-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CMDoP/CH6t0rm9NWni78+he55417JsDxUo+8TdqCSavEjYwGzg5IxYGsqcaQWiTD kGnznajSC+wK7bjLUzqekA== 0000909518-97-000309.txt : 19970529 0000909518-97-000309.hdr.sgml : 19970529 ACCESSION NUMBER: 0000909518-97-000309 CONFORMED SUBMISSION TYPE: 424B1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970528 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEUCADIA NATIONAL CORP CENTRAL INDEX KEY: 0000096223 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 132615557 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-21195 FILM NUMBER: 97615069 BUSINESS ADDRESS: STREET 1: 315 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2124601900 FORMER COMPANY: FORMER CONFORMED NAME: TALCOTT NATIONAL CORP DATE OF NAME CHANGE: 19800603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEUCADIA CAPITAL TRUST I CENTRAL INDEX KEY: 0001032199 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-21195-01 FILM NUMBER: 97615070 BUSINESS ADDRESS: STREET 1: 315 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2124601900 MAIL ADDRESS: STREET 1: 315 PARK AVENUE SOUTH CITY: NEW YORK STATE: NY ZIP: 10010 424B1 1 PROSPECTUS 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) (Cover Page continued on next page) (cover page continued) 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) (Cover Page continued on next page) (cover page continued) 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) (Cover Page continued on next page) (cover page continued) 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) (Cover Page continued on next page) (cover page continued) 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 (v) (Cover Page continued on next page) (cover page continued) 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) (Cover Page continued on next page) (cover page continued) 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, (vii) (Cover Page continued on next page) (cover page continued) 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 (viii) (Cover Page continued on next page) (cover page continued) 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) 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. 2 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. 3 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 4 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 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 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 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 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 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 10 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 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)), 12 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 13 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. 14 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 15 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. 16 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 17 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 18 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." 19 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 20 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 21 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 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 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.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------------ --------------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- (Unaudited) (In thousands, except per share amounts) 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 ==== ==== ===== ===== ===== ===== =====
24
AT MARCH 31, AT DECEMBER 31, ------------ ------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- (Unaudited) (In thousands, except per share amounts) 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
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------- ------------------------------------------------------ 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- 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 - ------------------- (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.
25 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
Three Months Year Ended Ended March 31, December 31, 1997 1996 1996 ---------- ---------- -------- (Unaudited) (In thousands, except per share amounts) 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 ==== ==== =====
26 LEUCADIA NATIONAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1997 and December 31, 1996 (Dollars in thousands, except par value)
March 31, December 31, 1997 1996 ----------- ------------ (Unaudited) 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 ========== ==========
27 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 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 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 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 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 32 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 33 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 34 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 35 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 36 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 37 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 38 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 39 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 40 405 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. 41 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. 42 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." 43 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 44 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, 45 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: 46 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 47 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 48 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 49 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 50 "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 51 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. 52 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. 53 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 54 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 55 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. 56 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 57 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 58 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. 59 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. 60 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 61 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. 62 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 63 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) 64 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 65 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. 66 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." 67 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 68 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 69 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 -- 70 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 71 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 72 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. 73 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 74 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. 75 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 76 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 77 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. 78 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 79 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. 80 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 81 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 82 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. 83 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 ---- 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 -----END PRIVACY-ENHANCED MESSAGE-----