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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 2001
REGISTRATION NO. 333-58350
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
HCC INSURANCE HOLDINGS, INC. HCC CAPITAL TRUST I
(Exact name of Registrant as specified in its charter) HCC CAPITAL TRUST II
(Exact Name of Each Registrant as specified in its charter)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
76-6494416
76-0336636 76-6494417
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
13403 NORTHWEST FREEWAY 13403 NORTHWEST FREEWAY
HOUSTON, TEXAS 77040-6094 HOUSTON, TEXAS 77040-6094
(713) 690-7300 (713) 690-7300
(Address, including zip code, and telephone number, (Address, including zip code, and telephone number,
including including
area code, of Registrant's principal executive offices) area code, of each Registrant's principal executive offices)
STEPHEN L. WAY
13403 NORTHWEST FREEWAY
HOUSTON, TEXAS 77040-6094
(713) 690-7300
(Name, address including zip code, and telephone number, including area code, of
agent for service)
copies to:
ARTHUR S. BERNER, ESQ. CHRISTOPHER L. MARTIN, ESQ.
HAYNES AND BOONE, LLP VICE PRESIDENT AND GENERAL COUNSEL
1000 LOUISIANA STREET, SUITE 4300 HCC INSURANCE HOLDINGS, INC.
HOUSTON, TEXAS 77002-5012 13403 NORTHWEST FREEWAY
(713) 547-2526 HOUSTON, TEXAS 77040-6094
(713) 690-7300
Continued on next page
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE(2)(3) REGISTRATION FEE
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Primary Offering:
Common Stock of HCC Insurance Holdings, Inc. (par value
$1.00 per share)........................................
Senior Debt Securities of HCC Insurance Holdings, Inc. ...
Subordinated Debt Securities of HCC Insurance Holdings,
Inc. ...................................................
Warrants of HCC Insurance Holdings, Inc. .................
Junior Subordinated Debt of HCC Insurance Holdings,
Inc. ...................................................
Capital Securities of HCC Capital Trust I and HCC Capital
Trust II(4).............................................
Guaranties of HCC Insurance Holdings, Inc. with respect to
Capital Securities......................................
Total..................................................... $461,115,000 $461,115,000 $115,278.75
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(1) An indeterminate number of shares of common stock and warrants of HCC
Insurance Holdings, Inc., an indeterminate principal amount of senior and
subordinated debt securities of HCC Insurance Holdings, Inc. and junior
subordinated debt securities of HCC Insurance Holdings, Inc. and an
indeterminate number of capital securities of HCC Capital Trust I and HCC
Capital Trust II as may from time to time be issued at indeterminate prices,
with an aggregate offering price not to exceed $461,115,000. Junior
subordinated debt securities may be issued and sold to HCC Capital Trust I
and HCC Capital Trust II, in which event the junior subordinated debt
securities may later be distributed to the holders of capital securities.
(2) Estimated solely for the purpose of calculating the registration fee, which
is calculated in accordance with Rule 457(o) of the rules and regulations
under the Securities Act of 1933. Rule 457(o) permits the registration fee
to be calculated on the basis of the maximum offering price of all of the
securities listed and, therefore, the table does not specify by each class
information as to the amount to be registered, the proposed maximum offering
price per unit or the proposed maximum aggregate offering price. $65,278.75
of the registration fee was previously paid in connection with this filing.
(3) Excludes an indeterminate number of shares of common stock and warrants of
HCC Insurance Holdings, Inc., an indeterminate principal amount of senior
and subordinated debt securities of HCC Insurance Holdings, Inc., and junior
subordinated debt securities of HCC Insurance Holdings, Inc. and an
indeterminate number of capital securities of HCC Capital Trust I and HCC
Capital Trust II as may from time to time be issued at indeterminate prices,
with an aggregate offering price not to exceed $138,885,000, which
securities were previously registered on Form S-3 (File No. 333-46432) and
which are covered by the prospectus included in this Registration Statement
pursuant to Rule 429. The Company previously paid aggregate filing fees of
$36,666 in respect of these previously registered securities.
(4) Includes the rights of holders of the capital securities under the
applicable guarantee of capital securities, the obligations of HCC Insurance
Holdings, Inc. under the applicable trust agreement of each of HCC Capital
Trust I and HCC Capital Trust II and the obligations of HCC Insurance
Holdings, Inc. under the indenture for the junior subordinated debt
securities and any related supplemental indenture, all of which are
described in this Registration Statement. No separate consideration will be
received for any of such guarantee or obligations.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THE PROSPECTUS
INCLUDED IN THIS REGISTRATION STATEMENT ALSO RELATES TO $138,885,000 OF UNSOLD
SECURITIES REGISTERED UNDER REGISTRATION STATEMENT NO. 333-46432 IN RESPECT OF
WHICH A REGISTRATION FEE OF $36,666 WAS PAID ON SEPTEMBER 22, 2000.
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Continued from previous page
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective, as determined by the
applicable Registrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION DATED JULY 18, 2001
PROSPECTUS
[HCC LOGO]
HCC INSURANCE HOLDINGS, INC.
COMMON STOCK
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
WARRANTS
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HCC CAPITAL TRUST I
HCC CAPITAL TRUST II
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED IN THIS
PROSPECTUS, BY HCC INSURANCE HOLDINGS, INC.
We or either of the Trusts may offer from time to time up to $600,000,000
of any combination of the securities described in this prospectus. Neither we,
nor the Trusts will offer or sell any securities under this prospectus unless
accompanied by a prospectus supplement.
We may offer and sell, from time to time:
- debt securities;
- shares of our common stock;
- warrants to purchase our debt securities or our common stock;
- junior subordinated debt securities to be purchased by a Trust; and
- guarantees of trust preferred securities sold by a Trust.
A Trust may offer and sell, from time to time, trust preferred securities
representing undivided beneficial interests in the assets of the respective
trust.
We will provide the specific terms of these securities in one or more
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest in these securities.
We may sell the securities directly, or through agents designated from time
to time, or to or through underwriters or dealers. If any underwriters are
involved in the sale of any securities, their names and any applicable
commissions or discounts will be set forth in a prospectus supplement. For
additional information on the methods of sale, you should refer to the section
entitled "Plan of Distribution."
Our common stock is listed on the NYSE under the Symbol "HCC." The last
reported sale price on July 17, 2001 was $23.88 per share.
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INVESTMENT IN THESE SECURITIES INVOLVES RISK. SEE THE RISK FACTORS
SECTION BEGINNING ON PAGE 5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy of this prospectus or whether it is truthful or complete. Any
representation to the contrary is a criminal offense.
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The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
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About This Prospectus....................................... 1
The Company................................................. 2
Risk Factors................................................ 5
Use of Proceeds............................................. 11
Ratio of Earnings to Fixed Charges.......................... 11
Description of Our Common Stock............................. 11
Description of Senior Debt Securities and Subordinated Debt
Securities................................................ 13
Description of Warrants..................................... 19
Description of Trust Related Junior Subordinated Debt
Securities................................................ 21
Description of Trust Preferred Securities................... 31
Description of Trust Related Guarantees..................... 41
Relationship Among the Trust Preferred Securities, the
Corresponding Junior Subordinated Securities and the
Guarantees................................................ 43
Book-Entry Issuance......................................... 45
Plan of Distribution........................................ 47
Certain Legal Matters....................................... 48
Experts..................................................... 49
About Forward-Looking Statements............................ 49
Where You Can Find More Information......................... 49
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process.
Under the shelf registration process, we may offer any combination of the
securities described in this prospectus in one or more offerings with a total
offering price of up to $600,000,000. This prospectus provides you with a
general description of securities we may offer. Each time we use this prospectus
to offer securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus supplement
may also add, update or change information contained in this prospectus. Unless
we provide otherwise in the prospectus supplement, we may redeem our junior
subordinated debt securities issued to a Trust for cash, or cause the Trusts to
liquidate and give investors our junior subordinated debt securities in place of
the Trust's trust preferred securities. Please carefully read this prospectus,
any prospectus supplement and the documents incorporated by reference in the
prospectus together with the additional information described under "Where You
Can Find More Information" and "Risk Factors" before you make an investment
decision.
You should rely only on the information contained in this prospectus and
the applicable prospectus supplement. We have not authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell the securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus,
together with the information we previously filed with the SEC and incorporate
by reference, is accurate only as of the date on the front cover of this
prospectus. The information included in any prospectus supplement is accurate
only as of the date of that prospectus supplement. Our business, financial
condition, results of operations and prospects may change after the date on the
front cover of this prospectus.
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THE COMPANY
As used in this prospectus, unless otherwise required by the context, the
terms "we," "us," "our" and the "Company" refer to HCC Insurance Holdings, Inc.
and its consolidated subsidiaries, and the term "HCC" refers only to HCC
Insurance Holdings, Inc. References to a "Trust" or an "HCC Trust" refer to
either HCC Capital Trust I or HCC Capital Trust II, which are the Delaware
statutory business trusts that we have formed to issue the trust preferred
securities which may be issued under this prospectus.
OVERVIEW
We provide property and casualty insurance and accident and health
insurance coverages, underwriting agency and intermediary services, and other
insurance related services both to commercial customers and individuals. We
concentrate our activities in selected narrowly defined lines of business. We
operate primarily in the United States and the United Kingdom, although some of
our operations have a broader international scope. We underwrite insurance both
on a direct basis, where we insure a risk in exchange for a premium, and on a
reinsurance basis, where we insure all or a portion of another insurance
company's risk in exchange for all or a portion of the premium. We market our
insurance products both directly to customers and through a network of
independent or affiliated agents and brokers.
Our insurance companies are risk-bearing and focus their underwriting
activities on providing insurance and/or reinsurance in the following lines of
business:
- accident and health;
- general aviation;
- marine and offshore energy;
- medical stop-loss;
- property; and
- workers' compensation.
In the United States, Avemco Insurance Company, U.S. Specialty Insurance
Company and HCC Life Insurance Company operate on an admitted, or licensed,
basis. Houston Casualty Company operates on a surplus lines basis as a
non-admitted, or unlicensed, insurer offering insurance coverage not otherwise
available from an admitted insurer in the relevant state.
Our agencies underwrite on behalf of our insurance companies and other
insurance companies. Our underwriting agencies receive fees for these services.
Our agencies do not bear any of the insurance risk of the companies for which
they underwrite. Our underwriting agencies generate revenues based entirely on
management fees and profit commissions and specialize in medical stop-loss
insurance and a variety of accident and health related insurance and reinsurance
products. Our medical stop-loss insurance provides coverages to companies,
associations and public entities that elect to self-insure their employee's
medical coverage for losses within specified levels, allowing them to manage the
risk of excessive health insurance exposure by limiting aggregate and specific
losses to a predetermined amount.
We have recently consolidated the operations of certain of our agencies
with certain of our insurance companies to improve operational efficiencies. The
operations of HCC Aviation Insurance Group, Inc., and our occupational accident
and workers' compensation underwriting agency, HCC Employer Services, Inc., were
consolidated into those of our licensed property and casualty insurance company,
U.S. Specialty Insurance Company, and the operations of our London-based
accident and health underwriting agency, LDG Re (London), Ltd., were
consolidated with those of the London branch of our largest property and
casualty insurance company, Houston Casualty Company.
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Our intermediaries provide insurance and reinsurance brokerage services for
our insurance companies and our clients, and receive fees for their services.
Our intermediaries do not bear any of the insurance risks of the companies they
act on behalf of. They earn commission income and to a lesser extent fees for
certain services, generally paid by the insurance and reinsurance companies with
whom the business is placed. These operations consist of:
- consulting on risks by providing information to clients about insurance
coverage;
- marketing risks by providing information and assistance on pricing a
particular insurance risk;
- placing risks by negotiating with insurers and reinsurers to accept an
insurance risk; and
- servicing risks by facilitating the collection of premiums and resolution
of claims on behalf of our insurance clients.
Our intermediaries specialize in developing and marketing employee benefit
plans on a retail basis and in placing reinsurance for both accident and health,
and property and casualty lines of business.
We are a Delaware corporation. Our principal executive offices are located
at 13403 Northwest Freeway, Houston, Texas 77040 and our telephone number is
(713) 690-7300. We maintain a World Wide Web-site at www.hcch.com. The reference
to our World Wide Web address does not constitute the incorporation by reference
of the information contained at this site in this prospectus supplement or the
accompanying prospectus.
OUR STRATEGY
Our business philosophy as an insurer is to maximize underwriting profits
while limiting risk in order to preserve shareholders' equity and maximize
earnings. We concentrate our insurance writings in selected, narrowly defined
lines of business where we believe we can achieve an underwriting profit. We
focus on lines of business that have relatively short lead times between the
occurrence of an insured event and the reporting of claims. We market our
insurance products both directly to customers and through independent or
affiliated agents and brokers.
The property and casualty insurance industry and individual lines of
business within the industry are cyclical in that there are times when a large
number of companies offer insurance on certain lines of business, and the
premiums tend to go down, and other times where insurance companies decide to
limit their writings in certain lines of business or suffer from excessive
losses, which tends to increase the premiums for those companies that continue
to write insurance in those lines of business. In our insurance company
operations, we believe our operational flexibility, which permits us to shift
the focus of our insurance underwriting activity among our various lines of
business and also to shift the emphasis from our insurance risk-bearing business
to our non-insurance fee-based business, as well as our experienced underwriting
personnel and access to, and expertise in, the reinsurance marketplace allow us
to implement a strategy of emphasizing more profitable lines of business during
periods of increased premium rates and de-emphasizing less profitable lines of
business during periods of severe competition. In addition, we believe that our
underwriting agencies and intermediary subsidiaries complement our insurance
underwriting activities. Our ability to utilize affiliated insurers,
underwriting agencies, intermediaries and service providers permits us to retain
a greater portion of the gross revenue derived from written premium.
We purchase reinsurance by transferring part of the risk we have assumed
through the process of ceding this risk to a reinsurance company in exchange for
part of the premium we receive in connection with the risk. We purchase
reinsurance to limit the net loss from both individual and catastrophic risks to
our insurance companies. The amount of reinsurance we purchase varies by, among
other things, the particular risks inherent in the policies underwritten, the
pricing of reinsurance and the competitive conditions within the relevant line
of business. In 2000, due to a hardening of the respective markets, premium
rates in the accident and health, general aviation and medical stop-loss lines
of business increased. We anticipate continued improvements in these markets in
2001. In response to these changing
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market conditions, we plan to continue to expand the underwriting activities in
our insurance company operations.
We also acquire or make strategic investments in companies that present an
opportunity for future profits or for enhancement of our business. We expect to
continue to seek to acquire complementary businesses with established management
and established reputations in the insurance industry. We believe that we can
enhance acquired businesses through the synergies created by our underwriting
capabilities and our other operations. However, our business plan is shaped by
our underlying business philosophy, which is to maximize underwriting profit,
while preserving shareholders' equity. As a result, our primary objective is to
increase net earnings rather than market share or gross written premium.
In our ongoing operations, we will continue to:
- emphasize the underwriting of lines of business in which premium rates,
the availability and cost of reinsurance, and market conditions warrant;
- limit our net loss exposure to our insurance company subsidiaries from a
catastrophe loss through the use of reinsurance; and
- review the potential acquisition of specialty insurance operations and
other strategic investments.
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RISK FACTORS
Investing in our securities will provide you with an interest in, or
obligation of, our Company. As an investor, you will be subject to risks
inherent in our businesses. The performance of your investment in our Company
will reflect the performance of our business relative to, among other things,
general economic and industry conditions, market conditions and competition. The
value of your investment may increase or it may decline and could result in a
loss. You should carefully consider the following factors as well as other
information contained in this prospectus or information incorporated by
reference before deciding to make any investment in our Company.
THE AVAILABILITY OF REINSURANCE TO REINSURE OUR RISKS AFFECTS OUR LEVEL OF
BUSINESS AND PROFITABILITY.
We purchase reinsurance for significant amounts of risk underwritten by our
insurance company subsidiaries, especially catastrophe risks. We also purchase
reinsurance on risks underwritten by others which we reinsure through a
retrocession agreement. Market conditions beyond our control determine the
availability and cost of the reinsurance protection we purchase, which may
affect the level of our business and profitability. For instance, the natural
attrition of reinsurers who exit lines of business, or who curtail their
writings, for economic or other reasons reduces the capacity of the reinsurance
market, causing rates to rise. In addition, the historical results of
reinsurance programs and the availability of capital also affect the
availability of reinsurance. Our reinsurance facilities are generally subject to
annual renewal. We cannot assure you that we can maintain our current
reinsurance facilities or that we can obtain other reinsurance facilities in
adequate amounts and at favorable rates. If we are unable to renew our expiring
facilities or to obtain new reinsurance facilities, either our net exposures
would increase or, if we are unwilling to bear an increase in net exposures, we
would have to reduce the level of our underwriting commitments, especially
catastrophe exposed risks. Either of these potential developments could have a
material adverse effect on our business. The lack of available reinsurance may
also adversely affect our ability to generate fee and commission income in our
underwriting agency and reinsurance intermediary operations. A reinsurance
intermediary structures and arranges reinsurance between insurers seeking to
cede insurance risks and reinsurers willing to assume such risks.
WE CANNOT GUARANTEE THAT OUR REINSURERS WILL PAY IN A TIMELY FASHION, IF AT ALL,
AND MUCH OF OUR PROFITABILITY IS DEPENDENT ON RECEIVING PAYMENT FROM OUR
REINSURERS.
We purchase reinsurance by transferring, or ceding, part of the risk we
have assumed to a reinsurance company in exchange for part of the premium we
receive in connection with the risk. Although reinsurance makes the reinsurer
liable to us to the extent the risk is transferred or ceded to the reinsurer, it
does not relieve us, the reinsured, of our liability to our policyholders or in
cases where we are a reinsurer, our reinsureds. Accordingly, we bear credit risk
with respect to our reinsurers. We cannot assure you that our reinsurers will
pay all of our reinsurance claims, or that they will pay our claims on a timely
basis. In 1999, we recorded a charge against our earnings to account for the
insolvency of one of our significant reinsurers and for the settlement of
another reinsurer's liabilities with us, and in 2000, we experienced some
reinsurers' delaying and contesting their obligations.
WE FACE SIGNIFICANT COMPETITIVE PRESSURES WHICH MAY AFFECT OUR SUCCESS AND
OPERATING RESULTS.
In our specialty insurance operations, we compete in narrowly-defined niche
classes of business such as the insurance of private aircraft, and employer
sponsored, self-insured medical plans (medical stop-loss), as distinguished from
such general lines of business as automobile or homeowners insurance. We compete
with a large number of other companies in our selected lines of business,
including: American International Group, U.S. Aviation Insurance Group, (a
subsidiary of Berkshire Hathaway, Inc.) and Associated Aviation Underwriters,
Inc., in our aviation line of business; SAFECO Corporation, Lincoln Financial
Group and Hartford Life, Inc. (a subsidiary of the Hartford Financial Services
Group, Inc.), in our medical stop-loss line of business; and Underwriters at
Lloyd's, Manufacturer's Life Insurance Company and ING Group, N.V. in our
accident and health line of business. We face competition both from specialty
insurance companies, underwriting agencies and intermediaries as well as
diversified
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financial services companies that are significantly larger than we are and that
have significantly greater financial, marketing, management and other resources
than we do. Some of these competitors also have significantly greater experience
and market recognition than we do. In addition to competition in the operation
of our business, we face competition from a variety of sources in attracting and
retaining qualified employees.
We cannot assure you that we will maintain our current competitive position
in the markets in which we operate, or that we will be able to expand our
operations into new markets. If we fail to do so, our business could be
materially adversely affected.
WE FACE LOSSES FROM UNFORESEEN CATASTROPHES BECAUSE WE ARE A PROPERTY AND
CASUALTY INSURER.
Property and casualty insurers are subject to claims arising out of
catastrophes that may have a significant effect on their results of operations,
liquidity and financial condition. Catastrophe losses have had a significant
impact on our results. Catastrophes can be caused by various events, including
hurricanes, windstorms, earthquakes, hailstorms, explosions, severe winter
weather and fires. The incidence and severity of catastrophes are inherently
unpredictable. The extent of losses from a catastrophe is a function of both the
total amount of insured exposure in the area affected by the event and the
severity of the event. Most catastrophes are restricted to small geographic
areas; however, hurricanes and earthquakes may produce significant damage in
large, heavily populated areas. Catastrophes can cause losses in a variety of
our property and casualty lines, and most of our past catastrophe-related claims
have resulted from hurricanes and earthquakes. Insurance companies are not
permitted to reserve for a catastrophe until it has occurred. In 2001,
approximately 10% of our business may be affected by catastrophes. It is
therefore possible that a catastrophic event or multiple catastrophic events
could have material adverse effect upon our results of operations, liquidity and
financial condition.
OUR FINANCIAL RESULTS ARE EXPOSED TO CURRENCY EXCHANGE RATE RISKS BECAUSE WE
OPERATE INTERNATIONALLY.
We underwrite insurance coverages which are denominated in a number of
foreign currencies, and we establish and maintain our loss reserves with respect
to these policies in their respective currencies. Our net earnings could be
adversely impacted by exchange rate fluctuations affecting receivable and
payable balances and reserves. Our principal area of exposure relates to
fluctuations in exchange rates between the major European currencies
(particularly the British pound sterling) and the U.S. dollar. Consequently, a
change in the exchange rate between the U.S. dollar and the British pound
sterling could have an adverse effect on our net earnings.
On a limited basis, we enter into foreign currency forward contracts as a
hedge against foreign currency fluctuations. The foreign currency forward
contracts are used to convert currency at a known rate in an amount which
approximates average monthly expenses. Thus, the effect of these transactions is
to limit the foreign currency exchange risk of the recurring monthly expenses.
We utilize these foreign currency forward contracts strictly as a hedge against
existing exposure to foreign currency fluctuations rather than as a form of
speculative or trading investment.
OUR EXPOSURE TO EXTENSIVE GOVERNMENTAL REGULATION MAY AFFECT OUR ABILITY TO
OPERATE IN MANY STATES.
We are subject to extensive governmental regulation and supervision. Most
insurance regulations are designed to protect the interests of policyholders
rather than shareholders and other investors. This regulation, generally
administered by a department of insurance in each state in which we do business,
relates to, among other things:
- approval of policy forms and premium rates;
- standards of solvency, including risk-based capital measurements (which
is a measure developed by the National Association of Insurance
Commissioners and used by state insurance regulators to identify
insurance companies that potentially are inadequately capitalized);
- licensing of insurers and their agents;
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- restrictions on the nature, quality and concentration of investments;
- restrictions on the ability of our insurance company subsidiaries to pay
dividends to us;
- restrictions on transactions between insurance company subsidiaries and
their affiliates
- restrictions on the size of risks insurable under a single policy;
- requiring deposits for the benefit of policyholders;
- requiring certain methods of accounting;
- periodic examinations of our operations and finances;
- prescribing the form and content of records of financial condition
required to be filed; and
- requiring reserves for unearned premium, losses and other purposes.
State insurance departments also conduct periodic examinations of the
affairs of insurance companies and require the filing of annual and other
reports relating to the financial condition of insurance companies, holding
company issues and other matters.
Recently adopted federal financial services modernization legislation is
expected to lead to additional federal regulation of the insurance industry in
the coming years. Also, foreign governments regulate our international
operations. Our business depends on compliance with applicable laws and
regulations and our ability to maintain valid licenses and approvals for our
operations.
Some regulatory authorities have relatively broad discretion to grant,
renew, or revoke licenses and approvals. Regulatory authorities may deny or
revoke licenses for various reasons, including the violation of regulations. In
some instances, we follow practices based on our interpretations of regulations,
or those that we believe may be generally followed by the industry, which may be
different from the requirements or interpretations of regulatory authorities. If
we do not have the requisite licenses and approvals and do not comply with
applicable regulatory requirements, the insurance regulatory authorities could
preclude or temporarily suspend us from carrying on some or all of our
activities or otherwise penalize us. That type of action could have a material
adverse effect on our business. Also, changes in the level of regulation of the
insurance industry (whether federal, state or foreign), or changes in laws or
regulations themselves or interpretations by regulatory authorities, could have
a material adverse effect on our business.
A REDUCTION IN OUR RATINGS BY A.M. BEST AND STANDARD & POOR'S COULD AFFECT OUR
OPERATIONS.
Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. Our insurance companies are rated
by A.M. Best Company and Standard & Poor's Corporation. A.M. Best and Standard &
Poor's ratings reflect their opinions of an insurance company's and insurance
holding company's financial strength, operating performance, strategic position,
and ability to meet its obligations to policyholders, and are not evaluations
directed to investors. Our ratings are subject to periodic review by A.M. Best
and Standard & Poor's and the continued retention of those ratings cannot be
assured. If our ratings are reduced from their current levels by A.M. Best
and/or Standard & Poor's, our results of operations could be adversely affected.
OUR FINANCIAL RESULTS MAY BE AFFECTED IF OUR ACTUAL CLAIMS LOSSES EXCEED OUR
RESERVES FOR CLAIMS BECAUSE THESE RESULTS ARE BASED ON ESTIMATED RESERVES FOR
CLAIMS.
We maintain loss reserves to cover our estimated liability for unpaid
losses and loss adjustment expenses, including legal and other fees as well as a
portion of our general expenses, for reported and unreported claims incurred as
of the end of each accounting period. Reserves do not represent an exact
calculation of liability. Rather, reserves represent an estimate of what we
expect the ultimate settlement and administration of claims will cost. These
estimates, which generally involve actuarial projections, are based on our
assessment of facts and circumstances then known, as well as estimates of future
trends in claims severity, frequency, judicial theories of liability and other
factors. These variables are affected by
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both internal and external events, such as changes in claims handling
procedures, inflation, judicial trends and legislative changes. Many of these
items are not directly quantifiable in advance. Additionally, there may be a
significant reporting lag between the occurrence of the insured event and the
time it is reported to us. The inherent uncertainties of estimating reserves are
greater for certain types of liabilities in which the various considerations
affecting these types of claims are subject to change and long periods of time
may elapse before a definitive determination of liability is made. Reserve
estimates are continually refined in a regular and ongoing process as experience
develops and further claims are reported and settled. Adjustments to reserves
are reflected in the results of the periods in which such estimates are changed.
Because setting reserves is inherently uncertain, there can be no assurance that
current reserves will prove adequate in light of subsequent events.
OUR FINANCIAL RESULTS MAY BE AFFECTED BECAUSE A SIGNIFICANT AMOUNT OF OUR ASSETS
ARE INVESTED IN FIXED INCOME SECURITIES THAT ARE SUBJECT TO MARKET FLUCTUATIONS.
As of March 31, 2001, $446.5 million of our $740.7 million investment
portfolio is invested in fixed income securities. The fair market value of these
fixed income securities and the investment income from these fixed income
securities fluctuate depending on general economic and market conditions. With
respect to our investments in fixed income securities, the fair market value of
these investments generally increases or decreases in an inverse relationship
with fluctuations in interest rates, while net investment income realized by us
from future investments in fixed income securities will generally increase or
decrease with interest rates. In addition, actual net investment income and/or
cash flows from investments that carry prepayment risk (such as mortgage-backed
and other asset-backed securities) may differ from those anticipated at the time
of investment as a result of interest rate fluctuations. An investment has
prepayment risk when there is a risk that the timing of cash flows that result
from the repayment of principal might occur earlier than anticipated because of
declining interest rates or later than anticipated because of rising interest
rates. Historically, the impact of market fluctuations has affected our
financial statements. Because all of our fixed income securities are classified
as available for sale, changes in the fair market value of our securities are
reflected in our balance sheet. Similar treatment is not available for
liabilities. Therefore, interest rate fluctuations could adversely affect our
generally accepted accounting principles, or GAAP, shareholders' equity, total
comprehensive income and/or our cash flows. Historically, the impact of market
fluctuations has affected our financial statements. Unrealized pre-tax net
investment gains (losses) on investments in fixed-income securities were $11.9
million, ($19.0 million) and $3.6 million for the years ended 2000, 1999 and
1998, respectively.
OUR FINANCIAL RESULTS MAY BE AFFECTED BECAUSE MANY STATES ASSESS OUR INSURANCE
COMPANY SUBSIDIARIES TO PROVIDE FUNDS FOR FAILED INSURANCE COMPANIES, WHICH
ASSESSMENTS COULD BECOME MATERIAL.
Our insurance company subsidiaries are subject to assessments in most
states where we are licensed for the provision of funds necessary for the
settlement of covered claims under certain policies provided by impaired,
insolvent or failed insurance companies. Maximum contributions required by law
in any one year vary by state, and have historically been between 1% and 2% of
annual premiums written. We cannot predict with certainty the amount of future
assessments. Significant assessments could have a material adverse effect on our
financial condition or results of operations.
DUE TO REGULATORY RESTRICTIONS IMPOSED ON INSURANCE HOLDING COMPANIES, WE MAY
NOT BE ABLE TO RECEIVE DIVIDENDS IN NEEDED AMOUNTS FROM OUR INSURANCE COMPANY
SUBSIDIARIES.
Our principal assets are the shares of capital stock of our insurance
company subsidiaries. We may rely on dividends from our insurance company
subsidiaries to meet our obligations for paying principal and interest on
outstanding debt obligations, dividends to shareholders and corporate expenses.
The payment of dividends by our insurance company subsidiaries is subject to
regulatory restrictions and will depend on the surplus and future earnings of
these subsidiaries, as well as the regulatory restrictions. As a result, we may
not be able to receive dividends from our subsidiaries at times and in amounts
necessary to meet our obligations.
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THE HCC TRUSTS
Each Trust is a statutory business trust that we have formed under Delaware
law. For each trust there is a trust agreement signed by HCC as depositor, by
First Union National Bank, as property trustee, and by First Union Trust
Company, N.A., as Delaware trustee. For each trust there is also a certificate
of trust filed with the Delaware Secretary of State. When we are ready to issue
and sell securities through the trust, the trust agreement will be amended to
read substantially like the form of amended and restated trust agreement that is
filed with the SEC as an exhibit to the registration statement of which this
prospectus is a part. Each trust agreement will be qualified as an indenture
under the Trust Indenture Act of 1939.
THE ISSUANCE AND SALE OF THE TRUST PREFERRED SECURITIES AND COMMON SECURITIES
We have created each Trust solely to:
- issue and sell its trust preferred securities and common securities,
which represent proportionate beneficial ownership interests in that Trust
and its assets;
- use the proceeds from the sale of the trust preferred securities and
common securities to buy from us a series of our junior subordinated debt
securities, which will be the only assets of that Trust;
- maintain its status as a grantor trust for federal income tax purposes;
and
- engage in only those other activities necessary or convenient to
accomplish the purposes listed above.
Because the Trusts' only assets will be junior subordinated debt securities
that we issue to them, our payments on the junior subordinated debt securities
will be the only source of funds to be paid to purchasers or owners of the trust
preferred securities and common securities. Each of the Trusts is a separate
legal entity, so the assets of one will not be available to satisfy the
obligations of the other trust or any other similar trust we may create.
We will acquire and own all of the common securities of each Trust. The
common securities will have an aggregate liquidation amount of at least 3% of
the total capital of each Trust. The remainder, representing up to 97% of the
ownership interests in the Trust, will be trust preferred securities of the
Trust that may be sold to the public. The common securities and the trust
preferred securities will have substantially the same terms, including the same
priority of payment and liquidation amount, and will receive proportionate
payments from the Trust in respect of distributions and payments upon
liquidation, redemption or otherwise at the same times, with one exception: if
we default on the junior subordinated debt securities that we issue to that
Trust and do not cure the default within the times specified in the indenture
governing the issuance of the junior subordinated debt securities, our rights to
payments as holder of the common securities will be subordinated to the rights
of the holders of the trust preferred securities. See "Description of Trust
Preferred Securities -- Subordination of Common Securities."
Unless we say otherwise in the applicable prospectus supplement, each Trust
will have a term of approximately 50 years. However, a Trust may terminate
earlier as provided in the applicable trust agreement and the prospectus
supplement.
Each Trust's business and affairs will be conducted by its trustees, whom
we, as holder of the common securities, will appoint. Unless we say otherwise in
the applicable prospectus supplement, the trustees for each Trust will be:
- First Union National Bank, as the property trustee; and
- First Union Trust Company, N.A., as the Delaware trustee.
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We refer to the property trustee and the Delaware trustee together as the
"issuer trustees." First Union National Bank, as property trustee, will act as
sole indenture trustee under each trust agreement for purposes of compliance
with the Trust Indenture Act. Unless we say otherwise in the applicable
prospectus supplement, First Union National Bank will also act as trustee under
our guarantee agreement relating to the trust preferred securities. See
"Description of Guarantees" and "Description of Trust Related Junior
Subordinated Debt Securities -- Certain Provisions Relating to Junior
Subordinated Debentures Issued to the HCC Trusts."
As the holder of the common securities of each Trust, we will ordinarily
have the right to appoint, remove or replace either issuer trustee for each
Trust. However, if we are in default with respect to the corresponding junior
subordinated debt securities issued to that Trust (and we have not cured that
default within the time specified in the indenture), then the holders of a
majority in liquidation amount of that Trust's outstanding trust preferred
securities will be entitled to appoint, remove or replace either or both issuer
trustees. In no event will the holders of the trust preferred securities have
the right to vote to appoint, remove or replace the administrators. We retain
that right exclusively as the holder of the common securities. The duties and
obligations of each issuer trustee are governed by the applicable trust
agreement.
Pursuant to the indenture and the trust agreements, we promise to pay all
fees and expenses related to each Trust and the offering of the trust preferred
securities and will pay, directly or indirectly, all ongoing costs, expenses and
liabilities of each Trust, except obligations under the trust preferred
securities and the common securities.
The Trusts have no separate financial statements. Separate financial
statements would not be material to holders of the trust preferred securities
because the Trusts have no independent operations. They exist solely for the
limited functions summarized above. We will guarantee the trust preferred
securities as described later in this prospectus.
The principal executive office of each Trust is 13403 Northwest Freeway,
Houston, Texas 77040, and its telephone number is (713) 690-7300.
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USE OF PROCEEDS
Except as otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of our securities (either to the
Trusts or directly to the public) for general corporate purposes, including, but
not limited to, the following purposes:
- contribute capital to insurance company subsidiaries;
- make acquisitions;
- make capital expenditures;
- provide working capital;
- purchase equity or fixed income investments;
- repay or refinance debt or other corporate obligations; or
- repurchase and redeem securities.
Pending any specific application, we may initially invest funds in
short-term marketable securities or apply them to the reduction of short-term
indebtedness.
Each Trust will use all of the proceeds it receives from the sale of its
trust preferred securities and common stock to purchase from us the junior
subordinated debentures that will provide the funds for that HCC Trust's
payments to purchasers of its trust preferred securities and common securities.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of our earnings to our fixed charges for the periods indicated
are as follows:
FOR THE YEARS ENDED DECEMBER 31,
FOR THE THREE MONTHS ----------------------------------
ENDED MARCH 31, 2001 2000 1999 1998 1997 1996
-------------------- ---- ---- ----- ----- ----
Ratio of earnings to fixed
charges........................... 7.58 5.13 3.58 15.42 11.10 9.31
For these ratios, earnings consist of income before interest expense,
estimated interest factor (33.3%) of rental expense, accounting changes and
income taxes. Fixed charges consist of interest expense, including amounts
capitalized and estimated interest factor (33.3%) of rent expense.
DESCRIPTION OF OUR COMMON STOCK
Set forth below is a summary of all of the material provisions of our
organizational documents. You should read the organizational documents, which
are filed as exhibits to this registration statement, for other provisions that
may be important to you. In addition, you should be aware that the summary below
does not give full effect to the terms of the provisions of statutory or common
law which may affect your rights as a shareholder.
Pursuant to our Certificate of Incorporation, we have the authority to
issue an aggregate of 250,000,000 shares of common stock, par value $1.00 per
share. As of July 1, 2001, 59,025,813 shares of common stock were outstanding,
and 8,059,934 shares of our common stock were reserved for issuance under our
various stock option plans.
Voting rights. Each share of common stock is entitled to one vote in the
election of directors and on all other matters submitted to a vote of our
shareholders. Our shareholders do not have the right to cumulate their votes in
the election of directors.
Dividends, distributions and stock splits. Holders of our common stock are
entitled to receive dividends if, as and when such dividends are declared by our
Board of Directors out of assets legally available therefor.
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Liquidation. In the event of any dissolution, liquidation, or winding up
of our affairs, whether voluntary or involuntary, after payment of our debts and
other liabilities, our remaining assets will be distributed ratably among the
holders of common stock.
Fully Paid. All shares of common stock outstanding are fully paid and
nonassessable, and all the shares of common stock to be outstanding upon
completion of this offering will be fully paid and nonassessable.
Other Rights. Holders of our common stock have no redemption or conversion
rights and no preemptive or other rights to subscribe for our securities.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
We are a Delaware corporation. The Delaware General Corporation Law
contains certain provisions that could discourage potential takeover attempts
and make it more difficult for our shareholders to change management or receive
a premium for their shares.
Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, the statute prohibits a publicly-held Delaware
corporation from engaging in a business combination with an "interested
shareholder" for a period of three years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner that includes approval by at
least 66.7% of the outstanding stock not owned by the interested shareholder. A
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the shareholder. For purposes of Section
203, an "interested shareholder" is defined to include any person that is:
- the owner of 15% or more of the outstanding voting stock of the
corporation;
- an affiliate or associate of the corporation and was the owner of 15% or
more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date; and
- an affiliate or associate of the persons described in the foregoing
bullet points.
Shareholders may, by adopting an amendment to the corporation's Certificate
of Incorporation or Bylaws, elect for the corporation not to be governed by
Section 203, effective 12 months after adoption. Neither our Certificate of
Incorporation nor our Bylaws exempt us from the restrictions imposed under
Section 203. It is anticipated that the provisions of Section 203 may encourage
companies interested in acquiring us to negotiate in advance with our Board of
Directors because shareholder approval of the transaction, as discussed above,
would be unnecessary.
Charter and Bylaw Provisions
Our Certificate of Incorporation and Bylaws provide that any action
required or permitted to be taken by our shareholders may be effected either at
a duly called annual or special meeting of the shareholders or by written
consent of the shareholders. Special meetings of shareholders may be called by
the President, the Board of Directors or by a majority of the shareholders
entitled to vote at the special meeting.
Our Certificate of Incorporation does not provide for the division of our
Board of Directors into classes. Each year at the annual meeting of
shareholders, all directors are elected to hold office until the next succeeding
annual meeting of shareholders. The number of directors is fixed by resolution
of the Board, but is required under the Bylaws to be at least seven and not more
than fifteen. The size of the board is currently fixed at twelve members.
Directors may be removed with the approval of the holders of a majority of
the shares entitled to vote at a meeting of shareholders. Directors may be
removed by shareholders with or without cause. Vacancies
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and newly-created directorships resulting from any increase in the number of
directors may be filled by a majority of the directors then in office, a sole
remaining director, or the holders of a majority of the shares entitled to vote
at a meeting of shareholders.
LIMITATION OF LIABILITY; INDEMNIFICATION
Our Certificate of Incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. These provisions eliminate a director's personal liability for
monetary damages resulting from a breach of fiduciary duty, except that a
director will be personally liable:
- for any breach of the director's duty of loyalty to us or our
shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law relating to
unlawful stock repurchases or dividends; or
- for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or those of any
shareholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws.
Our Bylaws also contain provisions indemnifying our directors and officers
to the fullest extent permitted by the Delaware General Corporation Law. We have
entered into separate indemnification agreements with our directors and officers
that may, in some cases, be broader than the specific indemnification provisions
contained in our Certificate of Incorporation, Bylaws or the Delaware General
Corporation Law. The indemnification agreements may require us, among other
things, to indemnify the officers and directors against certain liabilities,
other than liabilities arising from willful misconduct, that may arise by reason
of their status or service as directors or officers. These agreements also may
require us to advance the expenses incurred by the officers and directors as a
result of any proceeding against them as to which they could be indemnified. We
believe that these indemnification arrangements are necessary to attract and
retain qualified individuals to serve as directors and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is First Union
National Bank.
DESCRIPTION OF SENIOR DEBT SECURITIES AND
SUBORDINATED DEBT SECURITIES
GENERAL
The debt securities will be our general unsecured obligation and will be
issued as either senior notes and debentures, which are referred to throughout
as the senior debt securities, or subordinated notes and debentures, which are
referred to throughout as the subordinated debt securities, or both. We would
issue our debt securities under one or more separate indentures, in each case
between us, our subsidiary guarantors and the trustee, and in substantially the
form that has been filed as an exhibit to the registration statement of which
this prospectus is a part, but subject to any future amendments or supplements.
We will issue senior debt securities under a senior indenture and subordinated
debt securities under a subordinated indenture. We refer to the senior indenture
and the subordinated indenture below singularly as the indenture or together as
the indentures. We refer to the senior trustee and the subordinated trustee
below individually as a trustee and together as the trustees.
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Set forth below is a summary of all of the material terms of the
indentures. The particular terms of the debt securities we might offer and the
extent to which these general provisions apply will be described in a prospectus
supplement relating to the offered debt securities. We have included the forms
of the indentures under which the offered debt securities will be issued as
exhibits to the registration statement, and you should read the indentures for
provisions that may be important to you.
Our payment obligations under any debt securities may, if specified in any
prospectus supplement, be fully and unconditionally guaranteed by one or more of
our subsidiaries as subsidiary guarantors. If any series of debt securities is
guaranteed by one of our subsidiaries, the applicable prospectus supplement will
identify each subsidiary guarantor and describe such subsidiary guarantee,
including the circumstances in which it may be released. Unless specified
otherwise in any prospectus supplement, any guarantee of debt securities by one
or more of our subsidiaries will be on a full and unconditional basis.
Unless we provide otherwise in any prospectus supplement, the indentures do
not limit the aggregate principal amount of debt securities that we can issue.
We may issue debt securities in one or more series and in differing aggregate
principal amounts. We may issue debt securities in any currency or currency unit
that we may designate. We may issue debt securities in registered or global
form. The rights of holders of debt securities will be limited to our assets and
the assets of any subsidiary guarantors.
Except in the case of any debt securities that are guaranteed by a
subsidiary guarantor, the debt securities will not be obligations of any of our
subsidiaries. Except as may be described in any prospectus supplement, the
indentures do not limit the ability of our subsidiaries to incur debt in the
future. Our right to participate in the assets of any subsidiary (and thus the
ability of holders of the debt securities to benefit indirectly from such
assets) is generally subject to the prior claims of creditors, including trade
creditors, of that subsidiary, except to the extent that we are recognized as a
creditor of such subsidiary, in which case our claims would still be subject to
any security interest of other creditors of such subsidiary. Unless the debt
securities are guaranteed by our subsidiaries, the debt securities will be
structurally subordinated to creditors, including trade creditors, of our
subsidiaries with respect to the assets of the subsidiaries against which such
creditors have a more direct claim.
The senior debt securities will rank equally with all of our other senior
debt, if any. As of March 31, 2001, our debt to equity ratio was 7.5:1. If we
offer common stock, or securities convertible into such common stock, as of
March 31, 2001, $53,000,000 of consolidated debt will rank senior to such
securities. If we offer subordinated debt as of March 31, 2001, such debt will
rank behind approximately $53,000,000 of senior debt. We will disclose any
material changes to such amounts in a prospectus supplement prepared in
accordance with this prospectus. The subordinated debt securities will have a
junior position to all of our senior debt, if any. As of June 15, 2001, we have
a bank loan facility under which we could borrow up to $200,000,000. Any amounts
borrowed under that facility would be senior to the subordinated debt
securities. Other than as may be described in a prospectus supplement, neither
indenture will contain any covenant or provision that affords debt holders
protection in the event that we enter into a highly leveraged transaction in
which we borrow a substantial amount of the monetary requirements for such
transaction. These same holders would not have any right to require us to
repurchase the debt securities, in the event that the credit rating of any debt
securities declined as a result of our involvement in a takeover,
recapitalization, similar restructuring or otherwise.
A prospectus supplement including the indentures, filed as an exhibit,
relating to any series of debt securities which we may offer will include
specific terms relating to the offering. These terms will include some or all of
the following:
- the title and type of debt securities being offered, which may include
medium term notes;
- the total principal amount of debt securities being offered;
- whether the debt securities will be issued in one or more forms of global
securities and whether such global securities are to be issuable in
temporary global form or permanent global form;
- whether the debt securities will be guaranteed by any of the subsidiaries
of the Company;
- the dates on which the principal of, and premium, if any, on the offered
debt securities is payable;
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- the interest rate or the method of determining the interest rate;
- the date from which interest will accrue;
- the interest payment dates;
- the place where the principal, premium and interest is payable;
- any optional redemption periods;
- any sinking fund or other provisions that would obligate us to repurchase
or otherwise redeem the debt securities;
- whether the debt securities will be convertible into shares of common
stock or exchangeable for other of our securities (which would be
required to be registered under the Securities Act of 1933) and if so,
the terms of conversion or exchange;
- the currency or currencies, if other than U.S. dollars, in which
principal payments or other payments will be payable;
- events causing acceleration of maturity;
- any provisions granting special rights to holders when a specified event
occurs;
- any changes to or additional events of default or covenants;
- any material United States federal income tax consequences and any
special tax implications of ownership and disposition of the debt
securities; and
- any other terms of the debt securities.
The debt securities will be issued in registered form. There will be no
service charge for any registration, transfer or exchange of debt securities. We
may, however, require payment of an amount that would be sufficient to cover any
tax or other governmental charge we may incur. We may sell debt securities at a
discount or premium (which may be substantial) below or above their stated
principal amount, either bearing no interest or bearing interest at a rate that
may be below the market rate at the time we issue the debt securities.
We will describe any material United States federal income tax consequences
and other special considerations applicable to discounted debt securities in the
prospectus supplement. If we sell any of the offered debt securities for any
foreign currency or currency unit, or if any of the principal, premium or
interest, if any, is payable on any of the offered debt securities, the
restrictions, elections, tax consequences, specific terms and other information
pertaining to the offered debt securities and such foreign currency or foreign
currency unit will be set forth in the prospectus supplement describing such
offered debt securities.
DENOMINATIONS
We will issue the debt securities in registered form of $1,000 each or
integral multiples thereof.
SUBORDINATION
Under the subordinated indenture, payment of the principal, interest and
any premium on the subordinated debt securities generally will be subordinated
and junior in right of payment to the prior payment in full of all senior
indebtedness. The subordinated indenture defines senior indebtedness to include
all notes or other unsecured evidences of indebtedness, including our guarantees
for money borrowed by us, not expressed to be subordinate or junior in right of
payment to any other of our indebtedness and all extensions of such
indebtedness. The subordinated indenture provides that no
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payment of principal, interest and any premium on the subordinated debt
securities may be made in the event:
- of any insolvency, bankruptcy or similar proceeding involving us or our
property;
- we fail to pay the principal, interest, any premium or any other amounts
on any senior indebtedness when due;
- of a default (other than a payment default with respect to the senior
indebtedness) that imposes a payment blockage on the subordinated debt
securities for a maximum of 179 days at any one time, unless the event of
default has been cured or waived or shall no longer exist; or
- the principal and any accrued interest on any series of subordinated debt
securities has been declared due and payable upon an event of default
described in the subordinated debt indenture and such declaration has not
been rescinded.
In the event of any voluntary or involuntary bankruptcy, insolvency,
reorganization or other similar proceeding relating to us, all of our
obligations to holders of senior indebtedness will be entitled to be paid in
full before any payment shall be made on account of the principal of, or
premium, if any, or interest, if any, on the subordinated debt securities of any
series. In the event of any such bankruptcy, insolvency, reorganization or other
similar proceeding, holders of the subordinated debt securities of any series,
together with holders of indebtedness ranking equally with the subordinated debt
securities, shall be entitled, ratably, to be paid amounts that are due to them,
but only from assets remaining after we pay in full the amounts that we owe on
our senior indebtedness. We will make these payments before we make any payment
or other distribution on account of any indebtedness that ranks junior to the
subordinated debt securities. However, if we have paid in full all of the sums
that we owe with respect to our senior indebtedness and creditors in respect of
our obligations associated with such derivative products have not received
payment in full of amounts due to them, then the available remaining assets
shall be applied to payment in full of those obligations before any payment is
made on the subordinated debt securities. If we are in default on any of our
senior indebtedness or if any such default would occur as a result of certain
payments, then we may not make any payments on the subordinated debt securities
or effect any exchange or retirement of any of the subordinated debt securities
unless and until such default has been cured or waived or otherwise ceases to
exist.
No provision contained in the subordinated indenture or the subordinated
debt securities affects our absolute and unconditional obligation to pay when
due, principal of, premium, if any, and interest on the subordinated debt
securities and neither the subordinated indenture nor the subordinated debt
securities prevent the occurrence of any default or event of default under the
subordinated indenture or limit the rights of the subordinated trustee or any
holder of subordinated debt securities, subject to the three preceding
paragraphs, to pursue any other rights or remedies with respect to the
subordinated debt securities. As a result of these subordination provisions, in
the event of the liquidation, bankruptcy, reorganization, insolvency,
receivership or similar proceeding or an assignment for the benefit of our
creditors or any of our subsidiaries or a marshaling of our assets or
liabilities and our subsidiaries, holders of subordinated debt securities may
receive ratably less than other creditors.
If this prospectus is being delivered in connection with a series of
subordinated debt securities, the accompanying prospectus supplement or the
information incorporated herein by reference will set forth the approximate
amount of senior indebtedness outstanding as of the end of the most recent
fiscal quarter.
EVENTS OF DEFAULT; REMEDIES
The following are defined as events of default under each indenture:
- our failure to pay principal or any premium on any debt security when
due;
- our failure to pay any interest on any debt security when due, continued
for 30 days;
- our failure to deposit any mandatory sinking fund payment when due,
continued for 30 days;
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- our failure to perform any other covenant or warranty in the Indenture
that continues for 90 days after written notice;
- our certain events of bankruptcy, insolvency or reorganization; and
- any other event of default as may be specified with respect to debt
securities of such series.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities. The trustee may withhold notice to the holders of debt securities of
any default (except in the payment of principal or interest) if the trustee
considers withholding of notice to be in the best interest of the holders. If an
event of default occurs, either the trustee or the holders of at least 25% of
the principal amount of the outstanding debt securities may declare the
principal amount of the debt securities of the applicable series to be due and
payable immediately. If this happens, subject to certain conditions, the holders
of a majority of the principal amount of the outstanding debt securities of such
series can void the declaration. These conditions include the requirement that
we have paid or deposited with the trustee a sum sufficient to pay all overdue
principal and interest payments on the series of debt securities subject to the
default. If an event of default occurs due to certain events of bankruptcy,
insolvency or reorganization, the principal amount of the outstanding debt
securities of all series will become immediately due and payable without any
declaration or other act on the part of either trustee or any holder.
Depending on the terms of our indebtedness, an event of default under an
indenture may cause a cross default on our other indebtedness. Other than its
duties in the case of default, a trustee is not obligated to exercise any of its
rights or powers under any indenture at the request, order or direction of any
holder or group of holders unless the holders offer the trustee reasonable
indemnity. If the holders provide reasonable indemnification, the holders of a
majority of the principal amount of any series of debt securities may direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee, or exercising any power conferred upon the trustee for any series
of debt securities. The holders of a majority of the principal amount
outstanding of any series of debt securities may, on behalf of all holders of
such series, waive any past default under the indenture, except in the case of a
payment of principal or interest default. We are required to provide to each
trustee an annual statement reflecting the performance of our obligations under
the indenture and any statement of default, if applicable.
COVENANTS
Under the indentures, we will:
- pay the principal, interest and any premium on the debt securities when
due;
- maintain a place of payment;
- deliver a report to the trustee at the end of each fiscal year reviewing
our obligations under the indentures; and
- deposit sufficient funds with any payment agent on or before the due date
for any principal, interest or any premium.
MODIFICATION OR AMENDMENT OF INDENTURES
Under each indenture, all rights and obligations and the rights of the
holders may be modified or amended with the consent of the holders of a majority
in aggregate principal amount of the outstanding debt securities of each series
affected by the modification or amendment. No modification or amendment may,
however, be made without the consent of the holders of any debt securities if
the following provisions are affected:
- change in the stated maturity date of the principal payment or
installment of any principal payment;
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- reduction in the principal amount or premium on, or interest on any of
the debt securities;
- reduction in the percentage required for modifications or amendment to be
effective against any holder of any debt securities.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each indenture generally permits a consolidation or merger between us and
another corporation. Each indenture also permits us to sell all or substantially
all of our property and assets. If this happens, the surviving or acquiring
company will assume all of our responsibilities and liabilities under the
indentures, including the payment of all amounts due on the debt securities and
the performance of the covenants in the indentures. We will only consolidate or
merge with or into any other company or sell all, or substantially all, of our
assets according to the terms and conditions of the indentures. The surviving or
acquiring company will be substituted for us in the Indentures with the same
effect as if it had been an original party to the indenture. Thereafter, the
successor company may exercise our rights and powers under any indenture, in our
name or in its own name. Any act or proceeding our board of directors or any of
our officers are required or permitted to do may be done by the board of
directors or officers of the successor company. If we sell all or substantially
all of our assets, we shall be released from all our liabilities and obligations
under any Indenture and under the debt securities.
DISCHARGE AND DEFEASANCE
We will be discharged from our obligations under the debt securities of any
series at any time if we irrevocably deposit with the trustee enough cash or
U.S. government securities to pay the principal, interest, any premium and any
other sums due through the stated maturity date or redemption date of the debt
securities of the series. In this event, we will be deemed to have paid and
discharged the entire indebtedness on all outstanding debt securities of the
series. Accordingly, our obligations under the applicable indenture and the debt
securities of such series to pay any principal, premium, or interest, if any,
shall cease, terminate and be completely discharged. The holders of any debt
securities shall then only be entitled to payment out of the money or U.S.
government securities deposited with the trustee and such holders of debt
securities of such series will not be entitled to the benefits of the indenture
except as relate to the registration, transfer and exchange of debt securities
and the replacement of lost, stolen or mutilated debt securities.
PAYMENT AND PAYING AGENTS
We will pay the principal, interest and premium on fully registered
securities at designated places. We will pay by check mailed to the person in
whose name the debt securities are registered on the day specified in the
indentures or any prospectus supplement. We will make debt securities payments
in other forms at a place we designate and specify in a prospectus supplement.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Fully registered debt securities may be transferred or exchanged at the
corporate trust office of the trustee or at any other office or agency we
maintain for such purposes without the payment of any service charge except for
any tax or governmental charge. The registered securities must be duly endorsed
or accompanied by a written instrument of transfer, if required by us or the
security registrar. We will describe any procedures for the exchange of debt
securities for other debt securities of the same series in the prospectus
supplement for that offering.
GLOBAL SECURITIES
We may issue the debt securities of a series in whole or in part in the
form of one or more global certificates that will be deposited with a depositary
we identify in a prospectus supplement. We may issue global securities in
registered form and in either temporary or permanent form. Unless and until it
is exchanged in whole or part for the individual debt securities it represents,
the depositary or its nominee
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may not transfer a global security except as a whole. The depositary for a
global security and its nominee may only transfer the global security between
themselves or their successors. We will make principal, premium and interest
payments on global securities to the depositary or the nominee it designates as
the registered owner for such global securities. The depositary or its nominee
will be responsible for making payments to you and other holders of interests in
the global securities. We and the paying agents will treat the persons in whose
names the global securities are registered as the owners of such global
securities for all purposes. Neither we nor the paying agents have any direct
responsibility or liability for the payment of principal, premium or interest to
owners of beneficial interests in the global securities, and such liability is
that of the depositary or its variance. As a result the beneficial interest
holder may have to rely on the depositary to recover in the event of default.
DESCRIPTION OF WARRANTS
We may issue warrants, including warrants to purchase common stock, debt
securities or other securities registered pursuant to this registration
statement and described in this prospectus. We may issue warrants independently
or together with other securities that may be attached to or separate from the
warrants. We will issue each series of warrants under a separate warrant
agreement that will be entered into between us and a bank or trust company, as
warrant agent, and will be described in the prospectus supplement relating to
the particular issue of warrants. The warrant agent will act solely as our agent
in connection with the warrant of such series and will not assume any obligation
or relationship of agency for or with holders or beneficial owners of warrants.
The following describes certain general terms and provisions of the warrants we
may offer. We will set forth further terms of the warrants and the applicable
warrant agreement in the applicable prospectus supplement.
DEBT WARRANTS
The applicable prospectus supplement will describe the terms of any debt
warrants, including the following:
- the title of such debt warrants;
- the offering price for such debt warrants;
- the aggregate number of such debt warrants;
- the designation and terms of the debt securities purchasable upon
exercise of such debt warrants;
- if applicable, the designation and terms of the securities with which
such debt warrants are issued and the number of such debt warrants issued
with each security;
- if applicable, the date from and after which such debt warrants and any
securities issued therewith will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of a
debt warrant and the price at which such principal amount of debt
securities may be purchased upon exercise;
- the date on which the right to exercise such debt warrants shall commence
and the date on which such right shall expire;
- if applicable, the minimum or maximum amount of such debt warrants which
may be exercised at any one time;
- whether the debt warrants represented by the debt warrant certificates or
debt securities that may be issued upon exercise of the debt warrants
will be issued in registered form;
- information with respect to book-entry procedures, if any;
- the currency, currencies or currency units in which the offering price,
if any, and the exercise price are payable;
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- if applicable, a discussion of certain United States federal income tax
considerations;
- the antidilution provisions of such debt warrants, if any;
- the redemption or call provisions, if any, applicable to such debt
warrant; and
- any additional terms of the debt warrants, including terms, procedures
and limitations relating to the exchange and exercise of such debt
warrants.
COMMON STOCK WARRANTS
The applicable prospectus supplement will describe the terms of any
warrants exchangeable for common stock, including:
- the title of such warrants;
- the offering price of such warrants;
- the aggregate number of such warrants;
- the designation and terms of the common stock issued by us purchasable
upon exercise of such warrants;
- if applicable, the designation and terms of the securities with which
such warrants are issued and the number of such warrants issued with each
such security;
- if applicable, the date from and after which such warrants and any
securities issued therewith will be separately transferable;
- the number of shares of common stock issued by us purchasable upon
exercise of the warrants and the price at which such shares may be
purchased upon exercise;
- the date on which the right to exercise such warrants shall commence and
the date on which such right shall expire;
- if applicable, the minimum or maximum amount of such warrants which may
be exercised at any one time;
- the currency, currencies or currency units in which the offering price,
if any, and the exercise price are payable;
- if applicable, a discussion of certain United States federal income tax
considerations; and
- the antidilution provisions of the warrants, if any.
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DESCRIPTION OF TRUST RELATED JUNIOR SUBORDINATED DEBT SECURITIES
The junior subordinated debentures that we issue to a Trust will be our
direct unsecured general obligations. Only junior subordinated debt securities
will be issued to the Trusts. The debt securities will be issued in one or more
series under the indenture between us and First Union National Bank, as trustee
and under our resolution authorizing the particular series.
Set forth below is a complete summary of all the material provisions of the
indenture. The form of the indenture and a form of amended and restated trust
agreement are filed as exhibits to the registration statement of which this
prospectus is a part. The amended and restated trust agreement for each series
also has been or will be filed or incorporated by reference as an exhibit to the
registration statement. You should read the indenture and the applicable amended
and restated trust agreement for provisions that may be important to you. The
summary includes references to section numbers in the indenture so that you can
easily find those provisions. The particular terms of any debt securities we
offer will be described in the related prospectus supplement, along with any
applicable modifications of or additions to the general terms of the debt
securities described below and in the indenture. For a description of the terms
of any series of debt securities, you should also review both the prospectus
supplement relating to that series and the description of the debt securities
set forth in this prospectus before making an investment decision.
GENERAL
The indenture does not significantly limit our operations. In particular,
it does not:
- limit the amount of debt securities that we can issue under the
indenture;
- limit the number of series of debt securities that we can issue from time
to time;
- restrict the total amount of debt that we or our subsidiaries may incur;
or
- contain any covenant or other provision that is specifically intended to
afford any holder of the debt securities special protection in the event
of highly leveraged transactions or any other transactions resulting in a
decline in our ratings or credit quality.
As of the date of this prospectus, there are no debt securities outstanding
under the indenture. The ranking of a series of debt securities with respect to
all of our indebtedness will be established by the securities resolution
creating the series.
Although the indenture permits the issuance of debt securities in other
forms or currencies, the debt securities covered by this prospectus will only be
denominated in U.S. dollars in registered form without coupons, unless otherwise
indicated in the applicable prospectus supplement.
TERMS
A prospectus supplement and a securities resolution relating to the
offering of any series of debt securities will include specific terms relating
to the offering. The terms will include some or all of the following:
- the designation, aggregate principal amount, currency or composite
currency (if other than U.S. dollars) and denominations of the debt
securities;
- the price at which the debt securities will be issued and, if an index,
formula or other method is used, the method for determining amounts of
principal or interest;
- the maturity date and other dates, if any, on which the principal of the
debt securities will be payable;
- the interest rate or rates, if any, or method of calculating the interest
rate or rates which the debt securities will bear;
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- the date or dates from which interest will accrue and on which interest
will be payable, and the record dates for the payment of interest; the
manner of paying principal and interest on the debt securities; the place
or places where principal and interest will be payable;
- the terms of any mandatory or optional redemption of the debt securities
by us, including any sinking fund, the terms of any conversion or
exchange right; the terms of any redemption of debt securities at the
option of holders; any tax indemnity provisions;
- the portion of principal payable upon acceleration of the maturity date
of any debt security;
- whether and upon what terms debt securities may be defeased (which means
that we would be discharged from its obligations by depositing sufficient
cash or government securities to pay the principal, interest, any
premiums and other sums due to the stated maturity date or a redemption
date of the debt securities of the series);
- whether any events of default or covenants in addition to or instead of
those set forth in the indenture apply; provisions for electronic
issuance of debt securities or for debt securities in uncertificated
form;
- any provisions relating to extending or shortening the date on which the
principal and premium, if any, of the debt securities of the series is
payable;
- any provisions relating to the deferral of payment of any interest;
- the terms of any right to convert or exchange the debt securities into
any other of our securities or property;
- if the series of debt securities is to be issued to a Trust, the forms of
the related trust agreement and guarantee agreement;
- the additions or changes, if any, to the indenture with respect to that
series of debt securities to permit or facilitate the issuance of that
series of debt securities to a Trust; and
- any other terms not inconsistent with the provisions of the indenture,
including any covenants or other terms that may be required or advisable
under United States or other applicable laws or regulations, or advisable
in connection with the marketing of the debt securities. (Section 3.1).
We may issue debt securities of any series in such form and in such
denominations as we specify in the securities resolution and prospectus
supplement for the series. (Section 2.1).
A holder of registered debt securities may request registration of a
transfer upon surrender of the debt security being transferred at any agency or
office that we maintain for that purpose and upon fulfillment of all other
requirements of the agent.
CERTAIN COVENANTS
Any restrictive covenants that may apply to a particular series of debt
securities will be described in the related prospectus supplement.
SUBORDINATION
The indenture provides that the debt securities will be subordinated and
junior in right of payment to all of our Senior Debt (as defined below), which
was $53,000,000 as of March 31, 2001. This means that no payment of principal,
including redemption payments, premium, if any, or interest on the debt
securities may be made if:
- any of our Senior Debt has not been paid when due and any applicable
grace period relating to such default has ended and such default has not
been cured or waived or ceased to exist; or
- the maturity of any of our Senior Debt has been accelerated because of a
default.
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Upon any distribution of our assets to creditors upon any termination,
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 of our Senior Debt
must be paid in full before the holders of debt securities are entitled to
receive or retain any payment. Upon satisfaction of all claims related to all of
our Senior Debt then outstanding, the rights of the holders of the debt
securities will be subrogated to the rights of the holders of our Senior Debt to
receive payments or distributions applicable to Senior Debt until all amounts
owing on the debt securities are paid in full.
The term "Senior Debt" means:
(1) the principal, premium, if any, and interest in respect of (a)
indebtedness for money borrowed and (b) indebtedness evidenced by
securities, notes, debentures, bonds or other similar instruments issued by
us;
(2) all capital lease obligations of ours;
(3) all obligations of ours issued or assumed as the deferred purchase
price of property, all conditional sale obligations of ours and all
obligations of ours under any conditional sale or title retention
agreement, but excluding trade accounts payable and accrued liabilities
arising in the ordinary course of business;
(4) all obligations, contingent or otherwise, of ours in respect of
any letters of credit, banker's acceptance, security purchase facilities or
similar credit transactions;
(5) all obligations in respect of interest rate swap, cap, floor,
collar or other agreements, interest rate future or option contracts,
currency swap agreements, currency future or option contracts and other
similar agreements;
(6) any indebtedness between or among us and our affiliates, except as
provided in 8(b) below;
(7) all obligations of the type referred to in clauses (1) through (6)
above of other persons for the payment of which we are responsible or
liable as obligor, guarantor or otherwise; and
(8) all obligations of the type referred to in clauses (1) through (7)
above of other persons secured by any lien on any property or asset of
ours, whether or not such obligation is assumed by such obligor, except for
(a) any such indebtedness that by its terms ranks equally with, or
junior to, the debt securities; and
(b) any indebtedness between or among us or our affiliates relating
to other debt securities and guarantees in respect of those debt
securities, issued to (i) any Trust or a trustee of such Trust or (ii)
any other trust, or a trustee of such trust, partnership or other entity
affiliated with us that is a financing vehicle of ours in connection
with the issuance by such financing vehicle of preferred securities or
other securities guaranteed by us pursuant to an instrument that ranks
equally with, or junior to, the guarantee.
Such Senior Debt shall continue to be Senior Debt and be entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Debt.
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SUCCESSOR OBLIGOR
The indenture provides that, unless otherwise specified in the securities
resolution establishing a series of debt securities, we will not consolidate
with or merge into, or transfer all or substantially all of our assets to,
another company, unless:
- that company is organized under the laws of the United States or any
state or the District of Columbia;
- that company assumes by supplemental indenture all of our obligations
under the indenture and the debt securities;
- all required approvals of any regulatory body having jurisdiction over
the transaction shall have been obtained; and
- immediately after the transaction no default exists under the indenture.
(Section 8.1).
The successor shall be substituted for us as if it had been an original
party to the indenture, the trust agreements and the debt securities. Thereafter
the successor may exercise our rights and powers under the indenture, the trust
agreements and the debt securities, and all of our obligations under those
documents will terminate. (Section 8.2)
EXCHANGE OF DEBT SECURITIES
Registered debt securities may be exchanged for an equal principal amount
of registered debt securities of the same series and date of maturity in
authorized denominations requested by the holders upon surrender of the
registered debt securities at an office or agency HCC maintains for that purpose
and upon fulfillment of all other requirements set forth in the indenture.
(Section 3.6)
DEFAULTS
Unless the securities resolution establishing the series provides for
different events of default, in which event the prospectus supplement will
describe the change, an event of default with respect to a series of debt
securities will occur if:
- We default in any payment of interest on any debt securities of that
series when the payment becomes due and payable and the default continues
for a period of 30 days;
- We default in the payment of the principal and premium, if any, of any
debt securities of the series when those payments become due and payable
at maturity or upon redemption, acceleration or otherwise;
- We default in the payment or satisfaction of any sinking fund obligation
with respect to any debt securities of the series as required by the
securities resolution establishing the series and the default continues
for a period of 30 days;
- We default in the performance of any of our other agreements applicable
to the series and the default continues for 90 days after the notice
specified below;
- We file for bankruptcy or other specified events in bankruptcy,
insolvency, receivership or reorganization occur; or
- any other event of default specified in the prospectus supplement occurs.
(See Section 5.1)
A default under the indenture means any event which is, or after notice or
passage of time would be, an event of default under the indenture. A default
under the fourth bullet point above is not an event of default until the trustee
or the holders of at least 25% in principal amount of the debt securities of a
series notify us of the default and we do not cure the default within the time
specified after receipt of the notice. (Section 5.1)
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REMEDIES
If an event of default occurs under the indenture with respect to any
series of debt securities and is continuing, the trustee by notice to us or
(except as provided in the next sentence) the holders of at least 25% in
principal amount of the series by notice both to us and to the trustee, may
declare the principal of and accrued interest on all the debt securities of the
series to be due and payable immediately. In the case of a series of junior
subordinated debentures issued to a Trust, if, upon an event of default, the
trustee or the other holders, if any, together holding not less than 25% in
aggregate principal amount of that series, fail to declare the principal of all
the debt securities of that series to be immediately due and payable, then the
holders of 25% in aggregate liquidation amount of the trust preferred securities
issued by the Trust then outstanding shall have the right to do so by notice to
us and to the trustee.
Except as provided in the next sentence, the holders of a majority in
principal amount of a series of debt securities, by notice to the trustee, may
rescind an acceleration and its consequences if certain conditions are met,
including:
- We pay or deposit with the indenture trustee a sum sufficient to pay:
- all overdue interest,
- the principal of and any premium which have become due other than by the
declaration of acceleration and overdue interest on those amounts,
- any overdue sinking fund payments and overdue interest on such payments,
- interest on overdue interest to the extent lawful, and
- all amounts otherwise due to the indenture trustee under the indenture;
- the rescission would not conflict with any judgment or decree;
- all existing events of default on the series have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration.
In the case of a series of junior subordinated debentures issued to a
Trust, the holders of a majority in aggregate liquidation amount of the trust
preferred securities issued by that Trust then outstanding shall also have the
right to rescind the acceleration and its consequences with respect to such
series, subject to the same conditions set forth above. (Section 5.2)
If an event of default occurs and is continuing on a series, the trustee
may pursue any available remedy to collect principal or interest then due on the
series, to enforce the performance of any provision applicable to the series, or
otherwise to protect the rights of the trustee and holders of the series.
(Section 5.3)
In the case of a series of junior subordinated debentures issued to a
Trust, any holder of the outstanding trust preferred securities issued by that
Trust shall have the right, upon the occurrence and continuance of an event of
default with respect to that series following our failure to pay timely
interest, principal or premium as described above, to sue us directly. In that
lawsuit the holder of the trust preferred securities can force us to pay to the
holder (instead of the Trust) the principal of, and premium, if any, and
interest on, junior subordinated debentures held by the Trust having a principal
amount equal to the aggregate principal amount of the trust preferred securities
held by that holder. (Section 5.8)
The trustee may require an indemnity satisfactory to it before it performs
any duty or exercises any right or power under the indenture or the debt
securities which if reasonably believes may expose it to any risk of loss or
liability. (Section 6.1) With some limitations, holders of a majority in
principal amount of the debt securities of a series may direct the trustee in
its exercise of any trust or power with respect to that series. (Section 5.12)
Except in the case of default in payment on a series, the trustee may withhold
notice of any continuing default with respect to the debt securities of that
series if it determines that
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withholding the notice is in the interest of holders of the series. (Section
6.2) We are required to furnish the trustee annually a brief certificate as to
our compliance with all terms and conditions of the indenture. (Section 10.4)
The events of default specified in the indenture do not include a
cross-default provision. Thus, except to the extent provided in the securities
resolution establishing a series, a default by us on any other debt, including
any other series of debt securities, would not constitute an event of default
under the indenture (or in the case of an event of default as to any series, an
event of default as to any other series outstanding under the indenture). If a
securities resolution provides for a cross-default provision, the prospectus
supplement will describe the terms of that provision.
AMENDMENTS
Without the consent of any debt security holder, subject to certain
limitations, we may amend the indenture by entering into one or more
supplemental indentures of any of the following purposes:
- to cure any ambiguity, omission, defect or inconsistency;
- to provide for the assumption of our obligations to debt security holders
by the surviving company in the event of a merger or consolidation
requiring such assumption as described above under "-- Successor
Obligor";
- to provide that specific provisions of the indenture shall not apply to a
series of debt securities not previously issued;
- to create a series of debt securities and establish its terms;
- to provide for a separate trustee for one or more series of debt
securities; or
- to make any change that does not materially adversely affect the rights
of any debt security holder. (Section 9.1)
Unless the securities resolution provides otherwise, in which event the
prospectus supplement will describe the revised provision, we and the trustee
may amend the indenture by entering into one or more supplemental indentures
with the written consent of the holders of a majority in principal amount of the
debt securities of all series affected voting as one class. However, without the
consent of each debt security holder affected, no amendment may:
- reduce the principal amount of debt securities whose holders must consent
to an amendment or waiver;
- reduce the interest on or change the time for payment of interest on any
debt security (but this does not affect our right to elect to defer one
or more payments of interest as described below under "-- Certain
Provisions Relating to Junior Subordinated Debentures Issued to the HCC
Trusts -- Option to Defer Interest Payment Date");
- change the stated maturity of any debt security (subject to any right we
may have retained in the securities resolution and described in the
prospectus supplement);
- reduce the principal of any debt security or, if less than the principal
amount thereof, reduce the amount that would be due on acceleration of
any debt security thereof;
- change the currency in which the principal or interest on a debt security
is payable;
- make any change that materially adversely affects the right to convert or
exchange any debt security; or
- waive any default in payment of interest on or principal of a debt
security. (Section 9.2)
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In the case of a series of junior subordinated debentures issued to a
Trust, we are not permitted to amend the indenture if such amendment adversely
affects the holders of the trust preferred securities of that Trust in any
material respect, and no termination of the indenture shall occur, without the
prior consent of the holders of not less than a majority in aggregate
liquidation amount of the trust preferred securities then outstanding unless and
until the principal (and premium, if any) of the junior subordinated debentures
of that series and all accrued and unpaid interest thereon have been paid in
full. Furthermore, in the case of a series issued to a Trust, no amendment can
be made to the provisions of the indenture allowing holders of trust preferred
securities of that Trust to sue directly following our failure to make timely
payments on the junior subordinated debentures as described above without the
prior consent of the holder of each capital security then outstanding unless and
until the principal (and premium, if any) of the junior subordinated debentures
of that series and all accrued and unpaid interest thereon have been paid in
full. (Section 9.2)
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Debt securities of a series may be defeased at any time in accordance with
their terms and as set forth in the indenture and described briefly below,
unless the securities resolution establishing the terms of the series provides
otherwise. Any defeasance may terminate all of our obligations (with limited
exceptions) with respect to a series of debt securities and the indenture
("legal defeasance"), or it may terminate only our obligations under any
restrictive covenants which may be applicable to a particular series ("covenant
defeasance").
We may exercise our legal defeasance option even though we have also
exercised our covenant defeasance option. If we exercise the legal defeasance
option with respect to a series of debt securities, that series may not be
accelerated because of an event of default. (Section 4.2) If we exercise the
covenant defeasance option, that series of debt securities may not be
accelerated by reference to any restrictive covenants which may be applicable to
that particular series. (Section 4.3)
To exercise either defeasance option as to a series of debt securities, we
must:
- irrevocably deposit in trust (the "defeasance trust") with the trustee or
another trustee money or U.S. government obligations;
- deliver a certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of principal and
interest when due on the deposited U.S. government obligations, without
reinvestment, plus any deposited money without investment, will provide
cash at the times and in the amounts necessary to pay the principal and
interest when due on all debt securities of the series to maturity or
redemption, as the case may be; and
- comply with certain other conditions. In particular, we must obtain an
opinion of tax counsel that the defeasance will not result in recognition
of any gain or loss to holders for federal income tax purposes.
U.S. government obligations are direct obligations of (a) the United States
or (b) an agency or instrumentality of the United States, the payment of which
is unconditionally guaranteed by the United States, which, in either case (a) or
(b), have the full faith and credit of the United States of America pledged for
payment and which are not callable at the issuer's option. It also includes
certificates representing an ownership interest in such obligations. (Section
4.4)
CERTAIN PROVISIONS RELATING TO JUNIOR SUBORDINATED DEBENTURES ISSUED TO THE HCC
TRUSTS
General. The junior subordinated debentures that we issue to a Trust may
be issued in one or more series under the indenture with terms corresponding to
the terms of a series of trust preferred securities issued by that Trust. The
principal amount of the junior subordinated debentures that we issue to a Trust
will be equal to the aggregate stated liquidation amount of the trust preferred
securities and common securities of that Trust. Concurrently with the issuance
of each Trust's trust preferred securities, each
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Trust will invest the proceeds from the sale of the trust preferred securities
and the consideration we pay for the common securities in a series of
corresponding junior subordinated debentures that we will issue to that Trust.
The prospectus supplement will describe specific terms relating to the
offering of each series of junior subordinated debentures. See "Description Of
Trust Related Junior Subordinated Debt Securities -- Terms."
Unless otherwise specified in the applicable securities resolution, we will
covenant, as to each series of junior subordinated debentures:
- to maintain, directly or indirectly, 100% ownership of the common
securities of the Trust to which the corresponding junior subordinated
debentures have been issued (provided that certain successors which are
permitted pursuant to the indenture may succeed to our ownership of the
common securities);
- not to voluntarily terminate, wind-up or liquidate any Trust, except:
- in connection with a distribution of the junior subordinated debentures
to the holders of the trust preferred securities in liquidation of the
Trust; or
- in connection with certain mergers, consolidations or amalgamations
permitted by the related trust agreement; and
- to use our reasonable efforts, consistent with the terms and provisions
of the related trust agreement, to cause such Trust to remain classified
as a grantor trust and not as an association taxable as a corporation for
United States federal income tax purposes.
For additional covenants relating to payment of expenses of the HCC Trusts,
see "Description of Trust Preferred Securities -- Payment of Expenses."
Option to Defer Interest Payment Date. Unless otherwise stated in the
applicable prospectus supplement, we will have the right at any time and from
time to time during the term of any series of junior subordinated debentures
issued to a Trust to defer payments of interest by extending the interest
payment period for a specified number of consecutive periods. No deferral period
may extend beyond the maturity date of that series of junior subordinated
debentures. We may pay at any time all or any portion of the interest accrued to
that point during a deferral period. At the end of the deferral period or at a
redemption date, we will be obligated to pay all interest accrued and unpaid
(together with interest on the unpaid interest to the extent permitted by
applicable law). United States federal income tax consequences and special
considerations applicable to any junior subordinated debentures issued to a
Trust for which a deferral period has been elected will be described in the
applicable prospectus supplement. During any deferral period, or while we are in
default, we will be restricted in our ability to make payments or incur
obligations related to its capital stock or debt securities ranking equal to or
below the junior subordinated debentures. See "-- Restrictions on Certain
Payments."
Prior to the termination of any deferral period, we may extend the interest
payment period, and, after the termination of any deferral period and the
payment of all amounts due, we may decide to begin a new deferral period.
However, the deferral period may not extend beyond the maturity date of the
junior subordinated debentures.
If the trustee is the sole holder of the series of junior subordinated
debentures held by the Trust, we will give the trustee and the issuer trustees
of the Trust notice of our selection of any deferral period one business day
prior to the earlier of:
- the next date distributions on the trust preferred securities are
payable; or
- the date the Trust is required to give notice to the New York Stock
Exchange (or other applicable self-regulatory organization) or to holders
of its trust preferred securities of the record date or the date any
distribution on the trust preferred securities is payable.
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If the property trustee is not the sole holder of the series of junior
subordinated debentures, we will give the holders of the junior subordinated
debentures notice of our selection of any deferral period ten business days
prior to the earliest of:
- the next interest payment date; or
- the date upon which we are required to give notice to the NYSE (or other
applicable self-regulatory organization) or to holders of the junior
subordinated debentures of the record or payment date of any related
interest payment.
Redemption. The junior subordinated debentures and the applicable
securities resolution will provide the terms upon which we can redeem the junior
subordinated debentures at our option, and will specify a date prior to which we
will not be allowed to redeem the junior subordinated debentures, and after
which we will have the right to redeem the junior subordinated debentures, in
whole or in part, upon not less than 30 days nor more than 60 days notice to the
holder of the junior subordinated debentures at a redemption price or prices
stated in the applicable prospectus supplement.
If the junior subordinated debentures are redeemed only in part, they will
be redeemed pro rata or by lot or by any other method selected by the trustee.
If a partial redemption of the junior subordinated debentures would result in
delisting from any national securities exchange or other self-regulatory
organization on which the trust preferred securities of the Trust holding the
junior subordinated debentures are then listed, we will not be permitted to
effect a partial redemption and may only redeem the junior subordinated
debentures as a whole.
Except as otherwise specified in the applicable prospectus supplement and
subject to the provisions of the applicable securities resolution, if a Tax
Event (as defined below) or an Investment Company Event (as defined below) in
respect of a Trust occurs and is continuing, we have the option to redeem the
junior subordinated debentures held by that Trust, in whole, but not in part, at
any time within 90 days thereafter. If the applicable Trust is the holder of all
outstanding junior subordinated debentures, the proceeds of the redemption will
be used by the Trust to redeem its trust preferred securities and common
securities in accordance with their terms.
However, in the case of an occurrence of a Tax Event or an Investment
Company, if we can eliminate, within the 90 day period, such event by taking
some action, such as filing a form or making an election, or pursuing some other
similar reasonable measure which has no adverse effect on us, the relevant Trust
or the holders of the trust preferred securities or the common securities, we
will pursue that action instead of redemption. We will have no right to redeem
the junior subordinated debentures while such Trust or the property trustee is
pursuing any similar action based on its obligations under the trust agreement.
"Tax Event" means that the applicable Trust will have received an opinion
of counsel (which may be counsel to us or an affiliate) experienced in such
matters to the effect that, as a result of any
- amendment to, or change (including any announced proposed change) in the
laws or any regulations under the laws of the United States or any
political subdivision or taxing authority, or
- official administrative pronouncement or judicial decision interpreting
or applying the laws or regulations stated above whether or not the
pronouncement or decision is issued to or in connection with a proceeding
involving us or the Trust,
in each case which amendment or change is effective or which proposed change,
pronouncement, action or decision is announced on or after the date of issuance
of the applicable series of junior subordinated debentures pursuant to the
applicable securities resolution, there is more than an insubstantial risk that:
- the Trust is, or will be within 90 days of the date of the opinion of
counsel, subject to United States Federal income tax with respect to
income received or accrued on the junior subordinated debentures;
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- interest we pay on the corresponding junior subordinated debentures is
not, or will not be within 90 days of the date of the opinion of counsel,
deductible, in whole or in part, for United States Federal income tax
purposes; or
- the Trust is, or will be within 90 days of the date of the opinion of
counsel, subject to more than a de minimis amount of other taxes, duties
or other governmental charges.
"Investment Company Event" means that the applicable Trust will have
received an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a change in
interpretation or application of law or regulation by any legislative body,
courts, governmental agency or regulatory authority on or after the date of
original issuance of the trust preferred securities by the Trust, the Trust is
or will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended.
Restrictions on Certain Payments. Unless otherwise provided in the
applicable prospectus supplement, we will promise, as to each series of junior
subordinated debentures issued to a Trust, that it will not:
- declare or pay any dividends or distributions on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any of its
capital stock;
- make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any of its debt securities (including other junior
subordinated debentures) that rank equally with or junior in interest to
the junior subordinated debentures; or
- make any guarantee payments with respect to any of the debt securities of
any of its subsidiaries if the guarantee ranks equally with or junior in
interest to the junior subordinated debentures;
other than:
- dividends or distributions payable in its common stock;
- payments under any guarantee relating to the trust preferred securities
of a Trust;
- purchases of common stock related to the issuance of common stock under
any employment agreement or benefit plan for its directors, officers or
employees; and
- obligations under any dividend reinvestment plan or stock purchase plan.
These restrictions apply only if:
- at that time an event has occurred that (a) with the giving of notice or
the lapse of time, or both, would constitute an event of default under
the indenture with respect to the junior subordinated debentures of that
series and (b) we shall not have taken reasonable steps to cure the
event;
- the junior subordinated debentures are held by a Trust and we are in
default with respect to payment of any obligations under the guarantee
relating to the trust preferred securities of that Trust; or
- we shall have given notice of its intention to begin an interest deferral
period and have not rescinded the notice, or any deferral period is
continuing.
REGARDING THE TRUSTEE
First Union National Bank will act as trustee and registrar for
registration and transfer of debt securities issued under the indenture.
(Section 3.6) The trustee, in its individual or any other capacity, may make
loans to, accept deposits from, and perform services for us or our affiliates,
and may otherwise deal with us or our affiliates, as if it were not the trustee.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
The following section describes the general terms and provisions of the
trust preferred securities to which any prospectus supplement may relate. The
particular terms of the trust preferred securities offered by any Trust and the
extent to which any of these general provisions do not apply to its trust
preferred securities will be described in the prospectus supplement relating to
that Trust and its trust preferred securities.
The trust preferred securities will represent undivided beneficial
ownership interests in the assets of a Trust. The holders of the trust preferred
securities of a Trust will be entitled to a preference over holders of the
common securities of such Trust in some circumstances with respect to
distributions and amounts payable on redemption or liquidation. Holders of trust
preferred securities will also have other benefits as described in the
corresponding trust agreement.
We have summarized the material provisions of the trust preferred
securities and each trust agreement below. The form of trust agreement has been
filed as an exhibit to the registration statement of which this prospectus forms
a part. You should read the form of trust agreement for provisions that may be
important to you. You should also consider applicable provisions of the Trust
Indenture Act. Each of the Trusts is a legally separate entity, and the assets
of one are not available to satisfy the obligations of the other.
GENERAL
The trust preferred securities of a Trust will rank equally, and payments
on the trust preferred securities will be made pro rata, with the common
securities of that Trust except as described under "-- Subordination of Common
Securities." Legal title to the junior subordinated debentures issued to a Trust
will be held by the property trustee in trust for the benefit of the holders of
the trust preferred securities of that Trust and for us as holder of the common
securities of that Trust. Each guarantee agreement we execute for the benefit of
the holders of a Trust's trust preferred securities will be a guarantee on a
junior subordinated basis with, but will not guarantee payment of distributions
or amounts payable on redemption or liquidation of, such trust preferred
securities if the Trust does not have funds available to make such payments. See
"Description of Trust Related Guarantees."
DISTRIBUTIONS
Distributions on the trust preferred securities will be cumulative, will
accumulate from the date of original issuance and will be payable on the dates
specified in the applicable prospectus supplement. Except as specified in the
applicable prospectus supplement, in the event that any date on which
distributions are payable on the trust preferred securities is not a business
day, payment of the distribution will be made on the next succeeding day that is
a business day (without any interest or other payment in respect of the delay),
with the same force and effect as if made on the originally specified date.
However, if the next business day is in the next calendar year, payment of
distributions will be made on the preceding business day. Each date on which
distributions are payable is referred to in this prospectus as a distribution
date.
A Trust's trust preferred securities represent undivided beneficial
ownership interests in the assets of that Trust. The distributions on each
capital security will be payable at a rate specified in the prospectus
supplement for that capital security. The amount of distributions payable for
any period will be computed on the basis of a 360-day year of twelve 30-day
months unless otherwise specified in the applicable prospectus supplement.
Distributions to which holders of trust preferred securities are entitled will
accumulate interest at the rate per annum specified in the applicable prospectus
supplement. Distributions on trust preferred securities as used in this
prospectus includes these additional distributions unless otherwise stated.
The revenue of each Trust available for distribution to holders of its
trust preferred securities will be limited to payments it receives from us under
the junior subordinated debentures it owns. Each Trust will
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invest the proceeds from the issuance and sale of its common securities and
trust preferred securities in the corresponding junior subordinated debentures,
and it will have no other assets. See "Description of Trust Related Junior
Subordinated Debt Securities -- Certain Provisions Relating to Junior
Subordinated Debentures Issued to the HCC Trusts." If we do not make interest
payments on the junior subordinated debentures held by a Trust, the property
trustee will not have funds available to pay distributions on the trust
preferred securities of that Trust. We have guaranteed the payment of
distributions (if and to the extent the Trust has funds legally available for
the payment of distributions and cash sufficient to make the payments) on a
limited basis as set forth herein under "Description of Trust Related
Guarantees."
We may defer interest on any series of junior subordinated debentures for a
specified number of consecutive interest payment periods. See "Description of
Trust Related Junior Subordinated Debt Securities -- Certain Provisions Relating
to Junior Subordinated Debentures Issued to the HCC Trustee -- Option to Defer
Interest Payment Date." If we defer interest payments on the corresponding
junior subordinated debentures held by a Trust, the Trust will defer payments on
its trust preferred securities.
Distributions on the trust preferred securities will be payable to the
holders as they appear on the register of the Trust on the relevant record
dates, which, as long as the trust preferred securities remain in book-entry
form, will be one business day prior to the relevant distribution date. Subject
to any applicable laws and regulations and to the provisions of the applicable
trust agreement, each distribution payment will be made as described under
"Book-Entry Issuance." In the event any trust preferred securities are not in
book-entry form, the relevant record date for such trust preferred securities
shall be a date at least 15 days prior to the relevant distribution date, as
specified in the applicable prospectus supplement.
PAYMENT OF EXPENSES
Pursuant to the indenture, we have agreed to pay all debts and obligations
(other than distributions on the common securities and trust preferred
securities) and all costs and expenses of the Trusts and to pay any and all
taxes, duties, assessments or other governmental charges (other than United
States withholding taxes) imposed by the United States or any other taxing
authority. This includes, but is not limited to, all costs and expenses relating
to the organization of the Trusts, the fees and expenses of the property
trustee, the Delaware trustee and the administrators and all costs and expenses
relating to the operation of the Trusts. As a result, the net amounts received
and retained by a Trust after paying these fees, expenses, debts and obligations
will be equal to the amounts the Trust would have received and retained had no
fees, expenses, debts and obligations been incurred by or imposed on it. Our
promise to pay these obligations is for the benefit of, and shall be enforceable
by, any creditor to whom the fees, expenses, debts and obligations are owed,
whether or not the creditor has received notice of the promise. Any creditor may
enforce these obligations directly against us, and we have agreed to irrevocably
waive any right or remedy that would otherwise require that any creditor take
any action against the Trust or any other person before proceeding against us.
We will execute such additional agreements as may be necessary to give full
effect to these promises.
REDEMPTION OR EXCHANGE
If we repay or redeem, in whole or in part, any junior subordinated
debentures that have been issued to a Trust, whether at maturity or earlier, the
proceeds from the repayment or redemption shall be applied by the property
trustee to redeem a like amount of the trust preferred securities and the common
securities of that Trust. The property trustee will give you at least 30 but no
more than 60 days notice, and the redemption price will be equal to the sum of:
- the aggregate liquidation amount of the trust preferred securities and
common securities being redeemed; plus
- accumulated but unpaid distributions on to the redeemed trust preferred
securities and common securities to the date of redemption; plus
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- the related amount of the premium, if any, that we pay upon the
concurrent redemption of corresponding junior subordinated debentures.
See "Description of Trust Related Junior Subordinated Debt
Securities -- Certain Provisions Relating to Junior Subordinated Debentures
Issued to the HCC Trusts -- Redemption."
If we are repaying or redeeming less than all of any series of junior
subordinated debentures held by a Trust on a redemption date, then the proceeds
from the repayment or redemption shall be allocated to redeem the trust
preferred securities and common securities issued by that Trust, pro rata. The
amount of premium, if any, that we pay to redeem all or any part of any series
of junior subordinated debentures held by a Trust will also be allocated pro
rata to the redemption of the trust preferred securities and common securities
issued by that Trust.
We will have the right to redeem any series of junior subordinated
debentures:
- subject to the conditions described under "Description of Trust Related
Junior Subordinated Debt Securities -- Certain Provisions Relating to
Junior Subordinated Debentures Issued to the HCC Trusts -- Redemption";
or
- as may be otherwise specified in the applicable prospectus supplement.
We have the right to terminate a Trust at any time and, after satisfaction
of any liabilities to creditors of that Trust as provided by applicable law, to
cause the junior subordinated debentures owned by that Trust to be distributed
to the holders of the trust preferred securities and common securities in
liquidation of that Trust.
If provided in the applicable prospectus supplement, we will have the right
to extend or shorten the maturity of any series of junior subordinated
debentures at the time that we exercise our right to elect to terminate a Trust
and cause the junior subordinated debentures held by that Trust to be
distributed to the holders of the trust preferred securities and common
securities in liquidation of that Trust. However, we can extend the maturity
only if the conditions specified in the applicable prospectus supplement are met
at the time the election is made and at the time of the extension.
After the liquidation date fixed for any distribution of junior
subordinated debentures to the holders of any series of trust preferred
securities:
- that series of trust preferred securities will no longer be deemed to be
outstanding;
- The Depository Trust Company ("DTC") or its nominee, as the record holder
of the trust preferred securities, will receive a registered global
certificate or certificates representing the junior subordinated
debentures to be delivered in the distribution;
- We shall use our reasonable efforts to list the junior subordinated
debentures on the NYSE or on such other exchange, interdealer quotation
system or self-regulatory organization as such trust preferred securities
are then listed; and
- any certificates representing that series of trust preferred securities
not held by DTC or its nominee will be deemed to represent the junior
subordinated debentures having a principal amount equal to the stated
liquidation amount of that series of trust preferred securities, bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
distributions on that series of trust preferred securities until the
certificates are presented to the administrators or their agent for
transfer or reissuance.
We cannot predict the market prices for the trust preferred securities or
the junior subordinated debentures that may be distributed in exchange for trust
preferred securities. As a result, the trust preferred securities that an
investor may purchase, or the junior subordinated debentures that an investor
may receive on termination and liquidation of a Trust, may trade at a lower
price than the investor paid to purchase the trust preferred securities.
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REDEMPTION AND EXCHANGE PROCEDURES
Any trust preferred securities that are redeemed on any redemption date
will be redeemed with the proceeds received by the Trust from the
contemporaneous redemption of the junior subordinated debentures held by that
Trust. Redemptions of the trust preferred securities will be made and the
redemption price will be payable on each redemption date only to the extent that
the related Trust has cash on hand available for the payment of such redemption
price. See "-- Subordination of Common Securities."
If a Trust gives a notice of redemption in respect of its trust preferred
securities, then, by 12:00 noon, New York City time, on the redemption date, the
property trustee will deposit irrevocably with DTC funds sufficient to pay the
applicable redemption price to the extent funds are available. The property
trustee will give DTC irrevocable instructions and authority to pay the
redemption price to the holders of such trust preferred securities. See
"Book-Entry Issuance." If the trust preferred securities are no longer in book-
entry form, the property trustee, to the extent funds are available, will
irrevocably deposit with the paying agent for the trust preferred securities
funds sufficient to pay the applicable redemption price and will give the paying
agent irrevocable instructions and authority to pay the redemption price to the
holders of the trust preferred securities upon surrender of the certificates
evidencing their trust preferred securities.
Except as specified in the applicable prospectus supplement, in the event
that any date fixed for redemption of trust preferred securities is not a
business day, then payment of the redemption price payable on such date will be
made on the next succeeding day which is a business day (and without any
interest or other payment in respect of any delay). However, if the next
business day is in the next calendar year, the redemption price will be payable
on the preceding business day. In the event that payment of the redemption price
in respect of trust preferred securities called for redemption is improperly
withheld or refused and not paid either by the Trust or by us pursuant to the
guarantee as described under "Description of Trust Related Guarantees," then:
- distributions on those trust preferred securities will continue to accrue
at the then applicable rate from the redemption date originally
established by the Trust for those trust preferred securities to the date
the redemption price is actually paid; and
- the actual payment date will be the date fixed for redemption for
purposes of calculating the redemption price.
Payment of the redemption price on the trust preferred securities and any
distribution of corresponding junior subordinated debentures to holders of trust
preferred securities will be made to the applicable record holders thereof as
they appear on the register for the trust preferred securities on the relevant
record date. The record date will be one business day prior to the relevant
redemption date or liquidation date, as applicable, except that if any trust
preferred securities are not in book-entry form, the relevant record date for
those trust preferred securities shall be a date at least 15 days prior to the
redemption date or liquidation date, as applicable, as specified in the
applicable prospectus supplement.
If a Trust redeems less than all of its trust preferred securities and
common securities, then the aggregate liquidation amount of trust preferred
securities and common securities to be redeemed will be allocated pro rata
between the trust preferred securities and the common securities based upon
their respective aggregate liquidation amounts. Within 60 days of the redemption
date, the property trustee will select the trust preferred securities to be
redeemed from among the outstanding trust preferred securities not previously
called for redemption. The property trustee may use any method of selection it
deems to be fair and reasonable.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust preferred securities
or common securities to be redeemed at the holder's registered address.
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Unless we default in payment of the redemption price on the junior
subordinated debentures, on and after the redemption date, interest ceases to
accrue on the junior subordinated debentures or portions thereof (and
distributions cease to accrue on the trust preferred securities or portions
thereof issued by the Trust that holds such junior subordinated debentures)
called for redemption.
If notice of redemption has been given and funds deposited as required,
then upon the date of such deposit all rights of the holders of the trust
preferred securities called for redemption will cease, except the right to
receive the redemption price, but without interest on the redemption price, and
the trust preferred securities will cease to be outstanding.
SUBORDINATION OF COMMON SECURITIES
Payment of distributions on, and the redemption price of, each Trust's
trust preferred securities and common securities, as applicable, generally shall
be made pro rata based upon their respective aggregate liquidation amounts.
However, if on any distribution date or redemption date an event of default with
respect to any junior subordinated debenture held by a Trust has occurred and is
continuing, then:
- We shall not pay any distribution on, or redemption price of, any of the
Trust's common securities, and we can not make any other payment on
account of the redemption, liquidation or other acquisition of such
common securities, unless
- all accumulated and unpaid distributions on all of the Trust's
outstanding trust preferred securities are paid in full in cash for all
distribution periods terminating on or prior to any payment on the
common securities,
- in the case of a payment of the redemption price, the full amount of the
redemption price on all of the Trust's outstanding trust preferred
securities then called for redemption shall have been paid or provided
for, and
- all funds available to the property trustee shall first be applied to
the payment in full in cash of all distributions on, or redemption price
of, the Trust's trust preferred securities then due and payable.
In the case of any event of default with respect to any junior subordinated
debentures held by a Trust, we (as holder of the Trust's common securities) will
be deemed to have waived any right to act with respect to the event of default
under the applicable trust agreement until the effect of all events of default
with respect to such trust preferred securities has been cured, waived or
otherwise eliminated. Until any events of default under the applicable trust
agreement with respect to the trust preferred securities have been cured, waived
or otherwise eliminated, the property trustee is required to act solely on
behalf of the holders of the trust preferred securities and not on our behalf as
holder of the Trust's common securities, and only the holders of such trust
preferred securities will have the right to direct the property trustee to act
on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to each trust agreement, each Trust will automatically terminate
upon the expiration of its term or on the first to occur of:
- specified events relating to our bankruptcy, dissolution or liquidation;
- our written direction to the property trustee, as depositor, to dissolve
the Trust and distribute the corresponding junior subordinated debentures
to the holders of the trust preferred securities in exchange for the
trust preferred securities (which direction is optional and wholly within
our discretion as depositor);
- the redemption of all of the Trust's trust preferred securities and
common securities; and
- the entry of an order for the dissolution of the Trust by a court of
competent jurisdiction.
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If an early termination occurs for any reason other than the redemption of
all of the trust preferred securities and common securities, the Trust will be
liquidated by the property trustee as expeditiously as the issuer trustees
determine to be possible. Except as provided in the next sentence, the issuer
trustees will distribute (after satisfaction of any liabilities to creditors of
such Trust as provided by applicable law) to the holders of such trust preferred
securities and common securities a like amount of the corresponding junior
subordinated debentures. However, if such a distribution is determined by the
property trustee not to be practical, the holders of the trust preferred
securities will be entitled to receive out of the assets of the Trust available
for distribution to holders (after satisfaction of any liabilities to creditors
of the Trust as provided by applicable law) a liquidation distribution in an
amount equal to the aggregate of the liquidation amount plus accrued and unpaid
distributions thereon to the date of payment. If 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 its trust preferred securities will be paid on a pro
rata basis.
As the holder of the Trust's common securities, we will be entitled to
receive distributions upon any liquidation pro rata with the holders of its
trust preferred securities. However, if an event of default relating to the
junior subordinated debentures held by a Trust has occurred and is continuing,
that Trust's trust preferred securities will have a priority over its common
securities.
ADDITIONAL AMOUNTS
If at any time a Trust is 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 we will be required to
pay additional amounts on the junior subordinated debt securities. The
additional amounts will be sufficient so that the net amounts received and
retained by the Trust after paying any such taxes, duties, assessments or other
governmental charges will be not less than the amounts the Trust would have
received had no such taxes, duties, assessments or other governmental charges
been imposed. This means that the Trust will be in the same position it would
have been if it did not have to pay such taxes, duties, assessments or other
charges.
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes a "trust event of default"
under each trust agreement with respect to the trust preferred securities issued
by a Trust thereunder (whatever the reason for the trust event of default):
- an event of default with respect to the junior subordinated debentures
issued under the indenture to the Trust occurs (see "Description of Trust
Related Junior Subordinated Debt Securities -- Defaults");
- the property trustee does not pay any distribution within 30 days of its
due date, provided that no deferral period is continuing;
- the property trustee does not pay any redemption price of any trust
security when it becomes due and payable;
- the default by an issuer trustee in the performance, or breach, in any
material respect, of any covenant or warranty of the issuer trustees in
the trust agreement (other than a default in the payment of any
distribution or any redemption price as provided above), and continuation
of that default or breach for a period of 90 days after there has been
given, by registered or certified mail, to the defaulting issuer trustee
by the holders of at least 25% in aggregate liquidation preference of the
outstanding trust preferred securities of the applicable Trust, a written
notice specifying the default or breach and requiring it to be remedied
and stating that the notice is a "notice of default" under the trust
agreement; or
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- the property trustee files for bankruptcy or certain other events in
bankruptcy or insolvency occur and a successor property trustee is not
appointed within 60 days.
Within 90 days after learning of the occurrence of any trust event of
default, the property trustee is required to transmit notice of the trust event
of default to the holders of the Trust's trust preferred securities, to the
administrators and to us, as depositor, unless the trust event of default has
been cured or waived.
If an event of default with respect to a corresponding junior subordinated
debenture has occurred and is continuing, the trust preferred securities shall
have a preference over the common securities upon termination of the Trust as
described above. See "-- Liquidation Distribution upon Termination." The
existence of a trust event of default with respect to a Trust does not entitle
the holders of trust preferred securities issued by that Trust to cause the
redemption of the trust preferred securities.
REMOVAL OF ISSUER TRUSTEES
We as the holder of the common securities of a Trust may remove either
issuer trustee at any time, unless an event of default with respect to junior
subordinated debentures held by that Trust has occurred and is continuing. If a
trust event of default resulting from an event of default with respect to junior
subordinated debentures held by that Trust has occurred and is continuing, the
property trustee and the Delaware trustee may be removed by the holders of a
majority in liquidation amount of the outstanding trust preferred securities of
that Trust. In no event will the holders of the trust preferred securities have
the right to vote to appoint, remove or replace the administrators: that right
belongs exclusively to us as the holder of the common securities. No resignation
or removal of an issuer trustee and no appointment of a successor trustee will
be effective until the successor trustee accepts its appointment in accordance
with the provisions of the applicable trust agreement.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation into which the property trustee or the Delaware trustee
that is not a natural person may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of such
trustee, shall be the successor of such trustee under each trust agreement,
provided such corporation shall be otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, CONVERSIONS, AMALGAMATIONS OR REPLACEMENTS OF THE HCC
TRUSTS
A Trust may not merge or consolidate with or into, convert into, amalgamate
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below, as described in "-- Liquidation Distribution upon Termination"
or as described in the prospectus supplement with respect to the trust preferred
securities. A Trust may, at our request, with the consent the holders of a
majority of its trust preferred securities, merge or consolidate with or into,
convert into, amalgamate or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any state; provided, that:
- the successor entity either (a) expressly assumes all of the obligations
of the Trust with respect to its trust preferred securities or (b)
substitutes for the trust preferred securities other successor securities
having substantially the same terms as the trust preferred securities so
long as the successor securities rank the same as the trust preferred
securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise;
- We expressly appoint a trustee of such successor entity possessing the
same powers and duties as the property trustee as the holder of the
corresponding junior subordinated debentures;
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- the successor securities are listed, or any successor securities will be
listed upon notification of issuance, on any national securities exchange
or other organization on which the trust preferred securities are then
listed, if any;
- the merger, consolidation, conversion, amalgamation, replacement,
conveyance, transfer or lease does not cause the trust preferred
securities (including any successor securities) to be downgraded by a
nationally recognized statistical rating organization;
- the merger, consolidation, conversion, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the trust preferred
securities (including any successor securities) in any material respect;
- the successor entity has a purpose substantially similar to that of the
Trust;
- prior to the merger, consolidation, conversion, amalgamation,
replacement, conveyance, transfer or lease, the property trustee has
received an opinion from independent counsel to the Trust experienced in
such matters to the effect that:
- the merger, consolidation, conversion, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the holders of the trust preferred
securities (including any successor securities) in any material respect,
and
- following the merger, consolidation, conversion, amalgamation,
replacement, conveyance, transfer or lease, neither the Trust nor such
successor entity will be required to register as an investment company
under the Investment Company Act; and
- We or any permitted successor or assignee own all of the common
securities of the successor entity and guarantees the obligations of the
successor entity under the successor securities at least to the extent
provided by the guarantee.
Notwithstanding the general provisions described above, a Trust shall not,
except with the consent of holders of 100% in liquidation amount of the trust
preferred securities, merge with or into, consolidate, convert into, amalgamate,
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it if such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease would cause the Trust or the successor entity to be classified as other
than a grantor trust for United States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF EACH TRUST AGREEMENT
The holders of the trust preferred securities will have only the voting
rights described below and under "Description of Trust Related
Guarantees -- Amendments and Assignment," plus any voting rights required by
law.
Each trust agreement may be amended from time to time by us and the
property trustee, without the consent of the holders of the trust preferred
securities:
- to cure any ambiguity, correct or supplement any provisions in the trust
agreement that may be inconsistent with any other provision, or to
address matters or questions arising under the trust agreement in a way
which is consistent with the other provisions of the trust agreement; or
- to modify, eliminate or add to any provisions of the trust agreement if
necessary to ensure that the Trust will be classified for United States
federal income tax purposes as a grantor trust or to ensure that the
Trust will not be required to register as an "investment company" under
the Investment Company Act.
However, in the case of the first clause, the action must not adversely
affect in any material respect the interests of any holder of trust preferred
securities and common securities. Any amendment of the
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trust agreement becomes effective when we give notice of the amendment to the
holders of the trust preferred securities and common securities.
Each trust agreement may be amended by us and the property trustee with:
- the consent of holders representing not less than a majority (based upon
liquidation amounts) of the outstanding trust preferred securities and
common securities; and
- receipt by the property trustee of an opinion of counsel experienced in
such matters to the effect that the amendment or the exercise of any
power granted to the issuer trustees in accordance with the amendment
will not affect the Trust's status as a grantor trust for United States
federal income tax purposes or the Trust's exemption from status as an
"investment company" under the Investment Company Act.
However, without the consent of each holder of trust preferred securities
and common securities, no amendment may:
- change the amount or timing of any distribution on the trust preferred
securities and common securities or otherwise adversely affect the amount
of any distribution required to be made in respect of the trust preferred
securities and common securities as of a specified date; or
- restrict the right of a holder of trust preferred securities and common
securities to sue for the enforcement of any distribution payment.
The property trustee is required to notify each holder of trust preferred
securities whenever the property trustee is notified of a default with respect
to the corresponding junior subordinated debentures. Furthermore, so long as any
junior subordinated debentures are held by the property trustee, the issuer
trustees are not permitted to:
- direct the time, method and place of conducting any proceeding for any
remedy available to the trustee under the indenture, or execute any trust
or power conferred on the property trustee with respect to the junior
subordinated debentures;
- waive any past default that is waivable under the indenture governing the
junior subordinated debentures;
- exercise any right to rescind or annul a declaration that the principal
of all the junior subordinated debentures shall be due and payable; or
- give a required consent to any amendment, modification or termination of
the indenture, the applicable securities resolution or the junior
subordinated debentures
unless, in each case, they first obtain the approval of the holders of a
majority in aggregate liquidation amount of all outstanding trust preferred
securities. However, where the indenture requires the consent of each affected
holder of junior subordinated debentures, the property trustee cannot give the
consent without first obtaining the consent of each holder of the trust
preferred securities. The property trustee cannot revoke any action previously
authorized or approved by a vote of the holders of the trust preferred
securities except by subsequent vote of the holders of the trust preferred
securities.
In addition to obtaining approval of the holders of the trust preferred
securities as described above, the issuer trustees are required to obtain an
opinion of counsel to the effect that the proposed action will not cause the
Trust to be classified as a corporation for United States federal income tax
purposes.
Any required approval of holders of trust preferred securities may be given
either at a meeting of holders of trust preferred securities or pursuant to a
written consent. The property trustee must notify record holders of trust
preferred securities of any meeting in the manner set forth in each trust
agreement.
No vote or consent of the holders of trust preferred securities will be
required for a Trust to redeem and cancel its trust preferred securities in
accordance with the applicable trust agreement.
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Whenever holders of trust preferred securities are entitled to vote or
consent under any of the circumstances described above, neither we nor the
issuer trustees will be permitted to vote. For purposes of any vote or consent,
any of the trust preferred securities that we own (or that are owned by the
issuer trustees or our affiliates) will be treated as if they were not
outstanding.
PAYMENT AND PAYING AGENCY
The depositary for the trust preferred securities will make payments in
respect of the trust preferred securities by crediting the relevant accounts at
the depositary on the applicable distribution dates. If any trust preferred
securities of a Trust are not held by the depositary, then the paying agent will
mail checks to registered holders of the trust preferred securities as their
addresses appear on its register. Unless otherwise specified in the applicable
prospectus supplement, the paying agent shall initially be the property trustee
and any co-paying agent chosen by the property trustee and acceptable to the
administrators and to us. The paying agent can resign upon 30 days' written
notice to the property trustee and to us. If the property trustee resigns as
paying agent, the property trustee will appoint a bank or trust company
acceptable to the administrators to act as paying agent.
REGISTRAR AND TRANSFER AGENT
Unless otherwise specified in the applicable prospectus supplement, the
property trustee will act as registrar and transfer agent for the trust
preferred securities.
Each Trust will register transfers of its trust preferred securities
without charge, but will require payment of any tax or other governmental
charges that may be imposed in connection with any transfer or exchange. The
Trusts will not register transfers of their trust preferred securities after the
relevant trust preferred securities are called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The property trustee undertakes to perform only the duties that are
specifically set forth in each trust agreement, other than during the
continuance of a trust event of default. After a trust event of default, the
property trustee is required to exercise the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the property trustee has no obligation to exercise
any of its powers under the applicable trust agreement at the request of any
holder of trust preferred securities unless it is offered reasonable indemnity
against the costs, expenses and liabilities that it might incur by doing so. If
no trust event of default has occurred and is continuing and the property
trustee is required to decide between alternative courses of action, construe
ambiguous provisions in the applicable trust agreement or is unsure of the
application of any provision of the applicable trust agreement, then we will
have the right to tell the property trustee which action to take unless the
matter is one on which holders of trust preferred securities are entitled to
vote. If we do not give any directions, the property trustee will take whatever
action it deems advisable and in the best interests of the holders of the trust
preferred securities and common securities. The property trustee will have no
liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The property trustee and the administrators are authorized and directed to
operate the Trusts in such a way that:
- no Trust will be:
- deemed to be an "investment company" required to be registered under the
Investment Company Act or
- classified as an association taxable as a corporation for United States
federal income tax purposes; and
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- the junior subordinated debentures will be treated as our indebtedness
for United State federal income tax purposes.
Holders of the trust preferred securities have no preemptive or similar
rights.
No Trust may borrow money or issue debt or mortgage or pledge any of its
assets.
DESCRIPTION OF TRUST RELATED GUARANTEES
When the trust preferred securities and common securities of any series are
issued by a Trust, we will execute and deliver a guarantee agreement for the
benefit of the holders of the trust preferred securities of that series. The
guarantee agreement will be qualified as an indenture under the Trust Indenture
Act. First Union National Bank will act as guarantee trustee under each
guarantee for the purposes of compliance with the Trust Indenture Act, and will
hold the guarantee for the benefit of the holders of the related Trust's trust
preferred securities.
We have summarized the material provisions of the guarantees below. The
form of the guarantee agreement has been filed as an exhibit to the registration
statement of which this prospectus forms a part, and you should read the
guarantee agreement for provisions that may be important to you. Reference in
this summary to trust preferred securities means that Trust's trust preferred
securities to which a guarantee relates.
GENERAL
We will promise to pay the guarantee payments to the holders of the trust
preferred securities, as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert other than the defense
of payment. Our obligations under the guarantee will rank equal to the
corresponding junior subordinated debentures and will be junior and subordinated
to the Senior Debt. The guarantee payments include the following, to the extent
not paid by or on behalf of the related Trust:
- any accumulated and unpaid distributions required to be paid on the trust
preferred securities, but only if and to the extent that the applicable
Trust has funds on hand available for the distributions at that time;
- the redemption price with respect to any trust preferred securities
called for redemption, if and to the extent that the applicable Trust has
funds on hand available to pay the redemption price at that time; or
- upon a voluntary or involuntary termination, winding up or liquidation of
a Trust (unless the corresponding junior subordinated debentures are
distributed to the holders of the trust preferred securities), the lesser
of:
- the liquidation distribution; and
- the amount of assets of the applicable Trust remaining available for
distribution to holders of trust preferred securities.
Our obligation to make a guarantee payment may be satisfied either by our
direct payment of the required amounts to the holders of the applicable trust
preferred securities or by causing the Trust to pay them.
Each guarantee will be an irrevocable guarantee on a junior subordinated
basis of the related Trust's obligations in respect of the trust preferred
securities, but will apply only to the extent that the related Trust has funds
sufficient to make the required payments. If we do not make interest payments on
the junior subordinated debentures held by a Trust, the Trust will not be able
to pay distributions on its trust preferred securities.
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We may also agree to guarantee the obligations of the Trusts with respect
to the common securities to the same extent as the guarantee to holders of the
trust preferred securities. However, if there is an event of default with
respect to a corresponding junior subordinated debenture, holders of trust
preferred securities issued by that Trust will have priority over holders of
common securities issued by that Trust.
STATUS OF THE GUARANTEES
Each guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all of our Senior Debt.
Each guarantee will rank equally with all other guarantees issue relating
to trust preferred securities issued by the Trusts. Each guarantee will
constitute a guarantee of payment and not of collection (i.e., the guaranteed
party may institute a legal proceeding directly against us as the guarantor to
enforce its rights under the guarantee without first suing anyone else). Each
guarantee will be held for the benefit of the holders of the related trust
preferred securities. Each guarantee will be discharged only by payment of the
guarantee payments in full (to the extent not paid by the Trust) or by
distribution of the corresponding junior subordinated debentures to the holders
of the trust preferred securities. None of the guarantees places a limitation on
the amount of additional Senior Debt or subordinated debt that we may incur. We
expect from time to time to incur additional indebtedness constituting Senior
Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of the related trust preferred securities in any material respect (in
which case no vote will be required), no guarantee may be amended without the
prior approval of the holders of not less than a majority of the aggregate
liquidation amount of the related outstanding trust preferred securities. The
manner of obtaining any required approval will be as set forth under
"Description of Trust Preferred Securities -- Voting Rights; Amendment of Each
Trust Agreement." All guarantees and agreements contained in each guarantee
agreement will bind our successors, assigns, receivers, trustees and
representatives and will benefit the holders of the related trust preferred
securities then outstanding.
EVENTS OF DEFAULT
We will be in default under any guarantee agreement if (a) we do not make
required payments or (b) we are notified that we have not performed some other
obligation and have not cured that failure within 90 days.
The holders of a majority in aggregate liquidation amount of the related
trust preferred securities have the right:
- to direct the time, method and place of conducting any proceeding for any
remedy available to the guarantee trustee in respect of the guarantee
agreement; or
- to direct the exercise of any power conferred upon the guarantee trustee
under the guarantee agreement.
Holders of a majority in aggregate liquidation amount of the related trust
preferred securities also have the right to waive any past event of default and
its consequences.
Any holder of the trust preferred securities may institute a legal
proceeding directly against us to enforce the Trust's rights under the guarantee
agreement without first instituting a legal proceeding against the Trust, the
guarantee trustee or anyone else.
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As guarantor, we are required to file annually with the guarantee trustee a
certificate stating whether or not we are is in compliance with all the
conditions and covenants applicable to us under the guarantee agreement.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The guarantee trustee will perform only the duties that are specifically
set forth in each guarantee agreement, other than during the occurrence and
continuance of a default by us in performance of any guarantee. After we default
and while the default continues, the guarantee trustee must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision and so long as no
default under the applicable guarantee agreement has occurred and is continuing,
the guarantee trustee is under no obligation to exercise any of the powers
vested in it by any guarantee agreement at the request of any holder of any
trust preferred securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that it might incur by doing so.
TERMINATION OF THE GUARANTEES
Each guarantee will terminate upon full payment of the redemption price of
the related trust preferred securities, upon full payment of the amounts payable
upon liquidation of the related Trust or upon distribution of corresponding
junior subordinated debentures to the holders of the related trust preferred
securities. Each guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any holder of the related trust preferred
securities must restore payment of any sums paid under the trust preferred
securities or the guarantee.
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE CORRESPONDING JUNIOR
SUBORDINATED SECURITIES AND THE GUARANTEES
FULL AND UNCONDITIONAL GUARANTEE
We irrevocably guarantee payments of distributions and other amounts due on
the trust preferred securities (to the extent the applicable Trust has funds
available for the payment of the distributions) as and to the extent set forth
under "Description of Trust Related Guarantees." Taken together, our obligations
under each series of junior subordinated debentures, the related securities
resolution, the indenture, the related trust agreement and the related guarantee
agreement provide, in the aggregate, a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the related
series of trust preferred securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
the full guarantee. It is only the combined operation of these documents that
has the effect of providing a full, irrevocable and unconditional guarantee of
the Trust's obligations under the trust preferred securities. See "The HCC
Trusts," "Description of Trust Preferred Securities," and "Description of Trust
Related Junior Subordinated Debt Securities -- Certain Provisions Relating to
Junior Subordinated Debentures Issued to the HCC Trusts."
If and to the extent that we do not make payments on any series of
corresponding junior subordinated debentures, the Trust will not pay
distributions or other amounts due on its trust preferred securities. The
guarantees do not cover payment of distributions when the related Trust does not
have sufficient funds to pay the distributions. In that event, the remedy for a
holder of the trust preferred securities issued by that trust is to institute a
legal proceeding directly against us for enforcement of payment of the
distributions to such holder. Our obligations under each guarantee are
subordinate and junior in right of payment to all of our Senior Debt.
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SUFFICIENCY OF PAYMENTS
As long as we make payments when due on each series of junior subordinated
debentures, those payments will be sufficient to cover distributions and other
payments due on the related trust preferred securities. This is primarily
because:
- the aggregate principal amount of each series of junior subordinated
debentures will be equal to the sum of the aggregate stated liquidation
amount of the related trust preferred securities and related common
securities;
- the interest rate and interest and other payment dates on each series of
junior subordinated debentures will match the distribution rate and
distribution and other payment dates for the related trust preferred
securities;
- we, as issuer of the junior subordinated debentures, have promised to pay
any and all costs, expenses and liabilities of each Trust except the
Trust's obligations under its trust preferred securities; and
- each trust agreement provides that the Trust will not engage in any
activity that is not consistent with the limited purposes of the Trust.
We have the right to set-off any payment we are otherwise required to make
under the indenture if and to the extent we have already made, or are
concurrently making, a payment under the related guarantee agreement.
ENFORCEMENT RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES
A holder of any capital security may institute a legal proceeding directly
against us to enforce our rights under the related guarantee agreement without
first instituting a legal proceeding against the guarantee trustee, the related
Trust or anyone else.
Our default or event of default under any other senior or subordinated
indebtedness would not necessarily constitute a trust event of default. However,
in the event of payment defaults under, or acceleration of, our Senior Debt, the
subordination provisions of the applicable securities resolution will provide
that no payments may be made in respect of the corresponding junior subordinated
debentures until the Senior Debt has been paid in full or any payment default
thereunder has been cured or waived. Our failure to make required payments on
any series of corresponding junior subordinated debentures would constitute a
trust event of default.
LIMITED PURPOSE OF HCC TRUSTS
Each Trust's trust preferred securities evidence undivided beneficial
ownership interests in the assets of that Trust, and each Trust exists for the
sole purposes of issuing its trust preferred securities and common securities,
investing the proceeds in junior subordinated debentures and engaging in only
those other activities necessary, convenient or incidental to those purposes. A
principal difference between the rights of a holder of a capital security and a
holder of a corresponding junior subordinated debenture is that the holder of a
junior subordinated debenture is entitled to receive from us the principal
amount of and interest accrued on the junior subordinated debenture held, while
the holder of a capital security is entitled to receive distributions from the
Trust (or from us under the applicable guarantee agreement) if and to the extent
the Trust has funds available for the payment of the distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination of any Trust involving the
liquidation of the junior subordinated debentures held by that Trust, the
holders of the related trust preferred securities will be entitled to receive
the liquidation distribution in cash, out of assets of the Trust (and after
satisfaction of creditors of the Trust as provided by applicable law). See
"Description of Trust Preferred Securities --
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Liquidation Distribution upon Termination." If we become subject to any
voluntary or involuntary liquidation or bankruptcy, the property trustee, as
holder of the corresponding junior subordinated debentures, would be one of our
junior subordinated creditors. The property trustee would be subordinated in
right of payment to all of our Senior Debt, but it would be entitled to receive
payment in full of principal and interest before our shareholders receive
payments or distributions. We are the guarantor under each guarantee agreement
and pursuant to the indenture, as borrower, has agreed to pay all costs,
expenses and liabilities of each Trust (other than the Trust's obligations to
the holders of its trust preferred securities). Accordingly, in the event of our
liquidation or bankruptcy the positions of a holder of trust preferred
securities and of a holder of corresponding junior subordinated debentures are
expected to be substantially the same relative to our other creditors and to our
shareholders.
BOOK-ENTRY ISSUANCE
"STREET NAME" AND OTHER INDIRECT HOLDERS
Investors who hold trust preferred securities in accounts at banks or
brokers will generally not be recognized as legal holders of trust preferred
securities. This is called holding in "Street Name." Instead, the applicable
Trust would recognize only the bank or broker that directly holds, or the
financial institution the bank or broker uses to hold, its trust preferred
securities. These intermediary banks, brokers and other financial institutions
pass along distributions and other payments on the trust preferred securities,
either because they agree to do so in their customer agreements or because they
are legally required to. If you hold trust preferred securities in "Street
Name," you should check with your own institution to find out:
- how it handles securities payments and notices,
- whether it imposes fees or charges,
- how it would handle voting if ever required,
- whether and how you can instruct it to send you trust preferred
securities registered in your own name so you can be a direct holder as
described below, and
- how it would pursue rights under the trust preferred securities if there
were a default or other event triggering the need for holders to act to
protect their interests.
DIRECT HOLDERS
A Trust's obligations, as well as our obligations, the trustees and those
of any third parties employed by an HCC Trust, or the issuer trustees, run only
to individuals, corporations or other entities who are registered as holders of
trust preferred securities. As noted above, a Trust does not have obligations to
a holder of trust preferred securities who holds in "Street Name" or other
indirect means, either because the holder chooses to hold trust preferred
securities in that manner or because the trust preferred securities are issued
in the form of global securities as described below. For example, once a Trust
makes payment to the registered holder, the Trust has no further responsibility
for the payment even if that holder is legally required to pass the payment
along to a holder as a "Street Name" customer but does not do so.
GLOBAL SECURITIES
The trust preferred securities will be issued in the form of global
securities, and, therefore, the ultimate beneficial owners can only be indirect
holders. The global securities will be registered in the name of DTC or its
nominee and the trust preferred securities included in the global security may
not be transferred in the name of any other direct holder unless the special
circumstances described below occur. Any person wishing to own trust preferred
securities must be so indirectly by virtue of an account with a broker, bank or
other financial institution that in turn has an account with DTC.
Special Investor Considerations for Global Securities. As an indirect
holder, an investor's rights relating to a global security will be governed by
the account rules of the investor's financial institution and
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of DTC, as well as the general laws relating to securities transfers. An
investor should be aware that because the trust preferred securities are issued
only in the form of global securities:
- the investor will not be able to get the trust preferred securities
registered in his or her own name,
- the investor will not be able to receive physical certificates for his or
her interest in the trust preferred securities,
- the investor will be a "Street Name" holder and must look to his or her
own bank or broker for payments on the trust preferred securities and
protection of his or her legal rights relating to the trust preferred
securities (see "-- 'Street Name' and Other Indirect Holders" above),
- the investor may not be able to sell interests in the trust preferred
securities to some insurance companies and other institutions that are
required by law to own their securities in the form of physical
certificates,
- DTC's policies will govern payments, transfers, exchange and other
matters relating to the investor's interest in the global security (see
"-- The DTC System" below; we, the Trusts and the issuer trustees have no
responsibility for any aspect of DTC's actions or for its records of
ownership interests in the global security, nor do they supervise DTC in
any way), and
- payment for purchases and sales in the market for corporate bonds and
notes is generally made in next-day funds. In contrast, DTC will usually
require that interests in a global security be purchased or sold within
its system using same-day funds. This difference could have some effect
on how global security interests trade, but neither we nor any Trust
knows what the effect will be.
Special Situations When Global Security Will Be Terminated. In a few
special situations, the global security will terminate and interests in it will
be exchanged for physical certificates representing capital securities. After
the exchange, the choice of whether to hold trust preferred securities directly
or in "Street Name" will be up to the investor. Investors must consult their own
bank or brokers to find out how to have their interests in trust preferred
securities transferred to their own name, so that they will be direct holders.
The rights of "Street Name" investors and direct holders in the trust preferred
securities are described above under "-- 'Street Name' and Other Indirect
Holders" and "-- Direct Holders."
The special situations for termination of a global security are:
- DTC notifies us or a Trust that it is unwilling, unable or no longer
qualified to continue as the depositary for the trust preferred
securities;
- we in our sole discretion determines that the global security will be
exchangeable for certificated trust preferred securities; or
- an event of default under the trust agreement has occurred and has not
been cured and the holders of a majority in liquidation amount of the
outstanding trust preferred securities determine that the global security
will be exchangeable for certificated trust preferred securities.
When a global security terminates, DTC (and not us or the issuer trustees)
is responsible for deciding the names of the institutions that will be the
initial direct holders.
THE DTC SYSTEM
DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (the "Participations"). DTC
also facilitates the clearance and settlement between Participants in
transactions of securities deposited with DTC through changes in the account
records of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Underwriters are Participants in the DTC System. Access to
DTC's system is also available to other entities such as securities brokers and
dealers, banks and trust companies that work through a Participant (the
"Indirect Participants").
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51
When you purchase trust preferred securities through the DTC system, the
purchases must be made by or through a Participant, who will receive credit for
the trust preferred securities on DTC's records. Since you actually own the
trust preferred securities, you are the beneficial owner and your ownership
interest will only be recorded on the Participants' or Indirect Participants'
records. DTC has no knowledge of your individual ownership of the trust
preferred securities. DTC's records only show the identity of the Participants
and the amount of the trust preferred securities held by or through them. You
will not receive a written confirmation of your purchase or sale or any periodic
statement directly from DTC. You will receive these from your Participant or
Indirect Participant. Thus the Participants or Indirect Participants are
responsible for keeping accurate account of the holdings of their customers like
you.
Any redemption notices will be sent by us and the applicable Trust directly
to DTC, who will in turn inform the Participants, who will then contact you as a
beneficial holder. If less than all of the trust preferred securities are being
redeemed, DTC's current practice is to choose by lot the amount of the interest
of each Participant to be redeemed. The Participant will then use an appropriate
method to allocate the redemption price among its beneficial holders like you.
It is DTC's current practice, upon receipt of any payment of distributions
or liquidation amount, to credit Participants' accounts on the payment date
based on their holdings of beneficial interests in the global securities as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Participants whose accounts are credited with
trust preferred securities on a record date by using an omnibus proxy. Payments
by Participants to owners of beneficial interests in the global securities, and
voting by Participants, will be based on the customary practices between the
Participants and owners of beneficial interests, as is the case with the trust
preferred securities held for the account of customers registered in "Street
Name." However, payments will be the responsibility of the Participants and not
of DTC, the issuer trustees, the Trusts or us.
We have obtained the information concerning DTC and DTC's book-entry system
from sources that we believe to be accurate, but we are not responsibility for
the accuracy of this information. In addition, we are not responsible for the
performance by DTC, its Participants or any Indirect Participants of any of
their obligations.
REGISTRATION OF JUNIOR SUBORDINATED DEBENTURES
The junior subordinated debentures initially will be issued in certificated
form and registered in the name of the property trustee. If in the future the
junior subordinated debentures are distributed to the holders of trust preferred
securities in exchange for the trust preferred securities and at that time the
trust preferred securities are represented by a global security, the junior
subordinated debentures would also be represented by a global security. In this
event, we expect that the book-entry arrangements applicable to the trust
preferred securities would be similar to those applicable to the junior
subordinated debentures.
PLAN OF DISTRIBUTION
We or a Trust may distribute the securities described in this prospectus or
any prospectus supplement from time to time in one or more transactions at a
fixed price or prices (which may be changed from time to time), at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Each prospectus supplement will describe the
method of distribution of the securities offered under that prospectus
supplement.
We or a Trust may sell securities directly, through agents designated from
time to time, through underwriting syndicates led by one or more managing
underwriters or through one or more underwriters acting alone. Each prospectus
supplement will describe the terms of the securities to which the prospectus
supplement relates, the name or names of any underwriters or agents with whom we
or a Trust have entered into arrangements with respect to the sale of such
securities, the public offering or purchase price of such securities and the net
proceeds we or a Trust will receive from such sale.
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In addition, each prospectus supplement will describe any underwriting
discounts and other items constituting underwriters' compensation, any discounts
and commissions allowed or paid to dealers, if any, any commissions allowed or
paid to agents, and the securities exchange or exchanges, if any, on which the
subject securities will be listed.
Any underwriter or agent participating in the distribution of the
securities may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the offered securities and sold and any discounts or
commissions received by them, and any profit realized by them on the same or
resale of the securities may be deemed to be underwriting discounts and
commissions under the Securities Act. Certain of any such underwriters and
agents, including their associates, may be customers of, engage in transactions
with and perform services for us and our subsidiaries in the ordinary course of
business.
Securities may also be offered and sold, if so indicated in the prospectus
supplement, in connection with a remarketing upon their purchase, in accordance
with a redemption or repayment pursuant to their terms, by one or more firms
("remarketing firms") acting as principals for their own accounts or as agents
for either of us. Any remarketing firm will be identified and the terms of its
agreement, if any, with us and its compensation will be described in the
prospectus supplement. Remarketing firms may be deemed to be underwriters in
connection with the securities remarketed thereby.
If any underwriter or any selling group member intends to engage in
stabilizing, syndicate short covering transactions, penalty bids or any other
transaction in connection with the offering of securities that may stabilize,
maintain, or otherwise affect the price of those securities, such intention and
a description of such transactions will be described in the prospectus
supplement.
Agents and underwriters may be entitled under agreements entered into with
us and/or the applicable Trust to indemnification by us against certain civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribution with respect to payments which the agents or underwriters may be
required to make in respect thereof. Certain of any such agents and
underwriters, including their associates, may be customers of, engage in
transactions with, or perform services for, us and our subsidiaries in the
ordinary course of business.
Except as indicated in the applicable prospectus supplement, the securities
are not expected to be listed on a securities exchange, except for the common
stock, which is listed on the NYSE, and any underwriters or dealers will not be
obligated to make a market in securities. We cannot predict the activity or
liquidity of any trading in the securities.
CERTAIN LEGAL MATTERS
Unless otherwise indicated in the applicable prospectus supplements, the
validity of the securities offered by this prospectus will be passed upon (a)
for us by Haynes and Boone, LLP, our legal counsel and (b) for the Trusts (with
respect to the validity of the trust preferred securities under Delaware law) by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to us and the Trusts.
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53
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of HCC Insurance Holdings, Inc. for the year
ended December 31, 2000 and to the Current Report on Form 8-K dated June 14,
2001 of HCC Insurance Holdings, Inc. have been so incorporated in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered by the safe
harbors created by those laws; provided, however, that any statements of HCC
Capital Trust I and Capital Trust II, neither of which is subject to the
reporting requirements of Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934, do not fall within such safe harbors. These
forward-looking statements include information about possible or assumed future
results of our operations. All statements, other than statements of historical
facts, included or incorporated by reference in this prospectus that address
activities, events or developments that we expect or anticipate may occur in the
future, including, such things as future capital expenditures, business
strategy, competitive strengths, goals, growth of our business and operations,
plans, and references to future success may be considered forward-looking
statements. Also, when we use words such as "anticipate," "believe," "estimate,"
"expect," "intend," "plan," "probably" or similar expressions, we are making
forward-looking statements.
Many risks and uncertainties may impact the matters addressed in these
forward-looking statements. Many possible events or factors could affect our
future financial results and performance. These could cause our results or
performance to differ materially from those we express in our forward-looking
statements. Although we believe that the assumptions underlying our
forward-looking statements are reasonable, any of these assumptions, and
therefore also the forward-looking statements based on these assumptions, could
themselves prove to be inaccurate. In light of the significant uncertainties
inherent in the forward-looking statements included in this prospectus, our
inclusion of this information is not a representation by us or any other person
that our objectives and plans will be achieved. You should consider these risks
and those we set out in the Risk Factors section of this prospectus before you
purchase our securities.
Our forward-looking statements speak only as of the date made and we will
not update these forward-looking statements unless the securities laws require
us to do so. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus may not occur.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. The SEC maintains an internet site http://www.sec.gov
that contains reports, proxy and information statements, and other information
regarding issuers (including us) that file documents with the SEC
electronically. Our SEC filings may be obtained from that web site. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference
facilities. You may also read and copy any document we file with the SEC at the
following SEC public reference facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
You may also obtain copies of the documents at prescribed rates by writing
to the Public Reference Room of the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549.
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54
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until we terminate the offering:
- Our Annual Report on Form 10-K for the year ended December 31, 2000;
- Our Current Report on Form 8-K dated February 23, 2001;
- Our Current Report on Form 8-K dated March 2, 2001;
- Our Current Report on Form 8-K dated May 11, 2001;
- Our Current Report on Form 8-K dated June 14, 2001; and
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
Any person, including any beneficial owner, may request a copy of these
filings, at no cost, by writing or telephoning us at the following address:
Investor Relations
HCC Insurance Holdings, Inc.
13403 Northwest Freeway
Houston, TX 77040
713-690-7300
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[HCC LOGO]
HCC INSURANCE HOLDINGS, INC.
COMMON STOCK
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
WARRANTS
---------------------
HCC CAPITAL TRUST I
HCC CAPITAL TRUST II
[ ]% TRUST PREFERRED SECURITIES (TRUPS(R))
PROSPECTUS
, 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
56
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee........................................ $115,279
Printing.................................................... $100,000*
Accounting Fees and Expenses................................ $100,000*
Legal Fees and Expenses..................................... $125,000*
Transfer Agent Fees......................................... $ 5,000*
Transfer Fees and Expenses.................................. $ 30,000*
Rating Agency Fees and Expenses............................. $200,000*
Blue Sky Fees and Expenses.................................. $ 10,000*
Miscellaneous............................................... $ 14,721*
--------
Total............................................. $700,000*
========
- ---------------
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Subsection (b)(7) of Section 102 of the Delaware General Corporation Law (the
"DGCL"), enables a corporation in its original certificate of incorporation or
an amendment thereto to eliminate or limit the personal liability of a director
to the corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its shareholders, (ii) for any acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which the director derived an
improper personal benefit.
Section 145 of the General Corporation Law of the state of Delaware
("Section 145") provides that a Delaware corporation may indemnify any persons
who are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person is or was an officer, director, employee or
agent of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgment, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's bests interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify any persons who were
or are parties, or are threatened to be made a party to any threatened, pending
or completed, action or suit by or in the right of the corporation by reason of
the fact that such person is or was a director, officer, employee or agent of
such corporation, or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interest except that no indemnification is
permitted without judicial approval if the officer is adjudge to be liable to
the corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
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Article 11 of the Company's certificate of incorporation, as amended,
requires the Company to indemnify the Company's directors and officers to the
extent permitted under Section 145.
Article VIII of the Company's bylaws provides that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending, or completed action, suit, or proceeding whether
civil, criminal, administrative, or investigative (other than action by or in
the right of the Company), by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director or officer of the Company, or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit, or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The determination of whether an incumbent or former
director or officer is entitled to indemnification because it has met the
applicable standards of conduct set forth above is to be made, unless ordered by
a court: (i) by a majority vote of a quorum consisting of directors who at the
time of the vote are not parties to the proceeding; (ii) if such quorum cannot
be obtained, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (iii) by a vote
of Shareholders of the Company. The bylaws further provide that the expenses
(including attorneys' fees) incurred in any such action by a director or officer
of the Company may be paid or reimbursed by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of a written
undertaking by or on behalf of the director or officer to repay the amount paid
or reimbursed if it is ultimately determined that he is not entitled to be
indemnified by the Company as authorized therein.
The Company's bylaws also provide that the Company may indemnify to the
extent of the provisions set forth therein, any person, other than an officer or
director, who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative, by reason of the fact that he is or
was an employee or agent of the Company, or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise, if such person makes
written application for such indemnification to the Board of Directors and the
Board of Directors so determines that indemnification is appropriate and the
extent thereof.
The Company's bylaws further provide that the indemnification described
therein is not exclusive, and shall not exclude any other rights to which those
seeking to be indemnified may be entitled under statute, any bylaw, agreement,
vote of Shareholders or disinterested directors, or otherwise, both as to action
in his official capacity and to his action in another capacity while holding
such office.
The Amended and Restated Trust Agreement for each of the Trusts will
provide for the indemnification by HCC to the fullest extent permitted by
applicable law of a Trustee, an Administrator, a Paying Agent, any affiliate of
any of such parties, any officer, director, shareholder, member, partner,
employee, representative or agent of a Trustee, or an employee or agent of the
Trusts or their affiliates. HCC will also be obligated to advance expenses,
including legal expenses, from time to time upon the indemnified party's written
affirmation that such party believes in good faith to have met the standard of
conduct set forth in the Trust Agreement and an undertaking to repay any amounts
advanced if such party is not entitled to indemnification.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Items denoted by a letter are incorporated by reference to other documents
previously filed with the Securities and Exchange Commission as set forth at the
end of this table. Items not denoted by a letter but denoted with an * are being
filed herewith. Items designated with ** are to be filed by amendment. Items
marked with *** have been previously filed with this Registration Statement.
EXHIBIT
NUMBER
-------
*1.1 -- Form of Underwriting Agreement (Common Stock HCC
Insurance Holdings, Inc.).
*1.2 -- Form of Underwriting Agreement (Senior Debt Securities
and Junior Subordinated Debt Securities of HCC Insurance
Holdings, Inc.).
**1.3 -- Form of Underwriting Agreement (Trust Preferred
Securities).
**1.4 -- Form of Underwriting Agreement (Warrants of HCC Insurance
Holdings, Inc.).
a3.1 -- Bylaws of HCC Insurance Holdings, Inc., as amended
b3.2 -- Restated Certificate of Incorporation and Amendment
thereto of HCC Insurance Holdings, Inc
c3.3 -- Certificate of Trust of HCC Capital Trust I.
c3.4 -- Certificate of Trust of HCC Capital Trust II.
c4.1 -- Form of Indenture for Senior Debt Securities issued by
HCC Insurance Holdings, Inc.
c4.2 -- Form of Subordinated Indenture for Junior Subordinated
Debt Securities issued by HCC Insurance Holdings, Inc.
c4.3 -- Form of Subordinated Indenture for Junior Subordinated
Debt Securities issued by HCC Insurance Holdings, Inc. to
HCC Capital Trust I or HCC Capital Trust II.
**4.4 -- Forms of Senior Debt Security issued by HCC Insurance
Holdings, Inc.
**4.5 -- Form of Junior Subordinated Debt Security issued by HCC
Insurance Holdings, Inc.
**4.6 -- Form of Junior Subordinated Debt Security issued by HCC
Insurance Holdings, Inc. to HCC Capital Trust I or HCC
Capital Trust II.
c4.7 -- Trust Agreement of HCC Capital Trust I.
c4.8 -- Trust Agreement of HCC Capital Trust II.
c4.9 -- Form of Amended and Restated Trust Agreement of HCC
Capital Trust I and HCC Capital Trust II.
**4.10 -- Form of Capital Security.
c4.11 -- Form of Trust Preferred Securities Guarantee of HCC with
respect to the trust preferred securities issued by HCC
Capital Trust I and HCC Capital Trust II.
a4.12 -- Specimen of Common Stock certificate, $1.00 par value, of
HCC Insurance Holdings, Inc.
***5.1 -- Opinion of Haynes and Boone, L.L.P., counsel for HCC
Insurance Holdings, Inc.
***5.2 -- Opinion of Richards, Layton & Finger, P.A., counsel to
HCC Capital Trust I and HCC Capital Trust II.
***12.1 -- Computation of Statement of Ratios of Earnings to Fixed
Charges.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
***23.2 -- Consent of Haynes and Boone, L.L.P. (included in Exhibit
5.1).
***23.3 -- Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2).
***24.1 -- Powers of Attorney.
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EXHIBIT
NUMBER
-------
c25.1 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Indenture (Senior Debt Securities
issued by HCC Insurance Holdings, Inc.).
c25.2 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Subordinated Indenture (Junior
Subordinated Debt Securities issued by HCC Insurance
Holdings, Inc.).
c25.3 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Subordinated Indenture (Junior
Subordinated Debt Securities issued by HCC to HCC Capital
Trust I or HCC Capital Trust II).
c25.4 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Property Trustee for the Amended and Restated Trust
Agreement of HCC Capital Trust I.
c25.5 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Property Trustee for the Amended and Restated Trust
Agreement of HCC Capital Trust II.
c25.6 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Guarantee Trustee under the Guarantee of HCC for the
benefit of the holders of Trust Preferred Securities of
HCC Capital Trust I.
c25.7 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Guarantee Trustee under the Guarantee of HCC for the
benefit of the holders of Trust Preferred Securities of
HCC Capital Trust II.
- ---------------
(a) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 33-48737) filed October 27, 1992.
(b) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement on Form S-8 (Registration No. 333-61687) filed on
August 17, 1998.
(c) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 333-46432) filed September 22,
2000.
ITEM 17. UNDERTAKINGS
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement, or the most recent
post-effective amendment thereof, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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(4) In the event securities are offered under this prospectus by a
non-reporting registrant, to provide to the underwriter at the closing
specified in the underwriting agreements certificates in such denominations
and registered in such names as required by the underwriter to permit
prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrant has
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and therefore is unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act, and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act, that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
Texas, on the 18th day of July, 2001.
HCC INSURANCE HOLDINGS, INC.
By: /s/ STEPHEN L. WAY
----------------------------------
Stephen L. Way
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ STEPHEN L. WAY Chairman of the Board of July 18, 2001
- ----------------------------------------------------- Directors and Chief Executive
Stephen L. Way Officer (Principal Executive
Officer)
/s/ FRANK J. BRAMANTI Director and Executive Vice July 18, 2001
- ----------------------------------------------------- President
Frank J. Bramanti
/s/ MARVIN P. BUSH* Director July 18, 2001
- -----------------------------------------------------
Marvin P. Bush
/s/ PATRICK B. COLLINS* Director July 18, 2001
- -----------------------------------------------------
Patrick B. Collins
/s/ JAMES R. CRANE* Director July 18, 2001
- -----------------------------------------------------
James R. Crane
/s/ J. ROBERT DICKERSON* Director July 18, 2001
- -----------------------------------------------------
J. Robert Dickerson
/s/ EDWARD H. ELLIS, JR. Director and Senior Vice July 18, 2001
- ----------------------------------------------------- President and Chief Financial
Edward H. Ellis, Jr. Officer (Chief Accounting
Officer)
/s/ JAMES C. FLAGG* Director July 18, 2001
- -----------------------------------------------------
James C. Flagg, Ph.D.
/s/ EDWIN H. FRANK, III* Director July 18, 2001
- -----------------------------------------------------
Edwin H. Frank, III
/s/ ALLAN W. FULKERSON* Director July 18, 2001
- -----------------------------------------------------
Allan W. Fulkerson
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SIGNATURE TITLE DATE
--------- ----- ----
/s/ WALTER J. LACK* Director July 18, 2001
- -----------------------------------------------------
Walter J. Lack
/s/ STEPHEN J. LOCKWOOD* Director and Vice Chairman July 18, 2001
- -----------------------------------------------------
Stephen J. Lockwood
/s/ JOHN N. MOLBECK, JR. Director, President and Chief July 18, 2001
- ----------------------------------------------------- Operating Officer
John N. Molbeck, Jr.
*By: /s/ CHRISTOPHER L. MARTIN July 18, 2001
------------------------------------------------
Christopher L. Martin,
Attorney-in-fact
Pursuant to the requirements of the Securities Act of 1933, HCC Capital
Trust I certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Houston, Texas, on the 18th day of July, 2001.
HCC CAPITAL TRUST I
By: HCC INSURANCE HOLDINGS, INC., as
Depositor
By: /s/ STEPHEN L. WAY
----------------------------------
Stephen L. Way
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, HCC Capital
Trust II certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Houston, Texas, on the 18th day of July, 2001.
HCC CAPITAL TRUST II
By: HCC INSURANCE HOLDINGS, INC., as
Depositor
By: /s/ STEPHEN L. WAY
----------------------------------
Stephen L. Way
Chairman of the Board and
Chief Executive Officer
II-7
63
INDEX TO EXHIBITS
Items denoted by a letter are incorporated by reference to other documents
previously filed with the Securities and Exchange Commission as set forth at the
end of this table. Items not denoted by a letter but denoted with an * are being
filed herewith. Items designated with ** are to be filed by amendment. Items
marked with *** have been previously filed with this Registration Statement.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*1.1 -- Form of Underwriting Agreement (Common Stock HCC
Insurance Holdings, Inc.).
*1.2 -- Form of Underwriting Agreement (Senior Debt Securities
and Junior Subordinated Debt Securities of HCC Insurance
Holdings, Inc.).
**1.3 -- Form of Underwriting Agreement (Trust Preferred
Securities).
**1.4 -- Form of Underwriting Agreement (Warrants of HCC Insurance
Holdings, Inc.).
a3.1 -- Bylaws of HCC Insurance Holdings, Inc., as amended
b3.2 -- Restated Certificate of Incorporation and Amendment
thereto of HCC Insurance Holdings, Inc
c3.3 -- Certificate of Trust of HCC Capital Trust I.
c3.4 -- Certificate of Trust of HCC Capital Trust II.
c4.1 -- Form of Indenture for Senior Debt Securities issued by
HCC Insurance Holdings, Inc.
c4.2 -- Form of Subordinated Indenture for Junior Subordinated
Debt Securities issued by HCC Insurance Holdings, Inc.
c4.3 -- Form of Subordinated Indenture for Junior Subordinated
Debt Securities issued by HCC Insurance Holdings, Inc. to
HCC Capital Trust I or HCC Capital Trust II.
**4.4 -- Forms of Senior Debt Security issued by HCC Insurance
Holdings, Inc.
**4.5 -- Form of Junior Subordinated Debt Security issued by HCC
Insurance Holdings, Inc.
**4.6 -- Form of Junior Subordinated Debt Security issued by HCC
Insurance Holdings, Inc. to HCC Capital Trust I or HCC
Capital Trust II.
c4.7 -- Trust Agreement of HCC Capital Trust I.
c4.8 -- Trust Agreement of HCC Capital Trust II.
c4.9 -- Form of Amended and Restated Trust Agreement of HCC
Capital Trust I and HCC Capital Trust II.
**4.10 -- Form of Capital Security.
c4.11 -- Form of Trust Preferred Securities Guarantee of HCC with
respect to the trust preferred securities issued by HCC
Capital Trust I and HCC Capital Trust II.
a4.12 -- Specimen of Common Stock certificate, $1.00 par value, of
HCC Insurance Holdings, Inc.
***5.1 -- Opinion of Haynes and Boone, L.L.P., counsel for HCC
Insurance Holdings, Inc.
***5.2 -- Opinion of Richards, Layton & Finger, P.A., counsel to
HCC Capital Trust I and HCC Capital Trust II.
***12.1 -- Computation of Statement of Ratios of Earnings to Fixed
Charges.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
***23.2 -- Consent of Haynes and Boone, L.L.P. (included in Exhibit
5.1).
***23.3 -- Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.2).
64
EXHIBIT
NUMBER DESCRIPTION
------- -----------
***24.1 -- Powers of Attorney.
c25.1 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Indenture (Senior Debt Securities
issued by HCC Insurance Holdings, Inc.).
c25.2 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Subordinated Indenture (Junior
Subordinated Debt Securities issued by HCC Insurance
Holdings, Inc.).
c25.3 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union National Bank, as
Trustee under the Subordinated Indenture (Junior
Subordinated Debt Securities issued by HCC to HCC Capital
Trust I or HCC Capital Trust II).
c25.4 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Property Trustee for the Amended and Restated Trust
Agreement of HCC Capital Trust I.
c25.5 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Property Trustee for the Amended and Restated Trust
Agreement of HCC Capital Trust II.
c25.6 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Guarantee Trustee under the Guarantee of HCC for the
benefit of the holders of Trust Preferred Securities of
HCC Capital Trust I.
c25.7 -- Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939 of First Union Trust Company, N.A.,
as Guarantee Trustee under the Guarantee of HCC for the
benefit of the holders of Trust Preferred Securities of
HCC Capital Trust II.
- ---------------
(a) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 33-48737) filed October 27, 1992.
(b) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement on Form S-8 (Registration No. 333-61687) filed on
August 17, 1998.
(c) Incorporated by reference to the Exhibits to HCC Insurance Holdings, Inc.'s
Registration Statement (Registration No. 333-46432) filed September 22,
2000.