<PAGE>
PROSPECTUS RULE 424(b)(1)
File No. 33-59463
$100,000,000
Leucadia National Corporation
8-1/4% SENIOR SUBORDINATED NOTES DUE 2005
(Interest payable June 15 and December 15)
---------------------
The Notes will bear interest from the date of the original
issue, at the rate per annum set forth above, payable
semiannually on each June 15 and December 15, commencing December 15,
1995. The Notes will mature on June 15, 2005 and are not redeemable by
the Company prior to maturity. Upon a Change of Control (as defined),
each Noteholder will have the right, subject to certain conditions and
restrictions, to require the Company to repurchase the Notes at 101% of
the principal amount thereof, plus accrued interest.
The Notes will be subordinated to all Senior Indebtedness
(as defined) of the Company. At March 31, 1995, the Company's
Senior Indebtedness was $149,081,000, net of debt discount of
$919,000, and the indebtedness of the Company's consolidated
subsidiaries, to which the Notes are effectively subordinated,
was $23,068,000, exclusive of customer banking deposits
("Deposits"). The Notes will rank pari passu with the Company's
10-3/8% Senior Subordinated Notes due 2002, of which, at March
31, 1995, $124,324,000 aggregate principal amount was
outstanding, net of debt discount of $676,000.
----------------------
Application to list the Notes on the New York Stock Exchange
under the symbol "LUK/05" has been approved.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
---------- ------------ ----------
<S> <C> <C> <C>
Per Note . . . . . . . . 100.00 % 1.00 % 99.00 %
Total . . . . . . . . . . $100,000,000 $1,000,000 $99,000,000
<FN>
_______________
(1) Plus accrued interest, if any, from June 13, 1995.
(2) The Company has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company
estimated at $375,000.
/TABLE
<PAGE>
____________________
The Notes are offered by the Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, and subject
to approval of certain legal matters by counsel for the
Underwriters. It is expected that delivery of the Notes will be
made against payment therefor in New York, New York on or about
June 13, 1995.
____________________
Jefferies & Company, Inc.
CS First Boston
PaineWebber Incorporated
June 8, 1995<PAGE>
<PAGE>
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, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). The reports, proxy statements and
other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices at 7 World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60601-2511. Copies of such
material also can be obtained from the Public Reference Section
of the Commission, Washington, D.C. 20549 at prescribed rates.
In addition, material filed by the Company can be inspected at
the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20
Broad Street, New York, New York 10005 and the Pacific Stock
Exchange, Incorporated, 301 Pine Street, San Francisco,
California 94104, on which the Company's common shares, par
value $1.00 per share (the "Common Shares"), are listed.
The Company has filed with the Commission a Registration
Statement on Form S-3 (together with any amendments thereto, the
"Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities
offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement. Such
additional information may be obtained from the Commission's
principal office in Washington, D.C.
2
<PAGE>
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been filed by the Company
(File No. 1-5721) with the Commission are incorporated by
reference in this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (the "Annual Report"); and
(b) the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1995 (the "First Quarter 10-Q").
All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of
the Notes contemplated hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a
document incorporated by reference or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded
for all purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document
which also is incorporated or deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written
or oral request of such person, a copy of any and all of the
documents referred to above which have been or may be
incorporated in this Prospectus by reference, other than exhibits
to such documents, unless such exhibits are specifically
incorporated by reference therein. Requests for such copies
should be directed to: Leucadia National Corporation, 315 Park
Avenue South, New York, N.Y. 10010 (telephone number (212)
460-1900), Attention: Corporate Secretary.
_____________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-
ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICES OF THE NOTES OFFERED HEREBY AND THE COMPANY'S
OUTSTANDING 10-3/8% SENIOR SUBORDINATED NOTES DUE 2002 AT LEVELS
ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
FOR NORTH CAROLINA RESIDENTS: THE COMMISSIONER OF INSURANCE
OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED
THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS.
3<PAGE>
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere or
incorporated by reference in this Prospectus. As used herein,
the term "Company" means Leucadia National Corporation and its
subsidiaries, except as the context otherwise may require.
THE OFFERING
Issue . . . . . . . . . . $100,000,000 principal amount of
8-1/4% Senior Subordinated Notes due
2005 (the "Notes").
Maturity . . . . . . . . June 15, 2005.
Interest Rate . . . . . . 8-1/4% per annum.
Interest Payment Dates . June 15 and December 15,
commencing December 15, 1995.
Optional Redemption . . . The Notes are not redeemable at the
option of the Company prior to maturity.
Mandatory Redemption . . The Notes are not subject to sinking
fund payments.
Certain Covenants . . . . The indenture under which the Notes
will be issued (the "Indenture")
will contain covenants which, among
other things, place restrictions on
the ability of the Company and its
subsidiaries to incur additional
indebtedness, to make certain
investments, to redeem or repurchase
shares of capital stock of the
Company and to enter into certain
transactions with affiliates, on the
ability of the Company's insurance
subsidiaries to invest in non-
investment grade investments and on
the ability of the Company to pay
dividends and to consummate certain
mergers. In addition, if the
Company's Consolidated Tangible Net
Worth (as defined) is below a
certain level at the end of two
consecutive fiscal quarters, the
Company will be required, under
certain circumstances, to offer to
repurchase a portion of the Notes at
100% of their principal amount, plus
accrued but unpaid interest to the
repurchase date. In the event of a
Change of Control (as defined) of
the Company, each holder of a Note
(a "Noteholder") will have the
right, subject to certain
exceptions, to require the Company
to repurchase all or any portion of
such Noteholder's Notes at 101% of
the principal amount thereof, plus
accrued but unpaid interest to the
date of such repurchase.
Ranking . . . . . . . . . The Notes will be subordinated to
all existing and future Senior
Indebtedness. At March 31,
1995, the Company's Senior
Indebtedness was $149,081,000, net
of debt discount of $919,000, and
the indebtedness of the Company's
consolidated subsidiaries, to which
4<PAGE>
<PAGE>
the Notes are effectively
subordinated, was $23,068,000,
exclusive of Deposits. The Notes
will rank pari passu with the
Company's 10-3/8% Senior
Subordinated Notes due 2002 (the
"10-3/8% Notes"), of which, at March
31, 1995, $124,324,000 aggregate
principal amount was outstanding,
net of debt discount of $676,000.
The Notes will rank senior to the
Company's 5-1/4% Convertible
Subordinated Debentures due 2003
(the "5-1/4% Debentures"), of which
$100,000,000 aggregate principal
amount was outstanding at March 31,
1995, and the Company's 6%
Subordinated Swiss Franc Bonds due
1996 (the "Swiss Franc Bonds"), of
which $32,957,000 aggregate
principal amount was outstanding at
March 31, 1995. The Company may not
incur any indebtedness senior to the
Notes which is not Senior
Indebtedness.
Listing . . . . . . . . . Application to list the Notes on the
NYSE under the symbol "LUK/05" has
been approved.
Use of Proceeds . . . . . The net proceeds to the Company from
the sale of the Notes will be used
for general corporate purposes,
which may include working capital,
acquisitions or investment
opportunities (including repayment of
indebtedness incurred in connection
with the purchase of 46.4% of the
common stock of MK Gold Company
as described under "The Company--
Recent Developments") and
redemption of the Swiss Franc Bonds
when they mature in March 1996.
5<PAGE>
<PAGE>
THE COMPANY
GENERAL
The Company is a diversified financial services holding
company principally engaged in personal and commercial lines of
property and casualty insurance, life and health insurance,
banking and lending, manufacturing and the trading stamps
business. The Company concentrates on return on investment and
cash flow to build long-term shareholder value, rather than
emphasizing volume or market share. Additionally, the Company
continuously evaluates the retention and disposition of its
existing operations and investigates possible acquisitions of new
businesses in order to maximize shareholder value.
Shareholders' equity has grown from a deficit of $7,657,000
at December 31, 1978 (prior to the acquisition of a controlling
interest in the Company by the Company's Chairman and President),
to a positive shareholders' equity of $928,841,000 at March 31,
1995, equal to a book value per common share of negative $.22 at
December 31, 1978 and $33.01 at March 31, 1995. The Company's
Chairman and President and their families together beneficially
own in excess of 40% of the Company's outstanding Common Shares.
The Company's principal operations are its insurance
businesses, where it is a specialty markets provider of property
and casualty and life insurance products to niche markets. The
Company's principal personal lines insurance products are
automobile insurance, homeowners insurance, graded benefit life
insurance marketed primarily to the age 50-and-over population
and variable annuity products. The Company's principal
commercial lines are property and casualty products provided for
multi-family residential real estate, retail establishments and
taxicabs in the New York metropolitan area. For the year ended
December 31, 1994, the Company's insurance segments contributed
79% of total revenue and, at December 31, 1994, constituted 78%
of consolidated assets.
The property and casualty insurance industry, which is
highly regulated and competitive, has historically been cyclical
in nature, with periods of less intense price competition and
high underwriting standards generating significant profits,
followed by periods of increased price competition and lower
underwriting standards resulting in reduced profitability or
loss. Price competition has been significant in recent years.
As indicated in the Selected Financial Data included herein, the
Company's combined ratios for each of the past five years have
been better than industry averages for such periods. This has
been due, in part, to the Company's low expense ratios.
The Company's insurance subsidiaries have a diversified
investment portfolio of securities, substantially all of which
are issued or guaranteed by the U.S. Treasury or by U.S.
governmental agencies or are rated "investment grade" by Moody's
Investors Service Inc. ("Moody's") and/or Standard & Poor's
Corporation ("S&P"). Investments in mortgage loans, real estate
and non-investment grade securities represented less than 2% of the
insurance subsidiaries' portfolio at December 31, 1994. In the
recent volatile interest rate environment, the Company's primary
goal has been to preserve investment capital.
The Company's banking and lending operations principally
consist of making instalment loans primarily funded by Deposits
insured by the Federal Deposit Insurance Company. The Company
has established a niche market for automobile loans to
individuals with poor credit histories. The Company's
manufacturing operations primarily manufacture products for the
"do-it-yourself" home improvement market and for industrial and
agricultural markets.
At December 31, 1994, the Company had minimum tax loss
carryforwards of approximately $132,000,000. The amount and
availability of the tax loss carryforwards are subject to certain
qualifications, limitations and uncertainties as more fully
discussed in Note 13 of Notes to Consolidated Financial
Statements contained in the Annual Report.
6<PAGE>
<PAGE>
RECENT DEVELOPMENTS
On June 6, 1995, the Company purchased a 46.4% common stock
interest in MK Gold Company ("MK Gold") from Morrison Knudsen Corporation
("MKC") for an aggregate cash purchase price of $22,500,000. In addition,
the Company purchased at par all of CIBC, Inc.'s interest, as lender,
under its $20,000,000 revolving credit facility with MK Gold, of which
approximately $15,000,000 was outstanding at June 6, 1995, and released
MKC and certain of its affiliates from their guarantee obligations in
connection with such facility. MK Gold, an international precious metals
company whose shares are quoted on the Nasdaq National Market, reported
total assets at December 31, 1994 (the date of its latest public filing)
of $99,251,000. MK Gold does not constitute a "significant subsidiary"
under the rules of the Commission or a "Material Subsidiary" as defined
in the Indenture.
On May 26, 1995, the Company's Colonial Penn Group property and
casualty subsidiaries entered into an agreement with the California
Department of Insurance to settle their Proposition 103 rollback rebate
for approximately $17,000,000. The settlement, which is subject to certain
procedural conditions is substantially less than the original assessment
and does not exceed reserves established in prior years.
Recently the Company was informed by A.M. Best Company ("Best"), an
independant rating agency, that its rating for the Company's Empire
Group property and casualty insurance subsidiaries will be lowered to a
rating of A- (excellent) from A (excellent), principally due to the
Group's premium growth during the past year. This rating reflects
Best's concern over the decline in the relationship of the Empire Group's
surplus to premiums as a result of such growth. The Company plans to meet
with Best in the near future to discuss the change in its rating and
measures the Company could take to reinstate its A rating or to maintain
its A- rating. The Company does not believe that the A- rating of
the Empire Group will have a material adverse effect on the Empire
Group's operations.
USE OF PROCEEDS
The net proceeds from the sale of the Notes are estimated to
be $98,625,000. These proceeds will be used for general corporate
purposes, which may include working capital, acquisitions or investment
opportunities, including the repayment of indebtedness outstanding under
the Company's revolving credit agreements incurred in connection with the
MK Gold transaction as described above under "The Company - Recent
Developments," and redemption of the Swiss Franc Bonds outstanding when
they mature in March 1996. The aggregate principal amount of Swiss Franc
Bonds is $32,957,000. The revolving credit agreements bear interest at
the Company's option at either LIBOR plus .75% or the respective bank's
Base Rate (defined generally as the higher of the respective bank's base
or reference rate or the federal funds rate plus .5%). See Note 9 of
Notes to Consolidated Financial Statements contained in the Annual
Report. The Company has no material arrangement, commitment or
understanding with respect to any acquisition or investment opportunity.
Pending such uses, the proceeds will be invested in short-term investment
grade obligations.
7
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the (unaudited) consolidated
capitalization of the Company at March 31, 1995 and as adjusted
to give effect to the sale of the Notes.
<TABLE>
<CAPTION>
AS
ACTUAL ADJUSTED
------ --------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (a):
Revolving bank credit agreement borrowings . . . . . . . . . . . . . $ - $ -
Term loans with banks, due in 1999 . . . . . . . . . . . . . . . . . 50,000 50,000
7-3/4% Senior Notes due 2013, less debt
discount of $919 . . . . . . . . . . . . . . . . . . . . . . . . 99,081 99,081
Industrial revenue bonds . . . . . . . . . . . . . . . . . . . . . . 6,794 6,794
Other senior debt . . . . . . . . . . . . . . . . . . . . . . . . . 16,274 16,274
8-1/4% Senior Subordinated Notes due 2005 . . . . . . . . . . . . . - 100,000
10-3/8% Senior Subordinated Notes due 2002,
less debt discount of $676 . . . . . . . . . . . . . . . . . . . 124,324 124,324
6% Subordinated Swiss Franc Bonds due 1996 . . . . . . . . . . . . . 32,957 32,957
5-1/4% Convertible Subordinated Debentures due 2003 . . . . . . . . 100,000 100,000
----------- -----------
Total long-term debt, including current maturities . . . . . 429,430 529,430
----------- -----------
Shareholders' Equity (b):
Common shares, par value $1 per share,
authorized 150,000,000 shares; 28,141,012
shares issued and outstanding, after
deducting shares held in treasury . . . . . . . . . . . . . . . . 28,141 28,141
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 126,647 126,647
Net unrealized (loss) on investments . . . . . . . . . . . . . . . . (11,119) (11,119)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 785,172 785,172
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . 928,841 928,841
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,358,271 $ 1,458,271
=========== ===========
<FN>
----------------------
(a) Excludes Deposits of approximately $191,989,000. For information with respect to interest rates, maturities,
priorities and restrictions related to outstanding long-term debt and the Notes, see Note 9 of Notes to Consolidated
Financial Statements contained in the Annual Report and "Description of Notes", respectively.
(b) For information with respect to stock options, warrants and contingent obligations, see Notes 10 and 16 of Notes
to Consolidated Financial Statements contained in the Annual Report.
</TABLE>
8<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below has been derived
from and should be read in conjunction with the audited financial
statements and other financial information contained in the
Annual Report and with the unaudited financial statements
contained in the First Quarter 10-Q, which are incorporated by
reference in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
--------------- -----------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA: (a)
Revenues $360,688 $336,108 $1,384,385 $1,408,058 $1,573,015 $1,086,748 $674,914
Net securities gains (losses) 412 (1,467) (12,004) 51,923 51,778 50,391 (1,525)
Interest expense (b) 11,797 10,771 44,003 39,465 38,507 36,925 34,604
Insurance losses, policy benefits and
amortization of deferred acquisition costs 219,981 207,993 819,010 789,752 896,673 558,127 232,986
Income from continuing operations
before income taxes and cumulative
effects of changes in accounting
principles 23,422 22,034 100,318 176,868 143,553 95,030 78,938
Income from continuing operations
before cumulative effects of changes
in accounting principles (c) 16,323 14,219 70,836 116,259 130,607 94,830 65,010
(Loss) from discontinued operations
less applicable income taxes - - - - - - (17,670)
Income before cumulative effects of
changes in accounting principles 16,323 14,219 70,836 116,259 130,607 94,830 47,340
Cumulative effects of changes in
accounting principles - - - 129,195 - - -
Net income 16,323 14,219 70,836 245,454 130,607 94,830 47,340
Ratio of earnings to fixed charges: (d)
Excluding interest on Deposits 3.22x 3.38x 3.49x 5.80x 5.24x 4.54x 4.24x
Including interest on Deposits 2.77x 2.99x 3.08x 4.86x 4.14x 3.27x 3.05x
Per share:
Primary earnings (loss) per common and dilutive
common equivalent share:
Continuing operations before
cumulative effects of changes
in accounting principles $.56 $.49 $2.43 $3.97 $5.35 $4.00 $2.68
Discontinued operations - - - - - - (.73)
Cumulative effects of changes in
accounting principles - - - 4.41 - - -
---- ---- ----- ----- ----- ----- -----
Net income $.56 $.49 $2.43 $8.38 $5.35 $4.00 $1.95
==== ==== ===== ===== ===== ===== =====
Fully diluted earnings (loss) per common
share:
Continuing operations before
cumulative effects of changes
in accounting principles $.56 $.49 $2.41 $3.89 $5.33 $3.97 $2.68
Discontinued operations - - - - - - (.73)
Cumulative effects of changes in
accounting principles - - - 4.20 - - -
---- ---- ----- ----- ----- ----- -----
Net income $.56 $.49 $2.41 $8.09 $5.33 $3.97 $1.95
==== ==== ===== ===== ===== ===== =====
Number of shares used in calculation:
Primary 29,295 29,146 29,101 29,270 24,435 23,704 24,288
Fully Diluted 31,034 29,146 30,857 30,743 24,516 23,916 24,302
- --------------------------------
Footnotes on following page.
9<PAGE>
<PAGE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ ------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA: (a)
Cash and investments $2,855,465 $2,764,890 $2,989,384 $3,371,624 $3,627,542 $1,741,273
Total assets 4,840,230 4,674,046 4,689,272 4,330,580 4,590,096 2,406,438
Debt, including current maturities 429,430 425,848 401,335 225,588 220,728 208,458
Customer banking deposits 191,989 179,888 173,365 186,339 194,862 176,366
Common shareholders' equity 928,841 881,815 907,856 618,161 365,495 268,567
Book value per Common Share $33.01 $31.44 $32.54 $22.12 $15.89 $11.82
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INFORMATION ON PROPERTY
AND CASUALTY INSURANCE
OPERATIONS (Unaudited): (a)(e)(f)
GAAP Combined Ratio 101.4% 106.0% 99.1% 96.9% 101.7% 102.1% 105.2%
SAP Combined Ratio 100.2% 105.1% 98.8% 93.7% 102.8% 103.3% 100.8%
Industry SAP Combined Ratio (g) N/A 116.5% 108.4% 106.9% 115.7% 108.8% 109.5%
Premium to Surplus Ratio (h) N/A N/A 1.9x 1.6x 2.0x 2.2x 1.4x
<FN>
_________________________
(a) Data includes acquired companies from date of acquisition.
(b) Includes interest on customer banking deposits of
$8,304,000, $9,001,000, $11,954,000, $15,138,000 and
$14,145,000 for the years ended December 31, 1994, 1993,
1992, 1991 and 1990, respectively, and $2,695,000 and
$2,048,000 for the three month periods ended March 31, 1995
and 1994, respectively.
(c) The provision for income taxes for the years ended December
31, 1994 and 1993 and for the three month periods ended
March 31, 1995 and 1994 were calculated under Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which does not reflect the benefit from
utilization of tax loss carryforwards. The provision for
income taxes for the years ended December 31, 1992, 1991 and
1990 have been reduced for the benefit from utilization of
tax loss carryforwards.
(d) For purposes of computing these ratios, earnings represent
consolidated pre-tax income from continuing operations
before cumulative effects of changes in accounting
principles and equity in undistributed earnings or loss of
less than 50% owned companies, plus "fixed charges." Fixed
charges excluding interest on Deposits include interest
expense (other than on Deposits), the portion of net rental
expense representative of the interest factor and
amortization of debt expense. Fixed charges including
interest on Deposits include all interest expense, the
portion of net rental expense representative of the interest
factor and amortization of debt expense.
(e) Combined Ratios and the Premium to Surplus Ratios include
both Colonial Penn Group, Inc. and its subsidiaries for the
relevant periods since August 16, 1991, and Empire Insurance
Company ("Empire"). The 1990 ratios are for Empire only.
(f) The Combined Ratio is the sum of the Loss Ratio and the
Underwriting Expense Ratio determined in accordance with
generally accepted accounting principles or statutory
accounting principles ("SAP"), as the case may be. The Loss
Ratio is the ratio of incurred losses and loss adjustment
expenses to net
10<PAGE>
<PAGE>
premiums earned. The Expense Ratio is the ratio of
underwriting expenses (policy acquisition costs,
commissions and a portion of administrative, general and
other expenses attributable to underwriting operations) to
net premiums written, if determined in accordance with SAP,
or to net premiums earned, if determined in accordance with
generally accepted accounting principles. A Combined Ratio
under 100% indicates an underwriting profit and a Combined
Ratio above 100% indicates an underwriting loss. The
Combined Ratio does not include the effect of investment
income. Certain accident and health insurance business,
which is included in the statutory results of operations of
the property and casualty insurance segment and is reflected in
the SAP Combined Ratio, is reported in the life insurance segment
for financial reporting purposes and therefore is not included
in the GAAP Combined Ratios reflected herein. For 1993, the
difference in the treatment of costs for generally accepted
accounting principles and SAP purposes was a principal
reason for the difference between the GAAP Combined Ratio
and the SAP Combined Ratio. For 1992, the results of
certain accident and health insurance business had a non-
recurring income item which reduced the SAP Combined Ratio.
In addition, in 1992, certain income credits were recognized
only for generally accepted accounting principles purposes.
For 1990, the difference in the treatment of acquisition
costs for generally accepted accounting principles and SAP
purposes was a principal reason for the unusual difference
between the GAAP Combined Ratio and the SAP Combined Ratio.
(g) Source: Best Week P/C Supplement, April 3, 1995 Release 2,
with respect to annual information for 1994, Best's
Aggregate & Averages, Property/Casualty, 1994 edition, with
respect to annual information for 1990 through 1993, and
Insurance Services Office, Inc. Operating Results, June 8,
1994, with respect to interim information. Industry
Combined Ratios may not be fully comparable as a result of,
among other things, differences in geographical
concentration and in the mix of property and casualty
insurance products.
(h) The Premium to Surplus Ratio was calculated by dividing
statutory property and casualty insurance premiums written
by statutory capital at the end of the year.
</TABLE>
11<PAGE>
<PAGE>
DESCRIPTION OF NOTES
The Notes are to be issued under an Indenture to be dated as
of June 13, 1995, between the Company and The First National Bank
of Boston, as Trustee (the "Trustee").
The statements herein relating to the Notes and the
Indenture are summaries and make use of defined terms in the
Indenture, which are incorporated herein by reference, and are
qualified in their entirety by express reference to the
Indenture, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Notes will bear interest from June 13, 1995 at the rate
shown on the cover page of this Prospectus, payable on June 15
and December 15 in each year to the Noteholders of record at
the close of business on the June 1 and December 1 immediately
preceding such interest payment date, commencing December 15, 1995.
The Notes will be due on June 15, 2005, will be issued only in
denominations of $1,000 and integral multiples of $1,000, and will
be general unsecured obligations of the Company. The Indenture
authorizes an aggregate principal amount of $100,000,000 of the Notes.
OPTIONAL REDEMPTION
The Notes are not redeemable at the option of the Company
prior to maturity.
SINKING FUND
The Notes are not subject to sinking fund payments.
SUBORDINATION OF NOTES
The payment of all Obligations with respect to the Notes
will be subordinated in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior
Indebtedness (as defined in the Indenture) of the Company whether
outstanding on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Upon (a) the maturity of Senior
Indebtedness by lapse of time, acceleration or otherwise or (b)
any distribution of the assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the
Company, the holders of Senior Indebtedness will be entitled to
receive payment in full before the Noteholders are entitled to
receive any payment. In addition, the Indenture will provide
that no payments in respect of any Obligations with respect to
the Notes may be made if (i) any payment default on any Senior
Indebtedness shall have occurred or (ii) any other default under
any Senior Indebtedness shall have occurred which would permit
the holders thereof to accelerate such Indebtedness and the
Company shall have received notice of such default, unless, in
the case of clauses (i) or (ii), such default shall have been
cured or waived; provided, that (a) payments on the Notes may
resume in the case of any default described in clause (ii) on the
date which is 179 days after the giving of such notice (provided
there is not then a default under clause (i)) and (b) in no event
shall such payment blockage be applicable for more than 179 days
in each 360-day period. If in any of the situations referred to
in clause (i) or (ii) above a payment is made to the Trustee or
to Noteholders before all Senior Indebtedness has been paid in
full or provision has been made for such payment, the payment to
the Trustee or Noteholders must be paid over to the holders of
the Senior Indebtedness.
The Indenture defines "Senior Indebtedness" to mean all
Obligations of the Company with respect to the following, whether
outstanding at the date of original execution of the Indenture or
thereafter incurred, created or assumed: (a) indebtedness of the
Company for money borrowed, including, without limitation,
indebtedness of the
12<PAGE>
<PAGE>
Company for money borrowed which is evidenced by notes,
debentures, bonds or other securities issued under the
provisions of an indenture or other instrument, and also
including indebtedness represented by Purchase Money Obligations
(as defined), but only to the extent such indebtedness is
enforceable by a money judgment; (b) guarantees or assumptions by
the Company of indebtedness of others of any of the kinds
described in the preceding clause (a); and (c) renewals,
extensions and refundings of, and indebtedness of a successor
corporation issued in exchange for or in replacement of,
indebtedness, guarantees and assumptions of the kinds described
in the preceding clauses (a) or (b), unless, in the case of any
particular indebtedness, obligation, guarantee, assumption,
renewal, extension or refunding, the instrument creating or
evidencing the same expressly provides that such indebtedness,
obligation, guarantee, assumption, renewal, extension or
refunding is not superior in right of payment to the Notes;
provided, that Senior Indebtedness shall not be deemed to include
(i) any indebtedness of the Company to any Subsidiary, (ii) any
liability for taxes, (iii) any amounts payable or other
liabilities to trade creditors arising in the ordinary course of
business, (iv) any indebtedness which is subordinate or junior by
its terms to any other indebtedness of the Company, (v) the 10-
3/8% Notes, (vi) the 5-1/4% Debentures or (vii) the Swiss Franc
Bonds. At March 31, 1995, the amount of outstanding Senior
Indebtedness of the Company was $149,081,000, net of debt
discount of $919,000, and the amount of indebtedness of
Subsidiaries of the Company, to which the Notes are effectively
subordinated, was $23,068,000, exclusive of $191,989,000 of
Deposits. The Indenture will provide that no indebtedness of the
Company shall be senior in right of payment to the Notes unless such
indebtedness is pari passu in right of payment with the Company's
other Senior Indebtedness.
"Obligations" means any principal, interest, penalties,
fees, indemnities and other obligations and liabilities payable
under the documentation governing the applicable Indebtedness.
By reason of such subordination, in the event of insolvency,
general creditors of the Company may recover less, ratably, than
holders of Senior Indebtedness and may recover more, ratably,
than Noteholders or holders of other subordinated indebtedness of
the Company.
The Notes will rank senior in right of payment to the 5-1/4%
Debentures and the Swiss Franc Bonds and pari passu with the 10-
3/8% Notes.
CERTAIN COVENANTS
The Indenture will contain the following covenants:
Restriction on Incurrence of Indebtedness by the Company and
on Incurrence of Indebtedness and Issuance of Preferred Stock by
Its Subsidiaries. The Company shall not, and shall not permit
any Subsidiary to, create, incur, assume, or guarantee the
payment of any Indebtedness, and shall not permit any of its
Subsidiaries to issue any Preferred Stock, if, at the time of
such event and after giving effect thereto on a pro forma basis,
the Company's ratio of Consolidated Debt to Consolidated Tangible
Net Worth, as of the most recent date for which consolidated
financial statements are available and adjusted for the
incurrence of all Indebtedness and the issuance of all Preferred
Stock by Subsidiaries (other than Permitted Indebtedness) since
that date, would be greater than 1.75 to 1. This restriction
shall not preclude the incurrence of Permitted Indebtedness.
"Consolidated Debt" means, on any date, the sum of (i) total
Indebtedness of the Company and its Subsidiaries, at such date,
determined in accordance with generally accepted accounting
principles as in effect on December 31, 1994 ("GAAP") on a
consolidated basis, and (ii) the aggregate liquidation preference
of all Preferred Stock of Subsidiaries of the Company, at such
date, other than Preferred Stock to the extent held by the
Company and its Subsidiaries; provided, that Consolidated Debt
shall not include Permitted Indebtedness.
13<PAGE>
<PAGE>
"Indebtedness" of any Person means (i) any liability of such
Person (a) for borrowed money, (b) evidenced by a note, debenture
or similar instrument (including a Purchase Money Obligation or
deferred payment obligation) given in connection with the
acquisition of any property or assets (other than inventory or
similar property acquired in the ordinary course of business),
including securities, (c) for the payment of a Capitalized Lease
Obligation of such Person or (d) with respect to the
reimbursement of any letter of credit, banker's acceptance or
similar credit transaction (other than trade letters of credit
issued in the ordinary course of business; provided, that the
failure to make prompt reimbursement of any trade letter of
credit shall be deemed to be the incurrence of Indebtedness); and
(ii) any guarantee by such Person of any liability of others
described in clause (i) above or any obligation of such Person
with respect to any liability of others described in clause (i)
above. Indebtedness shall not include Deposits.
"Permitted Indebtedness" means (i) any Indebtedness of the
Company and its Subsidiaries outstanding on the date of the
Indenture, or any refinancing or replacement thereof; provided,
that the aggregate amount of such Indebtedness is not increased,
(ii) Acquired Indebtedness, (iii) Preferred Stock of Subsidiaries
held by the Company or its Subsidiaries (it being understood that
the sale of such Preferred Stock by the Company or such
Subsidiary to any Person other than the Company or a Subsidiary
of the Company or such Subsidiary no longer being a Subsidiary
shall be deemed the issuance of Preferred Stock for purposes of
the above test) and (iv) intercompany Indebtedness.
"Acquired Indebtedness" means Indebtedness or Preferred
Stock of a Person either (i) existing at the time such Person
becomes a Subsidiary, (ii) assumed in connection with the
acquisition of assets of such Person or (iii) any refinancing or
replacement by such Person of such Indebtedness or Preferred
Stock; provided, that the aggregate amount of such Indebtedness
or Preferred Stock then outstanding is not increased. Acquired
Indebtedness shall not include (x) any such Indebtedness created
or Preferred Stock issued in anticipation of such Person becoming
a Subsidiary (other than a refinancing or replacement of
Indebtedness or Preferred Stock of such Person, which original
Indebtedness or Preferred Stock was not incurred or issued in
anticipation of such Person becoming a Subsidiary), or (y) any
Indebtedness or Preferred Stock that is recourse to the Company
or any Subsidiary or any of their respective assets, other than
to such Person and its Subsidiaries and their respective assets.
Restriction on Investments by Insurance Subsidiaries. The
Indenture will provide that the Company shall not permit any
Subsidiary which is an insurance company to make, directly or
indirectly, any Investment other than in Investment Grade
Securities if, after giving effect thereto at the time of such
Investment, less than 80% of the aggregate Investments of such
insurance company would consist of Investment Grade Securities,
valuing Investments for purposes of this restriction at original
cost. The foregoing restriction shall not (i) apply to
Investments in the Company or any Subsidiary of the Company, (ii)
prevent the Company or its Subsidiaries from acquiring the
Capital Stock of, or all or substantially all of the assets of,
an insurance company or (iii) apply to securities issued in a
restructuring or exchange offer or similar transaction offered
generally to all holders of another security then held by such
Subsidiary.
"Investment Grade Securities" means (i) securities having
any of the following ratings: at least BBB- or the equivalent
thereof by S&P or at least Baa3 or the equivalent thereof by
Moody's or at least BBB- or the equivalent thereof by Duff &
Phelps Inc. ("Duff & Phelps") or (ii) cash or Cash Equivalents.
14<PAGE>
<PAGE>
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof, (ii) U.S. dollar
denominated time deposits, certificates of deposit, eurodollar
time deposits, eurodollar certificates of deposit, and bankers
acceptances of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million,
(iii) commercial paper having a rating from S&P of at least A-2
or the equivalent thereof or from Moody's of at least P-2 or the
equivalent thereof or from Duff & Phelps of at least D-2 or the
equivalent thereof and maturing within nine months from the date
of acquisition, and (iv) tax-exempt commercial paper of United
States municipal, state or local governments rated at least A-2
or the equivalent thereof by S&P or at least P-2 or the
equivalent thereof by Moody's or at least D-2 or the equivalent
thereof by Duff & Phelps and maturing within nine months from the
date of acquisition.
Restricted Payments and Restricted Investments. The Company
shall not, and shall not permit any Subsidiary to, make, directly
or indirectly, any Restricted Payment or Restricted Investment
if, immediately after giving effect to such Restricted Payment or
Restricted Investment, as the case may be: (a) a Default or
Event of Default under the Indenture shall have occurred and be
continuing, (b) the Company's Consolidated Tangible Net Worth
would be less than $250 million, (c) the Company would not be
permitted to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant
contained under "Restriction on Incurrence of Indebtedness by the
Company and on Incurrence of Indebtedness and Issuance of
Preferred Stock by Its Subsidiaries" above or (d) the sum of (x)
the aggregate amount expended for all Restricted Payments
subsequent to March 31, 1992 and (y) the aggregate amount of
Restricted Investments made subsequent to March 31, 1992 and then
outstanding reduced by any write down of any such Restricted
Investment to the extent that such write down otherwise reduced
Consolidated Net Income (the amount so expended for a Restricted
Payment or a Restricted Investment, if other than in cash, to be
determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board
Resolution) would exceed the sum of (1) $35 million, (2) 50% of
the aggregate Consolidated Net Income of the Company (or minus
100% of the aggregate Consolidated Net Loss of the Company)
accrued on a cumulative basis subsequent to March 31, 1992, and
(3) the aggregate net proceeds, including the fair value of
property other than cash (as determined by the Board of Directors
of the Company, whose determination shall be conclusive and
evidenced by a Board Resolution), received by the Company in
respect of the issue or sale subsequent to March 31, 1992 of (i)
any shares of Capital Stock of the Company, or (ii) any
Indebtedness of the Company to the extent converted into or
exchanged for Capital Stock of the Company subsequent to March
31, 1992. The foregoing restrictions shall not prevent (x) the
payment of any dividend or distribution within 60 days after the
date of declaration thereof, if at such date of declaration such
payment complied with the foregoing provisions, or (y) the
retirement of any shares of the Company's Capital Stock by
exchange for, or upon conversion of, or out of the proceeds of
the substantially concurrent sale (other than to a Subsidiary)
of, other shares of the Capital Stock of the Company, and neither
such retirement, exchange or conversion nor the proceeds of any
such sale shall be included in any computation made above. On
the first day on which the aggregate Restricted Payments and
Restricted Investments exceed by $100 million (calculated on the
date of payment or investment) the amount of Restricted Payments
and Restricted Investments that could otherwise be made pursuant
15<PAGE>
<PAGE>
to this paragraph if gains on sales of segments, businesses or
major lines of business, net of losses on such sales (whether
sold as assets or stock), had been excluded from the definition
of "Consolidated Net Income," then each Noteholder shall have the
right, at such Noteholder's option, to require the Company to
purchase all or any portion (in integral multiples of $1,000) of
such Noteholder's Notes at 101% of the principal amount thereof,
plus accrued interest; provided, that the Company will not be
obligated to purchase any of such Notes unless Noteholders holding
at least 10% of the Notes outstanding at the date of such Restricted
Payment or Restricted Investment (other than Notes held by the
Company and its Affiliates) shall have tendered their Notes for
repurchase. The mechanics, timing and other terms of the offer
will be substantially the same as those with respect to a "Change
of Control," as described below.
"Consolidated Net Income" and "Consolidated Net Loss" mean,
for any period, the net income or loss, as the case may be, of
the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP (provided, that, for
periods ended prior to January 1, 1995, Consolidated Net Income
shall mean the reported income before cumulative effects of
changes in accounting principles of the Company and its
Subsidiaries); provided, that there shall be excluded therefrom
(to the extent otherwise included therein) (i) the net income (or
net loss) of any Person that is not the Company or a Subsidiary
of the Company, except net income of such Person may be included
to the extent of the amount of dividends or other distributions
actually paid or made to the Company or any of its Subsidiaries
by such other Person during such period, (ii) except to the
extent includible pursuant to the foregoing clause (i), the net
income (or net loss) of any other Person accrued prior to the
date it becomes a Subsidiary of the Company or is merged into or
consolidated with the Company or any of its Subsidiaries or such
other Person's assets are acquired by the Company or any of its
Subsidiaries, (iii) all extraordinary gains, to the extent they
exceed extraordinary losses, in each case, determined in
accordance with GAAP and (iv) all gains or losses resulting from
the effect of any accounting change.
"Consolidated Tangible Net Worth" with respect to the
Company means, as of any date, the total shareholders' equity of
the Company determined in accordance with GAAP less (a) (to the
extent not otherwise deducted from total shareholders' equity at
such date) the amount of Restricted Investments of the Company
and its Subsidiaries outstanding on such date and (b) any and all
goodwill and other intangible assets reflected on the
consolidated balance sheet of the Company as of such date.
Deferred policy acquisition costs ("DPAC") and that portion of
the value of insurance in force resulting from an acquisition and
equivalent to the amount of DPAC of the acquired entity
outstanding immediately prior to such acquisition shall not be
deemed goodwill or other intangible assets for purposes of
determining Consolidated Tangible Net Worth.
"Restricted Investment" means, with respect to the Company
or any Subsidiary of the Company, an Investment by such Person in
an Affiliate of the Company (other than (x) in the Company or a
Subsidiary of the Company or (y) in a Person that is an Affiliate
of the Company solely because of (i) the ownership of securities
of such Person by the Company or its Subsidiaries, (ii)
contractual arrangements between the Company and its Subsidiaries
and such Person or (iii) a combination of (i) and (ii)).
16<PAGE>
<PAGE>
"Restricted Payment" means (i) the declaration or making of
any dividend or of any other payment or distribution on or with
respect to the Company's Capital Stock (other than dividends,
payments or distributions payable solely in shares of the
Company's Capital Stock), (ii) any payment on account of the
purchase, redemption, retirement or other acquisition for value
of the Company's Capital Stock; provided, that so long as there
shall not be a Default or Event of Default under the Indenture any
payment to the estate of Ian M. Cumming or Joseph S. Steinberg
(or any trustee or other legal representative on behalf of the
legatees or heirs of such Persons) on account of the repurchase
or redemption of Voting Stock owned by such estates (or trustees
or legal representatives), solely from the net proceeds of any
life insurance maintained by the Company on either of such
Persons, shall not be a Restricted Payment and (iii) the
declaration or making of any dividend or any other payment or
distribution with respect to the Capital Stock of any Subsidiary
of the Company and any payment on account of the purchase,
redemption, retirement or other acquisition for value of the
Capital Stock of any Subsidiary of the Company but, with respect
to this clause (iii), only to the extent such dividend, payment
or distribution is received by an Affiliate of the Company (other
than (x) the Company or a Subsidiary of the Company or (y) a
Person that is an Affiliate of the Company solely because of (A)
the ownership of securities of such Person by the Company or its
Subsidiaries, (B) contractual arrangements between the Company
and its Subsidiaries and such Person or (C) a combination of (A)
and (B)).
Maintenance of Consolidated Tangible Net Worth. The Company
is required to furnish the Trustee with an Officers' Certificate
within 55 days after the end of any fiscal quarter (100 days
after the end of any fiscal year) notifying the Trustee that the
Company's Consolidated Tangible Net Worth has declined below the
Minimum Tangible Net Worth at the end of any fiscal quarter in
which the Company's Consolidated Tangible Net Worth has so
declined. If, on the last day of each of any two consecutive
fiscal quarters (the last day of the second fiscal quarter being
referred to herein as a "Deficiency Date"), the Company's
Consolidated Tangible Net Worth is less than the Minimum Tangible
Net Worth, then the Company is required, no later than 65 days
after each such Deficiency Date (110 days if such Deficiency Date
is the last day of the Company's fiscal year), to make an offer
to all Noteholders to purchase (an "Offer") 10% of the aggregate
principal amount of the Notes originally issued (the "Offer
Amount") at a purchase price of 100% of the principal amount of
the Notes, plus accrued interest to the date of purchase. The
Offer is required to remain open for a period of 20 business days
following its commencement (unless required to remain open for a
longer period by applicable law) and the Company is required to
purchase the Offer Amount of the Notes on a designated date no
later than five business days after the termination of the Offer
or, if less than the Offer Amount has been tendered, all Notes
then tendered; provided, however, that the Company will not be
obligated to purchase any of such Notes unless Noteholders holding
at least 10% of the Offer Amount of Notes shall have tendered and
not subsequently withdrawn their Notes for repurchase. If the
aggregate principal amount of Notes tendered to the Company
exceeds the Offer Amount, the Company is required to purchase the
Notes tendered to it pro rata among the Notes tendered (with such
adjustments as may be appropriate so that only Notes in
denominations of $1,000 and integral multiples thereof shall be
purchased). The Company will comply with all applicable Federal
and state securities laws in connection with each Offer. In no
event will the failure of the Company's Consolidated Tangible Net
Worth to equal or exceed the Minimum Tangible Net Worth at the
end of any fiscal quarter be counted toward the making of more
17<PAGE>
<PAGE>
than one Offer. The Company may reduce the principal amount of
Notes to be purchased pursuant to the Offer by subtracting 100%
of the principal amount of Notes acquired by the Company
subsequent to the Deficiency Date through purchase or exchange
and surrendered for cancellation. The Company, however, may not
credit Notes that have been previously used as a credit against
any obligation to repurchase Notes pursuant to this provision,
pursuant to a Change of Control offer or pursuant to the
repurchase obligation described under "Restricted Payments and
Restricted Investments."
"Minimum Tangible Net Worth" means $250 million.
Limitation on Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, create or otherwise cause to exist or
become effective any encumbrance or restriction on the ability of
any Subsidiary to (a) pay dividends or make any other
distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits, owned by the
Company or any Subsidiary, or pay any Indebtedness owed to the
Company or any Subsidiary, (b) make loans or advances to the
Company or any Subsidiary or (c) transfer any of its properties
or assets to the Company, except for such encumbrances or
restrictions existing under or by reasons of (i) applicable law,
(ii) the Indenture, (iii) customary provisions restricting
subletting or assignment of any lease governing a leasehold
interest of the Company or any Subsidiary, (iv) any instrument
governing Acquired Indebtedness, which encumbrance or restriction
is not applicable to any Person, or the properties or assets of
any Person, other than such Person and its Subsidiaries, or the
property or assets of such Person and its Subsidiaries, so
acquired, (v) Indebtedness existing on the date of the Indenture
and any refinancing of such existing Indebtedness so long as the
terms and conditions of any such refinancing agreements are no
less favorable to the Company than those contained in the
agreements governing the Indebtedness being refinanced or (vi)
other Indebtedness; provided, that the Board of Directors of the
Company shall have concluded, in good faith, that the terms
thereof do not have a materially adverse effect on the Company,
on a stand-alone basis, or the Company's ability, on a stand-
alone basis, to meet its obligations.
Limitation on Issuance of Other Subordinated Debt. The
Company shall not issue, assume, guarantee, incur or otherwise
become liable, directly or indirectly, for any Indebtedness
subordinate or junior in ranking in any respect to any Senior
Indebtedness but senior in right of payment to the Notes.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL
In the event of any Change of Control, each Noteholder shall
have the right, at such Noteholder's option, to require the
Company to purchase all or any portion (in integral multiples of
$1,000) of such Noteholder's Notes on the date (the "Change of
Control Payment Date") which is 20 business days after the date
the Change of Control Notice (as defined below) is mailed (or
such later date as is required by applicable law) at 101% of the
principal amount thereof, plus accrued interest to the Change of
Control Payment Date; provided that the Company will not be
obligated to purchase any of such Notes unless Noteholders holding
at least 10% of the Notes outstanding at the Change of Control
Payment Date (other than Notes held by the Company and its
Affiliates) shall have tendered their Notes for repurchase. In
addition, in the event of any Change of Control, the Company will
not, and will not permit any of its Subsidiaries to, purchase or
redeem any Indebtedness ranking junior to the Notes pursuant to
any analogous provisions on or prior to the Change of Control
Payment Date.
18<PAGE>
<PAGE>
The Company is obligated to send to all Noteholders, within
five business days after the occurrence of each Change of
Control, a notice of the occurrence of such Change of Control
(the "Change of Control Notice"), specifying a date by which a
Noteholder must notify the Company of such Noteholder's intention
to exercise the repurchase right and describing the procedure
that such Noteholder must follow to exercise such right. The
Company is required to deliver a copy of such notice to the
Trustee and to cause a copy of such notice to be published in a
daily newspaper of national circulation. To exercise the
repurchase right, the Noteholder must deliver, on or before the
fifth calendar day prior to the Change of Control Payment Date,
written notice (which shall be irrevocable, except as provided
below) to the Company (or an agent designated by the Company for
such purpose) of the Noteholder's exercise of such right,
together with (i) the Note or Notes with respect to which the
right is being exercised, duly endorsed for transfer with the
form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, and (ii) if the Change of Control Payment
Date falls between any record date for the payment of interest on
the Notes and the next succeeding interest payment date, an
amount equal to the interest which the Noteholder is entitled to
receive on such interest payment date. The Company will comply
with all applicable Federal and state securities laws in
connection with each Change of Control Notice.
A "Change of Control" shall be deemed to occur if (i) the
Company has any other Indebtedness outstanding (other than
Indebtedness under a bank credit agreement or similar bank
financing) which provides for a Change of Control (as defined in
the instrument governing such Indebtedness) if Ian M. Cumming or
Joseph S. Steinberg ceases to beneficially own, in the aggregate,
a certain percentage of the outstanding Common Shares, which
percentage ownership requirement is in excess of 10%, and a
Change of Control (as defined in the instrument governing such
Indebtedness) occurs under such Indebtedness or (ii) at any time
when the Company does not have any other Indebtedness outstanding
of the type referred to in clause (i), Ian M. Cumming or Joseph
S. Steinberg, individually or in the aggregate, sells, transfers
or otherwise disposes of (a "Disposition"), after the date of the
Indenture, Common Shares so that, after giving effect thereto,
the sole beneficial ownership of outstanding Common Shares by Mr.
Cumming and/or Mr. Steinberg would, in the aggregate, fall below
10% of the then outstanding Common Shares; provided, that no
Change of Control shall be deemed to have occurred under clause
(ii) if the Notes are rated by Moody's or S&P as Investment Grade
both at the time of such Disposition and for a period of 90 days
from the date of such Disposition (it being understood that, with
respect to the foregoing proviso, a Change of Control shall be
deemed to occur on the first date during such 90-day period when
the Notes are rated below Investment Grade by both Moody's and
S&P). The term "Common Shares" shall include any securities
issued as dividends or distributions on the Common Shares. For
purposes hereof, "sole beneficial ownership" of Common Shares
shall be deemed to include (i) all Common Shares received after
June 15, 1992 from Mr. Cumming or Mr. Steinberg by any member of
their respective immediate families or by any trust for the
benefit of either of them or any member of their respective
immediate families (a "Recipient"), which Common Shares remain
held by a Recipient during the lifetime of Mr. Cumming or Mr.
Steinberg (unless sold, transferred or disposed of by such
Recipient during the lifetime of Mr. Cumming or Mr. Steinberg, as
the case may be, in which case such Disposition by such Recipient
shall constitute a Disposition by Mr. Cumming or Mr. Steinberg,
as the case may be) and (ii) after the death of Mr. Cumming
and/or Mr. Steinberg, all Common Shares owned as of the date of
death by the decedent, and any Recipient of the decedent,
regardless of whether such Recipient continues to own such Common
19<PAGE>
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Shares after the date of death. In determining the number of
outstanding Common Shares then held by Messrs. Cumming and
Steinberg and the total number of outstanding Common Shares,
there shall be excluded Common Shares issued by the Company after
December 31, 1991, or the conversion into or exchange for, after
December 31, 1991, Common Shares or securities convertible into
or exchangeable for Common Shares. As calculated pursuant to
this provision, Messrs. Cumming and Steinberg beneficially owned,
in the aggregate, approximately 46% of the Common Shares as of
March 31, 1995.
As of the date hereof, the Company's most restrictive
outstanding Indebtedness that contains a change of control
provision requires that Mr. Cumming and/or Mr. Steinberg continue
to have sole beneficial ownership of outstanding Common Shares
equal to at least 32% of the then outstanding Common Shares;
provided that, under such Indebtedness, Messrs. Cumming and/or
Steinberg may sell, transfer or otherwise dispose of additional
Common Shares if, after giving effect thereto, they would, in the
aggregate, then have sole beneficial ownership of Common Shares
equal to at least 23% of the then outstanding Common Shares, but
only if, after giving effect to any such Disposition, the
aggregate market value of the Common Shares then so owned by Mr.
Cumming and/or Mr. Steinberg on the date of such Disposition
would be at least $200 million; provided, further, that, under
such Indebtedness, upon the death of either Mr. Cumming or Mr.
Steinberg, the aggregate market value of the Common Shares then
so owned by the survivor on the date of such Disposition would be
at least $100 million. There can be no assurance that the
Company will have sufficient funds or the financing to satisfy
its obligations to repurchase the Notes and other Indebtedness
that may come due upon a Change of Control. In such case, the
Company's failure to purchase tendered Notes would constitute an
Event of Default under the Indenture.
The Noteholders holding a majority in principal amount of Notes
then outstanding may waive compliance by the Company of its
obligation to repurchase Notes upon a Change of Control. The
Company may not waive such provisions. See "Modification of the
Indenture."
The term "Investment Grade" is defined as BBB- or higher by
S&P or Baa3 or higher by Moody's or the equivalent of such
ratings by Moody's or S&P.
TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any Subsidiary
to, directly or indirectly, enter into any transaction or series
of related transactions with any Affiliate (other than (a) with
the Company or a Wholly Owned Subsidiary or (b) the making of a
Restricted Payment or Restricted Investment otherwise permitted
by the covenant described under "Restricted Payments and
Restricted Investments" above), including, without limitation,
any loan, advance or investment or any purchase, sale, lease or
exchange of property or the rendering of any service, unless such
transaction or series of transactions is in good faith and at
arm's-length and on terms which are at least as favorable as
those available in a comparable transaction from an unrelated
Person. Any such transaction that involves in excess of $10
million shall be approved by a majority of the Independent
Directors on the Board of Directors of the Company; or, in the
event that at the time of any such transaction or series of related
transactions there are no Independent Directors serving on the Board
of Directors of the Company, such transaction or series of related
transactions shall be approved by a nationally recognized expert with
experience in appraising the terms and conditions of the type of
transaction for which approval is required.
SUCCESSOR CORPORATION
The Company may not consolidate with, merge into or transfer
all or substantially all of its assets (i.e., 90% or more) to
another corporation unless (a) the successor corporation shall be
existing under the laws of the United States, any state thereof
or the District of Columbia, (b) there shall not be any Default
20<PAGE>
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or Event of Default under the Indenture, (c) such successor
corporation assumes all of the Obligations of the Company under
the Notes and the Indenture, (d) after giving effect to such
transaction, such successor corporation shall have a Consolidated
Net Worth equal to or greater than the Company and (e) after
giving effect to such transaction, the Company or such successor
corporation is permitted to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) as provided in
the Indenture. Thereafter all such obligations of the Company
will terminate.
REPORTS TO NOTEHOLDERS
The Company will mail copies of its annual reports and
quarterly reports mailed to its shareholders to Noteholders. If
the Company is not required to furnish annual or quarterly
reports to its shareholders, the Company will, upon request, mail
to each Noteholder, at such Noteholder's address as appearing on
the Note register, audited annual financial statements and
unaudited condensed quarterly financial statements. Such
financial statements shall be accompanied by management's
discussion and analysis of the results of operations and
financial condition of the Company for the period reported upon
in substantially the form required under the rules and
regulations of the Commission in effect from time to time.
THE TRUSTEE
The First National Bank of Boston will be the Trustee under the
Indenture.
The Noteholders holding a majority in principal amount of all
outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the Trustee. The Indenture will provide that, in
case an Event of Default thereunder shall occur and be
continuing, the Trustee will be required to use the degree of
care of a prudent person in the conduct of his own affairs in the
exercise of its power. Subject to such provisions, the Trustee
will be under no obligation to exercise any of its rights or
powers under the Indenture at the request of any of the
Noteholders, unless they shall have offered to the Trustee
security and indemnity satisfactory to it.
EVENTS OF DEFAULT AND NOTICE THEREOF
The term "Event of Default" when used in the Indenture shall
mean any one of the following: (i) failure to pay (whether or
not prohibited by the subordination provisions) interest for 30
days or principal; (ii) failure to perform any covenants not
described in clause (i) for 30 days after receipt of notice;
(iii) the occurrence of any event of default under an instrument
evidencing or securing other indebtedness of the Company or any
Material Subsidiary of the Company for borrowed money in excess
of $15 million resulting in the acceleration of such
indebtedness, which acceleration is not rescinded or annulled
pursuant to the terms of such instrument; and (iv) certain events
of bankruptcy, insolvency or reorganization relating to the
Company or any Material Subsidiary of the Company.
The term "Material Subsidiary" means (i) any Subsidiary of
the Company which at December 31, 1994 was a "significant
subsidiary" under Regulation S-X promulgated by the Commission or
any successor to such Subsidiary and (ii) any other Subsidiary of
the Company; provided that the Company's investments in and
advances to such Subsidiary at the date of determination thereof,
without giving effect to any write-downs in such investments or
advances taken within the prior 12 months, represent 20% or more
of the Company's Consolidated Tangible Net Worth as of such time;
provided, however, that this clause (ii) shall not include any
Subsidiary if, at the time that it became a Subsidiary, the
Company contemplated commencing a voluntary case or proceeding
under the Bankruptcy Law with respect to such Subsidiary.
21<PAGE>
<PAGE>
The Indenture will provide that the Trustee shall, within 90
days after the occurrence of a default, provide to the
Noteholders notice of all uncured defaults known to it (the term
default to include the events specified above without grace or notice);
provided, that, except in the case of default in the payment of
principal of or interest on any of the Notes, the Trustee shall
be protected in withholding such notice if and so long as a
committee of its Trust Officers in good faith determines that the
withholding of such notice is in the interests of the
Noteholders.
In case an Event of Default shall have occurred and be
continuing, the Trustee or the Noteholders holding at least 25% in
aggregate principal amount of the Notes then outstanding, by
notice in writing to the Company and to the Trustee, may declare
to be due and payable immediately the outstanding principal
amount and accrued interest, premiums, penalties and other
amounts in respect of the Notes and the Indenture. Such
declaration may be annulled and past defaults (except, unless
theretofore cured, a default in payment of principal of or
interest on the Notes) may be waived by the holders of a majority
in principal amount of the Notes, upon the conditions provided in
the Indenture.
The Indenture will include a covenant that the Company will
file annually with the Trustee a statement regarding compliance
by the Company with the terms thereof and specifying any defaults
of which the signers may have knowledge.
MODIFICATION OF THE INDENTURE
Under the Indenture, the rights and obligations of the
Company and the rights of Noteholders may be modified by the
Company and the Trustee only with the consent of the Noteholders
holding a majority in principal amount of the Notes then
outstanding; but no extension of the maturity of any Notes, or
reduction in the interest rate or extension of the time of
payment of principal of or interest on, or any change in the
subordination of the Notes that is adverse to the Noteholders, or
any other modification in the terms of payment of the principal
of or interest on the Notes or reduction of the percentage
required for modification will be effective against any
Noteholder without its consent. The Noteholders holding a majority
in principal amount of Notes then outstanding may waive compliance
by the Company with certain covenants, including those described
under "Certain Covenants-Maintenance of Consolidated Tangible Net
Worth" and "Repurchase at Option of Holders Upon a Change of
Control."
SATISFACTION AND DISCHARGE OF INDENTURE
The Indenture will be discharged and cancelled upon payment
of all the Notes or upon deposit with the Trustee, within not
more than one year prior to the maturity of the Notes, of funds
sufficient for such payment.
22<PAGE>
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UNDERWRITING
Subject to the terms and conditions set forth in the
Underwriting Agreement between Jefferies & Company, Inc., CS
First Boston Corporation and PaineWebber Incorporated
(collectively, the "Underwriters") and the Company, such Under-
writers have severally agreed to purchase from the Company $50,000,000,
$25,000,000 and $25,000,000, aggregate principal amount of the Notes,
respectively.
The Underwriting Agreement provides that the obligations of
the Underwriters thereunder are subject to certain conditions
precedent and that the Underwriters will be obligated to purchase
all of the Notes if they purchase any of the Notes.
The Underwriters propose to offer the Notes directly to the
public at the public offering price set forth on the cover page
of this Prospectus and to certain dealers at such price less a
concession not in excess of .50% of the principal amount of the
Notes. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of .25% of the principal amount of the
Notes to certain other dealers. After the initial public
offering, the offering price, concession and discount may be
changed.
The Company has agreed to indemnify the Underwriters against
certain liabilities including liabilities under the Securities
Act or to contribute to payments the Underwriters may be required
to make in respect thereof.
Each of Jefferies & Company, Inc. and CS First Boston
Corporation has previously performed investment banking and other
financial advisory services for the Company for which they have
received customary compensation. Such services included acting
as underwriters of the 10-3/8% Notes in June 1992, the 5-1/4%
Debentures in February 1993 and the Company's 7-3/4% Senior Notes
due 2013 in August 1993.
LEGAL MATTERS
The validity of the securities offered hereby and certain
legal matters will be passed upon by Weil, Gotshal & Manges (a
partnership including professional corporations), New York, New
York, General Counsel to the Company (members of which own
approximately 83,000 Common Shares). Certain legal matters
will be passed upon for the Underwriters by Cahill Gordon &
Reindel (a partnership including a professional corporation), New
York, New York.
23<PAGE>
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EXPERTS
The consolidated balance sheets as of December 31, 1994 and
1993 and the consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1994, incorporated by reference
in this Prospectus, have been incorporated herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and
auditing.
24<PAGE>
<PAGE>
NO DEALER, SALESMAN
OR OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY $100,000,000
INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN
THOSE CONTAINED OR
INCORPORATED BY REFERENCE LEUCADIA NATIONAL
IN THIS PROSPECTUS IN CON- CORPORATION
NECTION WITH THE OFFERING
DESCRIBED HEREIN, AND, IF 8-1/4% SENIOR SUBORDINATED NOTES
GIVEN OR MADE, SUCH DUE 2005
INFORMATION OR
REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY
OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF
AN OFFER TO BUY, IN ANY
JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE
HEREOF OR THAT THE
INFORMATION CONTAINED
HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS
DATE.
_____________________
TABLE OF CONTENTS Prospectus
Page
----
Available Information . 2
Incorporation of
Certain Documents
by Reference . . . . 2
Prospectus Summary . . . 3
The Company . . . . . . 5
Use of Proceeds . . . . 6
Capitalization . . . . . 7 Jefferies & Company, Inc.
Selected Financial Data 8 CS First Boston
Description of Notes . . 10 PaineWebber Incorporated
Underwriting . . . . . . 19
Legal Matters . . . . . 19
Experts . . . . . . . . 19
June 8, 1995
