Junior Subordinated Debentures"), which New
Guarantee and New Junior Subordinated Debentures have also been registered
under the Securities Act. The Old Capital Securities, the Old Guarantee and
the Old Junior Subordinated Debentures are collectively referred to herein as
the "Old Securities" and the New Capital Securities, the New Guarantee and the
New Junior Subordinated Debentures are collectively referred to herein as the
"New Securities."
The terms of the New Securities are identical in all material respects to
the respective terms of the Old Securities, except that (i) the New Securities
have been registered under the Securities Act and therefore
(Continued on the following page)
----------------
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Capital Securities on or about July 1, 1997.
----------------
SEE "RISK FACTORS" COMMENCING ON PAGE 16 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL SECURITIES
IN THE EXCHANGE OFFER.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is June 27, 1997.
<PAGE>
(Continued from previous page)
generally will not be subject to certain restrictions on transfer applicable
to the Old Securities, (ii) the New Capital Securities will not contain the
$100,000 minimum principal amount transfer restriction and (v) the New Junior
Subordinated Debentures will not provide for any liquidated damages thereon.
See "Description of New Capital Securities," "Description of New Junior
Subordinated Debentures" and "Description of Old Securities." The New Capital
Securities are being offered for exchange in order to satisfy certain
obligations of the Company and the Trust under the Registration Rights
Agreement dated as of February 3, 1997 (the "Registration Rights Agreement")
among the Company, the Trust and the Initial Purchasers (as defined herein).
In the event that the Exchange Offer is consummated, any Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
and the New Capital Securities issued in the Exchange Offer will vote together
as a single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Declaration.
The New Capital Securities and the Old Capital Securities (collectively, the
"Capital Securities") represent undivided beneficial interests in the assets
of the Trust. The Company is the owner of all of the beneficial interests
represented by common securities of the Trust (the "Common Securities"). The
Chase Manhattan Bank is the Property Trustee of the Trust. The Trust exists
for the sole purpose of issuing the Trust Securities and investing the
proceeds thereof in the Junior Subordinated Debentures (as defined herein).
The Junior Subordinated Debentures will mature on February 3, 2027 (the
"Stated Maturity Date"). The Capital Securities will have a preference over
the Common Securities under certain circumstances with respect to cash
distributions and amounts payable on liquidation, redemption or otherwise. See
"Description of New Capital Securities--Subordination of Common Securities."
As used herein, (i) the "Indenture" means that Indenture, dated as of
February 3, 1997, as amended and supplemented from time to time, between the
Company and The Chase Manhattan Bank, as Debenture Trustee (the "Debenture
Trustee"), (ii) the "Declaration" means the Amended and Restated Declaration
of Trust relating to the Trust among the Company, as Sponsor, The Chase
Manhattan Bank, as Property Trustee (the "Property Trustee"), Chase Manhattan
Bank Delaware, as Delaware Trustee (the "Delaware Trustee"), the
Administrative Trustees named therein (collectively, with the Property Trustee
and Delaware Trustee, the "Issuer Trustees"), and the holders from time to
time of the undivided beneficial interests in the assets of the Trust. In
addition, as the context may require, unless otherwise expressly stated, (i)
the term "Capital Securities" includes the Old Capital Securities and the New
Capital Securities, (ii) the term "Trust Securities" includes the Capital
Securities and the Common Securities, (iii) the term "Junior Subordinated
Debentures" includes the Old Junior Subordinated Debentures and the New Junior
Subordinated Debentures and (iv) the term "Guarantee" includes the Old
Guarantee and the New Guarantee.
Holders of New Capital Securities will be entitled to receive preferential
cumulative cash distributions arising from the payment of interest on the
Junior Subordinated Debentures, accruing from February 3, 1997, and payable
semi-annually in arrears on August 15 and February 15 of each year, commencing
August 15, 1997, at the annual rate of 8.207% of the Liquidation Amount of
$1,000 per New Capital Security ("Distributions"). The Company will have the
right to defer payments of interest on the Junior Subordinated Debentures at
any time and from time to time for a period not exceeding 10 consecutive semi-
annual periods with respect to each deferral period (each, an "Extension
Period), subject to the requirements set forth in the Indenture. If and for so
long as interest payments on the Junior Subordinated Debentures are so
deferred, Distributions on the Trust Securities will also be deferred and the
Company will not be permitted, subject to certain exceptions described herein,
to declare or pay any cash distributions with respect to the Company's capital
stock (which includes common and preferred stock) or to make any payment with
respect to debt securities of the Company that rank pari passu with or junior
to the Junior Subordinated Debentures. During an Extension Period, interest on
the Junior Subordinated Debentures will continue to accrue (and the amount of
Distributions to which holders of the Trust Securities are entitled will
accumulate) at the rate of 8.207% per annum, compounded semi-annually, and
2
<PAGE>
holders of Trust Securities will be required to accrue interest income for
United States federal income tax purposes prior to the receipt of cash
attributable to such income. See "Description of New Junior Subordinated
Debentures--Option to Extend Interest Payment Date" and "Certain Federal
Income Tax Considerations--Interest Income and Original Issue Discount."
Through the Guarantee, the guarantee agreement of the Company relating to
the Common Securities (the "Common Guarantee"), the Declaration, the Junior
Subordinated Debentures and the Indenture, taken together, the Company has
guaranteed or will guarantee, as the case may be, fully, irrevocably and
unconditionally, all of the Trust's obligations under the Trust Securities.
See "Relationship Among the New Capital Securities, the New Junior
Subordinated Debentures and the New Guarantee--Full and Unconditional
Guarantee." The Old Guarantee and the Common Guarantee guarantees and the New
Guarantee will guarantee, payments of Distributions and payments on
liquidation or redemption of the Trust Securities, but in each case only to
the extent that the Trust holds funds on hand legally available therefor and
has failed to make such payments, as described herein. See "Description of New
Securities--Description of New Guarantee." If the Company fails to make a
required payment on the Junior Subordinated Debentures, the Trust will not
have sufficient funds to make the related payments, including Distributions,
on the Trust Securities. The Guarantee and the Common Guarantee will not cover
any such payment when the Trust does not have sufficient funds on hand legally
available therefor. In such event, a holder of Capital Securities may
institute a legal proceeding directly against the Company to enforce its
rights in respect of such payment. See "Description of New Junior Subordinated
Debentures--Enforcement of Certain Rights By Holders of New Capital
Securities." The obligations of the Company under the Guarantee, the Common
Guarantee and the Junior Subordinated Debentures will be subordinate and
junior in right of payment to all Senior Indebtedness of the Company to the
extent and in the manner set forth in the Indenture and the Guarantees,
respectively (as defined in "Description of New Securities--Description of New
Junior Subordinated Debentures--Subordination"). In addition, because the
Company is a holding company, the Junior Subordinated Debentures and the
Guarantee effectively will be subordinated to all existing and future
liabilities of the Company's subsidiaries.
The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Company nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the commission, and subject to the two immediately
following sentences, the Company and the Trust believe that New Capital
Securities issued pursuant to the Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate" of the Company or the Trust or who intends to participate in
the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust for
resale pursuant to Rule 144A under the Securities Act, (a) will not be able to
rely on the interpretations of the staff of the Division of Corporation
Finance of the Commission set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to tender such Old Capital
Securities in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Old Capital Securities (other than pursuant to
the Exchange Offer) unless such sale is made pursuant to an exemption from
such requirements. In addition, as described below, if any broker-dealer holds
Old Capital Securities acquired for its own account as a result of market-
making or other trading activities and exchanges such Old Capital Securities
for New Capital Securities, the Securities Act in connection with any resales
of such New Capital Securities.
3
<PAGE>
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of the Company or the Trust,
(ii) any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New
Capital Securities. In addition, the Company and the Trust may require such
holder, as a condition to such holder's eligibility to participate in the
Exchange as a condition to such holder's eligibility to participate in the
Exchange Offer, to furnish to the Company and the Trust (or an agent thereof)
in writing information as to the number of "beneficial owners" (within the
meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) on behalf of whom such holder holds the Capital
Securities to be exchanged in the Exchange Offer. Each broker-dealer that
receives New Capital Securities for its own account pursuant to the Exchange
Offer must acknowledge that it acquired the Old Capital Securities for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Capital
Securities. The Letter of Transmittal states that, by so acknowledging and by
delivering a prospectus a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company and the
Trust believe that broker-dealers who acquired Old Capital Securities for
their own accounts, as a result of market-making activities or other trading
activities ("Participating Broker-Dealers"), may fulfill their prospectus
delivery requirements with respect to the New Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities
which represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale
of such New Capital Securities. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales
of New Capital Securities received in exchange for Old Capital Securities
where such Old Capital Securities were acquired by such Participating Broker-
Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
Agreement, the Company and the Trust have agreed that this Prospectus, as it
may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such New Capital
Securities for a period ending 90 days after the Expiration Date (as defined
herein) (subject to extension under certain limited circumstances described
below) or, if earlier, when all such New Capital Securities have been disposed
of by such Participating Broker-Dealer. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of New Capital Securities received in exchange for Old Capital
Securities pursuant to the Exchange Offer must notify the Company or the
Trust, or cause the Company or the Trust to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth
herein under "The Exchange Offer--Exchange Agent." Any Participating Broker-
Dealer who is an "affiliate" of the Company or the Trust may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer--Resales of New Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agents' Message (as
defined herein), that, upon receipt of notice from the Company or the Trust of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of New
4
<PAGE>
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable) pursuant to this Prospectus until the Company or
the Trust has amended or supplemented this Prospectus to correct such
misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such Participating Broker-Dealer or the Company or
the Trust has given notice that the sale of the New Capital Securities (or the
New Guarantee or the New Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be. If the Company or the Trust gives such notice to
suspend the sale of the New Capital Securities (or the New Guarantee or the
New Junior Subordinated Debentures, as applicable), it shall extend the 90-day
period referred to above during which Participating Broker-Dealers are
entitled to use this Prospectus in connection with the resale of New Capital
Securities by the number of days during the period from and including the date
of the giving of such notice to and including the date when Participating
Broker-Dealers shall have received copies of the amended or supplemented
Prospectus necessary to permit resales of the New Capital Securities or to and
including the date on which the Company or the Trust has given notice that the
sale of New Capital Securities (or the New Guarantee or the New Junior
Subordinated Debentures, as applicable) may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital
Securities will be a new issue of securities for which there currently is no
market. Although the Initial Purchasers have informed the Company and the
Trust that they each currently intend to make a market in the New Capital
Securities, they are not obligated to do so, and any such market making may be
discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Capital
Securities. The Company and the Trust currently do not intend to apply for
listing of the New Capital Securities on any securities exchange or for
inclusion in the NASDAQ Stock Market, the electronic securities market
operated by the National Association of Securities Dealers, Inc. ("NASDAQ").
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will
be subject to the same limitations applicable thereto under the Declaration
(except for those rights which terminate upon consummation of the Exchange
Offer). Following consummation of the Exchange Offer, the holders of Old
Capital Securities will continue to be subject to all of the existing
restrictions upon transfer thereof and neither the Company nor the Trust will
have any further obligation to such holders (other than under certain limited
circumstances) to provide for registration under the Securities Act of the Old
Capital Securities held by them. To the extent that Old Capital Securities are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Capital Securities could be adversely affected. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS
PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING
WHETHER TO TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on August 1, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is
extended by the Company or the Trust (in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is extended).
Tenders of Old Capital Securities may be withdrawn at any time on or prior to
the Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Company or the Trust and to the terms and provisions of
the Registration Rights Agreement. The Company has agreed to pay all expenses
of the Exchange Offer. See "The Exchange Offer--Fees and Expenses." Holders of
the Old Capital Securities whose Old Capital Securities are accepted for
exchange will not receive Distributions on such Old Capital Securities and
will be deemed to have waived the right to receive any Distributions on such
Old Capital Securities accumulated from
5
<PAGE>
and after February 3, 1997. Accordingly, holders of New Capital Securities as
of the record date for the payment of Distributions on August 15, 1997 will be
entitled to receive Distributions accumulated from and including February 3,
1997.
Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
----------------
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE
UPON WRITTEN OR ORAL REQUEST FROM ALLMERICA FINANCIAL CORPORATION, 440 LINCOLN
STREET, WORCESTER, MASSACHUSETTS 01653, ATTENTION: CHIEF FINANCIAL OFFICER,
TELEPHONE NUMBER (508) 855-1000. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JULY 25, 1997.
----------------
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 IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE TRUST. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR ANYONE TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
----------------
NOTICE TO NEW HAMPSHIRE RESIDENTS: NEITHER THE FACT THAT A REGISTRATION
STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED WITH THE STATE OF NEW
HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON
IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE
SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER OR CLIENT, ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
----------------
FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA,
NOR HAS THE COMMISSIONER PASSED ON THE ADEQUACY OF THIS PROSPECTUS.
6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information..................................................... 7
Incorporation of Certain Documents by Reference........................... 8
Summary................................................................... 9
Risk Factors.............................................................. 16
The Company............................................................... 21
Use of Proceeds........................................................... 25
Consolidated Ratio of Earnings to Fixed Charges........................... 25
Capitalization............................................................ 26
Selected Consolidated Financial Data of the Company....................... 27
Unaudited Pro Forma Condensed Consolidated Financial Information.......... 30
Unaudited Pro Forma Condensed Consolidated Statement of Income Three
Months Ended March 31, 1997.............................................. 31
Unaudited Pro Forma Condensed Consolidated Statement of Income Year Ended
December 31, 1996........................................................ 32
The Trust................................................................. 37
The Exchange Offer........................................................ 37
Description of New Capital Securities..................................... 46
Description of New Junior Subordinated Debentures......................... 56
Description of New Guarantee.............................................. 65
Description of Old Securities............................................. 68
Relationship Among the New Capital Securities, the New Junior Subordinated
Debentures and the New Guarantee......................................... 69
Certain Federal Income Tax Considerations................................. 70
ERISA Considerations...................................................... 73
Plan of Distribution...................................................... 74
Legal Matters............................................................. 75
Experts................................................................... 75
</TABLE>
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Room of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering Analysis and Retrieval System. The Web
site can be accessed at http://www.sec.gov. In addition, similar information
concerning the Company can be inspected at NYSE, 20 Broad Street, New York,
New York 10005.
No separate financial statements of the Trust have been included herein. The
Company does not consider that such financial statements would be material to
holders of the Capital Securities because (i) all of the voting securities of
the Trust are and will be owned, directly or indirectly, by the Company, a
reporting company under the Exchange Act, (ii) the Trust has no independent
operations but exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in Junior Subordinated Debentures issued by the Company, and
(iii) the Company's obligations described herein to provide certain
indemnities in respect of, and be responsible for, certain costs, expenses,
debts and liabilities of the Trust under the Indenture and any supplemental
indenture thereto and pursuant to the Declaration, the
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Guarantee, the New Junior Subordinated Debentures purchased by the Trust and
the related Indenture, taken together, constitute a full and unconditional
guarantee of payments due on the Capital Securities. See "Relationship Among
the New Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee." In addition, the Company does not expect that the Trust will file
reports, proxy statements or other information under the Exchange Act with the
Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Company and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission,
and reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company, the
Trust and the New Securities. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously or simultaneously filed by the Company
with the Securities and Exchange Commission (the "Commission") (File No. 1-
13754) are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) The Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996;
(c) The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997; and
(d) The Company's Current Reports on Form 8-K dated February 5, 1997,
February 19, 1997, and April 15, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
after the date of this Prospectus and prior to the termination of the offering
made hereby shall be incorporated by reference into this Prospectus and shall
be deemed to be a part of this Prospectus from the date of filing of such
documents. See "Available Information." Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
to the extent that a statement contained in this Prospectus or any supplement
thereto or in any other subsequently filed incorporated document, modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of
any contract or other document referred to herein do not purport to be
complete, and where reference is made to the particular provisions of such
contract or other document, such provisions are qualified in all respects by
reference to all of the provisions of such contract or other document. The
Company will provide, upon written or oral request, without charge, to each
person to whom a copy of this Prospectus has been delivered, a copy of any or
all of the documents which have been or may be incorporated in this Prospectus
by reference, other than certain exhibits to such documents. Requests for such
copies should be directed to: Allmerica Financial Corporation, 440 Lincoln
Street, Worcester, Massachusetts 01653 Attention: Chief Financial Officer.
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SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus.
THE COMPANY
The Company is the holding company for a diversified group of insurance and
financial services companies with total assets, as of March 31, 1997 of $19.6
billion. The Company, through its subsidiaries, operates in two fundamental
areas: retirement and asset management and risk management. The Company's
retirement and asset management segments offer annuities, variable life
insurance, full-service retirement savings products and investment management
services to retail and institutional clients. The Company's risk management
segments underwrite personal and commercial property and casualty insurance in
five major lines of business: personal automobile, homeowners, commercial
automobile, workers compensation and commercial multiple peril.
The Company is a Delaware corporation incorporated in 1995. Its executive
offices are located at 440 Lincoln Street, Worcester, Massachusetts 01653
(telephone number (508) 855-1000).
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant to
(i) the Declaration executed by the Company, as Sponsor, The Chase Manhattan
Bank, as Property Trustee, Chase Manhattan Bank Delaware, as Delaware Trustee
and the individual Administrative Trustees named therein, and (ii) the filing
of a certificate of trust with the Delaware Secretary of State on January 24,
1997. The Trust's business and affairs are conducted by the Issuer Trustees:
the Property Trustee, the Delaware Trustee and the three individual
Administrative Trustees who are employees or officers of or affiliated with the
Company. The Trust exists for the exclusive purposes of (i) issuing and selling
the Trust Securities, (ii) using the proceeds from the sale of the Trust
Securities to acquire the Junior Subordinated Debentures issued by the Company
and (iii) engaging in only those other activities necessary, advisable or
incidental thereto (such as registering the transfer of the Trust Securities).
Accordingly, the Junior Subordinated Debentures are and will be the sole assets
of the Trust, and payments under the Junior Subordinated Debentures will be the
sole revenue of the Trust. All of the Common Securities are and will be owned
by the Company.
RECENT DEVELOPMENTS
The Company expects to consummate the merger (the "Merger") of its wholly
owned subsidiary APY Acquisition, Inc. ("Merger Sub") with and into Allmerica
Property & Casualty Companies, Inc. ("Allmerica P&C") on or about July 16,
1997. The Company currently owns, through its wholly owned subsidiaries,
approximately 60% of the outstanding common stock of Allmerica P&C. As a result
of the Merger, Allmerica P&C will become a wholly owned subsidiary of the
Company. The Company is pursuing the Merger in order to, among other things,
(i) increase the proportion of its earnings from Allmerica P&C's property and
casualty operations, which are a key element of the Company's future operations
and strategy, (ii) create a simplified corporate structure for the Company,
allowing it greater efficiency and flexibility in its utilization of capital
and (iii) provide the Company with certain administrative cost savings. See
"The Company--Recent Developments."
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THE EXCHANGE OFFER
The Exchange Offer..........
Up to $300,000,000 aggregate Liquidation Amount
of New Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount
of Old Capital Securities. The Company and the
Trust are making the Exchange Offer in order to
satisfy their obligations under the Registration
Rights Agreement relating to the Old Capital
Securities. For a description of the procedures
for tendering Old Capital Securities, see "The
Exchange Offer--Procedures for Tendering Old
Capital Securities."
Expiration Date.............
5:00 p.m., New York City time, on August 1, 1997,
unless the Exchange Offer is extended by the
Company or the Trust (in which case the
Expiration Date will be the latest date and time
to which the Exchange Offer is extended). See
"The Exchange Offer--Terms of the Exchange
Offer."
Conditions to the Exchange The Exchange Offer is subject to certain
Offer...................... conditions, which may be waived by the Company
and the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any
minimum Liquidation Amount of Old Capital
Securities being tendered. See "The Exchange
Offer--Conditions to the Exchange Offer."
Terms of the Exchange The Company and the Trust reserve the right in
Offer...................... their sole and absolute discretion, subject to
applicable law, at any time and from time to
time, to (i) delay the acceptance of the Old
Capital Securities for exchange, (ii) terminate
the Exchange Offer if certain specified
conditions have not been satisfied, (iii) extend
the Expiration Date of the Exchange Offer and
retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject, however,
to the right of holders of Old Capital Securities
to withdraw their tendered Old Capital
Securities, or (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer
in any respect. See "The Exchange Offer--Terms of
the Exchange Offer."
Withdrawal Rights........... Tenders of Old Capital Securities may be
withdrawn at any time on or prior to the
Expiration Date by delivering a written notice of
such withdrawal to the Exchange Agent in
conformity with certain procedures set forth
below under "The Exchange Offer--Withdrawal
Rights."
Procedures for Tendering
Old Capital Securities.....
Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained
therein and forward the same by mail, facsimile
or hand delivery, together with any other
required documents, to the Exchange Agent, either
with the Old Capital Securities to be tendered or
in compliance with the specified procedures for
guaranteed delivery of Old Capital Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer, including an
Agent's Message in lieu of a Letter
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<PAGE>
of Transmittal. Holders of Old Capital Securities
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
are urged to contact such person promptly if they
wish to tender Old Capital Securities pursuant to
the Exchange Offer. See "The Exchange Offer--
Procedures for Tendering Old Capital Securities."
Letters of Transmittal and certificates
representing Old Capital Securities should not be
sent to the Company or the Trust. Such documents
should only be sent to the Exchange Agent.
Resales of New Capital The Company and the Trust are making the Exchange
Securities................. Offer in reliance on the position of the staff of
the Division of Corporation Finance of the
Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, neither the Company nor
the Trust has sought its own interpretive letter
and there can be no assurance that the staff of
the Division of Corporation Finance of the
Commission would make a similar determination
with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based
on these interpretations by the staff of the
Division of Corporation Finance of the
Commission, and subject to the two immediately
following sentences, the Company and the Trust
believe that New Capital Securities issued
pursuant to this Exchange Offer in exchange for
Old Capital Securities may be offered for resale,
resold and otherwise transferred by a holder
thereof (other than a holder who is a broker-
dealer) without further compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such New
Capital Securities are acquired in the ordinary
course of such holder's business and that such
holder is not participating, and has no
arrangement or understanding with any person to
participate, in a distribution (within the
meaning of the Securities Act) of such New
Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the
Company or the Trust or who intends to
participate in the Exchange Offer for the purpose
of distributing the New Capital Securities, or
any broker-dealer who purchased the Old Capital
Securities from the Trust for resale pursuant to
Rule 144A or any other available exemption under
the Securities Act, (a) will not be able to rely
on the interpretations of the staff of the
Division of Corporation Finance of the Commission
set forth in the above-mentioned interpretive
letters, (b) will not be permitted or entitled to
tender such Old Capital Securities in the
Exchange Offer and (c) must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any sale
or other transfer of such Old Capital Securities
unless such sale is made pursuant to an exemption
from such requirements. In addition, as described
below, if any broker-dealer holds Old Capital
Securities acquired for its own account as a
result of market-marking or other trading
activities and exchanges such Old Capital
Securities for New Capital Securities, then such
broker-dealer must
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<PAGE>
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resales
of such New Capital Securities.
Each holder of Old Capital Securities who wishes
to exchange Old Capital Securities for New
Capital Securities in the Exchange Offer will be
required to represent in the Letter of
Transmittal or by transmission of an Agent's
Message that (i) it is not an "affiliate" of the
Company or the Trust, (ii) any New Capital
Securities to be received by it are being
acquired in the ordinary course of its business,
(iii) it has no arrangement or understanding with
any person to participate in a distribution
(within the meaning of the Securities Act) of
such New Capital Securities, and (iv) if such
holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a
distribution (within the meaning of the
Securities Act) of such New Capital Securities.
Each broker-dealer that receives New Capital
Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired
the Old Capital Securities for its own account as
the result of market-making activities or other
trading activities and must agree that it will
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale
of such New Capital Securities. The Letter of
Transmittal states that, by so acknowledging and
by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an
"underwriter" within the meaning of the
Securities Act. Based on the position taken by
the staff of the Division of Corporation Finance
of the Commission in the interpretive letters
referred to above, the Company and the Trust
believe that Participating Broker-Dealers who
acquired Old Capital Securities for their own
accounts as a result of market-making activities
or other trading activities may fulfill their
prospectus delivery requirements with respect to
the New Capital Securities received upon exchange
of such Old Capital Securities (other than Old
Capital Securities which represent an unsold
allotment from the original sale of the Old
Capital Securities) with a prospectus meeting the
requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so
long as it contains a description of the plan of
distribution with respect to the resale of such
New Capital Securities. Accordingly, this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New
Capital Securities received in exchange for Old
Capital Securities where such Old Capital
Securities were acquired by such Participating
Broker-Dealer for its own account as a result of
market-making or other trading activities.
Subject to certain provisions set forth in the
Registration Rights Agreement and to the
limitations described below under "The Exchange
Offer--Resales of New Capital Securities," the
Company and the Trust have agreed that this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such
New Capital Securities for a period
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<PAGE>
ending 90 days after the Expiration Date (subject
to extension under certain limited circumstances)
or, if earlier, when all such New Capital
Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer
who is an "affiliate" of the Company or the Trust
may not rely on such interpretive letters and
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer--Resales of New Capital
Securities."
Exchange Agent.............. The exchange agent with respect to the Exchange
Offer is The Chase Manhattan Bank (the "Exchange
Agent"). The applicable addresses, and telephone
and facsimile numbers, of the Exchange Agent are
set forth in "The Exchange Offer--Exchange Agent"
and in the Letter of Transmittal.
Use of Proceeds............. Neither the Company nor the Trust will receive
any cash proceeds from the issuance of the New
Capital Securities offered hereby. See "Use of
Proceeds."
Certain United States
Federal Income Tax
Considerations; ERISA
Considerations.............
Holders of Old Capital Securities should review
the information set forth under "Certain Federal
Income Tax Considerations" and "ERISA
Considerations" prior to tendering Old Capital
Securities in the Exchange Offer.
NEW CAPITAL SECURITIES
Securities Offered.......... Up to $300,000,000 aggregate Liquidation Amount
of the New Capital Securities which have been
registered under the Securities Act (Liquidation
Amount $1,000) per New Capital Security). The New
Capital Securities will be issued, and the Old
Capital Securities were issued, under the
Declaration. The New Capital Securities and any
Old Capital Securities which remain outstanding
after consummation of the Exchange Offer will
vote together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised
certain rights under the Declaration. See
"Description of New Capital Securities--Voting
Rights; Amendment of the Declaration." The terms
of the New Capital Securities are identical in
all material respects to the terms of the Old
Capital Securities, except that the New Capital
Securities have been registered under the
Securities Act and will not be subject to the
$100,000 minimum Liquidation Amount transfer
restriction and certain other transfer
restrictions applicable to the Old Capital
Securities and will not provide for any increase
in the Distribution rate thereon. See "The
Exchange Offer--Purpose of the Exchange Offer,"
"Description of New Capital Securities" and
"Description of Old Securities."
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<PAGE>
Distribution Dates.......... February 15 and August 15 of each year,
commencing August 15, 1997.
Extension Periods........... So long as no Debenture Event of Default (as
defined herein) has occurred and is continuing,
Distributions on the New Capital Trust Securities
may be deferred for the duration of any Extension
Period elected by the Company with respect to the
payment of interest on the New Junior
Subordinated Debentures. No Extension Period will
exceed 10 consecutive semi-annual periods or
extend beyond the Stated Maturity Date. See
"Description of New Junior Subordinated
Debentures--Option to Extend Interest Payment
Date" and "Certain Federal Income Tax
Considerations--Interest Income and Original
Issue Discount."
Ranking..................... The New Capital Securities will rank pari passu,
and payments thereon will be made pro rata, with
the Old Capital Securities and the Common
Securities except as described under "Description
of New Capital Securities--Subordination of
Common Securities." The New Junior Subordinated
Debentures will rank pari passu with the Old
Junior Subordinated Debentures, and all other
junior subordinated debentures issued by the
Company (the "Other Debentures") and sold to
other trusts established or to be established by
the Company, in each case similar to the Trust
(the "Other Trusts"), and will be unsecured and
subordinate and rank junior in right of payment
to all Senior Indebtedness to the extent and in
the manner set forth in the Indenture. See
"Description of New Junior Subordinated
Debentures." The New Guarantee will rank pari
passu with the Old Guarantee and all other
guarantees issued by the Company with respect to
capital securities issued or to be issued by
Other Trusts (the "Other Guarantees") and will
constitute an unsecured obligation of the Company
and will be subordinate and rank junior in right
of payment to all Senior Indebtedness to the
extent and in the manner set forth in the
Guarantee Agreement. See "Description of New
Guarantee."
Redemption.................. The New Capital Securities will be subject to
mandatory redemption in a Like Amount, in whole
but not in part, (i) on the Stated Maturity Date
upon repayment of the New Junior Subordinated
Debentures and (ii) at any time before the Stated
Maturity Date contemporaneously with the optional
prepayment of the New Junior Subordinated
Debentures by the Company upon the occurrence and
continuation of a Special Event, in each case at
the applicable Redemption Price. See "Description
of New Capital Securities--Redemption."
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<PAGE>
Voting Rights............... Holders of New Capital Securities will have
limited voting rights and, so long as no
Debenture Event of Default has occurred and is
continuing, will not be entitled to vote to
appoint, remove or replace, or to increase or
decrease the number of Issuer Trustees, which
voting rights are vested exclusively in the
holder of the Common Securities. See "Description
of New Capital Securities--Voting Rights."
Ratings..................... The New Capital Securities are expected to be
rated "a2" by Moody's Investors Service, Inc. and
"BBB+" by Standard and Poors Rating Services. A
security rating is not a recommendation to buy,
sell or hold securities and may be subject to
revision or withdrawal at any time by the
assigning rating organization.
Absence of Market for New
Capital Securities.........
The New Capital Securities will be a new issue of
securities for which there currently is no
market. Although the Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley &
Co. Incorporated, the initial purchasers of the
Old Capital Securities (the "Initial
Purchasers"), have informed the Trust and the
Company that they currently intend to make a
market in the Capital Securities, the Initial
Purchasers are not obligated to do so, and any
such market making may be discontinued at any
time without notice. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the New Capital Securities. The
Trust and the Company do not intend to apply for
listing of the Capital Securities on any
securities exchange or for inclusion in NASDAQ.
See "Plan of Distribution."
Use of Proceeds............. Neither the Company nor the Trust will receive
any cash proceeds from the issuance of the New
Capital Securities offered hereby. See "Use of
Proceeds."
Risk Factors................ Prospective investors should carefully consider
the matters set forth under "Risk Factors."
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<PAGE>
RISK FACTORS
Prospective purchasers of Capital Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE NEW GUARANTEE AND THE NEW JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the New Guarantee and under the New
Junior Subordinated Debentures will be unsecured and subordinate and rank
junior in right of payment to all present and future Senior Indebtedness of
the Company to the extent and in the manner set forth in the Indenture and the
New Guarantee, respectively. No payment may be made of the principal of, or
premium, if any, or interest on the New Junior Subordinated Debentures, or in
respect of any redemption, retirement, purchase or other acquisition of any of
the New Junior Subordinated Debentures, at any time when (i) there shall have
occurred and be continuing a default in any payment in respect of any Senior
Indebtedness, or there has been an acceleration of the maturity thereof
because of a default or (ii) in the event of the acceleration of the maturity
of the New Junior Subordinated Debentures until payment has been made on all
Senior Indebtedness. As of March 31, 1997, Senior Indebtedness obligations of
the Company aggregated approximately $199.5 million. There are no terms in the
New Capital Securities, the New Junior Subordinated Debentures or the New
Guarantee that limit the Company's ability to incur additional indebtedness,
including indebtedness which ranks senior to the Junior Subordinated
Debentures and the Guarantee. See "Description of New Guarantee--Status of New
Guarantee" and "Description of New Securities--Description of New Junior
Subordinated Debentures--Subordination."
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION AND LEVERAGE
The Trust's ability to make distributions and other payments on the New
Capital Securities is solely dependent upon the Company's making interest and
other payments on the New Junior Subordinated Debentures. The Company is a
holding company and its assets consist almost entirely of investments in its
subsidiaries. In addition, because the Company is a holding company, the New
Junior Subordinated Debentures are effectively subordinated to all existing
and future liabilities of the Company's subsidiaries. A substantial portion of
the consolidated liabilities have been incurred by its subsidiaries.
Therefore, the Company's rights and the rights of its creditors, including
holders of New Junior Subordinated Debentures, to participate in the
distribution of assets of any subsidiary upon the latter's liquidation or
reorganization will be subject to prior claims of the subsidiary's creditors,
including trade creditors, except to the extent that the Company may itself be
a creditor with recognized claims against the subsidiary (in which case the
claims of the Company would still be subject to the prior claims of any
secured creditor of such subsidiary and of any holder of indebtedness of such
subsidiary that is senior to that held by the Company). Accordingly, the
holders of New Junior Subordinated Debentures may be effectively subordinated
to such claims. At March 31, 1997, the subsidiaries of the Company had total
liabilities of approximately $16.6 billion.
The Company's ability to service its indebtedness, including the New Junior
Subordinated Debentures, and to perform under the New Guarantee, is dependent
upon the earnings of the Company's subsidiaries and the distribution or other
payment of such earnings to the Company in the form of dividends, loans or
advances, and repayment of loans and advances from the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the New Junior
Subordinated Debentures or the New Guarantee or to make any funds available
therefor, whether by dividends, loans or other payments. The payment of
dividends or the making of loans and advances to the Company by its
subsidiaries are contingent upon the earnings of those subsidiaries and are
subject to various business considerations.
In addition, payments of dividends to the Company or its affiliates by the
Company's subsidiaries are subject to various insurance statutory and
regulatory restrictions. The payment of dividends to the Company by its
wholly-owned subsidiary First Allmerica Financial Life Insurance Company, a
Massachusetts insurance company ("FAFLIC"), is subject to general limitations
imposed by Massachusetts insurance laws. Such laws
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<PAGE>
require that statutory surplus following any dividend or distribution be
reasonable in relation to FAFLIC's outstanding liabilities and adequate to
meet its financial needs and permits the payment of dividends only out of
statutory earned (unassigned) surplus unless the payment out of other funds is
approved by the Massachusetts Commissioner of Insurance (the "Commissioner").
Additionally, notice to the Commissioner must be given prior to the payment of
any dividend or distribution. In addition, without prior notice to and
approval of the Commissioner, FAFLIC may not declare or pay an extraordinary
dividend, which is defined as any dividend or distribution of cash or other
property whose fair market value together with other dividends or
distributions made within the preceding 12 months exceeds the greater of
FAFLIC's statutory net gain from operations of the preceding calendar year or
10% of statutory surplus as of the preceding December 31. FAFLIC could have
paid up to approximately $144.9 million in dividends in 1996 without being
subject to the restrictions on payment of extraordinary dividends.
The Company currently owns, through its wholly-owned subsidiaries, including
FAFLIC, 100% of the outstanding stock of The Hanover Insurance Company, a New
Hampshire insurance company ("Hanover"). Dividend payments from Hanover are
regulated by the insurance laws of New Hampshire, which provide that the
maximum dividends and other distributions that an insurer may pay in any
twelve-month period, without prior 30-day notice to and approval of the New
Hampshire Commissioner of Insurance (the "New Hampshire Commissioner"), is
limited to 10% of its statutory policyholders' surplus as of the preceding
December 31. Additionally, New Hampshire law requires 15-day prior notice of
any dividend. In December 1996, Hanover authorized a dividend of $80 million.
On January 2, 1997, Hanover authorized, and on January 9, 1997, the New
Hampshire Commissioner approved, an extraordinary dividend of $120 million.
Any additional dividends from Hanover in 1997 would also be considered
extraordinary dividends and would require the approval of the New Hampshire
Commissioner.
The Indenture does not contain provisions that afford holders of the New
Junior Subordinated Debentures protection in the event of a highly leveraged
transaction, including a change of control, or other similar transactions
involving the Company that may adversely affect such holders. See "Description
of New Junior Subordinated Debentures--General."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company shall have the right under the Indenture to defer
payments of interest on the New Junior Subordinated Debentures at any time or
from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension
Period may extend beyond the Stated Maturity Date. Upon any such deferral,
semi-annual Distributions on the Trust Securities by the Trust will be
deferred (and the amount of Distributions to which holders of the Trust
Securities are entitled will accumulate Distributions thereon at the rate of
8.207% per annum, compounded semi-annually) from the relevant payment date for
such Distributions during any such Extension Period.
The Company may extend any existing Extension Period, provided that such
extension does not cause such Extension Period to exceed 10 consecutive semi-
annual periods or to extend beyond the Stated Maturity Date. Upon the
expiration of any Extension Period and the payment of all interest then
accrued and unpaid on the New Junior Subordinated Debentures (together with
interest thereon at the annual rate of 8.207%, compounded semi-annually, to
the extent permitted by applicable law), the Company may elect to begin a new
Extension Period, subject to the above requirements. There is no limitation on
the number of times that the Company may elect to begin an Extension Period.
See "Description of New Capital Securities--Distributions" and "Description of
New Junior Subordinated Debentures--Option to Extend Interest Payment Period."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of New Capital Securities
will be required to accrue income (as original issue discount ("OID"), in
respect of the deferred stated interest allocable to its New Capital
Securities for United States
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<PAGE>
federal income tax purposes, which will be allocated but not distributed to
holders of record of New Capital Securities. As a result, each such holder of
New Capital Securities will recognize income for United States federal income
tax purposes in advance of the receipt of cash and will not receive the cash
from the Trust related to such income if such holder disposes of its New
Capital 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 New Junior Subordinated Debentures. However,
should the Company determine to exercise such right in the future, the market
price of the Capital Securities is likely to be affected. A holder that
disposes of its New Capital Securities during an Extension Period, therefore,
might not receive the same return on its investment as a holder that continues
to hold its New Capital Securities. In addition, as a result of the existence
of the Company's right to defer interest payments, the market price of the New
Capital Securities (which represent an undivided beneficial interest in the
New Junior Subordinated Debentures) may be more volatile than other securities
on which OID accrues that do not have such rights. See "Certain States Federal
Income Tax Considerations--Interest Income and Original Issue Discount" and
"--Sales of New Capital Securities."
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, deny an issuer a deduction for United States
federal income tax purposes for the payment of interest on instruments with
characteristics similar to the Junior Subordinated Debentures. However, no
similar provision was contained in Chairman Archer's Mark submitted to the
Committee on Ways and Means on June 9, 1997. Even if the proposed legislation
were enacted in its current form, it would not be expected to apply to the New
Junior Subordinated Debentures since the proposed effective date for this
provision is the date of first committee action. There can be no assurances,
however, that the proposed legislation, if enacted, or similar legislation
enacted after the date hereof would not adversely affect the tax treatment of
the New Junior Subordinated Debentures, resulting in a Tax Event. The
occurrence of a Tax Event may result in the redemption of the New Junior
Subordinated Debentures for cash, in which event the holders of the New
Capital Securities would receive cash in redemption of their New Capital
Securities. See "Description of New Capital Securities--Redemption" and
"Description of New Junior Subordinated Debentures--Special Event Prepayment."
See also "Certain Federal Income Tax Consequences--Proposed Tax Legislation."
REDEMPTION OR DISTRIBUTION
Upon the occurrence and continuation of a Special Event (including a Tax
Event or an Investment Company Event, in each case, as defined under
"Description of New Junior Subordinated Debentures--Special Event
Prepayment"), the Company will have the right to prepay the New Junior
Subordinated Debentures in whole (but not in part) at the Special Event
Prepayment Price within 90 days following the occurrence of such Special Event
and therefore cause a mandatory redemption of the Capital Securities at the
Special Event Redemption Price. See "Description of New Capital Securities--
Redemption" and "--Liquidation of the Trust and Distribution of the Junior
Subordinated Debentures."
The Company will have the right at any time to terminate the Trust and cause
the New Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities in liquidation of the Trust. Such right is subject to the
Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities.
Under current United States federal income tax law, a distribution of New
Junior Subordinated Debentures upon the dissolution of the Trust would not be
a taxable event to holders of the Capital Securities. If, however, the Trust
is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of dissolution of the Trust,
the distribution of the New Junior Subordinated Debentures may constitute a
taxable event to holders of Capital Securities. Moreover, upon the occurrence
of a Special Event, a dissolution of the Trust in which holders of Capital
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Considerations--Receipt of Junior Subordinated Debentures
or Cash Upon Liquidation of the Trust."
18
<PAGE>
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for the New Capital
Securities or the New Junior Subordinated Debentures that may be distributed
in exchange for Capital Securities if a dissolution or liquidation of the
Trust were to occur. Accordingly, the New Capital Securities or the New Junior
Subordinated Debentures may trade at a discount to the price that the investor
paid to purchase the New Capital Securities offered hereby. Because holders of
New Capital Securities may receive New Junior Subordinated Debentures,
prospective purchasers of New Capital Securities are also making an investment
decision with regard to the New Junior Subordinated Debentures and should
carefully review all the information regarding the New Junior Subordinated
Debentures contained herein. See "Description of New Capital Securities--
Redemption," "--Distribution of the Junior Subordinated Debentures" and
"Description of New Junior Subordinated Debentures."
RIGHTS UNDER THE NEW GUARANTEE
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the New
Guarantee for the benefit of the holders of New Capital Securities. The Chase
Manhattan Bank will also act as Property Trustee under the Declaration and as
Debenture Trustee under the Indenture. Chase Manhattan Bank Delaware will act
as Delaware Trustee under the Declaration. The New Guarantee will guarantee to
the holders of New Capital Securities the following payments, to the extent
not paid by the Trust: (i) any accumulated and unpaid Distributions that are
required to be paid on the New Capital Securities, to the extent the Trust has
funds on hand legally available therefor, (ii) the Redemption Price, including
all accumulated and unpaid Distributions with respect to New Capital
Securities called for redemption by the Trust, to the extent the Trust has
funds on hand legally available therefor, and (iii) upon a voluntary or
involuntary termination and liquidation of the Trust (other than in connection
with the distribution of New Junior Subordinated Debentures to the holders of
New Capital Securities), the lesser of (a) the aggregate of the liquidation
amount and all accumulated and unpaid Distributions on the Capital Securities
to the date of the payment, to the extent the Trust has funds on hand legally
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to holders of the New Capital Securities in
liquidation of the Trust. Subject to certain limited exceptions, the holders
of a majority in liquidation amount of New Capital 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 New Guarantee.
Notwithstanding the foregoing, if the Guarantee Trustee fails to enforce the
New Guarantee, any holder of New Capital Securities may institute a legal
proceeding directly against the Company to enforce such holders' rights under
the New Guarantee without first instituting a legal proceeding against the
Trust, the Guarantee Trustee or any other person or entity. If the Company
were to default on its obligation to pay amounts payable on the New Junior
Subordinated Debentures or otherwise, the Trust would lack available funds for
the payment of distributions or amounts payable on redemption of the New
Capital Securities or otherwise, and, in such event, holders of the New
Capital Securities would not be able to rely upon the New Guarantee for
payment of such amounts. Instead, holders of the New Capital Securities would
rely on the enforcement (1) by the Property Trustee (as defined in "The Trust"
herein) of its rights as registered holder of the New Junior Subordinated
Debentures against the Company pursuant to the terms of the New Junior
Subordinated Debentures or (2) by such holder of its right against the Company
to enforce payments on the New Junior Subordinated Debentures. See
"Description of New Guarantee" and "Description of New Junior Subordinated
Debentures." The New Guarantee will constitute an unsecured obligation of the
Company and will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as the Junior Subordinated Debentures. The
Declaration provides that each holder of Capital Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the
subordination provisions thereof, and the Indenture.
LIMITED VOTING RIGHTS
Holders of New Capital Securities will have limited voting rights and, so
long as no Debenture Event of Default has occurred and is continuing, will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Trustees (as defined herein), which voting rights are vested
exclusively in the holder of the Common Securities. See "Description of New
Capital Securities--Voting Rights."
19
<PAGE>
TRADING PRICE
The New Capital Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying New
Junior Subordinated Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the New Junior
Subordinated Debentures are treated as issued with OID) and who disposes of
its Capital Securities between record dates for payments of distributions
thereon will be required to include accrued but unpaid interest on the New
Junior Subordinated Debentures through the date of disposition in income as
ordinary income (i.e., interest or, possibly, OID), and to add such amount to
its adjusted tax basis in its pro rata share of the underlying New Junior
Subordinated Debentures deemed disposed of. To the extent the selling price is
less than the holder's adjusted tax basis (which will include all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount" and "--Sales of
Capital Securities."
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities Act
or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws, or pursuant to
an exemption therefrom or in a transaction not subject thereto, and in each
case in compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Company and the Trust do not intend to register under
the Securities Act any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old
Capital Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain
actions or exercised certain rights under the Declaration. See "Description of
New Capital Securities--Voting Rights; Amendment of the Declaration."
The Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed with
the Commission by July 3, 1997 or has not been declared effective by August 2,
1997, the Distribution rate borne by the Old Capital Securities, currently
8.207% per annum, commencing on August 3, 1997 will increase by 0.25% per
annum until the Exchange Offer is consummated. Upon consummation of the
Exchange Offer, holders of Old Capital Securities will not be entitled to any
increase in the Distribution rate thereon or any further registration rights
under the Registration Rights Agreement, except under limited circumstances.
See "Description of Old Capital Securities."
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Company believes the Old
Capital Securities are currently owned by, a relatively small number of
beneficial owners. The Old Capital Securities have not been registered under
the Securities Act and will be subject to restrictions on transferability if
they are not exchanged for the New Capital Securities. Although the New
Capital Securities generally may be resold or otherwise transferred by the
holders (who are not affiliates of the Company or the Trust) without
compliance with the registration requirements under the Securities Act, they
will constitute a new issue of securities with no established trading
20
<PAGE>
market. Old Capital Securities may be transferred by the holders thereof only
in blocks having a Liquidation Amount of not less than $100,000 (100 Old
Capital Securities). New Capital Securities may be transferred by the holders
thereof in blocks having a Liquidation Amount of $1,000 (one New Capital
Security) or integral multiples thereof. The Company and the Trust have been
advised by the Initial Purchasers that the Initial Purchasers presently intend
to make a market in the New Capital Securities. However, the Initial
Purchasers are not obligated to do so and any market-making activity with
respect to the New Capital Securities may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act and may be limited during
the Exchange Offer. Accordingly, no assurance can be given that an active
public or other market will develop for the New Capital Securities or the Old
Capital Securities or as to the liquidity of or the trading market for the New
Capital Securities or the Old Capital Securities. If an active public market
does not develop, the market price and liquidity of the New Capital Securities
may be adversely affected.
If a public trading market develops for the New Capital Securities, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, the Company's results and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the
Company, the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the
Securities Act) of the Company or the Trust may publicly offer for sale or
resell the New Capital Securities only in compliance with the provisions of
Rule 144 under the Securities Act.
Each broker-dealer that receives New Capital Securities for its own account
in exchange for Old Capital Securities, where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such New Capital Securities. See "Plan of
Distribution."
EXCHANGE OFFER PROCEDURES
Issuance of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Capital Securities, a properly completed and
duly executed Letter of Transmittal or Agents' Message in lieu thereof and all
other required documents. Therefore, holders of the Old Capital Securities
desiring to tender such Old Capital Securities in exchange for New Capital
Securities should allow sufficient time to ensure timely delivery. Neither the
Company or the Trust is under any duty to give notification of defects or
irregularities with respect to the tenders of Old Capital Securities for
exchange.
THE COMPANY
The Company is the holding company for a diversified group of insurance and
financial services companies with total assets as of March 31, 1997 of $19.6
billion. Through its subsidiaries, the Company offers financial products and
services in two major areas: Risk Management and Retirement and Asset
Management. Within these broad areas, the Company operates principally in five
operating segments: Regional Property & Casualty; Corporate Risk Management
Services; Retail Financial Services; Institutional Services and Allmerica
Asset Management.
The Regional Property and Casualty segment of the Company's business
consists of its ownership of Allmerica P&C, which, through its subsidiaries
Hanover and Citizens, is in the business of underwriting personal and
commercial property and casualty insurance in five major lines of business:
personal automobile, homeowners, commercial automobile, workers' compensation
and commercial multiple peril.
21
<PAGE>
The Company's Retail Financial Services segment includes the individual
financial products businesses of First Allmerica Financial Life Insurance
Company ("FAFLIC") and its wholly owned subsidiary Allmerica Financial Life
Insurance and Annuity Company ("AFLIAC"), as well as the Company's registered
investment advisor and broker-dealer affiliates. Through this segment, the
Company is a leading provider of investment-oriented life insurance and
annuities to upper income individuals and small businesses throughout the
United States.
The Company's Corporate Risk Management Services segment provides, through
FAFLIC and its subsidiaries, managed care medical group insurance products and
administrative services as well as other group insurance coverages, such as
group life, dental and disability products, to corporate employers.
The Company's Institutional Services segment has historically offered plan
design, investment and participant recordkeeping services to defined benefit
and defined contribution retirement plans of corporate employers and sold GICs
and annuities to corporate retirement plans. The Company conducts its
operations in this segment through FAFLIC and its subsidiaries.
At March 31, 1997, the Company had $10.1 billion of investment assets,
generally of high quality and broadly diversified across asset classes and
individual investment risks. The major categories of investment assets are
fixed maturities, which includes both investment grade and below investment
grade public and private debt securities; equity securities; mortgages,
principally on commercial properties; policy loans and real estate, which
consists primarily of investments in commercial properties. The remainder of
the investment assets is comprised principally of cash and cash equivalents.
Additional information concerning the Company is included in the Company
reports and other documents incorporated by reference in this Prospectus. See
"Available Information" and "Incorporation of Certain Documents by Reference."
The Company is a Delaware corporation incorporated in 1995 with executive
offices at 440 Lincoln Street, Worcester, Massachusetts 01653 (telephone (508)
855-1000).
REGARDING FORWARD-LOOKING STATEMENTS
The Company wishes to caution readers that the following important factors,
among others, in some cases have affected and in the future could affect, the
Company's actual results and could cause the Company's actual results for 1997
and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. The words "believes,"
"anticipated," "expects" and similar expressions are intended to identify
forward looking statements. See "Important Factors Regarding Forward-Looking
Statements" filed as Exhibit 99.2 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 and incorporated herein by reference.
Factors that may cause actual results to differ materially from those
contemplated or projected, forecast, estimated or budgeted in such forward
looking statements include among others, the following possibilities:
(i) adverse catastrophe experience and severe weather; (ii) adverse loss
development for events the Company insured in prior years or adverse trends in
mortality and morbidity; (iii) heightened competition, including the
intensification of price competition, the entry of new competitors, and the
introduction of new products by new and existing competitors; (iv) adverse
state and federal legislation or regulation, including decreases in rates,
limitations on premium levels, increases in minimum capital and reserve
requirements, benefit mandates, limitations on the ability to manage care and
utilization, and tax treatment of insurance products; (v) changes in interest
rates causing a reduction of investment income or in the market value of
interest rate sensitive investments; (vi) failure to obtain new customers,
retain existing customers or reductions in policies in force by existing
customers; (vii) higher service, administrative, or general expense due to the
need for additional advertising, marketing, administrative or management
information systems expenditures; (viii) loss or retirement of key executives;
(ix) increases in medical costs, including increases in utilization, costs of
medical services,
22
<PAGE>
pharmaceuticals, durable medical equipment and other covered items; (x)
termination of provider contracts or renegotiation at less cost-effective
rates or terms of payment; (xi) changes in the Company's liquidity due to
changes in asset and liability matching; (xii) restrictions on insurance
underwriting, based on genetic testing and other criteria; (xiii) adverse
changes in the ratings obtained from independent rating agencies, such as
Moody's, Standard and Poors, A.M. Best and Duff & Phelps; (xiv) lower
appreciation on and decline in value of managed investments, resulting in
reduced variable products, assets and related fees; and (xv) possible claims
relating to sales practices for insurance products.
RECENT DEVELOPMENTS
On February 19, 1997, the Company, Allmerica P&C and Merger Sub entered into
an Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the
terms of the Merger Agreement, Merger Sub will merge with and into Allmerica
P&C, resulting in Allmerica P&C becoming a wholly owned subsidiary of the
Company. Holders of common stock, $1.00 par value, of Allmerica P&C
("Allmerica P&C Common Stock"), other than the Company or its subsidiaries or
persons who properly perfect their appraisal rights under the Delaware General
Corporation Law (each, an "Allmerica P&C Public Stockholder"), will receive,
at the election of such holder, one of the following (collectively, the
"Merger Consideration") in exchange for each share of Allmerica P&C Common
Stock:
(i) (x) 0.4 (the "Standard Exchange Ratio") of a share of the common
stock, $.01 par value of the Company ("Company Common Stock") and (y)
an amount in cash, without interest, equal to $17.60 (the "Standard
Cash Consideration"); provided, however, that (1) in the event the
average closing price of Common Stock for the ten consecutive trading
days ending on the fifth trading day prior to the effective date of
the Merger (the "Average Stock Price") is less than $36.00, the
Standard Cash Consideration shall be equal to (A) $32.00 less (B) the
Standard Exchange Ratio multiplied by the Average Stock Price and (2)
in the event the Average Stock Price is greater than $41.00, the
Standard Cash Consideration shall be equal to (A) $34.00 less (B) the
Standard Exchange Ratio multiplied by the Average Stock Price
(collectively, the "Standard Consideration"); or
(ii) 0.85714 (the "Stock Exchange Ratio") of a share of Company Common
Stock (the "Stock Consideration"); provided, however, that (1) in
the event the Average Stock Price is less than $36.00, the Stock
Exchange Ratio shall be equal to $32.00 divided by the Average Stock
Price and (2) that in the event the Average Stock Price is greater
than $41.00, the Stock Exchange Ratio shall be equal to $34.00
divided by the Average Stock Price; or
(iii) cash, without interest, in an amount equal to $33.00 (the "Cash
Consideration"); provided, however, that (1) in the event the
Average Stock Price is less than $36.00, the Cash Consideration
shall be equal to $32.00 and (2) in the event the Average Stock
Price is more than $41.00, the Cash Consideration shall be equal to
$34.00.
The maximum number of shares of Company Common Stock to be issued as Merger
Consideration is approximately 9.7 million shares. The maximum amount of cash
to be issued as Merger Consideration is approximately $425.5 million. The form
of payment of the Merger Consideration to Allmerica P&C Public Stockholders
will be prorated in the event the Cash Consideration or the Stock
Consideration is oversubscribed.
The total amount of funds required by the Company to pay the cash component
of the Merger Consideration is estimated to be approximately $425.5 million.
The Company expects to finance this cash payment and any costs relating to the
Merger from one or more of the following sources: (i) the $296.3 million of
net proceeds received by the Company from the sale of the Old Capital
Securities; (ii) internally available funds of the Company; and/or (iii)
borrowings pursuant to a revolving bank credit facility.
23
<PAGE>
The Company is pursuing the Merger in order to increase the proportion of
its earnings from Allmerica P&C's property and casualty operations, which are
a key element of the Company's future operations and strategy. Additionally,
the Company believes that the Merger will result in a more stable surplus
position for FAFLIC, since the Allmerica P&C Common Stock and therefore
FAFLIC's surplus, would no longer be linked to a fluctuating market price.
Further, the Merger will create a simplified corporate structure for the
Company, allowing it greater efficiency and flexibility in its utilization of
capital. Lastly, the Merger will provide the Company with certain
administrative cost savings, primarily resulting from the elimination of
certain Allmerica P&C shareholder-related expenses and the elimination of
taxes on Allmerica P&C dividends to its direct shareholder, SMA Financial
Corp.
CORPORATE STRUCTURE
The following organizational chart illustrates the corporate structure of
the Company and its principal subsidiaries, assuming consummation of the
Merger.
[ORGANIZATIONAL CHART]
24
<PAGE>
USE OF PROCEEDS
Neither the Company or the Trust will receive any cash proceeds from the
issuance of the New Capital Securities. In consideration for issuing the New
Capital Securities in exchange for the Old Capital Securities as described in
this Prospectus, the Trust will receive Old Capital Securities in like
Liquidation Amount. The Old Capital Securities surrendered in exchange for the
New Capital Securities will be retired and canceled.
The proceeds to the Trust (without giving effect to expenses of the offering
payable by the Company) from the offering of the Old Capital Securities were
$300,000,000. All of the proceeds from the sale of Old Capital Securities were
invested by the Trust in the Junior Subordinated Debentures. The net proceeds
to the Company of $296.3 million from the sale of the Old Junior Subordinated
Debentures were used to fund a portion of the cash component of the Merger
Consideration. See "The Company--Recent Developments."
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of earnings
to fixed charges for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ----------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges(1)................... 4.3x 8.5x 8.7x 13.4x 10.6x 33.4x 14.7x
</TABLE>
- --------
(1) For purposes of determining the historical ratios of earnings to fixed
charges, earnings consist of earnings before federal income taxes,
minority interest, extraordinary items and cumulative effect of accounting
changes plus fixed charges. Fixed charges consist of interest expense on
debt plus the portion of operating lease rentals representative of the
interest factor.
25
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of the
Company and its subsidiaries at March 31, 1997, and the pro forma consolidated
capitalization of the Company and its subsidiaries as of such date, giving
effect to the Merger as if it had occurred on such date. The table should be
read in conjunction with the Company's consolidated financial statements and
notes thereto included in the documents incorporated by reference herein. See
"Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
---------- -------------
AT MARCH 31, 1997
------------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Long-term debt.......................................... $ 202.2 $ 202.2
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust (1)..................... 300.0 300.0
Equity
Preferred stock, $.01 par value; 20,000,000 shares
authorized; none issued and outstanding.............. -- --
Common stock, $.01 par value; 300,000,000 shares
authorized; 50,134,651 shares issued and
outstanding.......................................... 0.5 0.6
Additional paid-in capital............................ 1,378.8 1,751.0
Retained earnings..................................... 223.5 223.5
Net unrealized appreciation on investments............ 69.2 69.2
---------- ----------
Total equity........................................ 1,672.0 2,044.3
---------- ----------
Total capitalization................................ $ 2,174.2 $ 2,546.5
========== ==========
</TABLE>
- --------
(1) As described herein, the sole assets of the Trust are, and will be, the
Junior Subordinated Debentures with a principal amount of approximately
$309.3 million. The Junior Subordinated Debentures bear interest at the
rate of 8.207% per annum and will mature on February 3, 2027. The Company
owns all of the Common Securities of the Trust. Upon redemption of the
Junior Subordinated Debentures, the Capital Securities will be mandatorily
redeemable.
26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following selected historical consolidated balance sheet data as of
December 31, 1996, 1995, 1994 and 1993 and the statement of income data for
each of the years ended December 31, 1996, 1995, 1994, 1993 and 1992 have been
derived from the consolidated financial statements of the Company, which have
been audited by the Company's independent accountants, whose reports thereon
for the years ended December 31, 1996, 1995 and 1994 and as of December 31,
1996 and 1995 are incorporated by reference in this Prospectus. The balance
sheet data as of March 31, 1997 and 1996 and December 31, 1992 and the
statement of income data for the three months ended March 31, 1997 and 1996
are unaudited but, in the opinion of management, reflect all adjustments
necessary for the fair presentation of the results for such period. All
adjustments are of a normal, recurring nature, except as described in the
accompanying notes. The following data should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto, which
are incorporated by reference in this Prospectus. See "Incorporation by
Reference" and "Available Information."
<TABLE>
<CAPTION>
AT OR FOR THE
THREE MONTHS ENDED AT OR FOR THE
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenues
Premiums............... $ 562.3 547.6 $ 2,236.3 $ 2,222.8 $ 2,181.8 $ 2,079.3 $ 2,172.4
Universal life and
investment product
policy fees........... 56.3 46.5 197.2 172.4 156.8 143.7 132.9
Net investment
income................ 163.4 161.1 672.6 710.5 743.1 782.8 823.7
Net realized
gains(1).............. 44.0 51.6 65.9 39.8 1.1 159.6 9.6
Other income(2)(3)..... 28.9 21.6 102.7 95.4 112.3 73.8 37.1
--------- -------- --------- --------- --------- --------- ---------
Total revenues....... 854.9 828.4 3,274.7 3,240.9 3,195.1 3,239.2 3,175.7
--------- -------- --------- --------- --------- --------- ---------
Benefits, Losses and
Expenses
Policy benefits,
claims, losses and
loss adjustment
expenses.............. 492.3 496.9 1,957.0 2,010.3 2,047.0 1,987.2 2,163.8
Policy acquisition
expenses.............. 119.8 119.7 483.5 470.3 475.7 435.8 424.1
Loss from cession of
disability income
business(4)........... 53.9 -- -- -- -- -- --
Other operating
expenses net(2)(5).... 134.9 115.6 502.5 458.5 518.9 421.3 373.5
--------- -------- --------- --------- --------- --------- ---------
Total benefits,
losses and
expenses............ 800.9 732.2 2,943.0 2,939.1 3,041.6 2,844.3 2,961.4
--------- -------- --------- --------- --------- --------- ---------
Income before federal
income taxes.......... 54.0 96.2 331.7 301.8 153.5 394.9 214.3
Federal income tax
expense............... 9.7 24.2 75.2 82.7 53.4 74.7 62.7
--------- -------- --------- --------- --------- --------- ---------
Income before minority
interest,
extraordinary item
and cumulative effect
of accounting
changes............... 44.3 72.0 256.5 219.1 100.1 320.2 151.6
Minority interest
Distributions on
Company-obligated
mandatorily
redeemable preferred
securities of
subsidiary trust...... (2.4) -- -- -- -- -- --
Equity in
earnings(6)........... (26.0) (24.7) (74.6) (73.1) (51.0) (122.8) (54.4)
--------- -------- --------- --------- --------- --------- ---------
(28.4) (24.7)
Income before
extraordinary item
and cumulative effect
of accounting
changes............... 15.9 47.3 181.9 146.0 49.1 197.4 97.2
Extraordinary item-
demutualization
expenses(7)........... -- -- -- (12.1) (9.2) (4.6) --
Cumulative effect of
accounting
changes(8)............ -- -- -- -- (1.9) (35.4) --
--------- -------- --------- --------- --------- --------- ---------
Net income............. $ 15.9 $ 47.3 $ 181.9 $ 133.9 $ 38.0 $ 157.4 $ 97.2
========= ======== ========= ========= ========= ========= =========
Net income per
share(9).............. $ 0.32 $ 0.94 $ 3.63 $ 2.61 $ -- $ -- $ --
========= ======== ========= ========= ========= ========= =========
Adjusted Net
Income(10)............. $ 33.2 $ 25.5 $ 137.9 $ 116.4 $ 90.4 $ 119.1 $ 109.9
========= ======== ========= ========= ========= ========= =========
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
PERIOD END):
Total assets............ $19,625.6 18,162.7 $18,997.7 $17,757.7 $15,921.5 $15,378.4 $14,083.1
Long-term debt.......... 202.2 202.2 202.2 202.3 2.7 -- --
Total liabilities....... 16,871.2 15,872.3 16,489.0 15,425.0 14,299.4 13,711.7 12,764.1
Minority interest:
Company obligated
mandatorily redeemable
securities of
subsidiary trust...... 300.0 -- -- -- -- -- --
Common Stock(6)........ 782.4 734.5 784.0 758.5 629.7 615.8 422.4
Equity.................. 1,672.0 1,555.9 1,724.7 1,574.2 992.4 1,050.9 896.6
ADDITIONAL DATA:
Book value per
share(9)............... $ 33.35 $ 31.03 $ 34.40 $ 31.40 -- -- --
Ratio of earnings to
fixed charges(11)...... 4.3x 8.5x 8.7x 13.4x 10.6x 33.4x 14.7x
Statutory combined
ratios(12)
Property and Casualty
Insurance
Subsidiaries.......... $ 105.2 $ 105.8 104.5 101.0 105.3 102.7 104.5
Property and Casualty
Industry.............. -- -- 107.0 106.5 108.5 106.9 115.8
Cash dividends declared
per share.............. $ 0.05 0.05 $ 0.20 $ 0.05 -- -- --
</TABLE>
- --------
(1) Net realized gains include (benefits) provisions for investment losses of
$(0.3) million and $1.3 million for the first three months of 1997 and
1996, respectively, and $5.5 million, $2.5 million, $19.5 million, $19.8
million and $22.8 million, in 1996, 1995, 1994, 1993 and 1992,
respectively. These provisions were primarily related to reserves and
writedowns of mortgage loan and real estate investments. Also included in
this item in 1995 is a $20.7 million gain from the sale of the Company's
mutual fund servicing business. In addition, in 1993, a gain of $35.7
million from the sale of the Company's wholly owned subsidiary, Beacon
Insurance Company of America ("Beacon"), and a gain of $62.9 million from
an initial public offering of 19.4% of Citizens' Common Stock, is
included.
(2) Other income primarily includes fee income from the Company's non-
insurance businesses, such as mutual fund services, institutional 401(k)
recordkeeping services and other fee income from the Company's insurance
segments, such as administrative services fees in the Company's Corporate
Risk Management Services ("CRMS") segment. Also included in other income
for the three months ended March 31, 1997 and 1996 and the years ended
December 31, 1996 and 1995 is income from the Closed Block totaling $5.5
million, $3.4 million, $8.6 million and $2.9 million, respectively.
(3) The Company sold its mutual fund servicing business during the first
quarter of 1995, which represented $13.7 million, or 14.4%, of other
income and $15.5 million in direct expenses during the year ended
December 31, 1995 and $42.5 million, or 37.8%, of other income and $49.3
million in direct expenses during the year ended December 31, 1994.
(4) In April 1997, the Company, through its wholly owned subsidiary AFLIAC,
entered into a letter of intent for the 100% coinsurance of its
disability income line of business. The consummation of the transaction
is subject to a number of conditions, including the negotiation and
execution of definitive documentation and the receipt of regulatory
approvals. The proposed transaction has resulted in the recognition of a
$53.9 million pre-tax loss for the three months ended March 31, 1997.
(5) Other operating expenses include all general and administrative expenses,
as well as the operating expenses resulting from the Company's non-
insurance businesses, such as mutual fund services, institutional 401(k)
recordkeeping services and investment advisory services.
(6) The Company's interest in Allmerica P&C, through its wholly owned
subsidiary SMA Financial Corp., was represented by ownership of 59.5%,
59.5%, 59.2%, 58.3%, and 57.4% of the outstanding shares of Allmerica P&C
common stock at March 31, 1997, December 31, 1996, March 31, 1996,
December 31, 1995 and 1994, respectively. Allmerica P&C had ownership
interests of 82.5%, 82.5%, 81.4%, 81.1% and 80.6% in Citizens at March
31, 1997, December 31, 1996, March 31, 1996, December 31, 1995 and 1994,
respectively. Earnings and stockholders' equity attributable to minority
shareholders are included in minority interest in the consolidated
financial statements.
(7) Demutualization expenses relate to costs associated with conversion from
a mutual life insurance company to a stock life insurance company. The
demutualization resulted in the issuance of 37.5 million shares of
Company Common Stock. Concurrent with the demutualization was an initial
public offering which resulted in issuance of an additional 12.6 million
shares of Company Common Stock. The demutualization and initial public
offering occurred during the quarter ended December 31, 1995.
28
<PAGE>
(8) In 1993, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pension" ("SFAS No. 106"), which
requires recognition of a liability for health and life insurance
benefits expected to be provided to employees after retirement. Adoption
of this statement resulted in a charge to net income of $35.4 million,
after taxes of $23.5 million and minority interest of $10.2 million, as a
cumulative effect of a change in accounting principle. In 1994, the
Company adopted the provisions of SFAS No. 112, "Employers' Accounting
for Postemployment Benefits" ("SFAS No. 112"), which requires employers
to recognize the costs of postemployment benefits over the service period
of the employees. Adoption of this statement resulted in a charge to net
income of $1.9 million, after taxes of $1.5 million, and minority
interest of $0.9 million, as a cumulative effect of a change in
accounting principle.
(9) Net income per share and book value per share for the three months ended
March 31, 1997 and 1996 and for the year ended December 31, 1996 are
based on a weighted average of the number of shares outstanding for the
three months ended March 31, 1997 and 1996 and for the year ended
December 31, 1996, respectively. The net income per share and book value
per share for the year ended December 31, 1995 are unaudited and are pro
forma based on a weighted average of the number of shares that would have
been outstanding between January 1, 1995 and December 31, 1995 had the
demutualization transaction and the initial public offering of Company
Common Stock occurred as of January 1, 1995, and does not represent a
projection or forecast of the Company's consolidated results of
operations for any future period.
(10) Adjusted net income represents net income adjusted to eliminate certain
items which management believes are not indicative of overall operating
trends, including net realized gains and losses on the sales of
investments, the cumulative effect of accounting changes, extraordinary
items, loss from the cession of the disability income business, gains on
sales of interests in subsidiaries and the differential earnings tax
adjustment. Company management believes adjusted net income enhances an
investor's understanding of the Company's results of operations by
highlighting net income attributable to the normal, recurring operations of
the business. However, adjusted net income is not a substitute for net
income determined in accordance with generally accepted accounting
principles and should be considered together with the Company's financial
statements.
(11) For purposes of determining the historical ratios of earnings to fixed
charges, earnings consists of earnings before federal income taxes and
minority interest plus interest expense on Company indebtedness and the
portion of operating lease rentals representative of the interest factor.
Fixed charges consist of interest expense on Company indebtedness,
dividends on Company-obligated manditorily redeemable preferred
securities of subsidiary trust recorded as minority interest before
provision for federal income taxes, plus the portion of operating lease
rentals representative of the interest factor.
(12) The amounts presented reflect ratios after policyholder dividends. The
industry combined ratios are not available for the three months ended
March 31, 1997 and 1996. Industry combined ratios before policyholder
dividends were 105.0, 107.1, 105.7 and 114.6 for the years ended December
31, 1995, 1994, 1993 and 1992, respectively. Industry combined ratios
before policyholder dividends are not yet published for 1996. Industry
averages are from A.M. Best.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information (the "Pro Forma
Information") of the Company presented below is based upon its consolidated
financial statements, which include the accounts of Allmerica P&C, as adjusted
to give effect to the Merger. See "The Company--Recent Developments." The
unaudited pro forma condensed consolidated statement of income for the three
months ended March 31, 1997 and for the year ended December 31, 1996 give
effect to the Merger and the offering of the Old Capital Securities (the
"Offering," and together with the Merger, the "Transactions") as if each had
occurred at the beginning of 1997 and 1996, respectively, and is based on the
consolidated statement of income of the Company for such period. The unaudited
pro forma condensed consolidated balance sheet at March 31, 1997 gives effect
to the Transactions as if each had occurred on such date and is based on the
consolidated balance sheet of the Company as of March 31, 1997.
The Pro Forma Information is based on available information and on
assumptions management believes are reasonable and that reflect the effects of
the Transactions. The Pro Forma Information is provided for informational
purposes only and should not be construed to be indicative of the Company's
consolidated financial position or its results of operations had the
transactions been consummated on the dates assumed and does not in any way
represent a projection or forecast of the Company's consolidated financial
position or consolidated results of operations for any future date or period.
The Pro Forma Information should be read in conjunction with the Company's
historical consolidated financial statements and the notes thereto included
elsewhere in this Prospectus and with the information set forth under "The
Company--Recent Developments" as well as the Company's audited consolidated
financial statements and unaudited interim consolidated financial statements
including the notes thereto, the Company's management discussion and analysis
of financial condition and results of operations and the Company's description
of business, which are incorporated by reference into this Prospectus. See
"Incorporation of Certain Documents by Reference."
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
---------- ----------------------------------------
ADJUSTMENTS
RELATING TO THE ADJUSTMENTS
CAPITAL RELATING TO THE ADJUSTED
AFC SECURITIES MERGER BALANCE
---------- --------------- --------------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Premiums................. $562.3 $562.3
Universal life and
investment product
policy fees............. 56.3 56.3
Net investment income.... 163.4 (1.6)(2)
(4.5)(10) 157.3
Net realized investment
gains................... 44.0 44.0
Other income............. 28.9 28.9
------ ----- ------
Total revenues......... 854.9 (6.1) 848.8
------ ----- ------
BENEFITS, LOSSES AND
EXPENSES
Policy benefits, claims,
losses and loss
adjustment expenses..... 492.3 0.1 (3) 492.4
Policy acquisition
expenses................ 119.8 119.8
Loss from cession of
disability income
business................ 53.9 53.9
Other operating
expenses................ 134.9 1.2 (4) 136.1
------ ----- ------
Total benefits, losses
and expenses.......... 800.9 1.3 802.2
------ ----- ------
Income before federal
income taxes.............. 54.0 (7.4) 46.6
Federal income tax expense
(benefit)................. 9.7 (2.0)(5) 7.7
------ ----- ------
Income before minority
interest.................. 44.3 (5.4) 38.9
------ ----- ------
Minority interest
Dividends on Company-
obligated mandatorily
redeemable preferred
securities of subsidiary
trust................... (2.4) (1.6)(6) (4.0)
Equity in earnings....... (26.0) 21.0 (7) (5.0)
------ ----- ----- ------
Total minority
interest.............. (28.4) (1.6) 21.0 (9.0)
------ ----- ----- ------
Net income(8).............. $ 15.9 $(1.6) $15.6 $ 29.9
====== ===== ===== ======
PER SHARE DATA
Net income............... $ 0.32 $ 0.50
------ ------
Shares used in calculating
per common share
amounts(9)................ 50.2 59.9
------ ------
</TABLE>
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(1)
---------- ----------------------------------------
ADJUSTMENTS
RELATING TO THE ADJUSTMENTS
CAPITAL RELATING TO THE ADJUSTED
AFC SECURITIES MERGER BALANCE
---------- --------------- --------------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES
Premiums................ $2,236.3 $2,236.3
Universal life and
investment product
policy fees............ 197.2 197.2
Net investment income... 672.6 (9.0)(2) 655.6
(8.0)(10)
Net realized investment
gains.................. 65.9 65.9
Other income............ 102.7 102.7
-------- ----- --------
Total revenues........ 3,274.7 (17.0) 3,257.7
-------- ----- --------
BENEFITS, LOSSES AND
EXPENSES
Policy benefits, claims,
losses and loss
adjustment expenses.... 1,957.0 0.4 (3) 1,957.4
Policy acquisition
expenses............... 483.5 483.5
Other operating
expenses............... 502.5 5.4 (4) 507.9
-------- ----- --------
Total benefits, losses
and expenses......... 2,943.0 5.8 2,948.8
-------- ----- --------
Income before federal
income taxes............. 331.7 (22.8) 308.9
Federal income tax expense
(benefit)................ 75.2 (5.3)(5) 69.9
-------- ----- --------
Income before minority
interest................. 256.5 (17.5) 239.0
-------- ----- --------
Minority interest
Dividends on Company-
obligated mandatorily
redeemable preferred
securities of
subsidiary trust....... -- (16.0)(6) (16.0)
Equity in earnings...... (74.6) 59.7 (7) (14.9)
-------- ------ ----- --------
Total minority
interest............. (74.6) (16.0) 59.7 (30.9)
-------- ------ ----- --------
Net income(8)............. $ 181.9 $(16.0) $42.2 $ 208.1
======== ====== ===== ========
PER SHARE DATA
Net income.............. $ 3.63 $ 3.48
-------- --------
Shares used in calculating
per common share
amounts(9)............... 50.1 59.8
-------- --------
</TABLE>
32
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA(1)
--------------------------
ADJUSTMENTS
HISTORICAL RELATING TO THE ADJUSTED
AFC MERGER BALANCE
---------- --------------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Investments:
Fixed maturities, at fair value..... $ 7,358.2 $ 7,358.2
Equity securities, at fair value.... 381.6 381.6
Mortgage loans...................... 646.5 646.5
Real estate......................... 100.9 100.9
Policy loans........................ 135.8 135.8
Other long-term investments......... 135.3 135.3
--------- ---------
Total investments................. 8,758.3 8,758.3
Cash and cash equivalents........... 553.3 (425.5)(10) 127.8
Accrued investment income........... 151.8 151.8
Deferred policy acquisition costs... 831.4 831.4
Reinsurance receivables............. 841.4 841.4
Deferred federal income taxes....... 122.6 (24.4)(11) 98.2
Premiums, accounts and notes
receivable......................... 542.5 542.5
Goodwill............................ -- 143.8 (12) 143.8
Other assets........................ 314.8 314.8
Closed Block assets................. 803.7 803.7
Separate account assets............. 6,705.8 6,705.8
--------- ------- ---------
Total assets...................... $19,625.6 $(306.1) $19,319.5
--------- ------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............. $ 2,610.7 $ 2,610.7
Outstanding claims, losses and loss
adjustment expenses................ 2,890.0 2,890.0
Unearned premiums................... 828.0 828.0
Contractholder deposit funds and
other policy liabilities........... 1,926.9 1,926.9
--------- ---------
Total policy liabilities and
accruals......................... 8,255.6 8,255.6
Expenses and taxes payable.......... 712.5 (9.0)(13) 703.5
Reinsurance premiums payable........ 30.1 30.1
Short-term debt..................... 67.6 67.6
Deferred federal income taxes....... 19.1 (19.1)(11) --
Long-term debt...................... 202.2 202.2
Closed Block liabilities............ 883.9 883.9
Separate account liabilities........ 6,700.2 6,700.2
--------- ------- ---------
Total liabilities................. 16,871.2 (28.1) 16,843.1
--------- ------- ---------
MINORITY INTEREST
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust................... 300.0 300.0
Common stock........................ 782.4 (650.3)(14) 132.1
--------- ------- ---------
Total minority interest........... 1,082.4 (650.3) 432.1
--------- ------- ---------
SHAREHOLDERS' EQUITY
Preferred stock..................... -- --
Common stock........................ 0.5 0.1 (15) 0.6
Additional paid-in capital.......... 1,378.8 372.2 (15) 1,751.0
Unrealized appreciation on
investments, net................... 69.2 69.2
Retained earnings................... 223.5 223.5
--------- ------- ---------
Total shareholders' equity........ 1,672.0 372.3 2,044.3
--------- ------- ---------
Total liabilities and
shareholders' equity........... $19,625.6 $(306.1) $19,319.5
========= ======= =========
</TABLE>
33
<PAGE>
(1) The unaudited pro forma condensed consolidated balance sheet consolidates
the historical balance sheet of the Company, which includes the accounts
of Allmerica P&C and the interest of Allmerica P&C Public Stockholders,
as if the Merger had been consummated on March 31, 1997. The pro forma
condensed consolidated statements of income for the three months ended
March 31, 1997 and for the year ended December 31, 1996 consolidate the
historical statements of income of the Company, which include the
accounts of Allmerica P&C and the interest of Allmerica P&C Public
Stockholders, as if the Merger had been consummated on January 1, 1997
and January 1, 1996, respectively.
The Merger will be accounted for by the purchase method of accounting as a
step purchase. Accordingly, the Company's cost to acquire the minority
interest in Allmerica P&C, calculated to be $797.8 million based on a
Company average Common Stock price of $38.50 per share, will be allocated
to the assets acquired and liabilities assumed according to their
respective fair values, with the excess Merger Consideration being
allocated to goodwill. Applicable income tax effects of such adjustments
are included as a component of the Company's net deferred tax asset.
Certain transactions conducted in the ordinary course of business between
the Company and Allmerica P&C are immaterial and, accordingly, have not
been eliminated.
Notwithstanding that the Merger Consideration is subject to change to the
extent of fluctuations in the Average Stock Price, subsequent changes in
the Company's market share price will not affect the measurement of the
cost of the transaction for accounting purposes. The unaudited pro forma
condensed consolidated financial information has been prepared based on a
Company average market price of $38.50, corresponding to the announcement
of the Merger on February 19, 1997. The final allocation of the Merger
Consideration is dependent upon certain valuations and other studies that
have not progressed to a stage where there is sufficient information to
make such an allocation in the accompanying unaudited pro forma condensed
consolidated financial statements. Accordingly, the purchase allocation
adjustments made in connection with the development of the unaudited pro
forma condensed consolidated financial statements are preliminary and have
been made solely for the purpose of developing such unaudited pro forma
consolidated financial statements.
The $143.8 million pro forma excess of Merger Consideration over net
tangible assets acquired as of March 31, 1997 would be amortized over 40
years at a rate of $3.6 million per year, in accordance with generally
accepted accounting principles, which require that acquired intangible
assets be amortized over lives not to exceed 40 years. After consummation
of the Merger, the Company anticipates completion of the valuations and
other studies of the significant assets, liabilities and business
operations of Allmerica P&C. These valuations and other studies include
determination of the fair value of Allmerica P&C's pension plans and
investment portfolio, as well as the final determination of the Company's
acquisition costs resulting from the Merger. Using this information, the
Company will make a final allocation of the Merger Consideration,
including allocation to tangible assets and liabilities, identifiable
intangible assets and goodwill. The Company believes that any significant
allocation of excess Merger Consideration to assets other than goodwill
will be amortized over periods approximating the assets' remaining useful
lives. The amortization periods used in preparing the unaudited pro forma
consolidated financial statements are not expected to change materially at
the consummation of the Merger.
The future results of operations of the Company will reflect increased
amortization of intangible assets which are non-deductible for tax
purposes. The future financial position of the Company will reflect
increased intangible assets as described above and increased shareholders'
equity resulting from the issuance of approximately 9.7 million shares of
Company Common Stock to Allmerica P&C Public Stockholders.
(2) Represents amortization or accretion of purchased premium or discount,
respectively, on fixed maturities over the estimated remaining life of
the securities. Net investment income is adjusted to include the effect
of restating the historical yield on fixed maturity securities to the
estimated market yield as of the beginning of the period. The change to a
market yield is estimated by referencing Hanover's and Citizens'
unrealized gain or loss on fixed maturities at the beginning of the
period, amortized over the estimated life of the portfolio (5 years).
34
<PAGE>
(3) Represents 40% of the elimination of the amortization of unrecognized
transition, prior service and other costs recognized in fair value
purchase accounting adjustment for Hanover's and Citizens' pension plans.
The remaining 60% of the elimination is an adjustment to other operating
expense. The 40%-60% allocation is based on the percentage of total
salary expense charged to losses and loss adjustment expenses and other
operating expenses.
(4) Represents (i) amortization over 40 years of goodwill resulting from this
transaction of $0.9 million for the three months ended March 31, 1997 and
$4.1 million for the year ended December 31, 1996 and (ii) 60% of the
elimination of the amortization of unrecognized transition, prior service
and other costs recognized in fair value purchase accounting adjustments
for Hanover's and Citizens' pension plans of $0.1 million for the three
months ended March 31, 1997 and $0.6 million for the year ended December
31, 1996 (the remaining 40% of the elimination is an adjustment to policy
benefits, claims, losses and loss adjustment expenses) and (iii)
elimination of the amortization of unrecognized transition, prior service
and other costs recognized in fair value purchase accounting adjustments
for Hanover and Citizens post-retirement benefit plans of $0.2 million
for the three months ended March 31, 1997 and $0.7 million for the year
ended December 31, 1996. The 60%- 40% allocation is based on the
percentage of total salary expense charged to adjustment policy benefits,
claims, losses and loss adjustment expenses and other operating expenses.
(5) Represents the income tax benefit of the above adjustments except
amortization of goodwill, which is non-deductible for tax purposes. The
income tax benefits of adjustments to net investment income discussed in
Note (10) which relate to reduced cash at Allmerica P&C are at 18.5% for
the three months ended March 31, 1997 and 19.4% for the year ended
December 31, 1996, respectively, which represents the effective tax rate
on Allmerica P&C's investment portfolio. The income tax benefit of all
other adjustments, except goodwill, is at 35%.
(6) The Company, through a subsidiary trust, on February 3, 1997, issued
mandatorily redeemable preferred securities with a liquidation amount
totaling $300.0 million due 2027, which accrue dividends at an annual
rate of 8.207%. Adjustments represent accrued dividends on these
securities of a subsidiary trust, net of federal income taxes at 35%, as
if such securities had been issued at the beginning of each period
presented. Distributions are payable on these securities on February 15
and August 15 of each year.
(7) Represents elimination of the minority interest expense associated with
the Company's interest in Allmerica P&C on the Company's consolidated
statement of income.
(8) The following ratios of earnings to fixed charges are derived from the
historical Consolidated Statements of Income and the Unaudited Pro Forma
Condensed Consolidated Statements of Income:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Historical Ratio of Earnings to
Fixed Charges(a)................... 4.3x 8.7x
Pro Forma Ratio of Earnings to Fixed
Charges(b)......................... 3.3x 5.2x
</TABLE>
(a) For purposes of determining the historical ratios of earnings to fixed
charges, earnings consist of earnings before federal income taxes and
minority interest plus interest expense on Company indebtedness and
the portion of operating lease rentals representative of the interest
factor. Fixed charges consist of interest expense on Company
indebtedness, dividends on Company-obligated manditorily redeemable
preferred securities of subsidiary trust recorded as minority interest
before provision for federal income taxes, plus the portion of
operating lease rentals representative of the interest factor.
(b) For purposes of determining the pro forma ratios of earnings to fixed
charges, earnings consist of pro forma earnings before federal income
taxes and minority interest plus interest expense on Company
indebtedness and the portion of operating lease rentals representative
of the interest factor. Fixed charges consist of interest expense on
Company indebtedness, pro forma dividends on Company-obligated
manditorily redeemable preferred securities of subsidiary trust
recorded as minority interest before provision for federal income
taxes, plus the portion of operating lease rentals representative of
the interest factor.
35
<PAGE>
(9) The unaudited pro forma condensed consolidated financial statements
reflect the conversion of each share held by an Allmerica P&C Public
Stockholder (24.2 million minority-owned shares at March 31, 1997) to 0.4
shares of Company Common Stock (50.2 million weighted average shares
outstanding at March 31, 1997), resulting in 59.9 million pro forma
shares of Company Common Stock outstanding.
The total market value of the Company Common Stock to be issued in
connection with the Merger, is calculated as follows (in thousands, except
the Standard Exchange Ratio and per share data):
<TABLE>
<S> <C>
Allmerica P&C minority-owned common shares outstanding on March
31, 1997...................................................... 24,177
Standard Exchange Ratio........................................ 0.4
--------
Shares of Company Common Stock to be issued.................... 9,671
Average market price per share of Company Common Stock at Feb-
ruary 19, 1997 $ 38.50
--------
Total market value of Company Common Stock to be issued...... $372,334
========
</TABLE>
(10) Reflects cash paid to Allmerica P&C minority shareholders at $17.60 per
approximately 24.2 million shares. Net investment income is decreased to
reflect the lower level of cash and cash equivalents at Allmerica P&C,
based on $129.2 million of cash utilized in the Merger and Allmerica
P&C's average portfolio yield of 6.11% and 6.19% for the three months
ended March 31, 1997 and the year ended December 31, 1996, respectively.
In addition, net investment income is reduced by $2.5 million for the
three months ended March 31, 1997 for the actual net investment income
earned on the proceeds from the mandatorily redeemable preferred
securities.
(11) Reflects the deferred tax effect of adjusting certain pension and post
retirement benefit liabilities to fair value. Additionally, the Company
and Allmerica P&C will become a single taxable entity as a result of the
Merger. Accordingly, the historical deferred tax liability of $19.1
million, which is related to the Life Insurance Subsidiaries, has been
netted against the historical deferred tax asset as part of the pro forma
adjustments.
(12) Consists of the excess of purchase price over the fair value of net
assets acquired, calculated as follows (in millions):
<TABLE>
<S> <C>
Purchase price.................................................. $ 797.8
Book value of minority interest in Allmerica P&C................ (650.3)
Fair market value adjustments on
Reserve for acquisition costs................................. 6.0
Accrued pension and post-retirement benefits (net of taxes)... (9.7)
-------
Net goodwill.................................................. $ 143.8
=======
</TABLE>
(13) Consists of a $6.0 million increase resulting from the establishment of a
reserve for acquisition costs and a $15.0 million decrease resulting from
adjusting certain pension and postretirement benefit liabilities to fair
value.
(14) Represents elimination of the Company's historical minority interest
related to Allmerica P&C.
(15) Reflects issuance of 9.7 million shares of Company Common Stock exchanged
for 100% of the minority shares of Allmerica P&C Common Stock, as
described in Note 9 above.
36
<PAGE>
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of January 24, 1997, executed by the
Company, as Sponsor (the "Sponsor"), the Delaware Trustee and the
Administrative Trustees named therein (the "Initial Declaration"), and (ii)
the filing of a certificate of trust with the Secretary of State of the State
of Delaware on January 24, 1997. The Initial Declaration was replaced by an
amended and restated declaration of trust executed as of February 3, 1997 by
the Company, as Sponsor, and the Issuer Trustees (as defined herein) (the
"Declaration"). The Trust exists for the exclusive purposes of (i) issuing and
selling the Trust Securities, which represent undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds from the sale of
the Trust Securities in the Junior Subordinated Debentures and (iii) engaging
in only those other activities necessary, advisable or incidental thereto.
Accordingly, the Junior Subordinated Debentures are and will be the sole
assets of the Trust and payments under the Junior Subordinated Debentures will
be the sole revenues of the Trust. All of the Common Securities are owned
directly by the Company. The Common Securities rank pari passu, and any
payments will be made thereon pro rata, with the Capital Securities, except
that upon the occurrence and during the continuance of an Event of Default,
the rights of the Company as holder of the Common Securities to payments in
respect of Distributions and payments upon liquidation, redemption or
otherwise will be subordinated and rank junior to the rights of the holders of
the Capital Securities. See "Description of New Securities--Description of New
Capital Securities--Subordination of Common Securities." The Company has
acquired Common Securities in a Liquidation Amount equal to at least 3% of the
total capital of the Trust. The Trust has a term of 31 years, but may
terminate earlier as provided in the Declaration. The Trust's business and
affairs are conducted by trustees (the "Issuer Trustees") appointed by the
Company as the direct holder of the Common Securities. The Issuer Trustees are
The Chase Manhattan Bank as the Property Trustee (the "Property Trustee"),
Chase Manhattan Bank Delaware as the Delaware Trustee (the "Delaware
Trustee"), and three individual trustees (the "Administrative Trustees"). The
Chase Manhattan Bank, as Property Trustee, is sole indenture trustee under the
Declaration. The Chase Manhattan Bank is also indenture trustee under the
Guarantee and the Indenture. See "Description of New Guarantee" and
"Description of New Junior Subordinated Debentures." The holder of the Common
Securities or, if an Event of Default under the Declaration has occurred and
is continuing, the holders of a majority in Liquidation Amount of the Capital
Securities, will be entitled to appoint, remove or replace the Property
Trustee and/or the Delaware Trustee. In no event will the holders of the
Capital Securities have the right to vote to appoint, remove or replace the
Administrative Trustees; such voting rights will be vested exclusively in the
holder of the Common Securities. The duties and obligations of each Issuer
Trustee are governed by the Declaration and the Delaware Business Trust Act.
The Company will pay directly all fees, reasonable expenses, disbursements and
advancements (other than the Trust Securities) related to the Trust and the
offering of the Capital Securities, including all ongoing costs, expenses and
liabilities of the Trust.
The principal place of business of the Trust is c/o Allmerica Financial
Corporation, 440 Lincoln Street, Worcester, Massachusetts 01653 Attention:
Chief Financial Officer.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Company and
the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Company and the Trust agreed to file with
the Commission and to use their reasonable efforts to cause to become
effective a registration statement with respect to the exchange of the Old
Capital Securities for the New Capital Securities. A copy of the Registration
Rights Agreement has been filed as an Exhibit to the Registration Statement of
which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Company and the Trust under the Registration Rights Agreement. The form
and terms of the New Capital Securities are the same as the form
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<PAGE>
and terms of the Old Capital Securities except that the New Capital Securities
have been registered under the Securities Act and will not be subject to the
$100,000 minimum Liquidation Amount transfer restriction and certain other
transfer restrictions applicable to the Old Capital Securities and will not
provide for any increase in the Distribution rate thereon. In that regard, the
Old Capital Securities provide, among other things, that, if a registration
statement relating to the Exchange Offer has not been filed with the
Commission by July 3, 1997 or has not been declared effective by August 2,
1997, the Distribution rate borne by the Old Capital Securities, currently
8.207%, commencing on August 3, 1997 will increase by 0.25% per annum until
the Exchange Offer is consummated. Upon consummation of the Exchange Offer,
holders of Old Capital Securities will not be entitled to any increase in the
Distribution rate thereon or any further registration rights under the
Registration Rights Agreement, except under limited circumstances. See "Risk
Factors--Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Capital Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Old Capital Securities in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from such holder, or any participant in The
Depository Trust Company ("DTC") system whose name appears on a security
position listing as the holder of such Old Capital Securities and who desires
to deliver such Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange promptly after the
Expiration Date, the Old Guarantee for the New Guarantee and the Old Junior
Subordinated Debentures, in an amount corresponding to the Old Capital
Securities accepted for exchange, for a like aggregate principal amount of the
New Junior Subordinated Debentures. The New Guarantee and New Junior
Subordinated Debentures have been registered under the Securities Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $300,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly
withdrawn in accordance with the procedures described below. The Trust will
issue, promptly after the Expiration Date, an aggregate Liquidation Amount of
up to $300,000,000 of New Capital Securities in exchange for a like principal
amount of outstanding Old Capital Securities tendered and accepted in
connection with the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum Liquidation Amount of
Old Capital Securities being tendered. As of the date of this Prospectus,
$300,000,000 aggregate Liquidation Amount of Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered for or are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and be entitled to the benefits of the
Declaration, but will not be entitled to any further registration rights under
the Registration Rights Agreement, except under limited circumstances. See
"Risk Factors--Consequences of a Failure to Exchange Old Capital Securities"
and "Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein
or otherwise, certificates for any such unaccepted Old Capital Securities will
be returned, without expense, to the tendering holder thereof promptly after
the Expiration Date.
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<PAGE>
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Company will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "--Fees and
Expenses" below.
NEITHER THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY ISSUER
TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN
ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD CAPITAL SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER
PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL
SECURITIES TO TENDER BASED ON SUCH HOLDERS OWN FINANCIAL POSITION AND
REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on August 1,
1997 unless the Exchange Offer is extended by the Company or the Trust (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, (i) to delay the acceptance of the Old Capital Securities for exchange,
(ii) to terminate the Exchange Offer (whether or not any Old Capital
Securities have theretofore been accepted for exchange) if the Trust
determines, in its sole and absolute discretion, that any of the events or
conditions referred to under "--Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Old Capital Securities tendered
pursuant to the Exchange Offer, subject, however, to the right of holders of
Old Capital Securities to withdraw their tendered Old Capital Securities as
described under "--Withdrawal Rights," and (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in any respect. If the
Exchange Offer is amended in a manner determined by the Company and the Trust
to constitute a material change, or if the Company and the Trust waive a
material condition of the Exchange Offer, the Company and the Trust will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the holders of the Old Capital Securities, and the Company
and the Trust will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral (promptly confirmed in writing) or written notice
thereof to the Exchange Agent and by making a public announcement thereof, and
such announcement in the case of an extension will be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Company
and the Trust may choose to make any public announcement and subject to
applicable law, the Company and the Trust shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old Capital
Securities tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of
Old Capital Securities into the Exchange Agent's account at DTC, (ii) the
Letter of Transmittal (or facsimile thereof), properly completed and
39
<PAGE>
duly executed, with any required signature guarantees or (in case of a book-
entry transfer) an Agent's Message in lieu of the Letter of Transmittal, and
(iii) any other documents required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Old Capital Securities into the Exchange Agent's account at
DTC. The term "Agent's Message" means a message, transmitted by DTC to and
received by the Exchange Agent and forming a part of book-entry confirmation,
which states that DTC has received an express acknowledgment from the
tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by the Letter of Transmittal and that the
Trust and the Company may enforce such Letter of Transmittal against such
participant.
Subject to the terms and conditions of the Exchange Offer, the Trust will be
deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral (promptly confirmed in writing) or written notice to the Exchange Agent
of the Trust's acceptance of such Old Capital Securities for exchange pursuant
to the Exchange Offer. The Exchange Agent will act as agent for the Trust for
the purpose of receiving tenders of Old Capital Securities, Letters of
Transmittal and related documents, and as agent for tendering holders for the
purpose of receiving Old Capital Securities, Letters of Transmittal and
related documents and transmitting New Capital securities to validly tendering
holders. Such exchange will be made promptly after the Expiration Date. If for
any reason whatsoever, acceptance for exchange or the exchange of any Old
Capital Securities tendered pursuant to the Exchange Offer is delayed (whether
before or after the Trust's acceptance for exchange of Old Capital Securities)
or the Trust extends the Exchange Offer or is unable to accept for exchange or
exchange Old Capital Securities tendered pursuant to the Exchange Offer, then,
without prejudice to the Trust's rights set forth herein, the Exchange Agent
may, nevertheless, on behalf of the Trust and subject to Rule 14e-1(c) under
the Exchange Act, retain tendered Old Capital Securities and such Old Capital
Securities may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a
holder of Old Capital Securities will warrant and agree in the Letter of
Transmittal that it has full power and authority to tender, exchange, sell,
assign and transfer Old Capital Securities, that the Trust will acquire good,
marketable and unencumbered title to the tendered Old Capital Securities, free
and clear of all liens, restrictions, charges and encumbrances, and the Old
Capital Securities tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Trust or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Capital Securities tendered pursuant to
the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender
Except as set forth below, in order for Old Capital Securities to be validly
tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees or (in the case of a book-entry transfer) an Agent's
Message in lieu of the Letter of Transmittal and any other required documents,
must be received by the Exchange Agent at one of its addresses set forth under
"--Exchange Agent," and either (i) tendered Old Capital Securities must be
received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a book-entry confirmation, including an Agent's Message if the tendering
holder has not delivered a Letter of Transmittal, must be received by the
Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the
guaranteed delivery procedures set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a tendering
holder should fill in the amount of Old Capital Securities being tendered in
the appropriate box on the Letter of Transmittal or so indicate in an Agent's
Message in lieu of the Letter of Transmittal. The entire amount of Old Capital
Securities delivered to the Exchange Agent will be deemed to have been
tendered.
40
<PAGE>
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer
The Exchange Agent will establish an account with respect to the Old Capital
Securities at DTC for purposes of the Exchange Offer within two business days
after the date of this Prospectus. Any financial institution that is a
participant in DTC's book-entry transfer facility system may make a book-entry
delivery of the Old Capital Securities by causing DTC to transfer such Old
Capital Securities into the Exchange Agent's account at DTC in accordance with
DTC's procedures for transfers. However, although delivery of Old Capital
Securities may be effected through book-entry transfer into the Exchange
Agent's account at DTC, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or an Agent's Message in lieu of the Letter of Transmittal, and any other
required documents, must in any case be delivered to and received by the
Exchange Agent at its address set forth under "--Exchange Agent" on or prior
to the Expiration Date, or the guaranteed delivery procedures set forth below
must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees
Certificates for the Old Capital Securities need not be endorsed and
signature guarantees on the Letter of Transmittal are unnecessary unless (a) a
certificate for the Old Capital Securities is registered in a name other than
that of the person surrendering the certificate or (b) such holder completes
the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" in the Letter of Transmittal. In the case of (a) or (b) above,
such certificates for Old Capital Securities must be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or clearing
agency; or (v) a savings association that is a participant in a Securities
Transfer Association (an "Eligible Institution"), unless surrendered on behalf
of such Eligible Institution. See Instruction 1 to the Letter of Transmittal.
Guaranteed Delivery
If a holder desires to tender Old Capital Securities pursuant to the
Exchange Offer and the certificates for such Old Capital Securities are not
immediately available or time will not permit all required documents to reach
the Exchange Agent on or prior to the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, such Old Capital
Securities may nevertheless be tendered, provided that all of the following
guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form accompanying the Letter of Transmittal, is
received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Capital securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof), with any required signature
guarantees and any other
41
<PAGE>
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three New York Stock Exchange trading days after the
date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mailed to the Exchange Agent and must include a guarantee by
an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a book-
entry confirmation with respect to such Old Capital Securities, and a properly
completed and duly executed Letter of Transmittal (or facsimile thereof or
Agent's Message in lieu thereof), together with any required signature
guarantees and any other documents required by the Letter of Transmittal.
Accordingly, the delivery of New Capital Securities might not be made to all
tendering holders at the same time, and will depend upon when Old Capital
Securities, book-entry confirmations with respect to Old Capital Securities
and other required documents are received by the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Old Capital
Securities will be determined by the Company and the Trust, in their sole
discretion, whose determination shall be final and binding on all parties. The
Company and the Trust reserve the absolute right, in their sole and absolute
discretion, to reject any and all tenders determined by them not to be in
proper form or the acceptance of which, or exchange for, may, in the opinion
of counsel to the Company and the Trust, be unlawful. The Company and the
Trust also reserve the absolute right, subject to applicable law, to waive any
of the conditions of the Exchange Offer as set forth under "--Conditions to
the Exchange Offer" or any condition or irregularity in any tender of Old
Capital Securities of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders.
The interpretation by the Company and the Trust of the terms and conditions
of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Company,
the Trust, any affiliates or assigns of the Company or the Trust, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in tenders or incur any liability for failure to give any
such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and unless waived by
the Company and the Trust, proper evidence satisfactory to the Company and the
Trust, in their sole discretion, of such person's authority to so act must be
submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee or custodian is urged to contact such entity promptly if such
beneficial holder wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance
of the Commission as set forth in certain interpretive letters
42
<PAGE>
addressed to third parties in other transactions. However, neither the Company
nor the Trust sought its own interpretive letter and there can be no assurance
that the staff of the Division of Corporation Finance of the Commission would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the staff of the Division of Corporation Finance of the Commission, and
subject to the two immediately following sentences, the Company and the Trust
believe that New Capital Securities issued pursuant to the Exchange Offer in
exchange for Old Capital Securities may be offered for resale, resold and
otherwise transferred by a holder thereof (other than a holder who is a
broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Capital
Securities are acquired in the ordinary course of such holder's business and
that such holder is not participating, and has no arrangement or understanding
with any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Capital Securities. However, any holder of Old
Capital Securities who is an "affiliate" of the Company or the Trust or who
intends to participate in the Exchange Offer for the purpose of distributing
New Capital Securities, or any broker-dealer who purchased Old Capital
Securities from the Trust for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other
transfer of such Old Capital Securities unless such sale is made pursuant to
an exemption from such requirements. In addition, as described below, if any
broker-dealer holds Old Capital Securities acquired for its own account as a
result of market-making or other trading activities and exchanges such Old
Capital Securities for New Capital Securities, then such broker-dealer must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required
to represent that (i) it is not an "affiliate" of the Company or the Trust,
(ii) any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New
Capital Securities. In addition, the Company and the Trust may require such
holder, as a condition to such holder's eligibility to participate in the
Exchange Offer, to furnish to the Company and the Trust (or an agent thereof)
in writing information as to the number of "beneficial owners" (within the
meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such holder
holds the Old Capital Securities to be exchanged in the Exchange Offer. Each
broker-dealer that receives New Capital Securities for its own account
pursuant to the Exchange Offer must acknowledge that it acquired the Old
Capital Securities for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Capital Securities. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the staff of the Division of
Corporation Finance of the Commission in the interpretive letters referred to
above, the Company and the Trust believe that Participating Broker-Dealers who
acquired Old Capital Securities for their own accounts as a result of market-
making activities or other trading activities may fulfill their prospectus
delivery requirements with respect to the New Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities
which represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale
of such New Capital Securities. Accordingly, this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales
of New Capital Securities received in exchange for Old Capital Securities
where such Old Capital Securities were acquired by such Participating Broker-
Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
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Agreement, the Company and the Trust have agreed that this Prospectus, as it
may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of such New Capital
Securities for a period ending 90 days after the Expiration Date (subject to
extension under certain limited circumstances described below) or, if earlier,
when all such New Capital Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of Distribution." However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of New Capital Securities received in exchange for Old Capital
Securities pursuant to the Exchange Offer must notify the Company or the
Trust, or cause the Company or the Trust to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth
herein under "--Exchange Agent." Any Participating Broker-Dealer who is an
"affiliate" of the Company or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal or delivery of an Agent's Message in
lieu thereof, that, upon receipt of notice from the Company or the Trust of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a
material fact necessary in order to make the statements contained or
incorporated by reference herein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of New Capital Securities (or the New Guarantee
or the New Junior Subordinated Debentures, as applicable) pursuant to this
Prospectus until the Company or the Trust has amended or supplemented this
Prospectus to correct such misstatement or omission and has furnished copies
of the amended or supplemented misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating Broker-
Dealer or the Company or the Trust has given notice that the sale of the New
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable) may be resumed, as the case may be. If the Company
or the Trust gives such notice to suspend the sale of the New Capital
Securities (or the New Guarantee or the New Junior Subordinated Debentures, as
applicable), it shall extend the 90-day period referred to above during which
Participating Broker-Dealers are entitled to use this Prospectus in connection
with the resale of New Capital Securities by the number of days during the
period from and including the date of the giving of such notice to and
including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales
of the New Capital Securities or to and including the date on which the
Company or the Trust has given notice that the sale of New Capital Securities
(or the New Guarantee or the New Junior Subordinated Debentures, as
applicable) may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "--Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Capital Securities to be
withdrawn, and (if certificates for such Old Capital Securities have been
tendered) the name of the registered holder of the Old Capital Securities as
set forth on the Old Capital Securities, if different from that of the person
who tendered such Old Capital Securities. If Old Capital Securities have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Old Capital Securities, the tendering holder must
submit the serial numbers shown on the particular Old Capital Securities to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of Old Capital Securities tendered
for the account of an
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Eligible Institution. If Old Capital Securities have been tendered pursuant to
the procedures for book-entry transfer set forth in "--Procedures for
Tendering Old Capital Securities," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of
Old Capital Securities, in which case a notice of withdrawal will be effective
if delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Old Capital Securities may not be
rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "--Procedures for Tendering Old Capital
Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and
binding on all parties. Neither the Company, the Trust, any affiliates or
assigns of the Company or the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities which have been tendered but which
are withdrawn will be returned to the holder thereof promptly after
withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive Distributions on such Old Capital Securities and
will be deemed to have waived the right to receive any Distributions on such
Old Capital Securities accumulated from and including February 3, 1997.
Accordingly, holders of New Capital Securities as of the record date for the
payment of Distributions on August 15, 1997 will be entitled to receive
Distributions accumulated from and including February 3, 1997.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any extension
of the Exchange Offer, the Company and the Trust will not be required to
accept for exchange, or to exchange, any Old Capital Securities for any New
Capital Securities, and, as described below, may terminate the Exchange Offer
(whether or not any Old Capital Securities have theretofore been accepted for
exchange) or may waive any conditions to or amend the Exchange Offer, if any
of the following conditions have occurred or exists or have not been
satisfied:
(a) there shall occur a change in the current interpretation by the staff
of the Commission which permits the New Capital Securities issued pursuant
to the Exchange Offer in exchange for Old Capital Securities to be offered
for resale, resold and otherwise transferred by holders thereof (other than
broker-dealers and any such holder which is an "affiliate" of the Company
or the Trust within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery provisions
of the Securities Act provided that such New Capital Securities are
acquired in the ordinary course of such holders' business and such holders
have no arrangement or understanding with any person to participate in the
distribution of such New Capital Securities; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer; or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Company or the Trust, threatened for that purpose or any governmental
approval has not been obtained, which approval the Company or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby.
If the Company or the Trust determines in its sole and absolute discretion
that any of the foregoing events or conditions has occurred or exists or has
not been satisfied, it may, subject to applicable law, terminate the Exchange
Offer (whether or not any Old Capital Securities have theretofore been
accepted for exchange) or may
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waive any such condition or otherwise amend the terms of the Exchange Offer in
any respect. If such wavier or amendment constitutes a material change to the
Exchange Offer, the Company or the Trust will promptly disclose such wavier or
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Old Capital Securities and will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent by registered or certified mail or by hand or overnight
delivery as follows:
By Registered or Certified Mail or Hand or Overnight Delivery:
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, New York 10041
Attention: Carlos Esteves
Confirm By Telephone:
Carlos Esteves: (212) 638-0828
Facsimile Transmissions:
(ELIGIBLE INSTITUTIONS ONLY)
Carlos Esteves: (212) 638-7375 or (212) 344-9367
Delivery to other than the above addresses or facsimile numbers will not
constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses
and other custodians, nominees and fiduciaries the reasonable out-of-pocket
expenses incurred by them in forwarding copies of this Prospectus and related
documents to the beneficial owners of Old Capital Securities, and in handling
or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Capital Securities in connection with the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
Neither the Company nor the Trust will make any payment to brokers, dealers
or other nominees soliciting acceptances of the Exchange Offer.
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Trust has issued the Old
Capital Securities and the Common Securities and will issue the New Capital
Securities in connection with the Exchange Offer. The New Capital
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Securities will represent preferred beneficial interests in the assets of the
Trust and the holders of the New Capital Securities and the Old Capital
Securities will be entitled to a preference over the Common Securities in
certain circumstances with respect to Distributions and amounts payable on
redemption of the Trust Securities or liquidation of the Trust. See "--
Subordination of Common Securities." The Declaration has been qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). This
summary of certain provisions of the New Capital Securities and the
Declaration does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Declaration, the Delaware Business Trust Act and the Trust Indenture Act.
Certain capitalized terms used herein are defined in the Declaration.
GENERAL
The Capital Securities (including the Old Capital Securities and the New
Capital Securities) are limited to $300,000,000 aggregate Liquidation Amount
at any one time outstanding. The New Capital Securities will rank pari passu,
and payments will be made thereon pro rata, with the Old Capital Securities
and the Common Securities except as described under "--Subordination of Common
Securities." Legal title to the New Junior Subordinated Debentures will be
held by the Property Trustee in trust for the benefit of the holders of the
New Capital Securities and the related Common Securities. The New Guarantee
will be a guarantee on a subordinated basis but will not guarantee payment of
Distributions or amounts payable on redemption of the New Capital Securities
or on liquidation of the Trust when the Trust does not have funds on hand
legally available for such payments. See "Description of New Guarantee."
DISTRIBUTIONS
Distributions on the New Capital Securities will be cumulative, will
accumulate from February 3, 1997 and will be payable semi-annually in arrears
on August 15 and February 15 of each year, commencing August 15, 1997, at the
annual rate of 8.207% of the Liquidation Amount to the holders of the New
Capital Securities on the relevant record dates. The record dates will be the
first day of the month in which the relevant Distribution Date (as defined
below) falls. The amount of Distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which Distributions are payable on the New Capital Securities
is not a Business Day (as defined below), payment of the Distribution payable
on such date will be made on the next succeeding day that is a Business Day
(and without any interest or other payment in respect to any such delay), in
each case with the same force and effect as if made on such date (each date on
which Distributions are payable in accordance with the foregoing, a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in New York, New
York or Wilmington, Delaware are authorized or required by law or executive
order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Company will have the right under the Indenture to elect to
defer the payment of interest on the New Junior Subordinated Debentures at any
time and from time to time for a period not exceeding 10 consecutive semi-
annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. Upon any such
election, semi-annual Distributions on the New Capital Securities will be
deferred by the Trust during such Extension Period. Distributions to which
holders of the New Capital Securities are entitled during any such Extension
Period will accumulate additional Distributions thereon at the rate per annum
of 8.207% thereof, compounded semi-annually, to the extent permitted by
applicable law from the relevant Distribution Date. The term "Distributions,"
as used herein, shall include any such additional Distributions.
During any such Extension Period, pursuant to the Indenture, the Company may
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock (which includes common and preferred stock), (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including any Other Debentures (as
defined in the Indenture)) that rank pari passu with or junior in right of
payment to the Junior Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Company of any securities of any
subsidiary of the Company (including Other Guarantees (as
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defined in the Indenture)) if such guarantee ranks pari passu with or junior
in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Company, (b) any
declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) as a direct result of, and only to the
extent required in order to avoid the issuance of fractional shares of capital
stock following, a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock or pursuant to an
acquisition in which fractional shares of the Company's capital stock would
otherwise be issued, (e) 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 (f)
purchases of common stock related to the issuance of common stock or rights
under any benefit plan for directors, officers, agents or employees of the
Company or its subsidiaries or any of the Company's dividend reinvestment or
director, officer, agent or employee stock purchase plans).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period, subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least
five Business Days prior to the earlier of (i) the date the Distributions on
the Trust Securities would have been payable except for the election to begin
or extend such Extension Period or (ii) the date the Administrative Trustees
are required to give notice to any securities exchange or to holders of
Capital Securities of the record date or the date such Distributions are
payable, but in any event not less than five Business Days prior to such
record date. The Debenture Trustee shall give notice of the Company's election
to begin or extend a new Extension Period to the holders of the Capital
Securities. There is no limitation on the number of times that the Company may
elect to begin an Extension Period.
Although the Company may in the future exercise its option to defer payments
of interest on the New Junior Subordinated Debentures, the Company has no such
current intention.
The revenue of the Trust available for distribution to holders of the
Capital Securities is limited to payments under the Junior Subordinated
Debentures in which the Trust will invest, or has invested, the proceeds from
the issuance and sale of the Trust Securities. See "Description of New Junior
Subordinated Debentures--General." If the Company does not make interest
payments on the Junior Subordinated Debentures, the Property Trustee will not
have funds available to pay Distributions on the Capital Securities. The
payment of Distributions (if and to the extent the Trust has funds on hand
legally available for the payment of such Distributions) will be guaranteed by
the Company on a limited basis as set forth herein under "Description of New
Guarantee."
REDEMPTION
Upon the repayment of the New Junior Subordinated Debentures on the Stated
Maturity Date or the prepayment of the New Junior Subordinated Debentures upon
the occurrence and continuation of a Special Event, the proceeds from such
repayment or prepayment shall be applied by the Property Trustee to redeem a
Like Amount (as defined below) of the Trust Securities, upon not less than 30
nor more than 60 days' notice of a date of redemption (the "Redemption Date")
at the applicable Redemption Price, which shall be equal to (i) in the case of
the repayment of the New Junior Subordinated Debentures on the Stated Maturity
Date, the Maturity Redemption Price (equal to the principal of and accrued and
unpaid interest on the New Junior Subordinated Debentures) and (ii) in the
case of the occurrence and continuation of a Special Event, the Special Event
Redemption Price (equal to the Special Event Prepayment Price in respect of
the New Junior Subordinated Debentures). See "Description of New Junior
Subordinated Debentures--Special Event Prepayment."
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The Company will have the option to prepay the New Junior Subordinated
Debentures, in whole but not in part, upon the occurrence and continuation of
a Special Event, at the Special Event Prepayment Price.
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
The Company will have the right at any time to terminate the Trust and cause
the New Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities in liquidation of the Trust. Such right is subject to the
Company having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of New Capital Securities.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Company or the
Trust; (ii) the distribution of a Like Amount of the Junior Subordinated
Debentures to the holders of the Trust Securities, if the Company, as Sponsor,
has given written direction to the Property Trustee to terminate the Trust
(which direction is optional and, except as described above, wholly within the
discretion of the Company, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "--Redemption" above; (iv) expiration of the
term of the Trust; (v) upon repayment of the Junior Subordinated Debentures or
at such time as no Junior Subordinated Debentures are outstanding or (vi) the
entry of an order for the dissolution of the Trust by a court of competent
jurisdiction.
If a termination occurs as described in clause (i), (ii), or (vi) of the
preceding paragraph, the Trust shall be liquidated by the Administrative
Trustees as expeditiously as the Administrative Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of
the Trust as provided by applicable law, to the holders of the Trust
Securities a Like Amount of New Junior Subordinated Debentures or Old Junior
Subordinated Debentures, as applicable, in which event such holders will be
entitled to receive out of the assets of the Trust legally available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the aggregate of the
Liquidation Amount plus accumulated and unpaid Distributions thereon to the
date of payment (such amount being the "Liquidation Distribution"). If the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets on hand legally available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on
the Capital Securities and the Common Securities shall be paid on a pro rata
basis, except that if a Debenture Event of Default has occurred and is
continuing, the Capital Securities shall have a priority over the Common
Securities. See "--Subordination of Common Securities" below.
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the
principal amount of Junior Subordinated Debentures to be paid in accordance
with their terms and (ii) with respect to a distribution of Junior
Subordinated Debentures upon the liquidation of the Trust, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by The
Depository Trust Company ("DTC") or its nominee will receive a registered
global certificate or certificates representing the Junior Subordinated
Debentures to be delivered upon such distribution and (iii) any certificates
representing Trust Securities not held by DTC or its nominee will be deemed to
represent Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of such Trust Securities, and bearing accrued and
unpaid interest in an amount equal to the accumulated and unpaid Distributions
on such Trust Securities until such certificates are presented to the
Administrative Trustees or their agent for cancellation, whereupon the Company
will issue to such holder, and the Debenture Trustee will authenticate, a
certificate representing such Junior Subordinated Debentures.
There can be no assurance as to the market prices for the New Capital
Securities or the New Junior Subordinated Debentures that may be distributed
in exchange for the Trust Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the New Capital Securities that an investor
may purchase, or
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the New Junior Subordinated Debentures that the investor may receive on
dissolution and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the New Capital Securities.
REDEMPTION PROCEDURES
If applicable, Trust Securities shall be redeemed at the applicable
Redemption Price with the proceeds from the contemporaneous repayment of the
New Junior Subordinated Debentures. Any redemption of Trust Securities shall
be made and the applicable Redemption Price shall be payable on the Redemption
Date only to the extent that the Trust has funds legally available for the
payment of such applicable Redemption Price. See also "--Subordination of
Common Securities" below.
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
to the extent funds are legally available, with respect to the Capital
Securities held by DTC or its nominees, the Property Trustee will pay or cause
the Paying Agent to pay the Redemption Price to DTC. See "--Form,
Denomination, Book-Entry Procedures and Transfer" below. With respect to the
Capital Securities held in certificated form, the Property Trustee, to the
extent funds are legally available, will give irrevocable instructions and
authority to the Paying Agent and will irrevocably deposit with the Paying
Agent for the Capital Securities funds sufficient to pay or cause the Paying
Agent to pay the applicable Redemption Price to the holders thereof upon
surrender of their certificates evidencing the Capital Securities. See
"Payment and Paying Agency" below. Distributions payable on or prior to the
Redemption Date shall be payable to the holders of such Capital Securities on
the relevant record dates for the related Distribution Dates occurring on or
prior to such Redemption Date. If notice of redemption shall have been given
and funds deposited with the Property Trustee to pay the Redemption Price for
the Capital Securities called for redemption, then all rights of the holders
of such Capital Securities will cease, except the right of the holders of such
Capital Securities to receive the applicable Redemption Price, but without
interest on such Redemption Price, and such Capital Securities will cease to
be outstanding. In the event that any Redemption Date is not a Business Day,
then the applicable Redemption Price payable on such date will be paid on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. In the event that payment of the applicable
Redemption Price is improperly withheld or refused and not paid either by the
Trust or by the Company pursuant to the Guarantee as described under
"Description of New Guarantee," (i) Distributions on Capital Securities called
for redemption will accumulate on the Redemption Price at the then applicable
rate, from the Redemption Date originally established by the Trust to the date
such applicable Redemption Price is actually paid, and (ii) the actual payment
date will be the Redemption Date for purposes of calculating the applicable
Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law) the Company or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the
open market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Company defaults in payment of the Special
Event Prepayment Price on, or in the repayment of, the Junior Subordinated
Debentures, on and after the Redemption Date Distributions will cease to
accrue on the Trust Securities called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Capital
Securities and the Common Securities, as applicable, shall be made pro rata
based on the Liquidation Amount of the Capital Securities and Common
Securities; provided, however, that if any Debenture Event of Default shall
have occurred and be continuing, no payments in respect of any Distribution
on, or payments upon liquidation, redemption, repurchase or otherwise with
respect to, the Common Securities, shall be made until the holders of the
Capital Securities
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shall be paid in full in cash all accumulated and unpaid Distributions on all
of the outstanding Capital Securities for all Distribution periods terminating
on or prior thereto or, in the case of Capital Securities called for
redemption on a Redemption Date on or prior thereto, the full amount of the
Redemption Price therefor, or in the case of a liquidation, the Liquidation
Distribution shall have been made or provided for, and all funds available to
the Property Trustee shall first be applied to the payment in full of all
Distributions on, Redemption Price of, or Liquidation Distribution for the
Capital Securities then due and payable.
In the case of any Event of Default, the Company as holder of the Common
Securities will be deemed to have waived any right to act with respect to such
Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has
been so cured, waived or otherwise eliminated, the Property Trustee shall act
solely on behalf of the holders of the Capital Securities and not on behalf of
the Company as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act
on their behalf.
EVENTS OF DEFAULT; NOTICE
The occurrence of a Debenture Event of Default (see "Description of New
Junior Subordinated Debentures--Debenture Events of Default") constitutes an
"Event of Default" under the Declaration.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Company, as Sponsor, unless such Event of
Default shall have been cured or waived. The Company, as Sponsor, and the
Administrative Trustees are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described
under "--Liquidation of the Trust and Distribution of New Junior Subordinated
Debentures" and "--Subordination of Common Securities" above.
REMOVAL OF ISSUER TRUSTEES
Unless a Debenture Event of Default shall have occurred and be continuing,
any Issuer Trustee may be removed at any time by the holder of the Common
Securities. If an Event of Default under the Declaration has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed at
such time by the holders of a majority in Liquidation Amount of the
outstanding Capital Securities. In no event will the holders of the Capital
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Company as the holder of the Common Securities. No resignation or removal of
an Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor Issuer Trustee in
accordance with the provisions of the Declaration.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any corporation or Person resulting
from any merger, conversion or consolidation to which such Issuer Trustee
shall be a party, or any corporation succeeding to all or substantially all
the corporate trust business of such Issuer Trustee, shall be the successor of
such Issuer Trustee under the Declaration, provided such corporation or Person
shall be otherwise qualified and eligible.
MERGERS, CONVERSIONS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE
TRUST
The Trust may not merge or convert with or into, consolidate, amalgamate, or
be replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other
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Person, except as described below. The Trust may, at the request of the
Company, as Sponsor, with the consent of the Administrative Trustees but
without the consent of the holders of the Capital Securities, the Property
Trustee or the Delaware Trustee, merge or convert with or into, consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to a trust organized as
such under the laws of any State; provided, that (i) such successor entity
either (a) expressly assumes all of the obligations of the Trust with respect
to the Trust Securities or (b) substitutes for the Trust 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 in priority with respect to distributions and
payments upon liquidation, redemption and otherwise, (ii) the Company
expressly appoints a trustee of such successor entity possessing the same
powers and duties as the Property Trustee with respect to the Junior
Subordinated Debentures, (iii) the Successor Securities are listed issued in
place of the Capital Securities, or any such Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which the Capital Securities are then listed or quoted,
if any, (iv) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Capital Securities (including any Successor Securities) in any
material respect (other than any dilution of such holders' interests in the
new entity), (vi) such successor entity has a purpose identical to that of the
Trust, (vii) prior to such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Company has received an
opinion from independent counsel to the Trust experienced in such matters to
the effect that (a) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the Capital Securities
(including any Successor Securities) in any material respect (other than any
dilution of such holders' interests in the new entity), and (b) following such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease, neither the Trust nor such successor entity will be
required to register as an investment company under the Investment Company Act
of 1940, as amended (the "Investment Company Act"), and (viii) the Company or
any permitted successor or assignee owns all of the common securities of such
successor entity and guarantees the obligations of such successor entity under
the Successor Securities at least to the extent provided by the Guarantee.
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in Liquidation Amount of the Trust Securities, consolidate,
amalgamate, merge or convert with or into, or be replaced by or convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge or convert with or into, or replace it if such
consolidation, amalgamation, merger, conversion, replacement, conveyance,
transfer or lease would cause the Trust or the successor entity not to be
classified as a grantor trust for the United States federal income tax
purposes.
VOTING RIGHTS; AMENDMENT OF THE DECLARATION
Except as provided below and under "--Mergers, Conversions, Consolidations,
Amalgamations or Replacements of the Trust" above and "Description of New
Guarantee--Amendments and Assignment" and as otherwise required by law and the
Declaration, the holders of the New Capital Securities will have no voting
rights.
The Declaration may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or
supplement any provisions in the Declaration that may be inconsistent with any
other provision, or to make any other provisions with respect to matters or
questions arising under the Declaration, which shall not be inconsistent with
the other provisions of the Declaration, or (ii) to modify, eliminate or add
to any provisions of the Declaration to such extent as shall be necessary to
ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust at all times that any Trust Securities are
outstanding or to ensure that the Trust will not be required to register as an
"investment company" under the Investment Company Act;
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provided, however, that in the case of clause (i), such action shall not
adversely affect in any material respect the interests of the holders of the
Trust Securities. Any amendment of the Declaration pursuant to the foregoing
shall become effective when notice thereof is given to the holders of the
Trust Securities. The Declaration may be amended by the Issuer Trustees and
the Company (i) with the consent of holders representing a majority (based
upon Liquidation Amount) of the outstanding Trust Securities and (ii) upon
receipt by the Issuer Trustee of an opinion of counsel to the effect that such
amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Trust's status as a grantor
trust for United States federal income tax purposes or the Trust's exemption
from status as an "investment company" under the Investment Company Act,
provided that, without the consent of each holder of Trust Securities, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution or other payment on the Trust Securities or otherwise adversely
affect the amount of any Distribution required to be made in respect of the
Trust Securities as of a specified date or (ii) restrict the right of a holder
of Trust Securities to institute suit for the enforcement of any such payment
on or after such date.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place
of conducting any proceeding for any remedy available to the Debenture
Trustee, or executing any trust or power conferred on the Debenture Trustee
with respect to the Junior Subordinated Debentures, (ii) waive certain past
defaults under the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Junior
Subordinated Debentures or (iv) consent to any amendment, modification or
termination of the Indenture or the Junior Subordinated Debentures, where such
consent shall be required to be made by the holders of a majority in aggregate
principal amount of the Junior Subordinated Debentures then outstanding,
without, in each case, obtaining the prior approval of the holders of a
majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of Capital Securities. The Issuer Trustees shall not revoke any
action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. In addition to
obtaining the foregoing approvals of such holders of the Capital Securities,
prior to taking any of the foregoing actions, the Issuer Trustees shall obtain
an opinion of counsel experienced in such matters to the effect that the Trust
will not be classified as an association taxable as a corporation for United
States federal income tax purposes on account of such action. The Property
Trustee shall in general notify each holder of Capital Securities of any
notice of default actually known to the Property Trustee with respect to the
Junior Subordinated Debentures.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. An Administrative Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be given to
each holder of record of Capital Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of Capital Securities will be required for
the Trust to redeem and cancel the Capital Securities in accordance with the
Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Company or any affiliate of the Company
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
The New Capital Securities may be represented by one or more New Capital
Securities in registered, global form (collectively, the "Global Capital
Securities"). The Global Capital Securities will be deposited upon issuance
with the Property Trustee as custodian for DTC, in New York, New York, and
registered in the name
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of DTC or its nominee, in each case for credit to an account of a direct or
indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee. Beneficial interests in the Global Capital Securities may
not be exchanged for Capital Securities in certificated form except in the
limited circumstances described below.
DTC has advised the Trust and the Company that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of the Participants. The
Participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interest and transfer
of ownership interest of each actual purchase of each security held by or on
behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Trust and the Company that, pursuant to procedures
established by it, (i) upon deposit of the Global Capital Securities, DTC will
credit the accounts of Participants designated by the Initial Purchasers with
portions of the Liquidation Amount of the Global Capital Securities and (ii)
ownership of such interests in the Global Capital Securities will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by DTC (with respect to the Participants) or by the Participants
and the Indirect Participants (with respect to other owners of beneficial
interests in the Global Capital Securities).
Except as described below, owners of interests in the Global Capital
Securities will not have Capital Securities registered in their name, will not
receive physical delivery of Capital Securities in certificated form and will
not be considered the registered owners or holders thereof under the
Declaration for any purpose.
Payments in respect of the Global Capital Security registered in the name of
DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Declaration. Under the terms of
the Declaration, the Property Trustee will treat the persons in whose names
the Capital Securities, including the Global Capital Securities, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all purposes whatsoever. Consequently, neither the Property
Trustee nor any agent thereof has or will have any responsibility or liability
for (i) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Capital Securities, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Capital Securities or (ii) any other matter relating to the actions and
practices of DTC or any of its Participants or Indirect Participants. DTC has
advised the Trust and the Company that its current practice, upon receipt of
any payment in respect of securities such as the Capital Securities, is to
credit the accounts of the relevant Participants with the payment on the
payment date, in amounts proportionate to their respective holdings in
Liquidation Amount of beneficial interests in the relevant security as shown
on the records of DTC unless DTC has reason to believe it will not receive
payment on such payment date. Payments by the Participants and the Indirect
Participants to the beneficial owners of Capital Securities will be governed
by standing instructions and customary practices and will be the
responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Property Trustee, the Trust or the Company.
Neither the Trust nor the Company or the Property Trustee will be liable for
any delay by DTC or any of its Participants in identifying the beneficial
owners of the Capital Securities, and the Trust or the Company and the
Property Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
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DTC has advised the Trust and the Company that it will take any action
permitted to be taken by a holder of Capital Securities only at the direction
of one or more Participants to whose account with DTC interests in the Global
Capital Securities are credited and only in respect of such portion of the
Liquidation Amount of the Capital Securities as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Declaration, DTC reserves the right to exchange the
Global Capital Securities for Capital Securities in certificated form and to
distribute such Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system has
been obtained from sources that the Trust and the Company believe to be
reliable, but neither the Trust nor the Company takes responsibility for the
accuracy thereof.
A Global Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC notifies the Trust that it is
unwilling or unable to continue as clearing agency for the Global Capital
Security or has ceased to be a clearing agency registered under the Exchange
Act and the Company thereupon fails to appoint a successor clearing agency
within 90 days, (ii) the Trust in its sole discretion elects to cause the
issuance of definitive certificated Capital Securities or (iii) there shall
have occurred and be continuing an Event of Default or any event which after
notice or lapse of time or both would be an Event of Default under the
Declaration. In addition, beneficial interests in a Global Capital Security
may be exchanged for certificated New Capital Securities upon request but only
upon at least 20 days' prior written notice given to the Property Trustee by
or on behalf of DTC in accordance with customary procedures. In all cases,
certificated New Capital Securities delivered in exchange for any Global
Capital Security or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the Depository (in accordance with its customary procedures), unless the
Property Trustee determines otherwise in compliance with applicable law.
PAYMENT AND PAYING AGENT
Payments in respect of the New Capital Securities held in global form shall
be made to the Depositary, which shall credit the relevant accounts at the
Depositary on the applicable Distribution Dates or in respect of the Capital
Securities that are not held by the Depositary, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address
shall appear on the register. The paying agent (the "Paying Agent") shall
initially be the Property Trustee. The Trust may appoint one or more
additional paying agents chosen by the Property Trustee and acceptable to the
Administrative Trustees and the Company. The Paying Agent shall be permitted
to resign as Paying Agent upon 30 days' written notice to the Administrative
Trustees. In the event that the Property Trustee shall no longer be the Paying
Agent, the Trust shall appoint a successor (which shall be acceptable to the
Administrative Trustees and the Company) to act as Paying Agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as registrar and transfer agent for the New
Capital Securities. Registration of transfers of Capital Securities will be
effected without charge by or on behalf of the Trust, but upon payment (with
the giving of such indemnity as the Administrative Trustees may require) in
respect of any tax or other government charges which may be imposed in
relation to it. The Trust will not be required to register or cause to be
registered the transfer of Capital Securities after such Capital Securities
have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after an Event of Default, shall exercise such rights
and powers vested in it by the Declaration and use the same degree of care and
skill as a prudent person would exercise under the circumstances in the
conduct of his or her own affairs. Subject to such provisions, the Property
Trustee is under no obligation to exercise any of the powers vested in it by
the Declaration at the request of any holder of Capital Securities,
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unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The holders of Capital
Securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct the Property Trustee to
take any action it is empowered to take under the Declaration following a
Declaration Event of Default. The Property Trustee also serves as trustee
under the Guarantee and the Indenture. The Company and certain of its
subsidiaries may, from time to time, conduct certain banking transactions with
the Property Trustee in the ordinary course of their business.
GOVERNING LAW
The Declaration and the Capital Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to operate the Trust
in such a way so that the Trust will not be required to register as an
"investment company" under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes. The Company is
authorized and directed to conduct its affairs so that the Junior Subordinated
Debentures will be treated as indebtedness of the Company for United States
federal income tax purposes. In this connection, the Company and the
Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of the Trust or the certificate
of incorporation of the Company, that each of the Company and the
Administrative 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 Capital Securities or vary the
terms thereof.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued, and the New Junior
Subordinated Debentures will be issued, as separate series under the
Indenture. The Indenture has been qualified under the Trust Indenture Act.
This summary of certain terms and provisions of the Junior Subordinated
Debentures and the Indenture does not purport to be complete, and where
reference is made to particular provisions of the Indenture, such provisions,
including the definitions of certain terms, some of which are not otherwise
defined herein, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture by
the Trust Indenture Act.
GENERAL
Concurrently with the issuance of the Old Capital Securities, the Trust
invested the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in Old Junior Subordinated Debentures
issued by the Company. Pursuant to the Exchange Offer, the Company will
exchange the Old Junior Subordinated Debentures, in an amount corresponding to
the Old Capital Securities accepted for exchange, for a like aggregate
principal amount of the New Junior Subordinated Debentures promptly after the
Expiration Date.
The New Junior Subordinated Debentures will bear interest at the annual rate
of 8.207% of the principal amount thereof, payable semi-annually in arrears on
February 15 and August 15 of each year (each, an "Interest Payment Date"),
commencing August 15, 1997, to the person in whose name each New Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the first day of the month in which the relevant payment
date falls. It is anticipated that, until the liquidation, if any, of the
Trust, each New Junior Subordinated Debenture will be held in the name of the
Property Trustee in trust for the benefit of the
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holders of the Trust Securities. The amount of interest payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months and,
for any period of less than a full calendar month, the number of days elapsed
in such month. In the event that any date on which interest is payable on the
New Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is
a Business Day (and without any interest or other payment in respect of any
such delay), with the same force and effect as if made on the date such
payment was originally payable. Accrued interest that is not paid on the
applicable Interest Payment Date will bear additional interest in the amount
thereof (to the extent permitted by law) at the rate per annum of 8.207%
thereof, compounded semi-annually. The term "interest," as used herein, shall
include semi-annual interest payments, interest on semi-annual interest
payments not paid on the applicable Interest Payment Date and Additional Sums
(as defined herein), as applicable.
The New Junior Subordinated Debentures will mature on February 3, 2027 (the
"Stated Maturity Date"). The New Junior Subordinated Debentures will rank pari
passu with all Other Debentures and will be unsecured and subordinate and rank
junior in right of payment to the extent and in the manner set forth in the
Indenture to all Senior Indebtedness of the Company. See "--Subordination"
below. The Company is a non-operating holding company and all of the operating
assets of the Company and its consolidated subsidiaries are owned by such
subsidiaries. The Company relies primarily on dividends from such subsidiaries
to meet its obligations. The ability of the Company's insurance subsidiaries
to provide dividends to the Company and the Company's other holding Company
subsidiaries is restricted by state insurance law and may require prior
approval of state insurance regulators. Because the Company is a holding
company, the right of the Company to participate in any distribution of assets
of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise is subject to the prior claims of creditors of the subsidiary,
except to the extent the Company may itself be recognized as a creditor of
that subsidiary. Accordingly, the New Junior Subordinated Debentures will be
effectively subordinated to all existing and future liabilities of the
Company's subsidiaries, and holders of New Junior Subordinated Debentures
should look only to the assets of the Company for payments on the New Junior
Subordinated Debentures. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Company, including Senior
Indebtedness. See "--Subordination" below and "Risk Factors--Holding Company
Structure; Structural Subordination and Leverage" above.
FORM, REGISTRATION AND TRANSFER
If the New Junior Subordinated Debentures are distributed to the holders of
the Trust Securities, the New Junior Subordinated Debentures may be
represented by one or more global certificates registered in the name of Cede
& Co. as the nominee of DTC. The depositary arrangements for such New Junior
Subordinated Debentures are expected to be substantially similar to those in
effect for the New Capital Securities. For a description of DTC and the terms
of the depositary arrangements relating to payments, transfers, voting rights,
redemptions and other notices and other matters, see "Description of New
Capital Securities--Form, Denomination, Book-Entry Procedures and Transfer."
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, and any interest on New Junior
Subordinated Debentures will be made at the office of the Debenture Trustee in
The City of New York or at the office of such Paying Agent or Paying Agents as
the Company may designate from time to time, except that at the option of the
Company payment of any interest may be made (i) by check mailed to the address
of the Person entitled thereto as such address shall appear in the register
for New Junior Subordinated Debentures or (ii) by transfer to an account
maintained by the Person entitled thereto as specified in such register,
provided that proper transfer instructions have been received by the relevant
record date. Payment of any interest on any New Junior Subordinated Debenture
will be made to the Person in whose name such New Junior Subordinated
Debenture is registered at the close of business on the record date for such
interest, except in the case of defaulted interest. The Company may at any
time designate additional Paying Agents or rescind the designation of any
Paying Agent; however, the Company will at all times be required to maintain a
Paying Agent in each place of payment for the New Junior Subordinated
Debentures.
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Any moneys deposited with the Debenture Trustee or any Paying Agent, or then
held by the Company in trust, for the payment of the principal of and premium,
if any, or interest on any New Junior Subordinated Debenture and remaining
unclaimed for two years after such principal and premium, if any, or interest
has become due and payable shall, at the request of the Company, be repaid to
the Company and the holder of such New Junior Subordinated Debenture shall
thereafter look, as a general unsecured creditor, only to the Company for
payment thereof.
OPTION TO EXTEND INTEREST PAYMENT DATE
So long as no Debenture Event of Default has occurred and is continuing, the
Company will have the right under the Indenture at any time during the term of
the Junior Subordinated Debentures to defer the payment of interest at any
time or from time to time for a period not exceeding 10 consecutive semi-
annual periods with respect to each Extension Period, provided that no
Extension Period may extend beyond the Stated Maturity Date. At the end of an
Extension Period, the Company must pay all interest then accrued and unpaid
(together with interest thereon accrued at the annual rate of 8.207%,
compounded semi-annually, to the extent permitted by applicable law). During
an Extension Period, interest will continue to accrue and, if the Junior
Subordinated Debentures have been distributed to holders of the Trust
Securities, holders of Junior Subordinated Debentures (or holders of the Trust
Securities while Trust Securities are outstanding) will be required to accrue
interest income for United States federal income tax purposes prior to the
receipt of cash attributable to such income. See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount."
During any such Extension Period, pursuant to the Indenture, the Company may
not (i) declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock (which includes common and preferred stock), (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities of the Company (including any Other Debentures)
that rank pari passu with or junior in right of payment to the Junior
Subordinated Debentures or (iii) make any guarantee payments with respect to
any guarantee by the Company of any securities of any subsidiary of the
Company (including Other Guarantees) if such guarantee ranks pari passu with
or junior in right of payment to the Junior Subordinated Debentures (other
than (a) dividends or distributions in shares of or options, warrants or
rights to subscribe for or purchase shares of, common stock of the Company,
(b) any declaration of a dividend in connection with the implementation of a
stockholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Guarantee, (d) as a direct result of, and only to the
extent required in order to avoid the issuance of fractional shares of capital
stock following, a reclassification of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock or pursuant to an
acquisition in which fractional shares of the Company's capital stock would
otherwise be issued, (e) 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 (f)
purchases of common stock related to the issuance of common stock or rights
under any benefit plan for directors, officers, agents or employees of the
Company or its subsidiaries or any of the Company's dividend reinvestment or
director, officer, agent or employee stock purchase plans).
Prior to the termination of any such Extension Period, the Company may
further extend such Extension Period, provided that such extension does not
cause the Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest
Payment Date, the Company may elect to begin a new Extension Period, subject
to the above requirements. No interest shall be due and payable during an
Extension Period, except at the end thereof. The Company must give the
Property Trustee, the Administrative Trustees and the Debenture Trustee notice
of its election of any Extension Period (or an extension thereof) at least
five Business Days prior to the earlier of (i) the date the Distributions on
the Trust Securities would have been payable except for the election to begin
or extend such Extension Period or (ii) the date the Administrative Trustees
are required to give notice to any securities exchange or to holders of
Capital Securities of the record
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date or the date such Distributions are payable, but in any event not less
than five Business Days prior to such record date. The Debenture Trustee shall
give notice of the Company's election to begin or extend a new Extension
Period to the holders of the Capital Securities. There is no limitation on the
number of times that the Company may elect to begin an Extension Period.
SPECIAL EVENT PREPAYMENT
If a Special Event (as defined herein) shall occur and be continuing, the
Company may, at its option, prepay the Junior Subordinated Debentures in whole
(but not in part) within 90 days of the occurrence of such Special Event, at a
prepayment price (the "Special Event Prepayment Price") equal to the greater
of (i) 100% of the principal amount of such Junior Subordinated Debentures or
(ii) the sum, as determined by a Quotation Agent, of the present values of the
principal amount of such Junior Subordinated Debentures, together with
scheduled payments of interest from the prepayment date to the Stated Maturity
Date, in each case discounted to the prepayment date on a semi-annual basis
(assuming a 360-day year consisting of 30-day months) at the Adjusted Treasury
Rate, plus, in each case, accrued interest thereon to the date of prepayment.
A "Special Event" means a Tax Event or an Investment Company Event (each as
defined herein), as the case may be.
A "Tax Event" means that the Administrative Trustees shall have received an
opinion of nationally recognized tax counsel experienced in such matters 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 official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change
is effective or such pronouncement or decision is announced on or after
January 29, 1997, there is more than an insubstantial risk that (i) the Trust
is, or as a result of the issuance of the Exchange Securities would be or will
be within 90 days of the date of such opinion, subject to United States
federal income tax with respect to income received or accrued on the Junior
Subordinated Debentures or any of the Exchange Securities, (ii) interest
payable by the Company on the Junior Subordinated Debentures or any of the
Exchange Securities is not, or within 90 days of the date of such opinion will
not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, or (iii) the Trust is, or will be within 90 days
of the date of such opinion, subject to more than a de minimis amount of other
taxes, duties or other governmental charges.
An "Investment Company Event" means that the Administrative Trustees shall
have received an opinion from counsel to the Company experienced in such
matters to the effect that, as a result of the occurrence of a change in law
or regulation or a written change (including any announced prospective 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 the Trust is or will be
considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change
in 1940 Act Law becomes or would become effective on or after January 29,
1997.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently
published statistical release designated "H.15 (519)" or any successor
publication which is published weekly by the Federal Reserve Board and which
establishes yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption "Treasury Constant
Maturities," for the maturity corresponding to the Stated Maturity Date (if no
maturity is within three months before or after the Stated Maturity Date,
yields for the two published maturities most closely corresponding to the
Stated Maturity Date shall be interpolated and the Adjusted Treasury Rate
shall be interpolated or extrapolated from such yields on a straight-line
basis, rounding to the nearest month) or (ii) if such release (or any
successor release) is not published during the week preceding the calculation
date or does not contain such yields, the rate per annum equal to the semi-
annual equivalent yield to maturity of the Comparable Treasury Issue,
calculated using a price for the
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Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such prepayment date, in each case
calculated on the third Business Day preceding the prepayment date, plus in
each case (a) 1.02% if such prepayment date occurs on or prior to February 3,
1998 and (b) .50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Stated
Maturity Date of the Junior Subordinated Debentures to be prepaid that would
be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity with the Stated Maturity Date of the Junior Subordinated
Debentures. If no United States Treasury security has a maturity which is
within a period from three months before to three months after the Stated
Maturity Date, the two most closely corresponding United States Treasury
securities shall be used as the Comparable Treasury Issue, and the Adjusted
Treasury Rate shall be interpolated or extrapolated on a straight-line basis,
rounding to the nearest month using such securities.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Company. "Reference Treasury Dealer" means: (i) Merrill Lynch Government
Securities, Inc. and their respective successors; provided, however, that if
the foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury
Dealer selected by the Debenture Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations for
U.S. Government Securities" or (ii) if such release (or any successor release)
is not published or does not contain such prices on such Business Day, (a) the
average of the five Reference Treasury Dealer Quotations for such prepayment
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (b) if the Debenture Trustee obtains fewer than three such
Reference Treasury Dealer Quotations, the average of all such quotations.
"Additional Sums" means such additional amounts as may be necessary in order
that the amount of Distributions then due and payable by the Trust on the
outstanding Capital Securities and Common Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any prepayment date, the average, as determined by the
Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third Business Day preceding such prepayment
date.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Company
defaults in payment of the prepayment price, on and after the prepayment date
interest ceases to accrue on such Junior Subordinated Debentures called for
prepayment.
If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Tax Event, the Company will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
CERTAIN COVENANTS OF THE COMPANY
The Company covenants that it will not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which
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includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Company (including any Other Debentures) that rank pari
passu with or junior in right of payment to the Junior Subordinated Debentures
or (iii) make any guarantee payments with respect to any guarantee by the
Company of any securities of any subsidiary of the Company (including Other
Guarantees) if such guarantee ranks pari passu with or junior in right of
payment to the Junior Subordinated Debentures (other than (a) dividends or
distributions in shares of or options, warrants or rights to subscribe for or
purchase shares of, common stock of the Company, (b) any declaration of a
dividend in connection with the implementation of a stockholder's rights plan,
or the issuance of stock under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (c) payments under the
Guarantee, (d) as a direct result of, and only to the extent required in order
to avoid the issuance of fractional shares of capital stock following, a
reclassification of the Company's capital stock or the exchange or conversion
of one class or series of the Company's capital stock for another class or
series of the Company's capital stock or pursuant to an acquisition in which
fractional shares of the Company's capital stock would otherwise be issued,
(e) 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 (f) purchases of common
stock related to the issuance of common stock or rights under any benefit plan
for directors, officers, agents or employees of the Company or its
subsidiaries or any of the Company's dividend reinvestment or director,
officer, agent or employee stock purchase plans) if at such time (1) a
Debenture Event of Default shall have occurred and be continuing, or would
occur upon the taking of any action specified in clauses (i) through (iii)
above, (2) there shall have occurred any event of which the Company has actual
knowledge that (a) with the giving of notice or the lapse of time, or both,
would constitute a Debenture Event of Default and (b) in respect of which the
Company shall not have taken reasonable steps to cure, (3) the Company shall
be in default with respect to its payment of any obligations under the
Guarantee or (4) the Company shall have given notice of its election of an
Extension Period or any extension thereof, as provided in the Indenture or an
extension period with respect to any Other Debentures, and shall not have
rescinded such notice, and such Extension Period, or any extension thereof, or
extension period with respect to Other Debentures, shall be continuing.
The Company will also covenant (i) to directly or indirectly maintain 100
percent ownership of the Common Securities of the Trust; provided, however,
that any permitted successor of the Company under the Indenture may succeed to
the Company's ownership of the Common Securities, (ii) to use its reasonable
efforts to cause the Trust (a) to remain a statutory business trust, except in
connection with the distribution of Junior Subordinated Debentures to the
holders of Trust Securities in liquidation of the Trust, the redemption of all
of the Trust Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of the Trust, and (b) to
otherwise continue not to be treated as an association taxable as a
corporation or a partnership for United States federal income tax purposes and
(iii) to use its reasonable efforts to cause each holder of Trust Securities
to be treated as owning an undivided beneficial interest in the Junior
Subordinated Debentures.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures constitutes a
"Debenture Event of Default" (whatever the reason for such Debenture Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures or any Other Debentures, when due (subject to the deferral of
any due date in the case of an Extension Period or an extension period with
respect to Other Debentures); or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
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(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to
the Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of Junior Subordinated Debentures;
or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures
may declare the principal due and payable immediately upon a Debenture Event
of Default. The holders of a majority in aggregate outstanding principal
amount of the Junior Subordinated Debentures may annul such declaration and
waive the default if the default (other than the nonpayment of the principal
of the Junior Subordinated Debentures which has become due solely by such
acceleration) has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration has
been deposited with the Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders
of all the Junior Subordinated Debentures, waive any past default except a
default in the payment of principal of or premium, if any, on or interest
(unless such default has been cured and a sum sufficient to pay all matured
installments of interest and premium, if any, and principal due otherwise than
by acceleration has been deposited with the Debenture Trustee) or a default in
respect of a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Junior Subordinated Debenture.
The Indenture requires the annual filing by the Company with the Debenture
Trustee of a certificate as to the absence of certain defaults under the
Indenture.
The Indenture provides that the Debenture Trustee may withhold notice of a
Debenture Event of Default from the holders of the Junior Subordinated
Debentures (except a Debenture Event of Default in payment of principal of, or
of interest or premium on, the Junior Subordinated Debentures) if the
Debenture Trustee considers it in the interest of the holders to do so.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
Pursuant to the Declaration, if a Debenture Event of Default shall have
occurred and be continuing and shall be attributable to the failure of the
Company to pay interest or premium, if any, on or principal of the Junior
Subordinated Debentures on the due date, a holder of Capital Securities may
institute a Direct Action. The Company may not amend the Indenture to remove
the foregoing right to bring a Direct Action without the prior written consent
of the holders of all of the Capital Securities. Notwithstanding any payments
made to a holder of Capital Securities by the Company in connection with a
Direct Action, the Company shall remain obligated to pay the principal of or
premium, if any, or interest on the Junior Subordinated Debentures, and the
Company shall be subrogated to the rights of the holder of such Capital
Securities with respect to payments on the Capital Securities to the extent of
any payments made by the Company to such holder in any Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the Junior Subordinated Debentures. See "Description of
Capital Securities--Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that the Company shall not consolidate with or merge
with or into any other Person or sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of its properties and assets as
an entirety to any Person, unless; (i) the person formed by such consolidation
or into which the Company is merged or the Person which acquires by sale,
assignment, conveyance, transfer, lease or disposition is a
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corporation, trust or partnership organized under the laws of the United
States or any State or the District of Columbia, and such successor expressly
assumes the Company's obligations on the Junior Subordinated Debentures; (ii)
immediately before and immediately after giving effect thereto, no Debenture
Event of Default, and no event which, after notice or lapse of time or both,
would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met. This provision shall only apply to a merger or consolidation in which
the Company is not the surviving corporation and to conveyances, leases and
transfers by the Company as transferor or lessor of all or substantially all
of the properties and assets of the Company to any Person.
Upon any consolidation by the Company with or merger by the Company into any
other corporation or any sale, assignment, conveyance, transfer, disposition
or lease of all or substantially all of the properties and assets of the
Company as an entirety to any Person in accordance with the conditions listed
in the immediately preceding paragraph, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, and in the
event of any such conveyance or transfer, the Company, except in the case of a
lease, shall be discharged of all obligations and covenants under the
Indenture and the Junior Subordinated Debentures and may be dissolved and
liquidated.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Company that may adversely affect holders of the
Junior Subordinated Debentures.
Additionally, state insurance holding company statutes applicable to the
Company due to its insurance company subsidiaries generally provide that no
person may acquire control of the Company, and thus indirect control of its
insurance subsidiaries, without prior approval of the appropriate insurance
regulators. Generally, any person who acquires beneficial ownership of 10% or
more of the outstanding shares of the Company's Common Stock would be presumed
to have acquired such control, unless the appropriate insurance regulators
upon application determine otherwise.
MODIFICATION OF THE INDENTURE
From time to time the Company and the Debenture Trustee may, without the
consent of the holders of Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies (provided that any such
action does not materially adversely affect the interest of the holders of
Junior Subordinated Debentures). The Indenture contains provisions permitting
the Company and the Debenture Trustee, with the consent of the holders of a
majority in principal amount of the Junior Subordinated Debentures, to modify
the Indenture in a manner affecting the rights of the holders of Junior
Subordinated Debentures; provided that no such modification may, without the
consent of the holders of each outstanding Junior Subordinated Debenture so
affected, (i) change the Stated Maturity Date or reduce the principal amount
of the Junior Subordinated Debentures or reduce the rate or extend the time of
payment of interest thereon or (ii) reduce the percentage of principal amount
of Junior Subordinated Debentures the holders of which are required to consent
to any such modification of the Indenture.
SATISFACTION AND DISCHARGE
The Indenture provides that when, among other things, all Junior
Subordinated Debentures not previously delivered to the Debenture Trustee for
cancellation (i) have become due and payable or (ii) will become due and
payable at maturity or upon redemption within one year, and the Company
deposits or causes to be deposited with the Debenture Trustee funds, in trust,
for the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Junior Subordinated Debentures not previously delivered to
the Debenture Trustee for cancellation, for the principal and premium, if any,
and interest to the date of the deposit or to the Stated Maturity Date, as the
case may be, then the Indenture will cease to be of further effect (except as
to the Company's obligations to pay all other sums due pursuant to the
Indenture and to provide the officers' certificates and
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opinions of counsel described therein), and the Company will be deemed to have
satisfied and discharged the Indenture.
SUBORDINATION
In the Indenture, the Company has covenanted and agreed that any Junior
Subordinated Debentures issued thereunder will be subordinate and junior in
right of payment to all Senior Indebtedness to the extent provided in the
Indenture. Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, or
similar proceedings, the holders of Senior Indebtedness will first be entitled
to receive payment in full in cash or other satisfactory consideration of all
amounts due or to become due on or in respect of such Senior Indebtedness
before the holders of Junior Subordinated Debentures will be entitled to
receive or retain any payment in respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full in cash or
other satisfactory consideration of all such Senior Indebtedness before the
holders of Junior Subordinated Debentures will be entitled to receive or
retain any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or premium, if any, or interest, if any,
in respect of the Junior Subordinated Debentures may be made if there shall
have occurred and be continuing a default in any payment with respect to
Senior Indebtedness, or in the event the acceleration of the maturity thereof
has been or would be permitted with notice or the passage of time, or if any
judicial proceeding shall be pending with respect to any such default until
all amounts due or to become due on the Senior Indebtedness are paid in full
in cash or other satisfactory consideration.
"Indebtedness" shall mean (i) any obligation of, or any obligation
guaranteed by, the Company for which the Company is responsible or liable as
obligor or otherwise including principal, premium, and interest (whether
accruing before or after filing of any petition in bankruptcy or any similar
proceedings by or against the Company and whether or not allowed as a claim in
bankruptcy or similar proceedings) for (A) indebtedness of the Company for
money borrowed and (B) indebtedness evidenced by securities, bonds,
debentures, notes or other similar written instruments (C) any deferred
obligation for the payment of the purchase price or conditional sale
obligation of property or assets acquired other than in the ordinary course of
business, (D) all obligations of the Company for the reimbursement of any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction, (E) all obligations of the Company under "keep-well"
agreements required by insurance regulators or (F) any obligation referred to
in (A) through (E) above of other persons secured by any lien on any property
or asset of the Company and (ii) all indebtedness of the Company for
obligations of the Company to make payment in respect of derivative products
such as interest and foreign exchange rate contracts, commodity contracts
(including future or options contracts) swap agreements, cap agreements,
repurchase and reverse repurchase agreements and similar arrangements, whether
outstanding on the date of execution of the Indenture or thereafter created,
assumed or incurred.
"Indebtedness Ranking on a Parity with the Junior Subordinated Debentures"
shall mean Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which specifically by
its terms ranks equally with and not prior to the Junior Subordinated
Debentures in the right of payment upon the happening of the dissolution or
winding-up or liquidation or reorganization of the Company. The securing of
any Indebtedness, otherwise constituting Indebtedness Ranking on a Parity with
the Junior Subordinated Debentures, shall not be deemed to prevent such
Indebtedness from constituting Indebtedness Ranking on a Parity with the
Junior Subordinated Debentures.
"Indebtedness Ranking Junior to the Junior Subordinated Debentures" shall
mean any Indebtedness, whether outstanding on the date of execution of the
Indenture or thereafter created, assumed or incurred, which specifically by
its terms ranks junior to and not equally with or prior to the Junior
Subordinated Debentures (and
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any other Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures) in right of payment upon the happening of the dissolution or
winding-up or liquidation or reorganization of the Company. The securing of
any Indebtedness, otherwise constituting Indebtedness Ranking Junior to the
Junior Subordinated Debentures, shall not be deemed to prevent such
Indebtedness from constituting Indebtedness Ranking Junior to the Junior
Subordinated Debentures.
"Senior Indebtedness" shall mean all Indebtedness, whether outstanding on
the date of execution of the Indenture or thereafter created, assumed or
incurred, except Indebtedness Ranking on a Parity with the Junior Subordinated
Debentures or Indebtedness Ranking Junior to the Junior Subordinated
Debentures, and any deferrals, renewals or extension of such Senior
Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued or entered into by the Company. As of March 31, 1997,
Senior Indebtedness of the Company aggregated approximately $199.5 million. In
addition, because the Company is a holding company, the Junior Subordinated
Debentures are effectively subordinated to all existing and future liabilities
of the Company's subsidiaries. See "Risk Factors--Holding Company Structure;
Structural Subordination and Leverage."
GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by,
and construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Following the Exchange Offer and the qualification of the Indenture under
the Trust Indenture Act, the Debenture Trustee shall have and be subject to
all the duties and responsibilities specified with respect to an indenture
trustee under the Trust Indenture Act. Subject to such provisions, the
Debenture Trustee is under no obligation to exercise any of the powers vested
in it by the Indenture at the request of any holder of Junior Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The Debenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Debenture
Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
DESCRIPTION OF NEW GUARANTEE
The Old Guarantee was executed and delivered by the Company concurrently
with the issuance by the Trust of the Old Capital Securities for the benefit
of the holders from time to time of the Old Capital Securities. Promptly after
the Expiration Date, the Old Guarantee will be exchanged by the Company for
the New Guarantee for the benefit of the holders from time to time of the New
Capital Securities. The Guarantee Agreement has been qualified under the Trust
Indenture Act. This summary of certain provisions of the Guarantee Agreement
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all of the provisions of the Guarantee Agreement,
including the definitions therein of certain terms, and the Trust Indenture
Act. The Guarantee Trustee will hold the New Guarantee for the benefit of the
holders of the New Capital Securities.
GENERAL
The Company will irrevocably agree to pay in full on a subordinated basis,
to the extent set forth herein, the Guarantee Payments (as defined below) to
the holders of the New Capital Securities, as and when due, regardless of any
defense, right of set-off or counterclaim that the Trust may have or assert
other than the defense of payment. The following payments with respect to the
New Capital Securities, to the extent not paid by or on behalf of the Trust
(the "Guarantee Payments"), will be subject to the New Guarantee: (i) any
accumulated and unpaid Distributions required to be paid on New Capital
Securities, to the extent the Trust has funds on hand
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legally available therefor, (ii) the Redemption Price with respect to any New
Capital Securities called for redemption, to the extent that the Trust has
funds on hand legally available therefor, or (iii) upon a voluntary or
involuntary termination and liquidation of the Trust (unless the New Junior
Subordinated Debentures are distributed to holders of the Capital Securities),
the lesser of (a) the Liquidation Distribution, to the extent that the Trust
has funds on hand legally available therefor, and (b) the amount of assets of
the Trust remaining available for distribution to holders of New Capital
Securities. 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 the New Capital Securities or by causing the Trust to pay such
amounts to such holders.
The New Guarantee will rank subordinate and junior in right of payment to
all Senior Indebtedness to the extent provided therein. See "--Status of New
Guarantee" below. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that subsidiary, except to the extent the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Company's obligations under the New Guarantee will be effectively subordinated
to all existing and future liabilities of the Company's subsidiaries, and
claimants should look only to the assets of the Company for payments
thereunder. See "Description of New Junior Subordinated Debentures--General."
The New Guarantee does not limit the incurrence or issuance of other secured
or unsecured debt of the Company, including Senior Indebtedness, whether under
the Indenture, any other indenture that the Company may enter into in the
future or otherwise.
The Company will, through the New Guarantee, the Declaration, the New Junior
Subordinated Debentures and the Indenture, taken together, fully, irrevocably
and unconditionally guarantee all of the Trust's obligations under the New
Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the New Capital Securities. See "Relationship Among
the New Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee."
STATUS OF NEW GUARANTEE
The New Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior
Indebtedness in the same manner as the New Junior Subordinated Debentures.
The New Guarantee will rank pari passu with the Old Guarantee and with all
Other Guarantees (if any) issued by the Company after the Issue Date with
respect to capital securities (if any) issued by Other Trusts. The New
Guarantee will constitute a guarantee of payment and not of collection (i.e.,
the guaranteed party may institute a legal proceeding directly against the
Company to enforce its rights under the New Guarantee without first
instituting a legal proceeding against any other person or entity). The New
Guarantee will not be discharged except (i) by payment of the Guarantee
Payments in full to the extent not paid by the Trust or (ii) upon distribution
to the holders of the New Capital Securities of the New Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Indebtedness that may be incurred by the Company. The
Company expects from time to time to incur additional indebtedness
constituting Senior Indebtedness.
EVENTS OF DEFAULT
An event of default under the New Guarantee will occur upon the failure of
the Company to perform any of its payment or other obligations thereunder.
Subject to certain limited exceptions, the holders of a majority in
liquidation amount of the New Capital 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 New Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under the
New Guarantee.
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If the Guarantee Trustee fails to enforce the Guarantee, any holder of New
Capital Securities may institute a legal proceeding directly against the
Company to enforce the Trustee's rights and the obligations of the Company
under the New Guarantee, without first instituting a legal proceeding against
the Trust, the Guarantee Trustee or any other person or entity.
The Company, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Company is in
compliance with all the conditions and covenants applicable to it under the
New Guarantee.
CERTAIN COVENANTS OF THE COMPANY
In the New Guarantee, the Company will covenant that, so long as any New
Capital Securities remain outstanding, if (a)(i) a Debenture Event of Default
shall have occurred and be continuing or (ii) there shall have occurred any
event of which the Company has actual knowledge that (A) is, or with the
giving of notice or the lapse of time, or both, would be, an Event of Default
and (B) in respect of which the Company shall not have taken reasonable steps
to cure, or (b) the Company shall have elected to exercise its right to extend
the interest payment period under the Indenture and such extension shall be
continuing, then the Company shall not (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Company's capital stock (which includes common and
preferred stock), (ii) make any payment of principal, interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Company
(including any Other Debentures) that rank pari passu with or junior in right
of payment to the Junior Subordinated Debentures or (iii) make any guarantee
payments with respect to any guarantee by the Company of any securities of any
subsidiary of the Company (including Other Guarantees) if such guarantee ranks
pari passu with or junior in right of payment to the Junior Subordinated
Debentures (other than (a) dividends or distributions in shares of or options,
warrants or rights to subscribe for or purchase shares of, common stock of the
Company, (b) any declaration of a dividend in connection with the
implementation of a stockholder's rights plan, or the issuance of stock under
any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a direct
result of, and only to the extent required in order to avoid the issuance of
fractional shares of capital stock following, a reclassification of the
Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or pursuant to an acquisition in which fractional shares of the
Company's capital stock would otherwise be issued, (e) 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 (f) purchases of common stock related to the
issuance of common stock or rights under any of the Company's benefit plans
for directors, officers, agents or employees of the Company or its
subsidiaries or any of the Company's dividend reinvestment or director,
officer, agent or employee stock purchase plans).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the New Capital Securities (in which case no consent
will be required), the New Guarantee may not be amended without the prior
approval of the holders of a majority of the Liquidation Amount of such
outstanding New Capital Securities. The manner of obtaining any such approval
will be as set forth under "--Description of New Capital Securities--Voting
Rights; Amendment of the Declaration." All guarantees and agreements contained
in the Guarantee Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the New Capital Securities then outstanding.
TERMINATION
The New Guarantee will terminate upon full payment of the applicable
Redemption Price of the Capital Securities, upon full payment of the
Liquidation Amount payable upon liquidation of the Trust or upon
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distribution of the New Junior Subordinated Debentures to the holders of the
New Capital Securities. Notwithstanding the foregoing, the New Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of New Capital Securities issued by the Trust must restore
payment of any sums paid under such New Capital Securities or the New
Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default and after the
curing or waiving of all defaults that may have occurred with respect to the
Guarantee, undertakes to perform only such duties as are specifically set
forth in the New Guarantee and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the New Guarantee at
the request of any holder of New Capital Securities, unless offered reasonable
indemnity against the costs, expenses and liabilities which might be incurred
thereby.
The Company and certain of its subsidiaries may, from time to time, conduct
certain banking transactions with the Guarantee Trustee in the ordinary course
of business.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
internal laws of the State of New York.
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
the New Securities, except that (i) the Old Securities have not been
registered under the Securities Act, and thus are subject to certain transfer
restrictions and are entitled to certain rights under the applicable
Registration Rights Agreement (which rights will terminate upon consummation
of the Exchange Offer, except under limited circumstances), (ii) the New
Capital Securities will not contain the $100,000 minimum Liquidation Amount
transfer restriction and certain other restrictions on transfer applicable to
Old Capital Securities, (iii) the New Capital Securities will not provide for
any increase in the Distribution rate thereon, (iv) the New Junior
Subordinated Debentures will not contain the $100,000 minimum principal amount
transfer restriction and (v) the New Junior Subordinated Debentures will not
provide for any increase in the liquidated damages thereon. The Old Securities
provide that, in the event that a registration statement relating to the
Exchange Offer has not been declared effective by August 2, 1997, or, in
certain limited circumstances, in the event a shelf registration statement
(the "Shelf Registration Statement") with respect to the resale of the Old
Capital Securities is not declared effective by August 2, 1997, then
liquidated damages will accumulate (in addition to the stated interest rate on
the Old Junior Subordinated Debentures) at the rate of 0.25% per annum on the
principal amount of the Old Junior Subordinated Debentures and Distributions
will accrue (in addition to the stated Distribution rate on the Old Capital
Securities) at the rate of 0.25% per annum on the Liquidation Amount of the
Old Capital Securities, for the period from the occurrence of such event until
such time as such required Exchange Offer is consummated or any required Shelf
Registration Statement is effective. The New Securities are not, and upon
consummation of the Exchange Offer the Old Securities will not be, entitled to
any such additional interest or Distributions. Accordingly, holders of Old
Capital Securities should review the information set forth under "Risk
Factors--Certain Consequences of a Failure to Exchange Old Capital Securities"
and "Description of New Securities."
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RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE
NEW JUNIOR SUBORDINATED DEBENTURES AND THE NEW GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the New Capital
Securities (to the extent the Trust has funds on hand legally available for
the payment of such Distributions) will be irrevocably guaranteed by the
Company as and to the extent set forth under "Description of the New
Guarantee." Taken together, the Company's obligations under the New Junior
Subordinated Debentures, the Indenture, the Declaration and the New Guarantee
will provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of Distributions and other amounts due on the New
Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the New Capital Securities. If and to the extent
that the Company does not make the required payments on the New Junior
Subordinated Debentures, the Trust will not have sufficient funds to make the
related payments, including Distributions, on the New Capital Securities. The
New Guarantee will not cover any such payment when the Trust does not have
sufficient funds on hand legally available therefor. In such event, the remedy
of a holder of New Capital Securities is to institute a Direct Action. The
obligations of the Company under the Guarantee will be subordinate and junior
in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
New Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the New Capital Securities, primarily
because: (i) the aggregate principal amount or Special Event Prepayment Price
of the New Junior Subordinated Debentures will be equal to the sum of the
Liquidation Amount or Redemption Price, as applicable, of the New Capital
Securities and Common Securities; (ii) the interest rate and interest and
other payment dates on the New Junior Subordinated Debentures will match the
Distribution rate and Distribution and other payment dates for the Trust
Securities; (iii) the Company shall pay for all and any costs, expenses and
liabilities of the Trust except the Trust's obligations to holders of Trust
Securities under such Trust Securities; and (iv) the Declaration will provide
that the Trust is not authorized to engage in any activity that is not
consistent with the limited purposes thereof.
ENFORCEMENT OF RIGHTS OF HOLDERS OF CAPITAL SECURITIES
If the Guarantee Trustee fails to enforce the Guarantee, a holder of any New
Capital Security may institute a legal proceeding against the Company to
enforce its rights under the Guarantee without first instituting a legal
proceeding against the Guarantee Trustee, the Trust or any other person or
entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in
the event of payment defaults under, or acceleration of, Senior Indebtedness,
the subordination provisions of the Indenture will provide that no payments
may be made in respect of the New Junior Subordinated Debentures until such
Senior Indebtedness has been paid in full or any payment default thereunder
has been cured or waived. Failure to make required payments on New Junior
Subordinated Debentures would constitute an Event of Default under the
Declaration.
LIMITED PURPOSE OF THE TRUST
The New Capital Securities will represent preferred beneficial interests in
the Trust, and the Trust exists for the sole purpose of issuing and selling
the Trust Securities, using the proceeds from the sale of the Trust Securities
to acquire the Junior Subordinated Debentures and engaging in only those
activities necessary, advisable or incidental thereto.
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RIGHTS UPON TERMINATION
Unless the New Junior Subordinated Debentures are distributed to holders of
the Trust Securities, upon any voluntary or involuntary termination and
liquidation of the Trust, the holders of the Trust Securities will be entitled
to receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of New Capital Securities--Liquidation of the Trust and
Distribution of New Junior Subordinated Debentures." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the New Junior Subordinated Debentures, would be a subordinated
creditor of the Company, subordinated in right of payment to all Senior
Indebtedness as set forth in the Indenture, but entitled to receive payment in
full of principal (and premium, if any) and interest, before any stockholders
of the Company receive payments or distributions. Since the Company will be
the guarantor under the Guarantee and will agree to pay for all costs,
expenses and liabilities of the Trust (other than the Trust's obligations to
the holders of its Trust Securities), the positions of a holder of New Capital
Securities and a holder of New Junior Subordinated Debentures relative to
other creditors and to stockholders of the Company in the event of liquidation
or bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Latham & Watkins, special counsel to the Company and the
Trust ("Tax Counsel"), the following is a summary of certain of the material
United States federal income tax consequences of the purchase, ownership and
disposition of Capital Securities held as capital assets by a holder. This
summary only addresses the tax consequences to a holder that acquired the Old
Capital Securities upon initial issuance at their original offering price. It
does not deal with special classes of holders such as banks, thrifts, real
estate investment trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or persons that
will hold the Capital Securities as a position in a "straddle," as part of a
"synthetic security," "hedge," "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not
address the tax consequences to persons that have a functional currency other
than the U.S. Dollar or the tax consequences to shareholders, partners or
beneficiaries of a holder of Capital Securities. Further, it does not include
any description of any alternative minimum tax consequences or the tax laws of
any state or local government or of any foreign government that may be
applicable to the Capital Securities. This summary is based 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.
The opinion of Tax Counsel is based on current law, certain assumptions set
forth therein, certain representations from the Company and certain other
information, data, documentation and materials Tax Counsel deems necessary. An
opinion of counsel is not binding on the Internal Revenue Service (the "IRS")
and, therefore, no assurance can be given that such an opinion will not be
challenged by the IRS or would be sustained by a court if challenged.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for New Capital Securities will not
be a taxable event to holders for United States federal income tax purposes.
The exchange of Old Capital Securities for New Capital Securities pursuant to
the Exchange Offer will not be treated as an "exchange" for United States
federal income tax purposes because the New Capital Securities should not be
considered to differ materially in kind or extent from the Old Capital
Securities and because the exchange will occur by operation of the terms of
the Old Capital Securities. If, however, the exchange of the Old Capital
Securities for the New Capital Securities were treated as an exchange for
United States federal income tax purposes, such exchange would constitute a
recapitalization for federal income tax purposes. Accordingly, the New Capital
Securities will have the same adjusted tax basis and holding period in the New
Capital Securities as the holder had in the Old Capital Securities immediately
before the exchange.
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CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Old Junior Subordinated Debentures,
Tax Counsel has rendered its opinion generally to the effect that under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Old Junior Subordinated Debentures will be classified for
United States federal income tax purposes as indebtedness of the Company.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Old Capital Securities, Tax Counsel
rendered 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, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as a partnership or an
association taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of Capital Securities generally will be
considered the owner of an undivided interest in the Junior Subordinated
Debentures, and each holder will be required to include in its gross income
any interest (or OID accrued) with respect to its allocable share of those
Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations") applicable to
debt instruments issued on or after August 13, 1996, a "remote" contingency
that stated interest will not be timely paid will be ignored in determining
whether a debt instrument is issued with OID. The Company believes that the
likelihood of its exercising its option to defer payments of interest is
"remote" since, among other things, exercising that option would prevent the
Company from declaring dividends on any class of its equity securities.
Accordingly, the Company intends to take the position, based on the advice of
Tax Counsel, that the Junior Subordinated Debentures will not be considered to
be issued with OID and, accordingly, stated interest on the Junior
Subordinated Debentures generally will be taxable to a holder as ordinary
income at the time it is paid or accrued in accordance with such holder's
method of accounting.
Under the Regulations, if the Company were to exercise its option to defer
payments of interest, the Junior Subordinated Debentures would at that time be
treated as issued with OID, and all stated interest on the Junior Subordinated
Debentures would thereafter be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. In such event, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures
would thereafter be accounted for on an economic accrual basis regardless of
such holder's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income. The amount of OID that
accrues in any month will approximately equal the amount of interest that
accrues in that month at the stated interest rate. Consequently, a holder of
Capital Securities would be required to include in gross income OID even
though the Company would not make actual cash payments during an Extension
Period.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with
respect to the Capital Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE
TRUST
The Company will have the right at any time to liquidate the Trust and cause
the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each
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holder would receive an aggregate tax basis in the Junior Subordinated
Debentures equal to such holder's aggregate tax basis in its Capital
Securities. A holder's holding period in the Junior Subordinated Debentures so
received in liquidation of the Trust would include the period during which the
Capital Securities were held by such holder. If, however, the Trust is
characterized for United States federal income tax purposes as an association
taxable as a corporation at the time of its dissolution, the distribution of
the Junior Subordinate Debentures may constitute a taxable event to holders of
Capital Securities.
Under certain circumstances described herein (see "Description of New
Capital Securities"), the Junior Subordinated Debentures may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption
of their Capital Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Capital Securities, and a holder could recognize gain or loss as
if it sold such redeemed Capital Securities for cash. See "--Sales of Capital
Securities" below.
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities (including a redemption of Capital
Securities either on the Stated Maturity Date or upon the occurrence of a
Special Event) will recognize gain or loss equal to the difference between its
adjusted tax basis in the Capital Securities and the amount realized on the
sale of such Capital Securities (for these purposes, the amount realized on
the sale of a Capital Security does not include any amount attributable to
accrued interest, which will be taxable on such unless previously taken into
account). A holder's adjusted tax basis in the Capital Securities generally
will be its initial purchase price increased by OID (if any) previously
includable in such holder's gross income to the date of disposition and
decreased by payments (other than stated interest that constitutes ordinary
income at the time it is paid or accrued) received on the Capital Securities.
Such gain or loss generally will be a capital gain or loss and generally will
be a long-term capital gain or loss if the Capital Securities have been held
for more than one year. Subject to certain limited exceptions, capital losses
cannot be applied to offset ordinary income for United States federal income
tax purposes.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is treated as a
foreign corporation, a non-resident alien individual, a foreign partnership,
or a non-resident fiduciary of a foreign estate or a foreign trust under
United States federal income tax rules.
Under present United States federal income tax law: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the
Capital Security does not actually or constructively own 10 percent or more of
the total combined voting power of all classes of stock of the Company
entitled to vote, (b) the beneficial owner of the Capital Security is not a
controlled foreign corporation that is related to the Company through stock
ownership, within the meaning of the Code, and (c) either (A) the beneficial
owner of the Capital Security certifies to the Trust or its agent, under
penalties of perjury, that it is not a United States holder and provides its
name and address or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary course
of its trade or business (a "Financial Institution"), and holds the Capital
Security in such capacity, certifies to the Trust or its agent, under
penalties of perjury, that such statement has been received from the
beneficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy thereof; and
(ii) a United States Alien Holder of a Capital Security generally will not be
subject to United States federal withholding tax on any gain realized upon the
sale or other disposition of a Capital Security.
PROPOSED TAX LEGISLATION
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the United States Treasury Department proposed legislation that
would, among other things, deny an issuer a deduction for United States
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federal income tax purposes for the payment of interest on instruments with
characteristics similar to the Junior Subordinated Debentures. However, no
similar provision was contained in Chairman Archer's Mark submitted to the
Committee on Ways and Means on June 9, 1997. Even if the proposed legislation
were enacted in its current form, it is not expected to apply to the Junior
Subordinated Debentures since the proposed effective date for this provision
is the date of first committee action. There can be no assurances, however,
that the proposed legislation, if enacted, or similar legislation enacted
after the date hereof would not adversely affect the tax treatment of the
Junior Subordinated Debentures, resulting in a Tax Event. The occurrence of a
Tax Event may result in the redemption of the Junior Subordinated Debentures
for cash, in which event the holders of the Capital Securities would receive
cash in redemption of their Capital Securities. The occurrence of a Tax Event
may result in the redemption of the Junior Subordinated Debentures for cash,
in which event the holders of the Capital Securities would receive cash in
redemption of their Capital Securities. See "Description of New Capital
Securities--Redemption" and "Description of New Junior Subordinated
Debentures--Special Event Prepayment."
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31 percent unless the holder
complies with certain identification requirements. Any withheld amounts will
be allowed as a credit against the holder's United States federal income tax,
provided the required information is provided to the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES
IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Company, the obligor with respect to the New Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee may
be considered a "party in interest" (within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) or a
"disqualified person" (within the meaning of Section 4975 of the Code) with
respect to many employee benefit plans ("Plans") that are subject to ERISA.
The purchase and/or holding of New Capital Securities by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of the
Code) and with respect to which the Company, the Property Trustee or any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code, unless such New Capital Securities
are acquired pursuant to and in accordance with an applicable exemption, such
as Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for
certain transactions determined by an independent qualified professional asset
manager), PTCE 91-38 (an exemption for certain transactions involving bank
collective investment funds), PTCE 90-1 (an exemption for certain transactions
involving insurance companies pooled separate accounts), PTCE 95-60 (an
exemption for transactions involving certain insurance company general
accounts) or PTCE 96-23 (an exception for certain transactions determined by
an in-house asset manager). In addition, a Plan fiduciary considering the
purchase of New Capital Securities should be aware that the assets of the
Trust may be considered "plan assets" for ERISA purposes. Therefore, a Plan
fiduciary should consider whether the acquisition of Capital Securities could
result
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in a delegation of fiduciary authority to the Property Trustee, and, if so,
whether such a delegation of authority is permissible under the Plan's
governing instrument or any investment management agreement with the Plan. In
making such determination, a Plan fiduciary should note that the Property
Trustee is a U.S. bank qualified to be an investment manager (within the
meaning of section 3(38) of ERISA) to which such a delegation of authority
generally would be permissible under ERISA. Further, prior to an Event of
Default with respect to the New Junior Subordinated Debentures, the Property
Trustee will have only limited custodial and ministerial authority with
respect to Trust assets.
Under the U.S. Department of Labor regulations defining "plan assets" for
ERISA purposes (the "Plan Assets Regulations"), the assets of the Trust will
be considered plan assets of Plans owning New Capital Securities unless the
aggregate investment in New Capital Securities by "benefit plan investors" is
not deemed "significant" or the New Capital Securities qualify as "publicly
offered securities" as defined in such Regulations. For this purpose, equity
participation by benefit plan investors will not be considered "significant"
on any date only if, immediately after the most recent acquisition of Capital
Securities, the aggregate interest in the New Capital Securities held by
benefit plan investors will be less than 25% of the value of the New Capital
Securities. Although it is possible that the equity participation by benefit
plan investors in New Capital Securities on any date will not be "significant"
for purposes of the Plan Assets Regulations, such result cannot be assured.
The New Capital Securities may qualify as "publicly offered securities"
under the Plan Assets Regulations if at the time of the Exchange Offer they
are also "widely held" and "freely transferable." Under the Regulations, a
class of securities is "widely held" only if it is a class of securities that
is owned by 100 or more investors independent of the issuer and of one
another. Although it is possible that at the time of the Exchange Offer the
New Capital Securities will be "widely held," such result cannot be assured.
Whether a security is "freely transferable" for purposes of the Regulations is
a factual question to be determined on the basis of all relevant facts and
circumstances. If at the time of the Exchange Offer the New Capital Securities
qualify as "publicly offered securities," the assets of the Trust should not
be "plan assets" with respect to Plans acquiring New Capital Securities. If at
the time of the Exchange Offer the New Capital Securities do not qualify as
"publicly offered securities," the "plan asset" considerations discussed in
the preceding paragraphs could be applicable in connection with the investment
by Plans in the New Capital Securities.
Any purchaser proposing to acquire Capital Securities with assets of any
Plan should consult with its ERISA counsel.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account
in connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by Participating Broker-Dealers during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities if such Old Capital Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-
making activities or other trading activities. The Company and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales
of such New Capital Securities for a period ending 90 days after the
Expiration Date (subject to extension under certain limited circumstances
described herein) or, if earlier, when all such New Capital Securities have
been disposed of by such Participating Broker-Dealer. However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Company or the Trust, or cause
the Company or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or may be
delivered to the Exchange Agent at one of the addresses set forth herein under
"The Exchange Offer--Exchange Act." See "The Exchange Offer--Resales of New
Capital Securities."
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Neither the Company nor the Trust will receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. New Capital Securities
received by broker-dealers for their own accounts in connection with the
Exchange Offer may be sold from time to time in one or more transactions in
the over-the-counter market, in negotiated transactions, through the writing
of options on the New Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at negotiated prices. Any such resale may
be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Capital Securities.
Any broker-dealer that resells New Capital Securities that were received by
it for its own account in connection with the Exchange Offer and any broker or
dealer that participates in a distribution of such New Capital Securities may
be deemed to be an "underwriter" within the meaning of the Securities Act, and
any profit on any such resale of New Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the New Capital
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, P.A., special Delaware counsel to the Company. The validity of the New
Junior Subordinated Debentures, the New Guarantee and certain matters relating
thereto will be passed upon on behalf of the Company by Ropes & Gray. Certain
United States federal income taxation matters will be passed upon for the
Company and the Trust by Latham & Watkins. Ropes & Gray will rely on Richards,
Layton & Finger, P.A. as to matters of Delaware law.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31,
1996, incorporated in this Prospectus by reference to its Annual Report on
Form 10-K/A for the year ended December 31, 1996, have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
75
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
AFC is a Delaware corporation. Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL") enables a corporation in its original certificate
of incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation or its stockholders for monetary
damages for violations of the director's fiduciary duty, except (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of directors for unlawful
payment of dividends or unlawful stock purchases or redemptions) or (iv) for
any transaction from which a director derived an improper personal benefit.
The Certificate of Incorporation and By-Laws of AFC contain provisions
eliminating the liability of directors to the extent permitted by Section
102(b)(7) of the DGCL.
Section 145 of the DGCL provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 145 further provides that a corporation similarly may
indemnify any such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor, against expenses actually and reasonably incurred in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper. The
Certificate of Incorporation of AFC provides for indemnification of each of
the Company's directors, officers and employees to the full extent permitted
by the DGCL.
The Registrant and its subsidiaries and affiliates maintain various
directors' and officers' insurance policies.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 Indenture of Allmerica Financial Corporation relating to the Junior
Subordinated Debentures.*
4.2 Form of Certificate of New Junior Subordinated Debenture.**
4.3 Certificate of Trust of AFC Capital Trust I.**
4.4 Declaration of Trust of AFC Capital Trust I.**
4.5 Amended and Restated Declaration of Trust for AFC Capital Trust I.*
4.6 Form of New Capital Security Certificate for AFC Capital Trust I.**
4.7 Form of New Guarantee of Allmerica Financial Corporation relating to
the New Capital Securities.**
4.8 Registration Rights Agreement.*
5.1 Opinion of Ropes & Gray as to legality of the New Junior Subordinated
Debentures and the New Guarantee to be issued by Allmerica Financial
Corporation.**
5.2 Opinion of Richards, Layton and Finger, P.A., special Delaware
counsel, as to legality of the New Capital Securities to be issued by
AFC Capital Trust I.**
8 Opinion of Latham & Watkins, special tax counsel, as to certain
federal income tax matters.**
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Ropes & Gray (included in Exhibit 5.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.2).
23.4 Consent of Latham & Watkins (included in Exhibit 8).
24 Powers of Attorney of certain officers and directors of Allmerica
Financial Corporation (included on the signature page of this
Registration Statement).
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act
as trustee under the Indenture.**
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act
as trustee under the Amended and Restated Declaration of Trust of AFC
Capital Trust I.**
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act
as Trustee under the New Guarantee for the benefit of the holders of
New Capital Securities of AFC Capital Trust I.**
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Exchange Agent Agreement.**
</TABLE>
- --------
* Incorporated by reference to Exhibits 3, 2 and 6, respectively, of the
Company's Current Report on Form 8-K filed with the Commission on February
5, 1997.
** Previously filed as part of this Registration Statement.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
II-2
<PAGE>
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the registrant pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(5) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(6) That, every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act of 1933 and is used in connection with
an offering of securities subject to Rule 415 thereunder, will be filed as a
part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when it
became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF WORCESTER, COMMONWEALTH
OF MASSACHUSETTS, ON THE 27TH DAY OF JUNE, 1997
Allmerica Financial Corporation
*
By __________________________________
NAME: JOHN F. O'BRIEN
TITLE: CHIEF EXECUTIVE OFFICER,
PRESIDENT AND DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON
JUNE 27, 1997.
SIGNATURE TITLE
Chief Executive Officer, President
* and Director (Principal Executive
- ------------------------------------- Officer)
JOHN F. O'BRIEN
Chief Financial Officer (Principal
/s/ Edward J. Parry III Financial and Accounting Officer)
- -------------------------------------
EDWARD J. PARRY III
Director
*
- -------------------------------------
MICHAEL P. ANGELINI
Director
*
- -------------------------------------
DAVID A. BARRETT
Director
*
- -------------------------------------
GAIL L. HARRISON
Director
*
- -------------------------------------
ROBERT P. HENDERSON
Director
*
- -------------------------------------
J. TERRENCE MURRAY
Director
*
- -------------------------------------
ROBERT J. MURRAY
II-4
<PAGE>
SIGNATURE TITLE
Director
*
- -------------------------------------
JOHN L. SPRAGUE
Director
*
- -------------------------------------
ROBERT G. STACHLER
Director
*
- -------------------------------------
HERBERT M. VARNUM
Director
*
- -------------------------------------
RICHARD M. WALL
* /s/ Edward J. Parry III
- -------------------------------------
EDWARD J. PARRY III
ATTORNEY-IN-FACT
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Worcester, Commonwealth
of Massachusetts, on the 27th day of June, 1997.
AFC CAPITAL TRUST I
By /s/ John P. Kavanaugh
-----------------------------------
John P. Kavanaugh, as
Administrative Trustee
By /s/ John F. Kelly
-----------------------------------
John F. Kelly, as Administrative
Trustee
By /s/ Edward J. Parry III
-----------------------------------
Edward J. Parry III, as
Administrative Trustee
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
4.1 Indenture of Allmerica Financial Corporation relating to the
Junior Subordinated Debentures.*
4.2 Form of Certificate of New Junior Subordinated Debenture.**
4.3 Certificate of Trust of AFC Capital Trust I.**
4.4 Declaration of Trust of AFC Capital Trust I.**
4.5 Amended and Restated Declaration of Trust for AFC Capital Trust
I.*
4.6 Form of New Capital Security Certificate for AFC Capital Trust
I.**
4.7 Form of New Guarantee of Allmerica Financial Corporation
relating to the New Capital Securities.**
4.8 Registration Rights Agreement.*
5.1 Opinion of Ropes & Gray as to legality of the New Junior
Subordinated Debentures and the New Guarantee to be issued by
Allmerica Financial Corporation.**
5.2 Opinion of Richards, Layton and Finger, P.A., special Delaware
counsel, as to legality of the New Capital Securities to be
issued by AFC Capital Trust I.**
8 Opinion of Latham & Watkins, special tax counsel, as to certain
federal income tax matters.**
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Ropes & Gray (included in Exhibit 5.1).
23.3 Consent of Richards, Layton & Finger, P.A. (included in Exhibit
5.2).
23.4 Consent of Latham & Watkins (included in Exhibit 8).
24 Powers of Attorney of certain officers and directors of
Allmerica Financial Corporation (included on the signature
page of this Registration Statement).
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as trustee under the Indenture.**
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as trustee under the Amended and Restated Declaration
of Trust of AFC Capital Trust I.**
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank
to act as Trustee under the New Guarantee for the benefit of
the holders of New Capital Securities of AFC Capital
Trust I.**
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Exchange Agent Agreement.**
</TABLE>
- --------
* Incorporated by reference to Exhibits 3, 2 and 6, respectively, of the
Company's Current Report on Form 8-K filed with the Commission on February
5, 1997.
** Previously filed as part of this Registration Statement.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to Registration Statement on Form S-
4 of Allmerica Financial Corporation and AFC Capital Trust I of our report
dated February 3, 1997, except as to Note 1, which is as of February 19, 1997,
and Note 2, which is as of April 14, 1997, which appears on the Allmerica
Financial Corporation Annual Report on Form 10-K/A for the year ended December
31, 1996. We also consent to the incorporation by reference of our report on
the Financial Statement Schedules, which appears on the Allmerica Financial
Corporation Annual Report on Form 10-K/A for the year ended December 31, 1996.
We also consent to the references to us under the headings "Experts" and
"Selected Consolidated Financial Data" in such Prospectus. However, it should
be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Consolidated Financial Data."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
June 27, 1997
<PAGE>
LETTER OF TRANSMITTAL
AFC CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.207% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.207% SERIES A CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
PURSUANT TO THE PROSPECTUS
DATED JUNE 27, 1997
The Exchange Agent for the Exchange Offer is:
THE CHASE MANHATTAN BANK
By Registered or Certified Mail
or Hand or Overnight Delivery:
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, New York 10041
Attention: Carlos Esteves
Confirm by Telephone:
(212) 638-0828
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 638-7375 or (212) 344-9367
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON AUGUST 1, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Capital
Securities (as defined below) either if Old Capital Securities are to be
forwarded herewith or if tenders of Old Capital Securities are to be made by
book-entry transfer to an account maintained by The Chase Manhattan Bank (the
"Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedures set forth in "The Exchange Offer--Procedures
<PAGE>
for Tendering Old Capital Securities" in the Prospectus and an Agent's Message
(as defined herein) is not delivered.
Holders of Old Capital Securities whose certificates (the "Certificates")
for such Old Capital Securities are not immediately available or who cannot
deliver their Certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) or who
cannot complete the procedures for book-entry transfer on a timely basis, must
tender their Old Capital Securities according to the guaranteed delivery
procedures set forth in "The Exchange Offer--Procedures for Tendering Old
Capital Securities" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
- --------------------------------------------------------------------------------
ALL TENDERING HOLDERS COMPLETE THIS BOX:
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD CAPITAL SECURITIES TENDERED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
IF BLANK, PLEASE PRINT NAME AND ADDRESS OLD CAPITAL SECURITIES
OF REGISTERED HOLDER. (ATTACH ADDITIONAL LIST)
- ----------------------------------------------------------------------------------
<S> <C> <C>
AGGREGATE LIQUIDATION
CERTIFICATE AMOUNT OF OLD CAPITAL
NUMBER(S)* SECURITIES**
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
TOTAL AMOUNT
TENDERED:
- ----------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** All Old Capital Securities held shall be deemed tendered unless a
lesser number is specified in this column. Please note that if less
than all Old Capital Securities are tendered by any holder, the
untendered Old Capital Securities will remain subject to the $100,000
minimum principal amount transfer restriction and therefore untendered
Old Capital Securities should be retained only in denominations of
$100,000 or more.
- --------------------------------------------------------------------------------
-2-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED BY BOOK-
ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: ______________________________________________
DTC Account Number __________________________________________________________
Transaction Code Number _____________________________________________________
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD CAPITAL SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ____________________________________________
Window Ticket Number (if any) _______________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which Guaranteed Delivery _______________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution __________________________________________
DTC Account Number _____________________________________________________
Transaction Code Number ________________________________________________
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD CAPITAL
SECURITIES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD CAPITAL
SECURITIES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: _______________________________________________________________________
Address: ____________________________________________________________________
_____________________________________________________________________________
-3-
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to AFC Capital Trust I, a trust formed under
the laws of Delaware (the "Trust") and Allmerica Financial Corporation, a
Delaware corporation, (the "Company"), the above described aggregate
Liquidation Amount of the Trust's 8.207% Series A Capital Securities (the "Old
Capital Securities") in exchange for a like aggregate Liquidation Amount of
the Trust's 8.207% Series B Capital Securities (the "New Capital Securities")
which have been registered under the Securities Act of 1933 (the "Securities
Act"), upon the terms and subject to the conditions set forth in the
Prospectus dated June 27, 1997, (as the same may be amended or supplemented
from time to time, the "Prospectus"), receipt of which is acknowledged, and in
this Letter of Transmittal (which, together with the Prospectus, constitute
the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Capital Securities tendered herewith in accordance with the
terms and conditions of the Exchange Offer (including, if the Exchange Offer
is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to or upon the
order of the Trust all right, title and interest in and to such Old Capital
Securities as are being tendered herewith. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent as its agent and attorney-in-fact
(with full knowledge that the Exchange Agent is also acting as agent of the
Company and the Trust in connection with the Exchange Offer) with respect to
the tendered Old Capital Securities, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the
Prospectus, to (i) deliver Certificates for Old Capital Securities to the
Company or the Trust together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Trust, upon receipt by the Exchange
Agent, as the undersigned's agent, of the New Capital Securities to be issued
in exchange for such Old Capital Securities, (ii) present Certificates for
such Old Capital Securities for transfer, and to transfer the Old Capital
Securities on the books of the Trust, and (iii) receive for the account of the
Trust all benefits and otherwise exercise all rights of beneficial ownership
of such Old Capital Securities, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL
POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
CAPITAL SECURITIES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR
EXCHANGE, THE TRUST WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE
THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES,
AND THAT THE OLD CAPITAL SECURITIES TENDERED HEREBY ARE NOT SUBJECT TO ANY
ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND
DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY, THE TRUST OR THE
EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE,
ASSIGNMENT AND TRANSFER OF THE OLD CAPITAL SECURITIES TENDERED HEREBY, AND THE
UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS
AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Capital
Securities tendered hereby should be printed above, if they are not already
set forth above, as they appear on the Certificates representing such Old
Capital Securities. The Certificate number(s) and the Old Capital Securities
that the undersigned wishes to tender should be indicated in the appropriate
boxes above.
If any tendered Old Capital Securities are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more Old
Capital Securities than are tendered or accepted for exchange, Certificates
for such nonexchanged or nontendered Old Capital Securities will be returned
(or, in the case of Old Capital Securities tendered by book-entry transfer,
such Old Capital Securities will be credited to an account maintained at DTC),
without expense to the tendering holder, promptly following the expiration or
termination of the Exchange Offer.
-4-
<PAGE>
If the undersigned is a broker-dealer holding Old Capital Securities
acquired for its own account as a result of market-making activities or other
trading activities, it agrees to deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of New Capital Securities
received in respect of such Old Capital Securities pursuant to the Exchange
Offer.
The undersigned understands that tenders of Old Capital Securities pursuant
to any one of the procedures described in "The Exchange Offer--Procedures for
Tendering Old Capital Securities" in the Prospectus and in the instructions
will, upon the Company's and the Trust's acceptance for exchange of such
tendered Old Capital Securities, constitute a binding agreement between the
undersigned, the Company and the Trust upon the terms and subject to the
conditions of the Exchange Offer. The undersigned recognizes that, under
certain circumstances set forth in the Prospectus, the Company and the Trust
may not be required to accept for exchange any of the Old Capital Securities
tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Capital
Securities be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of Old Capital Securities, that such New Capital
Securities be credited to the account indicated above maintained at DTC. If
applicable, substitute Certificates representing Old Capital Securities not
exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Capital Securities, will be
credited to the account indicated above maintained at DTC. Similarly, unless
otherwise indicated under "Special Delivery Instructions," please deliver New
Capital Securities to the undersigned at the address shown below the
undersigned's signature.
BY TENDERING OLD CAPITAL SECURITIES AND EXECUTING THIS LETTER OF
TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE
UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY OR THE TRUST, (II) ANY NEW
CAPITAL SECURITIES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE
ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR
UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION (WITHIN THE
MEANING OF THE SECURITIES ACT) OF NEW CAPITAL SECURITIES TO BE RECEIVED IN THE
EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE
UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A
DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW CAPITAL
SECURITIES. BY TENDERING OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER
AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD CAPITAL SECURITIES
WHICH IS A BROKER- DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN
INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF COMPANY FINANCE OF
THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH OLD
CAPITAL SECURITIES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR
(B) SUCH OLD CAPITAL SECURITIES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING
ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM
TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION
WITH ANY RESALE OF SUCH NEW CAPITAL SECURITIES (PROVIDED THAT, BY SO
ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE
DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE
SECURITIES ACT).
The Company and the Trust have agreed that, subject to the provisions of the
Registration Rights Agreement, the Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
(as defined below) in connection with resales of New Capital Securities
received in exchange for Old Capital Securities, where such Old Capital
Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making activities or other trading activities,
for a period ending 90 days after the Expiration Date (subject to extension
under certain limited circumstances described in the Prospectus) or, if
earlier, when all such New Capital Securities have been disposed of by such
Participating
-5-
<PAGE>
Broker-Dealer. In that regard, each Broker-Dealer who acquired Old Capital
Securities for its own account and as a result of market-making or other
trading activities (a "Participating Broker-Dealer"), by tendering such Old
Capital Securities and executing this letter of transmittal, agrees that, upon
receipt of notice from the Company or the Trust of the occurrence of any event
or the discovery of any fact which makes any statement contained or
incorporated by reference therein, in light of the circumstances under which
they were made, not misleading or of the occurrence of certain other events
specified in the Registration Rights Agreement, such Participating Broker-
Dealer will suspend the sale of New Capital Securities pursuant to the
Prospectus until the Company and the Trust have amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies
of the amended or supplemented Prospectus to the Participating Broker-Dealer
or the Company or the Trust has given notice that the sale of the New Capital
Securities may be resumed, as the case may be. If the Company or the Trust
gives such notice to suspend the sale of the New Capital Securities, it shall
extend the 90-day period referred to above during which Participating Broker-
Dealers are entitled to use the Prospectus in connection with the resale of
New Capital Securities by the number of days during the period from and
including the date of the giving of such notice to and including the date when
Participating Broker-Dealers shall have received copies of the supplemented or
amended Prospectus necessary to permit resales of the New Capital Securities
or to and including the date on which the Company or the Trust has given
notice that the sale of New Capital Securities may be resumed, as the case may
be.
As a result, a Participating Broker-Dealer who intends to use the Prospectus
in connection with resales of New Capital Securities received in exchange for
Old Capital Securities pursuant to the Exchange Offer must notify the Company
and the Trust, or cause the Company and the Trust to be notified, on or prior
to the Expiration Date, that it is a Participating Broker-Dealer. Such notice
may be given in the space provided above or may be delivered to the Exchange
Agent at the address set forth in the Prospectus under "The Exchange Offer--
Exchange Agent."
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive Distributions on such Old Capital Securities and
the undersigned waives the right to receive any Distribution on such Old
Capital Securities accumulated from and after February 3, 1997. Accordingly,
holders of New Capital Securities as of the record date for the payment of
Distributions on August 15, 1997 will be entitled to Distributions accumulated
from and after February 3, 1997.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
-6-
<PAGE>
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Capital Securities hereby tendered or on a
security position listing, or by any person(s) authorized to become the
registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certificates and other information as
may be required by the Trust or the Trustee for the Old Capital Securities
to comply with the restrictions on transfer applicable to the Old Capital
Securities). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another
acting in a fiduciary capacity or representative capacity, please set
forth the signer's full title. See Instruction 5.
___________________________________________________________________________
___________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date _______________________ , 1997
Name(s) ___________________________________________________________________
(PLEASE PRINT)
___________________________________________________________________________
Capacity or Title _________________________________________________________
Address ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number _________________________________________
___________________________________________________________________________
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature ______________________________________________________
Name ______________________________________________________________________
(PLEASE PRINT)
Date _______________________ , 1997
Capacity or Title _________________________________________________________
Name of Firm ______________________________________________________________
Address ___________________________________________________________________
(INCLUDE ZIP CODE)
Area Code(s) and Telephone Number _________________________________________
-7-
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New To be completed ONLY if New
Capital Securities or any Old Capital Securities or any Old
Capital Securities that are not Capital Securities that are not
tendered are to be issued in the tendered are to be sent to someone
name of someone other than the other than the registered holder
registered holder of the Old of the Old Capital Securities
Capital Securities whose name(s) whose name(s) appear(s) above, or
appear(s) above. to the registered holder(s) at an
address other than that shown
above.
ISSUE:
[_] New Capital Securities to: MAIL:
[_] Old Capital Securities not
tendered to: [_] New Capital Securities to:
[_] Old Capital Securities not
Name(s): __________________________ tendered to:
___________________________________ Name: _____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address: __________________________ ___________________________________
___________________________________ Address: __________________________
(ZIP CODE)
___________________________________
___________________________________ (ZIP CODE)
(TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE ENCLOSED SUBSTITUTE FORM W-9)
-8-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed either if (a)
tenders are to be made pursuant to the procedures for tender by book- entry
transfer set forth in "The Exchange Offer--Procedures for Tendering Old
Capital Securities" in the Prospectus and an Agent's Message is not delivered
or (b) Certificates are to be forwarded herewith. Timely confirmation of a
book-entry transfer of such Old Capital Securities into the Exchange Agent's
account at DTC, or Certificates as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its addresses set forth
herein on or prior to the Expiration Date. Tenders by book-entry transfer may
also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by DTC to
and received by the Exchange Agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering Participant, which acknowledgment states that such
Participant has received and agrees to be bound by the Letter of Transmittal
and that the Trust and the Company may enforce the Letter of Transmittal
against such Participant. The term "book-entry confirmation" means a timely
confirmation of book-entry transfer of Old Capital Securities into the
Exchange Agent's account at DTC.
Holders who wish to tender their Old Capital Securities and (i) who cannot
complete the procedures for delivery by book-entry transfer on a timely basis,
or (ii) who cannot deliver their Old Capital Securities, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) whose Old Capital Securities are not
immediately available may tender their Old Capital Securities by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer--Procedures
for Tendering Old Capital Securities" in the Prospectus. Pursuant to such
procedures: (a) such tender must be made by or through an Eligible Institution
(as defined below); (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Company,
must be received by the Exchange Agent on or prior to the Expiration Date; and
(c) the Certificates (or a book-entry confirmation) representing tendered Old
Capital Securities, in proper form for transfer, together with a Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof),
properly completed and duly executed, with any required signature guarantees
and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent within three New York Stock Exchange, Inc.
trading days after the date of execution of such Notice of Guaranteed
Delivery, all as provided in "The Exchange Offer--Procedures for Tendering Old
Capital Securities" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Capital
Securities to be properly tendered pursuant to the guaranteed delivery
procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on
or prior to the Expiration Date. As used herein and in the Prospectus,
"Eligible Institution" means a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as "an eligible guarantor institution," including (as
such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
NEITHER THE COMPANY NOR THE TRUST WILL ACCEPT ANY ALTERNATIVE, CONDITIONAL
OR CONTINGENT TENDERS. EACH TENDERING HOLDER, BY EXECUTION OF A LETTER OF
TRANSMITTAL (OR FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF), WAIVES
ANY RIGHT TO RECEIVE ANY NOTICE OF THE ACCEPTANCE OF SUCH TENDER.
-9-
<PAGE>
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the Old
Capital Securities) of Old Capital Securities tendered herewith, unless
such holder(s) has completed either the box entitled "Special Issuance
Instructions" or the box entitled "Special Delivery Instructions" above, or
(ii) such Old Capital Securities are tendered for the account of a firm
that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned "Description
of Old Capital Securities Tendered" is inadequate, the Certificate number(s)
and/or the principal amount of Old Capital Securities and any other required
information should be listed on a separate signed schedule which is attached
to this Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. If less than all the Old Capital
Securities evidenced by any Certificate submitted are to be tendered, fill in
the principal amount of Old Capital Securities which are to be tendered in the
box entitled "Liquidation Amount of Old Capital Securities Tendered." In such
case, new Certificate(s) for the remainder of the Old Capital Securities that
were evidenced by your Old Certificate(s) will be sent to the holder of the
Old Capital Security, promptly after the Expiration Date. All Old Capital
Securities represented by Certificates delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic,
telex or facsimile transmission of such notice of withdrawal must be timely
received by the Exchange Agent at one of its addresses set forth above or in
the Prospectus on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Capital
Securities to be withdrawn, the aggregate principal amount of Old Capital
Securities to be withdrawn, and (if Certificates for Old Capital Securities
have been tendered) the name of the registered holder of the Old Capital
Securities as set forth on the Certificate for the Old Capital Securities, if
different from that of the person who tendered such Old Capital Securities. If
Certificates for the Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such
Certificates for the Old Capital Securities, the tendering holder must submit
the serial numbers shown on the particular Certificates for the Old Capital
Securities to be withdrawn and the signature on the notice of withdrawal must
be guaranteed by an Eligible Institution, except in the case of Old Capital
Securities tendered for the account of an Eligible Institution. If Old Capital
Securities have been tendered pursuant to the procedures for book-entry
transfer set forth in "The Exchange Offer--Procedures for Tendering Old
Capital Securities," the notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if
delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Old Capital Securities may not be
rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures
for Tendering Old Capital Securities."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company and the
Trust, in their sole discretion, whose determination shall be final and
binding on all parties. Neither the Company, the Trust, any affiliates or
assigns of the Company and the Trust, the Exchange Agent nor any other person
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification. Any Old Capital Securities which have been tendered but which
are withdrawn will be returned to the holder thereof without cost to such
holder promptly after withdrawal.
-10-
<PAGE>
5. Signatures on Letter of Transmittal, Assignments and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Capital Securities tendered hereby, the signature(s) must correspond exactly
with the name(s) as written on the face of the Certificate(s) or on a security
position listing without alteration, enlargement or any change whatsoever.
If any of the Old Capital Securities tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of
Transmittal.
If any tendered Old Capital Securities are registered in different name(s)
on several Certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof or Agent's Message
in lieu thereof) as there are different registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing and must submit proper evidence
satisfactory to the Company and the Trust, in their sole discretion, of such
persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Capital Securities listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless New Capital
Securities are to be issued in the name of a person other than the registered
holder(s). Signature(s) on such Certificate(s) or bond power(s) must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Capital Securities listed, the Certificates
must be endorsed or accompanied by appropriate bond powers, signed exactly as
the name or names of the registered owner(s) appear(s) on the Certificates,
and also must be accompanied by such opinions of counsel, certifications and
other information as the Company, the Trust or the Trustee for the Old Capital
Securities may require in accordance with the restrictions on transfer
applicable to the Old Capital Securities. Signatures on such Certificates or
bond powers must be guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. If New Capital Securities are
to be issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Capital Securities are to be sent to someone other than
the signer of this Letter of Transmittal or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Certificates for Old Capital Securities not exchanged will be
returned by mail or, if tendered by book-entry transfer, by crediting the
account indicated above maintained at DTC. See Instruction 4.
7. Irregularities. The Company and the Trust will determine, in their sole
discretion, all questions as to the form of documents, validity, eligibility
(including time of receipt) and acceptance for exchange of any tender of Old
Capital Securities which determination shall be final and binding on all
parties. The Company and the Trust reserve the absolute right, in their sole
and absolute discretion, to reject any and all tenders determined by either of
them not to be in proper form or the acceptance of which, or exchange for,
may, in the view of counsel to the Company and the Trust, be unlawful. The
Company and the Trust also reserve the absolute right, subject to applicable
law, to waive any of the conditions of the Exchange Offer set forth in the
Prospectus under "The Exchange Offer--Certain Conditions to the Exchange
Offer" or any conditions or irregularity in any tender of Old Capital
Securities of any particular holder whether or not similar conditions or
irregularities are waived in the case of other holders. The Company's and the
Trust's interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Capital Securities will be deemed to have
been validly made until all irregularities with respect to such tender have
been cured or waived. Neither the Company, the Trust, any affiliates or
assigns of the Company, the Trust, the Exchange Agent, or any other person
shall be under any duty to give notification of any irregularities in tenders
or incur any liability for failure to give such notification.
8. Questions, Requests for Assistance and Additional Copies. Questions and
requests for assistance may be directed to the Exchange Agent at its address
and telephone number set forth on the front of this Letter of
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<PAGE>
Transmittal. Additional copies of the Prospectus, this Letter of Transmittal
and the Notice of Guaranteed Delivery may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Capital Securities are accepted for
exchange is required to provide the Exchange Agent with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 below. If the
Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Old Capital
Securities exchanged pursuant to the Exchange Offer may be subject to 31%
backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part 2 is checked, the holder or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN
is provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-
9. If the holder furnishes the Exchange Agent with its TIN within 60 days
after the date of the Substitute Form W-9, the amounts retained during the 60
day period will be remitted to the holder and no further amounts shall be
retained or withheld from payments made to the holder thereafter. If, however,
the holder has not provided the Exchange Agent with its TIN within such 60 day
period, amounts withheld will be remitted to the IRS as backup withholding. In
addition, 31% of all payments made thereafter will be withheld and remitted to
the IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Capital Securities or of the last transferee appearing on the
transfers attached to, or endorsed on, the Old Capital Securities. If the Old
Capital Securities are registered in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the
face thereof, to avoid possible erroneous backup withholding. A foreign person
may qualify as an exempt recipient by submitting a properly completed IRS Form
W-8, signed under penalties of perjury, attesting to that holder's exempt
status. Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather, the
U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. Lost, Destroyed or Stolen Certificates. If any Certificate(s)
representing Old Capital Securities have been lost, destroyed or stolen, the
holder should promptly notify the Exchange Agent. The holder will then be
instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been followed.
11. Security Transfer Taxes. Holders who tender their Old Capital Securities
for exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Capital Securities are to be delivered to, or are
to be issued in the name of, any person other than the registered holder of
the Old Capital
-12-
<PAGE>
Securities tendered, or if a transfer tax is imposed for any reason other than
the exchange of Old Capital Securities in connection with the Exchange Offer,
then the amount of any such transfer tax (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
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<PAGE>
PAYOR'S NAME: THE CHASE MANHATTAN BANK, AS EXCHANGE AGENT
- -------------------------------------------------------------------------------
PART I--PLEASE PROVIDE YOUR SOCIAL SECURITY OR
TIN IN THE BOX AT RIGHT AND EMPLOYER
CERTIFY BY SIGNING AND IDENTIFICATION NUMBER
DATING BELOW.
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE ______________________
TREASURY INTERNAL (If awaiting TIN
REVENUE SERVICE write "Applied For")
------------------------------------------------------
NAME (PLEASE PRINT)
PAYOR'S REQUEST FOR ------------------------------------------------------
TAXPAYER IDENTIFICATION ADDRESS
NUMBER ("TIN") AND ------------------------------------------------------
CERTIFICATION CITY STATE ZIP CODE
------------------------------------------------------
PART II--For Payees NOT subject to backup
withholding, see the enclosed Guidelines for
Certification of Taxpayer Identification Number on
Substitute Form W-9 and complete as instructed
therein.
------------------------------------------------------
CERTIFICATION--UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
1. The number shown on this form is my correct
Taxpayer Identification Number (or I am
waiting for a number to be issued to me),
AND
2. I am not subject to backup withholding
because: (a) I am exempt from backup
withholding, or (b) I have not been notified
by the Internal Revenue Service ("IRS") that
I am subject to backup withholding as a
result of a failure to report all interest
or dividends, or (c) the IRS has notified me
that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
underreporting interest or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you
are no longer subject to backup withholding, do not
cross out item (2).
Signature: __________________ Date: ________ , 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
PAYOR'S NAME: THE CHASE MANHATTAN BANK, AS EXCHANGE AGENT
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will
be withheld until I provide a number.
Signature(s): ______________________ Date: ______________________________
-14-
