Filed Pursuant to Rule 424(b)(1)
Registration Number 333-21195
333-21195-01
PROSPECTUS AND CONSENT SOLICITATION
$150,000,000
LEUCADIA CAPITAL TRUST I
OFFER TO EXCHANGE ITS 8.65% CAPITAL TRUST
PASS-THROUGH SECURITIES(SM) (TRUPS(SM))
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 8.65%
CAPITAL TRUST PASS-THROUGH SECURITIES(SM) (TRUPS(SM))
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
LEUCADIA NATIONAL CORPORATION
AND
SOLICITATION OF CONSENTS IN RESPECT OF
8.65% CAPITAL TRUST PASS-THROUGH SECURITIES(SM) (TRUPS(SM))
OF LEUCADIA CAPITAL TRUST I
The Exchange Offer, the Consent Solicitation and Withdrawal
Rights will expire at 5:00 p.m., New York City time, on
June 23, 1997, unless extended.
Revocation rights for consents will expire at the time and
date on which the requisite consents to the Proposed
Amendment are received.
Leucadia 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 and Consent
Solicitation (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $150,000,000 aggregate
liquidation amount of its 8.65% Capital Trust Pass-through SecuritiesSM
(TRUPSSM) (liquidation amount $1,000 per Capital Security) (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 8.65% Capital Trust Pass-
(i)
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through SecuritiesSM (TRUPSSM) (liquidation amount $1,000 per Capital Security)
(the "Old Capital Securities"), of which $150,000,000 aggregate liquidation
amount is outstanding. Pursuant to the Exchange Offer, Leucadia National
Corporation, a New York corporation (the "Company"), is also exchanging (i) its
guarantee with respect to the payment of distributions and other payments on
liquidation or redemption of the Old Capital Securities (the "Old Guarantee")
for a like guarantee of the New Capital Securities (the "New Guarantee"), and
(ii) all of its outstanding 8.65% Junior Subordinated Deferrable Interest
Debentures due 2027 (the "Old Subordinated Debt Securities"), of which
$154,640,000 aggregate principal amount is outstanding, for a like aggregate
principal amount of its 8.65% Junior Subordinated Deferrable Interest Debentures
due 2027 (the "New Subordinated Debt Securities"), which New Guarantee and New
Subordinated Debt Securities also have been registered under the Securities Act.
The Old Capital Securities, the Old Guarantee and the Old Subordinated Debt
Securities are collectively referred to herein as the "Old Securities" and the
New Capital Securities, the New Guarantee and the New Subordinated Debt
Securities 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 will not
be subject to certain restrictions on transfer applicable to the Old Securities,
(ii) the New Capital Securities will not provide for any increase in the
distribution rate thereon, and (iii) the New Subordinated Debt Securities will
not provide for any increase in the interest rate thereon. See "Description of
the Capital 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 January 21, 1997 (the
"Registration Rights Agreement"), among the Company, the Trust and Salomon
Brothers Inc, as representative of the Initial Purchasers (as defined herein) of
the Old Capital Securities. 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 certain rights under the Declaration (as defined
herein).
SEE "RISK FACTORS" BEGINNING ON PAGE 15 OF THIS PROSPECTUS FOR
CERTAIN INFORMATION RELEVANT TO AN INVESTMENT IN THE NEW SECURITIES, INCLUDING
THE PERIOD AND CIRCUMSTANCES DURING AND UNDER WHICH PAYMENTS ON THE NEW
SUBORDINATED DEBT SECURITIES AND THE NEW CAPITAL SECURITIES MAY BE DEFERRED AND
THE RELATED UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF SUCH DEFERRAL.
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 May 23, 1997.
Concurrently with the Exchange Offer, the Company and the Trust
are soliciting consents (the "Consent Solicitation") from holders of the Old
Capital Securities to approve an amendment (the "Proposed Amendment") to the
Registration Rights Agreement. The Proposed Amendment to the Registration Rights
Agreement will delete the requirement that the Company use its reasonable best
efforts to cause the New Capital Securities to be
(ii)
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duly authorized for listing on the New York Stock Exchange and thereafter
maintain such listing. The purpose of the Proposed Amendment is to enable the
Trust and the Company to consummate the Exchange Offer. Based on interpretations
by the staff of the Securities and Exchange Commission (the "Commission"), as
set forth in a recent no-action letter to a third party, the Trust and the
Company will be prohibited from consummating the Exchange Offer unless the
Proposed Amendment is effectuated.
A tender of Old Capital Securities for exchange pursuant to the
Exchange Offer also will constitute a consent to the Proposed Amendment with
respect to the Old Capital Securities so tendered.
Pursuant to Section 7(b) of the Registration Rights Agreement,
the Proposed Amendment requires the consent of the registered holders of a
majority in liquidation amount of the outstanding Capital Securities (as defined
herein).
The Exchange Offer is conditioned upon, among other things, there
having been received and not revoked, the requisite consents to adopt the
Proposed Amendment, which condition may not be waived by the Company or the
Trust. Accordingly, unless valid consents of holders of a majority in
liquidation amount of the Old Capital Securities are received and not revoked,
the Company and the Trust will not accept and exchange the Old Capital
Securities pursuant to the Exchange Offer. In such event, the Company and the
Trust, pursuant to the Registration Rights Agreement, will, as promptly as
practicable after termination of the Exchange Offer, file with the Commission a
shelf registration statement (the "Shelf Registration Statement") covering
resales of the Old Capital Securities by the holders thereof from time to time
in accordance with the methods of distribution elected by such holders and set
forth in such Shelf Registration Statement, and use their best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act by August 19, 1997, the 210th day (or, if the Exchange Offer is terminated
after the 210th day after the initial issuance of the Old Capital Securities, by
September 18, 1997, the 240th day) after January 21, 1997, the date of initial
issuance of the Old Capital Securities.
The Old Capital Securities and the New Capital Securities are
referred to as the "Capital Securities." The Old Capital Securities represent
and the New Capital Securities when issued will represent undivided beneficial
interests in the assets of the Trust. The Company owns all of the common
securities of the Trust (the "Common Securities") representing undivided
beneficial interests in the assets of the Trust. The Trust exists for the sole
purpose of issuing the Common Securities and the Capital Securities (together,
the "Trust Securities") and investing the proceeds thereof in the Subordinated
Debt Securities (as defined herein) and certain other limited activities
described herein.
The Old Subordinated Debt Securities and the New Subordinated
Debt Securities are referred to as the "Subordinated Debt Securities" and the
Old Guarantee and the New Guarantee are referred to as the "Guarantee." The Old
Subordinated Debt Securities and the Old Guarantee are, and the New Subordinated
Debt Securities and the New Guarantee when issued will be, unsecured obligations
of the Company, and are or will be, as the case may be, subordinate and junior
in right of payment to other existing and future indebtedness of the Company, as
described herein. Upon a Declaration Event of Default (as defined herein), the
holders of the Capital Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of redemption, liquidation
and otherwise.
(iii)
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Holders of the Capital Securities are entitled to receive
cumulative cash distributions at an annual rate of 8.65% per annum of the
liquidation amount of $1,000 per Capital Security, accruing from January 21,
1997, the date of original issuance of the Old Capital Securities, and (subject
to extension of distribution payment periods described below) payable
semiannually in arrears on January 15 and July 15 of each year, commencing July
15, 1997 ("distributions"). The payment of distributions on the Capital
Securities out of moneys held by the Trust and payments on liquidation of the
Trust or the redemption of the Capital Securities, as set forth below, are
guaranteed by the Company as described herein. The Guarantee covers payments of
distributions and other payments on the Capital Securities only if and to the
extent that the Trust has funds available therefor, which funds will not be
available except to the extent the Company has made payments of interest or
principal (or premium, if any) or other payments on the Subordinated Debt
Securities held by the Trust.
If the Company does not make interest payments on the
Subordinated Debt Securities held by the Trust, the Trust will have insufficient
funds to pay distributions on the Capital Securities. The Guarantee does not
cover payment of distributions when the Issuer does not have sufficient funds to
pay such distributions. In such event, a holder of Capital Securities may
institute a legal proceeding directly against the Company to enforce payment of
such distributions to such holder. See "Risk Factors -- Enforcement of Certain
Rights by Holders of Capital Securities," "Description of the Capital
Securities," "Description of the Guarantee" and "Description of Subordinated
Debentures."
The Guarantee, when taken together with the Company's obligations
under the Subordinated Debt Securities, the Declaration and the Indenture (as
defined herein), including its obligations to pay costs, expenses, debts and
other obligations of the Trust (other than with respect to the Trust
Securities), provides a full and unconditional guarantee on a subordinated basis
by the Company of amounts due on the Capital Securities. See "Risk Factors --
Guarantee Covers Distributions and Other Payments Only to the Extent the Trust
Has Available Funds; Related Remedies." The obligations of the Company under the
Guarantee and the Subordinated Debt Securities are subordinate and junior in
right of payment to all present and future Senior Indebtedness (as defined
herein) of the Company and are also effectively subordinate to claims of
creditors of the Company's subsidiaries. At March 31, 1997 the aggregate amount
of Senior Indebtedness and liabilities and obligations of the Company's
subsidiaries that would be effectively ranked senior to the Guarantee and the
Subordinated Debt Securities was approximately $3,007,544,000, exclusive of
customer banking deposits ("Deposits"). See "Capitalization." There are no terms
in the Subordinated Debt Securities, the Capital Securities or the Guarantee
that limit the ability of the Company or its subsidiaries to incur additional
indebtedness, liabilities and obligations, including such indebtedness that
ranks senior to the Subordinated Debt Securities and the Guarantee. The holders
of the Common Securities will be entitled to receive distributions upon any
liquidation of the Trust pro rata with the holders of the Capital Securities,
except that if a Declaration Event of Default has occurred and is continuing,
the Capital Securities shall have a priority over the Common Securities.
The distribution rate and the distribution payment dates and
other payment dates for the Capital Securities will correspond to the interest
rate and interest payment dates and other payment dates on the Subordinated Debt
Securities, which are the sole assets of the Trust.
The Company has the right, subject to the conditions set forth
herein, to defer payments of interest on the Subordinated Debt Securities by
extending the interest payment period on the Subordinated Debt Securities at any
time and from time to time for up to 10 consecutive semiannual periods (each
such extended interest payment period,
(iv)
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an "Extension Period"), provided that no Extension Period may extend beyond the
maturity of the Subordinated Debt Securities. If interest payments are so
deferred, distributions on the Capital Securities and the Common Securities will
also be deferred and the Company (subject to certain exceptions set forth
herein) will not be permitted to declare or pay any such distributions with
respect to the Company's capital stock (which currently consists of common
shares) or to make any payment with respect to debt securities of the Company
that rank pari passu with or junior to the Subordinated Debt Securities. During
any such Extension Period, interest will continue to accrue on the Subordinated
Debt Securities for United States federal income tax purposes in respect of such
deferred interest. As a result, during any Extension Period, holders of the
Capital Securities will be required to include deferred income in their gross
income for United States federal income tax purposes on the deferred amounts in
advance of receipt of cash distributions with respect to such deferred interest
payments. There could be multiple Extension Periods of varying lengths, each up
to 10 consecutive semiannual periods, throughout the term of the Subordinated
Debt Securities. See "Description of the Subordinated Debt Securities -- Option
to Extend Interest Payment Period," "Risk Factors -- Option to Extend Interest
Payment Period for Up to Five Years and Consequent Deferral of Distribution on
Capital Securities" and "Certain Federal Income Tax Consequences -- US Holders
- -- Original Issue Discount."
The Subordinated Debt Securities are redeemable by the Company at
the Call Price (as defined herein), plus accrued and unpaid interest to the date
of redemption, in whole or in part, at any time and from time to time, on or
after January 15, 2007 (the "Optional Redemptions"). In certain limited
circumstances described herein, upon the occurrence of a Tax Event (as defined
herein), the Subordinated Debt Securities also are redeemable by the Company, in
whole or in part at any time, at par, together with accrued and unpaid interest
thereon to the date of the redemption. Upon redemption by the Company or at
maturity of the Subordinated Debt Securities, the Trust must redeem on a pro
rata basis its Trust Securities having an aggregate liquidation amount equal to
the aggregate principal amount of the Subordinated Debt Securities so redeemed
or matured at a redemption price (the "Redemption Price") equal to (i) $1,000
per Trust Security, if redeemed either upon the maturity of the Subordinated
Debt Securities or upon the occurrence and continuation of a Tax Event under
certain limited circumstances described herein, or (ii) in the case of Optional
Redemptions of the Subordinated Debt Securities, an amount per Trust Security
equal to the product of $1,000 and the applicable percentage used to determine
the Call Price for the Subordinated Debt Securities being redeemed, plus in all
cases, accrued and unpaid distributions on such Trust Securities to the date
fixed for redemption. See "Description of the Capital Securities -- Redemption."
The Capital Securities will be redeemed upon maturity of the Subordinated Debt
Securities, whereupon the Trust will be dissolved. See "Description of the
Capital Securities -- Tax Event Redemption" and "Description of the Subordinated
Debt Securities."
The Company, as the holder of all of the outstanding Common
Securities, has the right at any time to dissolve the Trust (including, without
limitation, upon the occurrence of a Tax Event) and, after satisfaction of
liabilities to creditors of the Trust (to the extent not satisfied by the
Company), the Subordinated Debt Securities must be distributed to the holders of
the Trust Securities, on a pro rata basis, in accordance with the aggregate
stated liquidation amount thereof, in liquidation of the Trust.
In the event of the involuntary or voluntary dissolution of the
Trust, other than in connection with a redemption or maturity of Subordinated
Debt Securities as described above, after satisfaction of liabilities to
creditors of the Trust (to the extent not satisfied by the Company), the holders
of the Capital Securities generally will be entitled to receive the stated
liquidation amount thereof plus accrued and unpaid distributions thereon to the
date of payment, unless, in connection with such dissolution, the Subordinated
Debt Securities held by the Trust are
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distributed to the holders of the Trust Securities issued by the Trust as would
be required in certain circumstances. See "Description of the Capital Securities
- -- Liquidation Distribution Upon Dissolution."
The Old Capital Securities have been issued and may be
transferred only in blocks having a stated liquidation amount or an aggregate
principal amount, as the case may be, of not less than $100,000 (100 Old Capital
Securities). Any transfer, sale or other disposition of Old Capital Securities
resulting in a block having a liquidation amount of less than $100,000 (100 Old
Capital Securities) shall be void and of no legal effect whatsoever. See
"Description of the Capital Securities -- Restrictions on Transfer." The New
Capital Securities will not be so restricted.
Based on interpretations by the staff of the Commission, as set
forth in several no-action letters to third parties, and subject to the
immediately following sentence, the Company and the Trust believe that New
Securities issued pursuant to the Exchange Offer in exchange for Old Securities
may be offered for resale, resold and otherwise transferred by a holder thereof
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New 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 Securities. However, any holder of Old Capital Securities who is an
"affiliate" of either the Company or the Trust, a broker-dealer that acquires
the Old Capital Securities in a transaction other than as a part of its
market-making or other trading activities or other holder who intends to
participate in the Exchange Offer for the purpose of distributing New Capital
Securities (i) will not be able to rely on the interpretations by the staff of
the Commission set forth in the above-mentioned interpretive letters, (ii) will
not be able to tender such Old Capital Securities in the Exchange Offer, and
(iii) 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. Any broker-dealer who holds Old Securities acquired for its own
account as a result of market-making activities or other trading activities, and
who receives New Securities in exchange for such Old Securities pursuant to the
Exchange Offer (an "Exchanging Dealer") may be a statutory underwriter and must
deliver a prospectus meeting the requirements of the Securities Act, which may
be the prospectus prepared for the Exchange Offer so long as it contains a plan
of distribution with respect to such resale transactions, in connection with any
resales of such New Securities. Neither the Company nor the Trust sought its own
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as it has
in such no- action letters to third parties.
Each holder of Old Capital Securities (other than a
broker-dealer) 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
and (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. The Letter of Transmittal contains the foregoing representations. 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 Exchanging Dealer will be deemed to
have acknowledged by execution of the Letter of Transmittal or delivery of an
Agent's Message (as defined herein) that it acquired the Old Capital Securities
for its
(vi)
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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, an Exchanging 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 Commission in the no-action letters
referred to above, the Company and the Trust believe that Exchanging 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. Subject to certain provisions set
forth in the Registration Rights Agreement and to the limitations set out
herein, 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 an Exchanging Dealer
in connection with resales of such New Capital Securities for a period ending
one year after the Expiration Date (or longer, if required by the Registration
Rights Agreement). See "Plan of Distribution." Any person, including any
Exchanging Dealer, who is an "affiliate" of the Company or the Trust may not
rely on such no-action letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
Each broker-dealer that receives New Capital Securities for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such 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. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of New Capital Securities received 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. The Company and the Trust have agreed that, starting on the date on
which the Exchange Offer is consummated and ending on the close of business one
year after such date, they will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
In that regard, each Exchanging 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 by 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 the 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 Exchanging Dealer will suspend the sale of
New Securities 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
Exchanging Dealer, or the Company or the Trust has given notice that the sale of
the New Securities 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 Salomon Brothers Inc, Jefferies & Company, Inc. and
Credit Suisse First Boston Corporation,
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the initial purchasers of the Old Capital Securities (the "Initial Purchasers")
informed the Company and the Trust in connection with the offering of the Old
Capital Securities that they each intended to make a market in the Old Capital
Securities, they are not obligated to make a market in the Old Capital
Securities or the New Capital Securities, and any such market-making may be
discontinued at any time without notice in the sole discretion of the Initial
Purchasers. Accordingly, there can be no assurance as to the development or
liquidity of any market for the New Capital Securities. The New Capital
Securities will not be listed on the New York Stock Exchange or any other
national or regional securities exchange, or included for quotation through the
NASDAQ Stock Market.
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.
The Exchange Offer and Consent Solicitation will expire at 5:00
p.m., New York City time, on June 23, 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer and Consent
Solicitation are extended by the Company and the Trust (in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer and Consent Solicitation are 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 and conditioned upon there having been received and not revoked the requisite
consents to adopt the Proposed Amendment (which condition may not be waived by
the Company or the Trust), 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. A tender of Old Capital Securities for exchange pursuant to
the Exchange Offer also will constitute a consent to the Proposed Amendment with
respect to such tendered Old Capital Securities. Consents to the Proposed
Amendment may be revoked at any time prior to the time and date of receipt of
the requisite consents to the Proposed Amendment (such time and date hereinafter
referred to as the "Consent Date"). See "Consent Solicitation -- Revocation of
Consents." Old Capital Securities may be tendered in whole or in part having a
liquidation amount of not less than $100,000 (100 Old Capital Securities) or any
integral multiple of $1,000 liquidation amount (1 Old Capital Security) in
excess thereof. The Company has agreed to pay all expenses of the Exchange Offer
and Consent Solicitation, except as otherwise specified herein. See "The
Exchange Offer -- Fees and Expenses." Each New Capital Security will pay
cumulative distributions from the most recent Distribution Payment Date (as
defined herein) on the Old Capital Securities surrendered in exchange for such
New Capital Securities or, if no distributions have been paid on such Old
Capital Securities, from January 21, 1997. Holders of the Old Capital
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Securities whose Old Capital Securities are accepted for exchange will not
receive accumulated distributions on such Old Capital Securities for any period
from and after the last Distribution Payment Date on such Old Capital Securities
prior to the original issue date of the New Capital Securities or, if no such
distributions have been paid, will not receive any accumulated distributions on
such Old Capital Securities, and will be deemed to have waived the right to
receive any distributions on such Old Capital Securities accumulated from and
after such Distribution Payment Date or, if no such distribution has been paid
or duly provided for, from and after January 21, 1997. This Prospectus, together
with the Letter of Transmittal, is being sent to all registered holders of Old
Capital Securities as of May 23, 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 the Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS
NOT APPROVED OR DISAPPROVED THIS OFFERING, NOR HAS THE COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
NO EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), NO
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" OF ANY SUCH PLAN BY REASON
OF SUCH PLAN'S INVESTMENT IN THE ENTITY (COLLECTIVELY, "PLANS"), AND NO PERSON
INVESTING "PLAN ASSETS" OF ANY PLAN, MAY ACQUIRE OR HOLD THE CAPITAL SECURITIES
OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION
CLASS EXEMPTION ("PTCE") 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH RESPECT TO SUCH
PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE CAPITAL SECURITIES OR ANY
INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING
THEREOF THAT IT EITHER (A) IS NOT A PLAN AND IS NOT PURCHASING SUCH SECURITIES
ON BEHALF OF OR WITH "PLAN ASSETS" OF ANY PLAN OR (B) IS ELIGIBLE FOR THE
EXEMPTIVE RELIEF AVAILABLE UNDER PTCE 96-23, 95-60, 91-38, 90-1 OR 84-14 WITH
RESPECT TO SUCH PURCHASE OR HOLDING.
(ix)
(Cover Page continued on next 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 Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices in Chicago, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and in New York, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such information may also be accessed electronically by
means of the Commission's home page on the Internet (http://www.sec.gov). In
addition, such reports, proxy statements and other information can be inspected
at The New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005
and The Pacific Stock Exchange, Incorporated, 301 Pine Street, San Francisco,
California 94104 on which certain securities of the Company are listed.
The Company and the Trust have filed with the Commission a
Registration Statement on Form S-4 (together with all amendments and exhibits
thereto, the "Registration Statement") under 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.
No separate financial statements of the Trust have been included
herein. The Company and the Trust do not consider that such financial statements
would be material to holders of the Capital Securities because the Trust is a
newly formed special purpose entity, has no operating history or independent
operations, is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Subordinated Debt Securities and issuing
the Trust Securities. All of the Common Securities of the Trust are owned by the
Company and the Company's obligations described herein under the Indenture, the
Declaration (including its obligations to pay costs, expenses, debts and other
obligations of the Trust, other than with respect to the Trust Securities), the
Subordinated Debt Securities and the Guarantee, taken together, constitute a
full and unconditional guarantee on a subordinated basis by the Company of
amounts due on the Capital Securities. The Company represents that (a) it will
present the Capital Securities as a separate line item on its balance sheet
entitled "Company-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Leucadia National Corporation Securities"; (b)
it will disclose in a footnote to its financial statements that the sole asset
of the Trust is $154,640,000 principal amount of 8.65% Junior Subordinated
Deferrable Interest Debentures due 2027 of Leucadia National Corporation; and
(c) it will disclose in an audited footnote to its audited financial statements
that (i) the Trust is wholly-owned, (ii) the sole asset of the Trust is the
$154,640,000 principal amount of 8.65% Junior Subordinated Deferrable Interest
Debentures due 2027 of Leucadia National Corporation, and (iii) considered
together, the "back-up undertakings" constitute a full and unconditional
guarantee by the Company of the Trust's obligations under the Capital
Securities. See "The Trust," "Description of the Capital Securities,"
"Description of the Subordinated Debt Securities" and "Description of the
Guarantee." In addition, the Company does not expect that the Trust will file
reports under the Exchange Act with the Commission.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 1-5721)
with the Commission are incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (the "Annual Report");
(b) the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 (the "First Quarter 10-Q");
and
(c) the Company's Current Reports on Form 8-K dated January
14, 1997, April 7, 1997 and April 30, 1997.
All documents filed by the Company pursuant to Sections 13(a), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of any offering of securities made by this Prospectus 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 that is also 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.
As used herein, the terms "Prospectus" and "herein" mean this
Prospectus and Consent Solicitation, 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 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 OR ALL OF THE DOCUMENTS REFERRED TO ABOVE THAT HAVE
BEEN OR MAY BE INCORPORATED BY REFERENCE HEREIN, OTHER THAN EXHIBITS TO SUCH
DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE
THEREIN. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO THE COMPANY AT 315 PARK
AVENUE SOUTH, NEW YORK, NY 10010 (TELEPHONE NUMBER (212) 460-1900), ATTENTION:
CORPORATE SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY JUNE 10, 1997.
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<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the financial statements, including the notes
thereto, appearing elsewhere or incorporated by reference herein. Prospective
investors should consider carefully the factors set forth herein under "Risk
Factors." As used in this Prospectus, the "Company" means Leucadia National
Corporation and its subsidiaries, except as the context otherwise may require.
LEUCADIA CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware
law pursuant to (i) a declaration of trust, dated as of January 10, 1997 (the
"Initial Declaration"), and (ii) the filing of a certificate of trust with the
Delaware Secretary of State on January 10, 1997. The Trust's business and
affairs are conducted by its trustees: initially, The Chase Manhattan Bank, as
Institutional Trustee (as defined herein), and Chase Manhattan Bank Delaware,
as Delaware Trustee (as defined herein). The Trust exists for the exclusive
purposes of (i) issuing the Trust Securities, (ii) investing the gross
proceeds from the sale of the Common Securities and Capital Securities to
acquire the Subordinated Debt Securities, and (iii) engaging in only those
other activities necessary or incidental thereto, including engaging in the
Exchange Offer. Accordingly, the Subordinated Debt Securities are the sole
asset of the Trust, and payments under the Subordinated Debt Securities will
be the sole revenue of the Trust. All of the Common Securities are owned by
the Company. The principal place of business of the Trust is c/o Leucadia
National Corporation, 315 Park Avenue South, New York, New York 10010
(telephone number (212) 460-1900).
LEUCADIA NATIONAL CORPORATION
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 and manufacturing. 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. As disclosed in the Company's First Quarter 10-Q,
the Company signed an agreement to sell certain of its life and health insurance
operations to Conseco, Inc. As a result, certain financial information of the
Company included or incorporated by reference in this Prospectus reflects these
life and health insurance businesses as discontinued operations.
The principal executive offices of the Company are located at 315
Park Avenue South, New York, New York 10010 (telephone number (212) 460-1900).
THE EXCHANGE OFFER AND CONSENT SOLICITATION
The Exchange Offer................... Up to $150,000,000 aggregate liquidation
amount of New Capital Securities are
being offered in exchange for a like
aggregate liquidation amount of Old
Capital Securities. Old Capital
Securities may be tendered for exchange
in whole or in part in a liquidation
amount of $100,000 (100 Old Capital
Securities) or any integral multiple of
$1,000 in excess thereof provided that
if any Old Capital Securities are
tendered in exchange for part, the
untendered liquidation amount must be
$100,000 or any integral multiple of
$1,000 in excess thereof. The
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<PAGE>
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."
The Consent Solicitation............. Concurrently with the Exchange Offer,
the Company and the Trust are soliciting
consents from holders of the Old Capital
Securities to approve the Proposed
Amendment. The Exchange Offer is
conditioned upon, among other things,
there having been received and not
revoked, the consent of a majority in
liquidation amount of the Old Capital
Securities to the adoption of the
Proposed Amendment. A tender of Old
Capital Securities for exchange pursuant
to the Exchange Offer also will
constitute a consent to the Proposed
Amendment with respect to such tendered
Old Capital Securities. See "The Consent
Solicitation."
The Proposed Amendment............... The Proposed Amendment to the
Registration Rights Agreement will
delete the requirement that the Company
use its reasonable best efforts to cause
the New Capital Securities to be duly
authorized for listing on the New York
Stock Exchange and thereafter maintain
such listing. The purpose of the
Proposed Amendment is to enable the
Trust and the Company to consummate the
Exchange Offer. Based on interpretations
by the staff of the Commission, as set
forth in a recent no-action letter to a
third party, the Trust and the Company
will be prohibited from consummating the
Exchange Offer unless the Proposed
Amendment is effectuated. See "The
Consent Solicitation -- Purpose and
Effect of the Consent Solicitation."
Expiration Date...................... The Expiration Date of the Exchange
Offer and Consent Solicitation will be
5:00 p.m., New York City time, on
June 23, 1997, unless the Exchange
Offer and Consent Solicitation are
extended by the Company and the Trust.
See "The Exchange Offer -- Expiration
Date; Extensions; Amendments."
Conditions to
Exchange Offer....................... The Exchange Offer is subject to and
conditioned upon, there having been
received and not revoked, the requisite
consents to adopt the Proposed
Amendment, which condition may not be
waived by the Company and the Trust and
certain other conditions, which may be
waived by the Company and the Trust in
their reasonable discretion. The
Exchange Offer is not conditioned upon
any minimum liquidation amount of Old
Capital Securities being tendered. See
"The Exchange Offer -- Conditions to
Exchange Offer."
5
<PAGE>
Unless valid consents of holders of a
majority in liquidation amount of the
Old Capital Securities are received and
not revoked, the Company and the Trust
will not accept and exchange the Old
Capital Securities pursuant to the
Exchange Offer. In such event, the
Company and the Trust, pursuant to the
Registration Rights Agreement, will, as
promptly as practicable after
termination of the Exchange Offer, file
with the Commission the Shelf
Registration Statement covering resales
of the Old Capital Securities by the
holders thereof from time to time in
accordance with the methods of
distribution elected by such holders and
set forth in such Shelf Registration
Statement, and use their best efforts to
cause the Shelf Registration Statement
to be declared effective under the
Securities Act by August 19, 1997, the
210th day (or, if the Exchange Offer is
terminated after the 210th day after the
initial issuance of the Old Capital
Securities, by September 18, 1997, the
240th day) after January 21, 1997, the
date of initial issuance of the Old
Capital Securities.
The Company and the Trust reserve the
right, subject to applicable law, at any
time and from time to time, (a) in their
sole discretion, to delay the acceptance
of the Old Capital Securities for
exchange, (b) to terminate the Exchange
Offer and Consent Solicitation if
certain specified conditions have not
been satisfied, and/or (c) to extend the
Expiration Date of the Exchange Offer
and Consent Solicitation 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 (d) in their
reasonable discretion to waive any
condition (except with respect to the
Proposed Amendment) or otherwise amend
the terms of the Exchange Offer and
Consent Solicitation in any respect. See
"The Exchange Offer -- Expiration Date;
Extensions; Amendments."
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 Chase
Manhattan Bank, as Exchange Agent (the
"Exchange Agent"), in conformity with
certain procedures set forth below under
"The Exchange Offer -- Withdrawal
Rights."
Consents to the Proposed Amendment may
be revoked at any time prior to the
Consent Date. A holder of Old Capital
Securities shall be deemed to have
revoked his consent to the Proposed
Amendments if, and only if, such holder
effectively withdraws his tender of Old
Capital Securities prior to the Consent
Date in accordance with the instructions
set forth under "The Exchange Offer --
Withdrawal Rights." See "The Consent
Solicitation -- Revocation of Consents."
6
<PAGE>
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 the Letter 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. Questions
regarding how to tender and requests for
information should be directed to the
Exchange Agent. See "The Exchange Offer
-- Exchange Agent."
Procedure for Consenting
to the Proposed
Amendment............................ A tender of Old Capital Securities for
exchange pursuant to the Exchange Offer
also will constitute a consent to the
Proposed Amendment with respect to such
tendered Old Capital Securities. See
"The Exchange Offer -- Procedure for
Tendering Old Capital Securities" and
"The Consent Solicitation -- Procedure
for Consenting to the Proposed
Amendment."
Consents Required.................... Pursuant to Section 7(b) of the
Registration Rights Agreement, the
Proposed Amendment requires the consent
of the registered holders of a majority
in liquidation amount of the outstanding
Capital Securities.
Resales of New
Capital Securities................... Based on interpretations by the staff of
the Commission as set forth in no-action
letters issued to third parties, the
Company and the Trust believe that the
New Securities issued pursuant to the
Exchange Offer may be offered for
resale, resold or otherwise transferred
by holders thereof (other than any
holder that is an "affiliate" of the
Company or the Trust as defined under
Rule 405 of the Securities Act) without
compliance with the registration and
prospectus delivery provisions of the
Securities Act; provided that such New
Securities are acquired in the ordinary
course of such holders' business and
such holders are not
7
<PAGE>
engaged in, and do not intend to engage
in, a distribution of such New
Securities and have no arrangement or
understanding with any person to
participate in the distribution of such
New Securities. However, the staff of
the Commission has not considered the
Exchange Offer in the context of a
no-action letter, and there can be no
assurance that the staff of the
Commission would make a similar
determination with respect to the
Exchange Offer as in such other
circumstances. By tendering the Old
Capital Securities in exchange for New
Capital Securities, each holder, other
than a broker-dealer, will represent to
the Company and the Trust that: (i) it
is not an affiliate of the Company or
the Trust (as defined under Rule 405 of
the Securities Act); (ii) any New
Capital Securities to be received by it
were acquired in the course of its
ordinary business; and (iii) it is not
engaged in, and does not intend to
engage in, a distribution of the New
Capital Securities and has no
arrangement or understanding with any
person to participate in a distribution
(within the meaning of the Securities
Act) of the New Capital Securities.
Each broker-dealer that receives New
Capital Securities for its own account
pursuant to the Exchange Offer must
acknowledge that it will deliver a
prospectus in connection with any resale
of such 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. This Prospectus, as it
may be amended or supplemented from time
to time, may be used by a broker-dealer
in connection with resales of New
Capital Securities received 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. The Company and the
Trust have agreed that, starting on the
date on which the Exchange Offer is
consummated and ending on the close of
business one year after such date, they
will make this Prospectus available to
any broker-dealer for use in connection
with any such resale. See "Plan of
Distribution."
In that regard, each Exchanging 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, 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 the 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
8
<PAGE>
Exchanging Dealer will suspend the sale
of New Securities 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 Exchanging Dealer, or the
Company or the Trust has given notice
that the sale of the New Securities may
be resumed, as the case may be.
Exchange Agent....................... The Exchange Agent is The Chase
Manhattan Bank. The address and
telephone and facsimile numbers of the
Exchange Agent are set forth under "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 Federal Income
Tax Consequences; ERISA
Considerations....................... Holders of Old Capital Securities should
review the information set forth under
"Certain Federal Income Tax
Consequences" and "Certain ERISA
Considerations" prior to tendering Old
Capital Securities in the Exchange
Offer.
THE CAPITAL SECURITIES
The Exchange Offer applies to the Old 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 will not be subject to
certain restrictions on transfer applicable to the Old Securities, (ii) the
New Capital Securities will not provide for any increase in the distribution
rate thereon, and (iii) the New Subordinated Debt Securities will not provide
for any increase in the interest rate thereon. 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 certain
rights under the Declaration.
Securities Offered................... $150,000,000 aggregate liquidation
amount of the Capital Securities
(liquidation amount $1,000 per Capital
Security).
General.............................. The Capital Securities represent
undivided beneficial interests in the
Trust's assets, which consist solely of
the Subordinated Debt Securities. The
Subordinated Debt Securities, in which
the proceeds of the Trust Securities are
invested, mature on January 15, 2027,
unless the Subordinated Debt Securities
are redeemed by the Company prior to
such maturity as described under
"Description of the Capital
9
<PAGE>
Securities-Redemption" and "Description
of the Capital Securities-Tax Event
Redemption."
Distributions........................ The distributions payable on the Capital
Securities are fixed at a rate per annum
of 8.65% of the stated liquidation
amount of $1,000 per Capital Security
and will be cumulative, will accrue from
January 21, 1997, the date of original
issuance of the Old Capital Securities,
and (subject to the extensions of
distribution payment periods described
below) are payable semiannually, in
arrears, on January 15 and July 15 of
each year, commencing July 15, 1997. See
"Description of the Capital
Securities-Distributions."
Option to Extend Interest
Payment Period....................... The Company has the right, at any time,
subject to certain conditions, to defer
payments of interest on the Subordinated
Debt Securities for Extension Periods,
each not exceeding 10 consecutive
semiannual periods; provided that no
Extension Period may extend beyond the
maturity date of the Subordinated Debt
Securities. As a consequence of the
Company's extension of the interest
payment period on the Subordinated Debt
Securities, distributions on the Capital
Securities would be deferred (though
such distributions would continue to
accrue interest at a rate of 8.65% per
annum compounded semiannually (to the
extent permitted by law)). In the event
the Company exercises its right to
extend an interest payment period, then
during any Extension Period, subject to
certain exceptions, (i) the Company
shall not declare or pay any dividend
on, make any distributions with respect
to, or redeem, purchase, acquire or make
a liquidation payment with respect to,
any of its capital stock or rights to
acquire such capital stock or make any
guarantee payments with respect to any
guarantee by the Company of the debt
securities of any subsidiary of the
Company if such guarantee ranks pari
passu with or junior in interest to the
Subordinated Debt Securities (other than
payments on the Guarantee and the Common
Securities Guarantee (as defined
herein)) and (ii) the Company shall not
make any payment of interest on or
principal of (or premium, if any, on),
or repay, repurchase or redeem, any debt
securities issued by the Company which
rank pari passu with or junior to the
Subordinated Debt Securities. Upon the
termination of any Extension Period and
the payment of all amounts then due, the
Company may commence a new Extension
Period, subject to certain requirements.
See "Description of the Subordinated
Debt Securities -- Option to Extend
Interest Payment Period." Should an
Extension Period occur with respect to
the Capital Securities, holders of the
Capital Securities will continue to
recognize interest income for United
States federal income tax purposes,
notwithstanding the deferred receipt of
payments which accrue during the
Extension Period. As a result, such
holders will be required to include such
income in gross
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<PAGE>
income for United States federal income
tax purposes in advance of the receipt
of cash, and such holders will not
receive the cash from the Trust related
to such income if such holders dispose
of the Capital Securities prior to the
record date for payment of
distributions. See "Certain Federal
Income Tax Consequences -- US Holders --
Original Issue Discount."
Liquidation.......................... The Company, as the holder of all of the
Common Securities, has the right at any
time to dissolve and liquidate the Trust
(including, without limitation, upon the
occurrence of a Tax Event) with the
result that, after satisfaction of
liabilities to creditors of the Trust
(to the extent not satisfied by the
Company), the Subordinated Debt
Securities would be distributed to the
holders of the Trust Securities on a pro
rata basis in accordance with the
respective stated liquidation amounts
thereof, in liquidation of the Trust. In
addition, the Trust will be dissolved
and liquidated under certain other
circumstances. See "Description of the
Capital Securities -- Liquidation
Distribution upon Dissolution."
Liquidation Amount................... In the event of the dissolution of the
Trust, after satisfaction of liabilities
to creditors of the Trust (to the extent
not satisfied by the Company) holders of
the Capital Securities issued by the
Trust will be entitled to receive $1,000
per Capital Security plus an amount
equal to accrued and unpaid
distributions thereon to the date of
payment, unless the Subordinated Debt
Securities are distributed to holders of
Trust Securities in exchange therefor.
If such liquidation distribution can be
paid only in part because the Trust has
insufficient assets available to pay in
full the aggregate liquidation
distribution, then the amounts payable
directly by the Trust on the Capital
Securities shall be paid on a pro rata
basis. The holders of the Common
Securities will be entitled to receive
distributions upon any such liquidation
pro rata with the holders of the Capital
Securities, except that if a Declaration
Event of Default has occurred and is
continuing, the Capital Securities shall
have a priority over the Common
Securities. See "Description of the
Capital Securities -- Liquidation
Distribution Upon Dissolution."
Maturity............................. Upon the repayment of the Subordinated
Debt Securities at maturity, the
proceeds from such repayment will be
applied by the Institutional Trustee to
redeem a like amount of Trust
Securities, upon the terms and
conditions described herein. See
"Description of the Capital Securities
-- Redemption."
Optional Redemption.................. The Company has the right to redeem the
Subordinated Debt Securities on or after
January 15, 2007, in whole or in part,
at any time from time to time, subject
to the conditions described in
"Description of the Subordinated Debt
Securities -- Redemption," at the Call
Prices described
11
<PAGE>
herein, together with accrued and unpaid
interest to the date of redemption. Upon
the redemption of the Subordinated Debt
Securities, the proceeds of such
redemption will be applied by the
Institutional Trustee to redeem a like
amount of the Trust Securities pro rata
at the applicable Redemption Price, upon
the terms and conditions described
herein. See "Description of the Capital
Securities -- Redemption."
Tax Event Redemption................. If at any time a Tax Event should occur
and would continue despite dissolution
of the Trust and distribution of the
Subordinated Debt Securities to the
holders of the Trust Securities, the
Company may, within 90 days of the
occurrence of such Tax Event, redeem the
Subordinated Debt Securities in whole or
in part in certain limited circumstances
at a redemption price equal to the
aggregate of the principal amount to be
redeemed plus any accrued and unpaid
interest to the redemption date. See
"Description of the Capital Securities
-- Tax Event Redemption." Upon the
redemption of the Subordinated Debt
Securities, the proceeds of such
redemption will be applied by the
Institutional Trustee to redeem a like
amount of the Trust Securities pro rata
at the applicable Redemption Price, upon
the terms and conditions described
herein. See "Description of the Capital
Securities -- Redemption."
The Guarantee........................ The payment of distributions out of
moneys held by the Trust, payments on
liquidation of the Trust and payment
upon the redemption of Capital
Securities, in each case, if required
under the Declaration, are guaranteed by
the Company as described herein under
"Description of the Guarantee." The
Guarantee covers payments of
distributions and other payments on the
Capital Securities only if and to the
extent that the Trust has funds
available therefor, which funds will not
be available except to the extent the
Company has made payments of interest or
principal (or premium, if any) or other
payments on the Subordinated Debt
Securities. If the Company does not make
interest payments on the Subordinated
Debt Securities held by the Issuer, the
Trust will have insufficient funds to
pay distributions on the Capital
Securities. The Guarantee does not cover
payment of distributions when the Trust
does not have sufficient funds to pay
such distributions. In such event, a
holder of Capital Securities may
institute a legal proceeding directly
against the Company to enforce payment
of such distributions to such holder.
See "Risk Factors -- Enforcement of
Certain Rights by Holders of Capital
Securities," "Description of the Capital
Securities," "Description of the
Guarantee" and "Description of
Subordinated Debentures." The Guarantee,
when taken together with the Company's
obligations under the Subordinated Debt
Securities, the Declaration and the
Indenture (including its obligations to
pay costs, expenses, debts and other
obligations of the Trust (other than
with respect to the Trust Securities)),
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provides a full and unconditional
guarantee on a subordinated basis by the
Company of amounts due on the Capital
Securities. The Company has also agreed
separately to guarantee the obligations
of the Trust with respect to the Common
Securities as described herein under
"Description of the Guarantee --
General."
Ranking.............................. The Common Securities rank pari passu
with, and payments thereon will be made
pro rata with, the Capital Securities,
except that upon the occurrence and
during the continuance of a Declaration
Event of Default, the rights of the
holders of the Common Securities to
receive payment of periodic
distributions and payments upon
liquidation, redemption or otherwise
will be subordinated to the rights of
the holders of the Capital Securities.
See "Description of the Capital
Securities -- General." The Subordinated
Debt Securities are unsecured and
subordinate and junior in right of
payment to the extent and in the manner
set forth in the Indenture to all Senior
Indebtedness of the Company. See
"Description of the Subordinated Debt
Securities." The Guarantee constitutes
an unsecured obligation of the Company
and ranks subordinate and junior in
right of payment to the extent and in
the manner set forth in the Guarantee to
all Senior Indebtedness of the Company.
The Company's obligations under the
Guarantee and the Subordinated Debt
Securities are also effectively
subordinate to claims of creditors of
the Company's subsidiaries. See
"Description of the Guarantee."
Rating............................... The Capital Securities have been rated
investment grade by a nationally
recognized statistical rating
organization. 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.
Voting Rights........................ Holders of the Capital Securities will
have limited voting rights relating
generally to the modification of the
Capital Securities and the Guarantee and
the exercise of the Trust's rights as
the holder of the Subordinated Debt
Securities. Holders of the Capital
Securities will not be entitled to
appoint, remove or replace the
Institutional Trustee or the Delaware
Trustee except upon the occurrence of
certain events described herein. See
"Description of the Capital Securities
-- Voting Rights" and " -- Removal of
Trustees; Appointment of Successors."
Absence of Market
for the New Capital
Securities........................... The New Capital Securities will be a new
issue of securities for which there is
currently no market. Although the
Initial Purchasers informed the Company
and the Trust in connection with the
offering of the Old Capital Securities
that they each intended to make a market
in the Old Capital Securities, they are
not obligated to make a market in the
Old
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<PAGE>
Capital Securities or the New Capital
Securities, 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 New Capital
Securities will not be listed on the New
York Stock Exchange or any other
national or regional securities
exchange, or included for quotation
through the NASDAQ Stock Market.
Trading Price........................ The Capital Securities are expected to
trade in the secondary market at a price
per Capital Security plus accrued and
unpaid distributions, if any, to the
date of settlement. Because the Capital
Securities pay distributions at a fixed
rate based on the fixed interest rate
payable on the Subordinated Debt
Securities, the trading price on the
Capital Securities may decline if
interest rates rise.
Transfer............................. The Old Capital Securities have been
issued, and may be transferred, only in
blocks having a liquidation amount of
not less than $100,000 (100 Old Capital
Securities). Any transfer, sale or other
disposition of Old Capital Securities
resulting in a block having a
liquidation amount of less than $100,000
shall be deemed to be void and of no
legal effect whatsoever. The New Capital
Securities will not be so restricted.
For additional information with respect to the Capital
Securities, see "Description of the Capital Securities," "Description of the
Subordinated Debt Securities," "Description of the Guarantee" and "Certain
Federal Income Tax Consequences."
RISK FACTORS
Prospective investors should carefully consider the matters set
forth under "Risk Factors" beginning on Page 15 of this Prospectus.
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<PAGE>
RISK FACTORS
Holders of the Old Capital Securities should carefully review the
information contained elsewhere in this Prospectus and should particularly
consider the following matters prior to tendering Old Capital Securities in the
Exchange Offer and Consent Solicitation.
ABSENCE OF PUBLIC TRADING MARKET; TRANSFER RESTRICTIONS
There is no existing trading market for the Capital Securities
and there can be no assurance as to the liquidity of any such market that may
develop, the ability of the holders of the Capital Securities to sell such
securities or whether a trading market, if it develops, will continue to exist.
If such a market were to exist, the Capital Securities could trade at prices
higher or lower than their liquidation amounts, depending on many factors,
including prevailing interest rates, the market for similar securities and the
operating results of the Company. In the event that the Subordinated Debt
Securities are distributed by the Trust to the holders of the Capital
Securities, the preceding considerations would be equally applicable to the
Subordinated Debt Securities. The Company and the Trust were advised by the
Initial Purchasers in connection with the offering of the Old Capital Securities
that they intended to make a market in the Old Capital Securities. However, the
Initial Purchasers are not obligated to make a market in the Old Capital
Securities or the New Capital Securities and any such market-making activity may
be discontinued at any time without notice in the sole discretion of the Initial
Purchasers. 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. The Old Capital Securities have not been registered
under the Securities Act, and are subject to significant restrictions on resale
(including a prohibition on transfers resulting in blocks having a stated
liquidation amount of less than $100,000 (100 Old Capital Securities)).
Notwithstanding the registration of the New Capital Securities in the Exchange
Offer, holders who are "affiliates" of the Company or the Trust as defined under
Rule 405 of the Securities Act 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 tendering holder of the Old Capital Securities will be
deemed to have made certain acknowledgments, representations and agreements. In
addition, each broker-dealer that receives New Capital Securities for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. Any
broker-dealer that acquires Old Capital Securities in a transaction other than
as a part of its market making or other ordinary trading activities (i) will not
be able to rely on the interpretations of the staff of the Commission set forth
in certain no-action letters to third parties referenced under "The Exchange
Offer -- Resales of Capital Securities," (ii) will not be able to tender such
Old Capital Securities in the Exchange Offer and (iii) 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 requirement. See "Plan of
Distribution."
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND THE SUBORDINATED
DEBT SECURITIES
The obligations of the Company under the Guarantee and the
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness of the Company. No payment of
principal of (including redemption payments, if any) or premium, if any, or
interest on the Subordinated Debt Securities may be made if (i) any Senior
Indebtedness of the Company is not paid when due and any applicable grace period
with respect to such default has ended with such default not having been cured
or waived or ceasing to exist or (ii) the maturity of any Senior Indebtedness of
the Company has been accelerated because of a default. The Subordinated Debt
Securities and the Guarantee also are effectively subordinated to all existing
and future indebtedness, liabilities and obligations, including trade payables
and Deposits, of the Company's subsidiaries, except
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<PAGE>
to the extent that the Company is a creditor of the subsidiaries and is
recognized as such. At March 31, 1997, the aggregate amount of Senior
Indebtedness and liabilities and obligations of the Company's subsidiaries that
would be effectively ranked senior to the Guarantee and the Subordinated Debt
Securities was approximately $3,007,544,000, exclusive of Deposits. See
"Capitalization." There are no terms in the Capital Securities, the Subordinated
Debt Securities or the Guarantee that limit the ability of the Company or its
subsidiaries to incur additional indebtedness, liabilities and obligations
including such indebtedness that ranks senior to the Subordinated Debt
Securities and the Guarantee. See "Description of the Guarantee -- Status of the
Guarantee" and "Description of the Subordinated Debt Securities."
GUARANTEE COVERS DISTRIBUTIONS AND OTHER PAYMENTS ONLY TO THE EXTENT THE TRUST
HAS AVAILABLE FUNDS; RELATED REMEDIES
The terms of the Guarantee are those set forth in the Guarantee
and those made part of the Guarantee by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), under which The Chase Manhattan Bank is
acting as trustee (the "Guarantee Trustee"). The New Guarantee has been
qualified under the Trust Indenture Act. The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Capital Securities.
The Guarantee guarantees to the holders of the Capital Securities
the following payments, to the extent not paid by the Trust: (i) any accrued and
unpaid distributions required to be paid on the Capital Securities, to the
extent the Trust has funds available therefor, (ii) the Redemption Price, to the
extent the Trust has funds available therefor, with respect to the Capital
Securities called for redemption by the Trust, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Subordinated Debt Securities to the holders
of the Capital Securities in exchange therefor), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on the
Capital Securities to the date of the payment, to the extent the Trust has funds
available therefor and (b) the amount of assets of the Trust remaining available
for distribution to holders of the Capital Securities in liquidation of the
Trust. The Guarantee is subordinated as described under "-- Ranking of
Subordinate Obligations Under the Guarantee and the Subordinated Debt
Securities." The holders of a majority in liquidation amount of the 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
Guarantee. A holder of record of the Capital Securities may institute a legal
proceeding directly against the Company to enforce the Guarantee Trustee's
rights without first instituting any 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 Subordinated Debt Securities,
the Trust would lack available funds for the payment of distributions or amounts
payable on redemption of the Capital Securities or otherwise, and, in such
event, holders of the Capital Securities would not be able to rely upon the
Guarantee for payment of such amounts. Instead, each holder of the Capital
Securities would rely on the enforcement (i) by the Institutional Trustee of its
rights as registered holder of the Subordinated Debt Securities against the
Company pursuant to the terms of the Subordinated Debt Securities or (ii) by
such holder of the Capital Securities of its right against the Company to
enforce payments of principal (and premium, if any) and interest on the
Subordinated Debt Securities having an aggregate principal amount equal to the
aggregate liquidation amount of the Capital Securities of such holder as
described below under "-- Enforcement of Certain Rights By Holders of Capital
Securities." See "Description of the Capital Securities," "Description of the
Guarantee" and "Description of the Subordinated Debt Securities." The
Declaration provides that each holder of the Capital Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the subordination
provisions thereof, and the Indenture.
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<PAGE>
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF CAPITAL SECURITIES
If a Declaration Event of Default with respect to the Trust
occurs and is continuing, then the holders of the Capital Securities would,
except as provided below, rely on the enforcement by the Institutional Trustee
of its rights as holder of the Subordinated Debt Securities against the Company.
The holders of a majority in liquidation amount of the Capital Securities will
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Institutional Trustee with respect to
the Capital Securities or to direct the exercise of any trust or power conferred
upon the Institutional Trustee under the Declaration, including the right to
direct the Institutional Trustee to exercise the remedies available to it as
holder of the Subordinated Debt Securities. If the Institutional Trustee fails
to enforce its rights under the Subordinated Debt Securities after the holders
of a majority in liquidation amount of the Capital Securities have so directed
such Institutional Trustee, a holder of record of the Capital Securities may, to
the fullest extent permitted by law, institute a legal proceeding directly
against the Company to enforce the rights of the Institutional Trustee under the
Subordinated Debt Securities, without first instituting any legal proceeding
against such Institutional Trustee or any other person.
Notwithstanding the foregoing, if a Declaration Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay interest or principal (or premium, if any) on the
Subordinated Debt Securities on the respective dates such interest or principal
(or premium, if any) is payable, after giving effect to any Extension Period (or
in the case of redemption, on the redemption date), then a holder of record of
the Capital Securities may institute directly against the Company a proceeding
for enforcement of payment, on or after the respective due dates specified in
the Subordinated Debt Securities, to such holder directly of the principal of
(or premium, if any) or interest on the Subordinated Debt Securities having an
aggregate principal amount equal to the aggregate liquidation amount of the
Capital Securities of such holder (a "Direct Action"). In connection with such
Direct Action, the Company will be subrogated to the rights of such holder of
the Capital Securities under the Declaration to the extent of any payment made
by the Company to such holder of the Capital Securities in such Direct Action;
provided, however, that no such subrogation right may be exercised so long as a
Declaration Event of Default has occurred and is continuing. The holders of the
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debt Securities. See "Description
of the Capital Securities -- Declaration Events of Default" and "Effect of
Obligations Under the Declaration, the Subordinated Debt Securities and the
Guarantee."
OPTION TO EXTEND INTEREST PAYMENT PERIOD FOR UP TO FIVE YEARS AND CONSEQUENT
DEFERRAL OF DISTRIBUTIONS ON CAPITAL SECURITIES
The Company has the right under the Indenture to defer payments
of interest on the Subordinated Debt Securities by extending the interest
payment period, at any time and from time to time, subject to certain
conditions, for Extension Periods, each not exceeding 10 consecutive semiannual
periods, provided that no Extension Period may extend beyond the stated maturity
of the Subordinated Debt Securities. During each such Extension Period,
semiannual distributions on the Capital Securities would also be deferred (but
would continue to accrue, despite such deferral, with interest thereon
compounded semiannually (to the fullest extent permitted by law)) by the Trust.
In the event that the Company exercises this right to defer interest payments on
the Subordinated Debt Securities, and such deferral is continuing, or if there
shall have occurred and be continuing any event of default under the Indenture
or if the Company shall be in default with respect to the payment of its
obligations under the Guarantee, (a) the Company shall not declare or pay
dividends on, or make a distribution with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of the Company's
capital stock or rights to acquire such capital stock (other than (i) purchases
or acquisitions of shares of any such capital stock or rights to
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<PAGE>
acquire such capital stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or any other contractual
obligations of the Company (other than a contractual obligation ranking pari
passu with or junior to the Subordinated Debt Securities), (ii) as a result of a
reclassification of the Company's capital stock or rights to acquire such
capital stock or the exchange or conversion of one class or series of capital
stock of the Company or rights to acquire such capital stock for another class
or series of the Company's capital stock or rights to acquire such capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) dividends and
distributions made on the Company's capital stock or rights to acquire such
capital stock with the Company's capital stock or rights to acquire such capital
stock or (v) any declaration of a dividend in connection with the implementation
of a shareholder 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), or make guarantee payments with respect to any guarantee by the
Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior to the Subordinated Debt Securities
(other than payments under the Guarantee and the Common Securities Guarantee)
and (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Subordinated Debt
Securities. Prior to the termination of any such Extension Period, the Company
may further extend the interest payment period, provided that each such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 10 consecutive semiannual periods or extend beyond the
maturity of the Subordinated Debt Securities. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the terms set forth herein. See
"Description of the Capital Securities" and "Description of the Subordinated
Debt Securities."
During each Extension Period, if any, each holder of Capital
Securities will continue to accrue income (as original issue discount ("OID"))
in respect of the deferred interest allocable to its Capital Securities for
United States federal income tax purposes. In such event, each holder of the
Capital Securities will recognize income for United States federal income tax
purposes in advance of the receipt of cash, and will not receive cash related to
such income from the Trust if such holder disposes of its Capital Securities
prior to the record date for payment of such deferred interest. See "Certain
Federal Income Tax Consequences."
The Company has no current intention of exercising its right to
defer payments of interest on the Subordinated Debt Securities. 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
Capital Securities during an Extension Period, therefore, might not receive the
same return on its investment as a holder that continues to hold its Capital
Securities. In addition, as a result of the existence of the Company's right to
defer interest payments, the market price of the Capital Securities (which
represent undivided beneficial interests in the Subordinated Debt Securities)
may be more volatile than the market price of other similar securities where the
issuer does not have such right to defer interest payments.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton submitted to Congress a
proposal to implement tax legislation (the "Proposal"). As explained in the
Joint Committee on Taxation, Description and Analysis of Certain Revenue-
Raising Provisions Contained in President Clinton's Fiscal 1998 Budget Proposal
(JCS-10-97) April 16, 1997, and (JCX-10-97) March 11, 1997 (the "Joint Committee
Description"), the Proposal contains a provision which generally would deny a
deduction for interest on an instrument which (a) is issued by a corporation,
(b) has a maximum term of more than 15 years and (c) is not shown as
indebtedness on the separate balance sheet of the issuer (or, if the
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instrument is issued to a related party other than a corporation and the holder
or some other related party issues a related instrument, such instrument is not
shown as indebtedness on the issuer's consolidated balance sheet). As explained
in the Joint Committee Description, legislation enacted under the Proposal would
be effective generally for instruments issued on or after the date of first
congressional committee action. To date there has been no congressional
committee action on the Proposal.
While the Company expects to be able to deduct interest on the
Subordinated Debt Securities, see "Certain Federal Income Tax Consequences --
Characterization of the Subordinated Debt Securities," there can be no assurance
that the Proposal, if implemented, will not result in legislation having a
retroactive effect and applicable to the Subordinated Debt Securities.
Furthermore, there can be no assurance that other legislation enacted after the
date hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Subordinated Debt Securities. Accordingly,
there can be no assurance that a Tax Event will not occur. See "-- Redemption;
Distribution" and "Description of the Subordinated Debt Securities -- Proposed
Tax Legislation."
REDEMPTION; DISTRIBUTION
The Company, as the holder of all of the outstanding Common
Securities, has the right at any time (including, without limitation, upon the
occurrence of a Tax Event) to dissolve the Trust, and, after satisfaction of
liabilities to creditors of the Trust (to the extent not paid by the Company),
cause the Subordinated Debt Securities to be distributed to the holders of the
Trust Securities on a pro rata basis in accordance with the respective
liquidation amounts thereof, in liquidation of the Trust. See "Description of
the Capital Securities -- Liquidation Distribution Upon Dissolution." Upon the
occurrence of a Tax Event, in certain circumstances described herein, the
Company will have the right to redeem the Subordinated Debt Securities, in whole
or in part, in which event the Trust will redeem the Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debt Securities redeemed by the Company on a pro rata basis. See
"Description of the Capital Securities -- Tax Event Redemption" and "--
Liquidation Distribution Upon Dissolution."
Under current United States federal income tax law, a
distribution of the Subordinated Debt Securities upon the dissolution of the
Trust generally would not be a taxable event to holders of the Capital
Securities. However, a dissolution of the Trust in which holders of the Capital
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Consequences -- US Holders -- Receipt of Subordinated Debt
Securities or Cash Upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Capital
Securities or the Subordinated Debt Securities that may be distributed in
exchange for the Capital Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Capital Securities that an investor may
purchase, whether in the secondary market or otherwise, or the Subordinated Debt
Securities that a holder of the Capital Securities may receive on dissolution
and liquidation of the Trust, may trade at a discount to the price paid to
purchase the Capital Securities. Because the ability of the Trust to pay amounts
due on the Capital Securities is wholly dependent upon the Company's making
payments on the Subordinated Debt Securities as and when required, and because
holders of the Capital Securities may receive the Subordinated Debt Securities
upon dissolution and liquidation of the Trust, purchasers of the Capital
Securities are also making an investment decision with regard to the
Subordinated Debt Securities and should carefully review all the information
regarding the Subordinated Debt Securities contained herein and evaluate the
credit risk of the Company. See "Description of the Capital Securities" and
"Description of the Subordinated Debt Securities."
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CONSEQUENCES OF HIGHLY LEVERAGED TRANSACTION
The Indenture does not contain any provisions that afford holders
of the Subordinated Debt Securities 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 the Subordinated Debt Securities."
LIMITED VOTING RIGHTS
Holders of the Capital Securities will have limited voting rights
relating generally to the modification of the Capital Securities and the
Guarantee and the exercise of the Trust's rights as the holder of the
Subordinated Debt Securities. Holders of the Capital Securities will not be
entitled to appoint, remove or replace the Institutional Trustee or the Delaware
Trustee except upon the occurrence of certain events described herein. The
Institutional Trustee and the holders of a majority of the Common Securities may
amend the Declaration without the consent of the holders of the Capital
Securities to ensure that the Trust will be classified for United States federal
income tax purposes as a grantor trust and will not be required to register as
an "investment company" under the 1940 Act (as defined herein) even if such
action adversely affects the interests of such holders. See "Description of the
Capital Securities -- Voting Rights" and "-- Removal of Trustees; Appointment of
Successors."
TRADING PRICE
Because the Capital Securities pay distributions at a fixed rate
based upon the fixed interest rate payable on the Subordinated Debt Securities,
the trading price of the Capital Securities may decline if interest rates rise.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD CAPITAL SECURITIES AND TO CONSENT TO
THE PROPOSED AMENDMENT
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. In addition, any trading market
for Old Capital Securities which remain outstanding after the Exchange Offer
could be adversely affected.
The New Capital Securities and any Old Capital Securities which
remain outstanding after consummation of the Exchange Offer will constitute a
single series of Capital Securities under the Declaration and, accordingly, will
vote together as a single class for purposes of determining whether holders of
the requisite
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percentage in outstanding liquidation amount thereof have taken certain actions
or exercised certain rights under the Declaration. See "Description of New
Securities -- Description of Capital Securities -- General."
The Old Capital Securities provide that, if the Exchange Offer is
not consummated by August 19, 1997 (subject to extension in certain
circumstances), the distribution rate borne by the Old Capital Securities will
increase by 0.25% per annum until the Exchange Offer is consummated. See
"Description of Old Capital Securities." Following consummation of the Exchange
Offer, the Old Capital Securities will not be entitled to any increase in the
distribution rate thereon. The New Capital Securities will not be entitled to
any such increase in the distribution rate thereon.
Unless valid consents of holders of a majority in liquidation
amount of the Old Capital Securities are received and not revoked, the Company
and the Trust will not accept and exchange the Old Capital Securities pursuant
to the Exchange Offer. In such event, all of the Old Capital Securities will
remain outstanding and continue to bear a legend reflecting the restrictions on
transfer discussed above. The Registration Rights Agreement provides in such
event that the Company and the Trust will, as promptly as practicable after
termination of the Exchange Offer, file with the Commission the Shelf
Registration Statement covering resales of the Old Capital Securities by the
holders thereof from time to time in accordance with the methods of distribution
elected by such holders and set forth in such Shelf Registration Statement, and
use their best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act by the 210th day (or, if the Exchange Offer
is terminated after the 210th day after the initial issuance of the Old Capital
Securities, by the 240th day) after the initial issuance of the Old Capital
Securities.
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 Exchange Agent of such Old Capital Securities, a properly
completed and duly executed Letter of Transmittal or Agent's 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, the Trust, nor the Exchange Agent is under any duty to give
notification of defects or irregularities with respect to the tenders of Old
Capital Securities for exchange.
LEUCADIA NATIONAL CORPORATION
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 and manufacturing. 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.
As disclosed in the First Quarter 10-Q, on April 30, 1997, the
Company signed an agreement with Conseco, Inc. to sell certain subsidiaries
principally engaged in the sale of graded benefit life insurance policies
through direct marketing and agent-sold Medicare supplement insurance, together
with certain related assets, including the Company's health insurance operations
(the "Conseco Transaction"). The purchase price will be $460,000,000, consisting
of $400,000,000 in notes secured by non-cancellable letters of credit and
$60,000,000 in cash. The sale is subject to
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<PAGE>
customary terms and conditions, including the receipt of regulatory approvals.
The Company expects to report a pre-tax gain of approximately $300,000,000 upon
consummation of the Conseco Transaction. These businesses have been classified
as discontinued operations and the Company's balance sheet at December 31, 1996
and its income statements for the year ended December 31, 1996 and three month
period ended March 31, 1996 have been restated to conform to this presentation.
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 $1,106,376,000 at March 31, 1997, equal to a book value per common
share of negative $.11 at December 31, 1978 and $18.30 at March 31, 1997. The
Company's Chairman and President and their families beneficially own in the
aggregate approximately 35% 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 and
health 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
Medicare supplement and variable annuity products. The Company's principal
commercial lines are property and casualty products provided for workers'
compensation, multi-family residential real estate, retail establishments and
livery vehicles in the New York metropolitan area. For the year ended December
31, 1996, the Company's continuing insurance segments contributed 80% of total
revenue and, at December 31, 1996, constituted 73% of consolidated assets of
continuing operations.
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. The current cycle of intense price competition has continued for a
longer period than in the past, suggesting that the significant infusion of
capital into the industry in recent years, coupled with larger investment
returns has been, and may continue to be, a depressing influence on policy
rates. As indicated in the Selected Financial Data included herein, the
statutory combined ratios for the Company's property and casualty business have
been better than the industry averages for each of the past five years. This has
been due, in part, to the Company's low expense ratio.
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. and/or Standard & Poor's
Corporation. Investments in mortgage loans, real estate and non-investment grade
securities represented 2.3% of the portfolio of the Company's continuing
insurance operations at March 31, 1997.
From time to time several companies have expressed interest in
the acquisition of certain of the Company's insurance operations. Recently, the
Company has responded to certain of these overtures, conveying a willingness to
consider the sale of one or more of these operations in the appropriate context
and under acceptable circumstances. Presently the Company is in discussions with
certain interested parties. Although there can be no assurance that any
transaction will be entered into or that, if entered into, any such transaction
will be consummated, the price ranges being discussed for such insurance
operations are substantially in excess of the book value of these operations.
Unless and until a definitive agreement is executed concerning any such
transaction, the Company does not intend to update the status of any discussions
concerning any possible transaction.
The Company's banking and lending operations principally consist
of making instalment loans to niche markets primarily funded by customer banking
deposits insured by the Federal Deposit Insurance Corporation.
22
<PAGE>
One of the Company's principal lending activities is providing 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 markets.
Starting in 1994, the Company has made investments outside the
United States in Russia and Argentina. For more information concerning these
investments see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of the Annual Report.
The Company and certain of its subsidiaries have substantial tax
loss carryforwards. The amount and availability of the tax loss carryforwards
are subject to certain qualifications, limitations and uncertainties as more
fully discussed in the Notes to the Consolidated Financial Statements contained
in the Annual Report, incorporated by reference herein.
23
<PAGE>
LEUCADIA NATIONAL CORPORATION
SELECTED FINANCIAL DATA
The following selected financial data have been summarized from the
Company's consolidated financial statements and are qualified in their entirety
by reference to, and should be read in conjunction with, such consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," contained in the Company's Annual Report
and with the unaudited financial statements contained in the First Quarter 10-Q,
which are incorporated by reference herein. The information set forth below for
the three months ended March 31, 1997 and 1996 is unaudited; however, in the
opinion of the Company's management, such financial information contains all
adjustments, consisting only of normal recurring items, necessary to present
fairly the financial information for such periods. The results of operations for
the three months ended March 31, 1997 may not be indicative of annual results of
operations. The information set forth below for the year ended December 31, 1996
and the three months ended March 31, 1997 and 1996 reflect the life and health
insurance businesses as discontinued operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA: (a)
Revenues $310,558 $329,933 $1,276,329 $1,558,314 $1,384,385 $1,408,058 $1,573,015
Net securities gains (losses) 2,172 7,061 34,953 20,027 (12,004) 51,923 51,778
Interest expense (b) 12,958 13,879 53,931 52,871 44,003 39,465 38,507
Insurance losses, policy
benefits and amortization of
deferred acquisition costs 196,896 207,218 813,324 942,803 819,010 789,752 896,673
Income from continuing operations
before income taxes, minority
expense of trust preferred
securities, cumulative effects
of changes in accounting
principles and extraordinary
loss 12,287 10,519 30,183 132,182 100,318 176,868 143,553
Income from continuing
operations before cumulative
effects of changes in
accounting principles
and extraordinary loss 5,751 7,384 24,174 107,503 70,836 116,259 130,607
Income from discontinued
operations 6,969 8,217 31,341 - - - -
Cumulative effects of changes in
accounting principles - - - - - 129,195 -
Extraordinary loss from early
extinguishment of debt, net of
income tax benefit - - (6,838) - - - -
Net income 12,720 15,601 48,677 107,503 70,836 245,454 130,607
Per share:
Primary earnings (loss) per
common and dilutive common
equivalent share:
Income from continuing operations
before cumulative
effects of changes in
accounting principles
and extraordinary loss $.09 $.12 $ .40 $1.81 $1.22 $1.98 $2.67
Income from discontinued
operations .12 .14 .51 - - - -
Cumulative effects of changes
in accounting principles - - - - - 2.21 -
Extraordinary loss - - (.11) - - - -
---- ---- ----- ----- ----- ----- -----
Net income $.21 $.26 $ .80 $1.81 $1.22 $4.19 $2.67
==== ==== ===== ===== ===== ===== =====
Fully diluted earnings (loss)
per common share:
Income from continuing
operations before cumulative
effects of changes in
accounting principles
and extraordinary loss $.09 $.12 $ .40 $1.77 $1.21 $1.94 $2.66
Income from discontinued
operations .12 .14 .51 - - - -
Cumulative effects of changes
in accounting principles - - - - - 2.10 -
Extraordinary loss - - (.11) - - - -
---- ---- ----- ----- ----- ----- -----
Net income $.21 $.26 $ .80 $1.77 $1.21 $4.04 $2.66
==== ==== ===== ===== ===== ===== =====
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------ -------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA: (a)
Cash and investments $2,511,522 $2,400,656 $3,146,639 $2,764,890 $2,989,384 $3,371,624
Total assets 4,496,274 4,331,361 5,107,874 4,674,046 4,689,272 4,330,580
Debt, including current maturities 523,703 523,366 520,862 425,848 401,335 225,588
Customer banking deposits 206,299 209,261 203,061 179,888 173,365 186,339
Common shareholders' equity 1,106,376 1,118,107 1,111,491 881,815 907,856 618,161
Book value per common share $18.30 $18.51 $18.47 $15.72 $16.27 $11.06
</TABLE>
<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>
SELECTED INFORMATION ON PROPERTY AND
CASUALTY INSURANCE OPERATIONS
(Unaudited): (a)(c)
GAAP Combined Ratio 102.8% 104.3% 105.0% 103.5% 99.1% 96.9% 101.7%
SAP Combined Ratio 100.9% 99.3% 101.5% 101.2% 98.8% 93.7% 102.8%
Industry SAP Combined Ratio (d) N/A 106.7% 105.9% 106.4% 108.4% 106.9% 115.7%
Premium to Surplus Ratio (e) N/A N/A 1.6x 1.8x 1.9x 1.6x 2.0x
- -------------------
<FN>
(a) Data includes acquired companies from date of acquisition.
(b) Includes interest on customer banking deposits.
(c) 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. The Combined Ratio does not reflect the effect of
investment income. For 1996 and 1995, a change in the statutory
accounting treatment for retrospectively rated reinsurance
agreements was the principal reason for the difference between the
GAAP Combined Ratios and the SAP Combined Ratios. Additionally in
1996, the difference relates to the accounting for certain expenses
which are treated differently under SAP and GAAP. For 1993, the
difference reflects the different treatment of certain costs for
GAAP and SAP purposes. 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 GAAP purposes.
(d) Source: Best's Aggregates & Averages, Property/Casualty, 1996 Edition
with respect to annual information for 1992 through 1995, and Best
Week P/C Supplement, March 24, 1997 Release 1, with respect to annual
and interim information for 1996. 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.
(e) 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>
25
<PAGE>
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended
March 31, 1997 and 1996, and the
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Three Months Year Ended
Ended March 31, December 31,
1997 1996 1996
---------- ---------- --------
(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C>
Revenues:
Insurance revenues and commissions $203,135 $212,188 $ 827,758
Manufacturing 35,951 38,377 148,284
Finance 10,609 13,311 49,150
Investment and other income 69,702 59,374 249,815
Net securities gains 2,172 7,061 34,953
Equity in losses of associated companies (11,011) (378) (33,631)
-------- -------- ----------
310,558 329,933 1,276,329
-------- -------- ----------
Expenses:
Provision for insurance losses and
policy benefits 175,412 181,651 723,485
Amortization of deferred policy acquisition costs 21,484 25,567 89,839
Manufacturing cost of goods sold 25,002 28,364 107,667
Interest 12,958 13,879 53,931
Salaries 19,353 19,953 77,089
Selling, general and other expenses 44,062 50,000 194,135
-------- -------- ----------
298,271 319,414 1,246,146
-------- -------- ----------
Income from continuing operations before
income taxes, minority expense of trust
preferred securities and extraordinary loss 12,287 10,519 30,183
-------- -------- ----------
Income taxes:
Current 1,715 1,367 5,904
Deferred 3,064 1,768 105
-------- -------- ----------
4,779 3,135 6,009
-------- -------- ----------
Income from continuing operations before
minority expense of trust preferred securities
and extraordinary loss 7,508 7,384 24,174
Minority expense of trust preferred securities,
net of taxes 1,757 - -
-------- -------- ----------
Income from continuing operations before
extraordinary loss 5,751 7,384 24,174
Income from discontinued operations, net of taxes 6,969 8,217 31,341
-------- -------- ----------
Income before extraordinary loss 12,720 15,601 55,515
Extraordinary loss from early extinguishment of debt,
net of income tax benefit of $3,682 - - (6,838)
-------- -------- ----------
Net income $ 12,720 $ 15,601 $ 48,677
======== ======== ==========
Earnings (loss) per common and dilutive common
equivalent share:
Income from continuing operations $.09 $.12 $ .40
Income from discontinued operations .12 .14 .51
Extraordinary loss - - (.11)
---- ---- -----
Net income $.21 $.26 $ .80
==== ==== =====
Fully diluted earnings (loss) per common share:
Income from continuing operations $.09 $.12 $ .40
Income from discontinued operations .12 .14 .51
Extraordinary loss - - (.11)
---- ---- -----
Net income $.21 $.26 $ .80
==== ==== =====
</TABLE>
26
<PAGE>
LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996
(Dollars in thousands, except par value)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Investments:
Available for sale (aggregate cost of $2,055,596 and $1,926,201) $2,030,675 $1,928,938
Trading securities (aggregate cost of $27,889 and $32,317) 27,507 31,030
Held to maturity (aggregate fair value of $64,570 and $68,198) 65,001 68,202
Policyholder loans 5,127 4,955
Other investments, including accrued interest income 51,987 68,059
---------- ----------
Total investments 2,180,297 2,101,184
Cash and cash equivalents 331,225 299,472
Reinsurance receivables, net 252,721 246,946
Trade, notes and other receivables, net 476,840 456,088
Prepaids and other assets 223,088 222,141
Property, equipment and leasehold improvements, net 88,479 89,640
Deferred policy acquisition costs 43,213 41,654
Deferred income taxes 86,939 81,102
Separate and variable accounts 445,627 436,992
Investments in associated companies 224,529 206,384
Net assets of discontinued operations 143,316 149,758
---------- ----------
Total $4,496,274 $4,331,361
========== ==========
Liabilities:
Customer banking deposits $ 206,299 $ 209,261
Trade payables and expense accruals 170,782 187,561
Other liabilities 135,925 120,753
Income taxes payable 43,789 42,240
Policy reserves 1,258,232 1,253,445
Unearned premiums 446,859 431,323
Separate and variable accounts 445,017 435,937
Debt, including current maturities 523,703 523,366
---------- ----------
Total liabilities 3,230,606 3,203,886
---------- ----------
Minority interest 9,292 9,368
---------- ----------
Company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely Company securities 150,000 -
---------- ----------
Shareholders' Equity:
Common shares, par value $1 per share, authorized 150,000,000 shares;
60,460,018 and 60,417,579 shares issued and outstanding, after
deducting 54,355,052 and 54,353,691 shares held in treasury 60,460 60,418
Additional paid-in capital 161,402 161,026
Net unrealized gain (loss) on investments (23,110) 1,759
Retained earnings 907,624 894,904
---------- ----------
Total shareholders' equity 1,106,376 1,118,107
---------- ----------
Total $4,496,274 $4,331,361
========== ==========
</TABLE>
27
<PAGE>
PRO FORMA EFFECT OF CONSECO
TRANSACTION
As a result of the Conseco Transaction, the life and health
insurance businesses have been reflected as discontinued operations in the
foregoing financial information as of March 31, 1997 and December 31, 1996 and
for the three months ended March 31, 1997 and 1996 and the year ended December
31, 1996. Had the Conseco Transaction been effective at March 31, 1997, the
unaudited consolidated balance sheet at that date would have reflected: (i)
gross proceeds of $460,000,000, consisting of $400,000,000 in notes secured by
non-cancellable letters of credit and $60,000,000 in cash, (ii) the disposition
of the net assets of the discontinued operations and (iii) increased retained
earnings of $250,000,000 representing the estimated after-tax gain on the
transaction, which is subject to adjustment for actual expenses of and taxes
provided for the transaction.
CAPITALIZATION
The following table sets forth the unaudited March 31, 1997
consolidated capitalization of the Company and its subsidiaries. This table
should be read in conjunction with the Company's consolidated financial
statements and the notes thereto incorporated by reference herein. See
"Incorporation of Certain Documents by Reference." (Dollars are in thousands)
Long-term debt (a):
Revolving bank credit agreement
borrowings................................. $ 50,000
7 3/4% Senior Notes due 2013, less
debt discount of $819....................... 99,181
Industrial revenue bonds...................... 4,900
Other senior debt............................. 13,326
7 7/8% Senior Subordinated Notes
due 2006, less debt discount of $661........ 134,339
8 1/4% Senior Subordinated Notes due 2005..... 100,000
10 3/8% Senior Subordinated Notes due 2002,
less debt discount of $87................... 21,957
5 1/4% Convertible Subordinated
Debentures due 2003(b)...................... 100,000
----------
Total long-term debt, including
current maturities........................ 523,703
----------
Company-Obligated Mandatorily
Redeemable Preferred Securities of
Subsidiary Trust Holding Solely
Company Securities(c)(d)...................... 150,000
----------
Shareholders' Equity (e):
Common shares, par value $1 per share, authorized
150,000,000 shares; 60,460,018 shares issued and
outstanding, after deducting shares held in
treasury.................................... 60,460
Additional paid-in capital.................. 161,402
Net unrealized (loss) on
investments................................ (23,110)
Retained earnings........................... 907,624
----------
Total shareholders' equity................ 1,106,376
----------
Total................................... $1,780,079
==========
Footnotes on following page
28
<PAGE>
Footnotes from previous page
(a) Excludes Deposits of approximately $206,299,000. For information with
respect to interest rates, maturities, priorities and restrictions
related to outstanding long-term debt, see Note 10 of Notes to
Consolidated Financial Statements contained in the Annual Report.
(b) On March 12, 1997, the Company called for redemption on April 11, 1997
all of its outstanding $100,000,000 5-1/4% Debentures, at a redemption
price of 102.625% of the principal amount of the Debentures, plus
accrued interest through April 11, 1997. The redemption date, but not
the interest accrual period, was subsequently extended through June 12,
1997. The Capitalization table is not adjusted to reflect such
redemption.
(c) The sole asset of the Trust consists of approximately $154,640,000 in
aggregate principal amount of the 8.65% Junior Subordinated Deferrable
Interest Debentures due 2027 of Leucadia National Corporation with an
interest rate of 8.65% and a maturity date of January 15, 2027.
(d) The Trust is wholly-owned, and considered together, the "back-up
undertakings" constitute a full and unconditional guarantee by the
Company of the Trust's obligations under the Capital Securities.
(e) For information with respect to stock options and contingent
obligations, see Notes 11 and 16 of Notes to Consolidated Financial
Statements contained in the Annual Report.
29
<PAGE>
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the
Company's consolidated financial statements, with the Capital Securities shown
as "Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Leucadia National Corporation Securities." In a footnote to
the Company's audited financial statements there will be included a statement
that the Trust is wholly-owned, the sole asset of the Trust is the Subordinated
Debt Securities (indicating the principal amount, interest rate and maturity
date thereof) and that, considered together, the "back-up undertakings"
constitute a full and unconditional guarantee by the Company of the Trust's
obligation under the Capital Securities. See "Capitalization."
USE OF PROCEEDS
Neither the Company nor the Trust will receive any cash proceeds
from the issuance of the New Capital Securities offered hereby. In consideration
for issuing the New Capital Securities in exchange for 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 cancelled.
All of the proceeds from the sale of the Old Capital Securities
and the Common Securities were invested by the Trust in Subordinated Debt
Securities of the Company issued pursuant to the Indenture. The Company applied
the net proceeds from the sale of the Old Subordinated Debt Securities
(approximately $148 million) to its general funds to be used for general
corporate purposes, which may include, from time to time, the redemption or the
purchase, in the open market or in privately negotiated transactions or
otherwise, of outstanding indebtedness of the Company, or for working capital,
acquisitions or investment opportunities. Although the Company from time to time
evaluates potential acquisitions and investment opportunities, it currently has
no understandings, commitments or agreements with respect thereto. Pending such
application, the net proceeds have been invested in domestic and foreign,
short/intermediate-term obligations which are primarily investment grade.
THE TRUST
The Trust is a statutory business trust created under Delaware
law pursuant to (i) the Initial Declaration (as such Initial Declaration has
been amended and restated, the "Declaration") and (ii) the filing of a
certificate of trust for the Trust with the Delaware Secretary of State on
January 10, 1997. The Trust"s business and affairs are conducted by its
trustees, each appointed by the Company as the holder of the Common Securities.
At least one trustee of the Trust is required to be an entity that maintains its
principal place of business in the State of Delaware (the "Delaware Trustee")
and at least one trustee is required to be a financial institution that is
unaffiliated with the Company and is eligible to act as property trustee and as
indenture trustee pursuant to the terms set forth therein (the "Institutional
Trustee" and together with the Delaware Trustee, the "Trustees").
The Chase Manhattan Bank initially is serving as Institutional
Trustee and Chase Manhattan Bank Delaware initially is serving as Delaware
Trustee. In addition, three individuals who are employees or officers of or
affiliated with the holder of the majority of the Common Securities are acting
as administrators with respect to the Trust (the "Administrators"). The
Administrators have been selected by the holders of a majority of the Common
Securities. See "Description of the Capital Securities -- Miscellaneous." The
Trust exists for the exclusive purposes of (i) issuing the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of such Trust Securities in the Subordinated Debt
Securities, and (iii) engaging in only those other activities necessary or
incidental thereto, including engaging in the Exchange Offer. All of the Common
Securities of
30
<PAGE>
the Trust are directly owned by the Company. The Common Securities of the Trust
rank pari passu, and payments are made thereon pro rata, with the Capital
Securities of the Trust except that upon the occurrence and continuation of a
Declaration Event of Default, the rights of the holders of the Common Securities
to payment from the Trust in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of the
holders of the Capital Securities. The Company has acquired Common Securities in
an aggregate liquidation amount equal to approximately 3% of the total capital
of the Trust. The Trust has a term of approximately 55 years, but may earlier
dissolve as provided in the Declaration. The Company, as the holder of all of
the outstanding Common Securities, has the right at any time to dissolve the
Trust (including, without limitation, upon the occurrence of a Tax Event) and,
after satisfaction of liabilities to creditors of the Trust, cause the
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities on a pro rata basis in accordance with the respective liquidation
amounts thereof, in liquidation of the Trust.
The Institutional Trustee holds title to the Subordinated Debt
Securities for the benefit of the holders of the Trust Securities and has the
power to exercise all rights, powers and privileges under the Indenture as the
holder of the Subordinated Debt Securities. In addition, the Institutional
Trustee maintains exclusive control of a separate, segregated, non-interest
bearing trust account (the "Property Account") to hold all payments made in
respect of the Subordinated Debt Securities for the benefit of the holders of
the Trust Securities issued by the Trust. The Institutional Trustee will make
payments of distributions and payments on liquidation, redemption and otherwise
to the holders of record of the Trust Securities out of funds from the Property
Account. Holders of Capital Securities are not and will not be entitled to
appoint, remove or replace the Institutional Trustee or the Delaware Trustee
except upon the occurrence of certain events described herein. See "Description
of the Capital Securities -- Voting Rights" and "-- Removal of Trustees;
Appointment of Successors." The Company, as borrower under the Indenture, has
covenanted to pay all costs, expenses, debts and other obligations related to
the Trust (other than in respect of the Trust Securities) and the offering and
sale of the Trust Securities. See "Description of the Subordinated Debt
Securities -- Miscellaneous." The rights of the holders of the Capital
Securities of the Trust, including economic rights, rights to information and
voting rights, are set forth in the Declaration with respect to the Trust, the
Delaware Business Trust Act, as amended (the "Trust Act"), and the Trust
Indenture Act. See "Description of the Capital Securities."
31
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF 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
and to use their reasonable best efforts to cause to be declared effective by
the Commission a registration statement with respect to the exchange of the Old
Capital Securities for capital securities with terms identical in all material
respects to the terms of the Old Capital Securities (except as described below).
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 and terms of the Old Capital Securities, except that the New Capital
Securities (i) have been registered under the Securities Act and therefore will
not be subject to certain restrictions on transfer applicable to the Old Capital
Securities and (ii) will not provide for any increase in the distribution rate
thereon. In that regard, the Old Capital Securities provide, among other things,
that, if the Exchange Offer is not consummated by August 19, 1997 (subject to
extension in certain circumstances), the distribution rate borne by the Old
Capital Securities 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. If the Exchange Offer is not consummated for
any reason, including the failure to receive valid consents to the Proposed
Amendment from holders of a majority in liquidation amount of the Old Capital
Securities, the Company and the Trust, pursuant to the Registration Rights
Agreement, will, as promptly as practicable after termination of the Exchange
Offer, file with the Commission the Shelf Registration Statement covering
resales of the Old Capital Securities by the holders thereof from time to time
in accordance with the methods of distribution elected by such holders and set
forth in such Shelf Registration Statement, and use their best efforts to cause
the Shelf Registration Statement to be declared effective under the Securities
Act by August 19, 1997, the 210th day (or, if the Exchange Offer is terminated
after the 210th day after the initial issuance of the Old Capital Securities, by
September 18, 1997, the 240th day) after January 21, 1997, the date of the
initial issuance of the Old Capital Securities. See "Risk Factors --
Consequences of a Failure to Exchange Old Capital Securities" and "Description
of the Capital Securities."
The Exchange Offer is not being made to, nor will the Trust or
the Company accept tenders for exchange from, holders of Old Capital Securities
in any jurisdiction in which the Exchange Offer or the acceptance thereof would
not be in compliance with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with
respect to the Exchange Offer means any person in whose name the Old Capital
Securities are registered on the books of the Trust or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Old Capital Securities are held of record by The Depository Trust
Company ("DTC") who desires to deliver such Old Capital Securities by book entry
transfer at DTC.
Pursuant to the Exchange Offer, the Company will exchange as soon
as practicable after the date hereof, the Old Guarantee for the New Guarantee
and all of the Old Subordinated Debt Securities, of which $154,640,000 aggregate
principal amount is outstanding, for a like aggregate principal amount of the
New
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Subordinated Debt Securities. The New Guarantee has been registered, and New
Subordinated Debt Securities have been registered to the extent required to be
registered, under the Securities Act.
TERMS OF EXCHANGE
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 $150,000,000 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 $150,000,000 of New Capital Securities in exchange for a like aggregate
liquidation amount of outstanding Old Capital Securities tendered and accepted
in connection with the Exchange Offer. Holders may tender their Old Capital
Securities in whole or in part in a liquidation amount of not less than $100,000
or any integral multiple of $1,000 in excess thereof provided that if any Old
Capital Securities are tendered in exchange for part, the untendered liquidation
amount must be $100,000 or any integral multiple of $l,000 in excess thereof.
The Exchange Offer is not conditioned upon any minimum
liquidation amount of Old Capital Securities being tendered. As of the date of
this Prospectus, $150,000,000 aggregate liquidation amount of the Old Capital
Securities is outstanding.
Holders of Old Capital Securities do not have any appraisal or
dissenters' rights in connection with the Exchange Offer. Old Capital Securities
which are not tendered for or are tendered but not accepted in connection with
the Exchange Offer will remain outstanding and be entitled to the benefits of
the 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 the Capital Securities."
If any tendered Old Capital Securities are not accepted for
exchange because of an invalid tender, the occurrence of certain other events
set forth herein or otherwise, certificates for any such unaccepted Old Capital
Securities will be returned, without expense, to the tendering holder thereof
promptly after the Expiration Date.
Holders who tender Old Capital Securities in connection with the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of Old Capital Securities in connection with the
Exchange Offer. The Company will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the Exchange Offer.
See "-- Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR ANY
ADMINISTRATOR OR ANY 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 AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
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CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time,
on June 23, 1997, unless the Exchange Offer and Consent Solicitation are
extended by the Company and the Trust (in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer and Consent
Solicitation are extended).
The Company and the Trust expressly reserve the right in their
sole 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 Company and the Trust determine,
in their sole 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) in their reasonable discretion, to waive any condition (except with respect
to the Proposed Amendment) 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 an amended or
supplemented Prospectus that will be distributed to the registered holders of
the Old Capital Securities and by means of a post-effective amendment to the
Registration Statement which will be filed with the Commission, and the Company
and the Trust will extend the Exchange Offer, to the extent required by Rule
14e-l under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment
will be followed promptly by oral or written notice thereof to the Exchange
Agent and by making a public announcement thereof, and such announcement in the
case of an extension will be made no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Without
limiting the manner in which the 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
(pursuant to the withdrawal rights described under "-- Withdrawal Rights")
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, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal, (ii) the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any
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required signature guarantees or (in the case of a book-entry transfer) an
Agent's Message in lieu of the Letter of Transmittal and (iii) any other
documents required by the Letter of Transmittal.
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 a book-entry
confirmation, which states that DTC has received an express acknowledgement from
the tendering Participant (as defined herein), which acknowledgement 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
Company and the Trust will be deemed to have accepted for exchange, and thereby
exchanged, Old Capital Securities validly tendered and not withdrawn as, if and
when the Trust gives oral or written notice to the Exchange Agent of the
Company's and 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
Company and 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 Company's and the Trust's acceptance for
exchange of Old Capital Securities) or the Company and the Trust extend the
Exchange Offer or are unable to accept for exchange or exchange Old Capital
Securities tendered pursuant to the Exchange Offer, then, without prejudice to
the Company's and the Trust's rights set forth herein, the Exchange Agent may,
nevertheless, on behalf of the Company and 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 Company, 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 tender) an
Agent's Message in lieu of the Letter of Transmittal and any other required
documents, must be received by the Exchange Agent at its address set forth under
"--Exchange Agent," on or prior to the Expiration Date and (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
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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 unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE
TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book Entry Transfer. The Exchange Agent will establish an account
with respect to the Old Capital Securities at DTC for purposes of the Exchange
Offer 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 a 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 procedure set forth below must
be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Capital Securities
need not be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (i) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (ii) such registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (i) or (ii) 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 l7Ad-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 before the Expiration Date,
or the procedures for book-entry
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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:
(i) such tenders are made by or through an Eligible Institution;
(ii) 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 Expiration Date; and
(iii) 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 documents required
by the Letter of Transmittal are received by the Exchange Agent within
three New York Stock Exchange trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or
transmitted by facsimile or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of 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 an 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 or an Agent's Message in lieu thereof with
respect to Old Capital Securities and other required documents are received by
the Exchange Agent.
The Company and the Trust's acceptance for exchange of Old
Capital Securities tendered pursuant to any of the procedures described above
will constitute a binding agreement among the tendering holder, the Company 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 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 view of counsel to the Company or 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
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 Company's and the Trust's interpretation 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
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Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of
attorney, or any other document required by the Letter of Transmittal is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the 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
Based on existing interpretations by the staff of the Commission
set forth in several no-action letters to third parties, and subject to the
immediately following sentence, the Company and the Trust believe that New
Securities issued pursuant to the Exchange Offer in exchange for Old Securities
may be offered for resale, resold and otherwise transferred by a holder thereof
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New 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 Securities. However, any holder of Old Capital Securities who is an
"affiliate" of either the Company or the Trust, a broker-dealer that acquires
the Old Capital Securities in a transaction other than a part of its
market-making or other trading activities or other holder who intends to
participate in the Exchange Offer for the purpose of distributing New Capital
Securities (i) will not be able to rely on the interpretations by the staff of
the Commission set forth in the above-mentioned interpretive letters, (ii) will
not be able to tender such Old Capital Securities in the Exchange Offer, and
(iii) 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. Any broker-dealer who holds Old Securities acquired for its own
account as a result of market-making activities or other trading activities, and
who receives New Securities in exchange for such Old Securities pursuant to the
Exchange Offer may be a statutory underwriter and must deliver a prospectus
meeting the requirements of the Securities Act, which may be the prospectus
prepared for the Exchange Offer so long as it contains a plan of distribution
with respect to such resale transactions, in connection with any resales of such
New Securities. Neither the Company nor the Trust sought its own no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer as it has in such
no-action letters to third parties.
Each holder of Old Capital Securities (other than a
broker-dealer) 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
and (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. The Letter of Transmittal contains the foregoing representations. 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
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under the Exchange Act) on behalf of whom such holder holds the Old Capital
Securities to be exchanged in the Exchange Offer. Each Exchanging Dealer will be
deemed to have acknowledged by execution of the Letter of Transmittal or
delivery of an Agent's Message 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, an Exchanging 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 Commission in the no-action letters
referred to above, the Company and the Trust believe that Exchanging 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. Subject to certain provisions set
forth in the Registration Rights Agreement and to the limitations set out
herein, 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 an Exchanging Dealer
in connection with resales of such New Capital Securities for a period ending
one year after the Expiration Date (or longer, if required by the Registration
Rights Agreement). See "Plan of Distribution." Any person, including any
Exchanging Dealer, who is an "affiliate" of the Company or the Trust may not
rely on such no-action 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 Exchanging 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 Exchanging Dealer will suspend the sale of New Securities
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 Exchanging
Dealer or the Company or the Trust has given notice that the sale of the New
Securities 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 its address set forth under "--
Exchange Agent" on or prior to the Expiration Date. Any such notice of
withdrawal must specify the name of the person who tendered the Old Capital
Securities to be withdrawn, the aggregate liquidation amount of Old Capital
Securities to be withdrawn, and (if certificates for such Old Capital Securities
have been tendered) the name of the registered holder of the Old Capital
Securities as set forth on the Old Capital Securities, if different from that of
the person who tendered such Old Capital Securities. If Old Capital Securities
have been delivered or otherwise identified to the Exchange Agent, then prior to
the physical release of such Old Capital Securities, the tendering holder must
submit
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the certificate numbers shown on the particular Old Capital Securities to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Old Capital Securities tendered for
the account of an Eligible Institution. If Old Capital Securities have been
tendered pursuant to the procedures for book-entry transfer set forth in "--
Procedures for Tendering Old Capital Securities," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Capital Securities, in which case a notice of withdrawal will
be effective if delivered to the Exchange Agent by written, telegraphic, telex
or facsimile transmission. Withdrawals of tenders of Old Capital Securities may
not be rescinded. Old Capital Securities properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be 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 accumulated distributions on such Old
Capital Securities for any period from and after the last Distribution Payment
Date with respect to such Old Capital Securities prior to the original issue
date of the New Capital Securities or, if no such distributions have been made,
will not receive any accumulated distributions on such Old Capital Securities,
and will be deemed to have waived the right to receive any distributions on such
Old Capital Securities accumulated from and after such Distribution Payment Date
or, if no such distributions have been made, from and after January 21, 1997.
CONDITIONS TO 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
permitted to accept for exchange, or to exchange, any Old Capital Securities for
any New Capital Securities, and may terminate the Exchange Offer (whether or not
any Old Capital Securities have theretofore been accepted for exchange) if the
registered holders of less than a majority in liquidation amount of the Old
Capital Securities consent to the Proposed Amendment. This condition shall not
be waived.
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
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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;
(b) any action or proceeding shall have been instituted or
threatened in any court or by or before any governmental agency or body
with respect to the Exchange Offer which, in the Company's and the
Trust's judgment, would reasonably be expected to impair the ability of
the Trust or the Company to proceed with the Exchange Offer;
(c) any law, statute, rule or regulation shall have been adopted
or enacted which, in the Company's and the Trust's judgment, would
reasonably be expected to impair the ability of the Trust or the Company
to proceed with the Exchange Offer;
(d) a banking moratorium shall have been declared by United
States federal or New York State authorities which, in the Company's and
the Trust's judgment, would reasonably be expected to impair the ability
of the Trust or the Company to proceed with the Exchange Offer;
(e) trading on the New York Stock Exchange or generally in the
United States over-the-counter market shall have been suspended by order
of the Commission or any other governmental authority which, in the
Company's and the Trust's judgment, would reasonably be expected to
impair the ability of the Trust or the Company to proceed with the
Exchange Offer;
(f) 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 that any governmental approval has not been obtained, which approval
the Company and the Trust shall deem necessary for the consummation of
the Exchange Offer as contemplated hereby; or
(g) any change, or any development involving a prospective
change, in the business or financial affairs of the Trust or the Company
or any of its subsidiaries has occurred which might materially impair
the ability of the Trust or the Company to proceed with the Exchange
Offer.
If the Company and the Trust determine in the reasonable exercise
of their discretion that any of the foregoing events or conditions listed above
in subparagraphs (a) through (g) hereof has occurred or exists or has not been
satisfied, the Company and the Trust may, subject to applicable law, terminate
the Exchange Offer (whether or not any Old Capital Securities have theretofore
been accepted for exchange) or may waive any such condition or otherwise amend
the terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Company and the Trust
will promptly disclose such waiver by means of an amended or supplemented
Prospectus that will be distributed to the registered holders of the Old Capital
Securities and by means of a post-effective amendment to the Registration
Statement which will be filed with the Commission, and the Company and the Trust
will extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
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Unless valid consents of holders of a majority in liquidation
amount of the Old Capital Securities are received and not revoked, the Company
and the Trust will not accept and exchange the Old Capital Securities pursuant
to the Exchange Offer. In such event, the Company and the Trust, pursuant to the
Registration Rights Agreement, will, as promptly as practicable after
termination of the Exchange Offer, file with the Commission the Shelf
Registration Statement covering resales of the Old Capital Securities by the
holders thereof from time to time in accordance with the methods of distribution
elected by such holders and set forth in such Shelf Registration Statement, and
use their best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act by August 19, 1997, the 210th day (or, if the
Exchange Offer is terminated after the 210th day after initial issuance of the
Old Capital Securities, by September 18, 1997, the 240th day) after January 21,
1997, the date of the initial issuance of the Old Capital Securities.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for
the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
The Chase Manhattan Bank
55 Water Street, Room 234
New York, New York 10001
Attention: Lewis Padilla
Telephone: (212) 638-7375 or (212) 344-9367
Facsimile: (212) 638-0458
Delivery to other than the above address or facsimile number 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 others soliciting acceptances of the Exchange Offer.
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THE CONSENT SOLICITATION
Concurrently with the Exchange Offer, the Company and the Trust
are soliciting consents from holders of the Old Capital Securities to approve
the Proposed Amendment. If the Proposed Amendment is approved and the Exchange
Offer is consummated, all shares of Old Capital Securities not exchanged in the
Exchange Offer and remaining outstanding thereafter will be subject to the
Proposed Amendment.
THE PROPOSED AMENDMENTS
The Proposed Amendment to the Registration Rights Agreement will
delete the requirement that the Company use its reasonable best efforts to cause
the New Capital Securities to be duly authorized for listing on the New York
Stock Exchange and thereafter maintain such listing.
PURPOSE AND EFFECT OF THE CONSENT SOLICITATION
The purpose of the Proposed Amendment is to enable the Trust and
the Company to consummate the Exchange Offer. Based on interpretations by the
staff of the Commission, as set forth in a no-action letter to a third party
issued after the date of the Registration Rights Agreement, the Trust and the
Company will be prohibited from consummating the Exchange Offer unless the
Proposed Amendment is effectuated.
Unless valid consents of holders of a majority in liquidation
amount of the Old Capital Securities are received and not revoked, the Company
and the Trust will not accept and exchange the Old Capital Securities pursuant
to the Exchange Offer. In such event, all of the Old Capital Securities will
remain outstanding and continue to bear a legend reflecting the restrictions on
transfer discussed above. The Registration Rights Agreement provides in such
event that the Company and the Trust will, as promptly as practicable after
termination of the Exchange Offer, file with the Commission the Shelf
Registration Statement covering resales of the Old Capital Securities by the
holders thereof from time to time in accordance with the methods of distribution
elected by such holders and set forth in such Shelf Registration Statement, and
use their best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act by the 210th day (or, if the Exchange Offer
is terminated after the 210th day after the initial issuance of the Old Capital
Securities, by the 240th day) after the initial issuance of the Old Capital
Securities.
CONSENTS REQUIRED TO ADOPT THE PROPOSED AMENDMENTS
Pursuant to Section 7(b) of the Registration Rights Agreement,
the Proposed Amendment requires the consent of the registered holders of a
majority in liquidation amount of the outstanding Capital Securities.
PROCEDURE FOR CONSENTING TO THE PROPOSED AMENDMENT
A tender of Old Capital Securities for exchange pursuant to the
Exchange Offer also will constitute a consent to the Proposed Amendment with
respect to such tendered Old Capital Securities. See "The Exchange Offer --
Procedures for Tendering Old Capital Securities."
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REVOCATION OF CONSENTS
Consents to the Proposed Amendment may be revoked at any time
prior to the Consent Date. A holder of Old Capital Securities shall be deemed to
have revoked his consent to the Proposed Amendments if, and only if, such holder
effectively withdraws his tender of Old Capital Securities prior to the Consent
Date in accordance with the instructions set forth under "The Exchange Offer --
Withdrawal Rights."
DESCRIPTION OF THE CAPITAL SECURITIES
The Old Capital Securities have been issued and the New Capital
Securities will be issued pursuant to the terms of the Declaration. The
Institutional Trustee, The Chase Manhattan Bank, is acting as trustee for the
Capital Securities under the Declaration. The Declaration has been qualified
under the Trust Indenture Act. The following summary of the material terms and
provisions of the Capital Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to the Declaration (a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part), the Trust Act and the Trust Indenture Act.
GENERAL
The Declaration authorizes the Administrators to issue, on behalf
of the Trust, the Trust Securities, which represent undivided beneficial
interests in the assets of the Trust. All of the Common Securities are owned by
the Company. The Common Securities have equivalent terms to and rank pari passu,
and payments will be made thereon on a pro rata basis, with the Capital
Securities, except that upon the occurrence and during the continuance of a
Declaration Event of Default, the rights of the holders of the Common Securities
to receive payment of periodic distributions and payments upon liquidation,
redemption and otherwise will be subordinated to the rights of the holders of
the Capital Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Institutional
Trustee holds legal title to the Subordinated Debt Securities for the benefit of
the holders of the Trust Securities. The payment of distributions out of money
held by the Trust, and payments upon redemption of the Capital Securities upon
liquidation of the Trust, are guaranteed by the Company as described under
"Description of the Guarantee." The Guarantee is held by The Chase Manhattan
Bank, the Guarantee Trustee, for the benefit of the holders of the Capital
Securities. The Guarantee does not cover payment of distributions in respect of
the Capital Securities to the extent the Trust does not have available funds to
pay distributions. In such event, the remedy of holders of the Capital
Securities would be, through the vote of holders of a majority in liquidation
amount of the Capital Securities, to direct the Institutional Trustee to enforce
the Institutional Trustee's rights under the Subordinated Debt Securities except
in the circumstances in which a holder of such Capital Securities may take
Direct Action. See "-- Voting Rights" and "-- Declaration Events of Default."
The Capital Securities have been rated investment grade by a nationally
recognized statistical rating organization. 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.
DISTRIBUTIONS
Distributions on the Capital Securities are fixed at a rate per
annum of 8.65% of the stated liquidation amount of $1,000 per Capital Security,
compounded semiannually (to the extent permitted by law). The term
"distribution" as used herein includes cash distributions and any such
compounded distributions payable unless
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otherwise stated. The amount of distributions payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed per 30-day month.
Distributions on the Capital Securities are cumulative from
January 21, 1997, the date of original issuance of the Old Capital Securities,
and will be payable (subject to extensions of distribution payment periods as
described herein) semiannually in arrears on January 15 and July 15 of each year
(each, a "Distribution Payment Date"), commencing July 15, 1997, when, as and if
available for payment. Distributions will be made by the Institutional Trustee,
except as otherwise described below.
The Company has the right under the Indenture to defer payments
of interest on the Subordinated Debt Securities by extending the interest
payment period at any time and from time to time, subject to the conditions
described below, although such interest will continue to accrue on the
Subordinated Debt Securities at a rate of 8.65% per annum, compounded
semiannually (to the extent permitted by law) during any Extension Period. If
such right is exercised, semiannual distributions on the Capital Securities will
also be deferred (though such distributions will continue to accrue at the
distribution rate of 8.65% per annum compounded semiannually (to the extent
permitted by law)), during any Extension Period. Such right to extend any
interest payment period for the Subordinated Debt Securities is limited to
Extension Periods, each not exceeding 10 consecutive semiannual periods, and no
Extension Period may be initiated while accrued interest from a prior, completed
Extension Period is unpaid or while the Company is in default on the payment of
interest that has become due and payable on the Subordinated Debt Securities,
and no Extension Period may extend beyond the maturity of the Subordinated Debt
Securities. In the event that the Company exercises this right, then during any
Extension Period (a) the Company shall not declare or pay dividends on, make a
distribution with respect to, or redeem, purchase or acquire, or make a
liquidation payment with respect to, any of its capital stock or rights to
acquire such capital stock (other than (i) purchases or acquisitions of shares
of any such capital stock or rights to acquire such capital stock in connection
with the satisfaction by the Company of its obligations under any employee
benefit plans or any other contractual obligations of the Company (other than a
contractual obligation ranking pari passu with or junior to the Subordinated
Debt Securities), (ii) as a result of a reclassification of the Company's
capital stock or rights to acquire such capital stock or the exchange or
conversion of one class or series of the Company's capital stock or rights to
acquire such capital stock for another class or series of the Company's capital
stock or rights to acquire such capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (iv) dividends and distributions made on the Company's capital stock
or rights to acquire such capital stock with the Company's capital stock or
rights to acquire the capital stock, or (v) any declaration of a dividend in
connection with the implementation of a shareholder 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), or make any guarantee payments with respect
to any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior to the Subordinated
Debt Securities (other than payments under the Guarantee and the Common
Securities Guarantee) and (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to the
Subordinated Debt Securities. Prior to the termination of any such Extension
Period in respect of the Subordinated Debt Securities, the Company may further
extend the interest payment period; provided that each such Extension Period in
respect of the Subordinated Debt Securities, together with all such previous and
further extensions thereof, may not exceed 10 consecutive semiannual periods or
extend beyond the maturity of the Subordinated Debt Securities. Upon the
termination of any Extension Period in respect of the Subordinated Debt
Securities and the payment of all amounts then due, the Company may commence a
new Extension Period, subject to the above requirements. See "Description of the
Subordinated Debt Securities -- Interest," "-- Option to Extend Interest Payment
Period" and "-- Certain Covenants." If distributions are deferred,
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the distributions due on such Capital Securities shall be paid on the date that
the related Extension Period terminates, or, if such date is not a Distribution
Payment Date, on the immediately following Distribution Payment Date, to holders
of applicable Capital Securities as they appear on the books and records of the
Trust on the record date immediately preceding such date.
Distributions on the Capital Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account. The Trust's funds available for distribution to the holders of the
Capital Securities will be limited to payments received from the Company on the
Subordinated Debt Securities. See "Description of the Subordinated Debt
Securities." The payment of distributions out of moneys held by the Trust is
guaranteed by the Company to the extent set forth under "Description of the
Guarantee."
Distributions on the Capital Securities will be payable to the
holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which, as long as the Capital Securities are held solely
in book-entry only form, will be one Business Day (as defined below) prior to
the relevant payment dates. Such distributions will be paid through the
Institutional Trustee who will hold amounts received in respect of the
Subordinated Debt Securities in the Property Account for the benefit of the
holders of the Trust Securities. Subject to any applicable laws and regulations
and the provisions of the Declaration, each such payment will be made as
described under "-- Book-Entry Only Issuance -- The Depository Trust Company."
At any time when the Capital Securities are not held solely in book-entry only
form, the Administrators shall select record dates, which shall be 15 days prior
to the relevant payment date. In the event that any date on which distributions
are to be made on the Capital Securities is not a Business Day, then payment of
the distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect of
any such delay) with the same force and effect as if made on such payment date.
A "Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York City (in the State of New York) are
permitted or required by any applicable law to close.
REDEMPTION
The Subordinated Debt Securities will mature on January 15, 2027
and may be redeemed by the Company at par, together with accrued and unpaid
interest thereon to the date of redemption, in whole or in part, at any time in
certain circumstances upon the occurrence of a Tax Event. In addition, the
Subordinated Debt Securities may be redeemed by the Company, in whole or in
part, at anytime and from time to time on or after January 15, 2007, other than
upon the occurrence of a Tax Event, at the call prices (expressed as a
percentage of the principal amount) specified below:
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If redeemed during the
12-month period beginning
January 15, Call Price
----------- ----------
2007....................................... 104.2790%
2008....................................... 103.8511
2009....................................... 103.4232
2010....................................... 102.9953
2011....................................... 102.5674
2012....................................... 102.1395
2013....................................... 101.7116
2014....................................... 101.2837
2015....................................... 100.8558
2016....................................... 100.4279
and thereafter at 100% of the principal amount (each a "Call Price"), together,
in each case, with accrued and unpaid interest thereon to the date of
redemption.
Upon the repayment in full at maturity or redemption in whole or
in part of the Subordinated Debt Securities (other than following the
distribution of the Subordinated Debt Securities to the holders of the Trust
Securities), the proceeds from such repayment or payment shall concurrently be
applied to redeem on a pro rata basis (i) at $1,000 per Trust Security, plus
accrued and unpaid distributions to the date of repayment (in the case of
repayment at maturity) or (ii) at the applicable Redemption Price (in the case
of payment on redemption), Trust Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated Debt
Securities so repaid or redeemed; provided, however, that holders of such Trust
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Subordinated Debt
Securities). See "Description of the Subordinated Debt Securities --
Redemption." In the event that fewer than all of the outstanding Capital
Securities are to be redeemed, Capital Securities held in book-entry form will
be redeemed in accordance with the procedures of DTC as described under " --
Book-Entry Only Issuance -- The Depository Trust Company."
TAX EVENT REDEMPTION
"Tax Event" means the receipt by the Trustees of an opinion of a
nationally recognized independent tax counsel to the Company experienced in such
matters to the effect that, as a result of (a) any amendment to, clarification
of 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, (b) any judicial decision or official
administrative pronouncement, ruling, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (c) any amendment to,
clarification of or change in the administrative position or interpretation of
any Administrative Action or judicial decision that differs from the theretofore
generally accepted position, in each case, by any legislative body, court,
governmental agency or regulatory body, irrespective of the manner in which such
amendment, clarification or change is made known, which amendment, clarification
or change is effective or such Administrative Action or decision is announced,
in each case, on or after the date of this Prospectus, there is more than an
insubstantial risk that (i) the Trust is, or will be within 90 days of the date
thereof, subject to United States federal income tax with respect to interest
accrued or received on the Subordinated Debt Securities or subject to more than
a de minimis amount of other taxes, duties or other governmental charges, (ii)
any portion of interest payable by the Company to the Trust on the Subordinated
Debt Securities is not, or within 90 days of the date thereof will not be,
deductible by the Company for United States federal income tax purposes, or
(iii) the Company could become liable to pay, on the
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next date on which any amount would be payable with respect to the Subordinated
Debt Securities, any Additional Interest (as defined herein).
If, at any time, a Tax Event should occur and be continuing, and
the Company receives an opinion (a "Redemption Tax Opinion") of a nationally
recognized independent tax counsel experienced in such matters that, as a result
of such Tax Event, there is more than an insubstantial risk that the Company
would be precluded from deducting the interest on the Subordinated Debt
Securities for United States federal income tax purposes, even if the
Subordinated Debt Securities were distributed to the holders of Trust Securities
in liquidation of such holders' interests in the Trust as described in "--
Liquidation Distribution Upon Dissolution," the Company shall have the right at
any time, within 90 days following the occurrence of such Tax Event, upon not
less than 30 nor more than 60 days' notice, to redeem the Subordinated Debt
Securities, in whole or in part, for cash so long as such Tax Event is
continuing, at par plus any accrued and unpaid interest thereon to the date of
redemption (the "Tax Event Redemption") and, following such redemption, Trust
Securities with an aggregate liquidation amount equal to the aggregate principal
amount of the Subordinated Debt Securities so redeemed shall be redeemed by the
Trust at the applicable Redemption Price; provided, however, that if at the time
there is available to the Company or the Trust the opportunity to eliminate,
within such 90-day period and before any such notice is given, the adverse
effects of the Tax Event by taking some ministerial action, such as filing a
form or making an election or pursuing some other similar reasonable measure
that will have no adverse effect on the Trust, the Company or the holders of the
Trust Securities, the Company or the Trust will pursue such measure in lieu of
redemption.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding
Capital Securities unless all accrued and unpaid distributions have been paid on
all such Capital Securities for all semiannual distribution periods terminating
on or prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Capital
Securities (which notice will be irrevocable), then on the redemption date,
provided that the Institutional Trustee has a sufficient amount of cash in
connection with the related redemption or maturity of the Subordinated Debt
Securities, the Institutional Trustee will irrevocably deposit with the
Depositary or its nominee funds sufficient to pay the applicable Redemption
Price and will give the Depositary irrevocable instructions and authority to pay
such Redemption Price to the holders of such Capital Securities. See "--
Book-Entry Only Issuance -- The Depository Trust Company." With respect to
Capital Securities that are certificated securities, provided that the Company
has paid to the Institutional Trustee a sufficient amount of cash in connection
with the related redemption or maturity of the Subordinated Debt Securities, the
Institutional Trustee will pay the applicable Redemption Price to the holders of
such Capital Securities by check mailed to the address of each such holder
appearing on the books and records of the Trust on the redemption date. If
notice of redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue on the Capital Securities and all rights of
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. In the event that any date fixed for
redemption of Capital Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next succeeding day
that is a Business Day (without any interest or other payment in respect of any
such delay), except that, if such Business Day falls in the next calendar year,
such payment will be made on the immediately preceding Business Day. In the
event that payment of the Redemption Price in respect of Capital Securities is
improperly withheld or refused and not paid either by the Institutional Trustee
or by the Company pursuant to the Guarantee, distributions on such Capital
Securities will continue to accrue at the then applicable rate
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from the original redemption date to the actual date of payment, in which case
the actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Trust
Securities are to be redeemed, Trust Securities will be redeemed on a pro rata
basis in accordance with the procedures of DTC as described under "-- Book-Entry
Only Issuance -- The Depository Trust Company."
In the event of any redemption of Capital Securities in part, the
Trust shall not be required to (i) issue, register the transfer of or exchange
any certificated security during a period beginning at the opening of business
15 days before any selection for redemption of Capital Securities and ending at
the close of business on the earliest date on which the relevant notice of
redemption is deemed to have been given to all holders of Capital Securities to
be so redeemed or (ii) register the transfer of or exchange any certificated
securities so selected for redemption, in whole or in part, except for the
unredeemed portion of any certificated securities being redeemed in part.
Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), provided that the acquiror
is not the holder of the Common Securities or the obligor under the Subordinated
Debt Securities, 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.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of the voluntary or involuntary liquidation,
dissolution, winding-up or termination of the Trust (each a "Liquidation") other
than in connection with a redemption of the Subordinated Debt Securities as
previously described, the holders of the Capital Securities will be entitled to
receive out of the assets of the Trust, after satisfaction of liabilities to
creditors of the Trust (to the extent not satisfied by the Company),
distributions in an amount equal to the aggregate of the stated liquidation
amount of $1,000 per Capital Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"), unless, in
connection with such Liquidation, Subordinated Debt Securities in an aggregate
stated principal amount equal to the aggregate stated liquidation amount of the
Trust Securities have been distributed on a pro rata basis to the holders of the
Trust Securities in exchange for the Trust Securities. Upon any Liquidation in
which the Subordinated Debt Securities are distributed, if at the time of such
Liquidation the Capital Securities are rated by at least one nationally
recognized statistical rating organization, the Company will use its best
efforts to obtain from at least one nationally recognized statistical rating
organization a rating for the Subordinated Debt Securities.
The Company, as the holder of all of the Common Securities, has
the right at any time to dissolve the Trust (including, without limitation, upon
the occurrence of a Tax Event) and, after satisfaction of liabilities to
creditors of the Trust (to the extent not satisfied by the Company), cause the
Subordinated Debt Securities to be distributed to the holders of the Trust
Securities on a pro rata basis in accordance with the aggregate stated
liquidation amount thereof, in liquidation of the Trust.
Pursuant to the Declaration, the Trust shall dissolve on the
first to occur of (i) January 15, 2052, the expiration of the term of the Trust,
(ii) the bankruptcy of the Company, (iii) (other than in connection with a
merger, consolidation or similar transaction not prohibited by the Indenture,
the Declaration or the Guarantee, as the case may be) the filing of a
certificate of dissolution or its equivalent with respect to the Company, upon
the consent of the holders of at least a majority in liquidation amount of the
Trust Securities voting together as a single class to file a
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certificate of cancellation with respect to the Trust, or upon the revocation of
the charter of the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) the distribution of the
Subordinated Debt Securities to the holders of the Trust Securities upon
exercise of the right of the holder of all of the outstanding Common Securities
of the Trust to dissolve the Trust as described above, (v) the entry of a decree
of judicial dissolution of the Company or the Trust, or (vi) upon the redemption
of all of the Trust Securities. Pursuant to the Declaration, as soon as
practicable after the dissolution of the Trust and upon completion of the
winding up of the Trust, the Trust shall terminate upon the filing of a
certificate of cancellation.
If a Liquidation occurs as described in clause (i), (ii), (iii)
or (v) of the preceding paragraph, the Trust shall be liquidated by the Trustees
as expeditiously as such Trustees determine to be possible by distributing to
the holders of the Trust Securities, after satisfaction of liabilities to
creditors of the Trust, to the extent not satisfied by the Company, the
Subordinated Debt Securities, unless such distribution is determined by the
Institutional Trustee not to be practical, in which event such holders will be
entitled to receive out of the assets of the Trust available for distribution to
holders, after satisfaction of liabilities to creditors of the Trust, to the
extent not satisfied by the Company, an amount equal to the Liquidation
Distribution. An early Liquidation of the Trust pursuant to clause (iv) above
shall occur only if the Institutional Trustee determines that such Liquidation
is possible by distributing the Subordinated Debt Securities to the holders of
the Trust Securities, after satisfaction of liabilities of creditors of the
Trust, to the extent not satisfied by the Company.
If, upon any such Liquidation, the Liquidation Distribution can
be paid only in part because the Trust has insufficient assets available to pay
in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on such Capital Securities shall be paid to the holders of
the Trust Securities on a pro rata basis. The holders of the Common Securities
issued by the Trust will be entitled to receive distributions upon any such
Liquidation pro rata with the holders of such Capital Securities, except that if
a Declaration Event of Default has occurred and is continuing in respect of the
Trust, the Capital Securities shall have a preference over the Common Securities
with regard to such distributions.
After the date for any distribution of Subordinated Debt
Securities upon dissolution of the Trust, (i) the Trust Securities will be
deemed to be no longer outstanding, (ii) the Depositary (as defined herein) or
its nominee, as the record holder of the Capital Securities issued in book-entry
form, will receive a registered Global Certificate (as defined herein) or
Certificates representing the Subordinated Debt Securities to be delivered upon
such distribution, and (iii) any certificates representing Capital Securities
not held by the Depositary or its nominee will be deemed to represent undivided
beneficial interests in Subordinated Debt Securities having an aggregate
principal amount equal to the aggregate stated liquidation amount of such
Capital Securities until such certificates are presented to the Company or its
agent for transfer or reissuance.
There can be no assurance as to the market prices for either the
Capital Securities or the Subordinated Debt Securities that may be distributed
in exchange for the Capital Securities if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Capital Securities that an investor may
purchase, whether in the secondary market or otherwise, or the Subordinated Debt
Securities that an investor may receive if a dissolution and liquidation of the
Trust were to occur, may trade at a discount to the price paid to purchase the
Capital Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture in respect of the
Subordinated Debt Securities (an "Indenture Event of Default") constitutes an
event of default under the Declaration with respect to the Trust Securities
(each a
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"Declaration Event of Default"); provided that pursuant to the Declaration, the
holder of the Common Securities will be deemed to have waived any Declaration
Event of Default with respect to such Common Securities until all Declaration
Events of Default with respect to the Capital Securities have been cured, waived
or otherwise eliminated. Until such Declaration Events of Default have been so
cured, waived, or otherwise eliminated, the Institutional Trustee will be deemed
to be acting solely on behalf of the holders of the Capital Securities and only
the holders of such Capital Securities will have the right to direct the
Institutional Trustee with respect to certain matters under the Declaration, and
therefore the Indenture. The holders of a majority in liquidation amount of the
Capital Securities will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or to direct the exercise of any trust or power conferred upon the Institutional
Trustee under the Declaration, including the right to direct the Institutional
Trustee to exercise the remedies available to it as holder of the Subordinated
Debt Securities. If the Institutional Trustee fails to enforce its rights under
the Subordinated Debt Securities after the holders of a majority in liquidation
amount of such Capital Securities have so directed the Institutional Trustee, a
holder of record of such Capital Securities may, to the fullest extent permitted
by law, institute a legal proceeding against the Company to enforce the
Institutional Trustee's rights under the Subordinated Debt Securities without
first instituting any legal proceeding against the Institutional Trustee or any
other person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal (or premium, if any) on the
Subordinated Debt Securities on the respective dates such interest or principal
(or premium, if any) is payable (or in the case of redemption, the redemption
date), then a holder of record of such Capital Securities may institute a Direct
Action against the Company for payment, on or after the respective due dates
specified in the Subordinated Debt Securities, to such holder directly of the
principal of (or premium, if any) or interest on Subordinated Debt Securities
having an aggregate principal amount equal to the aggregate liquidation amount
of the Capital Securities of such holder. In connection with such Direct Action,
the Company will be subrogated to the rights of such holder of Capital
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Capital Securities in such Direct Action; provided,
however, that no such subrogation right may be exercised so long as a
Declaration Event of Default has occurred and is continuing. The holders of
Capital Securities will not be able to exercise directly any other remedy
available to the holders of the Subordinated Debt Securities.
Upon the occurrence of a Declaration Event of Default, the
Institutional Trustee, so long as it is the sole holder of the Subordinated Debt
Securities, will have the right under the Indenture to declare the principal of
(or premium, if any) and interest on the Subordinated Debt Securities to be
immediately due and payable. The Company and the Trust are each required to file
annually with the Institutional Trustee an officer's certificate as to its
compliance with all conditions and covenants under the Declaration.
VOTING RIGHTS
Except as described below, under the Trust Act and under " --
Removal of Trustees; Appointment of Successors" and "Description of the
Guarantee -- Modification of the Guarantee; Assignment," and as otherwise
required by law and the Declaration, the holders of the Capital Securities will
have no voting rights.
Subject to the requirements set forth in this paragraph, the
holders of a majority in aggregate liquidation amount of the Capital Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Institutional Trustee, or exercising any trust
or power conferred upon such Institutional Trustee under the Declaration,
including the right to direct such Institutional Trustee, as holder of the
Subordinated Debt Securities, to (i) exercise the remedies available to it under
the Indenture as a holder of the Subordinated Debt Securities, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right
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to rescind or annul a declaration that the principal of all the Subordinated
Debt Securities shall be due and payable or (iv) consent on behalf of all the
holders of the Capital Securities of the Trust to any amendment, modification or
termination of the Indenture or the Subordinated Debt Securities where such
consent shall be required; provided, however, that where a consent or action
under the Indenture would require the consent or act of holders of more than a
majority in principal amount of the Subordinated Debt Securities (a
"Super-Majority") affected thereby, the Institutional Trustee may only give such
consent or take such action at the written direction of the holders of at least
the proportion in aggregate liquidation amount of the Capital Securities
outstanding which the relevant Super-Majority represents of the aggregate
principal amount of the Subordinated Debt Securities outstanding. If the
Institutional Trustee fails to enforce its rights under the Subordinated Debt
Securities after the holders of a majority in liquidation amount of such Capital
Securities have so directed the Institutional Trustee, a holder of record of the
Capital Securities may, to the fullest extent permitted by law, institute a
legal proceeding directly against the Company to enforce the Institutional
Trustee's rights under the Subordinated Debt Securities without first
instituting any legal proceeding against the Institutional Trustee or any other
person or entity. Notwithstanding the foregoing, if a Declaration Event of
Default has occurred and is continuing and such event is attributable to the
failure of the Company to pay interest or principal (or premium, if any) on the
Subordinated Debt Securities on the respective dates such interest or principal
(or premium, if any) is payable (or in the case of redemption, the redemption
date), then a holder of record of Capital Securities may institute a Direct
Action against the Company for payment, on or after the respective due dates
specified in the Subordinated Debt Securities, to such holder directly of the
principal of (or premium, if any) or interest on the Subordinated Debt
Securities having an aggregate principal amount equal to the aggregate
liquidation amount of the Capital Securities of such holder. The Institutional
Trustee shall notify all holders of the Capital Securities of any default
actually known to the Institutional Trustee with respect to the Subordinated
Debt Securities unless (x) such default has been cured prior to the giving of
such notice or (y) the Institutional Trustee determines in good faith that the
withholding of such notice is in the interest of the holders of such Capital
Securities, except where the default relates to the payment of interest or
principal of (or premium, if any) on any of the Subordinated Debt Securities.
Such notice shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default. Except with respect to directing the time, method
and place of conducting a proceeding for a remedy, the Institutional Trustee
shall not take any of the actions described in clauses (i), (ii) or (iii) above
unless the Institutional Trustee has obtained an opinion of tax counsel to the
effect that, as a result of such action, the Trust will not be classified as
other than a grantor trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the
holder of the Subordinated Debt Securities, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture, such
Institutional Trustee shall request the direction of the holders of the Trust
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a majority in liquidation amount of such Trust Securities voting together as a
single class; provided, however, that where a consent under the Indenture would
require the consent of a Super-Majority, the Institutional Trustee may only give
such consent at the direction of the holders of at least the proportion in
liquidation amount of such Trust Securities outstanding which the relevant
Super-Majority represents of the aggregate principal amount of the Subordinated
Debt Securities outstanding. The Institutional Trustee shall not take any such
action in accordance with the directions of the holders of such Trust Securities
unless the Institutional Trustee has obtained an opinion of tax counsel to the
effect that, as a result of such action, the Trust will not be classified as
other than a grant or trust for United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a
waiver of the corresponding Declaration Event of Default.
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Any required approval or direction of holders of Capital
Securities may be given at a separate meeting of such holders convened for such
purpose, at a meeting of all of the holders of Trust Securities or pursuant to
written consent. The Institutional 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 mailed to
each holder of record of the Capital Securities. Each such notice will include a
statement setting forth the following information: (i) the date of such meeting
or the date by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought; and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Capital Securities will be required for the Trust to redeem
and cancel the Capital Securities or distribute the Subordinated Debt Securities
in accordance with the Declaration.
Notwithstanding that holders of Capital Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned at such time by the Company or any entity
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, the Company, shall not entitle the holders thereof to vote
or consent and shall, for purposes of such vote or consent, be treated as if
such Capital Securities were not outstanding.
The procedures by which holders of Capital Securities issued in
book-entry form may exercise their voting rights are described below. See "--
Book-Entry Only Issuance -- The Depository Trust Company" below.
REMOVAL OF TRUSTEES; APPOINTMENT OF SUCCESSORS
Unless an Indenture Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time and its successor appointed
by the holder of a majority of the Common Securities. If an Indenture Event of
Default has occurred and is continuing, a Trustee may be removed and its
successor appointed by the holders of at least a majority in liquidation amount
of Capital Securities. In no event will the holders of the Capital Securities
have the right to vote to appoint, remove or replace the Administrators, which
voting rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee shall be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Declaration.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default shall have occurred and be continuing,
at any time or times, for the purpose of meeting the legal requirements of the
Trust Indenture Act or of any jurisdiction in which any part of the Trust's
property may at the time be located, the Company, as the holder of a majority of
the Common Securities, and the Administrators shall have power to appoint one or
more persons either to act as a co-trustee, jointly with the Institutional
Trustee, of all or any part of such Trust's property, or to act as a separate
trustee of any such property, in either case with such powers as may be provided
in the instrument of appointment, and to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the Declaration. In case an Indenture Event of
Default has occurred and is continuing, the Institutional Trustee alone shall
have power to make such appointment.
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MODIFICATION OF THE DECLARATION
The Declaration may be amended from time to time by the
Institutional Trustee and the holders of a majority of the Common Securities
without the consent of the holders of the Capital Securities to: (i) cure any
ambiguity; (ii) correct or supplement any provision in such Declaration that may
be defective or inconsistent with any other provision of such Declaration; (iii)
add to the covenants, restrictions or obligations of the Company; (iv) modify,
eliminate or add to any provision of the Declaration to such an extent as may be
necessary to ensure that the Trust will be classified for United States federal
income tax purposes at all times as a grantor trust and will not be required to
register as an "investment company" under the Investment Company Act of 1940, as
amended (the "1940 Act"); and (v) modify, eliminate and add to any provision of
such Declaration, provided that no such modification, elimination or addition
referred to in clauses (i), (ii) and (iii) hereof shall adversely affect the
powers, preferences or special rights of the holders of such Capital Securities
so long as they remain outstanding.
In addition, the Declaration may be modified and amended if
approved by the Institutional Trustee and the holders of a majority of the
Common Securities (and in certain circumstances the Delaware Trustee), provided
that, if any proposed amendment provides for, or the Institutional Trustee
otherwise proposes to effect, (i) any action that would materially adversely
affect the powers, preferences or special rights of the Trust Securities,
whether by way of amendment to the Declaration or otherwise or (ii) the
Liquidation of the Trust other than pursuant to the terms of the Declaration,
then the holders of the Trust Securities voting together as a single class will
be entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of the holders of at least a
majority in liquidation amount of the Trust Securities affected thereby;
provided that if any amendment or proposal referred to in clause (i) above would
materially adversely affect only the Capital Securities or only the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a majority in liquidation amount of such class of
Trust Securities.
Notwithstanding the foregoing, no amendment or modification may
be made to the Declaration if such amendment or modification would (i) cause the
Trust to be classified for purposes of United States federal income taxation as
other than a grantor trust or (ii) cause the Trust to be deemed an "investment
company" which is required to be registered under the 1940 Act.
Notwithstanding any provision of the Declaration, the provisions
of Section 316(b) of the Trust Indenture Act incorporated by reference into the
Declaration provides that the right of any holder of Capital Securities to
receive payments of distributions and other payments upon redemption or
otherwise on or after their respective due dates, or to institute suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such holder.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below or as otherwise described in "-- Liquidation Distribution upon
Dissolution." The Trust may, at the request of the holders of a majority of the
Common Securities without the consent of the holders of the Capital Securities,
consolidate, amalgamate, merge with or into, or be replaced by, a trust
organized as such under the laws of any State of the United States; provided
that (i) if the Trust is not the survivor, such successor entity either (x)
expressly assumes all of the obligations of the Trust under the Trust Securities
or (y) substitutes for the Trust
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Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities"), so that the Successor Securities rank
the same as the Trust Securities rank with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) a trustee of such successor
entity possessing the same powers and duties as the Institutional Trustee is
appointed as the holder of the Subordinated Debt Securities, (iii) the Capital
Securities or any Successor Securities are listed, or any Successor Securities
will be listed upon notification of issuance, on any national securities
exchange or with another organization on which such Capital Securities are then
listed or quoted, if any, (iv) such merger, consolidation, amalgamation or
replacement does not cause the Capital Securities (including any Successor
Securities) to be downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges of the holders of
such Trust Securities (including any Successor Securities) in any material
respect (other than with respect to any dilution of the holders' interest in
such successor entity), (vi) such successor entity has a purpose substantially
identical to that of the Trust, (vii) prior to such merger, consolidation,
amalgamation or replacement, the Trust has received an opinion of a nationally
recognized independent counsel to the Trust experienced in such matters to the
effect that (A) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the holders of the
Trust Securities (including any Successor Securities) in any material respect
(other than with respect to any dilution of the holders' interest in such
successor entity), (B) following such merger, consolidation, amalgamation or
replacement, neither the Trust nor such successor entity will be required to
register as an investment company under the 1940 Act and (C) following such
merger, consolidation, amalgamation or replacement, neither the Trust nor such
successor entity will be classified as other than a grantor trust for United
States federal income tax purposes, and (viii) the Company guarantees the
obligations of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee. Notwithstanding the foregoing, the Trust
shall not, except with the consent of holders of 100% in liquidation amount of
the Trust Securities, consolidate, amalgamate, merge with or into, or be
replaced by, any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such consolidation,
amalgamation, merger or replacement would cause the Trust or the successor
entity to be classified as other than a grantor trust for United States federal
income tax purposes.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The description of book-entry procedures in this Prospectus
includes summaries of certain rules and operating procedures of DTC that affect
transfers of interests in the global certificate or certificates issued in
connection with sales of Capital Securities. Except as described in the next
paragraph, the Capital Securities will be issued only as fully registered
securities registered in the name of Cede & Co. (as nominee for DTC). One or
more fully registered global Capital Security certificates (the "Global
Certificates") will be issued, representing, in the aggregate, the New Capital
Securities, and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Capital
Securities as represented by a Global Certificate.
DTC has advised the Company and the Trust that it is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities that
its participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic
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computerized book-entry changes in Participants" accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
Purchases of Capital Securities within the DTC system must be
made by or through Direct Participants, which will receive a credit for the
Capital Securities on DTC's records. The ownership interest of each actual
purchaser of each Capital Security ("Beneficial Owner") is in turn to be
recorded on the Direct Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the Director Indirect Participants through which the Beneficial
Owners purchased Capital Securities. Transfers of ownership interests in the
Capital Securities are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Capital
Securities, except in the event that use of the book-entry system for the
Capital Securities is discontinued.
To facilitate subsequent transfers, all the Capital Securities
deposited by Participants with DTC will be registered in the name of DTC's
nominee, Cede & Co. The deposit of Capital Securities with DTC and their
registration in the name of Cede & Co. will effect no change in beneficial
ownership. DTC will have no knowledge of the actual Beneficial Owners of the
Capital Securities. DTC's records will reflect only the identity of the Direct
Participants to whose accounts such Capital Securities are credited, which may
or may not be the Beneficial Owners. The Direct Participants and Indirect
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder
of a Global Certificate in respect of the Capital Securities, DTC or such
nominee, as the case may be, will be considered the sole owner or holder of the
Capital Securities represented thereby for all purposes under the Declaration
and such Capital Securities. No Beneficial Owner of an interest in a Global
Certificate will be able to transfer that interest except in accordance with
DTC's applicable procedures.
DTC has advised the Company that it will take any action
permitted to be taken by a holder of Capital Securities (including the
presentation of Capital Securities for exchange as described below) only at the
direction of one or more Participants to whose accounts the DTC interests in the
Global Certificates are credited and only in respect of such portion of the
aggregate liquidation amount of Capital Securities as to which such Participant
or Participants has or have given such direction. However, if there is a
Declaration Event of Default with respect to the Capital Securities, DTC will,
upon notice, exchange the Global Certificates in respect of such Capital
Securities for certificated securities, which it will distribute to its
Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
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Redemption notices in respect of the Capital Securities held in
book-entry form will be sent to Cede & Co. If less than all of the Capital
Securities are being redeemed, the Capital Securities will be redeemed on a pro
rata basis.
Although voting with respect to the Capital Securities is
limited, in those cases where a vote is required, neither DTC nor Cede & Co.
will itself consent or vote with respect to the Capital Securities. Under its
usual procedures, DTC would mail an omnibus proxy to the Trust as soon as
possible after the record date. The omnibus proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Capital Securities are credited on the record date (identified in a listing
attached to the omnibus proxy).
Distributions on the Capital Securities held in book-entry form
will be made to DTC in immediately available funds. DTC's practice is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payments on such payment date. Payments by
Direct Participants and Indirect Participants to Beneficial Owners will be
governed by standing instructions and customary practices and will be the
responsibility of such Direct Participants and Indirect Participants and not of
DTC, the Trust or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of distributions to
DTC is the responsibility of the Trust, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct Participants and Indirect
Participants.
Except as provided herein, a Beneficial Owner of an interest in a
Global Certificate will not be entitled to receive physical delivery of Capital
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC, the Direct Participants and the Indirect Participants to exercise any
rights under the Capital Securities.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Certificates among Participants
of DTC, DTC is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Company, the Trust or the Trustees will have any responsibility for the
performance by DTC or its Direct Participants or Indirect Participants under the
rules and procedures governing DTC. DTC may discontinue providing its services
as a securities depositary with respect to the Capital Securities at any time by
giving notice to the Trust. Under such circumstances, in the event that a
successor securities depositary is not obtained, Capital Security certificates
will be required to be printed and delivered. Additionally, the Trust (with the
consent of the Company) may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary) with respect to the
Capital Securities of the Trust. In that event, certificates for such Capital
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company and the Trust
believes to be reliable, but neither the Company nor the Trust takes
responsibility for the accuracy thereof.
RESTRICTIONS ON TRANSFER
The Old Capital Securities have been issued and may be
transferred only in blocks having a stated liquidation amount of not less than
$100,000 (100 Old Capital Securities). Any such transfer of Old Capital
Securities in a block having a stated liquidation amount of less than $100,000
shall be deemed to be void and of no legal effect whatsoever. Any such
transferee shall be deemed not to be the holder of such Old Capital Securities
for
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any purpose, including but not limited to the receipt of distributions on such
Old Capital Securities, and such transferee shall be deemed to have no interest
whatsoever in such Old Capital Securities. The New Capital Securities will not
be so restricted.
PAYMENT AND PAYING AGENCY
Payments in respect of the Capital Securities represented by the
Global Certificates shall be made to DTC, which shall credit the relevant
accounts at DTC on the applicable distribution payment dates or, in the case of
certificated securities in non-book entry form, such payments shall be made by
check mailed to the address of the holder entitled thereto as such address shall
appear on books and records of the Trust. The paying agent for the Trust
Securities (the "Paying Agent") shall initially be The Chase Manhattan Bank. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Institutional Trustee, the Administrators and the Company. In the
event that The Chase Manhattan Bank shall no longer be the Paying Agent, the
Administrators shall appoint a successor to act as Paying Agent (which shall be
a bank or trust company acceptable to the Company).
REGISTRAR AND TRANSFER AGENT
The Institutional Trustee will act as registrar and transfer
agent for the Capital Securities of the Trust.
Registration of transfers or exchanges 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 Trust or the Company 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 or exchange of Capital Securities after such Capital
Securities have been called for redemption.
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional 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 default, shall exercise such of the
rights and powers vested in it by such Declaration, and use the same degree of
care and skill in their exercise, as a prudent individual would exercise or use
in the conduct of his or her own affairs. Subject to such provisions, the
Institutional Trustee is under no obligation to exercise any of the powers
vested in it by the Declaration at the request of any holder of Capital
Securities, 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 Institutional
Trustee to take any action it is empowered to take under the Declaration
following a Declaration Event of Default. The Institutional Trustee also serves
as trustee under the Guarantee and the Indenture.
Whenever in the exercise of its rights or powers or the
performance of its duties under the Declaration the Institutional Trustee shall
deem it desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action thereunder, the Institutional Trustee (i)
may request instructions from the holders of the Capital Securities, which
instructions may only be given by the holders of a majority, or such other
proportion, in liquidation amount of the Capital Securities as would be entitled
to direct the Institutional Trustee under the terms of such Capital Securities
in respect of such remedy, right or action, (ii) may refrain from enforcing
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such remedy or right or taking such other action until such instructions are
received, and (iii) shall be protected in conclusively relying on or acting on
or in accordance with such instructions.
The Company and certain of its affiliates maintain a banking
relationship with the Institutional Trustee and its affiliates.
GOVERNING LAW
The Declaration and the Capital Securities are governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to principles of conflict of laws.
MISCELLANEOUS
The Administrators, the holders of a majority of the Common
Securities and the Institutional Trustee 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 nor be characterized as other than a
grantor trust for United States federal income tax purposes. The Company has
agreed to conduct its affairs so that the Subordinated Debt Securities will be
treated as indebtedness of the Company for United States federal income tax
purposes. In this connection, the Institutional Trustee and the holders of a
majority of the Common Securities are authorized to take any action, not
inconsistent with applicable law or the Declaration, that the Institutional
Trustee and such holders of Common Securities determine in their discretion to
be necessary or desirable to achieve such end, even if such action adversely
affects the interests of the holders of the Capital Securities.
Holders of the Capital Securities have no preemptive or similar
rights.
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DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the
Guarantee which has been executed and delivered for the benefit of the holders
from time to time of the Capital Securities. The Chase Manhattan Bank is acting
as Guarantee Trustee under the Guarantee. The New Guarantee has been qualified
under the Trust Indenture Act. This summary of the material terms of the
Guarantee does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the Guarantee
(a copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part). The Guarantee will be held by the Guarantee
Trustee for the benefit of the holders of the Capital Securities of the Trust.
GENERAL
Pursuant to the Guarantee, the Company has irrevocably and
unconditionally agreed, to the extent set forth therein, to pay in full, to the
holders of the Capital Securities, the Guarantee Payments (as defined herein)
(except to the extent paid by the Trust), as and when due, regardless of any
defense, right of set-off or counterclaim which the Trust may have or assert.
The following payments with respect to Capital Securities, to the extent not
paid by the Trust (the "Guarantee Payments"), are subject to the Guarantee
(without duplication): (i) any accrued and unpaid distributions which are
required to be paid on Capital Securities, to the extent the Trust shall have
funds available therefor; (ii) the Redemption Price, to the extent the Trust has
funds available therefor, with respect to any Capital Securities called for
redemption by the Trust and (iii) upon Liquidation of the Trust (other than in
connection with the distribution of Subordinated Debt Securities to the holders
of the Capital Securities in exchange therefor), the lesser of (a) the aggregate
of the liquidation amount and all accrued and unpaid distributions on such
Capital Securities to the date of payment, to the extent the Trust has funds
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to holders of such Capital Securities in liquidation
of the Trust. 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 Capital Securities or by causing the Trust to pay such amounts to
such holders.
The Guarantee does not apply to any payment of distributions
except to the extent the Trust shall have funds available therefor, which funds
will not be available except to the extent the Company has made payments of
interest (or premium, if any) or principal or other payments on the Subordinated
Debt Securities purchased by the Trust. See "Description of the Subordinated
Debt Securities -- Certain Covenants." The Guarantee, when taken together with
the Company's obligations under the Subordinated Debt Securities, the
Declaration and the Indenture, including its obligations to pay costs, expenses,
debts and other obligations of the Trust (other than with respect to the Trust
Securities), provides a full and unconditional guarantee on a subordinated basis
by the Company of payments due on the Capital Securities.
Because the Guarantee is a guarantee of payment and not of
collection, holders of the Capital Securities may proceed directly against the
Company, rather than having to proceed against the Trust before attempting to
collect from the Company, and the Company waives any right or remedy to require
that any action be brought against the Trust or any other person or entity
before proceeding against the Company. Such obligations will not be discharged
except by payment of the Guarantee Payments in full. The Guarantee has been
deposited with the Guarantee Trustee to be held for the benefit of the holders
of Capital Securities. Except as otherwise noted herein, the Guarantee Trustee
has the right to enforce the Guarantee on behalf of the holders of the Capital
Securities.
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The Company has also agreed separately to irrevocably and
unconditionally guarantee the obligations of the Trust with respect to Common
Securities (the "Common Securities Guarantee") to the same extent as the
Guarantee, except that upon the occurrence and continuance of an event of
default under the Declaration, holders of Capital Securities shall have priority
over holders of Common Securities with respect to any payments made by the
Company on or in respect of the Trust Securities under the Guarantee and the
Common Securities Guarantee.
CERTAIN COVENANTS OF THE COMPANY UNDER THE GUARANTEE
In the Guarantee, the Company has covenanted that, so long as any
Capital Securities remain outstanding, if the Company shall be in default under
the Guarantee or there shall have occurred and be continuing any event that
would constitute an event of default under the Declaration, then (a) the Company
shall not declare or pay any dividend on, make a distribution with respect to,
or redeem, purchase or make a liquidation payment with respect to, any of the
Company's capital stock or rights to acquire such capital stock (other than (i)
purchases or acquisitions of shares of the Company's capital stock or rights to
acquire such capital stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or any other contractual
obligations of the Company (other than a contractual obligation ranking pari
passu with or junior to the Subordinated Debt Securities), (ii) as a result of a
reclassification of the Company's capital stock or rights to acquire such
capital stock or the exchange or conversion of one class or series of the
Company's capital stock or rights to acquire such capital stock for another
class or series of the Company's capital stock or rights to acquire such capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) dividends and
distributions made on the Company's capital stock or rights to acquire such
capital stock with the Company's capital stock or rights to acquire such capital
stock, or (v) any declaration of a dividend in connection with the
implementation of a shareholder 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), or make guarantee payments with respect to any guarantee by
the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior to the Subordinated Debt Securities
(other than payments under the Guarantee and the Common Securities Guarantee)
and (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Subordinated Debt
Securities.
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes which do not adversely affect
the rights of holders of the Capital Securities in any material respect (in
which case no vote of such holders will be required), the Guarantee may be
amended only with the prior approval of the holders of not less than a majority
in liquidation amount of the outstanding Capital Securities. All guarantees and
agreements contained in the Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Capital Securities then outstanding.
TERMINATION
The Guarantee will terminate as to the Capital Securities (a)
upon full payment of the Redemption Price of all Capital Securities, (b) upon
distribution of the Subordinated Debt Securities to the holders of all of the
Capital Securities or (c) upon full payment of the amounts payable in accordance
with the Declaration upon dissolution of the Trust. The Guarantee will continue
to be effective or will be reinstated, as the case may be, if at
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any time any holder of Capital Securities must restore payment of any sums paid
under such Capital Securities or Guarantee.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder; provided, however, that, other than with respect to a default on any
payment under the Guarantee, the Company shall have received notice of default
and shall not have cured such default within 90 days after receipt of such
notice.
The holders of a majority in liquidation amount of the 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
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. A holder of record of the Capital
Securities may institute a legal proceeding directly against the Company to
enforce the Guarantee Trustee's rights under the Guarantee, without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. Pursuant to the Guarantee, the Company will waive any
right or remedy to require that any action be brought first against the Trust or
any other person or entity before proceeding directly against the Company.
STATUS OF THE GUARANTEE
The Company's obligations under the Guarantee are subordinate and
junior in right of payment to all present and future Senior Indebtedness of the
Company and are also effectively subordinated to claims of creditors of the
Company's subsidiaries. The terms of the Capital Securities provide that each
holder of Capital Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Guarantee relating thereto. The right of the
Company to participate in any distribution of assets of any of its subsidiaries
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 Guarantee are 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. The
Guarantee does not limit the incurrence or issuance of other secured or
unsecured debt of the Company, including Senior Indebtedness of the Company,
under any indenture that the Company may enter into in the future or otherwise.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default with
respect to the Guarantee, undertakes to perform only such duties as are
specifically set forth in such Guarantee and, after default, shall exercise such
of the rights and powers vested in it by such Guarantee, and use the same degree
of care and skill in their exercise, as a prudent individual would exercise or
use in the conduct of his or her own affairs. Subject to such provisions, the
Trustee is under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Capital Securities, unless offered
reasonable indemnity against the costs, expenses and liabilities which might be
incurred thereby.
The Company and certain of its affiliates maintain a banking
relationship with the Guarantee Trustee and its affiliates.
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GOVERNING LAW
The Guarantee is governed by and construed in accordance with the
laws of the State of New York, without regard to conflict of laws principles.
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
The Old Subordinated Debt Securities were issued, and the New
Subordinated Debt Securities will be issued, as a separate series under the
Indenture. The Indenture has been qualified under the Trust Indenture Act. Set
forth below is a description of the principal terms of the Subordinated Debt
Securities. The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the description in
the Indenture, dated as of January 21, 1997 (the "Base Indenture"), between the
Company and The Chase Manhattan Bank, as trustee (the "Debt Trustee"), as
supplemented by a First Supplemental Indenture dated as of January 21, 1997 (the
Base Indenture, as so supplemented, is herein referred to as the "Indenture").
Certain capitalized terms used herein are defined in the Indenture. This summary
of the material terms of the Indenture does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Indenture (a copy of which has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part) and those terms
made a part of the Indenture by the Trust Indenture Act.
In certain circumstances, Subordinated Debt Securities may be
distributed to the holders of the Trust Securities in liquidation of the Trust.
See "Description of the Capital Securities -- Liquidation Distribution Upon
Dissolution."
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 the Old Subordinated Debt Securities
issued by the Company. The Old Subordinated Debt Securities were and the New
Subordinated Debt Securities exchanged for the Old Subordinated Debt Securities
under the Exchange Offer will be issued as unsecured debt under the Indenture.
Subordinated Debt Securities will be limited to an amount equal to the sum of
the aggregate stated liquidation amounts of the Trust Securities.
The Subordinated Debt Securities are not subject to a sinking
fund provision. The entire principal amount of the Subordinated Debt Securities
will mature and become due and payable, together with any accrued and unpaid
interest thereon including Compounded Interest (as defined herein) and
Additional Interest (as defined herein), if any, on January 15, 2027.
If the Subordinated Debt Securities are distributed to holders of
Capital Securities in liquidation of such holders' interests in the Trust, the
Subordinated Debt Securities will, with respect to Capital Securities held in
book-entry only form, initially be issued as a Global Security (as defined
herein) having an aggregate principal amount equal to the liquidation amount of
such Capital Securities and, with respect to such Capital Securities held in
certificated non-book entry form, will initially be deemed to be represented by
such certificates and to have an aggregate principal amount equal to the
liquidation amount of such Capital Securities. As described herein, under
certain limited circumstances, Subordinated Debt Securities may be issued in
certificated non-book entry form in exchange for a Global Security. See "--
Book-Entry Issuance and Settlement" below. Subordinated Debt Securities deemed
to be represented by a Capital Security certificate will be issued in
certificated form upon presentation for
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transfer or reissuance. Payments on Subordinated Debt Securities issued as a
Global Security will be made to DTC, a successor depositary or, in the event
that no depositary is used, to a paying agent for the Subordinated Debt
Securities. In the event Subordinated Debt Securities are issued in certificated
non-book entry form, interest and principal (and premium, if any) will be
payable, the transfer of the Subordinated Debt Securities will be registrable
and Subordinated Debt Securities will be exchangeable for Subordinated Debt
Securities of other denominations of a like aggregate principal amount at the
corporate trust office of the Debt Trustee in New York, New York; provided that
payment of interest may be made, at the option of the Company, by check mailed
to the address of the holder entitled thereto or by wire transfer to an account
appropriately designated by the holder entitled thereto. Notwithstanding the
foregoing, so long as the holder of any Subordinated Debt Securities is the
Institutional Trustee, the payment of interest and principal (and premium, if
any) on the Subordinated Debt Securities held by the Institutional Trustee will
be made at such place and to such account as may be designated by the
Institutional Trustee.
The Indenture does not contain provisions that afford holders of
the Subordinated Debt Securities protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all present and future Senior
Indebtedness of the Company. No payment of principal (including redemption
payments), premium, if any, or interest on the Subordinated Debt Securities may
be made (in cash, property, securities, by set-off or otherwise) if (i) any
Senior Indebtedness of the Company is not paid when due and any applicable grace
period with respect to a payment default under such Senior Indebtedness has
ended and such default has not been cured or waived or ceased to exist or (ii)
the maturity of any Senior Indebtedness of the Company has been accelerated
because of a default. Upon any distribution of assets of the Company to
creditors upon any dissolution, winding-up, liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all principal, premium, if any, and interest due or to become
due on all Senior Indebtedness of the Company must be paid in full before the
holders of Subordinated Debt Securities are entitled to receive or retain any
payment. Upon satisfaction of all claims of all Senior Indebtedness then
outstanding, the rights of the holders of the Subordinated Debt Securities will
be subrogated to the rights of the holders of Senior Indebtedness of the Company
to receive payments or distributions applicable to Senior Indebtedness until all
amounts owing on the Subordinated Debt Securities are paid in full.
The term "Senior Indebtedness" means, with respect to the Company
(except any other obligations which rank pari passu with or junior to the
Subordinated Debt Securities), (i) the principal, premium, if any, and interest
in respect of (A) indebtedness of the Company for money borrowed, and (B)
indebtedness evidenced by securities, debentures, notes, bonds or other similar
instruments issued by the Company, including, without limitation, any current of
future indebtedness under any indenture (other than the Indenture) to which the
Company is party; (ii) all capital lease obligations of the Company, (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations of
the Company under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of the
Company for the reimbursement on any letter of credit, any banker's acceptance,
any security purchase facility, any repurchase agreement or similar arrangement,
any interest rate swap, any other hedging arrangement, any obligation under
options or any similar credit or other transaction, (v) all obligations of the
type referred to in clauses (i) through (iv) above of other persons for the
payment of which the Company is responsible or liable as obligor, guarantor or
otherwise and (vi) all obligations of the type referred to in clauses (i)
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through (v) above of other persons secured by any lien on any property or asset
of the Company (whether or not such obligation is assumed by the Company),
except for (1) any indebtedness between or among the Company or any affiliate of
the Company and (2) any other debt securities issued pursuant to the Indenture
and guarantees in respect of those debt securities. Senior Indebtedness does not
include Subordinated Debt Securities or any junior subordinated debt securities
issued in the future with subordination terms substantially similar to the
Subordinated Debt Securities. Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such Senior
Indebtedness.
The 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 Subordinated Debt
Securities 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.
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued by the Company. The amount of Senior
Indebtedness and liabilities and obligations of the Company's subsidiaries that
would be effectively ranked senior to the Guarantee and the Subordinated Debt
Securities (exclusive of Deposits) was approximately $3,007,544,000 at March 31,
1997.
REDEMPTION
The Company may redeem the Subordinated Debt Securities, in whole
or in part, at any time and from time to time, on or after January 15, 2007 upon
not less than 30 nor more than 60 days' notice, at the Call Price described
under "Description of the Capital Securities -- Redemption," plus accrued and
unpaid interest to the redemption date.
In addition, Subordinated Debt Securities may be redeemed by the
Company at any time in certain circumstances upon the occurrence of a Tax Event
as described under "Description of the Capital Securities -- Tax Event
Redemption," upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest to the redemption date.
INTEREST
Subordinated Debt Securities bear interest at the rate of 8.65%
per annum, from the original date of issuance of the Old Subordinated Debt
Securities, payable semiannually in arrears on January 15 and July 15 of each
year (each an "Interest Payment Date"), commencing July 15, 1997, to the person
in whose name such Subordinated Debt Security is registered, subject to certain
exceptions, at the close of business on the Business Day next preceding such
Interest Payment Date. The term "interest" as used herein, as such term relates
to the Subordinated Debt Securities, includes any Compounded Interest,
Additional Interest or any Special Payment payable, unless otherwise stated. In
the event the Subordinated Debt Securities are not held solely in book-entry
only form, the Company will select relevant record dates, which shall be 15 days
prior to the relevant Interest Payment Date.
The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. The amount of interest
payable for any period shorter than a full semiannual period for which
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interest is computed will be computed on the basis of the actual number of days
elapsed per 30-day month. In the event that any date on which interest is
payable on the Subordinated Debt Securities is not a Business Day, then payment
of the interest payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay) with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company is not in default in the payment of
interest that has become due and payable on the Subordinated Debt Securities and
no accrued interest from a prior completed Extension Period is unpaid, the
Company shall have the right to defer payments of interest on the Subordinated
Debt Securities by extending the interest payment period, at any time and from
time to time, for Extension Periods, each not exceeding 10 consecutive
semiannual periods and none extending beyond the maturity date of the
Subordinated Debt Securities, provided, however, that on the date on which each
such Extension Period ends or, if such date is not an Interest Payment Date, on
the immediately following Interest Payment Date, the Company shall pay all
interest then accrued and unpaid, together with interest thereon at the rate of
8.65% per annum, compounded semiannually (to the extent permitted by applicable
law) ("Compounded Interest"). During any Extension Period (a) the Company shall
not declare or pay dividends on, make any distribution with respect to, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
its capital stock or rights to acquire such capital stock (other than (i)
purchases or acquisitions of shares of any such capital stock or rights to
acquire such capital stock in connection with the satisfaction by the Company of
its obligations under any employee benefit plans or any other contractual
obligations of the Company (other than a contractual obligation ranking pari
passu with or junior to the Subordinated Debt Securities), (ii) as a result of a
reclassification of the Company's capital stock or rights to acquire such
capital stock or the exchange or conversion of one class or series of the
Company's capital stock or rights to acquire such capital stock for another
class or series of the Company's capital stock or rights to acquire such capital
stock, (iii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) dividends and
distributions made on the Company's capital stock, or rights to acquire such
capital stock with the Company's capital stock or rights to acquire such capital
stock, or (v) any declaration of a dividend in connection with the
implementation of a shareholder 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), or make guarantee payments with respect to any guarantee by
the Company of the debt securities of any subsidiary of the Company if such
guarantee ranks pari passu with or junior to the Subordinated Debt Securities
(other than payments under the Guarantee and the Common Securities Guarantee)
and (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued by
the Company that rank pari passu with or junior to the Subordinated Debt
Securities. Prior to the termination of any such Extension Period, the Company
may further defer payments of interest by extending the interest payment period;
provided, however, that each such Extension Period, including all such previous
and further extensions thereof, may not exceed 10 consecutive semiannual periods
or extend beyond the maturity of the Subordinated Debt Securities. Upon the
termination of any Extension Period and the payment of all amounts then due, the
Company may commence a new Extension Period, subject to the terms set forth in
this section. No interest during an Extension Period, except on the date on
which such Extension Period terminates (or if such date is not an Interest
Payment Date, on the immediately following Interest Payment Date), shall be due
and payable. The Company has no present intention of exercising its right to
defer payments of interest on the Subordinated Debt Securities.
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If the Institutional Trustee shall be the sole holder of the
Subordinated Debt Securities, the Company shall give the Administrators, the
Institutional Trustee and the Debt Trustee notice of its initiation of any
Extension Period one Business Day prior to the earlier of (i) the date
distributions on the Capital Securities are payable or (ii) the date the
Administrators are required to give notice to holders of the Capital Securities
(or any national securities exchange or other organization on which the Capital
Securities are listed, if any) of the record date or the distribution payment
date, in each case with respect to distributions on the Trust Securities the
payment of which is being deferred. An Administrator shall give notice of the
Company's initiation of any Extension Period to the holders of such Capital
Securities. If the Institutional Trustee shall not be the sole holder of the
Subordinated Debt Securities, the Company shall give the holders of such
Subordinated Debt Securities notice of its initiation of such Extension Period
10 Business Days prior to the earlier of (i) the next succeeding Interest
Payment Date or (ii) the date upon which the Company is required to give notice
to holders of such Subordinated Debt Securities (or any national securities
exchange or other organization on which the corresponding Capital Securities are
listed, if any) of the record date or interest payment date, in each case with
respect to interest payments the payment of which is being deferred.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any such case, the Company will pay as additional interest ("Additional
Interest") on the Subordinated Debt Securities such additional amounts as shall
be required so that the net amounts received and retained by the Trust after
paying any such taxes, duties, assessments or other governmental charges will
equal the amounts the Trust and the Institutional Trustee would have received
had no such taxes, duties, assessments or other governmental charges been
imposed.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton submitted to Congress the
Proposal to implement tax legislation. As explained in the Joint Committee
Description, the Proposal contains a provision which generally would deny a
deduction for interest on an instrument which (a) is issued by a corporation,
(b) has a maximum term of more than 15 years and (c) is not shown as
indebtedness on the separate balance sheet of the issuer (or, if the instrument
is issued to a related party other than a corporation and the holder or some
other related party issues a related instrument, such instrument is not shown as
indebtedness on the issuer's consolidated balance sheet). As explained in the
Joint Committee Description, legislation enacted under the Proposal would be
effective generally for instruments issued on or after the date of first
congressional committee action. To date there has been no congressional
committee action on the Proposal.
While the Company expects to be able to deduct interest on the
Subordinated Debt Securities, see "Certain Federal Income Tax Consequences --
Characterization of the Subordinated Debt Securities," there can be no assurance
that the Proposal, if implemented, will not result in legislation having a
retroactive effect and applicable to the Subordinated Debt Securities.
Furthermore, there can be no assurance that other legislation enacted after the
date hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Subordinated Debt Securities. Accordingly,
there can be no assurance that a Tax Event will not occur. See "Risk Factors --
Redemption; Distribution" and "Description of the Capital Securities -- Tax
Event Redemption."
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CERTAIN COVENANTS
If (i) there shall have occurred and be continuing any event that
would constitute an Event of Default (as defined herein) under the Indenture,
(ii) the Company shall be in default with respect to its payment of any
obligations under the Guarantee or Common Securities Guarantee, or (iii) the
Company shall have given notice of its election to defer payments of interest on
the Subordinated Debt Securities by extending the interest payment period as
provided in the Indenture and such period, or any extension thereof, shall be
continuing, then (a) the Company shall not declare or pay any dividend on, make
a distribution with respect to, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock or rights to
acquire such capital stock (other than (i) purchases or acquisitions of shares
of any such capital stock or rights to acquire such capital stock in connection
with the satisfaction by the Company of its obligations under any employee
benefit plans or any other contractual obligations of the Company (other than a
contractual obligation ranking pari passu with or junior to the Subordinated
Debt Securities), (ii) as a result of a reclassification of the Company's
capital stock or rights to acquire such capital stock or the exchange or
conversion of one class or series of the Company's capital stock or rights to
acquire such capital stock for another class or series of the Company's capital
stock or rights to acquire such capital stock, (iii) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the conversion or
exchange provisions of such capital stock or the security being converted or
exchanged, (iv) dividends and distributions made on the Company's capital stock
or rights to acquire such capital stock with the Company's capital stock or
rights to acquire such capital stock, or (v) any declaration of a dividend in
connection with the implementation of a shareholder 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), or make guarantee payments with respect to
any guarantee by the Company of the debt securities of any subsidiary of the
Company if such guarantee ranks pari passu with or junior to the Subordinated
Debt Securities (other than payments under the Guarantee or the Common
Securities Guarantee) and (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company that rank pari passu with or junior to the
Subordinated Debt Securities.
For so long as the Trust Securities remain outstanding, the
Company will covenant to maintain 100% ownership of the Common Securities;
provided, however, that any permitted successor of the Company under the
Indenture may succeed to the Company's ownership of such Common Securities. The
Administrators and the holder of a majority of the Common Securities each will
covenant to use their respective reasonable efforts to cause the Trust (a) to
remain a statutory business trust, except in connection with the distribution of
Subordinated Debt Securities to the holders of Trust Securities in liquidation
of the Trust, the redemption of all of the Trust Securities or certain mergers,
consolidations or amalgamations, each as permitted by the Declaration, (b) to
otherwise continue to be classified as a grantor trust for United States federal
income tax purposes and (c) to use its reasonable efforts to cause each holder
of Trust Securities to be treated as owning an undivided beneficial interest in
the Subordinated Debt Securities.
LIMITATION ON MERGERS AND SALES OF ASSETS
Nothing contained in the Indenture or in the Subordinated Debt
Securities shall prevent any consolidation or merger of the Company with or into
any other corporation (whether or not affiliated with the Company) or successive
consolidations or mergers in which the Company or its successor or successors
shall be a party, or shall prevent any sale, conveyance, transfer or other
disposition of the property of the Company or its successor or successors as an
entirety, or substantially as an entirety, to any other entity (whether or not
affiliated with the Company or its successor or successors) authorized to
acquire and operate the same; provided, however, that
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the Company shall, upon any such consolidation, merger, sale, conveyance,
transfer or other disposition, cause the obligations of the Company under the
Subordinated Debt Securities and under the Indenture, to be expressly assumed,
by supplemental indenture satisfactory in form to the Debt Trustee and executed
and delivered to the Debt Trustee, by the successor entity formed by such
consolidation or into which the Company shall have been merged, or which shall
have acquired such property. Upon execution and delivery of such supplemental
indenture to the Debt Trustee, such successor entity will be substituted under
the Indenture and thereupon the Company will be relieved of any further
liability or obligation thereunder.
EVENTS OF DEFAULT, WAIVER AND NOTICE
The Indenture provides that any one or more of the following
described events which has occurred and is continuing with respect to the
Subordinated Debt Securities constitutes an "Event of Default" with respect to
the Subordinated Debt Securities:
(a) default for 30 days in payment of any interest on the
Subordinated Debt Securities, including any Compounded Interest or
Additional Interest in respect thereof or any Special Payment, when due
(subject to deferral of any due date in the case of an Extension
Period); or
(b) default in payment of principal and premium, if any, on the
Subordinated Debt Securities when due either at maturity, upon
redemption, by declaration or otherwise; or
(c) default resulting in acceleration of other indebtedness of
the Company for borrowed money where the aggregate principal amount so
accelerated exceeds $25 million and such acceleration is not rescinded
or annulled within 30 days after the written notice thereof to the
Company by the Debt Trustee or to the Company and the Debt Trustee by
the holders of 25% in aggregate principal amount of the Subordinated
Debt Securities then outstanding; or
(d) default by the Company in the performance of any other of the
covenants or agreements in the Indenture which shall not have been
remedied for a period of 90 days after notice to the Company by the Debt
Trustee or to the Company and the Debt Trustee by the holders of not
less than 25% in aggregate principal amount of Subordinated Debt
Securities; or
(e) certain events of bankruptcy, insolvency or reorganization of
the Company; or
(f) the Liquidation of the Trust, except in connection with the
distribution of Subordinated Debt Securities to the holders of Trust
Securities in liquidation of the Trust, the redemption of all of the
Trust Securities, or certain mergers, consolidations or amalgamations,
each as permitted by the Declaration.
The Indenture provides that the Debt Trustee may, under certain
circumstances, withhold from the holders notice of default with respect to the
Subordinated Debt Securities (except for any default in payment of principal of
or interest or premium, if any, on the Subordinated Debt Securities) if the
Trustee considers it in the interest of such holders to do so.
The Indenture provides that if an Event of Default in respect of
the Subordinated Debt Securities shall have occurred and be continuing, either
the Debt Trustee or the holders of not less than 25% in aggregate principal
amount of the Subordinated Debt Securities then outstanding may declare the
principal of and accrued interest on all
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Subordinated Debt Securities to be due and payable immediately, but upon certain
conditions such declarations may be annulled and past defaults may be waived
(except defaults in payment of principal of or interest or premium on the
Subordinated Debt Securities, which must be cured or paid in full) by the
holders of a majority in aggregate principal amount of the Subordinated Debt
Securities then outstanding.
No holder of any Subordinated Debt Security shall have any right
to institute any suit, action or proceeding for any remedy under the Indenture,
unless such holder previously shall have given to the Debt Trustee written
notice of a continuing Event of Default with respect to the Subordinated Debt
Securities and unless the holders of not less than 25% in aggregate principal
amount of the Subordinated Debt Securities then outstanding shall have given the
Debt Trustee a written request to institute such action, suit or proceeding and
shall have offered to the Debt Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred thereby, and
the Debt Trustee for 60 days after its receipt of such notice, request and offer
of indemnity shall have failed to institute any such action, suit or proceeding;
provided that no holder of Subordinated Debt Securities shall have any right to
prejudice the rights of any other holder of Subordinated Debt Securities, obtain
priority or preference over any other such holder or enforce any right under the
Indenture except as provided in the Indenture and for the equal, ratable and
common benefit of all holders of Subordinated Debt Securities. Notwithstanding
the foregoing, the right of any holder of any Subordinated Debt Security to
receive payment of the principal of, premium, if any, and interest, on such
Subordinated Debt Security when due, or to institute suit for the enforcement of
any such payment, shall not be impaired or affected without the consent of such
holder.
The holders of a majority in aggregate principal amount of the
Subordinated Debt Securities then outstanding shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to,
or exercising any trust or power conferred on, the Debt Trustee under the
Indenture; provided, however, that, except under certain circumstances, the Debt
Trustee may decline to follow any such direction if the Debt Trustee determines
that the action so directed would be unjustly prejudicial to holders not taking
part in such direction or would be unlawful or would involve the Debt Trustee in
personal liability. The Indenture requires the annual filing by the Company with
the Debt Trustee of a certificate as to the absence of certain defaults under
the Indenture.
An Event of Default under the Indenture also constitutes a
Declaration Event of Default. The holders of the Capital Securities of the
Trust, in certain circumstances, have the right to direct the Institutional
Trustee of the Trust to exercise its rights as the holder of the Subordinated
Debt Securities. See "Description of the Capital Securities -- Declaration
Events of Default" and " -- Voting Rights." Notwithstanding the foregoing, if an
Indenture Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal (or
premium, if any) on the Subordinated Debt Securities on the respective dates
such interest or principal (or premium, if any) is payable, after giving effect
to any Extension Period (or in the case of redemption, on the redemption date),
the Company acknowledges that a holder of record of Capital Securities may
institute a Direct Action for payment, on or after the respective due dates
specified in such Subordinated Debt Securities, to such holder directly of the
principal of (or premium, if any) or interest on Subordinated Debt Securities
having an aggregate principal amount equal to the aggregate liquidation amount
of the Capital Securities of such holder. Notwithstanding any payments made to
such 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 Subordinated Debt Securities, and the Company shall
be subrogated to the rights of such holder of such Capital Securities under the
Declaration to the extent of any payments made by the Company to such holder in
any Direct Action; provided, however, that no such subrogation right may be
exercised so long as a Declaration Event of Default has occurred and is
continuing. Except to the extent described above under "Description of the
Capital Securities --
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Declaration Events of Default" and " -- Voting Rights," the holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Subordinated Debt Securities.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the
Debt Trustee, with the consent of the holders of not less than a majority in
principal amount of the Subordinated Debt Securities at the time outstanding, to
modify the Indenture or any supplemental indenture or the rights of the holders
of the Subordinated Debt Securities; provided, however, that no such
modification shall without the consent of the holder of each Subordinated Debt
Security so affected (i) extend the fixed maturity of any Subordinated Debt
Security, or reduce the principal amount thereof or any redemption premium
thereon, or reduce the rate or extend the time of payment of interest thereon,
or make the principal of, or interest or premium on, the Subordinated Debt
Securities payable in any coin or currency other than that provided in the
Subordinated Debt Securities, or impair or affect the right of any holder of
Subordinated Debt Securities to institute suit for the payment thereof or (ii)
reduce the aforesaid percentage of Subordinated Debt Securities the consent of
the holders of which is required for any such modification.
The Company and the Debt Trustee may enter into supplemental
indentures, without the consent of any holder of the Subordinated Debt
Securities: (i) to evidence the succession of another corporation to the Company
and the assumption by the successor corporation of the covenants, agreements and
obligations of the Company pursuant to the Indenture; (ii) to add to the
covenants of the Company such further covenants, restrictions or conditions for
the protection of the holders of the Subordinated Debt Securities and to make
the occurrence, or the occurrence and continuance (including any or no grace
periods), of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of
remedies provided in the Indenture; (iii) to cure any ambiguity or to correct or
supplement any provision contained in the Indenture or in any supplemental
indenture which may be defective or inconsistent with any other provision
contained therein or in any supplemental indenture, or to make such other
provisions in regard to matters or questions arising under the Indenture;
provided that any such action shall not adversely affect the interests of the
holders of the Subordinated Debt Securities; (iv) to add to, delete from, or
revise the terms of the Subordinated Debt Securities to provide for transfer
procedures and restrictions substantially similar to those applicable to the
Capital Securities (for purposes of assuring that no registration of
Subordinated Debt Securities is required under the Securities Act); (v) to
evidence and provide for the acceptance of appointment under the Indenture by a
successor Debt Trustee with respect to the Subordinated Debt Securities and to
add to or change any of the provisions of the Indenture as shall be necessary to
provide for or facilitate the administration of the Trust under the Indenture by
more than one Debt Trustee, pursuant to the Indenture; (vi) to make any change
that does not adversely affect the rights of any holder of any Subordinated Debt
Security in any material respect; or (vii) to provide for the issuance, and
establish the form and terms and conditions, of the Subordinated Debt
Securities, to establish the form of any certifications required to be furnished
pursuant to the terms of the Indenture or the Subordinated Debt Securities or to
add to the rights of the holders of the Subordinated Debt Securities.
DISCHARGE
The Indenture provides that when, among other things, all
Subordinated Debt Securities not previously delivered to the Debt Trustee for
cancellation (i) have become due and payable or (ii) will become due and payable
at the stated maturity within one year or are to be called for redemption within
one year under arrangements satisfactory to the Debt Trustee, and the Company
deposits or causes to be deposited with the Debt Trustee funds, in trust, for
the purpose and in an amount sufficient to pay and discharge the entire
indebtedness on the Subordinated
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Debt Securities not previously delivered to the Debt Trustee for cancellation,
for the principal (and premium, if any) and interest to the date of the stated
maturity or redemption 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
opinions of counsel described therein), and the Company will be deemed to have
satisfied and discharged the Indenture.
THE DEBT TRUSTEE
The Company and certain of its affiliates maintain a banking
relationship with the Debt Trustee and its affiliates.
BOOK-ENTRY ISSUANCE AND SETTLEMENT
If distributed to holders of Capital Securities of the Trust in
connection with the involuntary or voluntary dissolution, winding-up or
liquidation of the Trust, the Subordinated Debt Securities will, with respect to
such Capital Securities held in book-entry form, initially be issued in the form
of one or more global certificates (each a "Global Security") registered in the
name of the Depositary or its nominee. Except under the limited circumstances
described below, Subordinated Debt Securities represented by a Global Security
will not be exchangeable for, and will not otherwise be issuable as,
Subordinated Debt Securities in definitive form. The Global Securities described
above may not be transferred except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in such a Global
Security.
Except as provided below, owners of beneficial interests in a
Global Security will not be entitled to receive physical delivery of
Subordinated Debt Securities in definitive form and will not be considered the
holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Subordinated Debt Securities
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each beneficial owner must
rely on the procedures of the Depositary or if such person is not a Participant,
on the procedures of the Participant through which such person owns its interest
to exercise any rights of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debt Securities are distributed to holders of
Capital Securities in liquidation of such holders' interests in the Trust, DTC
will act as securities Depositary for the Subordinated Debt Securities issued by
the Trust with respect to Capital Securities held in book-entry form. For a
description of DTC and the specific terms of the depositary arrangements, see
"Description of the Capital Securities -- Book-Entry Only Issuance -- The
Depository Trust Company." As of the date of this Prospectus, the description
herein of DTC's book-entry system and DTC's practices as they relate to
purchases, transfers, notices and payments with respect to the Capital
Securities would apply in all material respects to any debt obligations
represented by one or more Global Securities held by
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DTC. The Company may appoint a successor to DTC or any successor depositary in
the event DTC or such successor depositary is unable or unwilling to continue as
the Depositary for the Global Securities.
None of the Company, the Trust, the Institutional Trustee, the
Debt Trustee, any paying agent and any other agent of the Company, the Trust,
the Institutional Trustee or the Debt Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Security for the Subordinated Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debt
Securities registered in the names of persons other than the Depositary or its
nominee only if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor depositary shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable for Subordinated Debt Securities registered in such names as the
Depositary shall direct. It is expected that such instructions will be based
upon directions received by the Depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities are governed
by, and construed in accordance with, the laws of the State of New York, without
regard to conflict of laws principles.
MISCELLANEOUS
The Indenture provides that the Company will pay all fees and
expenses related to (i) the offering and sale of the Trust Securities and the
Subordinated Debt Securities, (ii) the organization, maintenance and dissolution
of the Trust, (iii) the retention of the Trustees and Administrators and (iv)
the enforcement by the Institutional Trustee of the rights of the holders of the
Capital Securities.
The Company will have the right at all times to assign any of its
respective rights or obligations under the Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided that, in the event of any such
assignment, the Company will remain liable for all of its obligations. Subject
to the foregoing, the Indenture will be binding upon and inure to the benefit of
the parties thereto and their respective successors and assigns. Except as
otherwise provided in " -- Limitation on Mergers and Sales of Assets," the
Indenture provides that it may not otherwise be assigned by the parties thereto.
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EFFECT OF OBLIGATIONS UNDER THE DECLARATION, THE SUBORDINATED
DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of the Trust is
to issue and sell the Trust Securities evidencing undivided beneficial interests
in the assets of the Trust, and to invest the proceeds from such issuance and
sale in the Subordinated Debt Securities issued by the Company in accordance
with such Trust Securities.
As long as payments of interest and other payments are made when
due on the Subordinated Debt Securities, such payments will be sufficient to
cover distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of the Subordinated Debt
Securities will be equal to the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other payment dates on
the Subordinated Debt Securities will match the distribution rate and
distribution and other payment dates for the Trust Securities; (iii) the Company
shall pay all, and the Trust shall not be obligated to pay directly or
indirectly any, costs, expenses, debts, and other obligations of the Trust
(other than with respect to such Trust Securities); and (iv) the Declaration
further provides that the Trustees shall not take any action or cause or permit
the Trust to, among other things, engage in any activity that is not consistent
with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are
available to the Trust) and other payments due on the Capital Securities (to the
extent funds therefor are available to the Trust) are guaranteed by the Company
as described under "Description of the Guarantee." If the Company does not make
interest payments on the Subordinated Debt Securities, it is expected that the
Trust will not have sufficient funds to pay distributions on such Capital
Securities. The Guarantee will not apply to any payment of distributions except
to the extent that Trust has funds available for the payment of such
distributions. The Guarantee will cover the payment of distributions and other
payments on such Capital Securities only if and to the extent that the Company
has made payments of interest or principal (or premium, if any) on the
Subordinated Debt Securities held by the Trust as its sole assets. The
Guarantee, when taken together with the Company's obligations under the
Subordinated Debt Securities, the Declaration and the Indenture, including its
obligations to pay costs, expenses, debts and other obligations of the Trust
(other than with respect to the Trust Securities), provide a full and
unconditional guarantee on a subordinated basis by the Company of amounts when
due on such Capital Securities.
If the Company fails to make interest or other payments on the
Subordinated Debt Securities when due (after giving effect to any Extension
Period), the Declaration provides a mechanism whereby the holders of the Capital
Securities, using the procedures described herein under "Description of the
Capital Securities -- Book-Entry Only Issuance -- The Depository Trust Company"
and " -- Voting Rights," may direct the Institutional Trustee to enforce its
rights under the Subordinated Debt Securities. If the Institutional Trustee
fails to enforce its rights under the Subordinated Debt Securities after a
majority in liquidation amount of Capital Securities have so directed the
Institutional Trustee, a holder of record of the Capital Securities may, to the
fullest extent permitted by law, institute a legal proceeding against the
Company to enforce the Institutional Trustee's rights under the Subordinated
Debt Securities without first instituting any legal proceedings against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay principal (or
premium, if any) or interest on the Subordinated Debt Securities on the
respective dates such principal (or premium, if any) or interest is payable,
after giving effect to any Extension Period (or in the case of redemption, on
the redemption date), then a holder of record of Capital Securities may
institute a Direct Action for payment on or after the respective due dates
specified in the Subordinated Debt Securities. In connection with such Direct
Action, the Company will be subrogated to the rights of such holder of Capital
Securities under the Declaration to the extent of any payment made by the
Company to such holder of Capital
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Securities in such Direct Action; provided, however, that no such subrogation
right may be exercised so long as a Declaration Event of Default has occurred
and is continuing.
The Subordinated Debt Securities and the Guarantee also are
effectively subordinated to all existing and future liabilities, including trade
payables and Deposits, of the Company's subsidiaries, except to the extent that
the Company is a creditor of the subsidiaries recognized as such.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Weil, Gotshal & Manges LLP, counsel to the
Company and the Trust (the "Counsel"), the following discussion, insofar as it
describes statements of law or legal conclusions, fairly summarizes the
principal United States federal income tax consequences to the holders of
Capital Securities attributable to the purchase, ownership and disposition of
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, each as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
This summary deals only with Capital Securities held as a capital
asset by a holder who or which purchased Capital Securities upon original
issuance (an "Initial Holder"). It does not deal with all aspects of United
States federal income taxation, nor with the particular United States federal
income tax consequences which may be applicable to certain classes of US Holders
(such as banks, thrift institutions, real estate investment trusts, regulated
investment companies, insurance companies, brokers and dealers in securities or
currencies, other financial institutions, tax-exempt organizations, persons
holding Capital Securities as a position in a "straddle," as part of a
"synthetic security or hedge," as part of a "conversion transaction" or as part
of any other integrated investment, persons having a functional currency other
than the U.S. Dollar and certain United States expatriates). Further, this
summary does not address (a) the federal income tax consequences to shareholders
in, or partners or beneficiaries of, a holder of Capital Securities, (b) the
United States federal alternative minimum tax consequences of the purchase,
ownership or disposition of Capital Securities, or (c) any state, local or
foreign tax consequences of the purchase, ownership and disposition of Capital
Securities.
EXCHANGE OF CAPITAL SECURITIES
For United States federal income purposes, the exchange of Old
Capital Securities for New Capital Securities pursuant to the Exchange Offer
should not be a taxable event to holders and should not be treated as an
"exchange." Accordingly, there should be no United States federal income tax
consequences as a result of the consummation of the Exchange Offer.
US HOLDERS
A "US Holder" is a holder of Capital Securities who or which is
a citizen or individual resident of the United States for federal income tax
purposes, a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, or a
trust or estate the income of which is includible in its gross income for United
States federal income tax purposes without regard to its source.
CHARACTERIZATION OF THE TRUST
In connection with the issuance of the Old Capital Securities,
Counsel rendered its opinion generally to the effect that, under then current
law and assuming full compliance with the terms of the Indenture and the
Declaration (and certain other documents), and based on certain assumptions and
qualifications referenced in the opinion, the Trust will be characterized for
United States federal income tax purposes as a grantor trust and not as an
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association taxable as a corporation. The discussion herein under the heading
"Certain Federal Income Tax Consequences" assumes that the Trust will be so
characterized. Accordingly, for federal income tax purposes, each holder of
Capital Securities generally will be considered the owner of an undivided
interest in the Subordinated Debt Securities owned by the Trust, and each US
Holder will be required to include all federal income or gain recognized for
federal income tax purposes with respect to its allocable share of the
Subordinated Debt Securities on its own income tax return. Investors should be
aware that such tax opinion is not binding on the Internal Revenue Service (the
"Service") or the courts.
CHARACTERIZATION OF THE SUBORDINATED DEBT SECURITIES
In connection with the issuance of the Old Subordinated Debt
Securities, Counsel rendered its opinion generally to the effect that, under
then current law and assuming full compliance with the terms of the Indenture
(and other documents), and based on certain assumptions and qualifications
referenced in the opinion, the Subordinated Debt Securities will be
characterized for United States federal income tax purposes as debt of the
Company. The discussion herein under the heading "Certain Federal Income Tax
Consequences" assumes that the Subordinated Debt Securities will be so
characterized. Investors should be aware that such tax opinion is not binding on
the Service or the courts.
ORIGINAL ISSUE DISCOUNT
Under the terms of the Subordinated Debt Securities, the Company
has the option to defer payments of interest from time to time by extending the
interest payment period for a period not exceeding 10 consecutive semiannual
periods, but not beyond the maturity of the Subordinated Debt Securities.
Recently issued Treasury regulations under Section 1273 of the Code provide that
debt instruments like the Subordinated Debt Securities will not be considered
issued with OID by reason of the Company's option to defer payments of interest
if the likelihood of deferral is "remote."
The Company has concluded, and this discussion assumes, that, as
of the date of issuance of the Old Subordinated Debt Securities, the likelihood
of exercise of that option is "remote" within the meaning of the applicable
regulations, in part because exercising that option would prevent the Company
from declaring dividends on its stock and would prevent the Company from making
any payments with respect to debt securities that rank pari passu or junior to
the Subordinated Debt Securities. In such case, the Subordinated Debt Securities
should not be treated as issued with OID by reason of the Company's deferral
option. Rather, stated interest on the Subordinated Debt Securities will
generally be taxable to a US Holder, as ordinary income, when paid or accrued in
accordance with that holder's method of accounting for federal income tax
purposes. It should be noted, however, that these regulations have not yet been
addressed in any rulings or other interpretations by the Service. Accordingly,
it is possible that the Service could take a position contrary to the
interpretation described herein.
Notwithstanding the foregoing, in the event the Company does
exercise its option to defer payments of interest, the Subordinated Debt
Securities would be treated as retired and reissued for OID purposes and the sum
of the remaining interest payments on the Subordinated Debt Securities would
thereafter be treated as OID, which would accrue, and be includible in a US
Holder's taxable income, on an economic accrual basis (regardless of the US
Holder's method of accounting for federal income tax purposes) over the
remaining term of the Subordinated Debt Securities (including any period of
interest deferral), without regard to the timing of payments under the
Subordinated Debt Securities. Subsequent distributions of interest on the
Subordinated Debt Securities generally would not be taxable. The amount of OID
that accrues in any period generally would equal the amount of interest that
accrues on
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the Subordinated Debt Securities in that period at the stated interest rate.
Consequently, during any period of interest deferral, US Holders will include
OID in gross income in advance of the receipt of cash, and a US Holder which
disposes of a Capital Security prior to the record date for payment of
distributions on the Subordinated Debt Securities following that period will be
subject to income tax on OID accrued through the date of disposition (and not
previously included in income), but will not receive cash from the Trust with
respect to that OID.
If the likelihood of exercise of Company's option to defer
payments of interest were not treated as remote, the Subordinated Debt
Securities would be treated as initially issued with OID in an amount equal to
the aggregate stated interest over the term of the Subordinated Debt. That OID
would generally be includible in a US Holder's taxable income, over the term of
the Subordinated Debt Securities, on an economic accrual basis, whether or not
the Company does exercise its option to defer payments of interest. The amount
of OID that accrues in any period generally would equal the amount of interest
that accrues on the Subordinated Debt Securities in that period at the stated
interest rate.
Because the income underlying the Capital Securities will not be
characterized as dividends for income tax purposes, corporate holders of Capital
Securities will not be entitled to a dividends-received deduction for any income
recognized with respect to the Capital Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Capital Securities other than Initial Holders may be
considered to have acquired their undivided interests in the Subordinated Debt
Securities with market discount or acquisition premium (as each phrase is
defined for federal income tax purposes).
RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF THE
TRUST
Under certain circumstances described herein (See "Description of
the Capital Securities"), the Company will have the right to distribute
Subordinated Debt Securities to holders in exchange for the Capital Securities
and in liquidation of the Trust. Under current law, such a distribution would
not be a taxable event for federal income tax purposes, and each US Holder would
have an aggregate adjusted basis in its Subordinated Debt Securities for federal
income tax purposes equal to such holder's aggregate adjusted basis in its
Capital Securities. For federal income tax purposes, a US Holder's holding
period in the Subordinated Debt Securities received in such a liquidation of the
Trust would include the period during which the Capital Securities were held by
the holder. If, however, the relevant event is a Tax Event which results in the
Trust being treated as an association taxable as a corporation, the distribution
would likely constitute a taxable event to US Holders of the Capital Securities
for federal income tax purposes.
Under certain circumstances described herein (see "Description of
the Capital Securities"), the Subordinated Debt Securities may be redeemed for
cash and the proceeds of such redemption distributed to holders in redemption of
their Capital Securities. Such a redemption would be taxable for income tax
purposes, and a US Holder would recognize gain or loss as if it had sold the
Capital Securities for cash. See " -- Sales of Capital Securities" below.
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SALES OF CAPITAL SECURITIES
A US Holder that sells Capital Securities will recognize gain or
loss equal to the difference between its adjusted basis in the Capital
Securities and the amount realized on the sale of such Capital Securities (other
than with respect to accrued but unpaid interest which has not yet been included
in income, which will be treated as ordinary income). Assuming the Capital
Securities are not deemed to be issued with OID, a US Holder's adjusted tax
basis in the Capital Securities generally will be its initial purchase price. If
the Capital Securities are deemed to be issued with OID (either upon original
issuance or at the time the Company exercises its option to defer interest
payments), a holder's tax basis in the Capital Securities generally will be its
initial issue price, increased by OID previously includible in such holder's
gross income to the date of disposition and decreased by payments received on
the Capital Securities from and including the date the Capital Securities were
deemed to be issued with OID. Except as noted above, any such gain or loss
generally will be 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 federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton submitted to Congress the
Proposal to implement tax legislation. As explained in the Joint Committee
Description, the Proposal contains a provision which generally would deny a
deduction for interest on an instrument which (a) is issued by a corporation,
(b) has a maximum term of more than 15 years and (c) is not shown as
indebtedness on the separate balance sheet of the issuer (or, if the instrument
is issued to a related party other than a corporation and the holder or some
other related party issues a related instrument, such instrument is not shown as
indebtedness on the issuer's consolidated balance sheet). As explained in the
Joint Committee Description, legislation enacted under the Proposal would be
effective generally for instruments issued on or after the date of first
congressional committee action. To date there has been no congressional
committee action on the Proposal.
While the Company expects to be able to deduct interest on the
Subordinated Debt Securities, see "-- Characterization of the Subordinated Debt
Securities," there can be no assurance that the Proposal, if implemented, will
not result in legislation having a retroactive effect and applicable to the
Subordinated Debt Securities. Furthermore, there can be no assurance that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Company to deduct the interest payable on the Subordinated
Debt Securities. Accordingly, there can be no assurance that a Tax Event will
not occur. See "Risk Factors -- Redemption; Distribution" and "Description of
the Subordinated Debt Securities -- Proposed Tax Legislation."
NON-US HOLDERS
The following discussion applies to an Initial Holder who is not
a US Holder (a "Non-US Holder").
Payments by the Trust to a holder of a Capital Security which is
a Non-US Holder will generally not be subject to United States federal income
tax or withholding of United States federal income tax if the income is not
effectively connected with the conduct of a trade or business within the United
States, provided that (a) the beneficial owner of the Capital Security does not
(directly or indirectly, actually or constructively) own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote, (b) the beneficial owner of the Capital Security is not a controlled
foreign corporation that is related to the Company through stock ownership, (c)
the beneficial owner of a Capital Security is not a bank with respect to which
the Capital Security constitutes an
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extension of credit made pursuant to a loan agreement entered into the ordinary
course of its trade or business, and (d) either (i) the beneficial owner of the
Capital Securities certifies to the Trust or its agent, under penalties of
perjury, that it is a Non-US Holder and provides its name and address, or (ii) 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 Securities in such capacity,
certifies to the Trust or its agent, under penalties of perjury, that such a
statement has been received from the beneficial owner by it or by another
Financial Institution between it and the beneficial owner in the chain of
ownership, and furnishes the Trust or its agent with a copy thereof.
As discussed above (see "-- Prior Tax Legislation"), changes in
legislation affecting the income tax consequences of the Subordinated Debt
Securities are possible, and could adversely affect the ability of the Company
to deduct the interest payable on the Subordinated Debt Securities. Moreover,
any such legislation could adversely affect, as the Proposed Legislation would
have adversely affected, Non-US Holders by characterizing income derived from
the Subordinated Debt Securities as dividends, generally subject to a 30% United
States federal income tax (on a withholding basis) when paid to a Non-US Holder
(subject to reduction under applicable treaties), rather than as interest which,
as discussed above, is generally exempt from income tax in the hands of a Non-US
Holder.
Under current law, a Non-US Holder of a Capital Security will
generally not be subject to withholding of income tax on any gain realized upon
the sale or other disposition of a Capital Security provided such holder is not
engaged or considered to be engaged in the conduct of a trade or business in the
United States or, in the case of an individual Non-US Holder, such holder is
present in the United States for less than 183 days in the taxable year of the
sale or other disposition of a Capital Security.
A Non-US Holder which holds Capital Securities in connection with
the conduct of a United States trade or business will be subject to United
States federal income tax on all income and gains recognized with respect to its
proportionate share of the Subordinated Debt Securities.
INFORMATION REPORTING; BACKUP WITHHOLDING
The Trust intends to report income on the Capital Securities for
a calendar year to holders of record on Forms 1099 by the following January
31st. Payments made on, and proceeds from the sale of, the Capital Securities
may be subject to a "backup" withholding tax of 31% unless the holder complies
with certain identification or exemption requirements. Any amounts so withheld
will be allowed as a credit against the holder's income tax liability, or
refunded, provided that the required information is provided to the Service.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY AND DOES NOT ADDRESS
THE CONSEQUENCES TO A PARTICULAR HOLDER OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF CAPITAL SECURITIES. POTENTIAL HOLDERS OF CAPITAL SECURITIES ARE
URGED TO CONTACT THEIR OWN TAX ADVISORS TO DETERMINE THEIR PARTICULAR TAX
CONSEQUENCES.
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PLAN OF DISTRIBUTION
Any broker-dealer who holds Old Securities acquired for its own
account as a result of market-making activities or other trading activities, and
who receives New Securities in exchange for such Old Securities pursuant to the
Exchange Offer may be a statutory underwriter and must deliver a prospectus
meeting the requirements of the Securities Act, in connection with any resales
of such New Securities. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection with resales of
New Capital Securities received in exchange for Old Capital Securities where
such Old Capital Securities were acquired as a result of market-making
activities or other trading activities. Subject to certain provisions set forth
in the Registration Rights Agreement and to the limitations set out herein, the
Company and the Trust have agreed that, starting on the date on which the
Exchange Offer is consummated and ending on the close of business one year after
such date (or longer, if required by the Registration Rights Agreement), they
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
August 21, 1997, all dealers effecting transactions in the New Capital
Securities may be required to deliver a prospectus. In that regard, each
Exchanging 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 Exchanging Dealer
will suspend the sale of New Securities 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 Exchanging Dealer or the Company or the Trust has given
notice that the sale of the New Securities may be resumed, as the case may be.
The Company and the Trust will not receive any proceeds from any
sale of New Capital Securities by broker-dealers. New Capital Securities
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the 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 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 pursuant to 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 an such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of one year after the date on which the Exchange
Offer is consummated, the Company and the Trust will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offer (including
the expenses of one counsel for the holders of the Old Capital Securities) other
than commissions or concessions of any brokers or dealers and will indemnify the
holders of
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the Old Capital Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
ERISA CONSIDERATIONS
Each fiduciary of a Plan subject to ERISA should consider the
fiduciary standards of ERISA in the context of the Plan's particular
circumstances before authorizing an investment in the Capital Securities.
Accordingly, among other factors, the fiduciary should consider whether the
investment would satisfy the prudence and diversification requirements of ERISA
and would be consistent with the documents and instruments governing the Plan.
The prohibited transaction rules of ERISA and Section 4975 of the
Code apply to Plans, including individual retirement accounts and entities
deemed to hold plan assets by reason of Department of Labor regulation, 29
C.F.R. ss.ss. 2510.3-101 ("Plan Assets Regulation") or applicable law, of such
employee benefit plans, accounts or plans (collectively "Plans"). Such rules
prohibit certain transactions involving "plan assets" of a Plan with persons who
are "parties in interest" under ERISA or "disqualified persons" under the Code
("Parties in Interest") with respect to such Plan unless exemptive relief is
available under an applicable statutory or administrative exemption. Employee
benefit plans that are governmental plans (as defined in Section 3(32) of
ERISA), certain church plans (as defined in Section 3(33) of ERISA) and foreign
plans (as described in Section 4(b)(5) of ERISA) are not subject to the
requirements of ERISA or Section 4975 of the Code.
Pursuant to an exception contained in the Plan Assets Regulation,
the assets of the Trust would not be deemed to be "plan assets" of Plans
acquiring Capital Securities if (i) the Capital Securities constitute publicly
offered securities, or (ii) immediately after the most recent acquisition of any
equity interest in the Trust, less than 25% of the value of each class of equity
interests in the Trust were held by Plans and other benefit plan investors
within the meaning of the Plan Assets Regulation (collectively, "Benefit Plan
Investors"), excluding for this purpose any Trust Securities owned by the
Institutional Trustee, the Delaware Trustee, the Company, the Administrators or
any of their affiliates. The Plan Assets Regulation states that a beneficial
interest in a trust is an equity interest. The acquisition of Capital Securities
(i) by at least 100 persons who are independent of one another (at the
completion of the initial offering or otherwise) for purposes of satisfying the
definition of a publicly offered security or (ii) by Benefit Plan Investors,
will not be monitored. Therefore, no assurances can be provided by the Initial
Purchasers that the assets of the Trust would not be treated as "plan assets" of
Plans owning Capital Securities at any time.
Certain transactions involving the Trust could be deemed to
constitute direct or indirect prohibited transactions under ERISA and Section
4975 of the Code if the assets of the Trust were deemed to be "plan assets" of
Plans investing in the Trust. For example, if the Company is a Party in Interest
with respect to an investing Plan, extensions of credit between the Company and
the Trust (as represented by the Subordinated Debt Securities and the
Guarantees) would likely be prohibited by Section 406(a)(1)(B) of ERISA and
Section 4975(c)(1)(B) of the Code, unless exemptive relief were available under
an applicable administrative exemption (see below).
The DOL has issued five PTCEs that may provide exemptive relief
for direct or indirect prohibited transactions resulting from the purchase or
holding of the Capital Securities, assuming that assets of the Trust were deemed
to be "plan assets" of Plans investing in the Trust (see above). Those class
exemptions are PTCE 96-23 (for certain transactions determined by in-house asset
managers), PTCE 96-60 (for certain transactions involving insurance company
general accounts), PTCE 91-38 (for certain transactions involving bank
collective investment funds), PTCE
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90-1 (for certain transactions involving insurance company separate accounts)
and PTCE 84-14 (for certain transactions determined by independent qualified
asset managers).
Because the Capital Securities may be deemed to be equity
interests in the Trust for purposes of applying ERISA and Section 4975 of the
Code, the Capital Securities may not be purchased or held by any Plan, any
entity whose underlying assets include "plan assets" by reason of any Plan's
investment in the entity (a "Plan Asset Entity") or any person investing "plan
assets" of any Plan, unless such purchaser or holder is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14. Any
purchaser or holder of the Capital Securities or any interest therein will be
deemed to have represented by its purchase and holding thereof that it either
(a) is not a Plan or a Plan Asset Entity and is not purchasing such securities
on behalf of or with "plan assets" of any Plan or (b) is eligible for the
exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-14 with
respect to such purchase or holding.
Due to the complexity of these rules and the penalties that may
be imposed upon persons involved in non-exempt prohibited transactions, it is
particularly important that fiduciaries or other persons considering purchasing
Capital Securities on behalf of or with "plan assets" of any Plan consult with
their counsel regarding the potential consequences if the assets of the Trust
were deemed to be "plan assets" and the availability of exemptive relief under
PTCE 96-23, 95-60, 91-38, 90-1 or 84-14.
The foregoing discussion with respect to Plans and other Benefit
Plan Investors is general in nature and is not intended to be all inclusive.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the
New Capital Securities and the creation of the Trust will be passed upon on
behalf of the Trust by Richards, Layton & Finger P.A., special Delaware counsel
to the Trust and the Company. The validity under New York law of the
Subordinated Debt Securities and the Guarantee will be passed upon for the
Company and the Trust by Weil, Gotshal & Manges LLP, New York, New York. Certain
United States federal income tax matters have been, and will be in connection
with the Exchange Offer, passed upon for the Company and the Trust by Weil,
Gotshal & Manges LLP, New York, New York.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995
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, 1996,
incorporated by reference herein, have been incorporated herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS EXCEPT AS CONTAINED IN THIS PROSPECTUS OR THE ACCOMPANYING
LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, NO SUCH INFORMATION OR
REPRESENTATION SHOULD BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
THE TRUST. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER
OF TRANSMITTAL OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE TRUST SINCE THE DATE HEREOF. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL OR BOTH TOGETHER
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL.
_____________________
TABLE OF CONTENTS
Page
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Available Information.......................................................2
Incorporation of Certain Documents by
Reference.................................................................3
Summary.....................................................................4
Risk Factors...............................................................15
Leucadia National Corporation..............................................21
Selected Financial Data....................................................24
Pro Forma Effect of Conseco Transaction....................................28
Capitalization.............................................................28
Accounting Treatment.......................................................30
Use of Proceeds............................................................30
The Trust..................................................................30
The Exchange Offer.........................................................32
The Consent Solicitation...................................................43
Description of the Capital Securities......................................44
Description of the Guarantee...............................................60
Description of the Subordinated Debt Securities............................63
Effect of Obligations Under the Declaration,
the Subordinated Debt Securities and the
Guarantee................................................................74
Certain Federal Income Tax Consequences....................................76
Plan of Distribution.......................................................81
ERISA Considerations.......................................................82
Legal Matters..............................................................83
Experts....................................................................83
$150,000,000
LEUCADIA CAPITAL
TRUST I
8.65% CAPITAL TRUST
PASS-THROUGH SECURITIES(SM)
(TRUPS(SM))
(Liquidation Amount $1,000
per Capital Security)
Fully and Unconditionally
Guaranteed, as described herein, by
LEUCADIA NATIONAL
CORPORATION
PROSPECTUS
DATED MAY 23, 1997
